2020 ANNUAL REPORTOverview

How wecreate value

CUSTOMER STORY

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

ADAPTING

Growing businessduring a crisis

An ANZ customer for more than 50 years, fellahamilton has beenin the business of Australian women’s fashion since the early 1970s.
Today, the company is managed by David Hamilton (son of theeponymous founder) and his wife, Sharon Hamilton, CEO.
When the COVID-19 pandemic first hit Australia in March,times were challenging.
Within the first few weeks of lockdowns,
they had to let go of employees at their
Moorabbin factory and retail storesnationally were shut.
However, shortly after, a doctor friend of
Sharon’s asked her to make a scrub set, as
there was a limited supply of PersonalProtective Equipment (PPE).
Sharon recalls the moment demand fortheir washable, hospital-grade PPE started
snowballing and a new direction for thebusiness appeared in ‘fellahealthwear’.

Photo credit: Simon Schluter, The Age“I’m a pharmacist by profession, with manyfriends in the medical industry. After the
first request, I received another, and another,and now we’re making and distributing
thousands of scrubs and gowns to GPs,

dentists and hospitals. We’ve hired backall of our staff and have never been busier,”says Sharon.
David credits the move into making PPE
to his wife’s optimistic nature and tendency
to ‘think outside the box’.
“Changing direction wasn’t easy,” says David.
“It needed us to have intestinal fortitude andcomplete dedication to what we thought
was the right move for our business.”“The road ahead is going to be tough.
While we’re doing well at the moment, weare uncertain about what the future holds,
so we need to remain adaptable and agile
in response to what may come next fromthe pandemic.”

CONTENTS
Overview

1

Our customers

18

2020 performance snapshot

1

Our divisions

25

Our 2020 reporting suite2

Our people

28

What matters most3

Our community

32

Chairman’s message

4

Our approach to climate change

34

CEO’s message

6

Governance

38

COVID-19 – protecting our customers,
employees and the community

Risk management

49

8

Performance overview

54

How we create value

10

Remuneration report

74

About our business10

Our vision and strategy

11

Directors’ report

109

How we create value

12

Financial report111

Our operating environment

14

Shareholder information

234

Glossary243

Becoming a fairer and more responsible bank 16

2020 performance snapshot60c

 ividend forD2020 per share

$3.8b

6.2%

$9.08bCash returnon equity1

funded and facilitatedin sustainable solutions
since 201911.3%
Common equity
Tier 1 Capital3

Cash profit1$20.04
Net tangible
assets per share2

132.7cCash earnings
per share1~1.8m

customer accounts
remediated5$139.5min community
investment4>61,000
people have beenreached through ourfinancial wellbeing
programs, MoneyMinded
and Saver Plus7

33.4%
of womenin leadership6

1. On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations included in cash profit. It is provided to assist readers inunderstanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 56. 2. Equals shareholders’equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares. 3. APRA Level 2. 4. Figure includes forgone revenue of$105 million, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not-for-profit organisations and students. 5. Refers toAustralian customer accounts in the last 12 months. 6. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leavestatus but not contractors (who are included in Full Time Equivalents (FTE)). 7. Includes individuals who have participated in more than one program or product (for example, people whohave participated in MoneyMinded as part of Saver Plus are counted twice as they are included in both the MoneyMinded and Saver Plus totals).

ANZ 2020 Annual Report1Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our 2020 reporting suite
Integrated reporting
This report includes information on our financial and non-financial
performance, providing readers with a holistic view of the Australia
and New Zealand Banking Group Limited’s1 performance. In
preparing pages 1 to 72, we have again drawn on aspects of theInternational Integrated Reporting Framework to describe how
our business model, strategy, governance and risk management
processes help us manage risks and opportunities in our operating
environment and deliver value for our stakeholders. We outline our
response to external social and environmental challenges, including
how we are supporting our stakeholders through the COVID-19
pandemic, continuing to implement recommendations from theRoyal Commission and strengthening our approach to climatechange and human rights.

Annual Report structure
The required elements of the Directors Report, including the
Operating and Financial Review (OFR) as required by ASIC
Regulatory Guide 247, are covered on pages 1 to 70. Commentaryon our performance overview contained on pages 54 to 71
references information reported in the Financial Reportpages 111 to 233.
The Remuneration Report pages 74 to 108 and the Financial Reportpages 111 to 233 have been audited by KPMG. KPMG also provides
limited assurance over Environment, Social and Governance (ESG)
content2 within this Annual Report. A copy of KPMG’s limited
assurance report is contained in the ANZ 2020 ESG Supplement.
This report covers all ANZ operations worldwide over which, unlessotherwise stated, we have control for the financial year commencing
on 1 October 2019 and ending 30 September 2020. Monetaryamounts in this document are reported in Australian dollars,
unless otherwise stated.

Additional information

Specifically, we will consider whether there are additional
reporting frameworks or metrics we could use to enhance ourdisclosures. In this respect we are closely watching work underway
by key sustainability disclosure bodies to develop a coherent andcomprehensive corporate reporting system in which existingsustainability standards and frameworks complement financial
accounting principles.
Our 2020 Corporate Governance Statement discloses how we havecomplied with the ASX Corporate Governance Council’s ‘Corporate
Governance Principles and Recommendations – 3rd edition’ and isavailable at anz.com/corporategovernance.
Our ESG Supplement complements this Annual Report, providing
stakeholders with more detailed ESG disclosures, including:
performance against our ESG targets and approach to our priority
areas of fair and responsible banking, financial wellbeing,environmental sustainability and housing. In response to stakeholder
feedback, for the first time, we are releasing our ESG Supplement
at the same time as this Annual Report.
The following documents are available atanz.com/shareholder/centre:• News Release• Consolidated Financial Report, Dividend Announcement& Appendix 4E• Results Presentation and Investor Discussion Pack
• Annual Review3• The Company Financial Report• Principal Risks and Uncertainties Disclosure• APS 330 Pillar III Disclosure• Climate-related Financial Disclosures
We are continually seeking to improve our reporting suite andwelcome feedback on this report. Please address any questions,comments or suggestions to investor.relations@anz.com.

We produce a suite of reports to meet the needs and requirementsof a wide range of stakeholders, including shareholders, customers,
employees, regulators, non-government organisations andthe community. In 2021 we intend to review our disclosures toensure they are meeting the evolving needs of our stakeholders.

2020 ANNUAL REVIEW

2020 ESG SUPPLEMENT

2020 CLIMATE-RELATEDFINANCIAL DISCLOSURES

2020 CORPORATE
GOVERNANCE STATEMENT

anz.com/annualreportanz.com/cs

anz.com/shareholder/centre

anz.com/corporategovernance1. Group: Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year (together, the Group).
2. ESG content includes the following sections: 2020 performance snapshot, What matters most, COVID-19 – protecting our customers, employees and the community, Becoming a fairer andmore responsible bank, Our customers, Our people, Our community, Our approach to climate change and ESG metrics on page 72. 3. The 2020 Annual Review is comprised of pages 1 to 72
and 241 to 242 of this Annual Report and a Remuneration Overview.

2What matters mostThrough our annual materiality assessment we engage with internal and external stakeholders
to inform our identification of ESG risks and opportunities. We seek to identify those issues thathave the most potential to impact our ability to operate successfully and create value forour shareholders and other stakeholders.
We use the assessment to inform our strategy, ESG targets andexternal reporting.
In 2019 our materiality assessment was focused on issues arisingfrom the Royal Commission. This year we returned to a broader
focus, with an emphasis on the ‘social’ aspects of ESG, andspecifically our support for customers, employees and thecommunity in response to COVID-19.
The bank’s response was well regarded by external stakeholders,with several commenting how the banking sector has responded tothe pandemic has helped to improve community trust lost during
the Royal Commission. They did note, however, that despite thepositive steps taken since the Royal Commission, trust should
remain a key focus and its recovery is fragile.
Both external and internal stakeholder groups identified fairness
and ethical conduct, financial wellbeing and customer experience
as priorities. Some external stakeholders also highlighted theimportance of continuing to act on climate change, while internal
stakeholders emphasised the importance of fraud and data security.

WE ASKED EXTERNAL STAKEHOLDERS:

What is one action ANZ could take to enhance
its reputation as a fair and ethical organisation?
THEY SAID:FAIRNESS AND ETHICAL CONDUCT: a strong

corporate culture, known for ethics, values, fairness andtransparency. Simple and understandable products
and communications (i.e. product disclosure, includingbank fees and charges) and appropriate hardship/collections policies.
FINANCIAL WELLBEING: promoting and enabling

access to safe and affordable products and services,
particularly lower-income and vulnerable customers.
Work with cross-sector partners to help customers,
employees and the broader community meet current
financial commitments and needs, and improve theirfinancial resilience.
CUSTOMER EXPERIENCE: delivering value andimproved customer experience through appropriate
financial products and services for all customers, small
business and retail.
CLIMATE CHANGE: managing the business risks andopportunities associated with climate change. Includes
the role we play in supporting our customers totransition to a low carbon economy.

FRAUD AND DATA SECURITY: policies and processes inplace to prevent fraud and protect customer data andprivacy. Includes customer access to personal data.

—1

Support customers through times of hardship— 2	Continue to resolve issues raised in theRoyal Commission— 3	
Link executive remuneration and performance
metrics to broader ESG considerations—4

Lead on sustainable finance

These insights were presented to the executive Ethics andResponsible Business Committee and the Board Ethics, Environment,
Social and Governance Committee and helped to inform thedevelopment of our ESG targets, as well as our continued response
to COVID-19, including our customer Statement of Intent(see page 8).
Our material ESG issues are ‘mapped’ to the bank’s material risks
on pages 52-53.

Supplementary disclosures

The full list of our material ESG issues, as well as the key
steps in the materiality assessment process, is discussed
in our 2020 ESG Supplement available at anz.com/cs.
Detailed information on other ways in which we haveengaged with stakeholders is also included in the 2020
ESG Supplement.

ANZ 2020 Annual Report3Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Chairman’s message
COVID-19 has had a profound impact on all our lives.
Whether it is the devastating loss of lives, the cripplingof some businesses and impact on livelihoods, limitations
placed on social activities and the way we are working –2020 will be remembered for generations.
ANZ has of course not been spared fromthe effects of the pandemic. Our full-year
statutory profit of $3.6 billion was down
40% – levels not seen since the height of
the Global Financial Crisis.
Looking through the immediate impact
of COVID-19, the fundamental drivers ofour business continued to perform well.
We are fortunate the actions taken by
our management team over many years
to simplify and improve our operations
have the bank well positioned to support
our customers as well as supporting
economic recovery.
Despite the challenges facing the broader
economy, the Board was pleased to declarea final dividend of 35 cents. This is on top of
the interim dividend announced in August,taking the total payout to 60 cents per share.

Given the uncertain environment, we put
aside $2.7 billion for possible future credit
losses. This takes ANZ’s total credit provision
reserves to $5.9 billion.
We also continued to simplify thebusiness through the year. On 31 January,
we completed the previously announced
sale of our OnePath Pensions andInvestments business to IOOF Holdings
Limited and in September we completed
the sale of UDC Finance in New Zealandto Shinsei Bank Limited.
During the most recent quarter, weannounced the sale of 1,300 offsite
Australian ATMs to Armaguard. While
we will continue to operate our 900
ATMs at our branches around Australia,
this was another step in achieving ouroverall goal to be simpler, more
efficient and better managed.

Supporting customers
For ANZ, 2020 will ultimately be definedby how we stepped up to support ourcustomers and the community throughthis devastating global pandemic.
Almost overnight businesses that wereonce thriving enterprises were restrictedfrom operating, families lost their main
source of income and millions faced
economic uncertainty, and our thoughts
are with those who have been directly
impacted.
I’m proud of the way our bank, under theleadership of our Chief Executive Shayne
Elliott, has risen to support our customers
and I can assure shareholders ANZ willcontinue to play a crucial role in theeconomic recovery of Australia and
New Zealand.

David Gonski, AC

4

Already we have provided loan payment
deferrals for more than 142,000 home loans
and business loans in Australia and New
Zealand. This approach has provided
customers with the time they need torecover while also protecting the interestsof shareholders.
While it’s an impossible task to provide
an accurate outlook for the future, I remain
optimistic about our prospects given
the positive way governments in our
key markets, particularly in Australia and
New Zealand, have responded to thechallenges of COVID-19.
Fortunately, we already are seeing the earlysigns of recovery, particularly in those partsof our business less impacted by COVID-19.
In Western Australia, for instance, our card
data shows spending on ‘dining & takeaway’
was up around 18% on the previous year.
Clearly there are still more challenges ahead
but these early signs provide us with a levelof confidence about the actions taken so far.

Executive remuneration
We know how we reward our most senior
people is important for many shareholders.
The Chair of our Human Resources
Committee, Ilana Atlas, AO, has provided
more detail in the Remuneration Report.
However, I can guarantee shareholders theBoard spent a great deal of time evaluating
the performance of the management teamand deciding how to reward themappropriately.
The Board was pleased with theperformance this year and was particularly
impressed with the way the bank responded
to the challenges presented by COVID-19.
However, given the impact the pandemic
has had on our shareholders, customers
and the broader community, the Board
exercised its discretion by applying a 50%
reduction to the variable remunerationfor our executive team, including ourChief Executive.
The Board also determined there would be
no fixed remuneration increases for any of
its Disclosed Executives, including the Chief
Executive Officer, for the coming year.

Board succession
As you may know, my time at ANZ came toan end at the finalisation of this year’s result
on 28 October. At that date I had been a
director for more than 11 years, originallyserving between 2002 and 2007, and thenreturning as Chair in 2014.
Serving as ANZ’s Chairman will always be ahighlight of my corporate career. Reflecting
on my time here, I am most proud to haveplayed a role in choosing Shayne Elliott tobe our Chief Executive and to work with
him to establish his talented leadershipteam. I know I am leaving ANZ in good
shape under this strong leadership andI will be keenly monitoring ANZ’s progress.

I am also delighted Paul O’Sullivan has
succeeded me as Chairman. Paul is an
outstanding company director who has
already made a strong contribution to theBoard. He has my absolute confidence.
Finally, I would like to thank shareholders
for their support over the years andacknowledge the efforts of our 39,000
people who have been working hard forour customers, shareholders and thebroader community.

David Gonski, AC Chairman

Message from Paul O’Sullivan

I am honoured to succeed David Gonski as the new
Chairman of ANZ. The bank has a proud 185-year history
and I look forward to contributing to its continued success.
While there will be much to consider in the coming year as economies recoverfrom the COVID-19 pandemic, my focus as Chairman will be to continue the work
we have been doing over many years to improve our operations and simplify thebank, particularly through digital and technological innovation.
The Board will also pay close attention to our business growth strategy in theconstantly changing landscape in which we operate. Looking at how we will
ensure success and improved financial performance in the long-term will beof critical importance.
Finally, I’d like to take this opportunity to acknowledge the enormous contribution
David has made and thank him on behalf of all shareholders for his hard work andleadership over the last seven years as Chair.
David steered the Board through some challenging times and helped build anorganisation with a strong focus on governance, accountability, improved culture
and enhanced customer outcomes.
His efforts to strengthen and champion the
bank’s work in the area of Environment, Socialand Governance (ESG), especially with respect
to social and economic inclusion and climatechange, is a legacy of which he should bevery proud.

Paul D O’Sullivan

ANZ 2020 Annual Report5Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Shayne Elliott

CEO’s message
We could never have forecast 2020, a year that started withdevastating bushfires in Australia and was followed by waves
of a terrible, global pandemic that continues to spread. We
still cannot predict its course but we do remain confident
we can deal with its impacts.
Our thoughts are with those who havesuffered from these events. We need
only look at some of the country towns
impacted by bushfires or the empty city
streets to know these crises have struckat the heart of our community.
We want our customers to know we willcontinue to do all we can to support themthrough the tough times. Fortunately wehave never been in better shape to support
all our stakeholders through what will be
one of history’s periods of great volatility.
While the Chairman’s message has provided
an overview of our financial performance,
I would reiterate we were pleased withhow the business performed in difficult
trading conditions.

6

As a bank, we entered 2020 in robust
condition. We have a strong balance sheetwith record levels of capital and liquidity.
The work done over several years to simplify
the bank means we now focus only on thethings that matter, our people are moreengaged than ever and we are able to quickly
adapt to the challenges the future holds.
While COVID-19 has impacted many parts ofour business, we have not sat idle. Times ofcrisis are when the best companies build forthe future in a prudent and disciplinedmanner. We invested record levels to build
a better bank for our customers and staff,
while continuing to closely manage costs.
In Australia, we achieved strong growthin our targeted home loan segments withabove system growth in the owner-occupiermarket, driven particularly by the refinancing
market. Deposits remained strong as
customers took a sensible approach to
managing their household balance sheet.
We also saw an accelerated shift away fromthe use of cash due to the pandemic and
we introduced new processes to help
customers move to online banking.

Times of crisis are when the best companies build forthe future in a prudent and disciplined manner.

The work done over many years to simplify
and refocus the Institutional businessproved beneficial in a market defined byhigh levels of liquidity, low interest rates andgeopolitical tensions. Increased volatility led
to strong activity in Global Markets which
again performed well and demonstrated
the benefits of a diversified business. As
Australia’s leading international bank, we
remain well positioned to assist domestic
companies doing business in Asia as theglobal economy improves.
COVID-19 appears contained in New Zealand
and we remain well positioned to benefit
from its subsequent economic recovery.
While it was a tough revenue environment,
given low interest rates and a focus on
reducing or simplifying fees, we havemaintained market leadership in ourtargeted segments: home loans, deposits
and KiwiSaver.
Given the critical role data, insights andautomation will play over the coming years,
particularly as we respond to the challenges
of COVID-19 and the daily uncertainty thatbrings, we also made changes to the
executive team with the addition of Emma
Gray to the new role of Group Executive
Data and Automation. This will be a criticalrole in the continued digital transformationof ANZ.
One of the most pleasing aspects of 2020
has been how our people have responded
to the challenge. We were able to successfully
move 95 per cent of our non-branch
employees to working productively fromhome where they were able to support ourcustomers at a time of significant stress.
Employee engagement is at record levels.
I’ve been amazed at their dedication andI’m proud to call them my colleagues.

Climate changeThis year we have released an updated
Climate Change Statement that outlines ourapproach and strengthened commitments
in support of a global transition to net zerocarbon emissions.
We understand the impact – positive andnegative – our financing has on climatechange. We have been working hard on
making a meaningful difference while
supporting long-standing customers who
are making the transition to a low carbon
future. Over the last five years, we have
reduced our lending to thermal coal mining
by almost 70 per cent and increased our
direct lending to renewables by 63 per cent.
Our 2020 Climate Change Statement
focuses on three main areas.
First, we will help our customers byencouraging them to identify climate risks
and opportunities, create transition plans
and report publicly on their progress.
Second, we will support the transition ofindustries to a low carbon future so they
can help grow the economy. A key element
for ANZ is we will no longer directly finance
new assets across the thermal coal value
chain and will exit all directly financed
coal-fired power stations and thermal
coal mines by 2030.
Thirdly, we will reduce our own impact
by managing and reducing emissions
from our operations. We will do this byaccelerating our emission reductions bysourcing 100 per cent of the electricity
needed for our business operations fromrenewables by 2025.

Vale Will Bailey
I would also like to acknowledge
the passing of our former Chief
Executive Officer Will Bailey
in August this year.
Having started as a teller in the
Oakleigh branch of the old ES&A
bank in 1950, Will served as CEO
between 1984 and 1992. He was amentor to many future ANZ leadersand made a significant contribution
in building the ANZ we allknow today.
One of Will’s major legacies wasmodernising the bank, introducing
automation and computerisation –and some technology still in
use today. In fact, ANZ opened
Australia’s first ‘electronic branch’in 1985 under his stewardship. On
behalf of everyone at ANZ, I’d like topass on our condolences to his wife
Dorothy and his family and friends.

Finally, I would like to acknowledge
again the terrific work of our 39,000 people
across the world. From our service centres
in Bangalore and Manila through to ourcontact centres in Australia and branches in
New Zealand, they have all done a great job
for customers in very difficult circumstances
despite competing priorities over this long,arduous period.

Shayne Elliott, Chief Executive Officer

ANZ 2020 Annual Report7Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

COVID-19 – protecting our customers,
people and community
While our decisions in responding to the COVID-19 pandemic have had a short-term financial
impact – on earnings, profitability and shareholder value – our focus is on the long-term.
A healthy and sustainable community is in everyone’s best interests.
Throughout the pandemic we have sought to balance the needs of all stakeholders. Our approach has been guided by four key principles:

Protect whatmatters

Adapt tothe changing
environment

Engage withstakeholders

Prepare forthe future

These principles informed our ‘Statement of Intent’ (available on anz.com), which outlines support for customers impacted financiallyby the pandemic and our commitment to work with them on a solution that is respectful, fair and appropriate.

Our customers

Our people

In March we announced our initial support package for retailand business customers, offering the option of deferring loan
repayments for a period of six months on a range of products,
including home, personal and business loans.

From early March we moved employees to work-at-homearrangements, split teams and introduced greater distance
between those employees performing essential functions in
the office. By late April approximately 95% of our non-branch
employees had adapted to working from home.

We received over 137,000 applications forhardship assistance in Australia alone.

Any employee concerned about their safety while working
from home (for example, due to domestic and family violence),
could elect to work in the office.
We also introduced 10 days’ of paid coronavirus-related special
leave, and provided a one-off payment to junior and mid-level
employees as a contribution towards working from home
work expenses.

In July we updated our support package for customers continuing
to experience financial difficulty due to COVID-19. Additional
assistance options (depending on the customer’s circumstances)included loan restructuring (for example, an interest only period)or an extension of the deferral period until 31 March 2021.

To protect our people still working in, or returning to the office, wehave put in place multiple controls to minimise the risk of exposure
to COVID-19 in the workplace, including thermal screening; physicaldistancing markers; enhanced cleaning protocols; and robust
incident notification, response and management processes.

Customers with loan repayment deferrals have been proactively
contacted by phone, SMS and/or email/letter to ensure they
understand the impacts of their loan relief and identify if theyneed further support.

Across Australia and New Zealand we have over 1.5 million home loans.

~~Of our 1 million home loans in Australia, 95,000 have received deferrals on their loan
repayments since March 2020, with 74,000 deferred loans active at 30 September.

~

~

~

Of our 529,000 home loans in New Zealand, 24,000 have received deferrals on theirloan repayments since March 2020, with 16,000 deferred loans active at 30 September.

~

~

~

Of our 236,000 business loans in Australia, 23,000 have received deferrals on theirloan repayments since March 2020, with 20,000 deferred loans active at 30 September.

8~

To support the wellbeing of our people we are providing coachingand digital resources through our employee intranet and new‘HealthyMe’ app. Our Employee Assistance Program also remains
available to our people and their immediate family members.
Finally, we are providing enhanced support for employees displaced
from their roles due to redundancy. This has included putting inplace a program for impacted employees, which provides themwith unlimited coaching and workshops to help them find newcareers and support their financial and emotional wellbeing.

Our community
We have worked closely with our community partners throughout
the pandemic – from adapting the way we deliver our financial
literacy programs to our senior executives engaging weekly with
NGOs, consumer advocates and financial counsellors to ensure weare acting responsibly and responsively to real world conditions.
In Australia, we donated $1.5m to the Brotherhood of St Laurence,
The Smith Family and the Financial Counselling Foundation – foreducation, employment, aged care and financial counselling
programs targeted at disadvantaged people affected by COVID-19.
We donated a total of NZ$2 million to Women’s Refuge, Age
Concern New Zealand, the NZ Salvation Army, Red Cross andother local charities in the Pacific to support those most affectedby the crisis.
We also directed $8.4 million of unclaimed remediation monies
to our key community partners to, among other things, help
expand their programs online. COVID-19 has highlighted the needfor diverse and sustainable ways to deliver services to vulnerable
families. One of our partners, The Smith Family, will use the funds
to further digitise their programs so they can continue to support
the education of around 58,000 students online.

Improving the lives of vulnerable Australians
during COVID-19

We have worked together with the Brotherhood of St Laurence(BSL) to adapt shared community programs so participants
can continue receiving support during COVID-19.
In response to the pandemic, we transitioned Saver Plus, amatched savings and financial education program developed
by ANZ and BSL, to digital delivery. This enabled over 2,000
participants to remain on the program by completing financial
education online instead of attending in person workshops.
Between March and September 2020, we provided over
$520,000 towards laptops and tablets, enabling digitalaccess for over 1,100 families and individuals to support
remote schooling and learning.
We were also one of the employers that continued toprovide employment opportunities for refugees and asylum
seekers through BSL’s Given the Chance work placement
program. “This has been very much appreciated by BSL, andfor the participants it has provided security and stability in atime when many areas of their lives are out of control”, BSL’s
Executive Director Conny Lenneberg says.

When children moved to remote learning, many of the families
supported by The Smith Family through their Learning for Life
program struggled to help their children with schoolwork. Thiswas due to a range of factors including some having low educationlevels themselves, limited technical confidence and skills, or having
English as a second language. In addition, digital inclusion issues
such as a lack of devices and internet access further affected somestudents. The educational support and learning programs The Smith
Family provides, with our help, is now needed more than ever, as
children and young people from disadvantaged backgrounds areat higher risk of falling behind due to the pandemic.

"We are incredibly grateful for the generosityand ongoing support of ANZ, who enable us
to continue helping children and families in
need, not just through this challenging time
but into the future as well.”
Dr Lisa O’Brien, Chief Executive Officer, The Smith Family

Supporting women in a time of crisis

Established in the 1970s, Women’s Refuge is New Zealand’s
largest nation-wide organisation supporting women andchildren experiencing domestic and family violence.
During the COVID-19 lockdowns many women haveneeded help to get through the crisis, with the pandemic
exacerbating family violence in some households.
In March 2020, we donated NZ$500,000 to the Women’s
Refuge, a community organisation that ANZ New Zealandhas had a long-standing relationship with.
Dr Ang Jury, CEO of Women’s Refuge commented on theimpact the crisis was having, saying, “we’ve been overwhelmedwith need in recent weeks. Unfortunately for some, there is
not a safe place to self-isolate for long periods of time.”
The funds from ANZ have meant that women and children
can be provided with food, healthcare, communications
services and importantly, safe lodging in motels.
“We are incredibly grateful for this donation from ANZ andthese funds will help ease the financial pressure our refuges
are facing during this time. We are also pleased to be able todirect a portion of the donation to future care and support
for women and children,” said Dr Jury.
Since 2017, ANZ has made it easier for women referred by
Women’s Refuge to set up their own bank account, eventhough they may not have ID or a permanent address.
ANZ NZ CEO Antonia Watson said: “It’s important to look out
for the most vulnerable in our communities during this time,
to not lose sight of their needs, and make sure the people
and organisations who support them are well resourced
and supported.”

ANZ 2020 Annual Report9Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

About our businessWe provide banking and financial products and services to over 8.5 million retail and businesscustomers, and operate across 33 markets.
Our purpose and values
Our expertise, products and services make us a bank. Our people, purpose, values and culture make us ANZ.

Our purpose is to help shape a world in which people and communities thrive. That is why we strive
to create a balanced, sustainable society in which everyone can take part and build a better life.
Our values are the foundation of how we work – living our values every day enables us to deliver on our strategy and purpose, strengthen
stakeholder relationships and earn the community’s trust. All employees and contractors must comply with our Code of Conduct, whichsets the expected standards of professional behaviour and guides us in applying our values.

Our values are:

I NTEGRITYC OL L A BOR AT I ON

A CCO U N TA B I L I TY

E XC E L L ENCE

Bringing our purpose to life

Supporting sustainable development

We are helping to respond to complex societal issues central to ourcustomers and our business strategy. In particular, we are focusing
our efforts on:

We are committed to the United Nations Sustainable
Development Goals (SDGs) and believe that business has
an important role to play in their achievement. Our ESG
targets support 11 of the 17 SDGs.

FINANCIAL WELLBEING – improving the financial wellbeing of our

In 2019 we became a founding signatory to the UN
Principles for Responsible Banking. Under the Principles weare required to set at least two targets that address our mostsignificant (potential) positive and negative impacts, alignedwith the SDGs and the Paris Climate Agreement. Further
information on our progress towards implementing thePrinciples, including targets we have set, is in our 2020
ESG Supplement available at anz.com/cs.

customers, employees and the community by helping them makethe most of their money throughout their lives;
ENVIRONMENTAL SUSTAINABILITY – supporting household,business and financial practices that improve environmental
sustainability; andHOUSING – improving the availability of suitable and affordable

housing options for all Australians and New Zealanders.
We are contributing to these challenges by: developing innovativeand responsible financial products and services; working with ourcustomers; harnessing the skills of our people; and supporting thecommunities in which we live and work.
Fundamental to our approach is a commitment to fair andresponsible banking – keeping pace with the expectations of ourcustomers, employees and the community, behaving fairly andresponsibly and maintaining high standards of conduct.
Throughout this report we illustrate how we have embedded purpose
into our business strategy, including through our Environment,
Social and Governance (ESG) targets and performance objectives.

10

R ESPECTOur vision and strategy
Our vision and strategy describe what we seek to achieve and how we will achieve it.

Our vision

Our strategy

Our vision is to build a bank of which
we can all be proud – whether you area customer, a shareholder or an
employee – known for:Our strategy is to help improve the financial wellbeing of ourcustomers, having the right people who listen, learn and adapt;putting the best tools and insights into their hands and; focusing
on those few things that really add value to customers, and doing
them right the first time.

• delivering value from innovative andconvenient banking services that help
customers get ahead in life – improving
their financial wellbeing• building the best and most diverse
team of people, regardless of where
they ultimately work
• showing leadership on important issues,and doing the right thing, even when it
comes at a cost
• delivering consistently strong financial
results for our shareholders, with abalance between growth and return,short-and long-term results

In particular, we want to help customers:• save for, buy and own a liveable home
• start or buy and grow their business and adopt sustainable business practices• move capital and goods around the region and adopt sustainable business practices.
In doing so, we seek to improve the financial wellbeing of our customers, people andcommunities by helping them make the most of their money throughout their lives;supporting household, business and financial practices that improve environmental
sustainability; and improving the availability of suitable and affordable housing options
for all Australians and New Zealanders.

Creating value forour stakeholders

Strategic Imperatives

Strategy

Create a simpler,better capitalised,better balanced bank

Improving the financial
wellbeing of customers...

Build a superior
experience for ourpeople and customers
in order to compete in
the digital age
Focus our efforts
where we can carve out
a winning position
Drive a purpose
and values-led
transformation of
the bank...looking tosave for,buy andown ahome...looking
to start,
buy andgrow abusiness...with people
who listen,learn and adapt...looking tomove capitaland goods
around theregion...with thebest tools
and insights

Decent returns
for shareholders
Great experiencefor customers
Engaged, adaptable
and capable employees
Improved financial
wellbeing, housing
and environmental
sustainability outcomesfor customers andcommunities...with flexible and resilient digital
infrastructure that supports greatcustomer experience at lower cost

ANZ 2020 Annual Report11Overview

How wecreate value

OUR VALUEDRIVERS

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

CUSTOMERS

Trusted relationships withover 8.5 million retail, businessand Institutional customers.

OUR OPERATINGENVIRONMENT$¢

The risks and opportunities inour operating environment impact
our ability to create value.

FINANCESocial andeconomic impactsof COVID-19
pandemic

How wecreate value

Access to capital through customer
deposits, debt and equity investors andwholesale markets enables us to run ouroperations and execute our strategy.

Limitedcredit growth
PEOPLE

By transforming ourbusiness – embedding apurpose and values-led
culture and simplifying our
products and services – we aim
to create long-term value forall of our stakeholders.

Regulatory
oversight andstakeholder
scrutiny

Our value creation model
outlines how we create value
for our key stakeholders throughTechnologicalour business activities, andchanges
identifies the inputs – or value
drivers – that we rely on to
enable us to deliver thatvalue and meet our
strategic objectives.
Demographic

Employees and contractors withthe key competencies and rightbehaviours to deliver our strategy.

!
RISK MANAGEMENT

Reducing the risk of doing businessfor our customers and the bank, withsystems and processes that are lesscomplex, less prone to error andmore secure.

changes

Increasing
importanceof ESG

Globalisation

TECHNOLOGY AND DATA CAPABILITIES

Flexible, digital-ready infrastructure to provide greatcustomer experience, agility, scale and control.

COMMUNITY AND RELATIONSHIPS

Strong stakeholder relationships are
essential to our brand and reputation.

12

OUR BUSINESS ACTIVITIESSHAREHOLDER VALUE

Operating across 33 markets,
we provide banking and financial
products and services to individualand business customers.

Deliver decent returns enabling shareholders
to meet goals

Through our business activities
we deliver the following outputs:

we provide transaction banking services
we hold deposits for our customers
	we lend money to our retail, businessand institutional customers
	we help customers mitigate
and manage financial risks	we support customers withtrade and capital flows	we provide wealth management
products

132.7 cents earnings per share1
6.2% cash return on equity1
60 cents dividend per share for 2020 with an interim
dividend of 25 cents and a final dividend of 35 cents,
both fully franked$20.04 net tangible assets per share2
CUSTOMER VALUE

Improve the financial wellbeing of our customers
Provide funding for lending, helping customers
to own homes and start and grow businesses
and assist businesses to transact, trade andinvest across our region
Great customer experience through flexible
and resilient digital infrastructure	we provide advisory services

19,839 FTE supporting our retail and commercial
customers, providing $353 billion in home lending and$91billion in business lending (Australia and New Zealand)	we invest in our people to build
a diverse and inclusive workforce

5,291 FTE supporting our Institutional customers, providing$158 billion in lending	we collaborate with partners to build
capacity and improve financial wellbeing
	we pay taxes in the countries within
which we operate	we pay dividends to our shareholders

Custodians of $552 billion of customer deposits across the business
EMPLOYEE VALUE

Build a resilient, adaptable and inclusive workforce
with a strong sense of purpose and ethics
86% employee engagement (up from 77% in 2019)
Employed 919 people from under-represented groups(since 2016)$4.9 billion in employee salaries and benefits
Increasing the skills and capabilities of our people
providing almost 970,000 hours of training

1. On a cash profit (continuing operations) basis. Excludes non-core
items included in statutory profit and discontinued operations
included in cash 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 topage 56. 2. Equals shareholders’ equity less preference share capital,
goodwill, software and other intangible assets divided by the
number of ordinary shares. 3. Figure includes forgone revenueof $105 million, being the cost of providing low or fee-free accounts
to a range of customers such as government benefit recipients,
not-for-profit organisations and students. 4. Total taxes borne by
the Group, includes unrecovered GST/VAT, employee related taxes
and other taxes. Inclusive of discontinued operations. 5. Includes
individuals who have participated in more than one programor product (for example, people who have participated in
MoneyMinded as part of Saver Plus are counted twice as they
are included in both the MoneyMinded and Saver Plus totals).

COMMUNITY VALUE

Connect with, and invest in, the communities
in which we operate to support growth,deliver services and develop opportunity
Invested $139.5 million in the community3$2.3 billion in taxes paid to government4> 61,000 people have been reached through our financial
wellbeing programs MoneyMinded and Saver Plus5

ANZ 2020 Annual Report13Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our operating environment
The COVID-19 pandemic has fundamentally changed the external environment in which we
operate, and we are adapting in response. A summary of the key external risks currently affecting
our business and our response to them is outlined below.
RISKS

OPPORTUNITIESSocial and economic impacts of COVID-19• Many customers are financially impacted by the
pandemic, and need to adapt to a new environment• Responding to customer circumstances,by providing financial support and information• Working cooperatively with government onpolicies to see our customers through the
COVID-19 pandemic and into a period of growth

Limited credit growth• An economic contraction, lower business confidence andhigher unemployment is limiting credit growth, and manycustomer loans have been deferred• Maintaining our focus on core banking services
to improve customer outcomes, together withefficient allocation of capital and resources

Regulatory oversight and stakeholder scrutiny• Challenges arising from regulatory expectations andhigher community standards and expectations• Rebuilding trust by ‘doing what we say’
• Working cooperatively with regulators,
government and NGOs
• Supporting our customers, employees andthe community through the COVID-19 pandemic
and ensuing recovery period

Technological changes• Increased competition from digitally enabled competitors• Increased cyber attacks and attempted fraud• Changed employment proposition due to stay-at-home
restrictions• Faster deployment of new and improved digital
services, products and processes will help meetcustomer needs for safe and secure banking• Providing staff with appropriate technology, tools
and equipment to work productively from homeduring the pandemic and its aftermath

Demographic changes• Demand for new home lending and some otherbank products may diminish, particularly as population
growth stalls as a result of the pandemic• Growing need for more affordable and accessible
housing in the market• Delivering attractive housing products andservices to grow market share• Partnering with business, government andNGOs to provide innovative and practical models
for the development of affordable housing

Increasing importance of ESG• Failure to meet our ESG commitments and related social
expectations could lead to customer and community
impacts and reduced shareholder value impacts• Strengthening our ESG standards, policies,
processes, products and services and disclosures• Growth of sustainable finance products and services

Globalisation• The COVID-19 pandemic and changing geopoliticalenvironment has hurt global prosperity and cooperation,
threatening flows of trade, investment and people. Thismay challenge supply chains and productivity acrossour geographies

14• Continued strength of traditional exports, developmentof new markets and economic recovery provides
business opportunities in Australia and the region

ANZ STORY

ADAPTING

Banking through timesof change
Much about the world has changed since
ANZ started out as the Bank of Australasia in 1835.
In the 1800s and early 1900s, customers used only
their ‘home’ branch, with tellers recording accountdetails in a ledger book using a quill and inkwell.
By the 1920s, Burroughs ledger machines– akin to typewriters or early adding
machines – were used for calculations,replacing mental arithmetic.

our customers looking to digital solutions– be it online or via their mobile phones –to enable them to do their banking fromthe safety of their home.

Then, in around the 1960s, passbook
accounts were designed with ‘black light’signature panels giving customers the
freedom to bank outside of theirhome branch.

Changing the way we do things to meet theneeds of our customers isn’t new for ANZ.

Fast forward to 2020, and we have morethan three million customers using ourmobile banking app to check accountbalances, view transactions, and send
and receive money.
The COVID-19 pandemic has accelerated
the shift to digital banking, with more ofMore than 100 years ago, the Spanish Flu
pandemic also led to the closure of stateborders, placing restrictions on banking
services.
Staff in ANZ’s Tweed Heads branch in NSW
came up with an innovative way to ensure
money and cheques were still able toflow, using a cigar box and some rope totransport the contents across the river tothe Queensland border at Coolangatta.

Image: Andrew Smith

Now in 2020, we continue to adapt theways in which we deliver products andservices to our customers.
With the majority of non-branch staff
working remotely from home for muchof the year, we had to implement digitalsolutions for almost every aspectof customer engagement – fromaccepting electronic signatures onbank documents, to holding virtualcustomer meetings and events via
phone or video calls.
Over the years, despite the challenges
in our operating environment, serving
customers and providing essentialbanking services has been our priority.

ANZ 2020 Annual Report15Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Becoming a fairer and more responsible bank
We continue to act in response to the ‘spirit and letter’ of the Royal Commission into Misconduct
in the Banking, Superannuation and Financial Services Industry (the Royal Commission).
Last year we developed an integrated response (‘roadmap’)to act on:• the lessons we identified from our misconduct and failures
to meet community standards and expectations; and• the themes raised in our 2018 APRA Self-Assessment reportacross culture, governance and accountability.
While there has been significant focus this year on the impactsof COVID-19, we recognise the importance of delivering on ourroadmap. Work on the roadmap has continued to deliver better
outcomes for our customers, our people and other stakeholders.
We remain committed to learn from our failures and build a bankthat is worthy of the trust and respect of our customers and thecommunity.

Integrated response to the Royal Commission
and the APRA Self-Assessment

Many of the recommendations in the Royal Commission’s
final report require legislative change. We continue to engage
constructively with government, regulators and industry as
they respond to these.

APRA Self-Assessment
Our roadmap is a multi-year program with defined success measuresand targets in place for each of the five focus areas. These areregularly reviewed and updated to ensure they remain relevant.
Governance and Accountability – The Board has committed tomaintain effective oversight of management’s implementation of
the roadmap and receives quarterly updates.

Our Royal Commission and Self-Assessment Oversight Group
monitors the progress with our roadmap. The Oversight Group is
co-chaired by our Deputy CEO and Chief Risk Officer and provides
regular updates on our progress to the Executive Committee andthe Board.

• Our Banking Executive Accountability Regime (BEAR) outputs
have assisted to clarify and strengthen accountability. BEAR
implementation is aligned with our three lines of defence andembedded within our governance, control and risk management
arrangements.

Our roadmap has five focus areas: Culture; Governance andAccountability; Management of Operational Risk; Remediation;and Simplification. Executive Committee members have‘ownership’ of each focus area.

• We introduced a strengthened Accountability and Consequence
Framework in June 2019, with expanded public disclosure ofsenior management consequences. The first annual effectiveness
review of the Framework was completed in February 2020, withenhancements implemented.

Delivering on our roadmap will give us confidence that thelessons of the Royal Commission and the themes raised in
our Self-Assessment report have been acted on.

Royal Commission
We made 16 commitments as part of our response to the Royal
Commission, to improve the treatment of retail customers, small
businesses and farmers in Australia.
• We have completed 11 commitments to date. We have taken
action on distressed agricultural loans; remuneration of frontline staff; the Retail Banking Remuneration Review (Sedgwick)recommendations; culture and governance; and reporting on
remediation of existing failures.
• Of the remaining five commitments, four are dependent on
the finalisation of related legislation, and one is ongoing as we
continue to assess our culture and respond where changes
are required.

16• We provide public updates on our progress to implement
the Royal Commission recommendations to the House ofRepresentatives Standing Committee on Economics. Our mostrecent update as at 21 August 2020 is available on anz.com.

Culture – We are working towards our aspirational culture andcreating an environment where employees are motivated and'speak up', when they see something wrong. Our Board and theexecutive Enterprise Culture Steering Group provide oversight.
• We promote a strong ‘speak up’ culture. Our most recent
internal employee engagement survey showed an uplift of
5% (from 69% to 74%) in response to the question ‘I can raiseissues and concerns in ANZ without fear of reprisals or negative
consequences’.
• We changed how we financially reward, recognise and manage
the performance of our people to reduce the risk of outcomesthat are not in our customers' best interests, and to support
collaboration, team performance and encourage long-term
thinking. Variable remuneration is now a smaller part of
take-home pay.

• We are building leadership capability to have regular and better
quality performance and coaching conversations, focusing on
outcomes and behaviours.
• We care about our customers. Our Royal Commissioncommitments improve the treatment of retail customers,
small businesses and farmers in Australia.
• Our Dispute Resolution Principles aim to help us be moreaccountable and transparent. We reviewed and updated ourprinciples in November 2019. The principles apply to our people
and our representatives when managing individual retail andsmall business customer complaints, disputes and litigation inAustralia. The principles are available on anz.com.
– The dedicated Indigenous telephone service we establishedin May 2019 has answered 6,641calls since inception, withan average speed to answer of 62 seconds as at
30 September 2020.
– We committed to the Australian Financial Complaints
Authority’s (AFCA) ‘look back’ under its new limits, and to
fully cooperate with AFCA as it resolves disputes. We
established a dedicated team responsible for investigating
legacy complaints, which could be lodged with AFCA until
30 June 2020. 179 legacy complaints were lodged, of which
134 have been closed. The remaining 45 cases are at various
stages of the AFCA process and we remain committed toresolving these where possible.
Management of Operational Risk – We continue to invest ina simplified operating environment, improved strength of systems
and processes, improved control effectiveness, and improved
risk capability.

Strengthening our approach to human rights
We recognise our business activities can have humanrights impacts. To manage these impacts we embed our
expectations across our business activities and relationships
via group-wide policies, training programs, and customer
and supplier screening tools and policies.
This year we commenced a review to strengthen our humanrights policies and processes, aligning our approach moreclosely with the UN Guiding Principles on Business andHuman Rights. This has included a review of our minimum
standards for business customer grievance mechanisms andcommunity engagement, which we expect to complete in
2021. Our approach is being informed by a working groupof external stakeholders, including NGOs, academics, tradeunions, customers, industry associations and humanrights consultants.1
Modern slavery

We are preparing our first statement in response to theAustralian Modern Slavery Act.
Modern slavery is serious exploitation of people which
undermines or deprives them of their freedom including
forced labour, deceptive recruiting and child labour.
The Australian legislation requires us to identify, assess andmanage risks in our business operations and supply chain.
We have identified three key areas in which to improve
our practices:

Remediation – Our customer remediation program continues.
An update on our progress is included on page 21 of this report.

• building awareness of modern slavery throughtraining and education;

Simplification – We have taken strategic action to simplify our• policy and process improvements; andbusiness, products and processes. For example, we completed
the sale of our New Zealand asset finance business, UDC Finance,in September 2020; and we completed the sale of our Pensions andInvestments business to IOOF Holdings Limited on 31 January 2020.

Further detail on our approach to human rights is in
our 2020 ESG Supplement available at anz.com/cs.

• enhancing our due diligence.

1. Their involvement does not infer endorsement of the outcomes of this review or other work carried out by ANZ.

ANZ 2020 Annual Report17Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our customers
Supporting our customers through the Australian bushfires and COVID-19 pandemic has been
our primary focus this year, but we have not lost sight of our longer-term priorities – to help
improve the financial wellbeing of our customers and to increase access to more affordable
and sustainable homes.
We are seeking to ensure our products are suited to our customers’
needs and meeting expectations. We are implementing digitalbanking solutions designed to improve financial wellbeing, andprotecting customers from those seeking to take criminal advantageof the shift to digital banking. We are listening to customers andmanaging complaints, taking steps to remediate when necessary
and learning from our mistakes. And we are supporting innovative
housing delivery models across the private, public and not-for-profit
sectors to increase the availability and affordability of homes
in Australia and New Zealand.

Product suitability

Supporting customers during difficult times

Improving customer experience throughdigital innovation

Financial relief packages were implemented quickly to support
customers affected by the bushfires that devastated parts ofAustralia over the summer months. This included the ability tosuspend loan and credit card repayments, temporary interest rate
relief, and early access to term deposit funds without incurring fees.
Specialised ATMs were deployed to impacted centres, and hardshipsupport was provided through referrals and funding to community
counselling services. Proactive contact was made with small
business customers in affected areas and through our insurance
partner QBE, prioritisation was given to claims, including emergency
payments and temporary accommodation costs.
See page 8 for information on how we are supporting ourcustomers during the COVID-19 pandemic. For discussion on thespecific supports available to customers experiencing vulnerability
see our 2020 ESG Supplement available at anz.com/cs.

We are helping our customers better understand how to get morevalue from their products – such as by showing them how to adjust
their use of a particular product, or identifying when there may be
an alternative product better suited to their needs. Our Product
Suitability team develops and manages a number of customer
contact programs to support improved customer outcomes andenhance customers’ financial wellbeing. Program results arereported quarterly to the Board.

We need to ensure our customers can rely on us to provide themwith secure remote access to banking products and services.
Digital platforms such as mobile and internet banking make itpossible for customers to serve themselves, anywhere, anytime andwe are adapting the way we operate to respond to our customers'changing banking habits.
The COVID-19 pandemic has accelerated the shift to digital banking,with mobile phone banking our fastest growing channel. We haveprovided additional education and support for customers using
digital channels for the first time this year, with 300 extra staff
retrained and deployed to assist.
PM

2–4A.M.
PEAK

PM

In Australia, the ANZ App
is helping 3.2 million
customers stay on top of
their day-to-day banking.
PEAK

PM

PM

2–4A.M.

51,000 LOGINSPEAKPeak usage on the ANZ App is
between 4–6pm, and even during
our quietest time between 2–4am,
we see an average of 51,000 logins

2–3A.M.

10,000 CUSTOMERSPeak usage for internet banking
is between 1–2pm, and during ourquietest time between 2–3am, weserve almost 10,000 customers.

2–3A.M.
PEAK

Over the last 12 months we have rolled out several new self-service features to the
ANZ App, including the ability to open new accounts, activate a card, set or change
a card PIN and temporarily block and unblock a card to protect an account fromtheft and fraud. To date, more than 22,000 new accounts have been opened, 760,000
debit and credit cards have been activated, 807,700 card pins have been set orchanged, and 45,300 temporarily block and unblock card requests have beenprocessed through the ANZ App.

18

The ANZ App won
Money Magazine’s
Mobile Banking Appof the Year 2020

HIGHLIGHT

INCREASING THE VALUE CUSTOMERS RECEIVE FROM OUR PRODUCTS

Our Concession Account Suitability program contacts customers in receipt of eligible Centrelink or Veterans’ Affairs benefits with
an offer to move to a low-cost basic bank account. To date we have contacted more than 335,000 customers (210,000 this year) withmore than 14,600 taking up the offer to move to a basic account. From 19 March to 22 July the program was paused as we shifted
our focus to supporting customers impacted by COVID-19.
Our Persistent Credit Card Debt program identifies and contacts credit card customers who are carrying persistent debt1 on theircard to help them pay their debt faster. Customers are offered financial education, and the opportunity to close their card and repay
the remaining debt at a lower interest rate. To date, we have contacted 18,195 customers with 1,450 customers taking up the offer.
This program was also paused while we focused on supporting customers impacted by COVID-19.

We are implementing digital solutions designed to make banking
easier and improve the financial wellbeing of our customers.
In Australia, we launched the ‘set a savings goal’ feature in the ANZ
App to help customers better manage their money and develop
savings habits. Customers receive personalised in-app notifications,encouraging them to set a goal, stay on track and celebrate
milestones along the way. One in 10 active App users has set a goal
this year. There are now more than 240,800 active or achieved goals
in the App, with 24% of these saving for a house, followed by aholiday (17%).
In New Zealand, we introduced several new self-service features to
ANZ goMoney and internet banking, including fixed-rate rollovers.
Customers with an existing fixed-term home loan or flexi homeloan, who want to fix their rate, can now request a personalised rate
for their loan facility and term (based on current market rates)
without needing to call us or visit a branch. One third of all homeloan fixed-rate requests are now completed digitally.
We also implemented customer alerts to mobile phones, letting
customers know when they receive a deposit or have a low balance,
assisting them to manage their finances.

Protecting our customers in a digital world
We have seen a significant increase in malicious emails
seeking to take advantage of our customers, withcyber criminals capitalising on more internet traffic
during the COVID-19 pandemic. Malicious email
tactics include those that claim to have links to mapsof virus outbreaks and related information, tricking people into
downloading malicious software.
The threat landscape is changing at a rapid pace, and we have
responded in kind, moving to leverage automation, machinelearning and advanced analytics. We invest heavily in our cybersecurity capability, and remain in a strong position to keep our
systems, data and customers safe from the increasing pace, scaleand sophistication of cyber attacks.
Our threat intelligence and 24/7 Security Operations Centre analyses
millions of data events every day to help keep customers, employees
and the bank safe online. As malicious campaigns are identified, we
implement targeted, automated capability to block them.

During a 30 day period near the start of the pandemic we blockedaround 550,000 COVID-19-themed emails, and during July 2020 weblocked over 12 million malicious emails alone, an increase of morethan 8 million emails compared to October 2019.
In the context of the changing threat landscape, ANZ did report amajor security event to the Reserve Bank of New Zealand and theAustralian Prudential Regulation Authority in the financial year 2020,
as a result of a distributed denial of service2 attack in New Zealand.
While this attack was similar to what was experienced by otherorganisations, we were able to proactively detect the activity andmitigate the risks through preventative security controls, resulting inminimal disruption to our operations and customer services, and no
impact to customer data.

HIGHLIGHT

MAKING SMALL BUSINESS LENDING EASIER

This year we launched ANZ Online Business Lending. The
platform provides conditional approval for up to $200,000 in
unsecured lending in as little as 20 minutes and access tofunds within four days. Customers using ANZ Online
Business Lending have access to fixed-and variable-termloans as well as overdraft facilities.
As the economy recovers from the impacts of COVID-19,
helping small businesses to access capital in a fast andconvenient way is critical.
According to Mark Hand, ANZ’s Group Executive, Australia
Retail and Commercial Banking, “While the current
economic crisis will be devastating for some businesses,
there has also been a great deal of resilience and some will
be able to come out the other side even stronger. We’re also
starting to see new businesses being created to meet
emerging customer needs.
“This sophisticated new technology is deeply integrated
with ANZ’s existing platforms to provide our customers witha quick, simple and secure lending experience so they canspend more time running and growing their business.”

1. Where for at least the last 12 months a credit card has over 80% of the credit utilised and the customer has been paying 2–3% of the outstanding balance on average each month.
2. A distributed denial of service (DDoS) attack is an attempt to make an online service unavailable by overwhelming it with traffic.

ANZ 2020 Annual Report19Overview

How wecreate value

CHALLENGE

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Measuring customer experience

SCAM ASSIST

During the COVID-19 pandemic we have seen an increasein customers falling victim to scams, particularly remote
access and investment scams. Digital fraud attempts havealso increased.
In addition, we have seen a number of customers trying to
supplement lost earnings through investments purported
to be high-yield options, such as crypto-currencies.
In 2020, our Australian Scam Assist team investigatedover 5,000 individual scams impacting our Australian Retailand Commercial customers and recovered approximately$25 million on behalf of some of those impacted.
As an industry, we face significant challenges in helping
our customers not fall victim to scams. We work with law
enforcement agencies, collaborating on a number ofoperations to identify and disrupt Australian based actors,
particularly via the Fintel Alliance. Efforts to break-up criminal
syndicates are focused on three key actions: customer andemployee education; improved detection capabilities; andongoing support of law enforcement disruption activities.

One of the ways we measure the experience of our customers isthrough our strategic Net Promoter Score (NPS). NPS enables us togauge whether we are meeting customer needs and expectations
and how we are performing relative to peers. It is measured byasking customers how likely they are to recommend ANZ (on a 0–10
scale) and is calculated by subtracting the percentage of detractors(those who give a score of 0–6) from the percentage of promoters(those who give a 9 or 10).
While our performance relative to peers improved for our Australian
Retail customers, we failed to improve relative to peers for ourAustralian Commercial and New Zealand Retail and Commercial
customers. Our Institutional ranking remains at number one in both
Australia and New Zealand.

Managing customer complaints
Internal Dispute Resolution (IDR) plays a vital role in protecting
customers. Fair and robust IDR assists with recognising and fixing
problems that arise, both at an individual customer level and acrossthe business. It allows us to ‘hear’ where changes need to be madeand serves to inform us when we are not meeting customer orcommunity expectations.
In 2019 we commenced a program to review and improve our IDR
policies, systems and practices, with program updates provided to
the Board and ASIC. Capability and quality improvement initiatives
support our objectives of fair, consistent and well communicatedcomplaint outcomes to our customers.

NET PROMOTER SCORE
AUSTRALIA

Retail: ranked 3rd1
(up from 4th at end of 2019)

Commercial: ranked 4th2
(down from equal 3rd at end of 2019)

A foundational element of the IDR program was the establishmentof a Customer Resolution portfolio in early 2020, which is dedicatedto working with our customers when they have a problem:(no change from 2019)• senior executive leadership and complaint management
expertise has been introduced to drive IDR uplift, along withsupporting governance, data, analytics and transformation
capabilities.

Retail: ranked 4th4• the portfolio has been focused on improving the way we handle
our customers' complaints in order to solve complaints earlier andimprove the overall complaint resolution timeframes. Additional
complaint handling staff have been also recruited to support
timely complaint resolution.

Institutional: ranked 1st3

NEW ZEALAND(no change from 2019)

Commercial and agricultural:ranked 5th5(no change from 2019)

Institutional: ranked 1st

6(no change from 2019)• we appointed a Vulnerable Customer Lead to continue thedevelopment of the Divisional vulnerable customer strategy andprovide an important link as we support our customers during
the COVID-19 pandemic and other life changing events.

1. Roy Morgan Single Source, Australian population aged 14+, Main Financial Institution, six-month rolling average to September 2020. Ranking based on the four major Australian banks.
2. DBM Business Atlas. Base: Commercial Banking (<$100 million annual turnover) Main Financial Institution customers. Six-month average to September 2020. Ranking based on the four major
Australian banks. 3. Peter Lee Associates, 2020 Large Corporate and Institutional Relationship Banking surveys, Australia. 4. Retail Market Monitor, Camorra Research, six-month rolling average
to September 2020. Ranking based on the five major New Zealand banks. 5. Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3 million – $150 million annual turnover) andAgricultural (>$500,000 annual turnover) customers. Four-quarter rolling average to Q3 2020. 6. Peter Lee Associates, Large Corporate and Institutional Relationship Banking surveys, New
Zealand 2020, ranked against the Top 4 competitors.

20

Improving our IDR practices

We are continually trying to find ways in which we canencourage feedback in order to provide better experiences
and fair outcomes for customers. Some of the improvements
we are working on include:• development of a new and improved complaints recording
and management system• establishment of a Systemic Issues Management function
with a focus on using complaint data and advanced
techniques such as machine learning and artificial intelligenceto identify issues early• continued investment in the capability of our people and theefficiency of our processes to help customers resolve theircomplaints as quickly as possible.
Further information on customer complaint management
is in our 2020 ESG Supplement available at anz.com/cs.

Customer remediation
We are delivering on our commitment to fair, responsible andefficient customer remediation.
In an effort to fix our past mistakes as quickly as possible, we haveincreased remediation staffing levels significantly since 2018. Acrossthe Group there are now over 1,200 staff working on customer
remediation, with approximately half in dedicated remediation teams.
Our Australian Responsible Banking team is resolving identified
fee or interest discrepancies with over 5.2 million Retail andCommercial customer accounts. Since April 2018, we haverefunded approximately $223 million across approximately
2.9 million customer accounts7.
Our pace of remediation has been steadily increasing and overthe last 12 months we have remediated approximately 1.8 million
customer accounts, compared to approximately 1.1 million overthe 18 months to September 2019.8

Assisting potentially vulnerable customers
to access their money

At the start of the COVID-19 pandemic around 7,000 of ourcustomers only held a passbook account at ANZ. These
accounts do not have the option of an ATM card or access tointernet or phone banking. Customers with these accounts
are typically over 70 years old with their pension income paid
into this account.
We recognised that our customers may have had difficulty
accessing their money in the event of a temporary branchclosure, or if they wanted to self-isolate. Our bankers wereable to reach over 5,000 of these customers to check in onthem considering their specific vulnerability during the
COVID-19 pandemic. We also sent letters with information
on everyday accounts with a Visa debit card that can beused for online/phone shopping, and ATM/store withdrawals.
It also includes access to internet banking and no monthly
account service fees.
We developed a new process enabling customers to open
an everyday account from their home entirely over thephone. We also implemented a technology change toenable passbook customers to establish a recurring transfer
by phone to automatically transfer regular income, suchas pension payments, from their passbook accountto their new everyday account.

More than 500 of these
7,000 customers chose toopen an everyday account.
Over 100 of our passbook customers
set up a recurring transfer to movetheir pension income into theireveryday account.

In Australia, we have an education program to share ‘lessons learnt’and to highlight to staff the impacts on customers when we fail to
get it right. The program is aimed at raising awareness and fostering
a culture where employees are clear on the role they play indelivering quality customer outcomes and safeguarding ourcustomers’ interests.
The Group’s customer remediation activities are regularly reviewed
by the Board. Directors are provided an overview of the status ofremediation matters; regulator engagement; repayments andprovisioning; and reviews underway to identify new matters.

7. In certain instances:•	we make a payment to one of our community partners in lieu of a payment to a customer account. As at 30 September 2020 payments were made to ~238k accounts totalling $744k•	we pay the customer via cheque. As at 30 September 2020 cheques had been issued for ~521k accounts totalling ~$59m. A portion of the cheques remain unpresented•	we offer certain customers access to payment via a payment portal. As at 30 September 2020 offers to access payment via payment portal have been issued for ~10k accounts totalling ~$379k•	we transfer payments through a process for unclaimed monies (includes payments for de-registered companies). As at 30 September 2020 payments transferred via this process have been
made for ~2k accounts totalling ~$1m.
8. The matter is considered complete when all customer payments have been processed. In some cases, remediation teams may continue to close out non-customer payments,
documentation and governance requirements beyond this point.

ANZ 2020 Annual Report21Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Improving the availability of suitable and affordable housing
Housing-related lending is a key activity ofthe bank. We lend to home owners andinvestors, and for property development
and infrastructure. We believe we can play arole in helping improve the availability andaffordability of housing, including support
for innovative housing delivery models acrossthe private, public and not-for-profit sectors.
At the end of 2018 we committed to fundand facilitate $1 billion of investment
by 2023 to deliver around 3,200 more
affordable, secure and sustainable homes
to buy and rent in Australia. We haveexceeded this target.1
In addition to the $1.02 billion of investment inAustralia, we have also funded and facilitatedaround NZ$1.35 billion to support the delivery
of social and sustainable housing across
New Zealand.

HOUSING

We have continued to build our housing
supply pipeline through direct engagementwith our clients (new and existing),
supporting innovative models to financenew supply.
This year we have:• jointly arranged two additional bondissuances for the Commonwealth’s
National Housing Finance and Investment
Corporation (NHFIC), including the largest
social bond for housing in Australia($562 million)• arranged bonds for Kāinga Ora (Housing
New Zealand Corporation) to support thedelivery of more social and sustainablehousing (jointly NZ$1 billion; solely
NZ$300 million)• supported the first Assemble Model,
designed to bridge the gap between
renting and owning a home to market2• invested in the development of aSpecialist Disability Accommodation(SDA) pipeline• helped build the case for institutional
investment in long-term rental housing
through the backing of a range of‘build-to-hold’ projects.
We have committed to increase ourtarget to fund and facilitate $10 billionof investment by 2030 to deliver more
affordable, accessible and sustainable
homes to buy and rent in Australia
and New Zealand.

DELIVERING ACCESSIBLE HOUSING OPTIONS TO MARKET

As part of the roll-out of the National
Disability Insurance Scheme (NDIS) in
Australia the government has contributed
funding to Specialist Disability
Accommodation (SDA) to encourage
investment in the development of new
high-quality housing for eligible people.
Our Corporate and Institutional Healthteam is developing its expertise andcapacity to ensure our ability to support
this much needed housing supply tomarket. The benefits to help deliver better
connection and opportunity for people
in SDA are key drivers of our interest ininvesting in this emerging asset class.
Over the course of this year, ANZ has
provided credit approved commitments
in excess of $100 million to the SDA sector
and closed its first transactions, partneringwith our clients to deliver SDA housing
and to aid them to grow a pipeline of
new homes across the country.
We have also worked with our existing
property clients to facilitate the inclusionof SDA as a pre-sale element in theirproperty developments. This has allowed
them to partner with developer, Summer
Housing, to include disability housing inmixed developments, providing residents
with access to services and supports.
Our support is broader than debt capital,
with the Summer Foundation receivinga 2019/20 ANZ Community Grant tosupport the roll-out of their Tenancy
Matching service.
“I am thrilled to be assisting people tonavigate their own housing journey,
courtesy of the ANZ Community
Foundation, which funded a Summer
Foundation project to deliver housing
workshops in Tasmania for people withdisability and their families,” said Liz Ellis,
Summer Foundation convenor.
The workshops helped participants to
identify where they wanted to live andto consider their specific housing needs
and preferences. They also provided
guidance on the different housing
models available – including SDA(through the NDIS) and affordable housing.

Summer Housing project

1. Due to the lag between financing and commencement of development, number of homes will be audited and disclosed once projects have been delivered. 2. The Assemble Model is a
new ‘build-to-rent-to-own’ hybrid model that bridges the gap between renting and owning a home. It offers residents a five-year lease with the option to purchase their home at the end of
the lease. The purchase price is fixed from the start of the lease, giving residents a set goal to save towards and mitigating the risk of being priced out of the market during the rental period.

22

HOUSING

INVESTING IN SOCIAL AND AFFORDABLE HOUSING IN NEW ZEALAND

Following the wellbeing bonds we arranged for Housing New Zealand Corporation in 2019, this year we jointly led NZ$1 billionof bond issuances and a sole placement of NZ$300 million for Kāinga Ora – Homes and Communities, to deliver an additional 8,000
new public housing and transitional housing places. All new homes will be built to 6 Homestar, meaning they will far exceed
Building Code (NZ) standards for warmth, dryness and health.
As part of Kāinga Ora’s ongoing build program, already more than 3,000 public housing homes have been built with this ratingaround New Zealand. Not only are these new homes warm and dry, they also contribute to improved financial wellbeing of tenants,
with energy savings estimated to be NZ$570 per household every year.
Kāinga Ora brings together the KiwiBuild Unit, Housing New Zealand and its development subsidiary HLC, and is designed to enable
a more cohesive approach to delivering the government’s priorities for housing and urban development in New Zealand.

In the last 12 months,
we have lent over$60b, helping
more than 170,000
customers in Australia
buy a home.

In the last 12 months,
we have lent over
NZ$18b, helping
more than 55,000
customers in New
Zealand buy a home.

LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK

Despite the serious challenges faced by the banking sector and community this year, our actions over previous years to simplify
and strengthen the bank provided us with the capacity to support our customers at a time of need and strengthen our long-term
relationships. While the focus has been on assisting customers in need, there has also been opportunity to build new customer
relationships and enable more digital services that have been especially valued in a restricted COVID-19 environment. Institutional
performance in key customer satisfaction/relationship strength surveys continued to be a highlight, and a new online payments
experience has been processing ~1 million payments daily and providing digital self-service for Institutional customers.
See section 4.5.3 of the Remuneration report for more details.

ANZ 2020 Annual Report23Overview

How wecreate value

Performanceoverview

CUSTOMER STORY

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

ADAPTING

Opportunities arise inchallenging times

Mount Zero Olives is a small,family-owned and operated
business in the Grampians inregional Victoria, producing
and processing certified
organic olives, olive oiland table fruit.
They also partner withlocal growers to produce a
range of pulses and grains.
Supplying predominantly
to restaurants throughout
Australia, the businesshas been hit hard by the
COVID-19 pandemic.
General Manager, Richard Seymour recalls
the moment he first realised they were infor tough times.
“I have a really vivid memory of when thepin was pulled on the Melbourne GrandPrix in March and I knew we were in for aworld of change.”
An ANZ customer for almost two decades,
Richard found himself drawing on hisstrong relationship with the bank,developing a roadmap to guide thebusiness through the pandemic.

24“With the help of ANZ and our businessadvisor, we put together a vision which saw
us quickly pivot to engaging directly withcustomers through an online platform. In amatter of months, we’ve been able to growwhat was around 5% of direct sales tocustomers, to around 35%.”
Mount Zero’s customers have always valued
its sense of brand, the foundation of which,according to Richard, is its proud heritage
as a family business that values
sustainability and supports ‘local’.

“This has really resonated with ourcustomers during the pandemic, as they’vebeen able to reach out to a businessdirectly that was already quite tangible tothem, and not just a paper wrapper on a
product on a supermarket shelf. They know
who we are, where we are from and what
we stand for, and they’ve supported us forthese reasons.”“As horrible as the outlook is for many small
businesses due to the pandemic, it haspresented an opportunity to drive change
and come out stronger on the other side, andfor that, we’re really grateful,” says Richard.

Our divisions
Australia Retail and Commercial"This year has been an extremely tough time
for our customers. We know not every businesswill survive but we also know there is opportunity
for others. We will be working closely withour customers – no matter their situation –to understand their need and to find solutions
that will help them succeed in the future." ark Hand, Group Executive Australia
M
Retail and Commercial Banking

Operating environment
Between drought, bushfires and COVID-19 it
has been a tough year for the economy andmany of our customers.
Unprecedented levels of fiscal stimulus
have so far sheltered Australia from theworst economic impacts and some areas ofthe economy are seeing opportunity, suchas online retail, home exercise equipment
and pet supplies.
Retail customers are accelerating theirshift to online and mobile banking, limiting
branch visits and moving away from cash,
credit cards and personal loans. Insteadthey’ve been saving more, reducing debt
and refinancing their mortgages.
Although Australia is yet to return to normal
activity, businesses are increasingly adapting
to the new environment. Many of ourcommercial customers have proactively
managed costs, been conservative withcapital, and innovated during this crisis.
While we face headwinds from theeconomic contraction, lower business
confidence and higher unemployment, weare focused on supporting our customers,
adapting to the changing environment,
and preparing for a more digital future.

Strategy and focus
Our goal is to be a simpler, more efficient,well-managed business, that is the bankof choice for Australian home owners andbusiness owners. Our priorities are tocontinue to fix our past mistakes, growstrategically and sustainably, reshape ourbusiness for a post-COVID world andprepare for a digitally-enabled and highly
automated future. We are investing in thebusiness through the economic cycle while
continuing to reduce costs to a moresustainable level.
Fixing past mistakes and returning money
owed to customers quickly remains animportant focus. Since April 2018 we have
remediated approximately 2.9 million
customer accounts and issued refundsof approximately $223 million.
We further simplified the business,
including by introducing a more targeted
approach in the Financial Advice businessto focus on affluent and high net worthclients, and announced the sale of 1,300
offsite ATMs to Armaguard.
Across our branch network, we invested
heavily to open digital branches providing
customers with new self-service options,
including smart (deposit taking) ATMs andbusiness cash deposit machines. We also
restored momentum in the home loan
book growing it by ~$10 billion in theyear to $275 billion.
We launched our new Online Business
Lending platform providing small businesses
with conditional approval for up to $200,000
in unsecured lending in as little as 20 minutes,
and access to funds within four days.

Performance highlights
Our response to the shifting environment
has had a very real short-term financial
impact – on revenue, profitability and returns.

Cash profit declined by 27% in 2020
compared to the prior year. Throughcontinued discipline, costs remain
well managed, flat year on year.
Mortgage sales volumes are back to 2017
levels, and Retail and Commercial deposits
are up by $12.7 billion and $13.9 billion
respectively. With lower levels of demandfor credit, commercial lending was flat.
In response to the pandemic we haveprovided assistance to our retail andcommercial customers, including deferrals
on home loans, personal loans, credit cards,
business loans and asset finance as well as
temporary overdraft increases. Around95,000 home loans and 23,000 businessloans received repayment deferrals. We also
increased the size of our hardship team and,diverted branch staff to support the 65%
increase in customer calls for support.
We contributed to communities throughour bushfire financial relief package forcustomers, donated more than $1 million
to support customers and communities
impacted by the fires, and extended our
special paid leave for employees who
volunteer in emergency services.
We received a number of awards, including
Money Magazine’s Mobile Banking App of
the Year, ANZ Canstar’s Small Business Bankof the Year Award for the third consecutive
year and Agribusiness Bank of the YearAward. ANZ Private Bank won a numberof awards, notably ranking #1 in four
categories in Euromoney’s peer-voted
Private Banking and Wealth Management
2020 Survey, including Best Overall.

ANZ 2020 Annual Report25Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Institutional“In Institutional, our global network positioned us
well to move quickly to respond to the pandemic
and support our valued, long-term customers.
We also mobilised our digital channels to managea sharp rise in transaction volumes, while working
closely with our customers to keep them cyber-safe.”
Mark Whelan,Group Executive Institutional

Operating conditions
The external environment was challenging
in 2020, particularly in the second half as
COVID-19 impacted the global economy
and supply chains. The pandemic led to
sharply lower levels of activity in every
geography and many sectors, and introduced
significant uncertainty about the future for
our Institutional customers. These immediatechallenges were also conflated with disruptive
structural change and geopolitical issues.
At the same time, these disruptions resulted
in strong activity in our markets and lending
businesses, which responded swiftly to market
volatility and unprecedented demand for
liquidity. With a presence in 33 markets
globally, our diverse business was preparedto support our customers and staff in ourhome markets and internationally.
The pandemic has increased competition, andrecord low interest rates continue to narrowmargins and place pressure on revenue.
Slower global demand and competition
led to lower trade finance volumes andrevenues. In the face of these conditions,
Institutional continues to sharpen its focus
on the right customers in priority sectors
and further invest in digital, data andautomation to strengthen the business.

markets, valued our network and were inindustries where ANZ had strong expertise.
Four years on, this strategy is wellprogressed. We have reshaped the business,diversified our revenue streams with greater
emphasis on lower capital-intensive products,
consistently reduced operating costs, andstrengthened our culture, while clearly
establishing our position as the leading
relationship bank in the region.
In the early days of the pandemic we wereable to move quickly to support our key
customers, and in the 6 months to endMarch provided $16 billion1 in additional
lending globally. We maintained adisciplined approach to pricing for risk
and capital management, and undertook
rigorous stress testing to manage credit risk.
Lending volumes declined in the second
half as global capital market conditions
improved, enabling customers to accessdebt and equity markets and repay bankdebt. Credit Risk Weighted Assets ended
the year broadly flat.

Strategy and focus

Through the pandemic, our digital channels
came to the fore, and payment volumes
increased 9.4% year on year. We supported
hundreds of customers working from homeby providing secure remote access via web
and mobile, and helped reduce customer
net losses from fraud by 62%.

In 2016, Institutional laid out a strategy tobuild the best bank for clients moving goods
and capital across the region. Our aim was tobe simpler for our customers and employees,
resilient through the cycle and increase returnon equity. We became more targeted andfocused on customers who would benefit
from regional growth, had a link to our home

We were recognised for supporting ourcustomers, and we maintained our leading
market positions across key geographies(#1 in Australia and New Zealand2, #5 inAsia3 for market penetration). This included#1 for overall relationship quality in Asia3and #1 for Net Promoter Score inAustralia and New Zealand2.

Performance highlights
Institutional continued to deliver the benefitsof a simpler, more disciplined and resilientbusiness in 2020, delivering 1% cash profit
growth compared to the prior year despite
tougher economic conditions. Net loans andadvances declined 4% after peaking in the
middle of the year, while customer deposits
grew 3%.
The results demonstrated the valueof customer, product and geographic
diversification within the business. In a
low interest rate environment, Transaction
Banking and Corporate Finance revenue
declined in 2020, down 15% and 1%
respectively. Markets revenue increased by
49%, as customers sought to manage theirfinancial risks amidst heightened volatility
in Global Markets.
Geographically, lower profit in Australia wasoffset in Asia Pacific, Europe & America and
New Zealand, mainly due to higher markets
revenue as customers managed foreignexchange, interest rate, credit andcommodity price risks.
The Division’s focus on productivity
contributed to another year of cost reduction,with lower full time equivalent staff, property
efficiencies and reduced discretionary spend.
Credit charges increased with tougher
economic conditions and lower forecast
economic growth, however, the credit
quality of the book remains strong.
Through 2020, ANZ Institutional helped
arrange the largest social bond by anAustralian issuer for the National Housing
Finance and Investment Corporation, as wellas $72 billion in funding for the AustralianGovernment’s COVID-19 support package.

1. Institutional Gross Loans and Advances excluding FX and Markets 2. Peter Lee Associates 2020 Large Corporate and Institutional Relationship Banking surveys, Australia & New Zealand.
3. Greenwich Associates 2019 Asian Large Corporate Banking study

26

New Zealand“As New Zealand’s largest bank, we’ve been in a uniqueposition to assist thousands of businesses and many moreindividuals through what has been a tough year for many.
Despite a challenging year, I’m proud that we’ve been able
to continue to support our customers, our communities
and our people.”
Antonia Watson, Chief Executive Officer New ZealandOperating conditions
Throughout the COVID-19 pandemic New
Zealand’s economy remained in an enviable
position relative to many others.
The housing market responded to record
low home loan rates, while being shieldedfrom the economic slowdown by the
mortgage payment deferral scheme andthe government’s wage subsidy scheme.
Surveyed business activity indicators
have increased since February 2020, now atsimilar levels to pre-pandemic, brightening
the outlook for near-term growth.
However, uncertainty, rising unemployment
and winding down of income support
measures will cause some discomfort,
and the impact of the closed border willplay a role in the economy for some time.
Helpfully, and providing some offset,
New Zealand’s export prices are holding
up, indicated by ongoing resilience inexport prices relative to other commodities
and strong operational models in ourcore industries.
The Reserve Bank of New Zealand hastaken a medium-term outlook with acurrent focus on quantitative easing.
They confirmed increased capitalrequirements, originally due to start taking
effect from July 2020, have been delayedby at least one year.

Business focus
We remain committed to delivering greatcustomer experiences and outcomes.
ANZ New Zealand implemented key
government-led initiatives in response to
COVID-19 and a major program of reduced
fees, charges and interest rates.

ANZ led the waiving of Merchant Service
Fees on existing customers’ contactless
debit capability for a limited time andpermanently reduced them after the
COVID-19 lockdown.
Since the pandemic we have provided
financial help to around 43,000 personal,
home and business loan customers throughrepayment deferrals, restructures oradjustments, covering lending of around
NZ$27 billion.
Data and digital initiatives included thelaunch of our electronic verification anduse of data to identify customers who
may be experiencing hardship.
We continued refining our physicalpresence to fewer, improved branches
and reduced hours for selected regional
branches, enabling an efficient andsimplified operating model. ANZ New
Zealand is part of an industry-led trial
for banking hubs in regional areas.
We completed the sale of UDC Finance
Limited to Shinsei Bank in line with oursimplification strategy.
We announced the Bonus Bonds Businesswould close to new investment and that
we intend to start winding up the schemeby the end of October 2020.
In the environmental space, ANZ provided
public submissions to government, completed
New Zealand’s first sustainability-linked loan
and arranged the country’s first inflationlinked sustainability bond.
We aided farmers’ decision-making throughproprietary digital tools including our dairy
and red meat dashboards and a geospatial
tool that analyses weather, soil andcontour data.

Performance highlights
Despite difficult conditions, we maintained
a leading position in core banking productswith ~31% share of mortgages and ~33%
share of households deposits (August 2020)and ~22% share of KiwiSaver (June 2020).
Net loan and advances were flat for the year,
underlying1 net loans and advances grewby 3%, driven by home lending growth of
6%, and the housing market has remained
reasonably resilient.
Customer deposits grew 9% aided byinflows from the government’s wage subsidy
scheme and increased system liquidity
following quantitative easing measuresfrom the RBNZ.
Revenue was impacted by interest-marginpressure from record low interest rates,
simplifying and reducing fees, and a range of
fee waivers initiated to support customers.
Higher credit impairment charges had amaterial impact on our results with asubstantial increase in collective provisions,recognising the possible impacts of future
economic and operating conditions.
Despite a trying year, our staff continued
to play a role in their communities. Many
helped to plant more than 25,000 trees
across New Zealand as part of ourpartnership with Sustainable Coastlines,
and volunteered over 6,000 hours.
Our payroll giving scheme allocated over
NZ $650,000 to 60 charities, and staff
donating to the ANZ New Zealand Staff
Foundation grew from 24.5% to 25.9%.
ANZ donated a total of NZ$2m to Women’s
Refuge, Age Concern New Zealand and theSalvation Army’s foodbank network to
support people through COVID-19, andNZ$1m to grassroots cricket and netballclubs and initiatives nation wide.

1. Adjusting for the sale of UDC

ANZ 2020 Annual Report27Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our people
Much of our focus thisyear has been on mobilisingresources to support thechanging needs of ourcustomers and businessduring the COVID-19
pandemic.
While we have continued to develop theculture, capabilities and behaviours needed
to deliver our strategy, our top priority has
been to protect our people, keeping themsafe and well. As discussed on pages 8–9,
our Group-wide COVID-19 response plan
includes supports for vulnerable employees,
employees working from home and thoseon the frontline supporting our customers.

Mobilising our resources
to meet demand
During March we began to experience a
dramatic increase in calls to our dedicatedhardship team in Australia. We received
around four years worth of hardship
applications in the space of only threemonths as almost 94,0001 customers
impacted by COVID-19 sought assistance.

EMPLOYEE STORYThe ‘Beyond the Branch’ program was launched earlier this year and assists
branch employees to move to business areas requiring additional resources
to meet increased customer demand as a result of COVID-19.
We benefit from transferring ourbranch employees’ customer focus
and experience to the areas of greatest
customer need – including our Customer
Contact Centre, Customer Service
Operations and Customer Resolution– and employees benefit from theopportunity to diversify their skillset
and broaden their career.
The program involves:• identifying the in-demand roles
that are a match for branch
employees;• distributing these roles acrossAustralia, rather than having thembased in our Melbourne head office;• actively promoting and providing
visibility of the opportunities; and• soliciting the support of seniorbranch staff to advocate for the
program and actively support
people moving into these roles.

In response, we developed COVID-19 ‘Talent
Mobility Principles’, the purpose of which
was to ensure we had ‘the right people, in
the right locations, at the right time’, tomeet customer and community needs
during the pandemic.
A campaign was run across Australia,
New Zealand and India to help employees
self-identify their skills and desire to moveinto critical areas of the business, such as
our Customer Contact Centre. Over 1,000
hours of customised virtual training wasdelivered to over 700 staff across ourCustomer Service Operations team andbranches to assist them to move temporarily
to in-demand roles. We have also recruited
approximately 185 new hardship consultants
and provided over 23,000 hours of training
to our Customer Connect (Hardship) teamto ensure ongoing support for our customers
on a COVID-19 assistance package.

1. Requests for COVID-19 assistance received between 1 March 2020 and 31 May 2020.

28

LIFE BEYOND THE BRANCH

Many branch employees have moved
into the Collections and Hardship teamas part of the program. We have also
set up ‘hubs’ in Western Australia, with
Queensland and New South Wales soon
to follow, so as to ‘tap into’ the capabilityof branch staff outside of Victoria.
Solarah Jupp has recently moved
from a branch into the Collectionsand Hardship team.
“I originally applied for 'Beyond theBranch' as I believed the roles suited
my skillset and I was really looking for
a new challenge. Going through thisexperience has meant the world to me– it has broadened my career horizons
far beyond what I could have thoughtpossible in branch. I feel excited for the
future and I’m looking forward to thenext challenge.”
As at 30 September, 197 'Beyond theBranch' roles have been filled, with roles
available in every state in Australia.

Employee engagement

In April, our engagement
result increased to 86%(up from the 77% in 2019),
with increases across allareas of the bank. This is atestament to the resilienceof our people and theirability to adapt to thenew pressures
up 9
and challenges
pointspresented by
COVID-19.

94% of employees said
ANZ is supporting themduring the pandemic, and
95% said senior leaders
have beencommunicating
effectively.

In response to COVID-19
we launched the ‘Team
Health Check’, a newteam wellbeing survey,
and we continue to run
regular pulse surveys tomeasure engagement– results have remained
relatively stablesince April.

CultureThe success of our strategy is dependent
on embedding a culture focused ondelivering great customer outcomes,
making things simpler and always learning.
This work is underpinned by our purpose
and values.
We are taking steps to improve our culture
and are enhancing how we track andmeasure our progress. Our Enterprise
Culture Steering Group (ECSG), chaired by
the CEO and whose membership includes
other members of the Executive Committee,
plays a critical role in guiding our efforts
by helping us to understand our cultural
strengths and development areas.

ownership of outcomes. There aresome reoccurring themes with respect
to challenges, and we are seeking totackle these through initiatives focusedon leadership engagement and change
programs; networking sessions to improve
collaboration and role clarity across functions;and career development opportunities
such as secondments and ‘job shadowing’.

Accountability andConsequence Framework

This year the ECSG has considered theway our organisational culture has changed
during COVID-19, including the opportunities
and risks created by the pandemic – forexample, cross-team collaboration and afocus on execution were identified asstrengths that have enabled us to deliver
positive customer outcomes.

In 2020, we continued to strengthen
and embed the Accountability andConsequence Framework (A&CF). The
Consequence Review Group (CRG), which
is chaired by the CEO, supports the Board
in monitoring the implementation andongoing effectiveness of ANZ’s A&CF, being
cognisant of its impact on the culture of
ANZ. The CRG reviews material events,
accountability and the application ofsuitable consequences where appropriate.
See section 6 of the Remuneration
report for more details.

Culture assessments

Changes to remuneration

Our Internal Audit group has continued
to conduct culture reviews throughout theyear, supporting businesses and functions
to understand their culture and impact
on ANZ’s aspirational and risk culture.

As part of the Group’s Reimagining Reward
program effective 1 October 2019, we madeadjustments to the remuneration mix for
staff, which included replacing individual
variable remuneration for around 80% of
employees with variable remuneration
based on the overall performance of theGroup. These changes respond to many of
the concerns about ‘bonus culture’ raised in
the final report of the Royal Commission,and form part of the wide-ranging reforms
for 2020 regarding how we reward, recognise
and manage the performance of employees.

Assessments are undertaken through a
combination of quantitative and qualitative
analysis, including surveys, focus groups
and interviews. Since 2016, we haveconducted nearly 2,000 focus groups andinterviews and more than 25,000 employees
have participated in culture surveys.
Once complete, a report on cultural
themes, including underlying issues andrelated impacts, is provided to the business.
The business must then develop an action
plan to mitigate any identified cultural
challenges. The plan is monitored andthe effectiveness of the actions in shifting
towards the desired culture is reviewed
before it is ‘closed’.
Internal Audit completed 18 culture reviews
in 2020, 11 of which were re-assessments.
Actions undertaken to address cultural
challenges have generally been effective,
particularly where leaders have taken

We are implementing the recommendations
from Stephen Sedgwick’s ‘Retail Banking
Remuneration Review’, which is focusedon strengthening the alignment of retailbank incentives, sales practices and good
customer outcomes. Recommendations
ANZ is delivering independently are now
100% complete and were implemented
ahead of the October 2020 deadline. We
will continue to work with industry toprogress the remaining recommendations.
Management provides regular updates tothe Board Human Resources Committee
on progress.

ANZ 2020 Annual Report29Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

OUR NEW WAYS OF LEADINGBe
curiousCreatesharedclarity

Building workforce capability
To help our leaders support their teams
through COVID-19, we provided additional
guidance aligned to two of our desired
leadership behaviours (referred to as our‘New Ways of Leading’), ‘Creating Shared
Clarity’ and ‘Empowering People’. We want
our people leaders to display these behaviours
in order to inspire and engage their teams,
helping them to deliver on the bank’s
strategic imperatives. When we surveyed
our people in July, we saw an increase inleaders modelling all of these behaviours.
We introduced a ‘Leading Through Change’
program for our 7,500 people leaders in
July, to help them lead with confidence andoptimism during this period of ongoing andaccelerated change. On completion, leaders
are provided with new tools to support
themselves and their teams to improve
focus, adapt faster and be more productive.
We have also introduced a simpler andmore flexible approach to performance
management. This includes giving
employees the ability to create and document
meaningful performance and growthobjectives in our new People+ system.
We are continuing to develop priority
capabilities aligned with our strategy andaimed at ‘future-proofing’ our workforce– data and engineering are two key
capabilities on which we are focused.
We have recruited more than 500 softwareand systems engineers over the course of
the year. The COVID-19 pandemic has had
little effect on supply of this capability inthe market and critical engineering talentremains scarce. In response, we areinvesting in innovative recruitment

EmpowerpeopleConnectwith empathy

strategies and have a dedicated teamworking on talent marketing, proactive
sourcing, and continuous improvementof the recruitment approach.
We have continued to invest in thecapabilities of our people through theprovision of training and development
programs. Almost 970,000 hours of learning
were delivered in 2020, including over
530,000 hours of compliance training. Our
Way of Learning (OWL), our digital social
learning platform, enabled employees toaccess learning materials relevant to theircurrent roles and future career aspirations
while working from home. The ability toaccess digital content anywhere, anytime
and on any device led to a 29% increase in
self-directed content access across the bank.

Diversity and inclusion
We want our workforce to reflect thecommunities we serve and believe thatleveraging the diversity of our people will
drive innovation, making us a better bankfor our customers.
As we come to the end of our current suiteof public diversity and inclusion targets,
we have been reflecting on our progressand challenges.
Our Women in Leadership objective focuses
our effort on the categories with the lowest
levels of female representation, being our
Senior Executive, Executive and Senior
Manager populations of the bank. This workis the key to closing our gender pay gap.
Both our Key Management Personnel
and Group Executive Committee are now
gender balanced. The representation of
Women in Leadership1 increased this year

Grow people
selflessly

to 33.4 % (up from 32.5% as at September2019), falling short of our target of
34.1% by the end of 2020. Our progress
is monitored monthly by the CEO andthe Group Execution and Performance
Committee, and will remain a focus.
Over the last four years we have launched
our Spectrum Program – a tailored program
to support autistic individuals into theworkforce – and our Return to Work
Program for people who have taken a career
break. We have welcomed new employee
networks including Cultural Diversity &Inclusion, Faith and Mental Health &Wellbeing and been recognised as a leading
employer for LGBTIQ+ inclusion, inclusion ofpeople with disability and women. We aredeveloping our second ‘Stretch’ Reconciliation
Action Plan (RAP), reflecting and building on
the lessons learnt from our previous RAPs.
We have promoted the participation ofpeople from under-represented groups
in our workforce, including Aboriginal
and Torres Strait Islander peoples, people
with disability and refugees. Challenging
conditions, including most recently the
COVID-19 pandemic, have impacted ourgoal of recruiting >1000 people fromunder-represented groups. We recruited
185 people from under-represented groups
in 2020, bringing the total recruited since2016 to 919.
We are currently finalising our new
Diversity and Inclusion strategy and it will
inform our approach and commitmentsfor 2021 and beyond.
Our new Diversity and Inclusion Policy
is available at anz.com/corporate
governance.

LINKS TO 2020 GROUP PERFORMANCE FRAMEWORKIn a challenging year, significant capacity and attention was focused on managing through COVID-19 and the Australian bushfires,
however, strong progress was still made on key priorities including embedding our new reward framework, building strategic andleadership capabilities, and strengthening governance, accountability and culture. Highlights include a nine point increase in our
employee engagement score, reflecting our strong support for employees and clear senior leader communication during the
pandemic, as well as the enablement of significant increases in our remote working capacity.
See section 4.5.3 of the Remuneration report for more details.

1. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave status but not contractors (who are included in FTE).

30

COMMUNITY STORYFINANCIAL WELLBEING

Building financial wellbeing
in the PacificAccording to participants
surveyed in the 2019
MoneyMinded Impact
Report, almost 50% of
people in Fiji and Kiribati
frequently run short ofmoney for food and otherregular expenses.
To help improve thissituation ANZ has partneredwith the United Nations
Development Programme(UNDP) to deliver its
adult financial education
programs, MoneyMinded
and Business Basics.

The program will be delivered to female
small business owners in rural areas acrossFiji, Kiribati, Solomon Islands, Tonga,
and Vanuatu.
Deputy Team Leader for Inclusive Growthat the UNDP Pacific Office in Fiji, Patrick
Tuimalealiifano, said the partnership ismore than just balancing a budget.
“A big part of our work is on helping womenin low income households to have financial
security and control over their future andthe future of their families.
“Building financial literacy and businessacumen translates into confidence and overtime we start seeing these women emerge
as community leaders, entrepreneurs
and successful businesswomen.

The MoneyMinded program is helping
Pacific people create a positive vision for
their future,” he said.
ANZ Regional Executive Pacific, Tessa Price,said the partnership with UNDP enables
ANZ MoneyMinded to reach deeper intorural communities and target different
groups of people, particularly women.
“We’ve already done a lot of work witha number of different groups, including
seasonal workers who receive MoneyMindedtraining before they travel to Australia and
New Zealand. This partnership with the
UNDP means we will be reaching straightto the heart of rural communities andto women who are at the heart of thehousehold,” she said.

ANZ 2020 Annual Report31How wecreate value

Overview

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our community
Strong relationships with our stakeholders and the broader community is one of our key value
drivers. We are supporting the communities in which we live and work to recover from thebushfires that devastated parts of Australia earlier this year, and through the COVID-19 pandemic.

We are investing in thecommunity through ourfinancial literacy programs,
as well as through local
partnerships with thenot-for-profit sector,
sponsorship, grants, andstaff volunteering andworkplace giving.

In 2020:

Financial wellbeing
Helping improve the financial wellbeing of our customers is core to our strategy.
We have in particular demonstrated a long-term commitment to helping disadvantaged
people build money management skills and savings capabilities through our financial
inclusion programs.
Being in control of personal and household finances generates improved long-term
financial health and wellbeing, community connectedness and social participation.
More broadly, it also contributes to the social and economic development of communities.

Our financial inclusion programs

20.5% of our employees
Saver Plus was developed by ANZ and the Brotherhood of St Laurence in 2003,

volunteered over
66,000 hours tocommunity organisations,and is co-funded by ANZ and the Australian Government.
Program participants open an ANZ savings account, set a savings goal and save
towards it regularly over 10 months while also attending MoneyMinded financial
education sessions. On reaching their goal, savings are matched by ANZ dollar fordollar, up to $500, which must be spent on education.

we matched employee

Since 2003, Saver Plus has helped more than 47,770 lower-income Australians saveover $24 million to support their own and their children’s educational needs, with
ANZ providing over $19 million in matched funds.

donations, collectively

MoneyMinded supports adults with low levels of financial literacy and those on

contributing almost$3.9

lower incomes across 15 markets, including Australia and New Zealand. It is deliveredby community partner organisations in Australia and New Zealand, and a mix ofcommunity organisations and ANZ employees in Asia and the Pacific.

million tocharitable organisations
in Australia, New Zealand

MoneyBusiness has been operating since 2005 and is designed to build the money
management skills and confidence of Aboriginal and Torres Strait Islanders. Since
inception, it has reached over 82,520 participants and has been delivered in over
320 communities through either Australian Government-funded service providers
or ANZ’s partners.

and Fijiinvesting a total$139.5 million in
the community1“I am in control of my life and my money for the first timesince having children. Thank you to Saver Plus for beinga part of that positive journey in getting my life andhappiness back!”
Saver Plus participant

1. Figure includes forgone revenue of $105 million, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not-for-profit
organisations and students.

32

LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK

We have continued to regain community trust following the Royal Commission, and while we know this year has been difficult for many
people, we have had the opportunity prove the value we provide to the community. Our focus on our purpose and values, combinedwith strong governance and leadership, has enabled us to help support the community. While across the industry community sentimentscores have fluctuated during the year, in the RepTrak survey ANZ led for the majority of 2020 and was ranked second based on July to
September results. We achieved an A- rating in the 2019 CDP climate change assessment, the leading score for Australian banks.
See section 4.5.3 of the Remuneration report for more details.

Supporting Australia’s ruraland regional communities
Since 2003, we have been helping build
vibrant and sustainable rural communities
through our Seeds of Renewal financial grants
program, administered by the Foundation
for Rural and Regional Renewal (FRRR).
The program has provided more than
$5 million to help over 800 community
groups. In 2020 we again donated $250,000
to enable local community programs that
support the ongoing prosperity ofregional Australia.

Bushfire relief – helping
communities rebuild
In January 2020, we donated $1 million to
support our customers and the communities
affected by bushfires, including $300,000 tovolunteer fire services across New South
Wales, Victoria and South Australia.
We also matched a further $100,000 of
employee donations to volunteer fire services,
and allocated $500,000 to support local
community services as well as home loancustomers who lost their homes to bushfires
and suffered ongoing financial hardship.
Our $50 billion sustainable finance target
now includes $1 billion specifically forfunding and facilitating initiatives that
support customers and communities
impacted by disasters. Capital may beallocated for weather related events (suchas bushfires, floods and cyclones) or tobuild resilience against non-weather
related disasters such as pandemics.

Workplace giving
Our workplace giving program enables
employees in Australia to make contributions
to around 30 charity partners – many ofwhich operate in areas aligned to ourpriority areas of financial wellbeing,environmental sustainability and housing –through regular pre-tax payroll deductions.
Donations are ‘double matched’ – for every
dollar donated by an employee (up to$5,000 per employee in a tax year) throughthe program, ANZ donates two dollars.
Our employees in New Zealand and Fiji
can also donate through payroll to theirrespective staff foundations (charitable
trusts that provide small grants) and
ANZ double matches donations.

Volunteering
Our Volunteer Leave Policy, which applies
to permanent, regular and fixed-term
employees provides for at least one dayof paid volunteer leave each year.
This year we also made available extended
special paid leave for employees who
volunteer in emergency services to ensure
they were financially supported while they
served their community during thebushfire season.

formation on business, economic, socialand environmental issues affecting ourcustomers and shareholders.
We are also a member of a number ofindustry associations that contribute to
public policy debate and formation.
In 2020, our key membershippayments included:
Australian Banking Association$3,258, 203
Business Council of Australia$93,500
New Zealand Bankers’ Association
NZ $309,079
Business New Zealand
NZ $40,250
We understand that our stakeholders areinterested in the position we take on issues
such as data security, privacy and climatechange, and our membership of industry
associations that develop policies andundertake advocacy on these issues.

Contribution to public policy

This year, in response to stakeholder
feedback, we reviewed the alignment of
ANZ’s policy position on climate changewith those of our industry associations.
The outcomes of this review will beon anz.com/shareholder.

We seek to contribute constructively to
public policy formation and understandthe perspectives of our community’selected representatives, policymakers
and regulators. We contribute to policy

We have also committed to review ourmemberships of industry associations atleast every three years. The results of any
such review, including any material changes
to our position, will be publicly disclosed.

Community organisation receives funding boost with Seeds of Renewal grant

In 2020, ANZ announced a grant of $15,000 to a NSW community organisation, ‘North Coast Community College’ for an Indigenous
land management employment pathway project. The money contributed to strengthening economic participation and employment
related activities for Aboriginal communities through the establishment of a training program run as a social enterprise.

ANZ 2020 Annual Report33Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Our approach to climate change
We support the Paris Agreement’s goal of transitioning to net zero emissions by 2050 andare committed to playing our part.
We understand the impact – positive andnegative – our financing has on climatechange. Through our lending decisions, we
support companies and projects that
contribute to reducing emissions and thatare resilient to a changing climate. We areconfident we can do this in parallel withsupporting strong economic growth.

Through our disclosures, we seek to provide
investors and other stakeholders withinformation enabling them to assess theadequacy of our approach to climatechange and our ability to manage theassociated risks and opportunities.

This year we released an updated Climate
Change Statement (available on anz.com/cs)
that outlines our approach and strengthenedcommitments in support of a global transition
to net zero emissions. We are focused onlowering emissions in key sectors, in a waythat carefully considers the potential forcommunity impacts and how we canmitigate these.

IN SUPPORTING THE 2050 GOAL, OUR APPROACH IS TO:

Help our customers byencouraging them toidentify climate risks andopportunities, createtransition plans and reportpublicly on their progress

Support transitioning
industries to help growthe economy

Reduce our own impact
by managing and reducing
emissions from our own
operations

Engaging with 100 of our largest emitting business customers on their transition plans
We have engaged with 83 of our largest
emitting business customers to support
them to establish, and where appropriate,
strengthen existing low carbon transition
plans. This engagement will inform thedevelopment of a model that can beapplied across our customer base.
Within each industry our customers
have different starting points. Throughcustomer discussions and reviews ofpublic disclosures we are developing abetter understanding of our customers’
preparation for, and management of, theirclimate-related risks and opportunities.
Insights we have gained from customer
conversations include:
Energy: our engagement in this sector

has initially focused on customers withthermal coal operations; however, we are34

broadening this to include our largest oil
and gas producing customers. While theimpacts of COVID-19 have affectedshort-term demand, some customers arecontinuing to see strong demand forhigh-quality, low-cost Australian thermal
coal for use in high efficiency, lower
emissions (HELE) plants across Asia; theirstrategy is focused on developing highquality thermal coal assets and they arecommitted to improving their external
disclosures.
Other customers have undertaken
scenario analysis (aligned withrecommendations of the Financial Stability
Board Taskforce on Climate-related Financial
Disclosures (TCFD)), revealing that someof their commodities will not perform
well under a low carbon transition; in
response, they are limiting expenditureon thermal coal (with most capital directed
to maintenance rather than expansion),or seeking to divest those assets. Somecompanies are starting to set firmer targets
to work with their suppliers and customers
to seek to reduce the emissions associatedwith the use of their mining commodities,
ie ‘Scope 3’ emissions.
Transport: a key customer in the airline

sector has committed to carbon neutral
growth from 2020 and halving 2005
emissions from international flights
by 2050. This aligns with the goals of theinternational aviation sector.
Buildings: a number of customers haveestablished and are now implementing
net zero by 2030 carbon targets that will beachieved largely through improved energy
efficiency and onsite solar installations.

This is the fourth year we have reported using the TCFD. For detailed information see ‘ANZ 2020 Climate-related Financial Disclosures’on anz.com/annualreport

Our progress on the TCFDOUR PROGRESS TO DATEGOVERNANCE
STRATEGY

FOCUS AREAS – 2021/22

BEYOND 2020 VISION•	Align with regulatory guidance on
climate-related risk governance,
including stress testing of selected
portfolios•	An enhanced
risk management
framework that
anticipates potential
climate-related impacts,
and associatedregulatory requirements•	Climate Change Statement (available on anz.com) reaffirms
support for the Paris Agreement goals and transition to a net
zero carbon economy•	Extending analysis of flood-relatedrisks to incorporate bushfire and otherrisks relating to retail customers•	Managing the net zero carbon transition focuses on an orderly and justtransition that gives careful consideration to the impacts on communities•	Include climate risk reference inlending guidance documents forrelevant industry sectors, usedby our front line bankers•	ANZ business strategy
more closely aligned
to a resilient andsustainable economy
that supports theParis Agreement
and UN Sustainable
Development Goals•	Board Risk Committee oversees management of climate-related risks•	Board Ethics, Environment, Social and Governance Committee
approves climate-related objectives, goals and targets•	Ethics and Responsible Business Committee (executive management)
oversees our approach to environment, social and governance (ESG)
and reviews climate-related risks and opportunities•	Participated in a United Nations Environment Program FinanceIndustry (UNEP FI) working group on TCFD scenario analysis thatissued recommendations and methods to assess portfoliotransition and physical risks•	Low carbon products and services within our Institutional businessfocused on climate-related opportunities•	Analysis of flood-related risks for our home loan portfolio
in a major regional location of Australia•	Test-pilot of socio-economic indicators showing financial resilienceof home loan customers with respect to flood risk
•	Climate change risk added to Group and Institutional
Risk Appetite Statements

RISK MANAGEMENT•	Climate change identified as a Principal Risk and Uncertainty in
our UK Disclosure and Transparency Rules (DTR) Submission•	Guidelines and training provided to over 1,000 of our Institutional
bankers on customers’ transition plan discussions•	Enhanced financial analysis and stronger credit approval terms
applied to agricultural property purchases in regions of low average
rainfall or measured variability•	New agribusiness customers assessed for financial resilience andunderstanding of rainfall and climate trends in their area, and water
budgets considered if irrigating

METRICS AND TARGETS•	Support 100 of our largest emitting customers to establish or
strengthen low carbon transition plans by 2021, with metrics
developed to track progress•	New metrics to enable our progress to be tracked in reducing‘financed emissions’, beginning with two key sectors: commercial
property and power generation. Metrics are tailored to each sector(eg. carbon emissions per square metre of net lettable space forcommercial property) and disclosed every 12 months•	$50 billion target to fund and facilitate sustainable solutions by 2025
•	Target to procure 100% renewable electricity for ANZ’s operations
by 2025•	Supporting 100 of our largest emitting
customers to develop and disclose
their transition plans•	Customer engagement to identify
customer or sector-specific transitionor physical risks, focused on corporate
and Institutional customers•	Develop an enhanced climate risk
management framework that strengthens
our governance and anticipates
potential climate-related impacts andassociated regulatory requirements•	Complete transition plan engagementwith high emitting customers andconsider how to integrate into
customer assessments•	Set targets to reduce metrics for‘financed emissions’ for key sectors
towards a net zero goal by 2050
•	Consider expanding new metrics formeasuring impact of our progress onenvironmental sustainability to otherkey sectors•	Further integrateassessment of climaterelated risks into ourGroup Risk management
framework•	Standard discussions
with business customers
include climate-relatedrisks and opportunities•	Assessment of customertransition plans part ofstandard lending decisions
and portfolio analysis•	Continue to evolve ourreporting with leading
practices to measure thealignment of our lending
with the Paris
Agreement goals•	Reduce ANZ’soperational emissions
in line with thedecarbonisation
trajectory of the Paris
Agreement goals•	Ongoing emissions reduction targets for ANZ energy use alignedwith the Paris Agreement goals

ANZ 2020 Annual Report35Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

We are supporting household, business and financial practices that improve environmental
sustainability. One way we do this is through encouraging and supporting 100 of our largest
emitting customers to establish, and where appropriate, strengthen existing low carbon
transition plans, by 2021.

CUSTOMER STORYENVIRONMENTAL SUSTAINABILITY

Supporting Wesfarmers to transition
to net zero emissions

Headquartered inWestern Australia andwith around 107,000
employees, Wesfarmers
Limited is one of Australia’s
largest listed companies,
with diversified operations
spanning across almost
30 retail and industrial
businesses.
Better known for its consumer brands suchas Bunnings, Kmart and Officeworks, it also
has interests in fertilisers, chemicals and in
the energy sector.
In September this year, it announced an
accelerated agenda to set and achieve net
zero emissions for its retail operations by2030, and its industrial businesses by 2050.
This is on top of existing 2025 emissions
reduction targets.
Naomi Flutter, an Executive General
Manager at Wesfarmers said its climate
action was driven by a commitment tocontributing positively to the global goalof achieving net zero emissions by 2050.

36“For us, transitioning to achieve net zero
emissions from our business is about doing
what’s right and good for the environment,
and we want to step up and contributein a responsible way. It’s also what ourcustomers believe in and want from us,
and so from that perspective it also
makes good business sense.”
To achieve its goals, Naomi says Wesfarmers
is pulling on numerous levers to significantly
reduce its emissions.
“We’re investing heavily in energy
efficiencies in our retail businesses throughnew technology, solar panels and LED
lighting. And in our industrial business
we’re investing catalyst technologies
to reduce emissions intensity.”

Wesfarmers has banked with ANZ since the1980s and we are supporting the company
in its transition journey.
“We value the role ANZ plays as a key
banking partner – especially with respect
to the open and constructive dialogue wehave with them on our transition agenda,”says Naomi.

CUSTOMER STORYENVIRONMENTAL SUSTAINABILITYNew Zealand’s agribusinesses leading
the way on transition planningGreenhouse Gas Emissions(GHG) from the foodand fibre sector, (and its
associated waste) accountfor around half of New
Zealand’s total emissions.¹
Synlait Milk Limited isworking hard to reduce
emissions in line with its
commitment to the Paris
Agreement goals.
According to Hamish Reid, Director of
Sustainability and Brand at Synlait, “weneed to act now and we need to be bold.
It’s both a matter of mitigating climaterelated risks and at the same time, seizing
opportunities to reimagine all aspectsof our business and value chain.”Synlait is implementing a range of initiatives
to reduce emissions and deliver long-term
financial benefits.
Targets relating to climate, welfare, water
and waste have been set – including an
off-farm² 50% reduction in GHG emissions
per kg of product by 2028, and an on-farm
35% reduction in GHG emissions per kg ofmilk solids by 2028.
Within its on-farm certification program,
Lead With Pride™, educational resources
and milk price incentives are being offeredto its farmer suppliers to implement bestpractice GHG mitigation techniques. It
has also recently opted for an energy andemissions efficient electrode boiler, rather
than the traditional coal-fired boiler, to
run its fresh milk and cream facility in
Canterbury, NZ.
Synlait has been an ANZ customer since
2000, when the company’s founders bought
their first few Canterbury dairy farms, before
then expanding into processing in 2008. In
2019, ANZ arranged and funded a NZ$50 million
sustainability linked loan which has supported
Synlait’s sustainability agenda.

“ANZ enabled us to enter into an ESG linked
loan, sending two strong signals to ourstakeholders. First, that leading banks today
recognise that sustainability performance
results in lower risk, and second, thatsustainability performance can lead tofinancial benefits. Having a diversity oflike-minded partners accompanying us
in our transition is critical for us to achieve
our goals,” says Hamish.
Another customer ANZ is assisting with
its transition towards a low carbon futureis Silver Fern Farms Limited.
Since 2018, the grass-fed red meat
processing and exporting company has
reduced its GHG emissions by 8%, andreduced its fossil fuel usage by 12% since2017. It is targeting a 30% reduction on
2005 levels of the GHG emissions intensityof its operations per tonne of productbefore 2030.
“We’ve taken a number of steps to embedsustainability within our company, frombeing the first red meat processor to certify
our carbon footprint in New Zealand, tohaving strong Board involvement in oursustainability agenda, to incorporating
sustainability and climate reporting into
our parent co-operative’s external
disclosures,” says Justin Courtney, Headof Communications and Sustainability
from Silver Fern Farms.

Silver Fern Farms uses a ‘whole of farm’system approach to reduce carbon in the
supply chain as a way to enhance thenatural, biodiverse farming environments
in New Zealand.
“In addition to our own initiatives, suchas sourcing animals from farms rich inbiodiversity and sourcing electricity from
100% renewable sources, we’re proactively
working with suppliers to better understandtheir carbon footprints and where theopportunities lie to reduce and optimise
carbon absorption on their farms,” says Justin.
The engagement with our largest emitting
customers on their transition plans is a toppriority for ANZ, as we seek to support themto manage the climate-related risks andopportunities. Synlait and Silver Fern Farms
are just two out of the 100 customers weare engaging with on their transition plans.

1. www.mpi.govt.nz/protection-and-response/environment-and-natural-resources/emissions-trading-scheme/agriculture-and-greenhouse-gases/ 2. On-farm: Synlait’s farmer suppliers(scope 3). Off-farm: Synlait’s own manufacturing processes (scope 1 and 2) and non-farm scope 3 emissions.

ANZ 2020 Annual Report37Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

GovernanceCorporate Governance Framework
SHAREHOLDERS

BOARD OF DIRECTORS

Audit
Committee

Ethics, Environment,
Social and GovernanceCommittee

Risk
Committee

Human
Resources
Committee

Digital Businessand Technology
Committee

Nomination and
Board Operations
Committee

Board reserved powers and delegation of authority

CHIEF EXECUTIVE OFFICERGROUP EXECUTIVE COMMITTEEBoard of Directors

ANZ’s strong governance framework provides a solid structure for effective and responsible
decision-making within the organisation.
The Board is responsible for the oversight of ANZ and its sound andprudent management, with specific duties as set out in its charter
available at anz.com/corporategovernance.

delegations of authority framework that clearly outlines thosematters delegated to the CEO and other members of senior
management.

There are six principal Board Committees – the Audit Committee,
the Ethics, Environment, Social and Governance Committee, the Risk
Committee, the Human Resources Committee, the Digital Businessand Technology Committee and the Nomination and Board
Operations Committee.

For further detail on ANZ’s governance framework see our2020 Corporate Governance Statement available atanz.com/corporategovernance.

Each Committee has its own charter setting out its roles andresponsibilities. At management level, the Group Executive
Committee comprises ANZ’s most senior executives. There is a38

Full biography details can be found on our website atanz.com/directors and on pages 44–48 of this report.

PAUL O'SULLIVAN

Chairman, Independent Non-Executive Director

ILANA ATLAS, AO

Independent Non-Executive Director

JANE HALTON, AO PSM

Independent Non-Executive Director

GRAEME LIEBELT

Independent Non-Executive Director

SHAYNE ELLIOTT

Chief Executive Officer, Executive Director

PAULA DWYER

Independent Non-Executive Director

RT HON SIR JOHN KEY, GNZM AC

Independent Non-Executive Director

JOHN MACFARLANE

Independent Non-Executive Director

ANZ 2020 Annual Report39Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Directors’ meetings
The number of Board, and Board Committee, meetings held during the year and each Directors’ attendance at those meetings are set out below:

Board

Risk
Committee

Audit
Committee

Human
Resources
Committee

Ethics,Environment,
Social andGovernanceCommittee

A

B

A

B

A

A

B

A

PAUL O'SULLIVAN

11

11

5

5

5

5

ILANA ATLAS, AO

14

14

PAULA DWYER

1414

SHAYNE ELLIOTT

1414

DAVID GONSKI, AC 21414

JANE HALTON, AO PSM

1414

RT HON SIR JOHN KEY, GNZM AC

14

14

7

7

GRAEME LIEBELT

14

14

7

7

8

8

JOHN MACFARLANE

14

14

7

7

8

8

7

7

7

7

B

8

8

6

6

8

8

6

6

8

8

5

B

Digital Businessand Technology
Committee
A

B

5

5

5

SpecialCommitteeof the Board1

Nominations
and Board
Operations

SharesCommittee1

A

A

B

A

B

1

1

1

1

1

1

1

1
2

2

3

3

B

6

6

5

5

6

6

1

1

6

6

5

5

6

6

1

1

5

5

6

5

1

1

1

1

1

1

6

6
6

6

Column A Indicates the number of meetings the Director was eligible to attend as a member. Column B Indicates the number of meetings attended. The Chairman became an ex-officio
member of the Risk, Audit, Human Resources, Ethics, Environment, Social and Governance, Digital Business and Technology and Nomination and Board Operations Committees on 28 October
2020, upon David Gonski's retirement. With respect to Committee meetings, the table above records attendance of Committee members. Any Director is entitled to attend these meetings
and from time to time Directors attend meetings of Committees of which they are not a member. 1. The meetings of the Special Committee of the Board and Shares Committee as referred
to in the table above include those conducted by written resolution. 2. David Gonski retired as Chairman and as a Non-Executive Director on 28 October 2020.

40

Executive Committee
Below from left to right1

Emma Gray

Group Executive Data and Automation

7

Kevin Corbally

Group Chief Risk Officer

Joined the Executive Committee on 19 March 2018.

Joined the Executive Committee on 1 May 2020

82

Joined the Executive Committee* on 20 October 2014.

Maile Carnegie

Group Executive Digital and Australia Transformation

Mark Whelan

Group Executive Institutional

Joined the Executive Committee on 27 June 2016.

93

Joined the Executive Committee on 17 June 2019.

Farhan Faruqui

Group Executive International

Antonia Watson

Chief Executive Officer New Zealand

Joined the Executive Committee on 1 February 2016.

104(appointed CEO on 1 January 2016).
Joined the Executive Committee* on 1 June 2009.

Gerard FlorianGroup Executive Technology

Joined the Executive Committee on 30 January 2017.

5

Alexis George

Deputy Chief Executive Officer andGroup Executive Wealth Australia

Joined the Executive Committee on 1 December 2016.

6Kathryn van der Merwe

Shayne Elliott

Chief Executive Officer

11

Michelle Jablko

Chief Financial Officer

Joined the Executive Committee on 18 July 2016.

12Mark Hand

Group Executive Australia Retailand Commercial Banking

Group Executive Talent and Culture

Joined the Executive Committee on 15 May 2018.

Joined the Executive Committee on 1 May 2017.

*previously known as Management Board.

Full biography details can be found on our website at anz.com/exco.

ANZ 2020 Annual Report41Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Board areas of focus
The Board and its Committees engage in key strategic, governance and oversight activities
each year. The list below is not a comprehensive list of all the matters but is illustrative toprovide stakeholders with an insight into some of the key matters considered by the
Board during the year.

CRISIS MANAGEMENTOver the year, Australia and the world has faced many crises,
and the Board and its Committees have played an active rolein providing oversight of the impact of and ANZ’s response
to, them, including the bushfires in Australia and the
COVID-19 pandemic.

In relation to the Australian bushfires, this included reviewing ANZ’scustomer relief response, the impact to our customers, staff and theeconomy generally, ANZ’s public commitments and contributions,and ANZ’s next steps to support ongoing resilience for communities
affected by this and future disasters. In addition to this, the Board
attended a bushfire marketplace where ANZ hosted at its Melbourne
Head Office small business customers and their peers who had
been impacted by the devastating bushfires in Victoria where
customers sold their goods and services.
In relation to the COVID-19 pandemic, the Board adopted amulti-faceted approach utilising the range of its Committees aswell as discussions at the Board itself. At the onset of the pandemic,
Directors received a weekly informal briefing as to developments,
supplemented with more detailed discussions at Board andCommittee meetings.

42

Key topics of those discussions included:• the measures put in place to support our customers, customer
take up of those measures, ANZ’s delivery of those measures andongoing communications with impacted customers;• the impact of the pandemic on the economy (domestic andinternational, looking at both the immediate and longer-term
impacts of the pandemic), on various industries, and ANZ’s risk
approach to them, including risk appetite settings;• discussions regarding the impact of the pandemic on thefinancial performance and position of the Group, including in
relation to capital requirements and the payment of dividends
to shareholders;• the impact of the pandemic on ANZ’s people, and the different
geographic responses undertaken in the jurisdictions ANZ
operates in, the steps ANZ was taking to protect and support its
people and to prepare and equip them for operating remotely,
including looking at the potential cultural impacts this may have.
The Board also had numerous discussions in relation to geopoliticalmatters and their potential impact on ANZ’s operations.

RISK, REGULATION AND REPUTATIONENGAGEMENT

The Board and its Committees
also continued overseeing theimportant work being carried out
by Management to implement thelessons learnt from the Royal
Commission, progress against ANZ’s
self-assessment roadmap, as well
as ANZ’s approach to improving
organisational and risk culture.

In addition, the Board continued its
oversight of customer remediation,highlighting the importance to the Groupof redressing customers when things gowrong and providing oversight ofprevention and detection activities.
The Board and its Committees also had
detailed and regular updates in relation
to interactions with regulators around theworld, including ASIC, APRA, AUSTRAC,
AFCA, RBNZ, FMA and MAS. Directors also
met with key regulators during the courseof the year with the purpose of maintaining
constructive and two-way dialogue.
The Board and its Committees also had
numerous meetings in relation todeveloping ANZ’s Compliance Strategy,
its approach to the management of
non-financial risks, risk appetite settings
and the triennial independent review
of ANZ’s approach to compliance with
APRA Prudential Standard CPS 220 “RiskManagement”.
The Board and its Committees also
discussed key environmental and social
risk matters, including ANZ’s approach toclimate change, reviewing and approving
ANZ’s Climate Change Statement, reviewing
ANZ’s industry association alignment withclimate policy and changes to Modern
Slavery and Human Rights laws.

STRATEGY AND THE FUTURE

In addition to the informal briefings
around the COVID-19 pandemic,
meetings with regulators and attending
the bushfire marketplace outlined
above, the Directors continued theirapproach to meeting with customers,
staff and investors, both in person
and virtually.

This included having a virtual session withall of ANZ’s Country Heads to discuss topicalmatters impacting their businesses.
A subset of Directors played an active rolein attending meetings with Management
throughout the year to actively engage andchallenge their approach to stress testing
the portfolio against severe but plausible
events to inform risk appetite setting andcapital planning processes.
Prior to the pandemic, the Board had
established regular meetings in diverse
geographic areas with a view to maximisinginteractions with customers, staff and otherstakeholders. It is envisaged that this willcontinue when the environment allows it.
During the financial year, the Board held
physical meetings in Melbourne, Sydney
and Brisbane.

The Board and its Committees
continued to focus on longer-term
strategic matters. Directors participatedin an annual Board strategy session
utilising internal and external experts tochallenge and provide different pointsof view to assist the Board andManagement in setting the strategic
direction of the Group.

The Board received regular updates on theimplementation of the Group’s strategy
from the Chief Executive Officer, andcorresponding updates from Risk andInternal Audit in relation to theirassessments of the risks associated withManagement’s approach to implementing
the strategy.
The Board also received numerous updates
in relation to the strategic approach todigitally transform its Australian Retailand Commercial business.
Finally, the Board carried out succession
planning in respect of the Chairman,
with the Board appointing Paul O’Sullivan
to succeed David Gonski, following his
retirement on 28 October 2020.

ANZ 2020 Annual Report43Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Directors’ qualifications, experienceand special responsibilities
As at the date of this report, the Board
comprises seven Non-Executive Directors andone Executive Director, the Chief Executive
Officer. David Gonski was Chairman and a
Non-Executive Director from 2014 until his
retirement in October 2020. The names of
the current Directors, together with detailsof their qualifications, experience andspecial responsibilities are set out below.
Audit Committee
Ethics, Environment, Social andGovernance Committee
Risk Committee

Paul O’Sullivan

CHAIR
MEMBERPOSITION

Chairman, Independent Non-Executive Director
QUALIFICATIONSBA (Mod) Economics, Advanced Management Program of Harvard
RESPONSIBILITIESChairman since October 2020 and a Non-Executive Director sinceNovember 2019.
Paul is an ex-officio member of all Board Committees and Chair of
the Ethics, Environment, Social and Governance Committee andthe Nomination and Board Operations Committee.
CAREER

Human Resources Committee

Digital Business and Technology Committee

Nomination and Board Operations Committee

Paul has experience in the telecommunications and oil
and gas sectors, both in Australia and overseas. He has held senior
executive roles with Singapore Telecommunications (Singtel) andwas previously the CEO of Optus. He has also held management
roles with the Colonial Group and the Royal Dutch Shell Group in
Canada, the Middle East, Australia and United Kingdom.
RELEVANT OTHER DIRECTORSHIPS

Chairman: Singtel Optus Pty Limited (from 2014, Director from2004) and Western Sydney Airport Corporation (from 2017).
Director: Coca-Cola Amatil (from 2017), Telkomsel Indonesia(from 2010) and St Vincent’s Health Australia (from 2019).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Director: Healthscope Limited (2016–2019) andNational Disability Insurance Agency (2017–2020).

Age | 60 years

44

Residence | Sydney, Australia

Shayne Elliott

Ilana Atlas, AO

CHAIR
MEMBERPOSITIONPOSITION

Chief Executive Officer and Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom

BJuris (Hons), LLB (Hons), LLM

RESPONSIBILITIESRESPONSIBILITIES

Chief Executive Officer and Executive Director since
1 January 2016.

Non-Executive Director since September 2014. Ilana is Chair of
the Human Resources Committee and is a member of the Audit
Committee, Ethics, Environment, Social and GovernanceCommittee and the Nomination and Board Operations
Committee.

CAREER

Shayne has over 30 years’ experience in banking in Australia andoverseas, in all aspects of the industry. Shayne joined ANZ as CEO
Institutional in June 2009, and was appointed Chief Financial
Officer in 2012.
Prior to joining ANZ, Shayne held senior executive roles at EFG
Hermes, the largest investment bank in the Middle East, which
included Chief Operating Officer. He started his career with Citibank
New Zealand and worked with Citibank/Citigroup for 20 years,
holding various senior positions across the UK, USA, Egypt, Australiaand Hong Kong.
Shayne is a Director of the Financial Markets Foundation for Children
and a member of the Australian Banking Association, the BusinessCouncil of Australia and the Australian Customs Advisory Board.

CAREER

Ilana brings a strong financial services background and legal
experience to the Board. Ilana was a partner at law firm Mallesons
Stephen Jaques (now King & Wood Mallesons), where in addition
to her practice in corporate law, she held a number of management
roles in the firm including Executive Partner, People and Information,and Managing Partner. She also worked at Westpac for 10 years,
where her roles included Group Secretary and General Counsel
and Group Executive, People, where she was responsible for humanresources, corporate affairs and sustainability. Ilana has a strong
commitment to the community, in particular the arts and education.
RELEVANT OTHER DIRECTORSHIPSRELEVANT OTHER DIRECTORSHIPS

Director: ANZ Bank New Zealand Limited (from 2009) andthe Financial Markets Foundation for Children (from 2016).
Member: Business Council of Australia (from 2016), the Australian
Banking Association (from 2016, Chairman 2017-2019) and theAustralian Customs Advisory Board (from 2020).

Age | 56 years

Residence | Melbourne, Australia

Chairman: Coca-Cola Amatil Limited (from 2017, Director from2011) and Jawun (from 2017, Director from 2014).
Director: Paul Ramsay Foundation (from 2017).
Member: Panel of Adara Partners (from 2015).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Director: OneMarket Limited (2018-2019), Westfield
Corporation Limited (2014–2018), Human Rights Law Centre Ltd(2012–2017) and Treasury Corporation of New South Wales(2013–2017).
Former Fellow: Senate of the University of Sydney (2015–2019).

Age | 66 years

Residence | Sydney, Australia

ANZ 2020 Annual Report45Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Directors’ qualifications, experience and special responsibilities continued

Paula Dwyer

Jane Halton, AO PSM

CHAIR

CHAIR

MEMBERMEMBERPOSITIONPOSITION

Independent Non-Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom, FCA, SF Fin, FAICD

BA (Hons) Psychology, FIPAA, Hon. FAAHMS, Hon. FACHSE,
Hon. DLitt, FAIM , FAICDRESPONSIBILITIESNon-Executive Director since April 2012. Paula is Chair of
the Audit Committee and is a member of the Risk Committee,
Human Resources Committee and Nomination and Board
Operations Committee.
CAREER

Paula has extensive experience in financial markets, corporate
finance, risk management and investments, having held senior
executive roles at Calibre Asset Management, Ord Minnett (nowJ P Morgan) and at Price Waterhouse (now PricewaterhouseCoopers).
Her career as a company director spans financial services,
investment, insurance, healthcare, gambling and entertainment,
fast moving consumer goods, property and construction andretailing sectors. Paula has a strong interest in education andmedical research, having served as a member of the Geelong
Grammar School Council and the Business and Economics
Faculty at the University of Melbourne and as Deputy Chairmanof Baker IDI.
RELEVANT OTHER DIRECTORSHIPS

Chairman: Tabcorp Holdings Limited (from 2011, Director from2005), Kin Group Advisory Board (from 2014) and Allianz Australia
Limited (from 2020, Director from 2019).
Director: Lion Pty Ltd (from 2012).
Member: Kirin International Advisory Board (from 2012) andAustralian Government Takeovers Panel (from 2017).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Chairman: Healthscope Limited (2014-2019).

RESPONSIBILITIESNon-Executive Director since October 2016. Jane is Chair of theDigital Business and Technology Committee and is a memberof the Human Resources Committee, Ethics, Environment,
Social and Governance Committee and Nomination and
Board Operations Committee.
CAREER

Jane’s 33 year career in the public service includes the positions ofSecretary of the Australian Department of Finance, Secretary of theAustralian Department of Health, Secretary for the Department of
Health and Ageing, and Executive Co-ordinator (Deputy Secretary)of the Department of the Prime Minister and Cabinet. She brings to
the Board extensive experience in finance, insurance, risk management,
information technology, human resources, health and ageing andpublic policy. She also has significant international experience.
Jane has contributed extensively to community health through local
and international organisations including the World Health Organisation
and National Aboriginal and Torres Strait Islander Health Council.
RELEVANT OTHER DIRECTORSHIPS

Chairman: Vault Systems (from 2017), Coalition for Epidemic
Preparedness Innovations (Norway) (from 2018, Member from2016) and Council on the Ageing Australia (from 2017).
Director: Clayton Utz (from 2017) and Crown Resorts Limited(from 2018).
Member: Executive Board of the Institute of Health Metrics and
Evaluation at the University of Washington (from 2007) and National
COVID-19 Commission Advisory Board (from 2020).
Adjunct Professor: University of Sydney and University of Canberra.
Council Member: Australian Strategic Policy Institute (from 2016).

Age | 60 years

Residence | Melbourne, Australia
Age | 60 years

46

Residence | Canberra, Australia

RT Hon Sir John Key,GNZM AC

Graeme Liebelt

CHAIR
MEMBERMEMBERPOSITIONPOSITION

Independent Non-Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom, DCom (Honoris Causa)

BEc (Hons), FAICD, FTSE, FIMLRESPONSIBILITIESRESPONSIBILITIESNon-Executive Director since February 2018. Sir John is amember of the Ethics, Environment, Social and GovernanceCommittee, Risk Committee, Digital Business and Technology
Committee and Nomination and Board Operations Committee.

Non-Executive Director since July 2013. Graeme is Chair of the
Risk Committee and is a member of the Audit Committee, Human
Resources Committee and Nomination and Board Operations
Committee.

CAREERCAREER

Sir John was Prime Minister of New Zealand from 2008 to 2016,
having commenced his political career in 2002. Sir John had a longcareer in international finance, primarily for Bankers Trust in New
Zealand and Merrill Lynch in Singapore, London and Sydney. He waspreviously a member of the Foreign Exchange Committee of theFederal Reserve Bank of New York (from 1999 to 2001).

Graeme brings to the Board his experience of a 23-year executive
career with Orica Limited (including a period as Chief Executive
Officer), a global mining services company with operations in morethan 50 countries. He has extensive international experience and astrong record of achievement as a senior executive, including instrategy development and implementation. Graeme is committed
to global trade and cooperation, as well as community education.

Sir John was made a Knight Grand Companion of the New ZealandOrder of Merit in the 2017 Queen’s Birthday Honours. In 2017 Sir
John became a Companion of the Order of Australia for advancing
the Australia-New Zealand bilateral relationship.
RELEVANT OTHER DIRECTORSHIPS

Chairman: ANZ Bank New Zealand Limited (from 2018,
Director from 2017).
Director: Palo Alto Networks (from 2019).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Chairman: The International Democratic Union(2014–2018).

RELEVANT OTHER DIRECTORSHIPS

Chairman: Amcor Limited (from 2013, Director from 2012)
Director: Australian Foundation Investment Company Limited(from 2012) and Carey Baptist Grammar School (from 2012).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Chairman: DuluxGroup Limited (2018–2019, Director
from 2016).

Age | 66 years

Residence | Melbourne, Australia

Former Director: Air New Zealand Limited (2017-2020).

Age | 59 years

Residence | Auckland, New Zealand

ANZ 2020 Annual Report47

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Directors’ qualifications, experience and special responsibilities continued

Company Secretaries’ qualifications
and experience

John Macfarlane

Currently there are two people appointed as Company Secretariesof the Company. Details of their roles are contained in the Corporate
Governance Statement.

MEMBER

Their qualifications and experience are as follows
POSITION

Independent Non-Executive Director

Ken Adams

QUALIFICATIONS

BCom, MCom (Hons)RESPONSIBILITIESNon-Executive Director since May 2014. John is a memberof the Audit Committee, Risk Committee, Digital Businessand Technology Committee and Nomination and Board
Operations Committee.
CAREER

John is one of Australia’s most experienced international bankers
having previously served as Executive Chairman of Deutsche Bank
Australia and New Zealand, and CEO of Deutsche Bank Australia.
John has also worked in the USA, Japan and PNG, and brings to
the Board a depth of banking experience in ANZ’s key markets inAustralia, New Zealand and the Asia Pacific. He is committed tocommunity health, and is a Director of the Aikenhead Centreof Medical Discovery Limited (from 2016).
RELEVANT OTHER DIRECTORSHIPSPOSITIONQUALIFICATIONSGroup General Counsel

BA, LLB, LLM

Ken joined ANZ as Group General Counsel in August 2019, having
assisted ANZ with major legal issues for over 10 years. Prior to ANZ,
Ken was a Partner of Freehills and later Herbert Smith Freehills for
21 years, and for 6 years was a member of the Herbert Smith
Freehills Global Board. Ken is one of Australia’s leading commercial
lawyers with significant experience in class actions, and complex
problems requiring strategic and multi-disciplinary analysis. He
holds a Master of Laws from the University of Melbourne and isa co-author of Class Actions in Australia.

Simon Pordage

Director: Colmac Group Pty Ltd (from 2014), AGInvest Holdings
Limited (MyFarm Limited) (from 2014, Chairman 2014–2016),
Balmoral Pastoral Investments (from 2017) and L1 Long Short
Fund (from 2018).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Director: St Vincent’s Institute of Medical Research(2008–2019) and Craigs Investment Partners Limited (2013-2020).

Age | 60 years

Residence | Melbourne, Australia

POSITIONQUALIFICATIONS

Company Secretary

LLB (Hons), FGIA, FCG (CS, CGP)

Simon joined ANZ in May 2016. He is a Chartered Secretary andChartered Governance Practitioner and has extensive company
secretarial and corporate governance experience. From 2009 to 2016he was Company Secretary for Australian Foundation Investment
Company Limited and a number of other listed investment companies.
Other former roles include being Deputy Company Secretary for ANZ
and Head of Board Support for Barclays PLC in the United Kingdom.
He is a formal brand ambassador for, and is a former National President
and Chairman of, Governance Institute of Australia, and is a member
and former Chairman of its National Legislation Review Committee.
Simon is committed to the promotion and practice of good
corporate governance, and regularly presents on governance issues.

48

Risk management
2020 has seen the external operating environment dramatically impacted by a number of events,
notably the COVID-19 pandemic, the effects of which continue to unfold. The strength of the
ANZ Risk Management Framework has underpinned our response to the crisis. It has provided
the flexibility to adapt to the rapidly changing environment while maintaining sound risk
management practices.

Our progressThis year we have continued to invest
in our Risk Management Framework,
processes and systems which has further
strengthened our ability to respond tochanges in our existing risks but also deal
with new risks that have been introduced
through the increasingly complex external
environment, with particular focus on theareas outlined below:
COVID-19

In response to the COVID-19 pandemic, wedeveloped a range of support measures toassist employees and customers, and tomaintain safe and secure operations. The
risk management function contributed tothe successful execution of this support,
including through:• Enactment of our Business Continuity
Plan enabling our operations to respondswiftly to the changing environment
without material disruption to criticalbusiness services. This allowed us
to continue operating through the
pandemic by:– scaling of remote working capacity,
enabling the majority of non-branch
employees to work productively
from home– ensuring no material impacts on
critical business services– remaining agile and able to adapt
to changing conditions in line withgovernment restrictions.
• Continued partnering with ourbusinesses to protect the bank by:– prioritising the re-rating of the Wholesale
book, with re-ratings complete for
93% of our total Institutional portfolio,
74% of our total Commercial Australia
portfolio, and 83% of our New ZealandCommercial & Agri portfolios; and– undertaking a series of industry deep
dives and stress tests across ourportfolios to assess potential
credit outcomes.
• Investment in systems, providing:– enhanced data analytics to better
analyse and observe customer
behaviour– an improved collections andhardship platform that enables
customers to manage their arrears
online while facilitating holistic
conversations with customers
about their financial situation.
Culture and conduct• We recognise that an ethical culture isa pre-determinant for us to deliver on
our strategy, and that in order to prevent
unfair customer outcomes we need to
be able to identify and understand any
behavioural misalignment in order totake corrective action. This year, to further
enhance how we measure, monitor andmanage conduct risk, we have exploredthe use of behavioural science techniques
to improve compliant behaviour and will
look to apply the methodology more
broadly in the coming year.
• In order to align with ANZ’s aspirational
culture, priorities for this year havecontinued to focus on transforming
behaviours through: focusing on'speak-up'; continuing to strengthen
our Accountability and Consequence
Framework; fortifying leadership; further
embedding the new remuneration,
recognition and performance
management framework; listening
and responding to our people; andfostering an 'always learning' culture.

• Risk culture (as a critical component of
our organisational culture) remains animportant focus for the organisation. In
addition to targeted initiatives created
to enhance elements of our risk culture,
our evolution to a more explicit andsimple approach to the management andmeasurement of risk culture will allow us
to more easily monitor progress towards
our desired risk culture state, and assess
the effectiveness of our actions.
Non-financial risk

We are continuing to improve the way inwhich we manage our obligations andoperational risks, following the redesignand simplification of our non-financial risk
framework in 2019. Our Compliance andOperational Risk Strategy provides acomprehensive, proactive and well-planned
approach to improving ANZ’s managementof non-financial risk, guided by our purpose
and contributing to the bank’s strategic
priority to improve the financial wellbeingof our customers.
Financial crime

Protecting the Australian banking systemfrom criminal use is one of our mostimportant roles. We continue to invest
in our financial crime risk management
program to ensure we regularly assess
and manage our financial crime risks.
Our program is designed to be compliant
with our financial crime obligations and
we report information that is useful togovernment authorities to disrupt
financial crime. Further information isin our 2020 ESG Supplement available
at anz.com/cs.

ANZ 2020 Annual Report49Overview

How wecreate value

Performanceoverview

Emerging risks

The risklandscapeis continually
evolving and we are
therefore constantly
reviewing issues toconsider their materiality
to the bank’s operations.

Three risks that continue to evolve andthat we seek to better understand are:Geopolitical risk: We continue to closely
monitor and support our businesses tomanage ongoing geopolitical tensions
and uncertainty.
Cybersecurity risk: Our approach to
mitigating cybersecurity risk involves
a range of controls relying on people,
technology and process and we arecontinually testing our defences internallyand through independent third parties.
For further detail on our approach to
cybersecurity risk refer to pages 19 to 20.
Climate change risk: The financial risks
associated with climate change remain a
key focus. Developing an enhanced risk
management framework that anticipates
potential climate-related impacts, andassociated regulatory requirements is apriority. We have set a new ESG target
to develop this enhanced framework
by FY22. For further detail on our
approach to climate-related financial
risk refer to pages 34 to 35.

Remuneration
reportDirectors’
reportOur Risk Management
Framework
The Board is responsible for establishingand 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 Committee
reports regularly to the Board on its
activities. The key pillars of the Group’s
RMF include:• the Risk Appetite Statement (RAS),
which sets out the Board’s expectations
regarding the degree of risk that theGroup is prepared to accept in pursuing
its strategic objectives and its operating
plan; and• the Risk Management Statement (RMS),
which describes the Group’s strategy
for managing risks and a summary of
the key elements of the RMF that giveeffect to that strategy. The RMS includes:a description of each material risk; andan overview of how the RMF addresses
each risk, with reference to the relevant
policies, standards and procedures. It also
includes information on how the Groupidentifies, measures, evaluates, monitors,
reports and then either controls or
mitigates material risks.

FinancialreportShareholder
information

The Group operates a Three Linesof-Defence Model in regard to risk
management that helps embed a culture
where risk is everyone’s responsibility.
The business – as the first line of defence –has day to day ownership of risks andcontrols and is accountable for
identifying and managing its own risks.
The Group Risk function is the secondline of defence, providing a strong andindependent oversight of the work
undertaken to manage the risk, as well
as developing and maintaining the RMF.
The final line of defence is Internal Audit
and includes independent assurance
that evaluates the adequacy andeffectiveness of both first and secondline risk management approaches.
The governance and oversight of risk,
while embedded in day-to-day activities,
is also the focus of committees andregular forums across the bank (seediagram next page). The committees
and forums discuss and monitor
known and emerging risks, reviewing
management plans and monitoring
progress to address known issues.

"The strength and adaptability of the bank's
risk function has played a key role in helping
navigate the organisation through thecurrent changing environment."
Kevin Corbally, Chief Risk Officer

LINKS TO 2020 GROUP PERFORMANCE FRAMEWORKCOVID-19 introduced a range of both new and increased risks for ANZ, our employees and our customers. Our existing strong Risk
Management Framework enabled us to respond well to these risks. We have continued to develop and improve our financial andoperational resilience and have maintained our focus on managing risk controls, demonstrating accountability for fixing issues ina timely and sustainable manner. Strong progress continues on risk culture maturity, evidenced in employee engagement scores,
with ‘Leaders accountable for risk’ (87%) – up on 2019, and ‘Raise issues without fear of reprisal’ (74%) – also up on 2019.
See section 4.5.3 of the Remuneration report for more details.

50

BOARD OF DIRECTORSCEOPRINCIPAL BOARD COMMITTEES

Audit
Committee

Ethics, Environment,
Social & GovernanceCommittee

Risk
Committee

Digital Business& Technology
Committee

Nomination &Board Operations
Committee

Human
Resources
Committee

Consequence
Review GroupEXECUTIVE COMMITTEE
ANZ's most senior executives meet regularly to discuss performance and review shared initiatives

GROUP PERFORMANCE AND EXECUTIVE COMMITTEE (GPEC)
Oversight of the Group's overall operational performance and position and the execution of the operating planGroup

KEY MANAGEMENT COMMITTEES

Credit & Market
Risk Committee(CMRC)

Group Asset &Liability Committee(GALCO)

Credit Ratings
System OversightCommittee(CRSOC)

Capital and Stress
Testing OversightCommittee(CSTOC)

Sub-commitee of CMRC

Sub-commitee of GALCOCountry

Division

Modelling Ratings Working Groups
and Usage Forums

Wholesale
Ratings
WorkingGroup(WRWG)

RetailRatings
WorkingGroup(RRWG)

Wholesale
Model
Usage
Forum
(WMUF)

Regional or Country Risk
Management Committees (RMCs)

Operational Risk
Executive
Committee (OREC)

Divisional
Initiatives
ReviewCommittees(DIRC) /Project Advisory
Councils (PAC)

Ethics &Responsible
Business Committee(ERBC)

Investment
Committee

Various Division SpecificManagement Committees
Divisional
Risk
Management
Committees(RMC)

Operational
Risk
Committees

Product
Committees

Divisional
Consequence
Review
GroupsDivisional
Consequence
Review
GroupsCountry Assets and Liabilities
Committees (ALCOs)

ANZ 2020 Annual Report51

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Key material risks
The material risks facing the group per the group’s Risk Management Statement, and how these risks are managed, are summarised below.
Note as part of the annual review of our Risk Management Strategy we have removed reputational risk as a key material risk. We recognisethat reputational risk is largely a consequence of the impact of other material risks. Reputational consequences are therefore mitigatedthrough the appropriate management of other material risks.
Risk type

Description

Managing the risk

We pursue an active approach to Capital Management
through ongoing review, and Board approval, of the level
and composition of our capital base against key policy
objectives.

CapitalAdequacy
Risk

The risk of loss arising from the Groupfailing to maintain the level of capitalrequired by prudential regulators andother key stakeholders (shareholders, debt
investors, depositors, rating agencies, etc.)
to support ANZ’s consolidated operations
and risk appetite.

Compliance
Risk

The risk of failure to act in accordance with Key features of how we manage Compliance Risk as partof our Operational Risk and Compliance Framework include:
laws, regulations, industry standards andcodes, internal policies and procedures• centralised management of key obligations, andand principles of good governance asemphasis on identifying changes in regulations and theapplicable to the Group’s businesses.
business environment, so as to enable us to proactively
assess emerging compliance risks and implement
robust reporting and certification processes.
• recognition of incident management as a separate
element to enhance ANZ's ability to identify, manage
and report on incidents/breaches in a timely manner.
• the Whistleblower Protection Policy allowing employees
and contractors to make confidential, anonymous
submissions regarding concerns relating to accounting,internal control, compliance, audit and other matters.

Credit Risk

The risk of financial loss resulting from:• a counterparty failing to fulfil its
obligations; or• a decrease in credit quality of acounterparty resulting in a financial loss

Our Credit Risk framework is top down, being defined bycredit principles and policies. Credit policies, requirements
and procedures cover all aspects of the credit life cycle— for example: transaction structuring, risk grading, initialapproval, ongoing management and problem debt
management, as well as specialist policy topics.

Credit Risk incorporates the risks
associated with us lending to customers
who could be impacted by climatechange or by changes to laws, regulations,or other policies adopted by governmentsor regulatory authorities, including carbon
pricing and climate change adaptation or
mitigation policies.
Liquidity andFunding Risk

The risk that the Group is unable to meetits payment obligations as they fall due,
including:• repaying depositors or maturingwholesale debt; or• the Group having insufficient capacity
to fund increases in assets.

52

Key principles in managing our Liquidity and Funding
Risk include:• maintaining our ability to meet liquidity ‘survival
horizons’ under a range of stress scenarios to meet cash
flow obligations over a short-to-medium term horizon;• maintaining a strong structural funding profile; and• maintaining a portfolio of high-quality liquid assets to
act as a source of liquidity in times of stress.

Material
ESG issues1

Risk typeMarket Risk

Description

Managing the risk

The risk to the Group’s earnings
arising from:• changes in any interest rates, foreignexchange rates, credit spreads, volatility,
and correlations; or• fluctuations in bond, commodity or
equity prices.

Material
ESG issues1

Our risk management and control framework for Market
Risk involves us quantifying the magnitude of market risk
within the trading and balance sheet portfolios throughindependent risk measurement. This identifies the rangeof possible outcomes, the likely timeframe, and thelikelihood of the outcome occurring. Then we allocate an
appropriate amount of capital to support these activities.

Operational
Risk

The risk of loss and/or non-compliancewith laws resulting from inadequate or
failed internal processes, people and/or
systems, or from external events. Thisdefinition includes legal risk, and the riskof reputation loss, or damage arising frominadequate or failed internal processes,
people and systems, but excludes
strategic risk.

We operate a three-lines-of-defence model to manage
Operational Risk, with each line of defence having
defined roles, responsibilities and escalation paths
to support effective communication and effective
management of our operational risk. We also haveongoing review mechanisms to ensure Operational
Risk and Compliance Framework continues to meetorganisational needs and regulatory requirements.

Strategic Risk

Risks that affect or are created by anorganisation’s business strategy andstrategic objectives. Strategic risk mightarise from making poor strategic businessdecisions, from the sub-standard executionof decisions, from inadequate resource
allocation, or from a failure to respond well
to changes in the business environment.

We consider and manage strategic risks 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 with theserisks form the primary controls.

Technology
Risk

The risk of loss and/or non-compliancewith laws resulting from inadequate or
failed internal processes, people andsystems or from external events impactingon IT assets, including the compromise ofan IT asset’s confidentiality, integrity
or availability.

Technology Risk is managed in accordance with ANZ’s
Operational Risk and Compliance Framework, which isconsistent with the management of Operational Risk.

Fairness andethical conduct

Fraud anddata security

Customerexperience

Corporate
governanceDigitalinnovation

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.

1. See page 3 for information on our material ESG issues

ANZ 2020 Annual Report53Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

OUR PERFORMANCE (continued)

Performance overview
GROUP PERFORMANCEThe results of the Group’s operations and financial position are set out on pages 54-71. Page 11 outlines the Group’s strategy and pages
10-27 describes in further detail the Group’s prospects in terms of future financial position and performance. Discussion of our approach
to risk management, including a summary of our key material risks is outlined on pages 49-53.
Statutory profit after tax for the year ended 30 September 2020 decreased 40% on the prior year to $3,577 million. Statutory return on
equity is 5.9% and statutory earnings per share is 126.4 cents, a decrease of 40% on prior year.

GROUP PROFIT RESULTS
2020

2019

Statutory
$m

Cash
$m

Statutory
$m

Cash
$m

Net interest income
Other operating income

14,0493,588

14,0493,703

14,3394,446

14,3394,690

Operating income

17,637(9,383)17,752(9,383)

18,785(9,071)

19,029(9,071)
9,958

Income Statement

Operating expenses
Profit before credit impairment and income tax

8,254

8,369

9,714

Credit impairment charge(2,738)(2,738)

(794)

(795)

Profit before income tax
Income tax expense
Non-controlling interests

5,516(1,840)(1)

5,631(1,872)(1)

8,920(2,609)(15)

9,163(2,678)(15)

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

3,675
(98)

3,758
(98)

6,296
(343)

6,470
(309)

Profit for the year

3,577

3,660

5,953

6,161

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 56 for adjustments between statutory and cash profit.
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.
As a result of the sale of our OnePath pensions and investment (OnePath P&I) and aligned dealer groups (ADG) businesses to IOOF Holdings
Limited and our life insurance business to Zurich Financial Services Australia, the financial results of these businesses and associated Group
reclassification and consolidation impacts are treated as discontinued operations from a financial reporting perspective (refer to page 67).
CORONAVIRUS (COVID-19)
The ongoing COVID-19 pandemic is causing major disruptions to community health and economic activity with wide-ranging impacts across
many business sectors in Australia, New Zealand and globally. Additionally, many of the Group’s customers have been impacted by the
COVID-19 pandemic. As a result, during the year the Group launched support packages for retail and commercial customers in Australia and
New Zealand, including the option of an up to six-month loan repayment deferral. The Group is continuing to work with customers impacted
by COVID-19 to restructure loans and in some circumstances will provide an extension to loan repayment deferrals for a further period.
Regulators and governments have implemented a broad range of measures to promote financial stability in response to COVID-19. Those
measures implemented by governments and regulators in Australia and New Zealand include financial assistance packages for homeowners
and businesses, liquidity and funding initiatives to strengthen the banking system, and regulatory changes to capital requirements.
The ongoing COVID-19 pandemic has also increased the estimation uncertainty in the preparation of the financial statements. The Group has
made various accounting estimates for future events in the financial statements based on forecasts of economic conditions which reflect
expectations and assumptions as at 30 September 2020 and that the Group believes are reasonable under the circumstances. There is aconsiderable degree of judgement involved in preparing these estimates. The underlying assumptions are also subject to uncertainties which
are often outside the control of the Group. Accordingly, actual economic conditions are likely to be different from those forecast since
anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting estimates
included in the financial statements.

54

OUR PERFORMANCE (continued)

While pervasive across the financial statements, the estimation uncertainty is predominantly related to expected credit losses where theGroup recognised a credit impairment charge of $2.7 billion pre-tax in the year ended 30 September 2020, the fair value measurement andrecoverable amount assessments of non-financial assets where the Group recognised an impairment charge of $815 million in respect of twoof the Group’s Asian associate investments and an impairment charge of $77 million in respect of goodwill. For further details of theseestimation uncertainties refer to the detailed notes in the financial statements. The ramifications of COVID-19 continue to be uncertain and it
remains difficult to predict the impact or duration of the pandemic.
ACCOUNTING STANDARDS ADOPTED
During the September 2020 full year, the Group adopted AASB 16 Leases (AASB 16) and applied a modified retrospective transition approachin recognising all leases (except for leases of low value assets and short term leases) on the balance sheet based on the present value ofremaining lease payments as of 1 October 2019. Consequently on 1 October 2019 the Group recognised an increase in lease liabilities of $1.7
billion, a right-of-use lease asset of $1.6 billion, an increase in deferred tax assets of $37 million and a net reduction to opening retained
earnings of $88 million. For further details on key requirements and impacts of the changes refer to Note 1 of the consolidated financial
statements.
The Group early adopted AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform from 1 October
2019. The standard modifies certain hedge accounting requirements to provide relief from the potential effects of the uncertainty caused byinterest rate benchmark reform. For further details on interest rate benchmark reform refer Note 1 of the consolidated financial statements.

CONTINUING OPERATIONS
We believe cash profit from continuing operations is a particularly important performance measure as we continue to strategically reposition
ourselves to create a simpler, better capitalised, better balanced and more agile bank. Key measures of our financial position and performanceare set out below.

1.
2.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.
The Directors propose a final dividend of 35 cents fully franked for Australia tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 4 cents per ordinary shares.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

55

55

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Description of adjustments between continuing operations statutory profit and cash profit:
Adjustment
Economic hedges
2020: $121 million
2019: $118 million
Revenue andexpense hedges
2020: ($36) million
2019: ($19) million

Reason for the adjustment
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. ANZ removes the fair value adjustments from cash profit since the profit or loss resulting from thehedge transactions will reverse over time to match with the profit or loss from the economically hedged item aspart of cash 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.

Structured credit
intermediation
trades2020: ($2) million
2019: ($2) million

ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight
US financial guarantors. This involved selling credit default swaps (CDSs) as protection over specific debt structuresand purchasing CDS protection over the same structures. ANZ has subsequently exited its positions with six US
financial guarantors. The remaining two portfolios with a $0.3 billion notional value are being monitored with aview to reducing the exposures when ANZ deems it cost effective relative to the perceived risk associated with a
specific trade or counterparty.

Revaluation of policy
liabilities – OnePath
Life (NZ)
2020: nil
2019: $77 million

When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect
the present value of the obligation, with the impact of changes in the market discount rate each period beingreflected in the Income Statement. ANZ includes the impact on the re-measurement of insurance contracts
attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of insurance contracts. With thesale completion of the OnePath Life (NZ) Ltd business this adjustment is no longer required.

1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.

56
56

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

GROUP CASH PROFIT PERFORMANCE
Cash profit performance and the analysis thereof has been presented on a cash profit from continuing operations basis. Discontinued
operations are described on page 67.

2020
$m

2019
$m

Movt

Net interest income
Other operating income

14,0493,703

14,339
4,690

-2%
-21%

Operating income

17,752(9,383)19,029(9,071)

-7%
3%

8,369
(2,738)

9,958
(795)

-16%
244%

Income tax expense
Non-controlling interests

5,631(1,872)(1)

9,163(2,678)
(15)

-39%
-30%
-93%

Profit after tax from continuing operations

3,758

6,470

-42%

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

Cash profit from continuing operations decreased $2,712 million (42%) compared with the 2019 financial year.
• net interest income decreased $290 million (-2%) largely due to lower interest rates and competitive pressures resulting in a 13 basis point
decrease in the net interest margin, partially offset by 6% growth in average interest earning assets. The lower net interest margin reflects
lower earnings on capital, customers switching to principal and interest home loans in Australia and from variable to fixed loans in both
Australia and New Zealand, a higher proportionate growth in the lower margin Institutional business and the impacts of growth in liquid
assets due to increased system liquidity, partially offset by favourable short-term funding costs and growth in at-call deposits. The increasein average interest earning assets reflects the impact of foreign currency translation movements and growth in the Institutional banking
portfolio, increases in average trading and investment securities and increases in average cash and other liquid assets.
• other operating income decreased $987 million (-21%) largely as the result of the impairment of Asian associates of $815 million, a reduction
associated with divestments of $342 million, a decrease in net fee and commission income of $252 million excluding divestment impacts, a
reduction in share of associates’ profit of $107 million, and a $79 million decrease due to widening credit spread impacts on loans measured
at fair value in Institutional. This was partially offset by higher Markets Other operating income of $598 million.
• operating expenses increased $312 million (3%) primarily due to an accelerated software amortisation charge of $197 million, lease-related
items of $85 million, higher restructuring expenses of $84 million, goodwill impairments of $77 million and higher compliance spend. Thiswas partially offset by lower customer remediation of $164 million within operating expenses, and productivity benefits.
• credit impairment charges increased $1,943 million largely due to additional collectively assessed credit impairment charges for the
expected impact of COVID-19.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

57

57

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

LARGE/NOTABLE ITEMS INCLUDED IN CASH PROFIT FROM CONTINUING OPERATIONS
Within continuing cash profit, the Group recognised a number of large/notable items. The impact of these items on a post-tax basis is
as follows:
2020
$m

2019
$m

OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME
Paymark
UDC Finance (UDC)
Divested business results1

(34)

157
10
1
37
-

OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME
Paymark
UDC Finance (UDC)
Other large/notable items

57

10
11
7
4
71

(279)
(138)
(815)
(66)
(72)
(115)
(77)

(475)
(10)
(54)
-

Gain/(Loss) on sale of divestments

Customer remediation
Accelerated software amortisation
Asian associates impairments
Asian associate AASB 9 adjustment
Lease-related items
Royal Commission legal costs
Restructuring
Goodwill write-off
1.

For business results that relate to completed divestments, comparative information has been restated for large/notable items included in the 2020 financial year.

58
58

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

Description of large/notable items:
Item

Description

Gain/(Loss) on sale ofdivestments

The 2020 financial year included a loss on sale upon completion of the sale of UDC. The 2019 financial year included
a gain on sale upon completion of the sale of OPL NZ, Paymark, Cambodia JV, and PNG Retail, Commercial and SME
businesses.

Divested businessresults

The 2020 financial year includes the divested business results of UDC (comparative information restated). The 2019financial year also included the divested business results of the Cambodia JV, OPL NZ, PNG Retail, Commercial and
SME, and Paymark.

Customer remediation Customer remediation includes provisions for expected refunds to customers, remediation project costs and related
customer and regulatory claims, penalties and litigation outcomes.
Accelerated softwareamortisation

Accelerated amortisation charge arising from the revised application of the Group’s software amortisation policy toreflect the shorter useful life of software caused by rapidly changing technology and business requirements. Refer
to Note 20 Goodwill and Other Intangible Assets of the consolidated financial statements for further details.

Asian associates
impairments

During the 2020 financial year, the Group recognised an impairment in respect of two of the Group’s investments toadjust their carrying values in line with their value-in-use calculations (refer Note 26 Investments in Associates of theconsolidated financial statements).

Asian associate AASB
9 adjustment

When the Group adopted AASB 9 Financial Instruments on 1 October 2018, an estimate of PT Panin’s transition
adjustment was recognised through opening retained earnings to align accounting policies. PT Panin adopted
AASB 9 during the current financial year recognising a transition adjustment in retained earnings. The adjustment
represents the Group’s equity accounted share of the transition adjustment net of the previous transition
adjustment.

Lease-related items

During the 2020 financial year, the Group recognised charges associated with the adoption of the new leaseaccounting standard on 1 October 2019. Comparative information has not been restated for the adoption of the
new lease accounting standard.

Royal Commission
legal costs

External legal costs associated with responding to the Banking Royal Commission.

Restructuring

Restructuring charges largely related to business and property changes in Australia Retail and Commercial division.

Goodwill write-off

Pacific division: The impact of COVID-19 on the economies of the Pacific has been significant and is expected totake some time to recover. Goodwill of $50 million was impaired. No further impairment was required on the
carrying value of other assets in the Pacific.
New Zealand division: As a result of changes in the economic environment and outlook, the Group has announced
its intention to begin winding up the Bonus Bonds business in New Zealand no later than 31 October 2020. As aresult, the Group wrote off the associated goodwill of $27 million.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

59

59

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

ANALYSIS OF CASH PROFIT PERFORMANCE
Net interest income

Net interest income
Average interest earning assets2
Average deposits and other borrowings2
Net interest margin (%) - cash1,2
1

1.
2.

2020
$m

2019
$m

Movt

14,049862,882
679,336
1.63

14,339813,219
638,380
1.76

-2%
6%
6%
-13bpsIncludes the major bank levy of -$406 million (2019: -$363 million).
Average balance sheet amounts include assets and liabilities of continuing operations reclassified as held for sale.

Net interest income decreased $290 million (-2%) largely due to lower interest rates and competitive pressures, partially offset by 6% growthin average interest earning assets.
Net interest margin reduced 13 bps due to the impact of central bank rate cuts on low rate deposits, earnings on capital and replicateddeposits net of repricing. This was also impacted by customers switching to principal and interest home loans in Australia and from variable to
fixed loans in both Australia and New Zealand, higher proportionate growth in the lower margin Institutional business, the impacts of growthin liquid assets due to increased system liquidity, partially offset by favourable short-term funding costs and growth in at-call deposits.
Average interest earning assets increased $49.7 billion (6%) reflecting growth in the Institutional banking portfolio, growth in liquid assets
and trading securities in Markets, higher central bank cash balances, higher collateral and the impact of foreign currency translation
movements.
Average deposits and other borrowings increased $41.0 billion (6%) driven by growth in all divisions but particularly in the Institutional andAustralia Retail and Commercial divisions, and the impact of foreign currency translation movements.

1.

Market Balance Sheet activities includes the impact of discretionary liquid assets and other Balance Sheet activities.

60
60

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

Other operating income
2020
$m

2019
$m

Movt

Markets other operating income
Share of associates' profit
Other1

2,215
1,884
155
(551)

2,493
1,286
262
649

-11%
47%
-41%
large

Total cash other operating income

3,703

4,690

-21%

Net fee and commission income1

1.

Total increase/(decrease)
$m

Movt

Explanation

Net fee andcommission
income1

(278)

-11%

Net fee and commission income decreased primarily due to lower volume related fees
due to the impact of COVID-19, reduction or removal of fees, loss of income fromdivested businesses, partially offset by lower customer remediation impacting Net fee
and commission income.

Markets otheroperating income

598

47%

Markets other operating income increased across Franchise Trading, Franchise Sales andBalance Sheet Trading. This was primarily due to increased customer sales flows andimproved trading conditions, particularly in International, as customers sought Markets
risk management products.

Share of associates'
profit

(107)

-41%

Share of associates’ profit decreased by $107m of which $68 million relates to theGroup’s equity accounted share of PT Panin’s transition adjustment on its adoption of
AASB 9. The equity accounted share of profits decreased by $10 million for PT Panin and$24 million for AmBank.

Other1(1,200)large

Other decreased primarily due the impairment of the Asian associates of $815 million,
the impact of divested businesses of $318 million and $79 million in Institutional division
related to widening credit spread impacts on loans measured at fair value.

Total cash otheroperating income
from continuing
operations

(987)

-21%

Excluding Markets.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

61

61

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Operating expenses
2020$mTotal cash operating expenses from continuing operations2
Full time equivalent staff (FTE) from continuing operations
Average full time equivalent staff (FTE) from continuing operations

9,383
37,50637,728

2019
$m
9,071
37,58837,480

Movt
3%
0%
1%

Operating expenses increased by $312 million (3%). Key drivers:
 personnel expenses increased $113 million (2%) largely driven by higher investment spend in the New Zealand and Australia Retail andCommercial divisions, higher customer remediation costs of $80 million, wage inflation and adverse foreign currency translation
movements. This was partially offset by lower variable remuneration and lower business as usual expenses, including reduced employee
leave balances.
 premises expenses decreased $6 million (-1%) largely driven by lower premises expense in our International network, partially offset by achange in accounting treatment associated with the new leasing standard (comparatives not restated).
 technology expenses (excluding personnel) increased $290 million (19%) largely as a result of accelerated amortisation of $197 million due
to a change in application of the software amortisation policy, a change in accounting treatment associated with the new leasing standard(comparatives not restated), an increase in investment spend and customer remediation ($13 million).
 restructuring expenses increased $84 million largely related to business and distribution changes in the Australia Retail and Commercial
division.
 other expenses decreased $169 million (-9%) largely due to lower customer remediation of $257 million and lower travel expenses, partially
offset by higher investment spend and Goodwill write-offs of $77 million in Pacific and New Zealand divisions.

Credit impairment
Collectively assessed credit impairment charge/(release) ($m)
Individually assessed credit impairment charge ($m)
Credit impairment charge ($m)
Gross impaired assets ($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

62
62

ANZ 2019 ANNUAL REPORT

2020

2019

Movt

1,717
1,021
2,738
2,459
360.0
5,899
36.2%
1.39%

17
778
795
2,029
358.1
4,190
40.1%
0.94%

large
large
large
21%
1%
41%

OUR PERFORMANCE (continued)

GROSS IMPAIRED ASSETS BY DIVISION ($m)

Gross impaired assets increased $430 million (21%) driven by the Institutional division ($169 million), Australia Retail and Commercial division($166 million) and New Zealand division ($102 million). The increase in the Institutional division primarily relates to impairments on a small
number of single name exposures. The Australia Retail and Commercial division increase was driven by home loans with a combination of theimplementation of a more market responsive collateral valuation methodology and impairments as 90 days past due exposures increased,
combined with impairments on a small number of single name exposures in the commercial portfolio. The increase in the New Zealanddivision is driven by impairments on a small number of single name commercial exposures.

The collectively assessed credit impairment charge increased by $1,700 million primarily driven by a $1,044 million increase in the Australia
Retail and Commercial division, a $363 million increase in the Institutional division and a $236 million increase in the New Zealand division.
The significant increases across all divisions are due to forward-looking assessments of the impacts of the COVID-19 pandemic driven by thedeterioration in the economic outlook as well as management adjustments to recognise the risk of credit quality deterioration expected toemerge as COVID-19 stimulus and support programs ease.

The individually assessed credit impairment charge increased by $243 million primarily due to a single name impairment in the Institutional
division. This was partially offset by improved delinquencies in the Australia Retail portfolios combined with ongoing lower portfolio growth in
the unsecured portfolio, and lower provisions in the Commercial portfolio.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

63

63

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

During the September 2020 year the collectively assessed allowance for expected credit losses increased by $1,632 million. This was
attributable to changes in economic outlook including impact of scenario weights of $1,018 million, COVID-19 related management
adjustments of $592 million, changes in risk of $61 million and a change in portfolio composition of $46 million, partially offset by reductions
from foreign exchange and divestments of $85 million.
During the September 2020 year, there was a net increase in the individually assessed allowance for expected credit losses of $77 million.
COVID-19 loan assistance packages offered to customers1
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability ofcustomers to meet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal andinterest repayments, replacing principal and interest with interest only repayments, and extension of loan maturity dates.
The Group does not consider that when a customer is first provided assistance, all other things being equal, that there has been a Significant
Increase in Credit Risk (SICR) and a consequent impact on ECL when assessing provisions. Subsequent to take-up, customers have been
contacted to discuss available options once the packages reach their end date. Additional information on the customer’s financial position
and ability to recommence their loan repayments is used to assist in classification of customers into risk categories. Customers in higher risk
categories, and those that have requested a deferral extension have been classified as having a SICR. The Group continues to work with ourcustomers on arrangements in respect of their loan obligations once the assistance package has ceased.
The categories of assistance packages provided and the amounts outstanding as at 30 September 2020 are noted in the following table:

Assistance package category
Loan deferral package
RetailCommercial and other
Interest only
RetailCommercial and otherTerm extensions
RetailCommercial and other
Total
RetailCommercial and other
Total
1.

Total
At 30 September
2020$m

26,117
8,989

3,705
193

29,822
9,182

126
33

2,287
494

2,413
527

3
24
35,292

611
66
7,356

614
90
42,64826,246
9,046
35,292

6,603
753
7,356

32,8499,799
42,648COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date
at 1 March 2020.

64
64

Australia Geography New Zealand Geography
At 30 September 2020 At 30 September 2020$m$m

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

DIVISIONAL PERFORMANCE

2020
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

2019
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

Australia
Retail andCommercial

Pacific

TSO andGroup
Centre

2.59%
45.1%

Group

3.10%
106.2%

n/a
n/a

1.63%
52.9%

1,017

(62)

(1,388)

3,758

157.6
223.3
5,291

116.6
91.0
5,761

1.9
3.5
1,113

1.6
11,263617.1
552.4
37,506Australia
Retail andCommercial

Institutional

New
Zealand

Pacific

TSO andGroup
Centre

Group

2.59%
43.2%

0.82%
50.6%

2.33%
38.8%

3.75%
64.7%

n/a
n/a

1.76%
47.7%

3,195

1,828

1,399

59

(11)

6,470

331.9
208.0
13,903

164.5
217.3
5,468

116.7
83.4
6,121

2.1
3.5
1,086

0.1
(0.4)
11,010615.3
511.8
37,588Institutional

New
Zealand

0.76%
43.9%

2.26%
44.8%

2,337

1,854

339.4
234.6
14,078ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

65

65

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

DIVISIONAL PERFORMANCE
Australia Retail and Commercial
Lending volumes increased in the September 2020 half driven by successful home loan growth, partially offset by lower consumer
demand for unsecured borrowing and increased customer repayments following fiscal and regulatory stimulus and a low interest
rate environment. Net interest margin was flat as the headwinds from official cash rate decreases on low customer rate deposits andearnings on capital, unfavourable lending mix from proportionately more growth in lower margin home loans compared to higher
margin unsecured lending were offset by home loan repricing benefits, lower funding costs and a favourable deposit mix impact.
Other operating income decreased driven by lower credit card and international transaction volumes driven by COVID-19 impacts
and fee removals. Operating expenses were flat with higher investment spend, higher restructuring expenses, additional charges forlease-related items, accelerated amortisation due to changes in application of the software policy and inflationary increases being
offset by productivity benefits and lower remediation expenses. Credit impairment charges increased driven by collectively assessed
credit impairment charges for the expected impact of COVID-19.
Institutional
Average lending volumes increased against the prior period. Customer deposits increased in Transaction Banking, partially offset bydecreases in the other businesses. Net interest margin ex-Markets decreased mainly due to the impact of low interest rates on
deposit margins. Other operating income increased due to higher Markets income, partly offset by lower volume related fee incomein the transaction banking business with a subdued international trade environment. Operating expenses decreased as a result of
lower personnel costs, lower discretionary spend, lower property charges and lower remediation expenses, partly offset byaccelerated amortisation due to changes in application of the software policy and additional charges for lease-related items. Credit
impairment charges increased due to higher collectively assessed credit impairment charge for the expected impact of COVID-19
and an increase in individually assessed credit impairment charges in Transaction Banking.
New ZealandLending ended flat against the prior period impacted by the sale of UDC at the end of the year. Customer deposit volumes grewacross all portfolios while funds under management increased during the period. Net interest margin decreased mainly due to lower
interest rates compressing deposit margins. Other operating income decreased primarily driven by fee changes and lower volume
related fee income and fee waivers due to the impact of COVID-19. Operating expenses increased due to higher investment spend
on compliance projects, goodwill write-off related to the Bonus Bonds business, accelerated amortisation due to changes inapplication of the software policy, and increased restructuring charges. Credit impairment charges increased driven by higher
collectively assessed credit impairment charges for the expected impact of COVID-19.
Pacific
Operating income for the Pacific division declined from the prior year due to the impact of COVID-19. Costs were higher largely due
to a goodwill write-off. Credit impairment charges increased driven by higher collectively assessed credit impairment charges for the
expected impact of COVID-19.
TSO and Group Centre
The 2020 financial year included the impairment of the Asian associates and a loss on sale of UDC. The 2019 financial year included
the gain on sale of OnePath Life (NZ), Paymark, Cambodia JV and PNG Retail, Commercial and SME.

66
66

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

DISCONTINUED OPERATIONS
The financial results of the divested Wealth Australia businesses and associated Group reclassification and consolidation impacts are treated as
discontinued operations from a financial reporting perspective.
The comparative Group Income Statement and Statement of Comprehensive Income have been restated to show discontinued operations
separately from continuing operations in a separate line item ‘Profit/(Loss) from discontinued operations’.
 Sale to IOOF Holdings Limited (IOOF)
On 17 October 2017, the Group announced it had agreed to sell its OnePath P&I and ADGs businesses to IOOF. The aligned dealer groups
business consists of ADGs that operate under their own Australian Financial Services licences. The sale of the ADGs completed on 1 October
2018 and the OnePath P&I business completed on 31 January 2020.
 Sale to Zurich Financial Services Australia (Zurich)
On 12 December 2017, ANZ announced that it had agreed to the sale of its life insurance business to Zurich and regulatory approval was
obtained on 10 October 2018. The transaction was completed on 31 May 2019.
Included in the ‘Cash loss from discontinued operations’ is: a $18 million loss on disposal ($13 million loss after tax) was recognised in the September 2020 full year attributable to sale completion
costs. The September 2019 full year included a $23 million loss ($81 million loss after tax) attributable to sale related adjustments and writedowns, the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold to Zurich, partially offset by therecycling on sale completion of gains previously deferred in equity reserves; and customer remediation which includes provisions for expected refunds to customers and related remediation costs associated withinappropriate advice or services not provided in the pensions and investments and life insurance businesses. An amount of $126 million
pre-tax, $96 million post tax was recognised in the 2020 financial year (2019: $241m pre-tax, $207 million post-tax).
E x p l a n a t i o n o f a d j u s t m e n t s b e t w e e n s t a t u t o r y p ro f i t a n d c a s h p r o f i t
 Treasury shares adjustment
ANZ shares held by the Group in Wealth Australia discontinued operations are deemed to be Treasury shares for accounting purposes.
Dividends and realised and unrealised gains and losses from these shares are reversed as they are not permitted to be recognised as income
for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on theGroup’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement. With thesale completion of the life insurance business to Zurich, there are no ANZ shares held by the Group in discontinued operations
 Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of theobligation, with the impact of changes in the market discount rate in each period being reflected in the Income Statement. ANZ includes
the impact on the re-measurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory
profit to remove the volatility attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.
With the sale completion of the life insurance business to Zurich, the 2019 financial year includes the reversal of the life-to-date cash profit
adjustments on the revaluation of policy liabilities sold, reducing cash profit by $15 million from discontinued operations.
2020
$m

2019
$m

Statutory profit/(loss) from discontinued operations

(98)

(343)

Adjustments between statutory profit and cash profit
Treasury shares adjustment
Revaluation of policy liabilities

-

34
(11)
45

(98)

(309)

Cash profit/(loss) from discontinued operations

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

67

67

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

FINANCIAL POSITION OF THE GROUP – INCLUDING DISCONTINUED OPERATIONSCondensed balance sheet
As at
2020
$b

2019
$b

Movt

129.7
144.3
135.3
617.1
15.9

100.3
126.9
120.7
615.3
1.8

29%
14%
12%
0%
-100%

16.1

-1%

1,042.3

981.1

6%

Settlement balances owed by ANZ / Collateral received
Deposits and other borrowings
Derivative financial instruments

31.5
682.3
134.7

18.8
637.7
121.0

68%
7%
11%

Debt issuances
Liabilities held for sale
Other

119.7
12.8

129.7
2.1
11.0

-8%
-100%
16%

Total liabilities

981.0

920.3

7%

Total equity

61.3

60.8

1%

AssetsCash / Settlement balances owed to ANZ / Collateral paid
Trading and investment securities
Derivative financial instruments
Net loans and advances
Assets held for sale
Other
Total assets
LiabilitiesCash/Settlement balances owed to ANZ/Collateral paid increased $29.4 billion (+29%) driven by an increase in balances with central
banks, increased overnight inter-bank deposits, and an increase in short term reverse repurchase agreements, partially offset by foreign
currency translation movements.

Trading and investment securities increased $17.4 billion (+14%) primarily driven by an increase in liquid assets in Markets, partially offset
by the impact of foreign currency translation movements.



Derivative financial assets and liabilities increased $14.6 billion (+12%) and $13.7 billion (+11%) respectively as interest rate and foreignexchange movements resulted in higher derivative volumes and fair values, particularly in interest rate and foreign exchange
swap products.

Net loans and advances increased $1.8 billion (+0%), driven by growth in home loans in the Australia Retail and Commercial division(+$10.1 billion) and New Zealand division (+$4.4 billion), partially offset by lower credit volumes in other products as a result of theongoing impacts of COVID-19 in the Institutional (-$4.1 billion) and Australia Retail and Commercial (-$1.6 billion) divisions, higher credit
provisions (-$1.5 billion) as a result of the ongoing impacts of COVID-19, the sale of the UDC business in New Zealand division in
September 2020 (-$3.4 billion) and foreign currency translation movements.



Deposits and other borrowings increased $44.6 billion (+7%) driven by increased customer deposits in the Australia Retail andCommercial division (+$26.6 billion), Institutional division (+$11.8 billion), and New Zealand division (+$7.8 billion) and drawdown of the
RBA Term Funding Facility (TFF) (+$12 billion). This was partially offset by a reduction in certificates of deposit (-$4.0 billion), commercial
paper issued (-$2.7 billion) and the impact of foreign currency translation movements.

Debt issuances decreased $10.0 billion (-8%) driven by lower senior debt issuances. Funding was partially replaced by the RBA TFF, which
is classified as Deposits and other borrowings.

68

ANZ 2019 ANNUAL REPORT68

OUR PERFORMANCE (continued)

Funding
2020

2019

$b

$b

Wholesale funding
Shareholders’ equity

561.3
277.5
61.3

521.4
270.3
60.8

Total funding

900.1

852.5

Net Stable Funding Ratio

124%

116%

Customer liabilities

The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency.
$13.2 billion of term wholesale debt with a remaining term greater than one year as at 30 September 2020 was issued during the year.
In March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system. The RBA is providing a three-year secured funding
facility to ADIs at a fixed rate of 0.25%. APRA has determined that the TFF qualifies for inclusion in determining the Liquidity Coverage Ratio(LCR) and Net Stable Funding Ratio (NSFR).
ADIs can obtain initial funding of up to 3% of their existing credit outstanding to Australian households and businesses. ADIs have access toadditional funding if they increase lending to small and medium-sized businesses. As at 30 September 2020, ANZ had drawn $12 billion fromits initial TFF allowance of $12 billion and had drawn $0 billion from its additional TFF allowance of $6 billion.
Liquidity
Full year average

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

1.

2020

2019

213.9
139%

188.4
140%

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 (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for
repurchase with central banks to provide same-day liquidity.
 high-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt
securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
 alternative liquid assets (ALA): Assets qualifying as collateral for the Committed Liquidity Facility (CLF) and other eligible securities listed by
the Reserve Bank of New Zealand (RBNZ).
The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory
requirements and the risk appetite set by the Board.
COVID-19 has impacted the normal operations of financial markets including funding markets, however the actions of governments globallyand central banks including the RBA, RBNZ and the US Federal Reserve have provided significant liquidity support to the system and financial
markets generally. ANZ’s liquidity measures have remained above regulatory requirements throughout this period.

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

69

69

Overview

How wecreate value

Performanceoverview

OUR PERFORMANCE (continued)

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Capital management
2020

2019

Movt

Common Equity Tier 1 (Level 2)- APRA Basel 3

11.3%

11.4%

Credit risk weighted assets ($b)

360.0

358.1

1%

Total risk weighted assets ($b)

429.4

417.0

3%

APRA Leverage ratio

5.4%

5.6%

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 the Bank.
The Group’s Common Equity Tier 1 ratio was 11.3% based on APRA Basel 3 standards, exceeding APRA’s minimum requirements. It decreased
2 bps as cash earnings and divestments were offset by the impact of dividends during the year.
At 30 September 2020 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
Our financial performance allowed us to propose that a final dividend of 35 cents be paid on each eligible fully paid ANZ ordinary share,bringing the total dividend for the year ended 30 September 2020 to 60 cents per share. This represents a dividend payout ratio of 45.3% ofcash profit from continuing operations.
The proposed 2020 final dividend of 35 cents per share will be fully franked for Australian taxation purposes, and carry New Zealand
imputation credits of NZD 4 cents per ordinary share. It will be paid on 16 December 2020 to owners of ordinary shares at close of business on
10 November 2020 (record date).
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2020 final dividend.
For the 2020 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares.
Further details on dividends provided for or paid during the year ended 30 September 2020 are set out in Note 5 of the consolidated financial
statements.
Shareholders Returns

1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.

70
70

ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

FIVE YEAR SUMMARY
20201
$m

20191
$m

20181
$m

20171
$m

2016
$m

14,0493,703(9,383)8,369(2,738)(1,872)
(1)
3,758
(98)
3,660
(83)
3,577

14,3394,690(9,071)
9,958(795)(2,678)
(15)
6,470
(309)
6,161
(208)
5,953

14,514
4,853(9,401)
9,966(688)(2,775)
(16)
6,487
(682)
5,805
595
6,400

14,875
4,941(8,967)
10,849(1,199)(2,826)
(15)
6,809
129
6,938
(532)
6,406

15,095
5,499(10,439)
10,155(1,956)(2,299)
(11)
5,889
n/a
5,889
(180)
5,709

1,042,286
61,29711.3%
16.7%

981,137
60,794
11.4%
16.4%

943,182
59,405
11.4%
16.8%

897,326
59,075
10.6%
15.8%

914,869
57,927
9.6%
14.5%

5.9%
0.3%
53.8%

10.0%
0.6%
49.5%

10.9%
0.7%
52.0%

11.0%
0.7%
46.1%

10.0%
0.6%
50.7%

Total return to shareholders (share price movement plus
dividends)-36.9%

9.2%

0.6%

13.1%

9.2%

Market capitalisation
Dividend (cents)
Franked portion– interim– finalShare price– high (dollars)– low (dollars)– closing (dollars)

48,83960
100%
100%$28.67$14.10$17.2280,842
160
100%
70%$29.30$22.98$28.5280,979
160
100%
100%
$30.80$26.08$28.1886,948
160
100%
100%
$32.95$25.78$29.6080,886
160
100%
100%
$29.17$21.86$27.63Financial performance - cash2
Net interest income
Other operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Income tax expense
Non-controlling interests
Cash profit from continuing operations2
Cash profit/(loss) from discontinued operations
Cash profit
Adjustments to arrive at statutory profit2
Profit attributable to shareholders of the Company
Financial position
AssetsNet assets
Common Equity Tier 1
Common Equity Tier 1 – Internationally
Comparable Basel 33
Return on average ordinary equity (statutory)4Return on average assets (statutory)
Cost to income ratio (cash)2
Shareholder value – ordinary shares

Share information(per fully paid ordinary share)
Earnings per share (cents) (statutory)
Dividend payout ratio (statutory)
Net tangible assets per ordinary share5
No. of fully paid ordinary shares issued (millions)
Dividend reinvestment plan (DRP) issue price– interim– final

126.4
47.6%
$20.04
2,840

210.0
76.2%
$19.59
2,835

221.6
72.1%
$18.47
2,874

220.1
73.4%
$17.66
2,937

197.4
81.9%
$17.132,927$18.06-$27.79$25.03$27.76$26.03$28.80$29.02$24.82$28.16

Other information
No. of employees (full time equivalents)
No. of shareholders

38,579553,171

39,060506,847

39,924509,238

44,896522,425

46,554545,2561.

During 2018, part of Wealth Australia and TSO and Group Centre division was classified as a discontinued operation. 2017 comparatives have been restated accordingly. 2016 has not been
restated. All ratios are presented on a Group basis inclusive of discontinued operations across all periods.
2.
Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. Cash profit is not
audited; however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis across each period presented, and the adjustments
for the sale impact of Shanghai Rural Commercial Bank (SRCB) in 2018 and 2017 are appropriate.
3.
Internationally Comparable Methodology applied for 2016–2020 aligns with APRA’s information paper entitled ‘International Capital Comparison Study’ (13 July 2015). Basel Internationally
Comparable ratios do not include an estimate of the Basel l capital floor requirement.
4.
Average ordinary equity excludes non-controlling interests and preference shares.
5.
Equals shareholders’ equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares

ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT

71

71

Overview

Performanceoverview

How wecreate value

Five year summary (continued)

Remuneration
reportDirectors’
reportFinancialreport2020

2019

Shareholder
information

2018

2017

2016

Fair and Responsible Banking

Net Promoter Score Ranking (relative to peers)
Australia Retail1

3

4

3

4

2

2

Australia Commercial

4

3

3

4

4

l3

Australia Institutional

1

1

1

2

1

New Zealand Retail

4

4

4

4

4

New Zealand Commercial and Agricultural5

5

5

5

5

5

New Zealand Institutional

1

1

1

3

1

Breaches7

569

784

1,114

1,443

1,408

Investigations resulting in termination

93

151

226

262

254

Whistleblower reports

157

156

137

121

71

1,070,930

998,474

889,135

550,361

453,054

86

77

73

72

74

33.4

32.5

32.0

31.1

29.9

139.5

142.2

136.9

131.1

89.8

66,402

134,930

124,113113,127

113,071

20.5

42.4

34.6

29.4

-

Environmental sustainability ($ billion)

7.57

7.60

4.65

4.51

2.37

Housing ($ billion)

1.45

Other social ($ billion)14

0.06

4

6

Code of conduct

Financial Wellbeing

Help enable social and economic participationof 1 million people by 2020 (cumulative total)8
Employees
Employee engagement (%)9
Total Women in Leadership (%)

10

Community
Total community investment ($m)
Volunteer hours
Employee volunteering participation rate (%)

11

Sustainable solutions AU$50 billion target12

Total funded or facilitated towards:
13

Environmental Sustainability

Environmental footprint
Total scope 1 & 2 GHG emissions (tCO2e)

134,093

156,568

171,012

180,993

193,569

Total scope 1,2 & 3 GHG emissions (tCO2e)203,700

250,857

266,906

273,216

299,224

Renewables (%)

87

83

76

70

63

Coal (%)

5

9

13

16

19

Gas (%)

7

8

10

13

18

1,501

1,371

1,076

1,141

875

Project finance portfolio

15

Project finance commitment to renewable energy ($m)
Average emissions intensity of generation financed
Australia (tCO2e/Mwh generated)

0.40

0.54

0.66

0.58

0.62

Outside Australia (tCO2e/Mwh generated)

0.01

0.02

0.08

0.24

0.16

1. Roy Morgan Single Source, Australian population aged 14+, Main Financial Institution, six month rolling average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20. Ranking based on the four major
Australian banks. 2. DBM Business Atlas. Base: Commercial (<$100 million annual turnover) Main Financial Institution customers. Six month average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20.
Ranking based on the four major Australian banks. 3. Peter Lee Associates, 2020 Large Corporate and Institutional Relationship Banking surveys, Australia. 4. Retail Market Monitor, Camorra
Research, six month rolling average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20. Ranking based on the five major New Zealand banks. 5. Business Finance Monitor, TNS Kantar Research. Base:
Commercial ($3 million – $150 million annual turnover) and Agricultural (>$500K annual turnover) customers. Four quarter rolling average to Q3’16, Q3’17, Q3’18, Q3’19 & Q3’20. Ranking basedon the five major New Zealand commercial / agricultural banks. 6. Peter Lee Associates Large Corporate and Institutional Relationship Banking surveys, New Zealand 2016 - 2020, ranked
against the Top 4 competitors (in 2016 rank based on question ‘which bank would you most likely to recommend’). 7. Resulting in a formal consequence or the employee leaving ANZ
8. Target commenced in 2016. Performance includes people helped through our initiatives to support financial wellbeing, including our financial inclusion, employment and community
programs, and targeted banking products and services for small business and retail customers. Refer to the 2020 ESG Supplement for methodology. 9. The 2017 engagement survey was
run as a pulse survey sent to 10% of the bank's employees with a 57% response rate. 10. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all
employees regardless of leave status but not contractors (which are included in FTE). 11. Commenced reporting in 2017. 12. 2016 –2019 figures represent annual contributions towards ANZ’s
2020 $15bn sustainable solutions target, which had an environmental focus. In 2020, ANZ set a new 2025 $50bn target with an expanded focus on environmental sustainability, housing andfinancial wellbeing. 13. Commenced reporting in 2020. 14. Commenced reporting in 2020. Includes Green, Social, Sustainability Bond transactions issued by Financial Institutions that align to
SDG 6, 7, 9, 11, 12 and 13 and indirectly align to Financial Wellbeing. 15. Breakdowns for 2020, 2018 and 2017 do not total to 100% due to rounding.

72

This page has been intentionally left blank.

ANZ 2020 Annual Report73Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Remuneration report
Dear Shareholder,2020 Remuneration Report –auditedIn many respects this was not the year
we planned it to be. However, despite theunprecedented combination of challenges
from COVID-19, bushfires and ongoing
industry transformation, management
navigated the year extremely well anddelivered the vast majority of the priorities
and objectives agreed with the Board. Like
many businesses, ANZ has been affectedboth operationally and financially.
From an operational perspective, we took
swift action to ensure our people could
safely and productively work at home, whilestill supporting customers during a periodof significant stress.
Since March 2020 we have provided
142,000 home and business loan repayment
deferrals in Australia and New Zealand –providing much needed relief for those who
had either lost income or face uncertainty
due to the pandemic.
Shareholders will be acutely aware of thefinancial impacts COVID-19 has had on thebank. Increased provisions for potential
future credit losses (which the Board
determined were appropriate), along with
the impairment of two of the Group’s Asian

associate investments, have reduced profits
and our share price has also been adversely
affected.
While these provisions were appropriate
given the uncertain environment, they have
reduced the amount of profit we are able to
pay to shareholders in the form of dividends
this year.
Aside from the financial impact of COVID-19,
the Group Performance Framework met theBoard’s expectations when considering thestretching objectives we set ourselves atthe start of the year. Solid growth in our key
markets, a continued simplification of ouroperations and maintaining our disciplined
approach to expense management were
key highlights.
The Board was also pleased with the way
the bank responded to the challenges
of COVID-19 with our plan designed toprotect our people and the things thatmatter, adapt quickly to the new operating
environment, increase engagementwith important stakeholders, including
Governments and regulators and prepare
for the future.
In 2020 we also moved to a new approach
to how we reward, recognise and manage
the performance of our employees aspart of the Group’s Reimagining Reward
program. This included basing variable

remuneration on Group rather than
individual performance for around 80%
of employees.

Fixed remuneration
To ensure remuneration remained
market competitive, the Board engaged
PricewaterhouseCoopers in September 2019to assist the Board to conduct a detailed
remuneration market benchmarking review
for our Chief Executive Officer and ourDisclosed Executives.
Shayne Elliott’s fixed remuneration wasincreased (effective 1 October 2019 before
the COVID-19 pandemic) from $2.1 million
to $2.5 million and this is reflected in thisyear’s Remuneration Report. Shayne’s Long
Term Variable Remuneration was reduced
by $700k, with the target decreasing from200% to 140% of fixed remuneration.
The Annual Variable Remuneration target
remained unchanged at 100% of fixed
remuneration.
It should be noted that Shayne has notreceived a fixed remuneration increasesince starting as Chief Executive Officer
in January 2016, and his target total
remuneration remains largely consistent
with previous years.

Ilana Atlas, AO,
Chair – Human
Resources Committee

74

Fixed remuneration increases were also
applied to five Disclosed Executives
on 1 October 2019 to improve market
positioning, and one increase was madeon permanent appointment. For the year
commencing 1 October 2020, the Board
determined there would be no fixed
remuneration increases for any of theDisclosed Executives, including the Chief
Executive Officer.
There were no increases to the Chairman
fee or Non-Executive Director base fee forthe 2020 year.

Variable remuneration
outcomes
Shayne had a successful year and has ANZ
well positioned to assist our customers andthe community in the most challenging
environment in decades, while alsodelivering a decent result for shareholders.
Shayne has role modelled ANZ’s values
and culture, demonstrated outstanding
leadership as well as making strong
progress in simplifying and improving ouroperations. Despite this good performance,
the Board took into account the significant
impact of COVID-19 on returns and the
profitability of our business as well as theimpact on the broader community, andexercised its discretion by applying a 50%
reduction to his 2020 Annual Variable
Remuneration outcome.

longer term strategic objectives andcreating long-term value for all stakeholders.
This allocation of course remains subject toshareholder approval at the 2020 Annual
General Meeting and performance hurdles
being met.

Contents

For Disclosed Executives, the Board also
exercised its discretion and applied a
50% reduction to their 2020 Variable
Remuneration outcomes resulting in an
average outcome of 36% of maximum
opportunity. Total remuneration reducedby 15% year-on-year for 2020 Disclosed
Executives who were in role for the fullyear 2019 and 2020.

1. Who is covered by this report76

2. 2020 outcomes at a glance76

3. Overview of ANZ’sremuneration framework77

4. 2020 outcomes79

5. Executive remuneration
structure and delivery

93

Performance rights granted in late 2016 to
the Chief Executive Officer and Disclosed
Executives (excluding the Chief Risk Officer)
did not meet their hurdles when tested in
November 2019. Therefore, the rights werelapsed and executives received no value
from these awards.

6. Accountability andConsequence Framework97

7. Non-Executive Director(NED) remuneration

98

8. Remuneration governance100

9. Other information

102

This has been a difficult year for all our
stakeholders and as a Board we believe
we have struck the right balance inrewarding our executives for good
performance while also taking into
account the broader environment.
On behalf of the Board, I invite you to
consider our Remuneration Report which will
be presented to shareholders for adoption
at the 2020 Annual General Meeting.

As a result, the Board awarded an Annual
Variable Remuneration outcome of $1.25
million (33% of maximum opportunity)for 2020.
Long Term Variable Remuneration of$3.5 million (reduced from $4.2 million
the previous year) is proposed. This
reinforces Shayne’s focus on achieving

Ilana Atlas, AO
Chair – Human Resources Committee

ANZ 2020 Annual Report75Overview

How wecreate value

Remuneration
reportPerformanceoverview

Directors’
reportFinancialreportShareholder
information

1. WHO IS COVERED BY THIS REPORT
1.1 DISCLOSED EXECUTIVE AND NED CHANGES

2020 Chief Executive Officer (CEO) and Disclosed Executives

There were several changes to our Key Management Personnel(KMP) during the 2020 year:

S Elliott

Chief Executive Officer and Executive Director

M Carnegie

Group Executive, Digital andAustralia Transformation

K Corbally

Chief Risk Officer (CRO)G FlorianGroup Executive, Technology

A George

Deputy Chief Executive Officer (title changed
effective 22 September 2020 from Deputy
Chief Executive Officer and Group Executive,
Wealth Australia)

M HandGroup Executive, Australia Retail andCommercial Banking

M Jablko

Chief Financial Officer (CFO)

K van derMerwe

Group Executive, Talent and Culture (GE T&C)

1.2 KEY MANAGEMENT PERSONNEL (KMP)The KMP whose remuneration is disclosed in this year’s report are:

A WatsonGroup Executive and Chief Executive Officer,
New Zealand (NZ) – appointed 18 December
2019 (Acting Group Executive and Chief
Executive Officer, NZ to 17 December 2019)

M WhelanGroup Executive, Institutional• Paul O’Sullivan was appointed as a Non-Executive Director (NED)
from November 2019 and as Chairman from 28 October 2020
(following the retirement of Chairman, David Gonski on that date).
• All Group Executive Committee (ExCo) roles with key
responsibility for the strategic direction and management of
the Group, and who report directly to the Chief Executive Officer(CEO) have been included in this year’s report, and so the roles ofGroup Executive, Talent and Culture (Kathryn van der Merwe) andGroup Executive, Technology (Gerard Florian) are now included.
• Antonia Watson was permanently appointed to the Group
Executive and Chief Executive Officer, New Zealand (NZ) rolein December 2019 (acting since June 2019).

2020 Non-Executive Directors (NEDs)
D Gonski

Chairman (retired 28 October 2020)

I AtlasDirector

P Dwyer

Director

J Halton

Director

J Key

Director

G Liebelt

Director

J Macfarlane

Director

P O’Sullivan

Director – appointed 4 November 2019
(Chairman from 28 October 2020)

There have been no changes to KMP since the end of 2020 up to
the date of signing the Directors’ Report, other than Paul O’Sullivan
commencing as Chairman on the retirement of David Gonski fromthat role.
The Remuneration Report for the Group outlines our remuneration
strategy and framework and the remuneration practices that apply
to KMP. This report has been prepared, and audited, as required by
the Corporations Act 2001. It forms part of the Directors’ Report.

2. 2020 OUTCOMES AT A GLANCE
2020 REMUNERATION CHANGES

2020 OUTCOMESThe following remuneration changes
were made at the start of the 2020
financial year following a detailed
review to better align to the externalmarket:• For the 2021 financial year (i.e. year
commencing 1 October 2020), theBoard determined that there would be
no increases to fixed remuneration for
either the CEO or Disclosed Executives.

• On 1 October 2019 the CEO’s fixed
remuneration was increased andLong Term Variable Remuneration(LTVR) was reduced (see section 3.2).

• The Board exercised their discretion andapplied a 50% reduction to the Annual
Variable Remuneration (AVR)/Variable
Remuneration (VR) outcomes for the CEO
and Disclosed Executives having regard
to the impact of COVID-19 (see section 4).

• On 1 October 2019 fixed
remuneration was increased fora number of Disclosed Executives(see section 4.1).
• No increase to the Chairman fee
or NED base fee, and Committee
fees remained unchanged except
for the Digital Business andTechnology Committee Chair fee
in recognition of the significant
increase in workload of theCommittee Chair (see section 7.1).

76– The CEO received an AVR awardof 33% of maximum opportunity.
– Disclosed Executives’ VR outcomesaveraged 36% of maximum
opportunity, with individual
outcomes ranging from 31% to
44% of maximum opportunity.
• The CEO will be awarded LTVR of $3.5
million subject to shareholder approval at
the 2020 Annual General Meeting (AGM).

• 100% of the performance rights granted
in late 2016 to the CEO and Disclosed
Executives (excluding the CRO) werelapsed, as the performance hurdles were
not met when tested at the end of theperformance period in November 2019(see section 4.4.3).
• As part of the Group’s Reimagining
Reward program effective 1 October
2019, ANZ made adjustments to the
remuneration mix for staff (increased
fixed/reduced variable remuneration),
which included replacing individual
variable remuneration for around 80%
of employees with variable remuneration
based on the overall performance of theGroup (see section 4.5.1).
• Enhancements were made to continue
to strengthen and further embed
ANZ’s Accountability and Consequence
Framework (A&CF) (see section 6).

3. OVERVIEW OF ANZ’S REMUNERATION FRAMEWORK
3.1 REMUNERATION FRAMEWORK OVERVIEW
The structure of our remuneration framework is aligned with our Reward Principles and has been designed to support ANZ’s purpose and strategy.

ANZ’S PURPOSE AND STRATEGY1IS UNDERPINNED BY OUR REMUNERATION POLICY WHICH INCLUDES OUR REWARD PRINCIPLES:

Attract, motivate andkeep great people

Reward our people for doing the right thing
having regard to our customers and shareholders

Focus on how things are achieved
as much as what is achieved

Are fair and simple
to understand

WITH REMUNERATION DELIVERED TO OUR CEO AND DISCLOSED EXECUTIVES THROUGH:

Fixed remuneration Cash salary and superannuation contributions. The Board sets (and reviews annually) the CEO and
Disclosed Executives’ fixed remuneration based on financial services market relativities reflecting their responsibilities,
performance, qualifications, experience and location.
Variable remuneration (at risk) The CEO and Disclosed Executives are eligible to receive variable remuneration under the ANZ
Incentive Plan (ANZIP), our variable remuneration plan.
CEO
Annual Variable Remuneration (AVR)DISCLOSED EXECUTIVES4
Variable Remuneration (VR)• Rewards the achievement of Group, and individual outcomesover a 12-month period• Rewarded under a single VR framework enabling us to:• Determination: ANZ Group Performance Framework, individual
strategic objectives, ANZ values2 and risk/complianceassessments, and Board discretion• Maximum opportunity: 150% of fixed remuneration• Delivery: 50% cash and 50% as ANZ shares deferred overfour years, subject to malus3

Long Term Variable Remuneration (LTVR)• Reinforces the CEO’s focus on achieving longer term strategic
objectives and creating long-term value for all stakeholders• Face value at full vesting: 140% of fixed remuneration• Delivery: Performance rights deferred for four years subject toperformance hurdles and malus• Performance hurdles: Relative total shareholder return (TSR)(75%), absolute TSR (25%)– Provide the appropriate mix of short and long-term rewards(including performance hurdles) to drive performance, andattract and retain talent;– Tie the full VR award to the performance of ANZ; and– Defer VR over the short, medium and longer term.
• Determination: ANZ Group Performance Framework,
Divisional Performance Frameworks, ANZ values and risk/
compliance assessments, and Board discretion• Maximum opportunity: 402% of fixed remuneration5• Delivery: 25% cash, 25% as ANZ shares deferred over four
years subject to malus, and 50% as performance rights
deferred for four years subject to performance hurdles
and malus• Performance hurdles: Relative TSR (75%), absolute TSR (25%)

Board discretion is applied when determining CEO and Disclosed Executive performance and remuneration outcomes, and also
before any scheduled release of previously deferred remuneration (see section 5.3). All deferred variable remuneration is subject
to malus adjustment.
REINFORCED BY ALIGNING REMUNERATION AND RISK:

Assessing behaviours based on ANZ’svalues and risk/compliance standards(including the Banking Executive
Accountability Regime (BEAR))

Determining variable
remuneration outcomes,
with risk as a key input at
a pool and individual level

Weighting remuneration
toward the longerterm with a significant
proportion at risk

Determining
accountability andapplying consequenceswhere appropriate

Prohibiting
the hedging
of unvested
equityWHILE SUPPORTING THE ALIGNMENT OF EXECUTIVES AND SHAREHOLDERS THROUGH:

Substantial shareholding
requirements

Significant variable
remuneration deferralin ANZ equity

Use of relative andabsolute TSR hurdles

Consideration of cash
profit and economic profit
in determining the ANZIP
variable remuneration pool

Consideration of the
impact to shareholdersof the reduction in shareprice and dividends

WHILE GOVERNED BY:

The Human Resources (HR) Committee and the Board determining fixed remuneration 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.

1. See the ‘About our business’ and ‘Our vision and strategy’ sections of the Annual Report. 2. ANZ’s values (Integrity, Collaboration, Accountability, Respect, Excellence (ICARE)) – thefoundation of how we work, supported by our Code of Conduct and our New Ways of Leading framework. 3. Malus relates to downward adjustment of unvested remuneration. 4. The
maximum opportunity and delivery of VR differs for the CRO to that of other Disclosed Executives. See section 5 for further details. 5. Performance rights face value at full vesting.

ANZ 2020 Annual Report77Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

3.2 CHANGES TO THE CEO AND DISCLOSED EXECUTIVES’ REMUNERATION FRAMEWORKS MADE IN 2020
CEOWith the assistance of a detailed market benchmarking review conducted by PricewaterhouseCoopers in September 2019, the Board
re-balanced the CEO’s remuneration mix from 1 October 2019 to ensure both the CEO’s fixed remuneration and total remuneration weremarket competitive at that time. There have been no changes to the delivery of AVR or LTVR for the 2020 financial year.
In summary:• Fixed remuneration was increased from $2.1 million to $2.5 million (to better align to the external market while also recognising theskills and experience the CEO brings to the role, noting that this was the first increase since his appointment in January 2016).
• Target AVR remains unchanged at 100% of fixed remuneration.
• LTVR has reduced from 200% to 140% of fixed remuneration providing an appropriate balance between rewarding for short-term andlong-term performance and ensuring total remuneration at target remains largely unchanged.
• Total remuneration at target increased from $8.4 million to $8.5 million (~1%).
CHANGE IN CEO’S REMUNERATION MIX$8.5 million

2020
29%
$2.5 million

29%$2.5 million

42%$3.5 million

2019$8.4 million
25%$2.1 million

Fixed remuneration25%$2.1 million

Target AVR

50%$4.2 million

LTVR face value at full vesting

Disclosed Executives
No changes have been made to the remuneration framework for Disclosed Executives for 2020.
A detailed review of our remuneration frameworks was planned for 2020, however this is now expected to occur in 2021 to enableappropriate consideration of the new APRA Prudential Standard CPS 511 Remuneration and to ensure that our frameworks continue toappropriately support ANZ’s purpose, strategy and Reward Principles.

78

4. 2020 OUTCOMES
Variable remuneration at ANZ is truly at risk and can range from zero to maximum opportunity. The HR Committee and the Board makevariable remuneration outcome decisions for the CEO and Disclosed Executives following lengthy and detailed discussions and assessment,
supported by comprehensive analysis of performance from a number of sources.
The tables in sections 4.1 and 4.2 supplement, and are different to, the Statutory Remuneration table (see section 9.1) which presents theaccounting expense for both vested and unvested awards in accordance with Australian Accounting Standards.
4.1 YEAR-ON-YEAR REMUNERATION AWARDED
These tables show a year-on-year comparison of remuneration awarded to the CEO and Disclosed Executives for the 2018, 2019 and 2020
performance periods. Remuneration awarded includes any cash payments (e.g. fixed remuneration and cash variable remuneration) and thevalue of deferred shares and performance rights awarded for the year but which have not yet vested (i.e. the value was not received during
the year).
Although 2020 performance was assessed as ‘Met Expectations’, the Board determined it was both necessary and appropriate to use its
discretion to ensure the market conditions arising from COVID-19 were factored into the process, resulting in a 50% reduction to the AVR/VR
outcomes for the CEO and Disclosed Executives. In determining the 50% reduction, the Board judged what was fair and reasonable having
regard to the impact on shareholders, and considering expectations from customers and the community.
CEO
The 2020 LTVR shown below has not yet been awarded to the CEO, approval will be sought from shareholders at the 2020 AGM. Note theCEO’s 2018 LTVR award was significantly reduced as a result of the matters raised in the Royal Commission relating to conduct issues andassociated reputational damage (as previously disclosed).
YEAR-ON-YEAR REMUNERATION AWARDED – CEO

Financial
Fixed
year remuneration
$

AVR
cash
$

AVR
deferredshares
$

Total
AVR
$

Threshold vesting

Full vesting

AVR as % of

Total
LTVR
performance remuneration
awardedrights
$
$

Total
LTVR
performance remuneration
awardedrights$$Target Maximum
opport- opportunity
unity

CEO
S Elliott2020

2,500,000 625,000

625,000 1,250,000

1,750,000

5,500,000

3,500,000

7,250,000

50%

33%

2019

2,100,000

750,000

750,000 1,500,000

2,100,000

5,700,000

4,200,000

7,800,000

71%

48%

2018

2,100,000

875,000

875,000 1,750,000

1,400,000

5,250,000

2,800,000

6,650,000

83%

56%

ANZ 2020 Annual Report79Overview

How wecreate value

Remuneration
reportPerformanceoverview

Directors’
reportFinancialreportShareholder
information

Disclosed Executives• Fixed remuneration increases were applied to five Disclosed Executives on 1 October 2019 to improve alignment to desired market
positioning, and one increase was made on permanent appointment (Antonia Watson). External benchmarking conducted byPricewaterhouseCoopers in September 2019 highlighted that ANZ was paying behind the market on fixed remuneration and these increases
were designed to deliver more market competitive remuneration reflecting executive’s responsibilities, qualifications and experience.
• There were no fixed remuneration increases for the 2021 year commencing 1 October 2020.
• Year-on-year remuneration awarded for both Mark Hand and Antonia Watson is not directly comparable, as they were Disclosed Executives
for only part of the 2019 financial year. In addition, Antonia Watson’s 2020 remuneration awarded reflects her permanent appointment to
the Group Executive and CEO, NZ role.
• The average 2020 VR outcome for Disclosed Executives was 36% (45% in 2019) of maximum opportunity (ranging from 31% to 44%).
Despite good performance these outcomes were deemed by the Board to better reflect the impact of the current economic conditions.
• Despite the increases to fixed remuneration applied to a number of executives at the start of 2020, year-on-year total remuneration has
reduced by 15%, and VR by 28% (at full vesting), for the 2020 Disclosed Executives who were in role for full year 2019 and 2020.
• Variable remuneration continues to differ both year-on-year and between different executives demonstrating the at risk nature of thiselement of remuneration and the variability in Group and individual performance year-on-year. See section 4.4 for details.
YEAR-ON-YEAR REMUNERATION AWARDED – DISCLOSED EXECUTIVES
Threshold vesting
Financial
Fixed
year remuneration
$

VR
cash
$

Full vesting

VR
VR
VR
Total
Total
deferred performance remuneration performance remunerationrights1rights1
sharesawardedawarded$$$$$VR as % ofTargetopportunity

Maximum
opportunity

Current Disclosed Executives
M Carnegie

K Corbally

2020

1,200,000

409,200

409,200

421,600

2,440,000

843,200

2,861,600

52%

34%

2019

1,000,000

495,000

495,000

510,000

2,500,000

1,020,000

3,010,000

75%

50%

2018

1,000,000

528,000

528,000

544,000

2,600,000

1,088,000

3,144,000

80%

53%

2020

1,100,000

429,000

429,000

442,000

2,400,000

442,000

2,400,000

66%

44%

2019

950,000

478,500

478,500

493,000

2,400,000

493,000

2,400,000

85%

57%

2018

486,000

164,835

164,835

169,830

985,500

169,830

985,500

83%

55%(6.5 months in role)

G Florian2020

1,075,000

371,250

371,250

382,500

2,200,000

765,000

2,582,500

52%

35%

A George

2020

1,100,000

363,000

363,000

374,000

2,200,000

748,000

2,574,000

50%

33%

2019

1,000,000

528,000

528,000

544,000

2,600,000

1,088,000

3,144,000

80%

53%

2018

876,000

354,750

354,750

365,500

1,951,000

731,000

2,316,500

61%

41%

2020

1,200,000

462,000

462,000

476,000

2,600,000

952,000

3,076,000

58%

39%

2019

726,000

198,000

198,000

204,000

1,326,000

408,000

1,530,000

41%

28%

2020

1,100,000

363,000

363,000

374,000

2,200,000

748,000

2,574,000

50%

33%

2019

1,000,000

544,500

544,500

561,000

2,650,000

1,122,000

3,211,000

83%

55%

(12 months/4.5 months
as Deputy CEO)M Hand(9 months as Disclosed
Executive)

M Jablko

2018

1,000,000

577,500

577,500

595,000

2,750,000

1,190,000

3,345,000

88%

58%

K van der Merwe

2020

850,000

330,000

330,000

340,000

1,850,000

680,000

2,190,000

59%

39%

A Watson2

2020

1,015,599

334,681334,681344,8222,029,783

689,645

2,374,605

50%

33%

2019

219,440

170,255

113,504-

503,199-

503,19965%

43%

1,200,000

363,000

363,000

374,000

2,300,000

748,000

2,674,000

46%

31%

(3.5 months in role)

M Whelan

2020
2019

1,200,000

874,500

874,500

901,000

3,850,000

1,802,000

4,751,000

110%

74%

2018

1,200,000

717,750

717,750

739,500

3,375,000

1,479,000

4,114,500

91%

60%

1. Deferred share rights for the CRO. 2. Paid in NZD and converted to AUD.

80

4.2 2020 ACTUAL REMUNERATION RECEIVED
This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2020 performance year as cash,
or in the case of prior equity awards, the value which vested in 2020. The final column also shows the value of prior equity awards which
lapsed/were forfeited in 2020 (these awards reflect the 2016 performance rights which fully lapsed when tested against their performance
hurdles in November 2019).
2020 ACTUAL REMUNERATION RECEIVED – CEO AND DISCLOSED EXECUTIVES

Fixedremuneration$

Cash variable
remuneration$

Deferred variable
remuneration
which vested
Totalcash during the year1$$

Other deferredremuneration
which vested
during the year1$

Actualremuneration
received$

Deferred variable
remuneration which
lapsed/forfeitedduring the year1, 2$

CEO and Current Disclosed Executives
S Elliott

2,500,000

625,000

3,125,000

597,362-

3,722,362(3,768,401)

M Carnegie

1,200,000

409,200

1,609,200

276,999-

1,886,199(241,617)

K Corbally

1,100,000

429,000

1,529,000

247,891-

1,776,891(135,003)

G Florian

1,075,000

371,250

1,446,250

141,723-

1,587,973-

A George

1,100,000

363,000

1,463,000

222,997-

1,685,997(117,474)

M Hand1,200,000

462,000

1,662,000

335,786-

1,997,786(196,368)

M Jablko3

1,100,000

363,000

1,463,000

326,785

195,305

1,985,090(241,617)

850,000

330,000

1,180,000

125,309-1,305,309-

4A Watson

1,015,599

334,6811,350,280

289,148-

1,639,428(90,473)

M Whelan

1,200,000

363,000

1,563,000

570,684-

2,133,684(1,374,281)

K van der Merwe

1. The point in time value of previously deferred remuneration granted as shares/share rights and/or performance rights is based on the one day Volume Weighted Average Price (VWAP) of
the Company’s shares traded on the ASX on the date of vesting or lapsing/forfeiture multiplied by the number of shares/share rights and/or performance rights. 2. The lapsed/forfeited values
relate to the performance rights we awarded in November/December 2016 which lapsed in November/December 2019 due to the performance hurdles not being met. 3. Other deferredremuneration for M Jablko relates to previously disclosed compensation for deferred remuneration forfeited as a result of joining ANZ. 4. Paid in NZD and converted to AUD.

4.3 APPLICATION OF REWARD PRINCIPLES
In considering the 2020 outcomes the HR Committee and Board reflected on the application of ANZ’s Reward Principles in the current
environment:• Reward our people for doing the right thing 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 to consider the experience/
expectations of all stakeholders (including shareholders, customers, employees, community and regulators). On this basis, for 2020 theBoard determined to apply a 50% reduction to the outcomes for the CEO (AVR) and Disclosed Executives (VR).
• Attract, motivate and keep great people: The Board acknowledged the importance of fixed remuneration being market competitive
to ensure retention of key talent – particularly in a more volatile and uncertain environment.
• Focus on how things are achieved as much as what is achieved: The Board has ensured that appropriate consideration and weight wasgiven to performance against objectives and how that performance was achieved (i.e. in accordance with our values and purpose).
• Be fair and simple to understand: Variable remuneration should be fair and consistent through the cycle and have regard to external
influences outside of management’s control.

ANZ 2020 Annual Report81Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

4.4 VARIABLE REMUNERATION – DETAIL
4.4.1 CEO performance, AVR and LTVR

2020 CEO individual strategic objectives

Performance• Lead and role model the culture and accountability
required to transform ANZWith regard to AVR, the CEO is assessed 50% on the ANZ Group
Performance Framework and 50% on achievement of individual
strategic objectives aligned to ANZ’s strategy. Both the 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 METRICS

AVR
Financial metrics have a 35% weighting in the Group
Performance Framework and therefore notionally have a
17.5% weighting in the CEO’s AVR. However, the CEO’s AVR
is not formulaic – outcomes are moderated by the Risk andReputation element of the Group Performance Frameworkand the Board’s judgement on the appropriate AVR
considering all aspects of performance.
LTVR
100% of the LTVR hurdles are based on TSR (both relative
and absolute).
At the end of the financial year, ANZ’s performance is assessed against
the Group Performance Framework, and the CEO’s performanceis assessed against his individual strategic objectives, the ANZvalues (behaviours), delivery of the BEAR obligations and ANZ’s risk
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 (ontalent and culture matters) and Group General Manager Internal Audit(GGM IA) (on internal audit matters). Material risk events that have
either occurred or come to light in the year (provided by the CRO) arealso considered together with input from both the Audit Committee
and the Risk Committee of the Board.
The Board has assessed the CEO’s 2020 performance as follows:
Group Performance Framework=

Met Expectations(see section 4.5.3)

Individual strategic objectives=

Met Expectations (see Board
assessment below)

ANZ values=

Above Expectations

Risk/compliance assessment=

Met Expectations

The Board has exercised their discretion in determining theappropriate AVR outcome for 2020 and applied a 50% reduction
which has resulted in an AVR outcome of 33% of maximum
opportunity.

• Enhance the reputation of ANZ• Drive the strategic direction of the organisation with afocus on growth• Show material progress on the productivity initiatives toimprove customer and staff experience while driving cost
towards a materially reduced run rate by close of 2022
• Continue to build ExCo effectiveness and CEO succession• Focus on operational excellence, including remediation andsystem stability, to ensure ANZ has a robust and reliable
platform to support long-term growth

Board assessment of performance on individual
strategic objectives: Met Expectations
The CEO has had a successful year, despite this being adifficult period, marked by the pandemic and other problems
affecting Australia. He has been a role model for ANZ’svalues and culture – including risk culture, demonstrating
outstanding leadership both internally and externally,
particularly in providing support and caring for our customers,
community and employees during COVID-19.
His crafting and leadership of ANZ’s response to COVID-19
enabled the organisation to focus on what mattered most:• Protecting our people, our customers and our balance sheet• Adapting to the COVID-19 environment• Engaging and staying connected with all of our stakeholders• Preparing for the future and being ready to embrace
opportunities
The CEO has maintained the strength of ANZ’s leadership,
infrastructure, balance sheet, and employee engagement toallow ANZ to be well positioned to assist our customers and thecommunity in the most challenging environment in decades.
He has also enhanced the reputation of ANZ, by embedding
purpose and values in our decision making and through hisleadership in response to COVID-19.
During the last 12 months the CEO has remained focused on
driving the strategic agenda for ANZ with progress towards
simplifying the business, improving our IT infrastructure andrestoring momentum in our core home loans business, while
re-shaping the business for the future. Growth continued to be
an area of focus in 2020, however opportunities have had to bebalanced against our COVID-19 response.
2020 has seen the bulk of our employees working from home(remotely) and productivity has not faltered. The CEO has
focused on the safety, wellbeing and engagement of ourpeople whilst also continuing to invest in the business andcultivating a more efficient workforce at all levels. In difficult
times, he has continued productivity improvements, with strong
management of expenses.
ExCo is functioning very effectively under his leadership and the
addition of the Group Executive, Data and Automation role thisyear appropriately reflects the importance of data within ANZ.
Infrastructure stability has improved and ANZ is well on track inbuilding a better platform for responsible well managed growth.

82

AVR and LTVRAt the end of the financial year, the HR Committee makes a recommendation to the Board for their approval in respect of the CEO’s
AVR outcome.
The CEO’s AVR will vary up or down year-on-year, it is not guaranteed, and may range from zero to a maximum opportunity.
The 2020 AVR awarded to the CEO is 33% of maximum opportunity.
Despite having been assessed as being above expectations on the ANZ values, and having met expectations on risk/compliance assessment,
individual strategic objectives and the Group Performance Framework, the Board has exercised its discretion and applied a 50% reduction
to the AVR. This takes into account the current environment in light of the COVID-19 pandemic (including the decline in returns andprofitability), the impact on shareholders and having regard to customer, community and regulator expectations. Accordingly, the Board
determined that an AVR outcome of $1.25 million (33% of maximum opportunity) was appropriate for 2020, noting that this is 17% lower
than 2019.
The CEO’s proposed LTVR of $3.5 million (performance rights face value at full vesting) (reduced from $4.2 million in 2019) is subject toshareholder approval at the 2020 AGM.
2020 AVR AwardedThis table shows the AVR awarded to the CEO for the year ending 30 September 2020.
2020 AVR AWARDED – CEOCEO

Maximum opportunity

S Elliott

1

AVR $1,250,000=++$625,000

33% of max$625,000

LTVR $3,500,000 performance rights face value at full vesting (subject to shareholder approval at the 2020 AGM)

Cash

Deferred shares

1. Variable remuneration for the CEO = AVR + LTVR.

Summary of Total Remuneration
The remuneration Shayne Elliott received in 2020 differs to the remuneration he was awarded in relation to the 2020 performance year
(which may or may not vest in future years). It also differs to his statutory remuneration which reflects the accounting expense value for 2020.
Awarded remuneration shown below includes the face value of the performance rights at both threshold (50%) and full (100%) vesting.
SUMMARY OF TOTAL REMUNERATION – CEO
Total Remuneration
AwardedThreshold vesting$

Full vesting$

Received1$

Statutory2$

2020

5,500,000

7,250,000

3,722,362

5,225,308

2019

5,700,000

7,800,000

4,093,464

5,181,339

2018

5,250,000

6,650,000

3,849,666

5,645,295

1. Includes the value of previously awarded AVR deferred shares and LTVR performance rights at the date of vesting. 2. Includes the value of AVR and LTVR that has been expensed in the year.

The CEO’s awarded remuneration based on full vesting value reduced by 7% from 2019 to 2020, despite the increase in fixed remuneration,reflecting the significant reduction in his 2020 variable remuneration awards. Note his 2018 (variable) remuneration reflected ANZ’s
acknowledgement of the matters raised in the Royal Commission relating to conduct issues and associated reputational damage.
The reduction in the CEO’s received remuneration from 2019 to 2020 reflects the reduction in 2020 variable remuneration and the fact that
the LTVR performance rights granted in December 2016 failed to vest when tested in November 2019.
Historical AVR and LTVR
This table shows the AVR as a % of maximum opportunity and LTVR vesting outcomes for the CEO over the last three years.
HISTORICAL AVR AND LTVR – CEO
2018

2019

2020

AVR outcome (% of maximum opportunity)

56%

48%

33%

LTVR vesting outcome (% vested)

0%

21.8%

0%

ANZ 2020 Annual Report83Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

4.4.2 Disclosed Executive performance and VR

Performance
At the start of each year, stretching performance objectives are
set by the HR Committee in the form of Divisional Performance
Frameworks for each of our Disclosed Executives, in alignment with
the Group Performance Framework approved by the Board.
Similar to the Group Performance Framework, the Divisional
Performance Frameworks include the key elements of Financial
and Discipline, Customer, and People and Culture, with Risk andReputation acting as a modifier1. The weighting of each element
varies to reflect the responsibilities of each individual’s role. The
Financial and Discipline element weightings range from 20% to 45%.
At the end of the financial year, the performance of each Disclosed
Executive2 is assessed against their contribution to the Group
Performance Framework, their Divisional Performance Framework,
ANZ’s values (behaviours), delivery of BEAR obligations and ANZ’srisk and compliance standards.
The HR Committee seeks input from the CEO, and independent
reports from Risk, Finance, Talent and Culture, and Internal Audit,
and also reviews material risk event data provided by the CRO, andseeks input from both the Audit Committee and the Risk Committeeof the Board.
The HR Committee reviews and recommends to the Board forapproval the overall performance outcomes for each Disclosed
Executive.
1. Except for the CRO who has a weighting assigned to Risk and Reputation measures.
2. Performance arrangements for the CRO are addressed additionally by the Risk Committee.
Performance arrangements for the Group Executive and CEO, NZ are determined andapproved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsedby the HR Committee/Board, consistent with their respective regulatory obligations.

84

VR
At the end of the financial year, the CEO and HR Committee
determine VR recommendations for each Disclosed Executive, which
are ultimately approved by the Board3. VR should and does vary yearon-year in line with performance – it is not guaranteed and may be
adjusted up or down ranging from zero to a maximum opportunity.
The variance in individual VR outcomes reflect the relative
performance of the different areas/individuals, ensuring appropriatealignment between performance and reward. There is less individual
differentiation in 2020 in recognition of the significant collaborationand team work across the Executive Committee throughout 2020 andparticularly in managing ANZ’s response to COVID-19. The outcomesdemonstrate the at risk nature of VR, and that outcomes vary acrossthe Disclosed Executives and also from year to year. The average 2020
VR for Disclosed Executives is 36% of maximum opportunity (ranging
from 31% to 44%), reflecting the impact of the 50% reduction appliedby the Board.
3. Remuneration arrangements for the Group Executive and CEO, NZ are determined andapproved by the ANZ NZ Board in consultation with and endorsed by the Board, consistent
with their respective regulatory obligations.

2020 VR AwardedThis table shows the combined VR awarded to Disclosed Executives for the year ending 30 September 2020.
2020 VR AWARDED – DISCLOSED EXECUTIVES
Current Disclosed Executives
M Carnegie=

VR $1,661,600=

VR $1,507,500+$371,250+=

VR $1,876,000

35% of max$765,000+

33% of max+$462,000

M Jablko+$462,000+=

VR $1,474,000

39% of max$952,000+

33% of max$363,000 $363,000 $748,000

K van der Merwe

Cash

44% of max$442,000$363,000 $363,000 $748,000

M HandVR $1,474,000+=

VR $1,474,000+$429,000$371,250

A George

M Whelan

34% of max+$429,000

G Florian

VR $1,359,006+=

VR $1,300,000

A Watson+$409,200 $409,200 $843,200

K Corbally1

VR $1,340,000

Maximum opportunity=+$330,000=

39% of max$680,000++$334,681=+$330,000$334,681+

33% of max$689,645+

31% of max$363,000 $363,000 $748,000

Deferred shares or deferred share rights

Performance rights face value at full vesting2

1. CRO receives deferred share rights instead of performance rights. 2. Divide by two to convert to face value at threshold vesting for performance rights.

Historical Disclosed Executive VR
This table shows the VR as a % of maximum opportunity for the executives who were disclosed over the last three years. Although ANZ’s
performance has been stronger this year and the Group has been assessed by the Board as having ‘Met Expectations’ against the Group
Performance Framework, the 50% reduction applied by the Board has resulted in a significant reduction in 2020 VR outcomes compared
to prior years.
HISTORICAL DISCLOSED EXECUTIVE VR
2018

2019

2020

VR outcome (average % of maximum opportunity)

51%

45%

36%

VR outcome (range % of maximum opportunity)

40% – 60%0% – 74%

31% – 44%

VR performance rights vesting outcome (% vested)

0%

21.8%

0%

ANZ 2020 Annual Report85Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

4.4.3 Performance rights outcomes (CEO and Disclosed Executives)

Performance rights granted to the CEO in December 2016 and Disclosed Executives (excluding the CRO) in November 2016 reached theend of their performance period in November 2019. As the performance hurdles were not met none of these performance rights vested,
the rights were lapsed and executives received no value from these awards.
PERFORMANCE RIGHTS OUTCOMES

HurdleGrant date1

First date
exercisable1

75% relative TSR

22 Nov 16

22 Nov 19

ANZ TSRover three years/
CAGR2 TSRMedian TSRover three years/
CAGR2 TSR target% vested

18.32%

26.21%

0%– Select Financial Services (SFS)
comparator group3

25% absolute CAGR2 TSR

Overall
performancerights outcome
0% vested and100% lapsed

22 Nov 16

22 Nov 19

5.78%

9.00%

0%

1. Grant date for the CEO was 16 December 2016, and date first exercisable was 16 December 2019. The CEO’s performance period was the same as the performance period for Disclosed
Executives. 2. Compound Annual Growth Rate (CAGR). 3. See section 5.2.3a for details of the SFS comparator group.

4.5 ANZIP VARIABLE REMUNERATION POOL AND GROUP PERFORMANCE
4.5.1 ANZIP variable remuneration

The ANZ Incentive Plan (ANZIP) is the variable remuneration plan operating across ANZ, and 2020 is the first year employees will participate
in a single Group plan where individual variable remuneration for around 80% of employees has been replaced with a variable payment
based on the overall performance of the Group. This change addresses many of the concerns about ‘bonus culture’ raised in the final reportof the Royal Commission, and forms part of wide ranging reforms for 2020 as to how we reward, recognise and manage the performanceof employees.
With the exception of the CEO, individual variable remuneration outcomes for all other employees including Disclosed Executives are
funded under ANZIP. The Board decides the CEO’s variable remuneration outcomes separately to help mitigate potential conflicts of interest.
See section 8.1.3.
At the end of each financial year, the HR Committee makes a recommendation to the Board for their approval on the size of the ANZIP variable
remuneration pool for that year. The Board exercise their judgement to determine the appropriate pool size – it is not a formulaic outcome.

ANZIP variable remuneration
pool recommended to theBoard for approval based on
performance and affordability<

Board review andapprove the ANZIP variable
remuneration pool<Business and individual
allocations from ANZIP
variable remuneration pool

The Board considered a range of factors in determining a fair and reasonable ANZIP pool, particularly given the unique circumstances in 2020.
01

02

The balance between performancein 2020, considering financial andnon-financial performance, and thelong-term (strengthening the bank):• Our 2020 financial performance – in particular cash profit and economic profit,
informed the pool range. Given financials were down on 2019 (due to the significant
impact of the COVID-19 pandemic), the pool range was negatively impacted.

The final ANZIP pool outcome also
considered:• The shareholder experience during 2020 and customer and community expectations.

• The ‘Met Expectations’ Group Performance Framework assessment (see 4.5.3) and thequality of the result then guided the broad positioning in the pool range.

• Increased volatility and uncertainty in the current environment.
• Our Reward Principles.

4.5.2 ANZ Group Performance Framework

The ANZ Group Performance Framework is approved by the Board at the start of each year and is designed around the following three key inputs:

01
86

Creating a safebank with soundrisk practices

02

Achieving ouragreed annual andlonger term goals

03

Realising ourstrategic vision

The key objective of our Group Performance Framework is toenable aligned focus across the organisation on delivering thecritical outcomes that matter most in delivering on our strategy.
It plays a key role to:• message internally what matters most;

These in-year adjustments occurred through the lens of our
purpose-led approach to managing through COVID-19 with
our objectives being to:• Protect our people, customers, shareholders and ANZ,
including strengthening our operational resilience;• reinforce the importance of sound management in addition
to risk, customer, people and financial outcomes; and• Adapt to the changing environment;• inform focus of effort, prioritisation and decision-making
across ANZ.

• Prepare for the future.

The emergence of the significant economic and social impactsof the COVID-19 pandemic required a rapid response andreprioritisation of resources. We tested our business strategy andresolved it remains relevant to create long-term sustainable value
for our stakeholders, notwithstanding changes caused by the
impact of COVID-19.
However, our priorities, sequencing and emphasis needed tochange, particularly in the short to medium-term. We also reviewed
our 2020 Group performance objectives and determined thatwhile they too remained directionally appropriate, the pandemic
demanded a material shift in our focus for the second half of theyear resulting in a sharpened emphasis on some key objectives anda shift of focus within others.

• Engage even more proactively with our stakeholders; andFor example:• Balancing our immediate responses and medium-term costambitions became even more critical, particularly in the current
low interest-rate environment;• In times of a crisis, restoring and retaining community trust is
crucial, making a focus on strong governance, leadership andcorporate citizenship vital in supporting our customers and thecommunity to navigate through the pandemic;• Our focus on providing great digital solutions was accelerated,encouraged by rapid changes in customer behaviour;• Immediate efforts to embed positive cultural change involved
enabling our people to work safely and productively, while
supporting them through clear communications to engage andmaintain their wellbeing and performance; and• Our talent priorities shifted partly away from hiring and retaining
strategic capabilities and towards supporting rapid internalmoves to maintain operational resilience and respond to rapidchanges in customer needs.

4.5.3 Assessment against the Group Performance Framework for 2020

RISK & REPUTATIONCUSTOMERPEOPLE & CULTURE

FINANCIAL &DISCIPLINEOVERALL

Overall
Adjustment

35%
weight30%
weight35%
weightGroup
Performance

x

+

+

=

ASSESSMENT:ASSESSMENT:ASSESSMENT:ASSESSMENT:ASSESSMENT:Met Expectations

Met Expectations

Above Expectations

Below Expectations

Met Expectations

As managing risk appropriately is fundamental to the way ANZ operates, Risk and Reputation forms an integral part of the assessment, directly
impacting the overall Group Performance Framework outcome (a modifier ranging from 0% to 110% of the Group Performance assessment).
When assessing Financial and Discipline (see section below), the Board considered a range of factors. This included an assessment of external
influences outside of the control of management. In 2020, returns and profitability were significantly impacted by COVID-19 – including
higher collective credit provision charges and the impairment of two of the Group’s Asian associate investments. Accordingly, cash profit fromcontinuing operations decreased 42% and Return on Equity (ROE) declined to 6.2%. This decline in profitability and returns was also consideredwhen the Board determined the size of the ANZIP variable remuneration pool for the year. For the purpose of assessing performance against theGroup Performance Framework, the extent these factors were considered outside of the control of management, have been factored into theassessment of performance.
Overall, ANZ’s performance ‘Met Expectations’ when considering the objectives we set ourselves. While we were largely on track to achieve thetargets we set before COVID-19, we also demonstrated appropriate responses to the pandemic, supporting our customers and people whileremaining well-managed, including through the demonstration of strong financial discipline.
The below table outlines ANZ’s focus areas in 2020 (aligned to the three key inputs), and provides a summary of performance outcomesfor each of the key performance categories to inform the overall assessment for 2020. Performance against expectations is evaluated usinga range of objective indicators and subjective considerations including management input on work undertaken, evidence of outcomesrealised and lessons learned, and with consideration given to the operating, regulatory and competitive environment.

ANZ 2020 Annual Report87Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

RISK & REPUTATION (MODIFIER 0% TO 110%)

COVID-19 introduced a range of both new and increased risks for ANZ, our employees and our customers. Our existing strong risk
management framework enabled ANZ to respond well to these risks and continue to support our customers and the communities weserve. In anticipation of the potential future impact of COVID-19 on our customers we increased our forward looking expected credit loss
provisions using a range of economic scenarios and we have continued to stress test our portfolio to re-assess our provisioning levels. At
the same time, management demonstrated accountability for fixing issues in a sustainable manner.
Risk culture measures reached all time high levels as concerted efforts to transform our culture prepared the bank well to manage
through the pandemic in a calm, measured and proactive manner. Strong leadership and citizenship have been paramount, centred
on regaining the trust of the community through our commitment to fair and responsible banking.

2020 focus areas

Performance commentary

Performance against
expectations
Below

Strengthen our financial
and non-financial risk,
control, governanceand compliance focus
in line with the risk
management framework• We have continued to develop and improve our financial and operational
resilience which has helped position us well to respond to the impactof the evolving external environment including from the impacts of
COVID-19, increased regulatory and compliance focus, bushfires andfloods, the uncertainty from geopolitical and trade tensions and increased
cyber activities.
• We prepared and adapted our workforce and increased operational
resilience by enabling over 95% of our workforce to work from home.

Focus on being
well-managed andmaintaining or improving
across key risk control
and cultural indicators• We have maintained our focus on managing risk controls, anddemonstrated accountability for fixing issues in a timely and sustainable
manner.

Timely delivery of the
APRA Governance,
Culture andAccountability (GCA)
self-assessment action
plan recommendations
and success measures• We have strengthened the bank’s focus on non-financial risk (NFR) andprogress has been made in uplifting our NFR control, governance andcompliance focus, including continuing to deliver sound progress toaddress the themes identified by the self-assessment and lessons learned
from the Royal Commission.

Improve our reputation
relative to industry as
evaluated by all key
stakeholders• After being the first bank to make Royal Commission commitments, ANZ
continues to act on these with a particular focus on supporting our mostvulnerable customers in both Australia and NZ.

• Strong progress continues on risk culture maturity, evidenced in employee
engagement scores, with ‘Leaders accountable for risk’ (87%) – up on
2019, and ‘Raise issues without fear of reprisal’ (74%) – also up on 2019.

• We remained committed to supporting our customers during theAustralian bushfires and COVID-19, through loan payment deferrals andfinancial support whilst also remaining focused on responsible credit
decision making.
• Across the industry, community perception scores have fluctuatedhowever, ANZ currently leads the major banks in the IPSOS survey
measuring social media sentiment, while in the RepTrak survey ANZ led
for the majority of 2020 and was second based on July to September
results. An A- rating was achieved in the 2019 CDP climate change
assessment, the leading score for Australian banks.

Risk & Reputation overall: Met Expectations

88

Met

Above

CUSTOMER (35% WEIGHT)

We have continued to demonstrate our commitment to improve the financial wellbeing of our customers, including ensuring our mostvulnerable customers and those undergoing COVID-19 related stress are aware of and can access the support we have available to them.
Despite the serious challenges faced by the sector and community this year, our actions over previous years to simplify and strengthen thebank provided us with the capacity to support our customers at a time of need and strengthen our long-term relationships. A proactive
approach to reallocating resources and keeping in close contact with customers through the Australian bushfires and COVID-19 ensured
we were available to listen and respond effectively. Across all our retail and commercial businesses in the region, we were also able to work
quickly and comprehensively provide an appropriate series of support packages including loan deferrals and access to working capital.
While the focus has clearly been on assisting customers in need, there has also been opportunity to build new customer relationships andenable more digital services that have been especially valued in a restricted COVID-19 environment.

2020 focus areas

Performance commentaryStrengthen relationships
and maintain customer
experience in our target
segments• Net Promoter Score (NPS)1 centred on key onboarding episodes in Australia,
where strong improvements have been made in retail home lending andbusiness lending, while NZ Retail achieved all time high scores.

Performance against
expectations
Below

Met

Above

• ANZ was ranked the #1 lead institutional bank by Peter Lee Associates2
for the fifth year running and #1 for relationship strength for the seventh
consecutive year, while a new online payments experience has beenprocessing ~1 million payments daily and providing digital self-service for
our Institutional customers.
• In Australia, customer complaint resolution and home lending assessment
timeframes have remained a challenge, however uplift programs arein place to improve these outcomes. Customer complaint timeframes
improved from 63% to 66% resolved within five business days, while
median home lending decision times increased from 6.0 days to 9.4 days
as improved processes and campaigns drove an overwhelmingly strong
demand from customers.

Help our people to makewise customer-focusedchoices every day• Launched a public campaign to improve financial wellbeing and behaviours
in the community and commenced embedding financial wellbeing
principles into key products and services.
• Supporting our customers through the Australian bushfires and COVID-19
pandemic has been a priority, incorporating financial relief packages andmaking sure we have remained available to provide assistance where it has
been needed.
• In Australia, significant progress was made on the customer commitments
and initiatives announced in 2019, including a focus on supporting
vulnerable customers. In NZ, our Good Customer Outcome principles andproduct simplification reviews are delivering better customer experiences,including the removal or reduction of several fees, including on Visa debit,
low rate products, payments and statements.

Quickly and effectively
remediate individual andsystemic customer issues
across the Group• Approximately 1.8 million customer accounts in Australia have beenrefunded (against a target of 500,000 accounts), with a total of ~$161
million returned. Sound progress continues to be made in closing out
large remediation streams in both Australia and NZ.

Customer overall: Met Expectations

ANZ 2020 Annual Report89Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

PEOPLE & CULTURE (30% WEIGHT)

In a challenging year, significant capacity and attention was focused on managing through COVID-19 and the Australian bushfires,
however strong progress was still made on key priorities including embedding our new reward framework, building strategic andleadership capabilities, and strengthening governance, accountability and culture. Our ability to make progress in the face of disruption
is the product of sustained efforts to embed our purpose and aspirational culture over multiple years, including through implementing
agile working practices and strong leadership behaviours.
In response to COVID-19, our core focus was protecting the safety of our people and in turn, our customers. By quickly enabling
significant increases in our remote working capacity, over 95% of all employees (excluding Australian branches) were able to continue
to work productively and safely from home and continue to deliver great outcomes for our customers.

2020 focus areas

Performance commentary

Performance against
expectations
Below

Strengthen governance,accountability, actions
and measurement of
culture• Continued to embed the Accountability and Consequence Framework(A&CF) including in support of our new reward model, with 12 full and26 preliminary accountability reviews completed.

Engaging our people
and diversifying ourworkforce• Overall engagement score increased to a record high of 86% (up from
77% in 2019), with strong results also seen in key measures, reflecting
ANZ’s strong support for our employees and clear senior leader
communication during the pandemic.

• Divisions have continued to share progress and lessons learned throughour culture steering groups and we have undertaken a review of ourculture measurement and assessment approach.

• Women in leadership increased 0.9% to 33.4% (against a 34.1% target).
Improve leader capability• Commenced rollout of a bank wide leadership capability program for all
people leaders.
• Key leadership survey results continued to improve, including scores forleaders role modelling our values and demonstrating effective leadershipbehaviours.

Embed Reimagining
Reward, including
new Performance
Management approach• Finalised and embedded changes to how we manage and reward ourpeople to better focus on the interests of our customers, collaboration,and the long-term health of the bank.

Strengthen strategic
capabilities• In response to COVID-19, safe internal workforce movement principles
were developed, and we rapidly enabled internal moves to support
operational resilience and supplement areas where customer demand
was highest.

• Implemented a more dynamic approach to performance management,
including a stronger emphasis on more frequent check-in conversations
to review and drive performance, as well as maintain employee wellbeing
during COVID-19. Some plans to embed performance changes had to bescaled back due to capacity constraints.

• Enhanced recruiting, assessment and onboarding processes, especially forgraduates and high demand capabilities. Achieved targets for hiring into
strategic capability areas, such as data and engineering skillsets.
People & Culture overall: Above Expectations

90

Met

Above

FINANCIAL & DISCIPLINE (35% WEIGHT)

Profitability and returns have been significantly impacted by the COVID-19 pandemic this year, including the impact of higher credit
provision charges and the impairment of two of the Group’s Asian associate investments. ANZ has been able to manage well throughthis challenging period given our long-term strategy to simplify the business and strengthen the balance sheet enabled us to enter the
COVID-19 environment in a strong financial position. As a result, we have been able to both support our customers and enable prudent
dividends to be paid to our shareholders, while absorbing a significant increase in credit reserves and without needing to raise capital.
Costs have again been well managed, with expenses broadly flat despite record levels of investment to grow and simplify the business,and increased regulatory and compliance spend. Divestments during the year reduced the complexity of the Group. Ongoing work to
identify and rectify customers in need of remediation led to further remediation charges, which impacted financial performance.

2020 focus areas

Performance commentary

Performance against
expectations
Below

Balance appropriately
between financial results,
safety and soundness,and investment in the
futureMet

Above• On a cash continuing basis, ROE decreased to 6.2% and NPAT fell 42%
due to the impacts of COVID-19 outlined above. Excluding large/notable
items3, a 1% decline in profit before provisions (PBP) wason target, noting the difficult operating environment.
• Costs remained broadly flat despite record levels of investment to grow andsimplify the business, and increased regulatory and compliance spend.
• Capital continued to be well managed. CET1 of 11.3% has remained above
regulatory minimums, while enabling dividends (albeit reduced) to be
paid to our shareholders and the disciplined use of our balance sheet tosupport our customers.
• Liquidity and funding was prudently managed in the environment, with
the Liquidity Coverage Ratio (LCR) of 139% and Net Stable Funding Ratio(NSFR) of 124%, well above regulatory minimums.

Progress agreed
simplification plan

• We continued to reduce the complexity of our business (e.g. sale of UDC
Finance to Shinsei Bank, sale of offsite ATM network to Armaguard).
• Through strong cost management, we created capacity to invest into thebusiness and remain committed to building a simpler and better bank.

Prepare NZ businessfor Reserve Bank of
New Zealand (RBNZ)
outsourcing policy (BS11)
and capital changes• We are well progressed in the preparation for both the RBNZ capitalchanges and BS11 compliance.

Financial & Discipline overall: Below Expectations

OVERALL
Group Performance assessment: Met Expectations

The impact to profitability and returns in 2020 as a result of the COVID-19 pandemic was consideredwhen the Board determined the ANZIP outcome (see section 4.5.1). For the purpose of assessing financial
performance against the Group Performance Framework, the extent these factors were considered outsideof the control of management, have been considered when forming the overall assessment of performance.
On balance, the Board considered an overall assessment of ‘Met Expectations’ fair and appropriate.
1. Net Promoter Score (NPS) is a customer loyalty metric used globally to evaluate a company’s brand, products or services. Net Promoter® and NPS® are registered trademarks and Net
Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld. 2. Peter Lee Associates 2020 Large Corporate and Institutional
Relationship Banking surveys, Australia and NZ. 3. Large/notable items include the impact of divestments, customer remediation, accelerated software amortisation, Royal Commission legal
costs, lease-related items, restructuring and impairments.

ANZ 2020 Annual Report91Overview

How wecreate value

Remuneration
reportPerformanceoverview

Directors’
reportFinancialreportShareholder
information

4.5.4 ANZ performance outcomes

ANZ’s financial performance 2016 – 2020
As discussed in section 4.5.1, when determining variable remuneration outcomes for Disclosed Executives and employees more broadly
cash profit and economic profit are considered. The Group uses cash profit1 as a measure of performance for the Group’s ongoing businessactivities, as this provides a basis to assess Group and Divisional performance against earlier periods and against peer institutions. Althoughcash profit is not audited, the external auditor has informed the Audit Committee that recurring adjustments have been determined on aconsistent basis across each period presented.
Statutory profit has decreased 40% compared to the prior financial year, while cash profit from continuing operations has decreased 42%.
The decline was driven primarily by:• Credit impairment charges of $2.7 billion pre-tax (up from $795 million in the prior financial year), which included increased credit reserves
for the impacts of the ongoing COVID-19 pandemic; and• An $815 million impairment in the valuation of two of the Group’s Asian associate investments, largely due to the impact COVID-19 has
had in those markets.
Excluding the movement in these two items, cash profit fell 5% from the prior financial year.
The table below provides ANZ’s financial performance, including cash profit, over the last five years.

Statutory profit ($m)
Cash profit ($m, unaudited)
Cash profit – Continuing operations ($m, unaudited)2

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

2

2016

2017

2018

2019

2020

5,709

6,406

6,400

5,953

3,577

5,889

6,938

5,805

6,161

3,660

5,889

6,809

6,487

6,470

3,758

10,155

10,849

9,966

9,958

8,369

Cash ROE (%) – Continuing operations (unaudited)

10.3

11.7

11.0

10.9

6.2

Cash EPS – Continuing operations (unaudited)2

202.6

232.7

223.4

227.6

132.7

Share price at 30 September ($)

27.63

29.60

28.18

28.52

17.22

Total dividend (cents per share)

160

160

160

160

60

Total shareholder return (12 month %)

9.2

13.1

0.6

9.2

(36.9)

2(On 1 October 2015, opening share price was $27.25)

1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers understand the results of the core business activities of the Group. 2. Cash profit fromcontinuing operations has been presented for 2017, 2018, 2019 and 2020 (2016 has not been restated). Cash profit from continuing operations represents the Group’s cash profit excluding theimpact of our discontinued businesses, which consist of OnePath Pensions and Investments and aligned dealer groups, and the Group’s life insurance business in Australia. The businesses
were reclassified to discontinuing in 2018, and only the 2017 result was restated in the table above. During 2019, the Group adopted AASB 15 Revenue from Contracts with Customers and only
2018 has been restated.

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 performance rights SelectFinancial Services (SFS) comparator group1 over one to ten years, noting that for this table TSR is measured over a different timeframe to theperformance period for our performance rights, i.e. to 30 September 2020.
• ANZ’s TSR performance was slightly above the median TSR of the SFS comparator group1 when comparing over one and three years;• slightly below the median over five years; and• below the median over ten years.
While ANZ’s TSR performance over 10 years was lower than the median, since Shayne Elliott’s tenure as CEO, ANZ’s TSR has performed aroundthe median when assessed over one, three and five years.
Years to 30 September 2020
1

32

5

10

ANZ (%)(36.9)(31.8)(15.7)

28.5

Median TSR SFS (%)(37.3)(32.0)(14.9)

40.9

Upper quartile TSR SFS (%)(18.4)

(1.7)

13.4

111.1

1. See section 5.2.3a for details of the SFS comparator group. 2. The outcomes for performance rights granted in November/December 2016 and tested in November 2019 are detailed in
section 4.4.3.

92

5. EXECUTIVE REMUNERATION STRUCTURE AND DELIVERY
There are two core components of remuneration at ANZ – fixed remuneration and at risk variable remuneration.
In structuring remuneration, the Board aims to find the right balance between fixed and variable remuneration (at risk), the way it is delivered(cash versus deferred remuneration) and appropriate time frames (the short, medium and long-term).
The Board sets (and reviews annually) the CEO and Disclosed Executives’ fixed remuneration based on financial services market relativities
and reflecting their responsibilities, performance, qualifications, experience and location.
The way variable remuneration operates differs somewhat between the CEO and Disclosed Executives. Namely:• The CEO’s variable remuneration is comprised of AVR and LTVR (subject to shareholder approval), which provides consistency with externalmarket practice, and LTVR reinforces his focus on achieving longer term strategic objectives and long-term stakeholder value creation.
• Disclosed Executives are subject to one combined VR plan which enables us to:– provide the appropriate mix of short and long-term rewards (including performance hurdles) to drive performance, and attract andretain talent;– tie the full VR award to the performance of ANZ; and– defer VR over the short, medium and longer term.
Variable remuneration seeks to differentiate for performance and is designed to focus our CEO and Disclosed Executives on stretching
performance objectives supporting our business strategy, and encourage the delivery of long-term stakeholder value.
By deferring a significant portion of variable remuneration (74% of maximum opportunity for the CEO, 75% for Disclosed Executives and
67% for the CRO), we seek to ensure alignment with shareholder interests to deliver on ANZ’s strategic objectives and 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, and also before anyscheduled release of previously deferred remuneration (i.e. consider malus or further deferral).
5.1 REMUNERATION MIX
We structure the CEO and Disclosed Executives’ remuneration as follows:
REMUNERATION MIX – CEO
Minimum opportunity$2.5 million
100%

Target opportunity$8.5 million
29%

14.5%

14.5%

42%

Maximum opportunity$9.75 million
26%

Fixed remuneration

19%

AVR cash

19%

36%

AVR deferred shares

LTVR performance rights

Minimum
Target= Fixed remuneration ($2.5 million)= Fixed remuneration + target AVR (100% of fixed remuneration) + LTVR (140% of fixed remuneration (performance rights
at full vesting))
Maximum = Fixed remuneration + maximum AVR (150% of fixed remuneration) + LTVR (140% of fixed remuneration (performance rights
at full vesting))

REMUNERATION MIX – DISCLOSED EXECUTIVE1
Minimum opportunity
100%

Target opportunity
27%

18%

18%

37%

Maximum opportunity
20%

Fixed remuneration

VR cash20%

20%

VR deferred shares

40%

VR performance rights

Minimum = Fixed remuneration
Target= Fixed remuneration + target VR (268% of fixed remuneration (performance rights at full vesting))
Maximum = Fixed remuneration + maximum VR (402% of fixed remuneration (150% of target VR and performance rights at full vesting))
1. Excluding CRO.

ANZ 2020 Annual Report93Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
informationCRO
To preserve the independence of the role and to minimise any conflicts of interest in carrying out the risk control function across theorganisation, the CRO’s remuneration arrangements differ to other Disclosed Executives.
The remuneration mix is 27% fixed remuneration and 73% VR maximum opportunity. The VR target opportunity is 180% of fixed
remuneration and VR maximum opportunity is 270% of fixed remuneration. VR is delivered as 33% cash, 33% deferred shares and 34%
deferred share rights (instead of performance rights).
5.2 VARIABLE REMUNERATION DELIVERY
Variable remuneration for the CEO and the Disclosed Executives (excluding the CRO) is delivered partly in cash, shares deferred over four
years, and performance rights deferred for four years. The performance rights are also subject to performance hurdles which determine
whether they vest in four years’ time.
60% of variable remuneration (AVR plus LTVR) for the CEO, 53% of VR for Disclosed Executives (other than the CRO), and 41% of VR for
the CRO will be deferred for at least four years (from the date the Board approved the variable remuneration in October (and the dateshareholders 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.
Before any scheduled release of deferred shares/deferred share rights/performance rights, the Board considers whether any malus/
downward adjustment of previously deferred remuneration (or further deferral of vesting) should be made for the CEO and Disclosed
Executives. See section 5.3.

Nov 2024

Nov 2023

Nov 2022

Nov 2021

Dec 20201

30 Sep
2020

1 Oct
2019

VARIABLE REMUNERATION DELIVERY – CEO AND DISCLOSED EXECUTIVESCash(AVR/VR)(AVR/VR)

30% vesting at
the end of year 2(LTVR/VR)

Deferredshares2

40% vesting at
the end of year 1

Performancerights3

ANZfinancial year

Variable remuneration paid/allocatedFixed remuneration

20% vesting at
the end of year 3

10% vesting at
the end of year 4

Vesting is subject tomeeting TSR performance
hurdles at the end of year 4

1. Variable remuneration outcomes were approved by the Board on 21 October 2020 (noting that the CEO’s performance rights are subject to shareholder approval at the 2020 AGM).
2. Deferred shares for the CRO vest as follows: 30% at the end of years 1 and 2, and 20% at the end of years 3 and 4. 3. Deferred share rights for the CRO.

5.2.1 Cash – CEO (AVR) and Disclosed Executives (VR)The cash component is paid to executives at the end of the annual Performance and Remuneration Review (December 2020).
5.2.2 Deferred shares – CEO (AVR) and Disclosed Executives (VR)Deferred shares are ordinary shares, deferred over one to four years. By deferring part of an executives’ remuneration over time (and it
remaining subject to malus), we enable a substantial amount of their remuneration to be directly linked to delivering long-term shareholder
value. We grant deferred shares in respect of performance for the 1 October to 30 September financial year in late November/early
December each year.
We calculate the number of deferred shares to be granted based on the VWAP of the shares traded on the ASX in the week leading up to andincluding the date of grant. For disclosure and expensing purposes, we use the one day VWAP to determine the fair value.
In some cases (generally due to regulatory or tax reasons), we may grant deferred share rights to executives instead of deferred shares.
Each deferred share right entitles the holder to one ordinary share.

94

5.2.3a Performance rights – CEO (LTVR) and Disclosed Executives (VR) excluding the CRO

A performance right is a right to acquire one ordinary ANZ share at nil cost – as long as time and performance hurdles are met. The future
value of performance rights may range from zero to an indeterminate value. The value depends on our performance against the hurdles andon the share price at the time of exercise.
The performance rights have a four-year performance period (and remain subject to malus up to the vesting date). For the 2020 grant, theperformance period is from 22 November 2020 to 21 November 2024. A four-year performance period provides sufficient time for longer
term performance to be reflected.
More detail relating to the 2020 performance rights is provided below.
Element

DetailPerformancerights hurdles

The performance rights have TSR performance hurdles reflecting the importance of focusing on achieving longer term
strategic objectives and aligning executives’ and shareholders’ interests. We will apply two TSR performance hurdles forthe 2020 grants of performance rights:• 75% will be measured against a relative TSR hurdle, tranche 1.
• 25% will be measured against an absolute TSR hurdle, tranche 2.
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 and tested
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) comparator group,
made up of core local and global competitors. This comparator group is chosen to broadly reflect the geographiesand business segments in which ANZ competes for revenue; and• the absolute Compound Annual Growth Rate (CAGR) TSR hurdle provides executives with a more direct line of sightto the level of shareholder return to be achieved. It also provides a tighter correlation between the executives’ 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
each tranche of performance rights become exercisable. We measure each tranche independently from the other – forexample one tranche may vest fully or partially but the other tranche may not vest.

Relative TSR
hurdle for theNovember/
December2020 grant

The relative TSR hurdle is an external hurdle that measures our TSR against that of the SFS comparator group over four
years. The SFS comparator group (unchanged from prior years) is made up of: Bank of Queensland Limited; Bendigo andAdelaide 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.
If our TSR when compared to the TSR of the comparator groupthen the percentage of performance rights that vest

is less than the 50 percentile
reaches at least the 50th percentile, but is less than
the 75th percentile

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

reaches or exceeds the 75th percentile

is 100%th

Absolute TSR
hurdle for theNovember/
December2020 grant

The absolute CAGR TSR hurdle is an internal hurdle as to whether ANZ achieves or exceeds a threshold level of growth
the Board sets at the start of the performance period.
The Board reviews and approves the absolute TSR targets each year for that year’s award. When reviewing the targets,the Board references ANZ’s assessed Cost of Capital. The Cost of Capital is determined using methodologies including
the Capital Asset Pricing Model (CAPM). There has been no change to the absolute CAGR TSR targets for 2020.
If the absolute CAGR of our TSR

then the percentage of performance rights that vest

is less than 8.5%

is nilis 8.5%is 50%

reaches at least 8.5%, but is less than 12.75%

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

reaches or exceeds 12.75%

is 100%

ANZ 2020 Annual Report95Overview

How wecreate value

Calculating TSR
performance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

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 startand end values;• ensure an independent measurement – by engaging the services of an external organisation, Mercer Consulting(Australia) Pty Ltd, to calculate ANZ’s performance against the TSR hurdles; and• test the performance against the relevant hurdle once only at the end of the four-year performance period – therights lapse if the performance hurdle is not met – there is no retesting.

Calculating
the number of
performancerightsThe number of performance rights we grant is calculated using a face value basis – i.e. the full share price. Face value
at full vesting is split into two tranches. Each tranche value is then divided by the market price (five trading day VWAP
of ANZ shares at the start of the performance period) to determine the number of performance rights we award ineach tranche.
Performance rights are allocated in late November/early December for Disclosed Executives and December for theCEO (subject to shareholder approval).

Expensing
performancerights

ANZ engages PricewaterhouseCoopers to independently determine the fair value of performance rights, which is onlyused for expensing purposes. They consider factors including: the performance conditions, share price volatility, lifeof the instrument, dividend yield, and share price at grant date.

5.2.3b Deferred share rights – CRO (VR)The CRO receives deferred share rights instead of performance rights to preserve the independence of the role and to minimise any conflictsof interest in carrying out the risk control function across the organisation.
The CRO’s deferred share rights are subject to a time-based vesting hurdle of four years. The value the Board uses to determine the numberof deferred share rights to be allocated to the CRO is the face value of the Company’s shares traded on the ASX at the time of grant (fivetrading day VWAP).
5.3 MALUS (DOWNWARD ADJUSTMENT OF PREVIOUSLY DEFERRED REMUNERATION) – BOARD DISCRETION
All deferred remuneration we award to an employee is subject to ANZ’s on-going and absolute discretion to adjust this downward (malus)(including to zero) at any time.
ANZ may exercise this discretion, for example, where:• there is a need to protect the financial soundness of ANZ or to meet regulatory requirements or there has been a material failure of risk
management or controls within ANZ;
• the employee has acted fraudulently or dishonestly, failed to act with due care, skill and diligence, or failed to comply with ANZ policies(including the Code of Conduct), processes or directions;• the employee is responsible or accountable, directly or indirectly, by virtue of their role or seniority for an occurrence/event which has had
an adverse impact on ANZ;
• there has been misconduct and the employee was involved directly or indirectly, failed to take adequate steps, could be considered
responsible due to their seniority, or the decision to award or grant the deferred remuneration was made on the basis of misinformation.
Further, where the CEO and/or Disclosed Executives of ANZ have failed to comply with their accountability obligations under the BEAR, theirdeferred remuneration will be reduced by an amount that is proportionate to the failure, as required by the BEAR.
An employee’s deferred remuneration is also subject to ANZ’s on-going and absolute discretion to further defer the vesting. Where ANZ
exercises this discretion, the vesting date is postponed and will not vest unless and until ANZ determines it should vest.
Before any scheduled vesting of deferred remuneration, the Board (for the CEO, Disclosed Executives and other specified roles) and/or theConsequence Review Group (CRG) (for other employees) considers whether malus/downward adjustment or further deferral should beapplied. See section 6 for details.

96

6. ACCOUNTABILITY AND CONSEQUENCE FRAMEWORKIn 2020, we continued to strengthen and embed the Accountability
and Consequence Framework (A&CF).
The HR Committee and Board determine accountability andconsequences for the CEO and Disclosed Executives, including theapplication of malus to previously deferred remuneration.
The CRO presented a report to the HR Committee of the Boardon the most material risk events for 2020, and input was alsosought from the Audit and Risk Committees of the Board. All of thisinformation was taken into consideration by the HR Committee andthe Board when considering the performance of the Group, anddetermining the performance and remuneration outcomes for ourGroup Executives including the CEO and the 2020 ANZIP variable
remuneration pool for all employees.
Adjustments were made to 2020 individual variable remuneration
outcomes to reflect accountability for relevant matters.
No malus was applied to the previously deferred remunerationof the CEO and Disclosed Executives during 2020.
The Consequence Review Group (CRG) supports the Board inmonitoring the implementation and ongoing effectiveness of ANZ’s
A&CF, being cognisant of its impact on the culture of ANZ. The
CRG is chaired by the CEO and members include the CRO, CFO and
GE T&C. The CRG reviews material events, accountability and theapplication of suitable consequences where appropriate.
When determining consequences consideration will be given to
the level of accountability, and the severity of the issue, including
customer impacts. Consequences may include, for example, one
or more of the following: counselling, formal warnings, impacts toin year performance and remuneration outcomes or applicationof malus to previously deferred remuneration and ultimately
termination of employment for the most serious issues.
Our ongoing focus on accountability, consequences and drivinga strong risk culture supports our customer commitment that whenthings go wrong, we fix them quickly and hold executives, current(and former where we can), to account where appropriate. We arealso focused on ensuring that we learn from the cause of the event,and mitigate the risk of future recurrences and continuously seek
to strengthen our risk culture.
We review the effectiveness of the A&CF every year and implement
enhancements to further strengthen the framework based on
regulatory and internal stakeholder input.

strengthened in 2020 compared to 2019. This gives
us confidence that the implementation of the A&CF
is consistent with our speak-up culture. We continue
to raise employee awareness of, and promote the various
ways that employees can speak up including throughinitiatives such as the annual Whistleblower Awareness Week.
In 2020 across the Group, there were 1,448 Code of Conduct cases
managed resulting in 199 employees being terminated for breachesof our Code of Conduct, or who otherwise left the bank after aninvestigation had been initiated. A further 370 employees received
a formal disciplinary outcome, with managers required to apply
impacts to their performance and remuneration outcomes as partof the annual review process.
At the senior leadership level, 34 current or former seniorleaders (senior executives, executives and senior managers) had
consequences applied in 2020 for Code of Conduct breaches orfindings of accountability for a relevant event, or otherwise left thebank after an investigation had been initiated. The 34 employees
represent 1.4% of our 2,443 senior leaders. The consequences
applied included warnings, impacts to performance and/or
remuneration outcomes and cessation of employment.
Senior leader consequences in 20201

Formal warnings2

19

No longer employed
Performance impacts

7
3

18

1. Individuals are included under all categories that are relevant meaning one individual may
be reflected in multiple categories. 2. As part of the annual Performance and Remuneration
Review process, performance and remuneration consequences are applied in line with our
A&CF. 3. Performance rating impacts are as at end of October 2020. Remuneration impacts
will also be applied.

There are also performance and remuneration consequences for
employees who are non-compliant with the mandatory learning
requirements by over 30 days, with these employees being deemed
ineligible to participate in the year-end remuneration review
process (unless genuinely exceptional circumstances exist). In
2020, less than 0.4% of employees had a mandatory learning noncompliance flag applied to their profiles as a result of becoming
overdue for 30 days on their mandatory learning requirements. The
remaining 99.6% of our employees completed their mandatory
learning requirements within the required period.

We also examined the impact of the A&CF on our ‘speak up’ culture.
Across all measures reviewed, including our annual My Voicesurvey, and percentage of self-disclosed audit issues and internal
audit cultural review data, we found that our speak-up culture had

ANZ 2020 Annual Report97Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

7. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
7.1 REMUNERATION STRUCTURE
The HR Committee reviewed NED fees for 2020 and determined not to increase Chairman, NED or Committee fees except for the Digital
Business and Technology Committee Chair fee (which increased from $35,000 to $45,000) in recognition of the significant increase inworkload of the Committee Chair.
NEDs receive a base 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 Board considers: 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 $4 million 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 2020.
2020 NED FEE POLICY STRUCTURE

Board1, 2

Audit
Committee

Risk
Committee

HR
Committee

Digital Business &Technology
Committee

Ethics, Environment,
Social & GovernanceCommittee

Chair fee

$825,000$65,000$62,000$57,000$45,000$35,000

Member fee$240,000$32,500$31,000$29,000$15,000$15,000

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% (200% for the Chairman) of the NED
member fee; and• to maintain this shareholding while they are a Director of ANZ.
Based on the ANZ share price as at 30 September 2020, all NEDs who have served five years met the holding requirement. NEDs appointed
within the last five years have either met or are building towards their shareholding requirement.

987.2 2020 STATUTORY REMUNERATION – NEDS
2020 STATUTORY REMUNERATION – NEDS
Short-term NED benefits
Financial
year

Post-employment

Fees1
$

Non monetary
benefits$

Super
contributions1$

Total
remuneration2$

803,824-

21,176825,000

Current Non-Executive Directors
D Gonski1

2020
2019

639,351-

20,649660,000

I Atlas1

2020

323,324-

21,176

344,500

2019

275,851-

20,649296,500

P Dwyer1

2020

354,326-

10,674

365,000

2019

296,351-

20,649317,000

J Halton1

2020

307,824-

21,176

329,000

2019

246,058-

20,649266,707

J Key1, 3

2020

279,824-

21,176

301,000

2019

229,131-

20,649249,780

G Liebelt1

2020

342,324-

21,176

363,500

2019

294,851-

20,649315,500

2020

297,324-

21,176

318,5002019

249,851-

20,649270,500

P O’Sullivan

2020

243,331-

19,207

262,538

Total of all Non-Executive Directors

2020

2,952,101-

156,937

3,109,038

2019

2,231,444-

144,543

2,375,987

J Macfarlane

14

1. Year-on-year differences in fees relate to the 20% reduction to the Chairman fee and the NED member fees in 2019 (as a consequence of a decision taken by the Directors that their fees
should reflect shared accountability for the failures highlighted by the Royal Commission), changes in Committee memberships and changes to the superannuation Maximum Contribution
Base. From 1 January 2020 to 30 June 2020, P Dwyer elected to receive all payments in fees and therefore did not receive superannuation contributions during this period. 2. Long-term
benefits and share-based payments do not apply for the NEDs. 3. In addition to the fees shown above that J Key received as a NED for Australia and New Zealand Banking Group Limited(ANZBGL), as Chairman for ANZ Bank New Zealand Limited J Key also received a total of NZD 391,000 in 2020 and NZD 382,950 in 2019. 4. P O’Sullivan commenced as a NED on 4 November
2019, so 2020 remuneration reflects a partial service year.

ANZ 2020 Annual Report99Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

8. REMUNERATION GOVERNANCE
8.1 THE HUMAN RESOURCES (HR) COMMITTEE
8.1.1 Role of the HR Committee

The HR Committee supports the Board on remuneration and otherHR matters. It reviews the remuneration policies and practicesof the Group, and monitors market practice and regulatory andcompliance requirements in Australia and overseas.
During the year the HR Committee met on six occasions1 andreviewed and approved, or made recommendations to the Boardon matters including:• remuneration for the CEO and other key executives (broader
than those disclosed in the Remuneration Report) coveredby the ANZBGL Remuneration Policy, and fees for the NEDs;• reward structure changes (including the Reimagining Reward
initiative);• ANZ’s response to the industry-wide Retail Remuneration Review
by Stephen Sedgwick AO;• updates on APRA’s draft Prudential Standard CPS 511
Remuneration, the BEAR Thematic Review, Treasury’s Financial
Accountability Regime (FAR), and ASIC’s review of governancepractices in the exercise of board discretion on executive
variable pay;
• the ANZ Group Performance Framework (annual objectives
setting and assessment) and annual variable remuneration spend;• performance and reward outcomes for key senior executives,
including the consideration of material risk events that have
either occurred or came to light in the year, and malus/downward
adjustment;• key senior executive appointments and terminations;

To further reflect the importance of the link between
remuneration and risk:• the Board had three NEDs (in addition to the
Chairman) in 2020 who served on both the HR Committee
and the Risk Committee;• the HR Committee has free and unfettered access to risk
and financial control personnel (the CRO and CFO attend
HR Committee meetings for specific agenda items);• the CRO provides an independent report to the HR Committee onmaterial risk events to help inform considerations of performanceand remuneration, and accountability and consequences at theGroup, Divisional and individual level; and• the chairs of the Audit and Risk Committees are asked to provide
input to the HR Committee to ensure appropriate considerationof all relevant risk and internal audit issues.
8.1.3 Conflict of interest

To help mitigate potential conflicts of interest:• management are not in attendance when their own performanceor remuneration is being discussed by the HR Committee or Board;• the CEO’s AVR is funded and determined separately from the
ANZIP pool;• the CRO’s remuneration arrangements differ to other Disclosed
Executives to preserve the independence of the role; and• the HR Committee seeks input from a number of sources toinform their consideration of performance and remuneration
outcomes for the CEO and Disclosed Executives including:• the effectiveness of the ANZBGL Remuneration Policy;– independent reports from Risk, Finance, Talent and Culture
and Internal Audit;• succession plans for key senior executives;– material risk event data provided by the CRO;• culture and governance including updates on the strengthened
Accountability and Consequence Framework (A&CF); and– input from both the Audit Committee and the Risk
Committee of the Board.

• diversity, inclusion, and employee engagement.
More details about the role of the HR Committee, including its
Charter, can be found on our website. Go to anz.com > Our
company > Strong governance framework > ANZ Human Resources
Committee Charter.
1. A subset of the HR Committee also met on a number of occasions during the year to
discuss regulatory developments and 2020 outcomes.

8.1.2 Link between remuneration and risk

The HR Committee has a strong focus on the relationship between
business performance, risk management and remuneration,aligned with our business strategy. The chairs of the Risk and Audit
Committees are members of the HR Committee and the full Board
is in attendance for specific HR Committee meetings.

8.1.4 External advisors provided information but notrecommendations

The HR Committee can engage independent external advisors
as needed.
Throughout the year, the HR Committee and management received
information from the following external providers: Aon, Ashurst, EY,
Mercer Consulting (Australia) Pty Ltd and PricewaterhouseCoopers.
This information related to market data, market practices, legislativerequirements and the interpretation of governance and regulatory
requirements.
During the year, ANZ did not receive any remuneration
recommendations from external consultants 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 with careful regard to ANZ’s strategic objectives, purpose
and values, risk appetite and the ANZBGL Remuneration Policy
and Principles.

100

8.2 INTERNAL GOVERNANCE
8.2.1 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 forfeit the relevant equity.
8.2.2 CEO and Disclosed Executives’ shareholding guidelines

We expect the CEO and each Disclosed Executive to, over a five-year period:• accumulate ANZ shares to the value of 200% of their fixed remuneration; and• maintain this shareholding level while they are an executive of ANZ.
For this purpose, shareholdings include all vested and unvested equity that is not subject to performance hurdles.
CEO
While the CEO is still within his five-year accumulation period his shareholdings are above the holding guideline and we note that he has not
sold any ANZ shares since his commencement as CEO.
Disclosed Executives
All but one Disclosed Executive are still within their five-year accumulation period and are building their holdings. One Disclosed Executive has
passed the five-year period and their shareholding (based on 30 September 2020 share price) was below the holding guideline. The impact of
COVID-19 on ANZ’s share price has resulted in the overall value of the executive’s holding reducing and the Board has exercised its discretion andis not requiring the executive to purchase additional shares at this time.
8.2.3 CEO and Disclosed Executives’ contract terms and equity treatment

The details of the contract terms and also 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.

Notice on termination
by ANZ1• 12 months by ANZ for CEO and Disclosed Executives.

How unvested equity
is treated on leaving
ANZ

Executives who resign or are terminated will forfeit all their unvested deferred equity – unless the Board
determines otherwise.

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 fixed remuneration up to thedate of their termination and their statutory entitlements.

If an executive is terminated due to redundancy or they are classified as a ‘good leaver’, then:• their deferred shares/share rights are released at the original vesting date; and• their performance rights2 are prorated for service to the full notice termination date and released at theoriginal vesting date (to the extent that the performance hurdles are met).
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
If a change of control or other similar event occurs, then we will test the performance conditions applying(applies to the CEO only) to the CEO’s performance rights. They will vest to the extent that the performance conditions are satisfied.
1. For K Corbally and M Hand, their contracts state that in particular circumstances they may be eligible for a retrenchment benefit in accordance with the relevant ANZ policy, as varied fromtime to time. For A Watson, notice on retrenchment is 6 weeks and compensation on retrenchment is calculated on a scale up to a maximum of 79 weeks after 25 years’ service. 2. Or deferredshare rights granted to the CRO instead of performance rights.

ANZ 2020 Annual Report101Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

9. OTHER INFORMATION
9.1 2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
fixed remuneration awarded (cash and superannuation contributions) and also the cash component of the 2020 variable remuneration
award, it does not show the actual variable remuneration awarded or received in 2020 (see sections 4.1 and 4.2), but instead shows
the amortised accounting value for this financial year of deferred remuneration (including prior year awards).
2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES

Short-term employee benefits

Post-employment

Cash salary1$

Non monetary
benefits2$

Total cash
incentive3$

Super
contributions4$

Retirement
benefit accrued
during year5$2020

2,478,824

15,089625,000

21,176-2019

2,079,351

19,383750,000

20,649-2020

1,178,824

20,646409,200

21,676-

2019979,351

32,221

495,000

21,149-2020

1,078,824

9,589

429,000

21,176-

2019929,351

16,633

478,500

20,649

-G Florian2020

1,053,824

20,646371,250

21,176-

A George

2020

1,078,824

26,146

363,000

21,676-

2019979,351

37,721

528,000

21,149-2020

1,178,824

9,589

462,000

21,17625,177

2019

710,307

10,868198,000

15,693

17,8512020

1,078,824

9,589

363,000

21,676-

2019979,351

17,083

544,500

21,149-K van der Merwe

2020

828,824

15,089330,000

21,676-

A Watson13

2020

975,974

11,176334,681

39,625-

2019

214,999273

170,255

4,441

-

2020

1,178,824

9,589

363,000

21,176-2019

1,179,351

13,883

874,500

20,649-Financialyear
CEO and Current Disclosed Executives
S Elliott

M Carnegie

K Corbally10

M Hand11

M Jablko12

M Whelan

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 companyfunded benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to in-country benefits. 3. The total cash incentive
relates to the cash component only. The relevant amortisation of the AVR/VR deferred components is included in share-based payments and has been amortised over the vesting period.
The total AVR/VR was approved by the Board on 21 October 2020. 100% of the cash component of the AVR/VR awarded for the 2019 and 2020 years vested to the executive in the applicablefinancial year. 4. For all Australian based executives, the 2019 and 2020 superannuation contributions reflect the Superannuation Guarantee Contribution based on the Maximum Contribution
Base. A Watson participates in KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay (less employer
superannuation contribution tax). 5. Accrual relates to Retirement Allowance. As a result of being employed with ANZ before November 1992, M Hand is eligible to receive a Retirement
Allowance on retirement, retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as three months of preserved notional salary(which is 65% of fixed remuneration) plus an additional 3% of notional salary for each year of full-time service above 10 years less the total accrual value of long service leave (including taken
and untaken). 6. Long service leave accrued during the year increased year-on-year for S Elliott, M Carnegie, A George, K Corbally, M Hand, M Jablko and A Watson as a result of their fixed
remuneration increases. 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 termsof share-based payments have been altered or modified during the financial year.

102

Long-term
employeebenefits

Share-based payments7
Total amortisation value of
Variable
remuneration

Other equity
allocations8Long service leaveaccrued during
the year6$

Shares$Share rights$

Performancerights$Shares$Termination
benefits9$

Total
remuneration$

100,651

828,507-

1,156,061--

5,225,308

31,819830,753-

1,449,384--

5,181,339

28,120502,572-

196,150--

2,357,188

15,152

470,209-344,501--

2,357,583

32,255

378,884

258,090

16,398--2,224,216

29,179340,108

171,583

35,455

194,492-

2,215,950

24,403

333,927-

238,329--

2,063,555

25,551

430,514-219,525--

2,165,236

15,152392,589-

260,314--2,234,276

112,623

367,507-203,224--

2,380,120

80,949259,006-

129,198--

1,421,872

21,570535,573-

307,22850,316-

2,387,776

15,152539,647-

400,011

133,552-

2,650,445

16,580358,605-

229,707--1,800,481

17,383

237,50282,84593,742711-

1,793,639

3,580

35,35883,50011,290141-

523,837

18,232754,535-

417,161--

2,762,517

18,182

839,283-

717,098--

3,662,946

8. Other equity allocations relate to employment arrangements such as compensation for bonus opportunity foregone and deferred remuneration forfeited, retention awards, and shares
received in relation to the Employee Share Offer. 9. No 2020 Disclosed Executive received a termination benefit. Whilst F Ohlsson (former Group Executive, Australia and 2019 Disclosed
Executive) concluded in a Disclosed Executive role on 28 December 2018, he ceased employment 15 November 2019 while on career break. Termination benefits paid on cessation (relating
to accrued annual and long service leave, and pay in lieu of notice in accordance with his contract), annual leave and long service leave taken at the commencement of his career break, andnon monetary benefits relating to cessation totalled $1,303,863. 10. In relation to K Corbally’s role before his appointment to the ExCo, in August 2016 the Board approved an equity retention
award of $600,000 vesting in August 2019. Other equity allocations relate to this award. 11. M Hand’s 2019 remuneration reflects a partial service year as he commenced in a Disclosed
Executive role on 29 December 2018. 12. Other cash and other equity allocations for M Jablko relate to previously disclosed compensation for bonus opportunity foregone and deferredremuneration forfeited. 13. A Watson’s 2019 remuneration reflects a partial service year as she commenced in a Disclosed Executive role on 17 June 2019 as Acting Group Executive and CEO,NZ. A Watson’s fixed remuneration is paid in NZD and converted to AUD. In 2018, 2019 and 2020 A Watson was eligible to receive shares under the Employee Share Offer. That offer provided
a grant of ANZ shares in each financial year to eligible employees subject to Board approval. See Note 31 Employee Share and Option Plans for further details on the Employee Share Offer.

ANZ 2020 Annual Report103Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

9.2 EQUITY HOLDINGSFor the equity granted to the CEO and Disclosed Executives in November/December 2019, all deferred shares were purchased on the market.
For deferred share rights and performance rights, we will determine our approach to satisfying awards closer to the time of vesting.
9.2.1 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 2020 year; or• in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2020 year.
EQUITY GRANTED VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED – CEO AND DISCLOSED EXECUTIVESNameType of equity

Equity fairvalue at
grant
(for 2020
grantsNumberonly)
1
granted$

Lapsed/Forfeited

Vested
First
Grant
date
date exercisable

Dateofexpiry Number%

Value2$

Number%Exercised/Sold
Value2$ Number%Value2$

Vestedandexercis Unexer
able as cisable
at 30 as at 30
Sep
Sep
20203 20204

CEO and Current Disclosed Executives
S Elliott

Deferred shares

6,941

22-Nov-16

22-Nov-19-

6,941 100 172,095

-

-

-

(6,941) 100 173,814--

Deferred shares

8,529

22-Nov-17

22-Nov-19-

8,529 100 211,468

-

-

-

(8,529) 100 213,581--

Deferred shares

8,623

22-Nov-18

22-Nov-19-

8,623 100 213,799

-

-

-

(8,623) 100 215,935--

Deferred shares

12,00624.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

12,006

Deferred shares

9,003

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

9,003

Deferred shares

6,002

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

6,002

Deferred shares

3,001

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

3,001

Performance rights

112,862

16-Dec-16

16-Dec-19 16-Dec-21

-

-

-

(112,862) 100 (2,826,313)

-

-

-

-

-

Performance rights

37,62016-Dec-16

16-Dec-19 16-Dec-21

-

-

-

(37,620) 100(942,088)

-

-

-

-

-

Performance rights

126,050

10.25 17-Dec-19

17-Dec-23 17-Dec-25

-

-

-

-

-

-

-

-

-

- 126,050

Performance rights

42,0165.03 17-Dec-19

17-Dec-23 17-Dec-25

-

-

-

-

-

-

-

-

-

-

42,016

M Carnegie Deferred shares

1,182

22-Nov-16

22-Nov-19-

1,182 100

29,307

-

-

-

-

-

-

1,182

-

Deferred shares

4,785

22-Nov-17

22-Nov-19-

4,785 100 118,639

-

-

-

-

-

-

4,785

-

Deferred shares

5,205

22-Nov-18

22-Nov-19-

5,205 100 129,053

-

-

-

-

-

-

5,205

-

Deferred shares

7,924

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

7,924

Deferred shares

5,942

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

5,942

Deferred shares

3,961

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

3,961

Deferred shares

1,980

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

1,980

Performance rights

7,309

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(7,309) 100(181,219)

-

-

-

-

-

Performance rights

2,436

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(2,436) 100(60,398)

-

-

-

-

-

Performance rights

30,61210.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

30,612

Performance rights

10,2045.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

10,204

K Corbally Deferred shares

21,49722-Nov-16

20-Aug-19

-

-

-

-

-

-

- (21,497) 100 526,105--

Deferred shares

2,758

22-Nov-16

22-Nov-19-

2,758 100

68,382---(2,758) 100

67,498--Deferred shares

4,230

22-Nov-17

22-Nov-19-

4,230 100 104,879

-

-

-

(4,230) 100 103,522--

Deferred shares

3,010

22-Nov-18

22-Nov-19-

3,010 100

74,630---(3,010) 100

73,665--

Deferred shares

5,745

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

5,745

Deferred shares

5,744

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

5,744

Deferred shares

3,829

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

3,829

Deferred shares

3,829

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

3,829

Deferred share rights

19,72724.99 22-Nov-19

22-Nov-23 29-Nov-23

-

-

-

-

-

-

-

-

-

-

19,727

Performance rights

5,445

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(5,445) 100(135,003)

-

-

-

-

-

104

Name

Type of equity

Equity fairvalue at
grant
(for 2020
grantsNumberonly)
1
granted$

Lapsed/Forfeited

Vested
First
Grant
date
date exercisable

Dateofexpiry Number%

Value2$

Number%Exercised/Sold
Value2$ Number%Value2$

Vestedandexercis Unexer
able as cisable
at 30 as at 30
Sep
Sep
20203 20204

CEO and Current Disclosed Executives
G Florian

A George

M HandM Jablko

Deferred shares

2,462

22-Nov-17

22-Nov-19-

2,462 100

61,043

-

-

-

-

-

-

2,462

-

Deferred shares

3,254

22-Nov-18

22-Nov-19-

3,254 100

80,680

-

-

-

-

-

-

3,254

-

Deferred shares

4,491

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

4,491

Deferred shares

3,367

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

3,367

Deferred shares

2,244

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

2,244

Deferred shares

1,122

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

1,122

Performance rights

17,34610.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

17,346

Performance rights

5,782

5.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

5,782

Deferred shares

2,400

22-Nov-16

22-Nov-19-

2,400 100

59,506

-

-

-

-

-

-

2,400

-

Deferred shares

3,096

22-Nov-17

22-Nov-19-

3,096 100

76,762

-

-

-

-

-

-

3,096

-

Deferred shares

3,498

22-Nov-18

22-Nov-19-

3,498 100

86,729

-

-

-

-

-

-

3,498

-

Deferred shares

8,453

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

8,453

Deferred shares

6,338

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

6,338

Deferred shares

4,225

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

4,225

Deferred shares

2,112

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

2,112

Performance rights

2,746

18-Nov-15

18-Nov-18 18-Nov-20

-

-

-

-

-

-

(1,793)65

46,678--Performance rights

4,738

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(4,738) 100(117,474)

-

-

-

-

-

Performance rights

32,65310.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

32,653

Performance rights

10,8845.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

10,884

Deferred shares

4,012

22-Nov-16

22-Nov-19-

4,012 100

99,474---(4,012) 100

99,242--

Deferred shares

6,277

22-Nov-17

22-Nov-19-

6,277 100 155,632

-

-

-

(6,277) 100 155,270--

Deferred shares

3,254

22-Nov-18

22-Nov-19-

3,254 100

80,680---(3,254) 100

80,492--

Deferred shares

4,755

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

4,755

Deferred shares

3,565

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

3,565

Deferred shares

2,376

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

2,376

Deferred shares

1,188

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

1,188

Performance rights

7,920

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(7,920) 100(196,368)

-

-

-

-

-

Performance rights

18,36710.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

18,367

Performance rights

6,122

5.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

6,122

Deferred shares

3,153

20-Aug-16

20-Aug-17

-

-

-

-

-

-

-

(3,153) 100

80,580--

Deferred shares

3,153

20-Aug-16

20-Aug-18

-

-

-

-

-

-

-

(3,153) 100

80,580--

Deferred shares

7,617

20-Aug-16

27-Feb-20-

7,617 100 195,305

-

-

-

-

-

-

7,617

-

Deferred shares

1,182

22-Nov-16

22-Nov-17

-

-

-

-

-

-

-

(1,182) 100

30,208--Deferred shares

1,182

22-Nov-16

22-Nov-18

-

-

-

-

-

-

-

(1,182) 100

30,208--Deferred shares

1,182

22-Nov-16

22-Nov-19-

1,182 100

29,307

-

-

-

-

-

-

1,182

-

Deferred shares

6,305

22-Nov-17

22-Nov-18

-

-

-

-

-

-

-

-

Deferred shares

6,305

22-Nov-17

22-Nov-19-

6,305 100 156,326

-

-

-

-

-

-

6,305

-

Deferred shares

5,693

22-Nov-18

22-Nov-19-

5,693 100 141,152

-

-

-

-

-

-

5,693

-

Deferred shares

8,717

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

8,717

Deferred shares

6,536

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

6,536

Deferred shares

4,357

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

4,357

Deferred shares

2,178

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

2,178

Performance rights

7,309

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(7,309) 100(181,219)

-

-

-

-

-

Performance rights

2,436

22-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(2,436) 100(60,398)

-

-

-

-

-

Performance rights

33,67310.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

33,673

Performance rights

11,2245.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

11,224-(6,305) 100 161,135

ANZ 2020 Annual Report105Overview

Name

How wecreate value

Type of equity

Performanceoverview

Equity fairvalue at
grant
(for 2020
grantsNumberonly)
1
granted$Remuneration
reportDirectors’
reportDateofexpiry Number

Shareholder
information

Lapsed/Forfeited

Vested
First
Grant
date
date exercisable

Financialreport%Value2$

Number%Exercised/Sold
Value2$ Number%Value2$

Vestedandexercis Unexer
able as cisable
at 30 as at 30
Sep
Sep
20203 20204

CEO and Current Disclosed Executives
K van derMerwe

A Watson

M Whelan

Deferred shares

1,477

22-Nov-17

22-Nov-19-

1,477 100

36,621

-

-

-

-

-

-

1,477

-

Deferred shares

3,577

22-Nov-18

22-Nov-19-

3,577 100

88,688

-

-

-

-

-

-

3,577

-

Deferred shares

6,604

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

6,604

Deferred shares

4,951

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

4,951

Deferred shares

3,301

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

3,301

Deferred shares

1,650

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

1,650

Performance rights

25,51010.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

25,510

Performance rights

8,503

5.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

8,503

Deferred shares

3,904

24.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

3,904

Deferred shares

3,901

24.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

3,901

Deferred shares

3,901

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

3,901

Deferred shares

4,541

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

4,541

Employee share offer

32

25.05 02-Dec-19

02-Dec-22

-

-

-

-

-

-

-

-

-

-

-

32

Deferred share rights

2,237

22-Nov-16

2,237 100

55,464---(2,237) 100

55,277--22-Nov-19 22-Nov-21

Deferred share rights

4,409

22-Nov-17

22-Nov-19 22-Nov-21

4,409 100 109,317

-

-

-

(4,409) 100 108,948--

Deferred share rights

5,016

22-Nov-18

22-Nov-19 22-Nov-21

5,016 100 124,367

-

-

-

(5,016) 100 123,947--

Performance rights

3,649

22-Nov-16

22-Nov-19 22-Nov-21-(3,649) 100(90,473)

-

-

-

-

Deferred shares

6,724

22-Nov-16

22-Nov-19(6,724) 100 166,715--

Deferred shares

9,218

22-Nov-17

22-Nov-19-

9,218 100 228,551

-

-

-

(9,218) 100 228,551--

Deferred shares

7,075

22-Nov-18

22-Nov-19-

7,075 100 175,418

-

-

-

(7,075) 100 175,418--

Deferred shares

13,99824.79 22-Nov-19

22-Nov-20

-

-

-

-

-

-

-

-

-

-

-

13,998Deferred shares

10,49824.79 22-Nov-19

22-Nov-21

-

-

-

-

-

-

-

-

-

-

-

10,498Deferred shares

6,998

24.79 22-Nov-19

22-Nov-22

-

-

-

-

-

-

-

-

-

-

-

6,998

Deferred shares

3,499

24.79 22-Nov-19

22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

3,499

Performance rights

41,57122-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(41,571) 100 (1,030,711)

-

-

-

-

-

Performance rights

13,85722-Nov-16

22-Nov-19 22-Nov-21

-

-

-

(13,857) 100(343,570)

-

-

-

-

-

Performance rights

54,08110.45 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

54,081

Performance rights

18,027

5.14 22-Nov-19

22-Nov-23 22-Nov-25

-

-

-

-

-

-

-

-

-

-

18,027

1. For the purpose of the five highest paid executive disclosures, Executives are definedas Disclosed Executives or other members of the ExCo. For the 2020 financial year thefive highest paid executives include four Disclosed Executives and the Group Executive,
International (F Faruqui). Rights granted to Disclosed Executives as remuneration in 2020are included in the table. Rights granted to F Faruqui as remuneration in 2020 include
four tranches of deferred share rights and two tranches of performance rights granted on
22 Nov 2019. (14,298 (tranche 1) deferred share rights first exercisable 22 Nov 2020, expiring
29 Nov 2020; 11,363 (tranche 2) deferred share rights first exercisable 22 Nov 2021, expiring
29 Nov 2021; 8,033 (tranche 3) deferred share rights first exercisable 22 Nov 2022, expiring
29 Nov 2022; 4,257 (tranche 4) deferred share rights first exercisable 22 Nov 2023, expiring
29 Nov 2023; 51,839 (tranche 1) and 17,279 (tranche 2) performance rights first exercisable
22 Nov 2023 subject to meeting performance hurdles, expiring 22 Nov 2025). No rights
have been granted to the CEO, Disclosed Executives or the five highest paid executives
since the end of 2020 up to the Directors’ Report sign-off date. 2. The point in timevalue of shares/share rights and/or performance rights is based on the one day VWAP
of the Company’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 shares/share rights and/or performance rights. The exercise price for all share rights/performance rights is $0.00.
No terms of share-based payment transactions have been altered or modified during thereporting 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 andrights were vested and unexercisable.

106

-

-

-

6,724 100 166,715

-

-

-

-

4. Performance rights granted in prior years (by grant date) that remained unexerciseable at
30 Sep 2020 include:
Nov-17
Nov-18
Nov-19S Elliott
143,294
110,365
168,066
M Carnegie
39,44042,88440,816
K Corbally
4,230
G Florian
20,30026,802
23,128
A George
25,52028,81343,537
M Hand6,277
26,802
24,489M Jablko
51,96846,90544,897
K van der Merwe
12,18029,48234,013A Watson
3,934
4,802
M Whelan
75,98058,296
72,108Performance rights granted to S Elliott in 2020 were approved by shareholders at the 2019
AGM in accordance with ASX Listing Rule 10.14.

9.2.2 NED, CEO and Disclosed Executives equity holdings

The 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 EXECUTIVESNameOpeningbalance at
1 Oct 2019

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 20203, 4

31,48814,36017,5009,049
3,000
20,3151,500
2,500
17,851
2,000
5,000
4,078
9,250

-

-

-

31,48814,36017,5009,049
3,000
20,3151,500
2,500
17,851
2,000
5,000
4,078
9,250

Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Deferred share rights
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Capital notes 1
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares

73,958189,258
438,874
54,732
3,071
92,06942,631
1,350
14,546
9,675
23,141
97847,10258,9625,614
802
60,864
26,434760
40,99984,494
2,925
108,618
20,388774
41,662-30,012
168,066
19,80740,81619,147
19,727
11,224
23,12821,12843,537
11,88424,48921,78844,897
16,50634,013
16,247

1,793(1,793)-(24,093)
27,563(150,482)
2,420(9,745)(31,495)(255)(5,445)
1,216
2,882(4,738)(13,543)429(7,920)(16,851)
2,319(9,745)
1,162-

79,877
216,821456,458
74,5395,491
123,140
30,283
1,095
34,273
4,230
34,365
2,194
70,23080,09010,289802
97,87024,775
1,189
57,56889,431
5,244
143,770
36,894
1,936
75,675
16,247

Employee share offer

102

32

-

-

134

-

-

11,662

12,04822,12912,38569,393
189,704

34,993
72,108(11,662)-386(3,649)(23,017)
1,126(55,428)

Type of equity

Current Non-Executive Directors
D GonskiI AtlasP Dwyer
J Halton
J Key
G Liebelt

J Macfarlane

P O’Sullivan5

Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Capital notes 1
Capital notes 2
Ordinary shares
Capital notes 2
Capital notes 3
Ordinary shares
Capital notes 2

CEO and Current Disclosed Executives
S Elliott

M Carnegie

K Corbally

G Florian

A George

M HandM Jablko

K van der Merwe

A WatsonOrdinary shares

M Whelan

Deferred share rights
Performance rights
Deferred shares
Ordinary shares
Performance rights

10,467
8,736
81,3691,126
206,384

1. Details of options/rights granted as remuneration during 2020 are provided in the previous table. 2. Shares resulting from any other changes during the year include the net result of any
shares purchased (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 2020: D Gonski – 31,488, I Atlas – 14,360, P Dwyer – 17,500, J Halton – 0,
J Key – 3,000, G Liebelt – 8,158, J Macfarlane – 24,851, P O’Sullivan – 0, S Elliott – 291,099, M Carnegie – 74,539, K Corbally – 30,283, G Florian – 34,365, A George – 83,570, M Hand – 24,775, M
Jablko – 89,431, K van der Merwe – 36,894, A Watson – 16,381 and M Whelan – 81,369. 4. 34,733 rights were vested and exercisable, and zero options/rights were vested and unexerciseable asat 30 September 2020. There was no change in the balance as at the Directors’ Report sign-off date. 5. Commencing balance is based on holdings as at the date of commencement as a KMP.

ANZ 2020 Annual Report107Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

9.3 LOANS
9.3.1 Overview

When 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 provisions raised in respect of these balances.
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.
Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2020 (including those with balancesless than $100,000) was $31,807,543 (2019: $29,359,432) with interest paid of $888,019 (2019: $731,353) during the period.
9.3.2 NED, CEO and Disclosed Executives loan transactions
LOAN TRANSACTIONS – NED, CEO AND DISCLOSED EXECUTIVES
Opening balance at
1 October 2019$

Name

Closing balance at Interest paid and payable Highest balance in thein the reporting period1
30 September 2020
reporting period$$$

Current Non-Executive Directors

I Atlas-1,608,028

8,021

2,308,028

J Key

-

-

23,2064,000,000

J Macfarlane

13,330,653

13,280,942

370,053

15,470,727

P O'Sullivan

1,005,057

888,916

2,348

1,022,409

2,926,267

2,782,319

68,3582,938,399

2,362,366

2,306,807

62,602

2,389,584

A George

1,612,899

1,535,414

51,5381,618,459

M Hand4,437,179

4,226,595

149,695

4,444,867

K van der Merwe

1,982,996

3,584,607

101,228

3,818,341

M Whelan

1,653,414

1,575,953

50,263

1,696,126

29,310,831

31,789,581

887,31239,706,940

2

CEO and Current Disclosed Executives

S Elliott
G Florian
3

4

Total

1. 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. 2. Opening balance is at
the date of commencement as KMP. 3. Opening balance has been restated to include a credit card balance. 4. Opening balance has been adjusted to take account of a minor timing variance.

9.4 OTHER TRANSACTIONSOther 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 October 20191$

Closing balance at
30 September 20202, 3$

48,951,515

48,364,383

1. Opening balance is at 1 October 2019 or the date of commencement as KMP if part way through the year. 2. Closing balance is at 30 September 2020 or at the date of cessation as KMP if
part way through the year. 3. Interest paid on deposits for 2020 was $498,931 (2019: $682,040).

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.

108

Directors’ report
The Directors’ Report for the financial year ended 30 September
2020 has been prepared in accordance with the requirements of
the Corporations Act 2001. The information below forms part ofthis Directors’ Report:• Principal activities on page 10

Pillar 3 information
ANZ provides information required by APS 330: Public Disclosure in
the Regulatory Disclosures section at anz.com/shareholder/centre/
reporting/regulatory-disclosure/.

• Operating and financial review on pages 54 to 71

Non-audit services• Dividends on page 70

The Group’s Stakeholder Engagement Model for Relationship with
the External Auditor (the Policy), which incorporates requirementsof the Corporations Act 2001 and industry best practice, prevents theexternal auditor from providing services that are perceived to be inconflict with the role of the external auditor or breach independence
requirements. This includes consulting advice and sub-contractingof operational activities normally undertaken by management, andengagements where the external auditor may ultimately berequired to express an opinion on its own work.

• Information on the Directors, Company Secretaries andDirectors’ meetings on pages 38 to 48• Remuneration report on pages 74 to 108

Significant changes in state of affairs
There have been no significant changes in the Group’s state of affairs.

Events since the end of the financial year

Specifically the Policy:

There have been no significant events from 30 September 2020
to the date of signing this report.

• limits the scope of non-audit services that may be provided;• requires that audit, audit-related and permitted non-audit services
be considered in light of independence requirements and forany potential conflicts of interest before they are approved 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 the external auditor can commence
any engagement for the Group.

Political donations
Our policy is that we will make an annual donation to the two major
federal parties to support the democratic process in Australia. In the2020 calendar year, we donated $100,000 to the Liberal Party ofAustralia and $100,000 to the Australian Labor Party.

Environmental regulation
ANZ recognises the expectations of its stakeholders – customers,
shareholders, staff and the community – to operate in a way thatmitigates its environmental impact.
In Australia, ANZ meets the requirements of the National
Greenhouse and Energy Reporting Act 2007 (Cth), which imposes
reporting obligations where energy production, usage or
greenhouse gas emissions trigger specified thresholds.
The Group does not believe that its operations are subject to any otherparticular and significant environmental regulation under a law of
the Commonwealth of Australia or of an Australian State or Territory.
It may become subject to environmental regulation as a result of its
lending activities in the ordinary course of business and has developed
policies to identify and manage such environmental matters.

Further details about the Policy can be found in the Corporate
Governance Statement.
The external auditor has confirmed to the Audit Committee that it has:
• implemented procedures to ensure it complies withindependence rules in applicable jurisdictions; and• complied with applicable policies and regulations in thosejurisdictions regarding the provision of non-audit services,and the Policy.
The Audit Committee has reviewed the non-audit services provided
by the external auditor during the 2020 financial year, and has
confirmed that the provision of these services is consistent with

Having made due enquiry, and to the best of ANZ’s knowledge,
no entity of the Group has incurred any material environmental
liability during the year.

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.

Further details of ANZ’s environmental performance, including
progress against its targets and details of its emissions profile, areavailable on anz.com.au/about-us/sustainability-framework/
environmental-sustainability/.

The categories of non-audit services supplied to the Group during
the year ended 30 September 2020 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

Corporate Governance Statement
ANZ is committed to maintaining a high standard in its governanceframework. ANZ confirms it has followed the ASX Corporate GovernanceCouncil’s Corporate Governance Principles and Recommendations (3rdedition) during the 2020 financial year. ANZ’s Corporate GovernanceStatement, together with the ASX Appendix 4G which relates to
the Corporate Governance Statement, can be viewed at anz.com/
corporategovernance and has been lodged with the ASX.

Non-audit services

2020

2019

Training related services

16

106

Methodology and procedural reviews

107

10

Total

123

116

ANZ 2020 Annual Report109Overview

How wecreate value

Performanceoverview

Directors’
reportRemuneration
reportFinancialreportShareholder
information

Further details on the compensation paid to KPMG is provided
in Note 34 Auditor Fees to the financial statements including detailsof audit-related services provided during the year of $5.37 million(2019: $5.71 million).

Note 31 Employee Share and Option Plans to the 2020 Financial
Report contains details of the 2020 financial year and as at the dateof this report:

For the reasons set out above, the Directors are satisfied that theprovision of non-audit services by the external auditor during theyear ended 30 September 2020 is compatible with the generalstandard of independence for external auditors imposed by the
Corporations Act 2001 and did not compromise the auditor
independence requirements of the Corporations Act 2001.

• Shares issued as a result of the exercise of options/rights
granted to employees; andDirectors’ and officers’ indemnity
The Company’s Constitution (Rule 11.1) permits the Company to:• indemnify any officer or employee of the Company, or its auditor,
against liabilities (so far as may be permitted under applicable law)
incurred as such by an officer, employee or auditor, including
liabilities incurred as a result of appointment or nomination by
the Company as a trustee or as an officer or employee of anothercorporation; and• make payments in respect of legal costs incurred by an officer,
employee or auditor in defending an action for a liability incurredas such by an officer, employee or auditor, or in resisting or
responding to actions taken by a government agency, a duly
constituted Royal Commission or other official inquiry, a liquidator,
administrator, trustee in bankruptcy or other authorised official.

• Options/rights issued over shares granted to employees;• Other details about share options/rights issued, including any
rights to participate in any share issues of the Company.
The names of all persons who currently hold options/rights are enteredin the register kept by the Company pursuant to section 170 of the
Corporations Act 2001. This register may be inspected free of charge.

Rounding of amounts
The Company 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 and this Directors’ Report have been rounded
to the nearest million dollars unless specifically stated otherwise.
This report is made in accordance with a resolution of the Boardof Directors and is signed for and on behalf of the Directors.

It is the Company’s policy that its employees should be protectedfrom any liability they incur as a result of acting in the course of theiremployment, subject to appropriate conditions.
Under the policy, the Company will indemnify employees and former
employees against any liability they incur to any third party as a resultof acting in the course of their employment with the Company or asubsidiary of the Company and this extends to liability incurred as aresult of their appointment/nomination by or at the request of theGroup as an officer or employee of another corporation or body oras trustee.
The indemnity is subject to applicable law and certain exceptions.
In accordance with the employee indemnity policy, the Company has
during or since the year ended 30 September 2020 paid legal expenses
totalling $1,233,965.13 incurred by Mr Richard Moscati in relation to legal
proceedings brought against him and the Company by a third party.
The Company has entered into Indemnity Deeds with each of its
Directors, with certain secretaries and former Directors of the Company,
and with certain employees and other individuals who act as directors
or officers of related bodies corporate or of another company, toindemnify them against liabilities and legal costs of the kind
mentioned in the Company’s Constitution.
During the financial year, the Company has paid premiums for
insurance for the benefit of the Directors and employees of theCompany and related bodies corporate of the Company. In
accordance with common commercial practice, the insurance
prohibits disclosure of the nature of the liability insured against
and the amount of the premium.

Key management personnel and employee
share and option plans
The Remuneration Report contains details of Non-Executive
Directors, Chief Executive Officer and Disclosed Executives’ equity
holdings and options/rights issued during the 2020 financial year
and as at the date of this report.

110

Paul D O'Sullivan
Chairman
4 November 2020

Shayne C ElliottManaging Director

Lead Auditor’s Independence Declaration
The Lead Auditors Independence Declaration given under Section
307C of the Corporations Act 2001 is set out below and forms part of
the Directors' Report for the year ended 30 September 2020.
To: the Directors of Australia and New Zealand Banking Group Limited
I declare that, to the best of my knowledge and belief, in relation to
the audit of Australia and New Zealand Banking Group Limited forthe financial year ended 30 September 2020, there have been:• 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 code of professional conduct
in relation to the audit.

KPMG

Alison Kitchen
Partner©2020 KPMG, an Australian partnership and a member firm of the KPMG globalorganisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee. All rights reserved. The KPMG nameand 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.

Financial report
CONTENTS

Consolidated Financial Statements
Income Statement
Statement of Comprehensive Income
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity

112
113
114
115
116

Notes to The Consolidated Financial Statements
Non-Financial Liabilities

Basis of Preparation1.

About Our Financial Statements

117

21. Other Provisions

194

EquityFinancial Performance2.

Operating Income

123

22. Shareholders’ Equity

196

3.

Operating Expenses

126

23. Capital Management

198

4.

Income Tax

128

5.

Dividends

130

Consolidation and Presentation

6.

Earnings per Ordinary Share

132

24. Parent Entity Financial Information

200

133

25. Controlled Entities

201

26. Investments in Associates

203

27. Structured Entities

205

7.

Segment Reporting

Financial Assets

8.

Cash and Cash Equivalents

137

28. Transfers of Financial Assets

208

9.

Trading Securities

138

29. Discontinued Operations and Assets
and Liabilities Held For Sale209

10. Derivative Financial Instruments

139

11. Investment Securities

147

12. Net Loans and Advances

149

Employee and Related Party Transactions

13. Allowance for Expected Credit losses

150

30. Superannuation and Post Employment
Benefits Obligations

212

Financial Liabilities

31. Employee Share and Option Plans

214

14. Deposits and Other Borrowings

160

32. Related Party Disclosures219

15. Debt Issuances

161

Financial Instrument Disclosures

Other Disclosures

166

33. Commitments, Contingent Liabilities
and Contingent Assets

220

17. Fair Value of Financial Assets and Financial Liabilities

182

34. Auditor Fees

223

18.	Assets Charged as Security for Liabilities
and Collateral Accepted as Security for Assets

35. Events Since the End of the Financial Year

224

187

19. Offsetting

188

Directors’ Declaration

225

Independent Auditor’s Report

226

16. Financial Risk Management

Non-Financial Assets

20. Goodwill and Other Intangible Assets

189

ANZ 2020 Annual Report111Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

FINANCIAL REPORTINCOME STATEMENT
2020
$m

2019
$m

Interest income1

24,426

31,077

Interest expense(10,377)(16,738)

For the year ended 30 September

Note

Net interest income

2

14,04914,339Other operating income

2

3,355

4,058

Net income from insurance business

2

78

126

Share of associates’ profit

2

155

262

17,637

18,785

3(9,383)(9,071)

8,254

9,714

13

(2,738)

(794)

5,516

8,920

(1,840)(2,609)

3,676

6,311

(98)

(343)

3,578

5,968

3,577

5,953

1

15

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

4

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

29

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

6

126.4

210.0

Diluted

6

118.0

201.9

Earnings per ordinary share (cents) from continuing operations
Basic

6

129.8

222.1

Diluted

6

121.1

213.0

Dividend per ordinary share (cents)

5

60

160

1.

Includes interest income calculated using the effective interest method of $23,837 million on financial assets measured at amortised cost or fair value through other comprehensive income (2019: $30,224
million).

The notes appearing on pages 117 to 225 form an integral part of these financial statements.

112

112

FINANCIAL REPORTSTATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September

2020
$m

2019
$m

Profit for the year from continuing operations

3,676

6,311

(157)

45

13

67

Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCIOther reserve movements
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve1

(550)

697

Other reserve movements

712

909

Income tax attributable to the above items

(180)

(288)

51

26

Other comprehensive income after tax from continuing operations

(111)

1,456

Profit/(Loss) after tax from discontinued operations

(98)

(343)

-

(97)

3,467

7,327

3,467

7,307

-

20

Share of associates’ other comprehensive income2

Other comprehensive income/(loss) after tax from discontinued operations
Total comprehensive income for the year
Comprising total comprehensive income attributable to:Shareholders of the Company
Non-controlling interests
1.
2.

Includes foreign currency translation differences attributable to non-controlling interests of a $1 million loss (2019: $5 million gain).
Share of associates’ Other comprehensive income includes a FVOCI reserve gain of $48 million (2019: $20 million gain), defined benefits gain of $3 million (2019: $7 million gain), cash flow hedge reserve
loss of $1 million (2019: $2 million loss) and a foreign currency translation reserve gain of $1 million (2019: $1 million gain) that may be reclassified subsequently to profit or loss.

The notes appearing on pages 117 to 225 form an integral part of these financial statements.

ANZ 2020 Annual Report

113

113

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

FINANCIAL REPORT (continued)
BALANCE SHEETAs at 30 September

Note

2020
$m

2019
$m

8

107,923

81,621

7,541

3,739

AssetsCash and cash equivalents
Settlement balances owed to ANZ

14,30815,006

Trading securities

950,913

43,169Derivative financial instruments

10

135,331

120,667

Collateral paid

Investment securities

11

93,391

83,709Net loans and advances

12

617,093615,258801

879

Regulatory deposits
Assets held for sale

29

-

1,831

Investments in associates

26

2,164

2,957

Current tax assets

161

265

Deferred tax assets1

2,124

1,356

4,379

4,861

Premises and equipment

3,013

1,924

Other assets

3,144

3,895

Total assets

1,042,286

981,137

Settlement balances owed by ANZ

22,241

10,867

Collateral received

9,304

7,929

Goodwill and other intangible assets

20

1Liabilities

Deposits and other borrowings

14682,333

637,677

Derivative financial instruments

10

134,711

120,951

349

260

Current tax liabilities
Deferred tax liabilities
Liabilities held for sale

29

Payables and other liabilities1

80

67

-

2,121

9,128

7,968

596

589

Other provisions

21

2,579

2,223

Debt issuances

15

119,668

129,691

Total liabilities

980,989

920,343

Net assets

61,29760,794

Employee entitlements

Shareholders' equity
Ordinary share capital

22

26,531

26,490Reserves

22

1,501

1,629

22

33,25532,664

Share capital and reserves attributable to shareholders of the Company

22

61,28760,783

Non-controlling interests

22

10

11

Total shareholders' equity

22

61,29760,794Retained earnings

1

1.

On adoption of AASB 16 on 1 October 2019, the Group recognised right-of-use assets of $1.6 billion presented within Premises and equipment and lease liabilities of $1.7 billion presented within Payables
and other liabilities. This resulted in a reduction to opening retained earnings of $88 million and an increase in deferred tax assets of $37 million. Comparative information has not been restated. Refer toNote 1 for further details.

The notes appearing on pages 117 to 225 form an integral part of these financial statements.

114

114

FINANCIAL REPORTCASH FLOW STATEMENTThe Consolidated Cash Flow Statement includes discontinued operations. Please refer to Note 29 for cash flows associated with discontinued
operations and cash and cash equivalents reclassified as held for sale.
2020
For the year ended 30 September
Profit after income tax
Adjustments to reconcile to net cash provided by/(used in) operating activities:
Allowance for expected credit losses
Impairment of investment in associates
Depreciation and amortisation1, 2
Goodwill impairment(Profit)/loss on sale of premises and equipment
Net derivatives/foreign exchange adjustment(Gain)/loss on sale from divestments
Other non-cash movements
Net (increase)/decrease in operating assets:
Collateral paid
Trading securities
Net loans and advances
Investments backing policy liabilities
Other assets
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 activities3
Cash flows from investing activities
Investment securities assets:
Purchases
Proceeds from sale or maturity
Proceeds from divestments, net of cash disposed
Proceeds from/(Repayment of) IOOF secured notes
Other assets
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Debt issuances:4
Issue proceeds
Redemptions
Dividends paid5
On market purchase of treasury shares
Repayment of lease liabilities6
Share buyback
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 year7

$m

2019

$m

3,578

5,968

2,738
815
1,391
77
(8)
(3,046)
25
(80)

794
871
(5)
4,940
(137)
(356)

283
(1,803)(7,119)(76)(3,493)(7,941)(10,268)(3,542)(454)

51,875
11,476
1,739(9,581)
48,70652,284

7,006(1,077)
1,004
2,140(10,518)(4,550)(40,029)
28,642
1,309
(800)
(587)
(11,465)(23,847)
21,228
2,121
800
(508)
(206)

12,260(21,430)(2,861)(122)(281)(12,434)
28,385
81,621(2,083)
107,923

25,900(22,958)(4,471)(112)(1,120)(2,761)(7,517)84,964
4,174
81,621

1.

Includes depreciation of right-of-use assets recognised on 1 October 2019 following the adoption of AASB 16. Comparatives have not been restated.
Includes accelerated amortisation of $197 million following the Group’s change in the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing
technology and business requirements. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
3.
Net cash inflows/(outflows) from operating activities includes income taxes paid of $2,348 million (2019: $3,129 million).
4.
Non-cash changes in debt issuances includes fair value hedging loss of $1,127 million (2019: $2,437 million loss) and foreign exchange gains of $1,623 million (2019: $3,815 million loss).
5.
Cash outflow for shares purchased to satisfy the dividend reinvestment plan are classified in Dividends paid.
6.
Relates to repayments of lease liabilities which the Group commenced recognising on 1 October 2019 following the adoption of AASB 16. Comparative information has not been restated.
7.
Includes cash and cash equivalents recognised on the face of balance sheet of $107,923 million (2019: $81,621 million) with no amounts recorded as part of assets held for sale. (2019: nil).
2.

The notes appearing on pages 117 to 225 form an integral part of these financial statements.

ANZ 2020 Annual Report

115

115

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

FINANCIAL REPORT (continued)
STATEMENT OF CHANGES IN EQUITY

Reserves$m

Retainedearnings$m

Share capitaland reserves
attributable toshareholdersof the Company$m27,205323

31,73759,265140

59,405

Impact on transition to AASB 9

-

14

(624)

(610)

-

(610)

Profit or loss from continuing operations

-

-

6,296

6,296

15

6,311

Profit or loss from discontinued operations

-

-

(343)

(343)

-

(343)

Other comprehensive income for the year fromcontinuing operations

-

1,393

58

1,451

5

1,456

Other comprehensive income for the year fromdiscontinued operations

-

(97)

-

(97)

-

(97)

-

1,296

6,011

7,307

20

7,327

-

-

(4,481)(4,481)(2)(4,483)

-

-

12

12

-

12

(1,120)--(1,120)-(1,120)

405

-

-

405

-

405

As at 1 October 2018

Ordinaryshare capital$m

Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
Dividend income on treasury shares held within
the Group’s life insurance statutory funds
Group share buy-back2
Other equity movements:
Treasury shares Wealth Australia
discontinued operations adjustment3
Other items

NonTotal
controlling shareholders’interests
equity
$m
$m

-

(4)

9

5

(147)

(142)

26,4901,629

32,66460,783

11

60,794

Impact on transition to AASB 16

-

-

(88)

(88)

-

(88)

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

-

-

3,675
(98)

3,675
(98)

1
-

3,676
(98)

Other comprehensive income for the year fromcontinuing operations

-

(124)

14

(110)

(1)

(111)

-

(124)

3,591

3,467

-

3,467

-

-

(2,922)(2,922)-(2,922)

Dividend Reinvestment Plan

61

-

-

61

-

61

Other equity movements:
Group employee share acquisition scheme
Other items

(20)

-

-

(20)

-

(20)

-

(4)

10

6

(1)

5

26,531

1,501

33,25561,287

10

61,297As at 30 September 2019

Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid1

As at 30 September 2020
1

3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final Dividend; nil shares for the 2019 interim dividend as the shares werepurchased on-market and provided directly to shareholders participating in the DRP). On-market share purchases for the DRP in 2020 were $185 million (2019: $432 million).

2

The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in 2019 resulting in 42.0 million shares being cancelled.

3

The successor funds transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result, the Group no longer eliminates the ANZ sharespreviously held in Wealth Australia discontinued operations (treasury shares).

The notes appearing on pages 117 to 225 form an integral part of these financial statements.

116

116

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes
to the consolidated financial statements
1. ABOUT OUR FINANCIAL STATEMENTS
These are the financial statements for Australia and New Zealand Banking Group Limited (the Company) and its controlled entities (together, ‘theGroup’ or ‘ANZ’) for the year ended 30 September 2020. The Company is incorporated and domiciled in Australia. The address of the Company’s
registered office and its principal place of business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking
and financial services to individuals and business customers and operates in and across 33 markets.
On 4 November 2020, 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 and relevant 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).

BASIS OF MEASUREMENT
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 exposure; financial instruments held for trading; financial assets and financial liabilities designated at fair value through profit or loss; financial assets at fair value through other comprehensive income; and assets and liabilities classified as held for sale (except those at their carrying value as per Note 29).
In accordance with AASB 1038 Life Insurance Contracts (AASB 1038) we have measured life insurance liabilities using the Margin on Services (MoS)
model. In accordance with AASB 119 Employee Benefits (AASB 119) we have measured defined benefit obligations using the Projected Unit
Credit Method.

DISCONTINUED OPERATIONS
The aligned dealer groups business sold to IOOF Holdings Limited (IOOF) completed on 1 October 2018; the life insurance business sold to Zurich
Financial Services Australia Limited completed on 31 May 2019; and the Wealth Australia pensions and investments business sold to IOOF wascompleted on 31 January 2020. As a result of these sale transactions, the associated Group reclassification and consolidation impacts are treated as
discontinued operations from a financial reporting perspective.

ANZ 2020 Annual Report117Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
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 Group 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 at fair value through profit or loss and report them as part of the fair value gain or loss onthese items. For non-monetary items classified as investment securities measured at fair value through other comprehensive income translationdifferences 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 if for a significant transaction 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 as part of the gain orloss on sale.

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.

118

118

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

1. ABOUT OUR FINANCIAL STATEMENTS (continued)
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimatesand assumptions about past and future events. Further information on the key judgements and estimates that we consider material to
the financial statements are contained within each relevant note to the financial statements.
Coronavirus (COVID-19) pandemic
The COVID-19 pandemic and its effect on the global economy have impacted our customers, operations and Group performance. The
outbreak necessitated governments to respond at unprecedented levels to protect the health of the population, local economies andlivelihoods. It has affected different regions at different times and at varying degrees and there remains a risk of subsequent waves ofinfection. Thus the pandemic has significantly increased the estimation uncertainty in the preparation of these financial statements
including:•the extent and duration of the disruption to business arising from the actions of governments, businesses and consumers tocontain the spread of the virus;•

the extent and duration of the expected economic downturn, and subsequent recovery. This includes the impacts on capital
markets and liquidity, credit quality, increasing unemployment, declines in consumer spending, reductions in production, andother restructuring activities; and•the effectiveness of government and central bank measures to support businesses and consumers through this disruption andeconomic downturn.

The Group has made various accounting estimates in these financial statements based on forecasts of economic conditions whichreflect expectations and assumptions as at 30 September 2020 about future events that the Directors believe are reasonable in thecircumstances. There is a considerable degree of judgement involved in preparing these estimates. The underlying assumptions arealso subject to uncertainties which are often outside the control of the Group. Accordingly, actual economic conditions are likely to bedifferent from those forecast since anticipated events frequently do not occur as expected, and the effect of those differences may
significantly impact accounting estimates included in these financial statements.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expectedcredit losses, fair value measurement, and the assessment of the recoverable amount of non-financial assets.
The impact of the COVID-19 pandemic on each of these estimates is discussed further in the relevant note of these financial
statements. Readers should carefully consider these disclosures in light of the inherent uncertainty described above.

ACCOUNTING STANDARDS ADOPTED IN THE PERIODAASB 16 Leases (AASB 16)
AASB 16 became effective for the Group from 1 October 2019 and replaced the previous standard AASB 117 Leases (AASB 117). AASB 16 primarily
impacts the Group’s property and technology leases which were previously classified as operating leases. Under AASB 117, operating leases were notrecognised on balance sheet and rent payments were expensed over the lease term.
Under AASB 16, the Group recognises all leases (except for leases of low value assets and short term leases) on balance sheet under a single
accounting model. Accordingly, the Group recognises its right to use an underlying leased asset over the lease term as a right-of-use (ROU) asset, andits obligation to make lease payments as a lease liability. In the income statement, the Group recognises depreciation expense on the ROU asset andinterest expense on the lease liability. As a result, lease expenses will be higher in the early periods of a lease and lower in the later periods of the lease
compared to the previous standard where expenses were constant over the lease term. Cumulative expenses over the life of a lease will not change.
As permitted by the standard, the Group does not recognise ROU assets and lease liabilities for leases of low value items and short term leases (lessthan 12 months). Instead, the lease payments associated with these leases are recognised as an operating expense in the income statement on astraight-line basis over the lease term.
The Group has applied the modified retrospective transition approach whereby initial lease liabilities are recognised based on the present value ofremaining lease payments as of the transition date. The initial ROU asset recognised for certain large commercial and retail leases was measured as if
AASB 16 had always been applied to the leases. For all other leases, the initial ROU asset was measured as equal to the initial lease liability.
The implementation of AASB 16 requires management to make certain key judgements including the determination of lease terms, discount rates
and identifying arrangements that contain a lease. Extension options are included in the lease term if the Group is reasonably certain the option will
be exercised. This assessment includes consideration of facts and circumstances that create an economic incentive for the Group to exercise theoption.
Based on the modified retrospective transition approach, the Group recognised lease liabilities of $1.7 billion presented within Payables and otherliabilities and ROU assets of $1.6 billion presented within Premises and equipment. This resulted in a reduction to opening retained earnings of $88
million and an increase in deferred tax assets of $37 million as of 1 October 2019. Comparatives have not been restated.

ANZ 2020 Annual Report

119

119

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
In addition, the Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:a) Impairment of ROU assets at the transition date was assessed by relying on onerous lease provisions previously recognised as of 30 September
2019 under AASB 117;b) Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised attransition;c) No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases weretreated as short-term leases with all lease payments recognised in rent expense as incurred; andd) Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
The following table reconciles the operating lease commitments disclosed under AASB 117 as at 30 September 2019 to the opening lease liabilities
recognised under AASB 16 as at 1 October 2019.
$m
1,656
Operating Lease Commitments as at 30 September 2019
Increase in lease term for extension options
210
Exclusion of low value leases and leases of less than 12 months(19)
Exclusion of service components
(10)
Other
(17)
Total Undiscounted Lease Payments
1,820
Effect of discounting at a weighted average incremental borrowing rate of 2.44%(141)
Total lease liabilities under AASB 16 as at 1 October 2019

1,679

During the reporting period, the Group recognised the following amounts in the income statement
Depreciation expense on ROU assets
Interest expense on lease liabilities
Interest expense on makegood provisions
Rent expense in relation to low value leases and leases of less than 12 months
Other income in relation to subleases

$m
394
37
2
35
21

The Group's accounting policies with respect to lease arrangements where it acts as lessor have not changed under AASB 16 except where the Group
subleases certain leased properties. Where the Group acts as intermediate lessor, it classifies the sublease as either a finance lease or operating leaseby reference to the ROU asset of the head lease. Income from operating subleases is recognised in Other operating income in the Income Statement.

120

120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
Interest Rate Benchmark Reform
Background
Interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), play a critical role in global financial markets, serving as reference
rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments.
Uncertainty surrounding the integrity of IBOR rates has in recent years, led regulators, central banks and market participants to work towards atransition to alternative risk-free benchmark reference rates (RFRs) and market-led working groups in respective jurisdictions have recommended
alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant
uncertainty in the future of IBOR benchmarks beyond 1 January 2022.
Accounting amendments
In response to the uncertainty about the long-term viability of these benchmark rates, and LIBOR in particular, the International Accounting Standards
Board (IASB) has established a project to consider the financial reporting implications of the reform. The transition from IBORs is expected to have an
impact on various elements of financial instrument accounting, including hedge accounting, as well as fair value methodologies and disclosures.
In October 2019, the AASB issued AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform, which amends certain
existing hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the interest rate benchmark reform. The
Group elected to early adopt the amendments from 1 October 2019 which have not had a significant impact on the Group. These amendments
address the accounting effects of uncertainty in the period leading up to the reform arising from the Group’s ability to satisfy the existing prospective
hedge effectiveness requirements of AASB 139. This uncertainty arises as it is not known when the hedged items (such as debt issuances) andassociated hedging instruments (such as interest rate swaps) will be changed to reference the RFRs, or if both the hedging item and the associatedhedging instrument will move to the new rates at the same time. The Group has applied this amendment to all hedge accounted relationships (cashflow or fair value hedges) where the reform gives rise to uncertainties about the timing or amount of IBOR based cash flows of the hedged item or
hedging instrument.
In September 2020, the AASB issued AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 which ismandatory for the Group for the 2022 financial year. This standard addresses issues that may affect the Group at the point of transition from anexisting IBOR rate to a RFR, including the effects of changes to contractual cash flows or hedging relationships. The standard includes amendments in
respect of:

Modification of a financial asset or a financial liability measured at amortised cost
IBOR reform is expected to result in a change to the basis for determining contractual cash flows of impacted assets and liabilities of the Group.
The amendments provide a practical expedient to account for a change in the basis for determining the contractual cash flows as a result of
IBOR reform by updating the effective interest rate. As a result, no immediate gain or loss is recognised. This applies only when the change isnecessary as a direct consequence of the reform, and the new basis for determining the contractual cash flows is economically equivalent to theprevious basis.

Additional relief for hedging relationships
The Standard also amends a number of existing hedge accounting requirements that will assist the Group to maintain its existing hedge
accounted relationships post IBOR transition. The Group will continue to record any ongoing hedge ineffectiveness, including that generated bychanges as a result of interest rate reform, within the Income Statement.

The Group is in the process of assessing the impact of the new standard on its financial statements.
Impact of IBOR reform
The Group has exposure to IBOR through its issuance of debt, the structural interest rate risk position, holdings of investment securities, products
denominated in foreign currencies and associated hedging activities in our treasury and markets businesses within the TSO and Group Centre andInstitutional divisions respectively.
The Group has established an enterprise-wide Benchmark Transition Program to manage the transition. The program includes the assessment andactions necessary to accommodate the transition to RFRs as they apply to internal processes and systems including pricing, risk management,
documentation and hedge arrangements. The program includes management of the impact on customers.
Impact of IBOR reform on the Group’s hedging relationships
Certain IBOR rates are subject to replacement by RFRs. The Group has hedge accounted relationships referencing IBORs, with the most significant
interest rate benchmarks to which the Group's hedging relationships are exposed to are USD LIBOR, Euro Interbank Offered Rate (EURIBOR), Bank Bill
Swap Rate (BBSW) and Bank Bill Market (BKBM).
Of these benchmarks the Group expects BBSW, BKBM and EURIBOR to exist as benchmark rates for the foreseeable future and therefore does notbelieve its BBSW, BKBM or EURIBOR benchmark fair value or cash flow hedges will be directly impacted by IBOR reform.

ANZ 2020 Annual Report

121

121

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. About Our Financial Statements (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
Interest Rate Benchmark Reform (continued)
The table below details the carrying values of the Group's exposures designated in hedge accounting relationships that will be impacted by IBOR
reform, principally USD LIBOR. The nominal value of the associated hedging instruments is also included:

As at 30 September 2020
USD LIBOR exposures$m
15,002Hedged items
Investment securities at FVOCINet loans and advances

111

Debt issuances

32,235

Fair value hedges

Notional designated up to
31 December 2021$m
12,778

Notional designatedbeyond 31 December 2021$m
32,250Total Notional Amount$m
45,028Cash flow hedges

-

1,055

1,055

Hedging instruments

As at 30 September 2020 the Group also has GBP LIBOR, CHF LIBOR and JPY LIBOR exposures designated in hedge accounting relationships of $927
million, $975 million and $2,131 million respectively.
In addition to hedge accounted relationships that will be impacted by IBOR reform, the Group has exposures to other financial instruments
referencing an IBOR rate that are also subject to reform. The Group is continuing to monitor market developments in relation to the transition to RFRs
from IBOR rates and their impact on the Group’s financial assets and liabilities to ensure that there are no unexpected consequences or disruption
from the transition.
AASB INTERPRETATION 23 UNCERTAINTY OVER INCOME TAX TREATMENTS (AASB Interpretation 23)
AASB Interpretation 23 became effective for the Group from 1 October 2019. The interpretation clarifies application of recognition and measurement
requirements in AASB 112 Income Taxes where there is uncertainty over income tax treatments. As the Group’s existing policy aligned with therequirements of AASB Interpretation 23, the interpretation had no material impact on the Group.

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 2020, and have not been applied by the Group in preparing these financial statements. Further details of these areset out below.
GENERAL HEDGE ACCOUNTINGAASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
hedging both financial and non-financial risks. AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 hedge
accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Group
continues to apply the hedge accounting requirements of AASB 139.
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 is not expected to have material impact on the Group.
REVISED CONCEPTUAL FRAMEWORKIn June 2019 the AASB issued a revised Conceptual Framework for Financial Reporting. The new Framework includes updated definitions and criteria
for the recognition and derecognition of assets and liabilities. Additionally, it introduces new concepts on measurement, including factors to consider
when selecting a measurement basis. The revised Conceptual Framework will apply to the Group from 1 October 2020 and is not expected to have amaterial impact on the Group.

122

122

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

2. OPERATING INCOME
2020
$m

2019
$m

Net interest income
Interest income by type of financial asset
Investment securities - FVOCI

1,162

1,624

Financial assets at amortised cost

22,67528,600

584

848

5

5

24,426

31,077(9,783)(16,149)

Securities sold short

(95)

(110)

Financial liabilities designated at FV through profit or loss

(93)

(116)

(9,971)(16,375)

Trading securities
Financial assets designated at FV through profit or loss
Interest income
Interest expense by type of financial liability
Financial liabilities at amortised cost

Interest expense
Major bank levy
Net interest income

(406)

(363)

14,04914,339

579

602

2,687

3,059

121

124

Other operating incomei) Fee and commission income
Lending fees1
Non-lending fees
Commissions
Funds management income

275

254

Fee and commission income

3,662

4,039

Fee and commission expense(1,337)(1,462)

Net fee and commission income

2,325

2,577

Net foreign exchange earnings and other financial instruments income2

1,809

1,278

Impairment of AmBank

(595)

-

Impairment of PT Panin

(220)

-

ii) Other income

Sale of UDC(7)-

Sale of OnePath Life (NZ) Ltd (OPL NZ)-

89

Sale of Paymark Limited (Paymark)-37

Sale of ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)-

10Sale of PNG Retail, Commercial & SME-

1Dividend income on equity securities

26

28

Other

17

38

Other income

1,030

1,481

Other operating income

3,355

4,058

Net income from insurance business

78

126

Share of associates' profit

155

262

17,637

18,785

Operating income3
1.

Lending fees exclude fees treated as part of the effective yield calculation in interest income.
2.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk on funding
instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit or loss.
3.
Includes charges for customer remediation of $174 million (2019: $212 million).

ANZ 2020 Annual Report

123

123

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. OPERATING INCOME (continued)

RECOGNITION AND MEASUREMENTNET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense for all financial instruments, including those classified as held for trading, assets measured at fairvalue through other comprehensive income or designated at fair value through profit or loss in net interest income. We use the effective
interest rate method to calculate the amortised cost of assets held at amortised cost and to recognise interest income on financial assets
measured at fair value through other comprehensive income. The effective interest rate is the rate that discounts the stream of estimatedfuture cash receipts or payments over the expected life of the financial instrument or, when appropriate, a shorter period, to the net
carrying amount of the financial asset or liability. For assets subject to prepayment, we determine their expected life on the basis ofhistorical behaviour of the particular asset portfolio - taking into account contractual 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. This is 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 the Company. The Group hasdetermined that the levy represents a finance cost for the Group and $406 million (2019: $363 million) is presented as interest expense in
the Income Statement.
OTHER 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
and commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers adistinct good or service that are recognised separately from the underlying lending product (including annual package fees thatprovide benefits on other ANZ products).
 non-lending fees includes fees associated with deposit and credit card accounts, interchange fees and fees charged for specificcustomer transactions such as international money transfers. 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 therelative stand-alone selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
 commissions represent fees from third parties where ANZ acts as an agent by arranging a third party (e.g. an insurance provider) to
provide goods and services to a customer. In such cases, ANZ is 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, the Group only recognises the net
commission it retains as revenue. When the commission is variable based on factors outside the control of the Group (e.g. a trail
commission), revenue is only recognised if it is highly probable that a significant reversal of the variable amount will not be required infuture periods.
 funds management income represents fees earned from customers for providing financial advice and fees for asset management
services and advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or overthe 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 that we use to manage interest rate and foreignexchange risk on funding instruments not designated as accounting hedges;
 the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;

124

124

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

2. OPERATING INCOME (continued)

RECOGNITION AND MEASUREMENT (continued)
 immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments in 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 fair value through profit or loss or held for trading; amounts released from the fair value through other comprehensive income (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 the significant risks and rewards from the asset transfer to the buyer.
NET 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’ PROFITThe equity method is applied to accounting for associates. Under the equity method, the Group’s share of the after tax results ofassociates is included in the Income Statement and the Statement of Comprehensive Income.

ANZ 2020 Annual Report

125

125

Overview
ANZ 2020
ANNUAL REPORT How we

Performanceoverview

create value

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. OPERATING EXPENSES
2020
$m

20191
$m

Personnel
Salaries and related costs

4,310

4,249

Superannuation costs

329

293

Other

239

223

4,878

4,765

Rent

84

450

Depreciation

517

167

Other

188

178

789

795

Depreciation and amortisation2,3

858

694

Subscription licences and outsourced services

780

672

Other

186

168

1,824

1,534

161

77

Advertising and public relations

177

226

Professional fees

667

537

Freight, stationery, postage and communication

205

216

Personnel

1

Premises

Premises2

Technology

Technology (excluding personnel)

1

Restructuring
Other

Royal Commission legal costs
Other4
Other1
Operating expenses

1

-

15

682

906

1,731

1,900

9,383

9,071

1.

Includes customer remediation expenses of $209 million in 2020 (2019: $373 million).
2.
Following the adoption of AASB 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with leases are shown as depreciation of the right-ofuse asset and interest expense associated with the lease liability (comparatives not restated).
3.
During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
4.
Includes goodwill write-off of $77 million in the September 2020 financial year.

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 are settled.
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.

126

126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

3. OPERATING EXPENSES (continued)

RECOGNITION AND MEASUREMENT
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 share option reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as
share price performance 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 not met, for example an employee fails to satisfy the minimum service period specified in the award on resignation, termination
or notice of dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure tomeet a market-based performance condition.
Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note
31 Employee Share and Option Plans.

ANZ 2020 Annual Report

127

127

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. 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:
2020
$m

2019
$m

Profit before income tax from continuing operations

5,516

8,920

Prima facie income tax expense at 30%

1,655

2,676

Tax effect of permanent differences:2(25)

Impairment of investment in AmBank and PT Panin

245-

Share of associates' profit

(47)

(78)

Gains or losses on sale from divestments

Interest on convertible instruments

52

63

Overseas tax rate differential

(86)

(112)

Provision for foreign tax on dividend repatriation

20

39

Other

25

63

Subtotal

1,866

2,626

Income tax (over)/under provided in previous years

(26)

(17)

Income tax expense

1,840

2,609

Current tax expense

2,637

2,779

Adjustments recognised in the current year in relation to the current tax of prior years

(26)

(17)

Deferred tax expense/(income) relating to the origination and reversal of temporary differences

(771)

(153)

1,840

2,609

Australia

1,115

1,682

Overseas

725

927

33.4%

29.2%

Income tax expense

Effective tax rate

128

128

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

4. 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. The Company 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 of themembers of the tax-consolidated group. The Company (as head entity in the tax-consolidated group) recognises current tax liabilities and assets ofthe 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 theCompany and each member of the tax-consolidated group in relation to the tax contribution amounts paid or payable between the Company andthe other members of the tax-consolidated group.
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 $10 million (2019: $10 million).
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches andsubsidiaries are repatriated) total $329 million (2019: $429 million).

RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE

CURRENT TAX EXPENSE

DEFERRED TAX ASSETS AND LIABILITIESKEY JUDGEMENTS AND ESTIMATES
Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities
based on its understanding of the relevant law in each of the countries in which it operates and seeks independent advice whereappropriate.

ANZ 2020 Annual Report

129

129

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. DIVIDENDS
ORDINARY SHARE DIVIDENDSDividends are provided for in the financial statements once determined, accordingly, the final dividend announced for the current financial year is provided forand paid in the following financial year.
Amountper share

Total dividend$m2018 final dividend paid1,2

80 cents

2,295

2019 interim dividend paid1,2

80 cents

2,267

Dividends% of total

Financial Year 2019

Bonus option plan adjustment(81)

Dividends paid during the year ended 30 September 2019

4,481

Cash

90.4%

Dividend reinvestment plan

9.6%

4,049
432

Dividends paid during the year ended 30 September 2019

4,481

Financial Year 20202019 final dividend paid2,32020 interim dividend paid

1,2

80 cents

2,268

25 cents

709

Bonus option plan adjustment(55)

Dividends paid during the year ended 30 September 2020

2,922

Cash

93.7%

2,737

Dividend reinvestment plan

6.3%

185

Dividends paid during the year ended 30 September 2020

Dividends announced and to be paid after year-end
2020 final dividend (fully franked for Australian tax, New Zealand imputationcredit NZD 4 cents per share)
1.
2.
3.

2,922

Payment dateAmountper share

Total
dividend$m

16 December 2020

35 cents

994

Fully franked for Australian tax purposes (30% tax rate).
Carries New Zealand imputation credits of NZD 3 cents for the 2020 interim dividend, NZD 9 cents for the 2019 final dividend, 2019 interim dividend and 2018 final dividend.
Partially franked at 70% for Australian tax purposes (30% tax rate).

DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
Eligible shareholders can elect to reinvest their dividend entitlement into ANZ ordinary shares under the Company’s Dividend Reinvestment Plan
(DRP). Eligible shareholders can elect to forgo their dividend entitlement and instead receive ANZ ordinary shares under the Company’s Bonus Option
Plan (BOP). For the 2020 final dividend, DRP and BOP participation will be satisfied by an issue of new ANZ ordinary shares. There will be no discountapplied to the DRP and BOP price.
See Note 22 Shareholders’ Equity for details of shares the Company issued or purchased in respect of the DRP and BOP.

DIVIDEND FRANKING ACCOUNT
Currency

2020
$m

2019
$m

Australian franking credits available at 30% tax rate

AUD

477

35

New Zealand imputation credits available (which can be attached to our Australian
dividends but may only be used by New Zealand resident shareholders)

NZD

4,583

4,068

The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
 franking credits that will arise from the payment of income tax payable as at the end of the financial year; and franking credits/debits from the receipt/payment of dividends that have been recognised as tax receivables/payables as at the end of the financialyear.
The proposed final 2020 dividend will utilise $426 million of the franking credits available at 30 September 2020.

130

130

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

5. DIVIDENDS (continued)
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA’s written approval is required before paying dividends on ANZ ordinary shares: 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 if the Group’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 ANZ ordinary shares.
In July 2020, APRA provided an update to their guidance on capital management. In the updated guidance, APRA acknowledged that the uncertainty
in the economic outlook has reduced somewhat since April 2020 and APRA had the opportunity to review ADIs’ financial projections and stresstesting results. Taking these and other developments since April 2020 into account, APRA advised ADIs to maintain caution in planning capital
distributions, including dividend payments and that for the remainder of the calendar year, the ADIs’ Board should: seek to retain at least half of their earnings when making decisions on capital distributions (and utilise dividend reinvestment plans and otherinitiatives to offset the diminution in capital from capital distributions where possible); conduct regular stress testing to inform decision-making and demonstrate ongoing lending capacity; and make use of capital buffers to absorb the impacts of stress, and continue to lend to support households and businesses.
The Company’s 2020 interim dividend of 25 cents per share (paid to shareholders on 30 September 2020) and 2020 final dividend of 35 cents per
share took into account the updated regulatory guidance above.

ANZ 2020 Annual Report

131

131

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share (EPS) - Basic
Earnings Per Share

2020
cents

2019
cents

126.4

210.0

Earnings Per Share from continuing operations

129.8

222.1

Earnings Per Share from discontinued operations(3.4)(12.1)

Earnings per ordinary share (EPS) - Diluted

2020
cents

2019
cents

1

Earnings Per Share

118.0

201.9

Earnings Per Share from continuing operations1

121.1

213.0

Earnings Per Share from discontinued operations(3.1)(11.1)

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period (after eliminating ANZ shares held within the Group known as treasury shares). Diluted EPS is calculated by adjusting
the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares used in the basic EPS calculation for theeffect of dilutive potential ordinary shares.
Reconciliation of earnings used in earnings per share calculations

2020
$m

2019
$m

3,578

5,968

1

15

Basic:
Profit for the year
Less: Profit attributable to non-controlling interests
Earnings used in calculating basic earnings per share

3,577

5,953

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

(98)

(343)

Earnings used in calculating basic earnings per share from continuing operations

3,675

6,296

3,577

5,953

201

268

3,778

6,221

Diluted:Earnings used in calculating basic earnings per share
Add: Interest on convertible subordinated debt
Earnings used in calculating diluted earnings per share
Less: Profit/(Loss) after tax from discontinued operations

(98)

(343)

Earnings used in calculating diluted earnings per share from continuing operations

3,876

6,564

2020
millions

2019
millions

2,830.9

2,834.9

362.2

237.9

8.0

8.8

3,201.1

3,081.6

Reconciliation of weighted average number of ordinary shares (WANOS) used in earnings per
share calculations1,2
WANOS used in calculating basic earnings per share
Add: Weighted average dilutive potential ordinary shares
Convertible subordinated debt
Share based payments (options, rights and deferred shares)
WANOS used in calculating diluted earnings per share1.

The successor fund transfer performed in preparation for the sale of the Group’s wealth businesses to Zurich and IOOF was completed on 13 April 2019. Post this date, treasury shares held in Wealth Australia
discontinued operations ceased to be eliminated in the Group’s consolidated financial statements and are included in the denominator used in calculating earnings per share. If the weighted average
number of treasury shares held in Wealth Australia discontinued operations was included in the denominator used in calculating earnings per share from continuing operations in the comparative period,
basic earnings per share from continuing operations for the comparative period would have been 221.4 cents and diluted earnings per share from continuing operations for the comparative period would
have been 212.4 cents.
2.
Weighted average number of ordinary shares excludes the weighted average number of treasury shares held in ANZEST of 5.0 million (2019: 4.7 million) and Wealth Australia discontinued operations of 8.2
million in 2019.

132

132

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

7. SEGMENT REPORTINGDESCRIPTION OF SEGMENTS
The Group’s five continuing 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 structureof the Group.
We measure the performance of these segments on a cash profit basis. To calculate cash profit, we remove certain non-core items from statutory
profit. Details of these items are included in the “Other Items” section of this note. Transactions between business units across segments within ANZ
are conducted on an arm’s-length basis and disclosed as part of the income and expenses of these segments.
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 and Commercial
The Australia Retail and Commercial division comprises: Retail provides products and services to consumer customers in Australia via the branch network, mortgage specialists, contact centres, a variety
of self-service channels (internet banking, phone banking, ATMs, website, ANZ share investing and digital banking) and third party brokers in
addition to financial planning services provided by salaried financial planners.
 Commercial provides a full range of banking products and financial services including asset financing across the following customer segments:
medium to large commercial customers and agribusiness customers across regional Australia, small business owners and high net worth
individuals and family groups.
Institutional
The Institutional division services governments, global institutional and corporate customers across three product sets: Transaction Banking, Corporate
Finance and Markets.
 Transaction Banking provides 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 (previously Loans and Specialised Finance) provides loan products, loan syndication, specialised loan structuring andexecution, project and export finance, debt structuring and acquisition finance and corporate advisory.
 Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to managing
the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises: Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers andcontact centres.
 Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions throughdedicated managers focusing on privately owned medium to large enterprises, the agricultural business segment, government and governmentrelated entities.
Pacific
The Pacific division provides products and services to retail customers, small to medium-sized enterprises, institutional customers and governments
located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticatedfinancial solutions provided to business customers through dedicated managers.
Technology, Services & Operations (TSO) and Group Centre
TSO and Group Centre provide support to the operating divisions, including technology, group operations, shared services, property, risk
management, financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes residual components ofGroup divestments, Group Treasury, Shareholder Functions and minority investments in Asia.
Refer to Note 29 for further details on Discontinued Operations.

OPERATING SEGMENTS
There have been no methodology or structural changes during the year which have impacted the presentation of the Group’s operating segments inthe 2020 financial year. As such, the presentation of the divisional results remains consistent with the prior period.

ANZ 2020 Annual Report

133

133

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS (continued)

Year ended 30 September 2020
Net interest income
Net fee and commission income- Lending fees
- Non-lending fees
- Commissions- Funds management income- Fee and commission expense
Net income from insurance business
Other income
Share of associates’ profit
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment (charge)/release
Profit before income tax
Income tax expense and non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
Includes non-cash items:
Share of associates’ profit
Impairment of associates
Depreciation and amortisation3
Equity-settled share based payment expenses
Credit impairment (charge)/release2

Financial position
Goodwill4
Investments in associates2
1.

Australia
Retail andCommercial Institutional
$m
$m

New
Zealand$m

Pacific$m

TSO andGroup
Centre$m

Otheritems1
$m

Group
Total
$m

7,916

3,182

2,731

109

111

-

14,049

267
1,310
67
30
(588)
77
(1)
(1)
1,161
9,077
(4,091)
4,986(1,647)3,339(1,002)
2,337

288
776
2
(308)
1,891
2,649
5,831
(2,558)
3,273
(694)
2,579
(725)
1,854

14
586
54
243
(436)
12
473
3,204
(1,435)
1,769
(345)
1,424
(407)
1,017

10
29
(5)
50
84
193
(205)
(12)
(52)
(64)
2
(62)

(14)
1
(807)
156
(664)
(553)
(1,094)(1,647)(1,647)259(1,388)

(115)
(115)
(115)
(115)
(115)
32
(83)

579
2,687
121
275
(1,337)
78
1,030
155
3,588
17,637(9,383)8,254(2,738)5,516(1,841)
3,675
(98)
3,577

(1)
(197)
(7)
(1,647)

(188)
(70)
(694)

(103)
(7)
(345)

(11)
(1)
(52)

156
(815)
(892)
(25)
-

-

155
(815)
(1,391)(110)(2,738)Australia
Retail andCommercial Institutional
$m
$m

New
Zealand$m

Pacific$m

TSO andGroup Discontinued
Centreoperations
$m
$m

Group
Total
$m

1,793
-

-

403
17

1,068
4

2,143

-

3,264
2,164

Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
performance of the segment.
2.
During the 2020 financial year, ANZ recognised an $815 million impairment after tax in respect of two of the Group’s equity accounted investments to adjust their carrying values in line with their value-inuse calculations. AMMB Holdings Berhad (AmBank) was impaired by $595 million and PT Bank Pan Indonesia (PT Panin) was impaired by $220 million. Refer to Note 26 Investments in Associates for further
details.
3.
During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year (Australia Retail and Commercial $31 million, Institutional $38 million, New Zealand$2 million, TSO and Group Centre $126 million). Refer to Note 20 Goodwill and Other Intangible Assets for further details.
4.
During the 2020 financial year, the Group wrote off $50 million of goodwill in the Pacific division and wrote off $27 million of goodwill in the New Zealand division winding up the Bonus Bonds business, amanaged investment product in New Zealand. Refer to Note 20 Goodwill and Other Intangible Assets for further details.

134

134

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

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

Australia
Retail andCommercial InstitutionalYear ended 30 September 2019
Net interest income
Net fee and commission income- Lending fees
- Non-lending fees
- Commissions- Funds management income- Fee and commission expense
Net income from insurance business
Other income
Share of associates’ profit
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment (charge)/release
Profit before income tax
Income tax expense and non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
Non-cash items
Share of associates’ profit
Depreciation and amortisation
Equity-settled share based payment expenses
Credit impairment (charge)/release

Financial position
Goodwill
Investments in associates
1.

New
Zealand

Pacific

TSO andGroup
CentreOther
items1

Group
Total

$m
8,092

$m
3,080

$m
2,736

$m
128

$m
303

$m
-

$m
14,339

290
1,499
75
14
(657)
100
27
(1)
1,347
9,439
(4,074)
5,365
(712)
4,653
(1,458)
3,195

282
847
2
(338)
1,399
2,192
5,272
(2,667)
2,605
2
2,607
(779)
1,828

16
691
61
243
(459)
18
6
4
580
3,316
(1,286)
2,030
(87)
1,943
(544)
1,399

14
42
(9)
57
104
232
(150)
82
1
83
(24)
59

(20)
(12)
(5)
1
1
243
259
467
770
(894)
(124)
1
(123)
112
(11)

7
(251)
(244)
(244)
(244)
1
(243)
69
(174)

602
3,059
124
254
(1,462)
126
1,481
262
4,446
18,785(9,071)
9,714
(794)
8,920
(2,624)
6,296
(343)
5,953

(1)
(176)
(13)
(712)

(112)
(69)
2

4
(41)
(4)
(87)

(7)
(1)
1

259
(535)
(33)
1

1

262
(871)
(120)
(794)

Australia
Retail andCommercial Institutional
$m
$m
410
1,070
17
2

New
Zealand$m
1,937-

TSO andGroup Discontinued
Centreoperations
$m
$m
42
2,938
-

Group
Total
$m
3,509
2,957

Pacific$m
50-

Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
performance of the segment.

ANZ 2020 Annual Report

135

135

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
OTHER ITEMSThe table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.
Profit after tax
Item

Related segment

Revaluation of policy liabilities

New Zealand

Economic hedges

Institutional, New Zealand, TSO and Group Centre

2020
$m

2019
$m

-

(77)

(121)

(118)

Revenue and expense hedges

TSO and Group Centre

36

19

Structured credit intermediation trades

Institutional

2

2

(83)

(174)

Total from continuing operations

SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are interest income and other operating income. The Australia Retail and Commercial,
New Zealand, and Pacific divisions derive income from products and services from retail and commercial banking. The Institutional division derives its
income from institutional products and market services. No single customer amounts to greater than 10% of the Group’s income.

GEOGRAPHICAL INFORMATION
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.
The reportable segments operate across three geographical regions as follows: Australia Retail and Commercial division - Australia
 Institutional division – all three geographical regions
 New Zealand division – New Zealand Pacific division – International TSO and Group Centre division – all three geographical regions
 Discontinued operations – Australia
The International region includes Asia, Pacific, Europe and Americas.

Australia
2020$mInternational
2019
$m

2020
$m

New Zealand
2019
$m

2020
$m

Total
2019
$m

2020
$m

2019
$m

Total operating income1

11,83812,394

1,975

2,613

3,773

3,947

17,586

18,954

Assets to be recovered in more than one year2

362,846

386,062

27,632

48,545

100,377

105,642

490,855

540,249

1.

Includes operating income earned from Discontinued operations of -$51 million (2019: $169 million).

2.

Consists of investment securities measured at fair value through other comprehensive income and net loans and advances.

136

136

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets relevant to the subsequent note disclosures.

CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, fair value through profit or loss (FVTPL) andfair value through other comprehensive income (FVOCI). Financial assets are classified into these measurement classifications on the basisof 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 ofprincipal 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 abusiness model whose objective is to collect their cash flows;
 FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a businessmodel 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 at FVTPL on initial recognition when the designation eliminates or significantly reduces anaccounting mismatch that would otherwise arise.

8 . CA S H A ND C A SH E Q U I VAL E N T S

Coins, notes and cash at bank

2020
$m

2019
$m

1,514

1,186

-

3

Securities purchased under agreements to resell in less than 3 months

35,60325,277

Balances with central banks

46,091

25,681

Settlement balances owed to ANZ within 3 months

24,71529,474

Cash and cash equivalents

107,923

81,621

Money at call, bills receivable and remittances in transit

ANZ 2020 Annual Report

137

137

Overview
ANZ 2020
ANNUAL REPORT How we

Performanceoverview

create value

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. TRADING SECURITIES
168

1,017

5,699

6,042

6,574

Government debt
securities and notes

38,472

2020

2019
4,987

32,042

Corporate and financial
institutional securities
Commodities
Equity and other securities

2020
$m

2019
$m

Government debt securities and notes1

38,472

32,042

Corporate and financial institution securities1

6,574

4,987

Commodities

5,699

6,042

168

1,017

50,91344,088Equity and other securities1
Total
Less: Assets reclassified as held for sale (refer to Note 29)
Total

-

(919)

50,913

43,169

1. In 2020, ANZ reclassified trading securities issued by development banks and supra-nationals from Corporate and financial institution securities and Equity and other securities to Government debt
securities and notes. Comparative information has been restated accordingly, with $4,865 million reclassified as Government debt securities and notes made up of $4,653 million from Corporate andfinancial institution securities and $212 million from Equity and other securities.

RECOGNITION AND MEASUREMENT
Trading securities are financial instruments 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.
We recognise purchases and sales of trading securities 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 the profit and loss.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 17 Fair Value of Financial Assets and Financial Liabilities for further details.

138

138

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

10. DERIVATIVE FINANCIAL INSTRUMENTS
Assets2020$m

Liabilities
2020$m

Assets2019$m

Liabilities
2019$m

130,097(130,227)

116,622(116,778)

5,234(4,484)

4,045(4,173)

135,331(134,711)

120,667(120,951)

Fair Value
Derivative financial instruments - held for trading
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 (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 to 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 and 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 a 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.

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).

CreditCounterparty risk in the event of default.

ANZ 2020 Annual Report

139

139

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADINGThe majority of the Group’s derivative financial instruments are held for trading. The fair values of derivative financial instruments held for trading are:

Fair Value

Assets2020$m

Liabilities
2020$m

Assets2019$m

Liabilities
2019
$m

86

(86)

74

(78)

Interest rate contracts
Forward rate agreements
Futures contracts

31

(128)

41

(109)

Swap agreements

104,814(101,277)

82,996(80,588)

Options purchased

1,676

-

1,454

-

-

(2,609)-(2,317)

106,607(104,100)

84,565(83,092)

Spot and forward contracts

11,815(11,435)

15,987(15,359)

Swap agreements

8,703(12,334)

13,836(16,235)

Options purchased

372

-

405

-

-

(502)

-

(514)

Total

20,890(24,271)

30,228(32,108)

Commodity contracts

2,577(1,834)

1,807(1,553)

Options sold
Total
Foreign exchange contracts

Options sold

Credit default swaps
Structured credit derivatives purchased

18

-

16

-

Other credit derivatives purchased

4

(3)

4

(3)

Credit derivatives purchased

22

(3)

20

(3)

Structured credit derivatives sold

-

(18)

-

(19)

Other credit derivatives sold

1

(1)

2

(3)

Credit derivatives sold

1

(19)

2

(22)

Total
Derivative financial instruments - held for trading

140

140

23

(22)

22

(25)

130,097(130,227)

116,622(116,778)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS
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 valueof the derivatives.

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.

ANZ 2020 Annual Report

141

141

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Under the policy choice provided by AASB 9 Financial Instruments, the Group has continued to apply the hedge accounting requirements of AASB 139
Financial Instruments: Recognition and Measurement.
The fair value of derivative financial instruments designated in hedging relationships are:
2019

2020
Nominalamount$m

Assets$m-

Liabilities$mNominalamount$m

Assets$m

Liabilities
$m

-

-

21

1

-

558

-

(9)

581

-

(9)

Interest rate swap agreements

105,249

2,871(3,532)

108,243

2,093(3,155)Interest rate futures contracts

9,380

-

(103)

3,139

-

(27)

Interest rate swap agreements

97,170

2,233

(769)

84,365

1,876

(832)

Foreign exchange swap agreements

2,943

63

(54)

2,934

75

(91)

153

-

-

159

-

(1)

1,269

67

(17)

1,484

-

(58)

216,7225,234(4,484)200,926

4,045(4,173)

Fair value hedges
Foreign exchange swap agreements
Foreign exchange spot and forward contracts

Cash flow hedges

Foreign exchange spot and forward contracts
Net investment hedges
Foreign exchange spot and forward contracts
Derivative financial instruments - designated in
hedging relationships

The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2020 is:

Nominal Amount

Average
Rate

Less than 3months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

1.47%

3,548

12,736

69,83628,509114,629

5.59

558

-

-

-

558

1.72%

9,062

30,36455,5492,195

97,170

38

613

1,157

1,288

3,096

591

678

-

-

1,269

Fair value hedges
Interest rate

Interest Rate

Foreign exchange

HKD/AUD FX Rate

Cash flow hedges
Interest rate
Foreign exchange1

Interest Rate
AUD/USD FX Rate

0.72

USD/EUR FX Rate

0.91

TWD/AUD FX Rate

20.29

THB/AUD FX Rate

21.63

Net investment hedges
Foreign exchange
1.

142

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

142

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2019 is:Nominal Amount
Fair value hedges
Interest rate

Interest Rate

Foreign exchange

HKD/AUD FX Rate

Average
Rate

Less than 3months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

1.95%

3,195

18,407

63,87325,907111,382

5.38

602

-

-

-

602

2.15%

1,088

14,04066,8802,357

84,365

40

120

1,652

1,281

3,093

474

1,010

-

-

1,484

Cash flow hedges
Interest rate
Foreign exchange1

Interest Rate
AUD/USD FX Rate

0.72

USD/EUR FX Rate

0.91

TWD/AUD FX Rate

21.41

THB/AUD FX Rate

21.77

Net investment hedges
Foreign exchange
1.

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

The impact of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:Ineffectiveness2020
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange

Amount reclassified from
Change in value
Hedge ineffectivenessthe cash flow hedge
of hedging Change in value
recognised in profit reserve or FCTR to profit
instrument of hedged item
and lossand loss
$m
$m
$m
$m
372
23

(358)
(23)

14
-

-

451
(15)

(449)
15

2
-

10
(2)

94

(94)

-

(15)

Ineffectiveness2019
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange
1.

Amount reclassified from
Change in value
Hedge ineffectivenessthe cash flow hedge
of hedging Change in value
recognised in profit reserve or FCTR to profit
instrument of hedged item
and lossand loss
$m
$m
$m
$m
586
(36)

(582)
36

4
-

-

836
20

(825)
(20)

11
-

14
2

(144)

144

-

-

All hedging instruments are held within Derivative Financial Instruments.

Hedge ineffectiveness recognised is classified within Other operating income. Reclassification adjustments to the Statement of Comprehensive
Income are recognised within Net interest income and Other operating income.

ANZ 2020 Annual Report

143

143

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Hedged items in relation to the Group’s fair value hedges as at 30 September 2020 are as follows:

Fixed rate loans and advances

Balance sheet
presentation
Hedged risk
Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuances

Fixed rate investment securities (FVOCI)1 Investment securities
Equity securities at FVOCI

1

Investment securities

Carrying amount
AssetsLiabilities
$m
$m
7,375

-

Interest rate-

Interest rate

55,233

52-(61,355)-(2,518)

-

2,256

-

558

-

29

-

63,166(61,355)

2,337(2,518)Foreign exchange

Total

Accumulated fair value
hedge adjustments on
the hedged item
AssetsLiabilities$m$m

Hedged items in relation to the Group’s fair value hedges for 30 September 2019 are as follows:

Balance sheet
presentation

Hedged risk

Fixed rate loans and advances

Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuances

Carrying amount
AssetsLiabilities$m$m

Accumulated fair value
hedge adjustments on
the hedged item
AssetsLiabilities
$m
$m

2,281

-

17

-

Interest rate-

(67,555)-(1,749)Fixed rate investment securities (FVOCI)1 Investment securities

Interest rate

47,641

-

1,907

-

Equity securities at FVOCI1

Foreign exchange

581

-

52

-

50,503(67,555)

1,976(1,749)Total
1.

Investment securities

The carrying amount of debt and equity instruments at fair value through other comprehensive income does not include the fair value hedge adjustment since accounting for the hedge relationship resultsin the transfer of the hedge adjustment out of other comprehensive income into the Income Statement to match the profit or loss on the hedging instrument.

The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is $nil (2019: $8
million).

144

144

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Hedged items in relation to the Group’s cash flow and net investment hedges as at 30 September 2020 are as follows:

Hedged risk
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuance
Foreign currency investment securities
Highly probable forecast transactions
Net investment hedges
Foreign operations

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
Foreign exchange

2,013
(562)
(2)
10
(1)

38
(18)
-

-

-

Foreign exchange

-

-

(80)

(149)

Hedged items in relation to the Group’s cash flow and net investment hedges as at 30 September 2019 are as follows:
Cash flow
Foreign currency
hedge reservetranslation reserve
Continuing Discontinued
Continuing Discontinued
hedgeshedgeshedgeshedgesHedged risk
$m
$m
$m
$m
Cash flow hedges
Floating rate loans and advancesInterest rate
1,587
41
Floating rate customer deposits
Interest rate
(577)
(32)
Foreign currency debt issuance
Foreign exchange
14
Foreign currency investment securities
Foreign exchange
6Highly probable forecast transactions
Foreign exchange
3
Net investment hedges
(159)
(149)
Foreign operations
Foreign exchange
The table below details the reconciliation of the cash flow hedge reserve by risk type:Interest rate$m

Foreigncurrency
$m

Total
$m

Balance at 1 October 2018

128

(1)

127

Fair value gains

825

20

845

Transferred to income statement

14

2

16

Income taxes and others

(251)

(6)

(257)

Balance at 30 September 2019
Fair value gains
Transferred to income statement
Income taxes and others
Balance at 30 September 2020

716
449
10
(141)
1,034

15
(15)
(2)
6
4

731
434
8
(135)
1,038

Hedges from net investments in a foreign operation resulted in a $94 million increase in FCTR during the year (2019: -$144 million). Of that, $15 million(2019: nil) was reclassified from FCTR to the income statement during the year.

ANZ 2020 Annual Report

145

145

Overview
ANZ 2020
ANNUAL REPORT How we

Performanceoverview

create value

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED 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 (CVA) to reflect the counterparty risk and/or event of default; and

a funding valuation adjustment (FVA) 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.

Impact on the
Income Statement

How we recognise gains or losses on derivative financial instruments depends on whether thederivative is held for trading or is designated in a hedging relationship. For derivative financial
instruments held for trading, gains or losses from changes in the fair value are recognised in profit orloss.
For an instrument designated in a hedging relationship, the recognition of gains or losses depends on
the nature of the item being hedged. Refer to the previous table on page 141 for profit or loss
treatment depending on the hedge type.
Sources of hedge ineffectiveness may arise from basis risk and differences in discounting between thehedged items and the hedging instruments. The hedging instruments are discounted using OvernightIndex Swaps discount curves which are not applied to the hedged items.

Hedge effectivenessTo qualify for hedge accounting, a hedge is expected to be highly effective. A hedge 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 least at eachreporting 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 17 Fair
Value of Financial Assets and Financial Liabilities for further details.

146

146

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

11. INVESTMENT SECURITIES
2,762

1,062

2,491

1,221

9,444

11,617

Government securities

2020

2019

Corporate and financial
institution securities

70,553

Other securities

77,950Equity securities

2020
$m

2019
$m

Debt securities

85,46076,489Equity securities

1,062

1,221

Investment securities measured at amortised cost
Debt securities1

6,816

5,999

Investment securities measured at fair value through other comprehensive income

Investment Securities measured at fair value through profit or loss
Debt securities

53-

93,391

83,709No
maturity
$m

Total
$m

18,683-

77,950Total
Less than 3months$m

2020 Investment securities
Government securities2

3 to 12months 1 to 5 years After 5 years
$m
$m
$m

7,175

14,43637,656

701

2,698

8,128

90

-

11,617

Other securities2

-

-

532

2,230

-

2,762

Equity securities

-

-

-

-

1,062

1,062

7,876

17,13446,31621,003

1,062

93,391Government securities2

7,617

15,731

34,236

12,969-70,553

Corporate and financial institution securities2

431

1,653

7,339

21

-

9,444

2

Other securities

-

-

773

1,718

-

2,491

Equity securities

-

-

-

-

1,221

1,221

8,048

17,38442,34814,708

1,221

83,709Corporate and financial institution securities

2

Total
2019 Investment securities

Total

Includes allowance for expected credit losses of $20 million (2019: $13 million).
2. In 2020, ANZ reclassified investment securities issued by development banks and supra-nationals from Corporate and financial institution securities to Government securities. Comparative information
has been restated accordingly, with $10,894 million reclassified as Government securities from Corporate and financial institution securities. In addition, ANZ reclassified certain investment securities from
Government securities to Other securities and comparative information was restated with $577 million reclassified.
1.

ANZ 2020 Annual Report

147

147

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. INVESTMENT SECURITIES (continued)
During the year, the Group recognised a net gain (before tax) in Other operating income from the recycling of gains/losses previously deferred inequity of $23 million (2019: $240 million) in respect of investment securities.
The carrying value of equity securities at FVOCI is $1,062 million (2019: $1,221 million). This includes the Group’s $934 million (2019: $1,106 million)
investment in the Bank of Tianjin (BoT).

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.
Non-traded equity investments 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 bereclassified 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 137. Additionally, expected credit losses associated with
“Investment securities - debt securities at amortised cost” and “Investment securities - debt securities at fair value through othercomprehensive income” are recognised and measured in accordance with the accounting policy outlined in Note 13. For “Investment
securities – debt securities at fair value through other comprehensive income” 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 17 Fair Value of Financial Assets andFinancial Liabilities for further details.

148

148

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

12. NET LOANS AND ADVANCES
The following table provides details of net loans and advances for the Group:
2020
$m

2019
$m

Overdrafts
Credit cards
Commercial bills
Term loans – housing
Term loans – non-housing
Other
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Gross loans and advances
Allowance for expected credit losses (refer to Note 13)
Net loans and advances

5,214
7,194
6,383
358,350
241,7252,406
621,272(66)
868
622,074(4,981)
617,093

7,267
9,241
6,159
343,808
248,337
3,483
618,295(398)
870
618,767(3,509)615,258

Residual contractual maturity:
Within one year
More than one year
Net loans and advances

126,238
490,855
617,093

133,273
481,985
615,258

613,155
3,938
617,093614,336922
615,258

Carried on Balance Sheet at:
Amortised cost
Fair value through profit or loss1
Net loans and advances1.

From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through the profit and loss.

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/mortgage origination fees 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 provision for credit impairment, or at fairvalue when they are specifically designated on initial recognition as fair value through profit or loss or when held for trading.
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 and control over the asset is lost, the Group derecognises the asset. If control over the asset is
not lost, the Group continues to recognise the asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets and liabilities as appropriate.
Assets disclosed as net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 137. 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.

ANZ 2020 Annual Report

149

149

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
The following tables present the movement in the allowance for ECL (2019 includes allowance for ECL reclassified as held for sale) for the year. The
total allowance for ECL at 30 September 2020 was $5,899 million (30 September 2019: $4,190 million).
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.

Stage 31

As at 1 October 2018
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 2019

Stage 1
$m
920
166
(168)
9
927

Stage 2
$m
1,391
(308)
291
4
1,378

Collectively
assessed
$m
359
(91)
147
(2)
413

Individuallyassessed
$m
894
233
1,139
(382)
(1,076)
(17)
791

Total
$m
3,564
1,409
(382)
(1,076)(6)
3,509

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 2020

200
110
(33)
1,204

(308)
1,428
(33)
2,465

(112)
162
(2)
461

220
1,324
(321)
(1,109)
(54)
851

3,024
(321)
(1,109)
(122)
4,981

Stage 3
Collectively Individuallyassessedassessed
$m
$m
-

Total
$m
11
1
1
13

1.
2.

The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
Other movements include the impacts of divestments completed during the year and the impact of discount unwind on individually assessed allowance for ECL.

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

As at 1 October 2018
New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2019

Stage 1
$m
9
2
1
12

Stage 2$m
2
(1)
1

New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2020

10
(2)
20

(1)
-

150

150

-

-

9
(2)
20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
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 (OCI) with a corresponding charge to profit or loss.
Stage 3As at 1 October 2018
New and increased provisions (net of releases)
Foreign currency translation and other movements1
As at 30 September 2019
New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2020
1.

Stage 1
$m
14
(2)
(4)
8

Stage 2$m-

Collectively
assessed$m-

Individuallyassessed
$m
-

Total
$m
14
(2)
(4)
8

2
10

-

-

-

2
10

Other movements includes the impacts of divestments completed in 2019.

Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
Stage 31

As at 1 October 2018
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2019

Stage 1
$m
474
27
(36)
8
473

Stage 2
$m
166
(29)
12
2
151

Collectively
assessed
$m
15
6
21

Individuallyassessed
$m
26
2
(3)
(2)
23

Total
$m
681
(18)
(3)
8
668

Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2020

18
115
(10)
596

(24)
115
(3)
239

(1)
3
23

7
24
(14)
40

257
(14)
(13)
898

1.
2.

The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
Other movements includes the impacts of divestments completed during the year.

ANZ 2020 Annual Report

151

151

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
2020
$m

2019
$m

New and increased provisions (net of releases)1- Collectively assessed

1,717

16

- Individually assessed

1,575

1,374

Write-backs

(335)

(385)

Recoveries of amounts previously written-off

(219)

(212)

Total credit impairment charge

2,738

793

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

-

(1)

2,738

794

Includes the impact of transfers between collectively assessed and individually assessed.

The contractual amount outstanding on financial assets that were written off during the period ended 30 September 2020 and that are still subject toenforcement activity is $340 million (2019: $212 million).

COVID-19 REPAYMENT DEFERRAL PACKAGES OFFERED TO CUSTOMERS1
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of customers tomeet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal and interest repayments,
replacing principal and interest with interest only repayments, and extension of loan maturity dates. Refer to Key Judgements and Estimates in thisNote for details of the impact of deferrals when determining if there has been a Significant Increase in Credit Risk (SICR).
The loan repayment deferral package is considered to be a loan modification under AASB 9. This either results in the loan being derecognised andreplaced with a new loan (substantial modification) or the existing loan continuing to be recognised (non-substantial modification). The table below
shows the outstanding balance as at 30 September 2020 of all loans that have been modified (both substantial and non-substantial modifications):

Assistance package category
Loan deferral package
RetailCommercial and other
Interest only
RetailCommercial and otherTerm extensions
RetailCommercial and otherTotal2RetailCommercial and otherTotal2
1.
2.

152

Total loan outstanding
At 30 September 2020$m
29,822
9,182
2,413
527
614
90
42,64832,8499,799
42,648COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date at 1 March 2020.
The gross carrying amount of loans at the date of modification that were considered non-substantial modifications and had loss allowances based on lifetime expected losses was $9,917 million. No gain or loss wasrecognised as a result of the modification and none of the loans have subsequently changed to a 12 month expected loss allowance.

152

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

RECOGNITION AND MEASUREMENTEXPECTED CREDIT LOSS IMPAIRMENT 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 equivalent to 12 months 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, expectedcredit 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 equivalent to lifetime ECL is recognised reflecting expected credit
losses resulting from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a
subsequent period such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a
Stage 1 classification and a 12 month ECL applies.
 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 macro-economic 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 behaviourand substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring expected credit losses is aligned to the definition used for internal credit risk management
purposes across all portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicatorsthat a debtor is unlikely to fully satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
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 credited to credit impairment charge in the income statement.

ANZ 2020 Annual Report

153

153

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENTMODIFIED FINANCIAL ASSETS
If the terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial reasons,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 is considered non-substantial, the existing
financial asset is not derecognised and its date of origination continues to be used to determine SICR. Where a modification is considered
substantial, the existing financial asset 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 Significant Increase in Credit Risk (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 sinceorigination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date to
the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the probability of default of the borrower andincorporates 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 probabilityof default 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 criteria for both non-retail and retail portfolios. For retail portfolios only, facilities are
required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
iii. COVID-19 initiatives
For facilities subject to the COVID-19 repayment deferral arrangements noted above, an assessment of SICR has been determined basedon various measures of the customer’s current financial position and earnings capacity from which the facilities are categorised into risk
categories. SICR is then determined based on the resulting risk categorisation. Customers in higher risk categories, and those who haverequested a deferral extension are classified as having a SICR.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a Significant Increase in
Credit Risk (SICR) since its initial recognition and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Groupconsiders four probability-weighted forecast economic scenarios as follows:i.

Base case scenario
The base case scenario is ANZ’s view of the most likely future macro-economic conditions. It reflects management’s assumptions used forstrategic planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process
the Group 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
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe impactof less likely extremely adverse economic conditions. It reflects macro-economic conditions of a downturn economic event with aprobability of occurrence once every 25 years.

154

154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated 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 macro-economic variables used in the PD, LGD and EAD models (collectively the ECL models)depending on the portfolio and country of the borrower. Examples of the variables include unemployment rates, GDP growth rates, house
price indices, commercial property price indices and consumer price indices.
Probability weighting 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 forecast scenario and the Credit and Market Risk Committee (CMRC)
approves the probability weights applied to each scenario.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process. CMRC is responsible for approving such adjustments.

KEY JUDGEMENTS AND ESTIMATES
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:• the selection of an estimation technique or modelling methodology, noting that the modelling of the Group’s ECL estimates arecomplex; 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 ECL 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 impact of COVID-19, and reflect historicalexperience and other factors that are considered to be relevant, including expectations of future events that are believed to be reasonable
under the circumstances. In relation to COVID-19, judgements and assumptions include the extent and duration of the pandemic, theimpacts of actions of governments and other authorities, and the responses of businesses and consumers in different industries, along withthe associated impact on the global economy. Accordingly, the Group’s ECL estimates are inherently uncertain and, as a result, actual results
may differ from these estimates.
Judgement/Assumption

Description

Considerations for the year ended 30 September 2020

Determining when a
Significant Increase in
Credit Risk (SICR) has
occurredIn the measurement of ECL, judgement isinvolved in setting the rules and trigger points todetermine whether there has been a SICR sinceinitial recognition of a loan, which would result in
the financial asset moving from ‘Stage 1’ to ‘Stage2’. This is a key area of judgement since transition
from Stage 1 to Stage 2 increases the ECL from anallowance based on the probability of default in
the next 12 months, to an allowance for lifetime
expected credit losses. Subsequent decreases incredit risk resulting in transition from Stage 2 toStage 1 may similarly result in significant changes
in the ECL allowance.

In response to the impacts of COVID-19, various
packages, such as repayment deferrals, have beenoffered to eligible retail and commercial customers inAustralia and New Zealand. The Group does not consider
that when a customer is first provided assistance, allother things being equal, that there has been a
Significant Increase in Credit Risk (SICR) and aconsequent impact on ECL when assessing provisions.

The setting of precise 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.

Subsequent to take-up, customers have been contacted
to discuss available options once the packages reach
their end date. This additional information on thecustomer’s financial position and ability to recommence
their loan repayments is used to assist in classification ofcustomers into risk categories. Customers in higher risk
categories, and those who have requested a deferral
extension, have been classified as having a SICR.

ANZ 2020 Annual Report

155

155

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
Judgement/Assumption

Description

Considerations for the year ended 30 September 2020

Measuring both 12month and lifetime credit
lossesThe probability of default (PD), loss given default(LGD) and exposure at default (EAD) credit risk
parameters used in determining ECL are point-intime measures reflecting the relevant forwardlooking information determined by management.
Judgement is involved in determining which
forward-looking information variables are relevant
for particular lending portfolios and for determining
each portfolio’s point-in-time sensitivity.

The PD, EAD and LGD models are subject to the Group’s model risk
policy that stipulates periodic model monitoring, periodic revalidation and defines approval procedures and authorities
according to model materiality.
There were no material changes to the policies during the year
ended 30 September 2020.

In addition, judgement is required where
behavioural characteristics are applied in estimating
the lifetime of a facility to be used in measuring
ECL.

There were no changes to behavioural lifetime estimates during
the year ended 30 September 2020.

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

There have been no changes to the types of forward-looking
variables (key economic drivers) used as model inputs in thecurrent year.

Base case economic
forecast

As at 30 September 2020, the base case assumptions have been
updated to reflect the rapidly evolving situation with respect to
COVID-19. This includes an assessment of the impact of central
bank policies, governments’ actions, the response of business, andinstitution specific responses (such as repayment deferrals). These
are considered in determining the length and severity of theforecast economic downturn.
The expected outcomes of key economic drivers for the base casescenario as at 30 September 2020 are described below under theheading “Base case economic forecast assumptions”.

Probability weighting ofeach economic scenario(base case, upside,
downside and severe
downside scenarios)1,2

Probability weighting of each economic scenario is
determined by management considering the risks
and uncertainties surrounding the base caseeconomic scenario at each measurement date.

The key consideration for probability weightings in the current
period is the continuing impact of COVID-19.
The Group considers these weightings in each geography toprovide the best estimate of the possible loss outcomes and has
analysed inter-relationships and correlations (over both the shortand long term) within the Group’s credit portfolios in determiningthem.
In addition to the base case forecast which reflects the negative
economic consequences of COVID-19, greater weighting has been
applied to the downside scenario given the Group’s assessment ofdownside risks.
The assigned probability weightings in Australia, New Zealand andRest of world are subject to a high degree of inherent uncertainty
and therefore the actual outcomes may be significantly different tothose projected.

1.
2.

156

156

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.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES (continued)
Judgement/Assumption

Description

Considerations for the year ended 30 September 2020

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, and natural disasters that are notincorporated into our current parameters, risk
ratings, or forward-looking information are
examples of such circumstances. The use ofmanagement temporary adjustments may
impact the amount of ECL recognised.

Management have applied a number of adjustments to themodelled ECL primarily due to the uncertainty associatedwith COVID-19.
Management overlays (including COVID-19 overlays) which
add to the modelled ECL provision have been made for risks
particular to small business and commercial banking inAustralia, for retail, commercial and agri banking in New
Zealand, and for tourism in the Pacific.

The uncertainty associated with the COVID-19
pandemic, and the extent to which the actionsof governments, businesses and consumers
mitigate against potentially adverse credit
outcomes are not fully incorporated into
existing ECL models. Accordingly, management
overlays have been applied to ensure credit
provisions are appropriate.
Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the economic forecast resulting in an understatement oroverstatement of the ECL balance due to uncertainties around: the extent and duration of measures to stop or reduce the speed of the spread of COVID-19;
 the extent and duration of the economic downturn, along with the time required for economies to recover; and the effectiveness of government stimulus measures, in particular their impact on the magnitude of economic downturn and the extent
and duration of the recovery.
The economic drivers of the base case economic forecasts at 30 September 2020 are set out below. These reflect ANZ’s view of the most
likely future macro-economic conditions at 30 September 2020. For years beyond the near term forecasts below, the ECL models project
future year economic conditions including an assumption to eventual reversion to mid-cycle economic conditions.
Forecast calendar year
2020
2021
2022
Australia
GDP
Unemployment
Residential property prices
Consumer price index
New ZealandGDP
Unemployment
Residential property prices
Consumer price index
Rest of worldGDP
Consumer price index

-4.3%
7.3%
-2.2%
0.8

1.6%
8.8%
-4.8%
1.2

4.0%
7.7%
2.0%
1.3

-5.6%
5.7%
-0.3%
1.6

2.0%
9.1%
0.9%
1.0

5.6%
6.5%
4.1%
1.2

-4.5%
1.0

2.5%
1.8

2.5%
2.0

ANZ 2020 Annual Report

157

157

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES (continued)
The base case economic forecasts as at 30 September 2020 reflect a significant deterioration in current and expected economic conditions fromthe forecasts as at 30 September 2019 reflecting the emergence and ongoing impact of the COVID-19 pandemic.
Probability weightings
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base caseeconomic scenario. The key consideration for probability weightings in the current period is the continuing impact of COVID-19.
In addition to the base case economic forecast which reflects the negative economic consequences of COVID-19, greater weighting has been
applied to the downside economic scenario given the Group’s assessment of downside risks.
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 toprovide the best estimate of the possible loss outcomes and has analysed inter-relationships and correlations (over both the short and longterm) within the Group’s credit portfolios in determining them. The average weightings applied across the Group are set out below:

Group
Base
UpsideDownside
Severe Downside

2020

2019

50.0%
10.4%
33.3%
6.3%

50.0%
15.7%
29.3%
5.0%

ECL - Sensitivity analysis
The uncertainty of the impact of COVID-19 introduces significant estimation uncertainty in relation to the measurement of the Group’s
allowance for expected credit losses. The rapidly evolving consequences of COVID-19 and government, business and consumer responses
could result in significant adjustments to the allowance in future financial years.
Given current economic uncertainties and the judgment applied to factors used in determining the expected default of borrowers in future
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 2020:

158

158

ECL
$m

Impact$m

If 1% of Stage 1 facilities were included in Stage 2
If 1% of Stage 2 facilities were included in Stage 1

5,069
4,998

61
(10)

100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario

1,898
4,011
5,144
6,315

(3,110)
(997)
136
1,307

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

FINANCIAL LIABILITIESOutlined below is a description of how we classify and measure financial liabilities relevant to the subsequent note disclosures.

CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or fair value through profit or loss (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 is evaluated on a fair value basis, in accordance with a documented risk
management strategy; or

the financial liability contains one or more embedded derivatives unless:a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; orb) the embedded derivative is closely related to the host financial liability.

Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included inother comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.

ANZ 2020 Annual Report

159

159

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. DEPOSITS AND OTHER BORROWINGS
Certificates of deposit

9,142

32,491

11,812
77,52688,337
197,273

39,874

2019

256,264

Term deposits
On demand and shortterm deposits

28,342

2020

315,216

36,646

227,087

Deposits not bearing interest
Deposits from banks &securities sold under
repurchase agreements1
Commercial paper andother borrowings2

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 borrowings2
Deposits and other borrowings
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 loss (designated on initial recognition)3
Deposits and other borrowings
1.

2.
3.

2020
$m

2019
$m

32,491
197,273
315,216
39,87488,3379,142
682,333

36,646
227,087
256,264
28,342
77,526
11,812
637,677

665,151
17,182
682,333

630,373
7,304
637,677

679,255
3,078
682,333

635,376
2,301
637,677

Includes $12 billion of funds drawn under the RBA’s Term Funding Facility (TFF). TFF is initially recognised at fair value and is subsequently measured at amortised cost using the effective interest rate
method. Refer to Note 16 Financial Risk Management for more details.
In 2019, Other borrowings related to secured investments issued by the consolidated subsidiary UDC Finance Limited (UDC) of NZD 0.1 billion, which were secured by a security interest over all the assetsof UDC of NZD 3.5 billion. The Group divested of UDC during 2020.
From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.

RECOGNITION AND MEASUREMENT
For deposits and other borrowings that: are not designated at fair value through profit or loss on initial recognition, we measure them at amortised cost and recognise theirinterest expense using the effective interest rate method; and are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designatedthem as measured at fair value through profit or loss.
Refer to Note 17 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 theGroup’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise
directly in profit and loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit andloss.
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 the profit and loss.

160

160

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

15. DEBT ISSUANCESThe Group 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 take priority over holders of subordinated debt owed by therelevant issuer. In the winding up of the relevant issuer, the subordinated debt will be repaid by the relevant issuer only after the repayment of claimsof depositors, other creditors and the senior debt holders.

Senior debt
Covered bonds
Securitisation
Total unsubordinated debt
Subordinated debt
- Additional Tier 1 capital- Tier 2 capital
Total subordinated debt
Total debt issued

2020
$m

2019
$m

80,835
15,948
1,824
98,60789,737
20,957
2,411
113,105

8,196
12,86521,061
119,668

8,171
8,415
16,586
129,691

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.

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, Norwegian kroner, Singapore dollars, Indonesian rupiah and Canadian dollars

Total debt issued
Residual contractual maturity1:
Within one year
More than one year
No maturity date (instruments in perpetuity)
Total debt issued
1.

2020
$m

2019
$m

41,10023,03843,697
3,682
2,131
975
2,387
1,088
1,570
119,668

45,841
26,20039,273
5,130
3,312
1,501
4,720
1,446
2,268
129,691

25,68892,0591,921
119,668

20,803106,963
1,925
129,691

Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).

SUBORDINATED DEBT
Subordinated debt qualifies as regulatory capital for the Group and is classified as either Additional Tier 1 (AT1) capital or Tier 2 capital for APRA’s
capital adequacy purposes depending on their terms and conditions: AT1 capital: perpetual capital instruments:
 ANZ Capital Notes (ANZ CN); ANZ Capital Securities (ANZ CS); and ANZ NZ Capital Notes (ANZ NZ CN).
 Tier 2 capital: perpetual or term subordinated notes.
Tier 2 capital instruments rank ahead of AT1 capital instruments, and AT1 capital instruments only rank ahead of ordinary shares, in any liquidation
event impacting the issuer of the instruments.

ANZ 2020 Annual Report

161

161

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. DEBT ISSUANCES (continued)
AT1 CAPITAL
All outstanding AT1 capital instruments are Basel III fully compliant instruments (refer to Note 23 Capital Management for further information about
Basel III). 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 ANZ 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 and, in respect of the ANZ NZ CN, the Reserve Bank of
New Zealand’s (RBNZ) prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZ ordinary shares (based on the average market price of theshares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZ ordinary shares) if: ANZ’s or, in the case of the ANZ NZ CN, ANZ Bank New Zealand Limited’s (ANZ NZ) 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 the Company that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent
support), it considers that the Company would become non-viable or, in the case of the ANZ NZ CN, the RBNZ directs ANZ NZ to convert or writeoff the notes or a statutory manager is appointed to ANZ NZ and decides that ANZ NZ must convert or write-off the notes – known as a NonViability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZ ordinary shares (based on the average market price ofthe 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.
The tables below show the key details of the Group’s AT1 capital instruments on issue at 30 September in both the current and prior years:

Additional Tier 1 capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)
AUD
1,120mANZ CN1
AUD
1,610mANZ CN2
AUD
970m
ANZ CN3
AUD
1,622mANZ CN4
AUD
931m
ANZ CN5
ANZ Capital Securities (ANZ CS)
USD
1,000mANZ Capital Securities
ANZ NZ Capital Notes (ANZ NZ CN)
NZD500m
ANZ NZ Capital Notes
Total Additional Tier 1 capital2
1.

Carrying values net of issue costs.

2.

This forms part of qualifying Additional Tier 1 capital (refer to Note 23 Capital Management).

162

162

2020
$m

2019
$m

1,119
1,608
967
1,614
926

1,118
1,607
966
1,612
925

1,499

1,481

463

462

8,196

8,171

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

15. DEBT ISSUANCES (continued)

ANZ Capital Notes (ANZ CN)
Issuer

CN1
ANZ

CN2
ANZ

Issue date

7 August 2013

31 March 2014

CN3
ANZ, acting through its New
Zealand branch
5 March 2015

Issue amount$1,120 million$1,610 million$970 million

Face value

$100

$100

$100

Distribution frequency

Semi-annually in arrears

Semi-annually in arrears

Semi-annually in arrears

Distribution rate

Floating rate: (180 day BankBill rate +3.4%)x(1-Australian
corporate tax rate)

Floating rate: (180 day BankBill rate +3.25%)x(1Australian corporate tax rate)

Floating rate: (180 day BankBill rate +3.6%)x(1-Australian
corporate tax rate)

Issuer’s early redemption or conversion option

1 September 2021

24 March 2022

24 March 2023

Mandatory conversion date

1 September 2023

24 March 2024

24 March 2025

Common equity capital trigger event

Yes

Yes

Yes

Non-viability trigger event
Carrying value 2020 (net of issue costs)

Yes$1,119 million(2019: $1,118 million)

Yes$1,608 million(2019: $1,607 million)

Yes$967 million(2019: $966 million)

CN4

CN5

IssuerANZ

ANZ

Issue date

27 September 2016

28 September 2017

Issue amount$1,622 million$931 million

Face value

$100

$100

Distribution frequency

Quarterly in arrears

Quarterly in arrears

Distribution rate

Floating rate: (90 day Bank Billrate +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

20 March 2024

20 March 2025

Mandatory conversion date

20 March 2026

20 March 2027

Common equity capital trigger event

Yes

Yes

Non-viability trigger event
Carrying value 2020 (net of issue costs)

Yes$1,614 million(2019: $1,612 million)

Yes$926 million(2019: $925 million)

ANZ 2020 Annual Report

163

163

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. DEBT ISSUANCES (continued)
ANZ Capital Securities (ANZ CS)
Issuer

ANZ, 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 2020 (net of issue costs)$1,499 million (2019: $1,481 million)

ANZ NZ Capital Notes (ANZ NZ CN)
IssuerANZ Bank New Zealand Limited (ANZ NZ)

Issue date

31 March 2015

Issue amountNZD 500 million

Face value

NZD 1

Interest frequency

Quarterly in arrears

Interest rate

Fixed at 7.2% p.a. until 25 May 2020. The rate reset in May 2020 to a floating rate: New Zealand 3
month bank bill rate + 3.5%
Interest payments are subject to ANZ NZ’s absolute discretion and certain payment conditions(including APRA and RBNZ requirements)

Issuer’s early redemption option

The option was not exercised on 25 May 2020 and has expired1

Mandatory conversion date

25 May 2022

Common equity capital trigger event

Yes

Non-viability trigger event

Yes

Carrying value 2020 (net of issue costs)$463 million (2019: $462 million)

1.

164

The RBNZ has informed New Zealand-incorporated registered banks (including ANZ NZ) that they should not redeem capital instruments at this time. Accordingly, ANZ NZ was not permitted to redeem its
NZ$500 million Capital Notes in May 2020, although it can continue making coupon payments on those Capital Notes. As ANZ NZ did not exercise its option to convert in May 2020, the terms of the Capital
Notes provide for their conversion into a variable number of ANZBGL shares in May 2022 subject to certain conditions.

164

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

15. DEBT ISSUANCES (continued)
TIER 2 CAPITAL
The convertible term subordinated notes are Basel III fully compliant instruments. If a Non-Viability Trigger Event occurs, the convertible term
subordinated notes will immediately convert into ANZ ordinary shares (based on the average market price of the shares immediately prior toconversion less a 1% discount, subject to a maximum conversion number).
APRA has granted transitional Basel III capital treatment for the USD 300 million perpetual subordinated notes until the end of the transitional
period (December 2021).
The table below shows the Tier 2 capital subordinated notes the Group holds at 30 September in both the current and prior year:

Currency

Face value

Maturity

Next optional call date – subject
to APRA’s prior approvalInterest
rate

NonViability
Trigger
Event

2020
$m

2019
$m

Floating

No

422

444

422

444

1,225

1,250

Basel III transitional subordinated notes (perpetual)
USD

300m

Perpetual

Each semi-annual interest payment date

Total Basel III transitional subordinated notes
Basel III fully compliant convertible subordinated notes (term)
USD

800m

2024

N/A

Fixed

Yes

CNY

2,500m

2025

2020

Fixed

Yes

-

519

SGD

500m

2027

2022

Fixed

Yes

529

544

AUD

200m

2027

2022

Fixed

Yes

200

200

JPY

20,000m

2026

N/A

Fixed

Yes

270

281

AUD

700m

2026

2021

Floating

Yes

700

700

USD

1,500m

2026

N/A

Fixed

Yes

2,253

2,229

JPY

10,000m

2026

2021

Fixed

Yes

133

137

JPY

10,000m

2028

2023

Fixed

Yes

133

137

AUD

225m

2032

2027

Fixed

Yes

225

224

AUD

1,750m2029

2024

Floating

Yes

1,750

1,750

EUR

1,000m

2029

2024

Fixed

Yes

1,657

-

AUD

265m

2039

N/A

Fixed

Yes

265

-

USD

1,250m

2030

2025

Fixed

Yes

1,859

-

AUD

1,250m2031

2026

Floating

Yes

1,244

-

Total Basel III fully compliant subordinated notes

12,443

7,971

Total Tier 2 capital1,2

12,865

8,415

1.

2.

Carrying value net of issuance costs.
This forms part of qualifying Tier 2 capital (refer to Note 23 Capital Management)

RECOGNITION AND MEASUREMENT
Debt issuances are measured at amortised cost, except where designated at fair value through profit or loss. Where the Group enters into afair value hedge accounting relationship, the fair value attributable to the hedge risk is reflected in adjustments to the carrying value of thedebt. Interest expense is recognised using the effective interest rate method.
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 fair value through profit and loss. The embedded derivatives
arise because the amount 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.

ANZ 2020 Annual Report

165

165

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. 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 section.
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

Overview

 An overview of our Risk Management Framework

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 Credit quality

 a decrease in credit quality of a counterparty resulting in afinancial loss.

 Concentrations of credit risk
 Collateral management

Credit risk incorporates the risks associated with us lending tocustomers who could be impacted by climate change or bychanges to laws, regulations, or other policies adopted bygovernments or regulatory authorities, including carbon pricing
and climate change adaptation or mitigation policies.
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

Liquidity and funding risk
The risk that the Group is unable to meet payment obligations as
they fall due, including: repaying depositors or maturing wholesale debt; or the Group having insufficient capacity to fund increases in
assets.

166

166



Equity securities designated at FVOCI

 Liquidity risk overview, management and control responsibilities
 Key areas of measurement for liquidity risk
 Liquidity risk outcomes Residual contractual maturity analysis of the Group’s liabilities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. FINANCIAL RISK MANAGEMENT (continued)
OVERVIEWAN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORKThis overview is provided to aid the users of the financial statements to understand the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures (AASB 7). It should be read in conjunction with the Governance and Risk Management section.
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 ANZ is prepared to accept in pursuitof its strategic objectives and business plan; and the Risk Management Strategy (RMS), which describes ANZ’s strategy for managing risks and the key elements of the RMF that gives effect to thisstrategy. 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 ANZ 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 ANZ’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.

ANZ 2020 Annual Report

167

167

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. 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, andcredit provisioning.
All customers with whom ANZ 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 referred out for 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:

168

Credit Quality
Description

Internal CCR

ANZ Customer Requirements

Moody’s
RatingStandard & Poor’s
RatingStrong

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 medium term.

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

168

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. 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.
For the purpose of this note, assets presented as assets held for sale in the Balance Sheet have been reallocated to their respective Balance Sheet
categories.
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.
Reported

Maximum exposure
to credit risk

Excluded1

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

617,093615,258--

617,093615,258

On-balance sheet positions
Net loans and advances
Other financial assets:
107,923

81,621

1,514

1,186

106,40980,435

Settlement balances owed to ANZ

7,541

3,739

7,541

3,739

-

-

Collateral paid

14,30815,006--

14,30815,006

Cash and cash equivalents

Trading securities

50,91344,088

5,698

6,199

45,21537,889Derivative financial instruments

135,331

120,667--

135,331

120,667- debt securities at amortised costs

6,816

5,999

-

-

6,816

5,999

- debt securities at FVOCI

85,46076,489--85,46076,489- equity securities at FVOCI

1,062

1,221

1,062

1,221

-

-

- debt securities at FVTPL

53

-

-

-

53

-

Investment securities

Regulatory deposits

801

879

-

-

801

879

Other financial assets2

2,407

3,619

-

-

2,407

3,619

Total other financial assets

412,615353,328

15,815

12,345396,800

340,983

1,029,708

968,586

15,815

12,345

1,013,893

956,241

266,716

253,123--

266,716

253,123

1,296,424

1,221,709

15,815

12,345

1,280,609

1,209,364

Subtotal
Off-balance sheet positions
Undrawn and contingent facilities3
Total
1.

Bank notes and coins and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; Equity securities and precious metal exposures within Trading
securities; Equity securities within Investment securities were excluded as they do not have credit risk exposure.
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.
2.

ANZ 2020 Annual Report

169

169

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. 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 rating by stage without taking
account of the effects of any collateral or other credit enhancements:
Net loans and advances
2020
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

Strong395,608

18,262--413,870

Satisfactory

133,558

37,577--

171,135

8,461

16,850--25,311

-

-

4,762

2,256

7,018

Weak
Defaulted

Total
$m

Gross loans and advances at amortised cost

537,627

72,689

4,762

2,256

617,334

Allowance for ECL(1,204)(2,465)

(461)

(851)

(4,981)

Net loans and advances at amortised cost

536,423

70,224

4,301

1,405

612,353

0.22%

3.39%

9.68%

37.72%

0.81%

Coverage ratio
Loans and advances at fair value through profit or loss

3,938

Unearned income(66)

Capitalised brokerage/mortgage origination fees

868
617,093

Net carrying amount2019

Stage 1$m

Stage 2$m

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

Strong425,113

18,597--443,710

Satisfactory

121,030

28,445--

149,475

7,138

10,373--

17,511

-

-

4,699

1,978

6,677

553,281

57,415

4,699

1,978

617,373(927)(1,378)

(413)

(791)

(3,509)552,354

56,037

4,286

1,187

613,864

0.17%

2.40%

8.79%

39.99%

0.57%

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

922

Unearned income(398)

Capitalised brokerage/mortgage origination fees870

Net carrying amount

170

170

615,258

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at amortised cost
2020

Stage 1$m

Stage 2$m

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

Strong

5,594

-

-

-

5,594

Satisfactory

1,067

175

-

-

1,242

Weak

-

-

-

-

-

Defaulted

-

-

-

-

-

Gross investment securities - debt securities at amortised cost

6,661

175

-

-

6,836

Allowance for ECL

(20)

-

-

-

(20)

Net investment securities - debt securities at amortised cost

6,641

175

-

-

6,816

Coverage ratio

0.30%

0.00%

-

-

0.29%

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

2019

Stage 1$m

Stage 2
$m

4,798

-

-

-

4,798

707

507

-

-

1,214

Weak

-

-

-

-

-

Defaulted

-

-

-

-

-

5,505

507

-

-

6,012

StrongSatisfactory

Gross investment securities - debt securities at amortised cost
Allowance for ECL

(12)

(1)

-

-

(13)

Net investment securities - debt securities at amortised cost

5,493

506

-

-

5,999

Coverage ratio

0.22%

0.20%

-

-

0.22%

ANZ 2020 Annual Report

171

171

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at FVOCI
2020
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

85,287---85,287

173

-

-

-

173

Weak

-

-

-

-

-

Defaulted

-

-

-

-

-

85,460---85,460

(10)

-

-

-

(10)

0.01%

-

-

-

0.01%

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

StrongSatisfactory

Investment securities - debt securities at FVOCIAllowance for ECL recognised in other comprehensive income
Coverage ratio

Total
$m

2019

StrongSatisfactory
Weak

Stage 1$m

Stage 2
$m

76,218---76,218

271

-

-

-

271

-

-

-

-

-

-

-

-

-

-

76,489---76,489

(8)

-

-

-

(8)

0.01%

-

-

-

0.01%

2020
$m

2019
$m

Strong293,171

248,020

Satisfactory

10,724

10,060

628

415

1

-

304,524

258,495

Defaulted
Investment securities - debt securities at FVOCIAllowance for ECL recognised in other comprehensive income
Coverage ratio
Other financial assets

Weak
Defaulted
Total carrying amount

172

172

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Off-balance sheet commitments - undrawn and contingent facilities
2020
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

Strong171,979

3,045

-

-

175,024

Satisfactory

22,983

3,972

-

-

26,955

Weak

1,123

1,132

-

-

2,255

-

-

144

203

347

196,085

8,149

144

203

204,581

Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 21)
Net undrawn and contingent facilities subject to ECL
Coverage ratio
Undrawn and contingent facilities not subject to ECL

Total
$m

(596)

(239)

(23)

(40)

(898)

195,489

7,910

121

163

203,683

0.30%

2.93%

15.97%

19.70%

0.44%
63,033

1

Net undrawn and contingent facilities

266,7162019
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

Strong162,891

1,972

Satisfactory

23,655

3,634

294

976

-

-

140

186,840

6,582

(473)

(151)

186,367

6,431

0.25%

2.29%

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 21)
Net undrawn and contingent facilities subject to ECL
Coverage ratio

-

Total
$m

-

164,863--

27,289

-

-

1,270

51

191

140

51

193,613

(21)

(23)

(668)

119

28

192,945

15.00%

45.10%

0.35%

Undrawn and contingent facilities not subject to ECL1

60,178Net undrawn and contingent facilities

253,123

1.

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

ANZ 2020 Annual Report

173

173

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
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

Off-balance sheet
credit related
commitments

Other financial
assets

Total

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

Agriculture, forestry, fishing and mining

36,45838,562

1,092

1,070

17,18818,42454,73858,056

Business services

8,642

8,449

172

168

6,506

6,976

15,32015,593

Construction

5,807

6,711

44

65

6,679

6,697

12,53013,473

Electricity, gas and water supply

5,881

6,599

2,386

2,008

8,663

7,087

16,93015,694Entertainment, leisure and tourism

13,17912,780

600

699

4,114

3,446

17,893

16,925

Financial, investment and insurance

51,85755,344279,468

247,351

48,537

41,874

379,862

344,569

Government and official institutions

4,645

3,388

98,01775,066

1,968

2,524

104,630

80,978Manufacturing

25,163

23,796

2,306

2,932

41,11444,091

68,58370,819Personal lending

361,459

351,894

1,170

1,754

50,43354,429413,062

408,077

Property services

50,406

46,721

2,044

1,905

27,992

17,21680,442

65,842Retail trade

10,73913,078

231

242

9,602

7,086

20,572

20,406

Transport and storage

12,657

13,583

1,280

1,194

8,587

8,269

22,52423,046Wholesale trade

11,81615,177

2,649

3,141

19,494

20,283

33,95938,601

44,661

41,003

Other

22,56322,213

5,361

3,401

16,737

15,389Gross total

621,272

618,295

396,820

340,996

267,614

253,791 1,285,706 1,213,082

Allowance for ECL(4,981)(3,509)

(20)

(13)

(898)

Subtotal

616,291

614,786

396,800

340,983

266,716

Unearned income

(66)

(398)

-

-

-

-

(66)

(398)

Capitalised brokerage/mortgage origination fees

868

870

-

-

-

-

868

870

617,093615,258

396,800

340,983

266,716

Maximum exposure to credit risk

174

174

(668)

(5,899)(4,190)253,123 1,279,807 1,208,892

253,123 1,280,609 1,209,364

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
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 that are secured by corresponding
investment for which the margin loans are utilised and for reverse repurchase agreements. 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.
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, for example: guarantees, standby lettersof credit or derivative protection.

Other financial assets
Trading securities,
Investment securities,
Derivatives and Other
financial assets

For trading securities, we do not seek collateral directly from the issuer or counterparty. However, thecollateral may be implicit in the terms of the instrument (for example, with an asset-backed security). The
terms of debt 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:
Credit exposure

Unsecured portion of credit
exposure

Total value of collateral

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

Net loans and advances

617,093615,258

510,995

490,188

106,098

125,070

Other financial assets

396,800

340,983

45,24631,898351,554309,085

Off-balance sheet positions

266,716

253,123

51,361

48,225215,355

204,898

1,280,609

1,209,364

607,602570,311

673,007

639,053

Total

ANZ 2020 Annual Report

175

175

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. 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 correlation between interest
rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit & Market Risk
Committee (CMRC) and the Group Asset & 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 gauges the Group’s possible daily loss based on historical market movements.
The Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices andvolatilities over: the previous 500 business days, to calculate standard VaR, and a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using one-day and ten-day holding periods. For stressed VaR, we use a ten-day period. Back testing is used toensure 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.

176

176

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. 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:
2020
As at
$m

2019

High foryear$m

Low foryear$mAveragefor year
$m

As at
$m

High foryear$m

Low foryear$mAveragefor year$m

Traded value at risk 99% confidence
Foreign exchange

2.0

6.1

1.2

3.1

1.4

9.5

1.2

4.1

Interest rate

9.6

13.8

3.3

7.2

3.6

10.4

3.6

5.8

Credit

13.9

17.1

1.8

8.6

5.1

5.4

1.2

3.1

Commodity

3.0

4.7

1.3

2.6

1.6

3.9

1.4

2.2

-

-

-

-

-

-

-

-

EquityDiversification benefit(10.9)

n/a

n/a

(8.0)

(5.5)

n/a

n/a

(7.2)

Total VaR

17.6

31.9

5.7

13.5

6.2

13.4

5.1

8.0

1

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.

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 Asia
Pacific, Europe and Americas (APEA) geographies which are calculated separately.
2020

2019

As at
$m

High foryear$m

Low foryear$mAveragefor year
$m

As at
$m

High foryear$m

Low foryear$mAveragefor year$mAustralia

60.8

60.8

18.8

33.4

22.7

22.7

16.4

18.9

New Zealand

26.3

26.3

9.4

15.2

9.6

9.6

7.1

8.0

Asia Pacific, Europe & America

29.4

30.2

17.8

24.2

17.6

17.7

12.9

16.1

Diversification benefit1(61.4)

n/an/a(29.5)(17.8)

n/a

n/a(14.8)

Total VaR

55.1

58.3

31.5

43.3

32.1

32.1

25.2

28.2

Non-traded value at risk 99% confidence

1.

The diversification benefit reflects the historical correlation between the regions. The high and low VaR figures reported for the region did not necessarily occur on the same day as the high and low VaRreported for the Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

ANZ 2020 Annual Report

177

177

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. 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. A positive number signifies that a rate increase is positive for net interest income over the next 12 months.
2020

20191

As at period end

1.25%

1.19%

Maximum exposure

1.61%

1.19%

Minimum exposure

0.52%

0.33%

Average exposure (in absolute terms)

1.01%

0.69%

Impact of 1% rate shock1.

Prior period numbers have been restated to reflect IRR model enhancements

EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprise investments we hold for longer-term strategic reasons.
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 the valuations of the investments within the portfolio and assesses whether the investments are appropriately measured
based on the recognition and measurement 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 it is considered appropriate, the Group takes out economic hedges against larger foreign exchange denominated revenue streams (primarily
New Zealand Dollar, US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreignexchange rates on the consolidated capital ratios are minimised.

178

178

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. 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, atthe site 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.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISKScenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the Board. The metrics cover a range of
scenarios of varying duration and level of severity.
A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking
regulators including APRA. As part of meeting LCR requirements, the Group has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia(RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative formof contingent liquidity. The total amount of the CLF available to a qualifying Australian Deposit-taking Institution is set annually by APRA. From 1
January 2020, ANZ’s CLF is $35.7 billion (2019 calendar year end: $48.0 billion).
Liquid assets
The Group holds a portfolio of high quality (unencumbered) liquid assets to protect the Group’s liquidity position in a severely stressed environment,
to meet regulatory requirements. HQLA comprise three categories consistent with Basel III LCR requirements:
 HQLA1- Cash and highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide
same-day liquidity.
 HQLA2 - High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality coveredbonds eligible for repurchase with central banks to provide same-day liquidity.
 Alternative liquid assets (ALA) - Assets qualifying as collateral for the CLF and eligible securities that the Reserve Bank of New Zealand (RBNZ) will
accept in its domestic market operations.
LIQUIDITY RISK OUTCOMES1
Liquidity Coverage Ratio
ANZ’s Liquidity Coverage Ratio (LCR) averaged 139% for 2020, a decrease from the 2019 average of 140%, and above the regulatory minimum of100%.
Net Stable Funding Ratio
ANZ’s Net Stable Funding Ratio (NSFR) as at 30 September 2020 was 124% (2019: 116%), 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.

ANZ 2020 Annual Report

179

179

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
Liquidity crisis contingency planning
The Group 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
The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures thatan 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 budgeting 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%. APRA has determined that the TFF qualifies forinclusion in determining the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). ADIs can obtain initial funding of up to 3% of their
existing credit outstanding to Australian households and businesses, and have access to additional funding if they increase lending to business,
especially to small and medium-sized businesses.
As at 30 September 2020, ANZ had drawn $12 billion from its initial TFF allowance of $12 billion, and drawn $nil from its additional TFF allowance of $6
billion.

180

180

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

16. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF GROUP’S LIABILITIESThe tables below provide residual contractual maturity analysis of financial liabilities, including financial liablities reclassified to held for sale, at 30
September within relevant maturity groupings. All outstanding debt issuance and subordinated debt is profiled on the earliest date on which theGroup may be required to pay. All at-call liabilities are reported in the “Less than 3 months” category. Any other items without a specified maturity
date are included in the “After 5 years” category. The amounts represent principal and interest cash flows - so they may differ from equivalent amounts
reported on balance sheet. For the purpose of this note, liabilities presented as liabilities held for sale in the Balance Sheet have been reallocated totheir respective Balance Sheet categories.
It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 179.
Less than
3 months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

Settlement balances owed by ANZ

22,241---

22,241

Collateral received

9,304

-

-

-

9,304

576,506

90,241

18,025

159

684,931

449

-

-

-

449

5,174

26,642

78,181

16,948

126,9452020

Deposits and other borrowings
Liability for acceptances
Debt issuances1

123,865---

123,865

72

248

809

390

1,519

Receive leg(11,170)(21,569)(69,594)(18,243)(120,576)

Pay leg

10,856

20,20666,455

17,403

114,920

Receive leg(75,098)(40,956)(9,738)(8,512)(134,304)

Pay leg

75,22640,401

10,031

7,271

132,929

Settlement balances owed by ANZ

10,83829--

10,867

Collateral received

7,929

-

-

-

7,929

530,392

102,731

7,657

100

640,880

760

-

-

-

760

Derivative liabilities (excluding those held for balance sheet management)2
Lease liabilities3
Derivative assets and liabilities (balance sheet management)- Funding4- Other balance sheet management

2019

Deposits and other borrowings
Liability for acceptances

7,948

18,985

95,632

17,886140,451

108,501---

108,501

Receive leg(27,588)(29,128)(82,588)(22,238)(161,542)

Pay leg

26,77826,594

77,686

21,190152,248

Receive leg(85,489)(26,218)(11,632)(1,893)(125,232)

Pay leg

85,887

26,98013,071

2,311

128,249

Debt issuances1

Derivative liabilities (excluding those held for balance sheet management)2
Derivative assets and liabilities (balance sheet management)4- Funding- Other balance sheet management1.

Any 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,
and perpetual debt instruments after 5 years.
The full mark-to-market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘less than 3 months’ category.
3.
On adoption of AASB 16 on 1 October 2019, the Group recognised a lease liability of $1.7 billion presented within Payables and other liabilities. Comparative information has not been restated. Refer to Note
1 for further details.
4.
Include derivatives designated into hedging relationships of $4,484 million (2019: 4,173 million) and $6,362 million (2019: $8,277 million) categorised as held for trading but form part of Group’s balance
sheet activities.
2.

At 30 September 2020, $227,819 million (2019: $209,341 million) of the Group’s undrawn facilities and $39,795 million (2019: $44,451 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.

ANZ 2020 Annual Report

181

181

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESThe Group carries a significant number of financial instruments on the balance sheet at fair value. In addition the Group also holds assets
classified as held for sale which are measured at fair value less costs to sell. The fair value is the best estimate of the price that would bereceived to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
VALUATION
The Group has an established control framework, including appropriate segregation of duties, to ensure that fair values are accurately determined,
reported and controlled. The framework includes the following features: products are approved for transacting with external customers and counterparties only where fair values can be appropriately determined; quoted market prices used to value financial instruments are independently verified with information from external pricing providers; fair value methodologies and inputs are evaluated and approved by a function independent of the party that undertakes the transaction;
 movements in fair values are independently monitored and explained by reference to underlying factors relevant to the fair value; and valuation adjustments (such as funding valuation adjustments, credit valuation adjustments and bid-offer adjustments) are independently
validated and monitored.
If the Group holds offsetting risk positions, then the Group uses the portfolio exception in AASB 13 Fair Value Measurement (AASB 13) to measure thefair value of such groups of financial assets and financial liabilities. We measure the portfolio based on the price that would be received to sell a net
long position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
We 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; or in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatcharises as we measure the derivative financial instruments (which we acquired to mitigate interest rate risk of the 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.
We may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit or loss
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:

Valuation techniques are used that incorporate observable market inputs for financial
instruments with similar credit risk, maturity and yield characteristics. Equity
instruments that are not traded in active markets may be measured using
comparable company valuation multiples.

- Trading securities- Securities sold short- Derivative financial assets and financial liabilities- Investment securities
Financial instruments classified as:- Net loans and advances- Deposits and other borrowings- Debt issuances
Assets and liabilities held for sale

182

182

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 with similar maturities or yield curve appropriate for theremaining term to maturity.
Valuation based on the expected sale price before transaction costs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESThe following tables set out the classification of financial asset and liability categories according to measurement bases together with their carrying
amounts as reported on the balance sheet.
2020

2019

Note

At
amortised
cost
$m

At
fair
value
$m

8

107,923-

Settlement balances owed to ANZ

7,541

-

Collateral paid

14,308

-

Total
$m

At
amortised
cost
$m

At
fair
value
$m

Total
$m

107,923

81,621-

81,621

7,541

3,739

-

3,739

14,30815,006-15,006

Financial assets
Cash and cash equivalents

Trading securities

9-50,91350,913-

43,16943,169Derivative financial instruments

10-

135,331

135,331-

120,667

120,667

Investment securities

11

6,816

86,57593,391

5,999

77,71083,709Net loans and advances

12613,155

3,938

617,093614,336922

615,258

801

-

801

879

-

879

Regulatory deposits
Assets held for sale

1

Other financial assets
Total

-

-

-

-

1,420

1,420

2,407

-

2,407

3,118

-

3,118

752,951

276,757

1,029,708

724,698

243,888968,586

22,241-

22,241

10,867-

10,867

Financial liabilities
Settlement balances owed by ANZ

9,304

-

9,304

7,929

-

7,929

Deposits and other borrowings

14679,255

3,078

682,333

635,376

2,301

637,677

Derivative financial instruments

10-

134,711

134,711-

120,951

120,951

Collateral received

Liabilities held for sale

1

Payables and other liabilities
Debt issuances
Total
1.

15

-

-

-

-

1,914

1,914

5,285

3,843

9,128

5,377

2,591

7,968

117,509

2,159

119,668

127,1022,589

129,691

833,594

143,791

977,385786,651

130,346

916,997

Assets held for sale and liabilities held for sale include only the components of assets or liabilities held for sale which are financial instruments.

FAIR VALUE HIERARCHYThe Group categorises assets and liabilities carried at fair value into a fair value hierarchy as required by AASB 13 based on the observability of inputs
used to measure the fair value:
 Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
 Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or
indirectly; and Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.

ANZ 2020 Annual Report

183

183

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
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)
2020
2019
$m
$m

Using observable
inputs (Level 2)

Using unobservable
inputs (Level 3)

Total

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

6,909

5,401

-

-

50,913

43,169365 134,588

120,24162

61

135,331

120,667

Assets44,004

Trading securities1
Derivative financial instruments
Investment securities

1

Net loans and advances2
Assets held for sale

681
85,33076,000

137

499

1,108

1,211

86,57577,710

-

-

3,925

922

13

-

3,938

922

-

-

1,952

-

-

-

1,952

114,133 145,559

129,015

1,183

1,272

276,757

244,420-3

130,015

Total

37,768

Liabilities
Deposits and other borrowings2

-

-

3,078

2,301

-

-

3,078

2,301

Derivative financial instruments

1,120

881

133,536

120,01855

52

134,711

120,951

Payables and other liabilities4

3,830

2,553

13

38

-

-

3,843

2,591

Debt issuances (designated at fair value)

-

-

2,159

2,589

-

-

2,159

2,589

Liabilities held for sale

-

-

-

2,121

-

-

-

2,121

3,434 138,786

127,06755

52

143,791

130,553

3

Total

4,950

1.

During the year, $127 million of assets were transferred from Level 2 to Level1 (2019: nil) following increased trading activity to support quoted prices. There were no other material transfers during the year.
Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
From 1 October 2019, Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
3.
The amount classified as Assets and Liabilities held for sale relates to assets and liabilities measured at fair value less cost to sell in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued
Operations. The amount presented reflects fair value excluding cost to sell but including intercompany eliminations.
4.
Payables and other liabilities relates to securities sold short, which we classify as held for trading and measured at fair value through profit or loss.
2.

FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Level 3 fair value measurements
The net balance of Level 3 is an asset of $1,128 million (2019: $1,220 million). The assets and liabilities which incorporate significant unobservable
inputs primarily include: equities for which there is no active market or traded prices cannot be observed;
 structured credit products for which credit spreads and default probabilities relating to the reference assets and derivative counterparties cannot
be observed;
 net loans and advances that are required to be measured at fair value for which there is no observable market data; and other derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
Movement in Level 3 balance is mainly due to the revaluation of the Group’s investment in Bank of Tianjin.
There were no material transfers in or out of Level 3 during the period.

184

184

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
Bank of Tianjin (BoT)The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is the ratio of the market value of equity to the bookvalue of equity). The extent of judgement applied in determining the appropriate multiple and comparator group from which the multiple is derived
are non-observable inputs which have resulted in the Level 3 classification.
Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs not being directly observable in the market place (Level 3 inputs), then changing theseassumptions changes the Group’s estimate of the instrument’s fair value. Favourable and unfavourable changes are determined by changing the
primary unobservable parameter used to derive the valuation.
Bank of Tianjin (BoT)The valuation of the BoT investment is sensitive to the selected unobservable input, being the P/B multiple. If the P/B multiple was increased or
decreased by 10% it would result in a $93 million (2019: $111 million) increase or decrease to the fair value of the investment, which would berecognised in shareholders’ equity.
Other
The remaining Level 3 balance is immaterial and changes in the Level 3 inputs have a minimal impact on net profit and net assets of the Group.
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.
The day one gains and losses deferred are not material.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The following table sets out the Group’s basis of estimating fair values of financial instruments carried at amortised cost:
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.

ANZ 2020 Annual Report

185

185

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The financial assets and financial liabilities listed in the table below are carried at amortised cost on the Group’s Balance Sheet. While this is the value atwhich we expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of the financial assets andfinancial liabilities at balance date in the table below.
Categorised into fair value hierarchy

At amortised cost

Quoted priceactive markets(Level 1)

Using observable
inputs (Level 2)With significant nonobservable inputs(Level 3)

Fair value (total)

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

613,155

614,336--

16,161

22,629597,997592,704

614,158

615,333

Financial assets
Net loans and advances
Investment securities

6,816

5,999

-

-

6,816

5,997

-

-

6,816

5,997

Total

619,971

620,335--

22,97728,626597,997592,704

620,974

621,330

Deposits and other borrowings

679,255

635,376--

679,544635,660--

679,544635,660

Debt issuances

117,509

127,102

26,10743,304

93,18785,484--

119,294

128,788

Total

796,764

762,478

26,10743,304

772,731

721,144--798,838

764,448

Financial liabilities

KEY JUDGEMENTS AND ESTIMATESThe Group evaluates the material accuracy of the valuations incorporated in the financial statements as they can involve a high degreeof judgement and estimation in determining the carrying values of financial assets and financial liabilities at the balance sheet date.
The majority of valuation models the Group uses employ only observable market data as inputs. This has not changed as a result of
COVID-19, however the Group has considered the impact of related economic and market disruptions on fair value measurement
assumptions and the appropriateness of valuation inputs, notably valuation adjustments, as well as the impact of COVID-19 on theclassification of exposures in the fair value hierarchy.
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 to determine fair value depending on the significance of the unobservable input tothe 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 value of a financial instrument using a valuation technique, the Group considers valuation adjustments indetermining the fair value. We may apply adjustments (such as bid/offer spreads, credit valuation adjustments and funding valuation
adjustments – refer Note 10 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants
would consider in setting fair value.

186

186

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

18. 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.
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:
2020
$m

2019
$m

61,415

43,213-

3,228

Residential mortgages provided as security for covered bonds

28,55930,799

Other

4,990

4,927

Securities sold under arrangements to repurchase1
Assets pledged as collateral for UDC Secured Investments

2

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.
2.

UDC Secured Investments were secured by a security interest over all of UDC’s assets. The Group divested of UDC during 2020 and, therefore, there are no longer any associated collateral balances requiring
disclosure by the Group.

COLLATERAL ACCEPTED AS SECURITY FOR ASSETSANZ has received collateral associated with various financial instruments. Under certain transactions ANZ has the right to sell, or to repledge, thecollateral received. These transactions 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:
2020
$m

2019
$m

Fair value of assets which can be sold or repledged

54,24237,990Fair value of assets sold or repledged

32,57829,460

ANZ 2020 Annual Report

187

187

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
19. 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.
If the above conditions are not met, the financial assets and financial liabilities are presented on a gross basis.
The Group does not have any arrangements that satisfy the conditions necessary to offset financial assets and financial liabilities within the balance
sheet. 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

2020

Amounts not
Total amounts
subject torecognised in master netting
the agreement orBalance Sheetsimilar
$m
$m

Total
$m

Financial
instruments$mFinancialcollateral(received)/pledged$mNetamount$m

Derivative financial assets

135,331(3,862)

131,469(117,982)(6,397)

7,090

Reverse repurchase, securities borrowing andsimilar agreements1

53,434(5,922)47,512(1,566)(45,946)-

Total financial assets

188,765(9,784)

178,981(119,548)(52,343)

7,090

Derivative financial liabilities(134,711)

2,824(131,887)

117,982

10,059(3,846)

Repurchase, securities lending and similar
agreements2(55,716)

14,354(41,362)

1,566

39,796-

Total financial liabilities(190,427)

17,178(173,249)

119,548

49,855(3,846)

Amount subject to master netting agreement or similar

2019

Amounts not
Total amounts
subject torecognised in master netting
the agreement orBalance Sheetsimilar
$m
$m

Total
$m

Financial
instruments$mFinancialcollateral(received)/pledged$mNetamount$m

Derivative financial assets

120,667(4,019)116,648(103,247)(6,378)

7,023

Reverse repurchase, securities borrowing andsimilar agreements1

37,102(5,299)31,803(1,414)(30,389)-

Total financial assets

157,769(9,318)148,451(104,661)(36,767)

7,023

Derivative financial liabilities(120,951)

3,145(117,806)

103,247

10,970(3,589)Repurchase, securities lending and similar
agreements2(41,367)

17,781(23,586)

1,414

22,172-

Total financial liabilities(162,318)

20,926(141,392)

104,661

33,142(3,589)1.

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.

2.

Repurchase agreements are presented on the Balance Sheet within deposits and other borrowings.

188

188

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

20. GOODWILL AND OTHER INTANGIBLE ASSETS
Software

Goodwill1
2020
Balance at start of year
Additions

2019

2020

Other Intangibles
2019

2020

2019

Total
2020

2019

$m

$m

$m

$m

$m

$m

$m

$m

3,467

3,440

1,323

1,421

71

69

4,861

4,930

-

-

375

421

6

-

381

421

Amortisation expense

-

-

(657)

(517)

(1)

-

(658)

(517)

Impairment expense

(77)

-

(2)

(4)

-

-

(79)

(4)

Written off on disposal

(124)

-

-

-

-

-

(124)

-

(2)

27

-

2

-

2

(2)

31

Balance at end of year

3,264

3,467

1,039

1,323

76

71

4,379

4,861

Cost3

3,341

3,467

7,300

7,068

77

75

10,718

10,610(77)

n/a(6,261)(5,745)(1)(4)(6,339)(5,749)

3,264

3,467

1,039

1,323

76

71

4,379

4,861

2

Foreign currency exchange difference

Accumulated amortisation/impairment
Carrying amount
1.
2.
3.

Goodwill excludes notional goodwill in equity accounted investments.
During the second half of the 2020 financial year, the Group amended the application of its software amortisation policy. The Group recognised accelerated amortisation of $197 million.
Includes impact of foreign currency translation differences.

IMPAIRMENT TESTING FOR CASH GENERATING UNITS (CGUs) CONTAINING GOODWILL
During the year ended September 2020, $124 million of goodwill was written off in relation to completed divestments. In addition, as a result ofchanges in economic outlook, the Group announced its intention to begin winding up the Bonus Bonds business, a managed investment product in
New Zealand and the Group wrote off the associated goodwill of $27 million. The balance of goodwill was subject to impairment assessment as set
out below which resulted in $50 million of goodwill impairment in the Pacific division.
An assessment as to whether the current carrying value of goodwill is impaired is undertaken annually or where there are indicators of potential
impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated at the date of acquisition to the cash
generating units (CGUs) that are expected to benefit from the synergies of the related business combination. These CGUs are ANZ’s reportablesegments. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount.
In determining the carrying amount of the CGUs to which goodwill is allocated, we include all direct assets and liabilities and an allocation, on areasonable and consistent basis, of corporate assets and liabilities that are recorded outside those CGUs to which goodwill is allocated.
We estimate the recoverable amount of each CGU to which goodwill is allocated using a fair value less costs of disposal (FVLCOD) approach, with avalue in use (VIU) assessment performed where the FVLCOD is less than the carrying amount.
As the Group’s market capitalisation was below the Group’s net asset value at 30 September 2020, and considering uncertainties surrounding COVID19, the Group assessed the carrying value of goodwill as at 30 September 2020. Based on this assessment:
no impairment was identified in the Australia Retail and Commercial, New Zealand and Institutional CGUs under the FVLCOD approach;

the Pacific CGU’s recoverable amount measured on a VIU basis (being higher than its FVLCOD) indicated a shortfall in recoverable amountrelative to carrying amount. Accordingly an impairment loss of $50 million has been recognised at 30 September 2020, reducing the carrying
amount of goodwill to nil.

Fair Value Less Cost of Disposal
The recoverable amount of each CGU to which goodwill is allocated is estimated on a FVLCOD basis, calculated using a market multiple approach.
Under this approach, we determine the estimated fair value of each of our CGUs by applying observable price earnings multiples of appropriatecomparator companies to the estimated future maintainable earnings of each CGU. A deduction is then made for estimated costs of disposal. The
valuation is considered to be level 3 in the fair value hierarchy due to unobservable inputs used in the valuation.

ANZ 2020 Annual Report

189

189

Overview
ANZ 2020
ANNUAL REPORT How we

Performanceoverview

create value

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
Management’s approach and the key assumptions used to determine FVLCOD, for those CGUs where recoverable amount was determined on thebasis of FVLCOD were as follows:
Key assumption
Future maintainable earnings

Price/Earnings (P/E) multiple
applied (including control
premium)

Approach to determining the value (or values) for each key assumption
Future maintainable earnings for each CGU have been estimated as the sum of:
The financial year 2021 financial plan results for each CGU, which incorporates management
estimates of the impacts of COVID-19; plusAn allocation of the central costs recorded outside of the CGU’s to which goodwill is allocated.
Adjustments have been made to the financial year 2021 plan results to:reflect longer term expected credit losses; and
normalise certain other operating expenditure where specific factors result in financial year 2021
planned expenditure exceeding longer term maintainable levels with the higher operating
expenditure treated as a one-off adjustment in the valuations.
Trading multiples:
The P/E multiples used have been derived from valuations of comparable publicly traded companies as at
30 September 2020 and are the median P/E multiple (2021 earnings multiple) of the comparator group:
For the Australia Retail and Commercial and New Zealand CGUs, the comparator group is the four
major banking groups headquartered in Australia;
For the Institutional CGU, the comparator group includes the four major banking groups
headquartered in Australia plus certain major financial institutions who compete with the Group ininternational markets.
In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments
to comparator group multiples to address specific factors relevant to those CGUs.
For each of ANZ’s CGUs where the recoverable amount was determined on the basis of FVLCOD, the P/E
multiples applied (including a 30% control premium discussed below) were as follows:
Division
Australia Retail and Commercial
New ZealandInstitutional

2020
16.0
12.7
13.4

2019
17.9
17.8
14.7

Control premium:
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 activitiesof 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 input from historicaland recent transactions.

FVLCOD assessment outcomes
For those CGUs where recoverable amount was determined on the basis of FVLCOD, the surplus of the recoverable amount over the carrying amount
was as follows:

Cash generating unit:
Australia Retail and Commercial
New ZealandInstitutional

Surplus30 September 2020
$m
4,539
1,201
516

Sensitivity analysis
The surpluses disclosed above are sensitive to judgements and estimates in respect of:



190

190

for recoverable amount – The future maintainable earnings and the P/E multiple applied (including the control premium applied indetermining the P/E multiple); andfor carrying amount - The allocation of corporate assets and liabilities recorded outside those CGUs to which goodwill is allocated.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
The FVLCOD estimates for the respective CGUs would continue to show a surplus in recoverable amount over carrying amount if:either the P/E multiple applied or the future maintainable earnings estimates were reduced (in isolation) by 13.6% in Australia Retail andCommercial; 8.6% in New Zealand or 2.6% in Institutional; orthe 30% control premium applied was reduced by 59.5% in Australia Retail and Commercial (resulting in a control premium applied of
12.1%), by 38.1% in New Zealand (resulting in a control premium applied of 18.6%) or by 11.4% in Institutional (resulting in a control
premium applied of 26.6%); or
the share of corporate assets and liabilities was increased (in isolation) by 17.3% to Australia Retail and Commercial; 10.1% to New Zealandor 3.2% to Institutional.

As the recoverable amounts estimated on the basis of FVLCOD show a surplus of recoverable amount over carrying amount for the Australia Retailand Commercial, New Zealand and Institutional CGUs, such adverse movements would not necessarily trigger an impairment, rather they would
trigger the need for a VIU assessment to be performed with any impairment determined on the basis of the higher of FVLCOD and VIU.
Value In Use
The Pacific CGU’s recoverable amount was measured on the basis of its VIU (as this was higher than the FVLCOD). Recoverable amount under the VIU
assessment was estimated at $466 million using a post-tax discount rate of 13%, which resulted in a shortfall relative to carrying amount. Accordingly
an impairment loss of $50 million has been recognised at 30 September 2020, reducing the carrying amount of goodwill to nil. In addition, an
associated assessment of the carrying values of the other assets in the Pacific was completed and no impairment (apart from goodwill) was recorded.
The goodwill applicable to each CGU before and after impairment charges and other adjustments is shown below:

Cash generating unit:
Australia
New ZealandInstitutional
Pacific
Total

Balance as at
1 October 2019
$m
409
1,937
1,071
50
3,467

Impairment
expense
$m
(27)
(50)
(77)

Disposalon sale
$m
(6)
(118)
(124)

Foreign exchange
difference
$m
1
(3)
(2)

Balance at
30 September 2020
$m
403
1,793
1,068
3,264

ANZ 2020 Annual Report

191

191

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:

Definition

Carrying value

Goodwill

Software

Other Intangible Assets

Excess amount the Group has
paid in acquiring a business overthe fair value of the identifiable
assets and liabilities acquired.

Purchases of “off the shelf” software
assets are capitalised as assets.

Management fee rights arising fromacquisition of funds managementbusiness and an intangible asset
arising from contractual rights.

Cost less any accumulated
impairment losses.

Initially, measured at cost.

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.

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 inwhich the costs are incurred.
Subsequently, carried at cost lessaccumulated amortisation andimpairment losses.

Initially, measured at fair value atacquisition.
Subsequently, carried at cost lessamortisation and impairment losses.

Costs incurred in planning or evaluating
software proposals or in maintaining
systems after implementation are
not capitalised.
Except for major core infrastructure,amortised over periods between
2-5 years; however major core
infrastructure may be amortised up to 7
years subject to approval by the Audit
Committee.

Management fee rights with anindefinite life are reviewed for
impairment at least annually or when
there is an indication of impairment.
The contractual rights intangible asset
has a useful life of 3 years.

Purchased software is amortised over 2
years unless it is considered integral toother assets with a longer useful life.
Depreciation
method

192

192

Not applicable.

Straight-line method.

Not applicable to indefinite life
intangible assets. Straight line forthose with a limited life.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

20. 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 an asset, or
if 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:

the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Group’s four
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 used to determine whether the carrying amount of goodwill is supported isbased on judgements including:oselection of the model used to determine the fair value – the Group has used the market multiple approach to estimate thefair value; andoselection of the key assumptions in respect of future maintainable earnings, the P/E multiple applied, including selection ofan appropriate comparator group and determination of an appropriate control premium, and costs of disposal as describedabove.

The assessment of the recoverable amount of each CGU has been made within the context of the ongoing impact of COVID-19 on both earnings
and asset prices, and reflects expectations of future events that are believed to be reasonable under the circumstances. The rapidly evolving
consequences of COVID-19 and government, business and consumer responses create heightened uncertainty in these estimates and any
variations could have a positive or adverse impact on the determination of recoverable amounts.
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, thecarrying 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 businessstrategy, significant divestments and the underlying pace of technological change.
During the Financial year the Group amended the application of the software policy to reflect the shorter useful lives of various types of software,
including regulatory and compliance focused assets and purchased assets. These changes better reflect the Group’s rapidly changing technology
and business needs and ongoing reinvestment in purchased and internally developed software to ensure assets remain fit for purpose.

ANZ 2020 Annual Report

193

193

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21. OTHER PROVISIONS
2020
$m

2019
$m

898

668

Customer remediation

1,109

1,139

Restructuring costs

105

64

Non-lending losses, frauds and forgeries

79

94

Other

388

349

2,579

2,314

-

(91)

2,579

2,223

ECL allowance on undrawn and contingent facilities1

Total other provisions (including liabilities reclassified as held for sale)Less: Other provisions reclassified as held for sale
Total other provisions
1.

Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.

Balance at 1 October 2018

Customer
remediation$m

Restructuring
costs
$m

Non-lending
losses, frauds
and forgeries
$m

Other
$m

602

105

100

191

New and increased provisions made during the year

857

97

18

338

Provisions used during the year

(186)

(117)

(5)

(71)

Unused amounts reversed during the year
Balance at 30 September 2019 (including liabilities reclassified as held
for sale)

(134)

(21)

(19)

(109)

1,139

64

94

349

New and increased provisions made during the year

773

124

4

400

Provisions used during the year

(381)

(74)

(12)

(215)

Unused amounts reversed during the year1

(422)

(9)

(7)

(146)

Balance at end of year

1,109

105

79

388

1.

Customer remediation includes a $99 million transfer to the purchaser on completion of divestment of part of Wealth Australia discontinued operations.

Customer remediation
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory
claims, penalties and litigation outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or themanner in which 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 andadvances and losses arising from forgeries, frauds and the correction of operational issues. The amounts recognised are the best estimate of theconsideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround theevents and circumstances 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 partof a business combination.

194

194

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

21. OTHER PROVISIONS (continued)

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, fraud 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.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and otherrelevant evidence including expert legal advices and adjustments are made to the provisions where appropriate.

ANZ 2020 Annual Report

195

195

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. SHAREHOLDERS’ EQUITYSHAREHOLDERS' EQUITY
2020
$m

2019
$m

26,531

26,490Foreign currency translation reserve

155

705

Share option reserve

85

89

FVOCI reserve

245

126

Ordinary share capital
Reserves

Cash flow hedge reserve

1,038

731

Transactions with non-controlling interests reserve

(22)

(22)

Total reserves

1,501

1,629

Retained earnings

33,25532,664

Share capital and reserves attributable to shareholders of the Company

61,28760,783

Non-controlling interests
Total shareholders’ equity

10

11

61,29760,794

ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the period.
2020

Balance at start of the year
Dividend reinvestment plan ('DRP') Issuances

1

Bonus option plan2

2019

Number ofshares$m

Number ofshares$m

2,834,584,923

26,4902,873,618,118

27,205

3,373,022

61

-

-

2,412,280-

2,999,796-

Group employee share acquisition scheme

-

(20)

-

-

Share buy-back3--(42,032,991)(1,120)Treasury shares in Wealth Australia discontinued operations4

-

-

-

405

2,840,370,225

26,531

2,834,584,923

26,490

Balance at end of year
1.

3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final and interim dividend as the shares were purchased on-market andprovided directly to shareholders participating in the DRP).
2.
The Company issued 0.8 million shares under the Bonus Option Plan (BOP) for the 2020 interim dividend and 1.6 million shares for the 2019 final dividend (1.4 million shares for the 2019 interim dividendand 1.6 million shares for the 2018 final dividend).
3.
The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the September 2019 full year resulting in 42.0 million ANZ ordinary shares being
cancelled in the September 2019 full year.
4.
The successor fund transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result the Group no longer eliminates the ANZ sharespreviously held in Wealth Australia discontinued operations.

196

196

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

22. SHAREHOLDERS’ EQUITY (continued)

RECOGNITION AND MEASUREMENT
Ordinary shares

Ordinary shares have no par value. They entitle holders to receive dividends, orproceeds 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 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, or the life insurance business purchased and held to back policy liabilities in thestatutory funds prior to the successor fund transfer performed in preparation for the sale of
the Group’s wealth business to Zurich and IOOF which completed on 13 April 2019.
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.

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
as shareholders.

Non-controlling interests

Share in the net assets of controlled entities attributable to equity interests which theCompany does not own directly or indirectly.

ANZ 2020 Annual Report

197

197

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
23. CAPITAL MANAGEMENTCAPITAL 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.

REGULATORY ENVIRONMENT
Australia
As ANZ is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959 (Cth). ANZ mustcomply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that APRA sets and which areconsistent with the global Basel III capital framework. This is the common framework for determining the appropriate level of bank regulatory capitalas set by the Basel Committee on Banking Supervision (“BCBS”). APRA 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%.

Level 1

Level 2

Level 3The ADI on a stand-alone basis (that is
the Company 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 Group at the widest level.

Minimum Prudential Capital Ratios (PCRs)

Reporting Levels

APRA also requires the ADI to hold additional CET1 buffers as follows: a capital conservation buffer (CCB) of 3.5% 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 to zero for Australia.
ANZ reports to APRA on a Level 1 and Level 2 basis, and measures capital adequacy monthly on a Level 1 and Level 2 basis, and is not yet required tomaintain capital on a Level 3 basis (APRA have yet to conclude required timing for Level 3 reporting).
Life 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 Group’s results,then we exclude them from the determination of CET1 capital to the extent they have not been remitted to the Company.

198

198

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

23. CAPITAL MANAGEMENT (continued)
Outside Australia
In addition to APRA, the Company’s branch operations and major banking subsidiary operations are also overseen by local regulators such as theReserve Bank of 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 theirindividual jurisdictions.

CAPITAL ADEQUACY1
The following table provides details of the Group’s capital adequacy ratios at 30 September:
2020
$m

2019
$m

61,29760,794

Qualifying capital
Tier 1
Shareholders' equity and non-controlling interests
Prudential adjustments to shareholders' equity

(205)

120

Gross Common Equity Tier 1 capital

61,092

60,914

Deductions(12,390)(13,559)

Common Equity Tier 1 capital

48,70247,355Additional Tier 1 capital2

7,779

7,866

Tier 1 capital

56,481

55,221

Tier 2 capital3

13,957

8,549

Total qualifying capital

70,43863,770Common Equity Tier 1

11.3%

11.4%

Tier 1

13.2%

13.2%

Tier 2

3.3%

2.1%

Total capital ratio

16.4%

15.3%

429,384

416,961

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 $8,196 million (2019: $8,171 million) (refer to Note 15 Debt issuances), reduced for regulatory adjustments and deductions of $417 million (2019: $305 million).

3.

This includes Tier 2 capital of $12,865 million (2019: $8,415 million) (refer to Note 15 Debt issuances), general reserve for impairment of financial assets of $1,813 million (2019: $296 million) and deductions
for regulatory adjustments of $721 million (2019: $162 million).

ANZ 2020 Annual Report

199

199

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. PARENT ENTITY FINANCIAL INFORMATION
Australia and New Zealand Banking Group Limited (the Company) has prepared a separate set of financial statements to satisfy the requirements of
the Australian Financial Services Licence it holds with ASIC. These separate Company financial statements are available on the ANZ website at anz.com
and have been lodged with ASIC.
Selected financial information of the Company is provided below:

SUMMARY FINANCIAL INFORMATION

Income statement information for the financial year
Profit after tax for the year
Total comprehensive income for the year
Balance sheet information as at the end of the financial year
Cash and cash equivalents
Net loans and advances
Total assets
Deposits and other borrowings
Total liabilities
Shareholders' equity
Ordinary share capital
Reserves
Retained earnings
Total shareholders' equity
CREDIT RELATED COMMITMENTS AND CONTINGENCIES

Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total

2020
$m

2019
$m

2,806
3,007

4,447
5,413

98,083
488,002
979,078
558,136
925,806

77,949484,655
914,832
524,241
861,618

26,454
1,018
25,80053,272

26,413840
25,961
53,214

2020
$m

2019
$m

191,300
20,64015,505
227,445

171,881
20,37520,097
212,353

The contingent liabilities of the Group described under Other contingent liabilities in Note 33 are contingent liabilities of the parent entity (some arealso contingent liabilities of other Group companies).

200

200

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

25. CONTROLLED ENTITIES
Incorporated inAustralia

Nature of BusinessBanking

All controlled entities are 100% owned, unless otherwise noted.
The material controlled entities of the Group are:
ANZ Bank (Vietnam) Limited1

VietnamBanking

ANZ Capel Court Limited

Australia

Securitisation Manager

ANZ Funds Pty. Ltd.

Australia

Holding Company

Kiribati
Samoa
Thailand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New ZealandSingapore
Singapore
Hong Kong
Hong Kong
VanuatuSingapore
Australia

Banking
Banking
Banking
Holding Company
Banking
Funds Management
Finance
Holding Company
Funds Management
Finance
Holding Company
Merchant Banking
Holding Company
Banking
Banking
Captive-Insurance
Mortgage Insurance

Australia

Finance

Australia and New Zealand Bank (China) Company Limited

China

Banking

Australia and New Zealand Banking Group (PNG) Limited

1

Papua New Guinea

Banking

Chongqing Liangping ANZ Rural Bank Company Limited1

China

Banking

Guam

Holding Company

Guam
Indonesia

Banking
Banking

The ultimate parent of the Group is Australia and New Zealand Banking Group Limited

ANZ Bank (Kiribati) Limited (75% ownership)
ANZ Bank (Samoa) Limited1
ANZ Bank (Thai) Public Company Limited1
ANZ Holdings (New Zealand) Limited1
ANZ Bank New Zealand Limited1
ANZ Investment Services (New Zealand) Limited1
ANZ New Zealand (Int’l) Limited1
ANZ Wealth New Zealand Limited1
ANZ New Zealand Investments Limited1
ANZNZ Covered Bond Trust1,4
ANZ International Private Limited1
ANZ Singapore Limited1
ANZ International (Hong Kong) Limited1
ANZ Asia Limited1
ANZ Bank (Vanuatu) Limited2
ANZcover Insurance Private Ltd1ANZ Lenders Mortgage Insurance Pty. Limited
1

ANZ Residential Covered Bond Trust4
1

Citizens Bancorp

3

ANZ Guam Inc3
PT Bank ANZ Indonesia1 (99% ownership)
1.

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.
2.

ANZ 2020 Annual Report

201

201

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25. CONTROLLED ENTITIES (continued)
CHANGES TO MATERIAL CONTROLLED ENTITIESThe following changes to our material entities have occurred during the year ended 30 September 2020.
 In January 2020, OnePath Funds Management Limited and OnePath Custodians Pty Limited was sold to IOOF Holdings Limited. The
holding company of these entities, ANZ Wealth Australia Limited, is no longer considered to be a material entity.
 In September 2020, UDC Finance Limited was sold to Shinsei Bank Limited.

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 ofthe entity.
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.
When the Group ceases to control a subsidiary, it: measures any retained interest in the entity at fair value; and recognises any resulting gain or loss in profit or loss.
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 forthat as a transaction with equity holders in their capacity as equity holders.
All transactions between Group entities are eliminated on consolidation.

202

202

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

26. INVESTMENTS IN ASSOCIATES
Significant associates of the Group are:Ordinary shareinterest

Carrying amount$m

Name of entity

Principal activity

2020

2019

2020

2019

AMMB Holdings Berhad ('AmBank')

Banking and insurance

24%

24%

1,056

1,586

PT Bank Pan Indonesia ('PT Panin')

Consumer and business bank

39%

39%

1,084

1,350

n/a

n/a

24

21

2,164

2,957

Aggregate other individually immaterial associates
Total carrying value of associates

1

1.

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 both associates have different financial
years to the Group (PT Panin 31 December, AmBank 31 March).
Principal place of business and country of incorporation

AMMB Holdings Berhad
Malaysia

PT Bank Pan Indonesia
Indonesia

2020
$m

2019
$m

2020
$m

2019
$m

Operating income

3,156

3,298

1,105

1,109

Summarised results
Profit for the year

456

569

319

349

Other comprehensive income/(loss)

105

69

72

24

Total comprehensive income

561

638

391

373

Less: Total comprehensive (income)/loss attributable to non–controlling interests

(26)

(25)

(11)

(12)

Total comprehensive income attributable to owners of associate

535

613

380

361

53,30155,74019,66922,518

Total liabilities

48,53048,718

16,59918,743

Total Net assets1
Less: Non–controlling interests of associate

4,771

7,022

3,070

3,775

(343)

(368)

(294)

(309)

Net assets attributable to owners of associate

4,428

6,654

2,776

3,466

Reconciliation to carrying amount of Group's interest in associate
Carrying amount at the beginning of the year

Summarised financial position
Total assets1
1

1,586

1,427

1,350

1,103

Group's share of total comprehensive income

126

146

150

140

Dividends received from associate

(32)

(50)

-

-

Group's share of other reserve movements of associate and foreign currency translation
reserve adjustments2

(29)

63

(128)

107

-

-

(68)

-

Impairment charges4

(595)

-

(220)

-

Carrying amount at the end of the year

1,056

1,586

1,084

1,350

727

1,050

653

1,303

Group's equity accounted share of AASB 9 transition adjustment3

Market value of Group's investment in associate
1.

Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).
In 2019, the Group recognised a decrease of $32m and $33m to the carrying value of AMMB Holdings Berhad and PT Bank Pan Indonesia respectively with a corresponding decrease to retained earnings
reflecting the Group's share of the estimated initial application impact of IFRS 9 (the international equivalent of AASB 9).
3.
In 2020, the Group recognised an adjustment of $68 million to the equity accounted earnings of PT Panin. When the Group adopted AASB 9 Financial Instruments on 1 October 2018, an estimate of PT
Panin’s transition adjustment was recognised through opening retained earnings to align accounting policies. PT Panin adopted AASB 9 during the current financial year recognising a transition adjustment
in retained earnings. The adjustment of $68 million represents the Group’s equity accounted share of the transition adjustment net of amounts previously recognised by the Group on 1 October 2018.
4.
The Group recorded an impairment charge of $815 million in other operating income based on impairment assessments performed as part of the Group 31 March 2020 half year results with AmBank
impaired by $595 million and PT Panin impaired by $220 million.
2.

ANZ 2020 Annual Report 203

203

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. INVESTMENTS IN ASSOCIATES (continued)
IMPAIRMENT ASSESSMENTThe Group assesses the carrying value of its associate investments for impairment indicators.
During the year the Group identified an indicator of impairment as neither the market values of the investments in AMMB Holdings Berhad(AmBank) and PT Bank Pan Indonesia (PT Panin) (based on share price) nor the value-in-use (VIU) calculation supported the carrying value ofeither investment. Accordingly, the Group recorded an impairment charge of $815 million ($595 million for AmBank and $220 million for PT
Panin).
VIU assessments were also conducted as at 30 September 2020 given the market values were below their carrying values. The assumptions usedin the VIU were updated to reflect the ongoing impact of COVID-19 and the uncertainty of the future performance of these investments. The VIU
assessments supported the carrying value of both Ambank and PT Panin as at 30 September 2020, however did not indicate the recoverable
amount of either investments had increased sufficiently to reverse any of the impairment recorded during the year.

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 relating to the associate in the carrying amount of theinvestment. 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.

KEY JUDGEMENTS AND ESTIMATES
The ongoing impact of COVID-19 on the valuation of AmBank and PT Panin is uncertain. Significant management judgment is required todetermine the key assumptions underpinning the VIU calculations. 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 rate arising from an increase in the risk premiumor risk-free rates.
The key assumptions used in the value-in-use calculation are outlined below:
As at 30 September 2020

AmBankPT Panin

Post-tax discount rate

11.3%

15.2%

Terminal growth rate

4.8%

5.3%

Expected earnings growth (compound annual growth rate – 5 years)

2.8%

4.2%

Common Equity Tier 1 ratio (5 year average)
12.9%
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 2020 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(46 million) /$50 million, and $(87 million) / $99 million for AmBank.



A change in the September 2020 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $8 million / ($8million) and $47 million / ($44 million) for Ambank.
Neither investment would be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably
possible changes above.

204

204

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated 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 controls SEs established to securitise customer loans and advances that it has originated, in order todiversify sources of funding for liquidity management. Such transactions involve transfers to an internal
securitisation (bankruptcy remote) vehicle used to create assets that are eligible for repurchase under agreementswith the applicable central bank. These internal securitisation SEs 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

Structured financearrangements

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.
The Group is involved with SEs established:in connection with structured lending transactions to facilitate debt syndication and/or to ring-fencecollateral; andto 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 conducts investment management and other fiduciary activities as a responsible entity, trustee,custodian or manager for investment funds and trusts – including superannuation funds and wholesale and retail
trusts (collectively ‘Investment Funds’). The Investment Funds are financed through the issuance of puttable units
to investors. The Group’s exposure to Investment Funds is limited to receiving fees for services and derivatives
entered into for risk management purposes. These interests do not create significant exposures to the funds thatwould allow the Group to control the funds. Therefore, the funds are not consolidated.

ANZ 2020 Annual Report 205

205

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27. STRUCTURED ENTITIES (continued)
CONSOLIDATED STRUCTURED ENTITIESFINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIESThe Group provides financial support to consolidated SEs as outlined below. As these are intra-group transactions, they are eliminatedon consolidation:
Securitisation and coveredbond issuances

The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instrumentsthat 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 (2019: nil). Other than as disclosed above, the Group does
not have any current intention to provide financial or other support to consolidated SEs.

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

2020
$m

2019
$m

Investment securities

2,280

1,923

Gross loans and advances

8,479

7,679

Total on-balance sheet

10,759

9,602

2,072

1,531

2020
$m

Total
2019
$m

2020
$m

2019
$m

-

-

2,280

1,923

74

110

8,553

7,789

74

110

10,833

9,712

22

9

2,094

1,540

On-balance sheet interests

Off-balance sheet interests
Commitments (facilities undrawn)

40

67

-

-

40

67

Total off-balance sheet

2,112

1,598

22

9

2,134

1,607

Maximum exposure to loss

12,871

11,20096

119

12,967

11,319

Guarantees

In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $285 million (2019: $509
million) during the year.

206

206

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

27. STRUCTURED ENTITIES (continued)
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 a maximum value of approximately $5.1 billion.
The Group did not provide any non-contractual support to unconsolidated SEs during the year (2019: nil) nor does it have any current intention toprovide financial or other support to unconsolidated SEs.

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 Limited. The Group does notprovide 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);
 exposure to variable returns of the entity; and the ability to use its power over the entity to affect the Group’s returns.

ANZ 2020 Annual Report 207

207

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportFinancialreportDirectors’
reportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 give rise to the Group fully, or partially, derecognising those financial assets - depending on the Group’s exposure to the risks and rewards orcontrol 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. In addition, the Group is entitled to any residual income of the SEs andsometimes enters into derivatives with the SEs. The Group retains the risks and rewards of the residential mortgages and continues to recognise themortgages as financial assets. The obligation to pay this amount to the SE is recognised as a financial liability of the Group.
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. The mortgages provide security for the obligations
payable on the issued covered bonds.
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 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 obligation to pay this amount to the SEs is recognised as a financial
liability of the Group.
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.

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 and commodity prepayment arrangements. Thesetransactions are recognised on Group’s balance sheet as lease receivables or loans. At times, other financial institutions participate in the funding ofthese 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 or financed commodity and related proceeds. Where the Group continues to be exposed to some of therisks 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 table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
Securitisations1,2

Covered bonds

Repurchaseagreements

Structured financearrangements

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

2020
$m

2019
$m

Current carrying amount of assets transferred

1,831

2,422

28,55930,79961,415

43,213

67

81

Carrying amount of associated liabilities

1,824

2,411

15,948

20,95755,71641,367

67

81

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.

208

208

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALEDISCONTINUED OPERATIONSIn October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and Aligned Dealer Groups(ADGs) businesses to IOOF. The sale of the ADG business completed on 1 October 2018 and the sale of OnePath P&I business was completed on 31
January 2020.
In December 2017, the Group announced that it had agreed to the sale of its life insurance business to Zurich Financial Services Australia (Zurich) andthe transaction was completed on 31 May 2019.
As a result of the sale transactions outlined above, the financial results of the businesses to be divested and associated Group reclassification andconsolidation impacts are treated as discontinued operations from a financial reporting perspective.
Details of the financial performance and cash flows of discontinued operations are shown below.
Income Statement
2020
$m

2019
$m

Net interest income

(5)

(76)

Other operating income1

(46)

245

Operating income

(51)

169

Operating expenses1

(200)

(449)

Profit/(Loss) before credit impairment and income tax

(251)

(280)

-

1

Profit/(Loss) before income tax

(251)

(279)

Income tax expense

153

(64)

(98)

(343)

Credit impairment (charge)/release1

Profit/(Loss) for the period attributable to shareholders of the Company1,21.

Includes customer remediation of $96 million post-tax recognised in the September 2020 financial year (2019: $207 million) comprising $128 million customer remediation recognised in other operating
income (2019: $161 million), -$2 million of remediation costs recognised in Operating expenses (2019: $80 million), and $30 million income tax benefit (2019: $34 million).

2.

Includes the results of the OnePath P&I business up to the sale completion in January 2020 and the life insurance business up to the sale completion in May 2019.

Cash Flow Statement
2020
$m

2019
$m

Net cash provided by/(used in) operating activities

(25)

(552)

Net cash provided by/(used in) investing activities-

837

Net cash provided by/(used in) financing activities

25

(290)

-

(5)

Net increase/(decrease) in cash and cash equivalents

ASSETS AND LIABILITIES HELD FOR SALE
Assets and liabilities held for sale are re-measured at the lower of their existing carrying amount and fair value less costs to sell, except for assets suchas deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement andcontinue to be recognised at their existing carrying value.

ANZ 2020 Annual Report 209

209

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
(continued)

As at 30 September 1

2019
Discontinued
Operations$m

Trading securities
Deferred tax assets
Goodwill and other intangible assets
Premises and equipment
Other assets

919
16
394
1
501

Total assets held for sale

1,831

Current tax liabilities
Deferred tax liabilities
Payables and other liabilities
Provisions2

3
105
1,914
99

Total liabilities held for sale

2,121

1.
2.

Amounts in the table above are shown net of intercompany balances.
Includes employee entitlements of $8 million and other provisions of $91 million.

INCOME STATEMENT IMPACT RELATING TO ASSETS AND LIABILITIES HELD FOR SALE
During the 2020 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale that were recognised indiscontinued operations: $13 million loss after tax recorded in operating income attributable to sale completion costs.
 $126 million of customer remediation charges ($128 million recorded in operating income and a release of $2 million recorded in operating
expenses) and an associated $30 million tax benefit.
 $101 million charge was recorded in operating income offset by a $101 million tax benefit within income tax expense relating to the finalisation of
the policyholder tax position associated with the sale of the life insurance business to Zurich.
During the 2019 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale: $65 million loss after tax on discontinued operations, comprising a net loss of $1 million from sale related adjustments and write-downs, partially
offset by the recycling of gains previously deferred in equity reserves on sale completion, and a $64 million income tax expense. This loss wasrecognised in discontinued operations.
 $10 million gain after tax relating to the sale of Cambodia JV, comprising a $30 million release from the foreign currency translation reserve, a $17
million dividend withholding tax associated with the sale completion and $3 million of asset write-offs. The gain was recognised in continuing
operations.
 $1 million gain after tax relating to the sale of PNG Retail, Commercial and SME, net of costs associated with the sale. The gain was recognised incontinuing operations.
 $76 million gain after tax relating to the sale of the OPL NZ business, comprising a $56 million gain on sale, a $26 million release from the foreign
currency translation reserve, a $7 million provision release and a $13 million income tax expense. The gain was recognised in continuing
operations.
 $37 million gain after tax relating to the sale of the Paymark. The gain was recognised in continuing operations.

210

210

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
(continued)

RECOGNITION AND MEASUREMENT
LIFE INSURANCE CONTRACT LIABILITIES AND LIABILITIES CEDED UNDER REINSURANCE CONTRACTS
We calculate Life insurance contract Liabilities under the Margin on Service (MoS) model using a projection method based on actuarial
principles and standards.
We discount the expected future cash flows of these contracts at the risk-free discount rate.
LIFE INVESTMENT CONTRACT LIABILITIESA life investment contract liability is measured at fair value and is directly linked to the fair value of the assets that back it. For guaranteed
policies, we determine the liability as the net present value of expected cash flows, subject to a minimum of current surrender value.

KEY JUDGEMENTS AND ESTIMATES
A significant level of judgement is used by the Group to determine: whether an asset or group of assets is classified and presented as held for sale or as a discontinued operation; and the fair value of the assets and liabilities classified as being held for sale.
Management is required to exercise significant judgement when assessing the fair value less costs to sell for assets and liabilities held forsale. The judgemental factors include determining: costs to sell, allocation of goodwill, indemnities provided under the sale contract andconsideration received - particularly where elements of consideration are contingent in nature. Any impairment we record is based on thebest available evidence of fair value compared to the carrying value before the impairment. The final sale price may be different to the fairvalue we estimate when recording the impairment. Management regularly assess the appropriateness of the underlying assumptions
against actual outcomes and other relevant evidence and adjustments are made to fair value where appropriate. We expect that the sales
will complete within 12 months after balance date, subject to the relevant regulatory approvals and customary terms of sale forsuch assets.

ANZ 2020 Annual Report

211

211

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. 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:
2020
$m

2019
$m

Defined benefit obligation and scheme assets
Present value of funded defined benefit obligation(1,478)(1,538)Fair value of scheme assets

1,693

1,739

Net defined benefit asset

215

201

Net liabilities arising from defined benefit obligations included in payables and other liabilities

(59)

(54)

Net assets arising from defined benefit obligations included in other assets

274

255

As represented in the Balance Sheet

Net defined benefit asset

215

201

Weighted average duration of the benefit payments reflected in the defined benefit obligation (years)

14.9

14.9

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 $104 million (2019 surplus of $48 million). In 2020, the Group made defined benefit contributions totaling $4 million (2019: $3
million). It expects to make contributions of around $3 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.

212

212

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

30. 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 affect on the Statement of Other Comprehensive Income and Balance Sheet.

Discount rate (% p.a.)2020
0.5 - 1.7

Sensitivity analysis
change in significant
2019
assumptions
1.1 - 2.0
0.5% increase

Future salary increases (% p.a.)

1.6 - 3.0

1.7 - 3.2

1.1 - 2.8/2.2

1.7 - 3.0/2.3– Males (years)

26.0 - 28.7

25.6 - 28.6

– Females (years)

28.9 - 30.4

28.8 - 30.3

Assumptions

Increase/(decrease) in
defined benefit obligation
2020
$m

2019
$m

(103)

(107)

0.5% increase85

80

1 year increase

73

70

Future pension indexation
In payment (% p.a.)/In deferment (% p.a)Life expectancy at age 60 for current pensioners

31. EMPLOYEE SHARE AND OPTION PLANSANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan.

ANZ EMPLOYEE SHARE ACQUISITION PLAN
ANZ Employee Share Acquisition Plan schemes that operated during the 2020 and 2019 years were the Employee Share Offer and the Deferred
Share Plan.
Employee Share Offer

Eligibility

Most permanent employees employed in either Australia or New Zealand with three years continuous service for themost recent financial year.

Grant

Up to AUD 1,000 in Australia (and AUD 800 in New Zealand) of ANZ shares, subject to Board approval.

Allocation value

One week Volume Weighted Average Price (VWAP) of ANZ shares traded on the ASX in the week leading up to andincluding the date of grant.

Australia

ANZ ordinary shares are granted to eligible employees for nil consideration. The shares vest on grant and are held in
trust for three years from grant date, after which time they may remain in trust, be transferred to the employee’s nameor sold. Dividends are automatically reinvested in the Dividend Reinvestment Plan.

New ZealandShares are granted to eligible employees on payment of NZD one cent per share. Shares vest subject to satisfaction ofa three-year service period, after which they may remain in trust, be transferred to the employee’s name or sold.
Unvested shares are forfeited if the employee resigns or is dismissed for serious misconduct. Dividends are either paidin cash or reinvested into the Dividend Reinvestment Plan.

Expensing value(fair value)

In Australia, the fair value of the shares is expensed in the year shares are granted, as they are not subject to forfeiture.

2020 and 2019 grants

698,862 shares were granted on 2 December 2019 at an issue price of $24.96, noting this is the final Employee Share
Offer in its current form following changes to variable remuneration (effective financial year 2020) as part of the
Reimagining Reward initiative.

In New Zealand, the fair value is expensed on a straight-line basis over the three year vesting period.
The expense is recognised as a share-based compensation expense with a corresponding increase in equity.

656,738 shares were granted on 3 December 2018 at an issue price of $26.91.

ANZ 2020 Annual Report

213

213

Overview
ANZ 2020
ANNUAL REPORT How we

Performanceoverview

create value

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
Deferred Share Plani) ANZ Incentive Plan (ANZIP) - Chief Executive Officer (CEO), Group Executive Committee (ExCo) and other Banking Executive Accountability
Regime (BEAR) Accountable Executives
EligibilityGroup CEO, ExCo and Group General Manager Internal Audit (GGM IA).

Grant

50% of the CEO’s Annual Variable Remuneration (AVR), 25% of ExCo’s Variable Remuneration (VR) (except for the
Chief Risk Officer (CRO)), and 33% of the CRO and GGM IA’s VR, is received as deferred shares.

Conditions
Deferred over at least one to four years from the date the Board approved the variable remuneration award.
ii) ANZIP (all employees excluding the CEO, ExCo and other BEAR Accountable Executives1) and Business Unit Incentive Plans (BUIPs)
Eligibility

All employees excluding the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).

Grant

If VR is at or exceeds AUD 150,000, then 60% of VR amounts exceeding AUD 80,000 (subject to a minimum deferral
amount of AUD 42,000) is deferred as shares.
Deferred over three years from grant date.

Conditionsiii) Long Term Incentives (LTIs)
Eligibility

Selected employees (excludes the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).

Grant

100% deferred shares.

Conditions

Vest three years from grant date.

iv) 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 foregone from their previous employer. The vesting period generallyaligns with the remaining vesting period of the remuneration they have foregone, 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.

v) Further information
Cessation

Unless the Board 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 paid in cash or 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).

Allocation value

All deferred shares are issued based on the VWAP of ANZ shares traded on the ASX in the week leading up to andincluding the date of grant.

Expensing value (fair value)

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.
During the 2020 year, we granted 2,259,897 deferred shares (2019: 1,945,668) with a weighted average grant priceof $24.94 (2019: $25.39).
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. ANZ’s malus (downward adjustment) provisions
are detailed in section 5.3 of the 2020 Remuneration Report.
Board discretion was not exercised to adjust downward any deferred shares in 2020 (2019: 9,810).

2020 and 2019 grants
Malus (downward
adjustment)

1.

Specific deferral arrangements also exist under ANZIP for roles defined as United Kingdom Material Risk Takers and China Material Risk Takers, in line with local regulatory requirements.

Expensing of the ANZ Employee Share Acquisition Plan
Expensing value(fair value)

214

214

The fair value of shares we granted during 2020 under the Employee Share Offer and the Deferred Share Plan,
measured as at the date of grant of the shares, is $73.4 million (2019: $67.7 million) based on 2,958,759 shares (2019:
2,602,406) at VWAP of $24.81 (2019: $26.01).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

31. 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 thebonus 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 Board’s discretion, be satisfied by a cash equivalent payment rather
than shares.
Expensing

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.

Cessation

The provisions that apply if the employee’s employment ends are in section 8.2.3 of the 2020 Remuneration Report.

Malus (downward
adjustment)

ANZ’s malus (downward adjustment) provisions are detailed in section 5.3 of the 2020 Remuneration Report.

Option Plans that operated during 2020 and 2019i) Performance Rights
Allocation

Satisfying vesting1.

We grant performance rights to the CEO and ExCo, and have granted performance rights to selected employees, aspart of ANZ’s variable remuneration plans. Performance rights provide the holder with the right to acquire ANZ sharesat nil cost, subject to a four-year vesting period1 and Total Shareholder Return (TSR) performance hurdles. Further
details on the performance hurdles are in section 5.2.3a of the 2020 Remuneration Report.
Any portion of the award of performance rights (that have met the performance hurdles) may be satisfied by a cash
equivalent payment rather than shares at the Board’s discretion. In 2020, all performance rights lapsed due to notmeeting the performance hurdles. In 2019, the performance rights that vested were satisfied through a shareallocation, other than 47,195 performance rights for which a cash payment was made.

2020 and 2019 grants

During the 2020 year, we granted 520,172 performance rights (2019: 885,810).

Malus (downward
adjustment)

Board discretion was not exercised to adjust downward any performance rights in 2020 (2019: 59,012).

Three years for grants during 2019.

ANZ 2020 Annual Report

215

215

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)ii) Deferred Share Rights (no performance hurdles)
Allocation

Deferred share rights provide the holder with the right to acquire ANZ shares at nil cost after a specified
vesting period. We adjust the fair value of rights for the absence of dividends during the restriction period.

Satisfying vesting

Any portion of the award of share rights may be satisfied by a cash equivalent payment rather than shares at
the Board’s discretion. All share rights were satisfied through a share allocation, other than 99,891 deferredshare rights (2019: 68,357) for which a cash payment was made.

2020 and 2019 grants

During the 2020 year, 2,393,424 deferred share rights (no performance hurdles) were granted(2019: 2,078,427).

Malus (downward adjustment)

Board discretion was not exercised to adjust downward any deferred share rights in 2020 (2019: 11,824).

Options, Deferred Share Rights and Performance Rights on Issue
As at 4 November 2020, there were 543 holders of 4,489,045 deferred share rights on issue and 125 holders of 2,216,062 performance rights 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 of2020 and the movements during 2020:

Number of options/rights
WA exercise priceOpeningbalance
1 Oct 2019

Options/rightsgrantedOptions/rightsforfeited1

Options/rightsexpiredOptions/rightsexercised

Closingbalance
30 Sep 2020

6,688,538

2,913,596(976,468)

0(1,901,109)

6,724,557

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

WA closing share price$19.94WA remaining contractual life

1.9 years

WA exercise price of all exercisable
options/rights outstanding$0.00

Outstanding exercisable options/rights

151,829

This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2019
and the movements during 2019:
Options/
Options/
Closing
Opening
Options/
Options/rightsrightsbalancebalancerightsrightsexpiredexercised
30 Sep 2019
1 Oct 2018
grantedforfeited1
Number of options/rights
WA exercise price

7,148,573

2,964,237(1,589,109)

0(1,835,163)

$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 2020 and 2019, were issued at a nil exercise price.
As at the date of the signing of the Directors’ Report on 4 November 2020:
 no options/rights over ordinary shares have been granted since the end of 2020; and 15,592 shares issued as a result of the exercise of options/rights since the end of 2020, all with nil exercise prices.

216

216

6,688,538$0.00$26.66
1.9 years$0.00
181,581NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

31. EMPLOYEE SHARE AND OPTION PLANS (continued)
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.
2020

Exercise price ($)
Share closing price at grant date ($)

PerformancerightsPerformancerights

0.00

0.00

0.00

0.00

24.78

24.93

25.83

25.52

20.0

20.0

20.0

20.0

Equity term (years)

2.5

6.0

2.5

4.8

Vesting period (years)

2.1

4.0

2.1

3.0

Expected life (years)

2.1

4.0

2.1

3.0

Expected volatility of ANZ share price (%)

1.

2019
Deferred
share
rightsDeferred
share
rights1

Expected dividend yield (%)

6.0

6.0

6.0

6.0

Risk free interest rate (%)

0.77

0.74

1.96

2.05

Fair value ($)

21.95

9.07

22.87

9.40

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 deferred 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 2020 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 4,882,936 shares at an average price of $25.06 per share (2019: 4,317,094 shares at
an average price of $25.99 per share).

ANZ 2020 Annual Report

217

217

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. RELATED PARTY DISCLOSURESKEY MANAGEMENT PERSONNEL COMPENSATIONKey Management Personnel (KMP) are defined as all directors of the Group and those personnel with a key responsibility for the strategic direction
and management of the Group and report directly to the CEO. KMP compensation included within total personnel expenses in Note 3 Operating
Expenses is as follows:
2020
$000

2019
$0001

19,26015,784Post-employment benefits

414

415

Other long-term benefits

397

213

-

2,112

Short-term benefits

Termination benefits
Share-based payments

8,198

6,184

Total

28,26924,7081.

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 provision raised in respect of these balances. Details of the terms and conditions of lending products can be foundon ANZ.com. The aggregate of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP including theirrelated parties, were as follows:
2020
$000

2019
$000

Loans advanced1,2

31,80826,884

Undrawn facilities

1,028

513

Interest charged3

888

739

1.

Prior period balance has been restated to reflect minor timing variances and omissions.
2.
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.
3.
Interest charged is for all KMP’s during the period.

KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIESKMP, including their related parties, held subordinated debt, shares, share rights and options over shares in the Company directly, indirectly or
beneficially as shown below:

Shares, options and rights
Subordinated debt
1.

218

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.

218

2020
Number

2019
Number1

2,211,879

1,892,754

21,052

11,802NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

32. 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 $48.4 million (2019: $60 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.

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:
2020
$000

2019
$000

354

664

Amounts payable to associates

1,354

697

Interest income from associates-

93

Amounts receivable from associates

Other revenue from associates

500-

Other expenses paid to associates

7,706

11,561Dividend income from associates

32,46550,014

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.

ANZ 2020 Annual Report

219

219

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETSCREDIT RELATED COMMITMENTS AND CONTINGENCIES
2020
$m

2019
$m

Undrawn facilities

227,819

209,340

Contract amount of:
Guarantees and letters of credit

22,77822,339Performance related contingencies

17,017

22,112

Total

267,614

253,791

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 may be required to pay, the total
undrawn facilities of $227,819 million (2019: $209,341 million) 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 non-monetary
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 may be required to pay, the total guarantees and letters of credit of $22,778 million (2019: $22,339 million)
and total performance related contingencies of $17,017 million (2019: $22,112 million) mature within 12 months.

220

220

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
OTHER CONTINGENT LIABILITIESAs at 30 September 2020, the Group had contingent liabilities in respect of the matters outlined below. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions (refer to note 21) and/or disclosures as deemed appropriate have been made. In some instances
we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure
may prejudice the interests of the Group.
REGULATORY AND CUSTOMER EXPOSURESIn recent years there has been an increase in the number of matters on which the Group engages with its regulators. There have also been significant
increases in the nature and scale of regulatory investigations, surveillance and reviews, civil and criminal enforcement actions (whether by court action
or otherwise), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued by regulators, particularly against
financial institutions both in Australia and globally. The Group has received various notices and requests for information from its regulators as part ofboth 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, currently include a range of matters including responsible lending practices, regulated lending requirements,
product suitability 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, reporting and disclosure obligations and product disclosure documentation. There may be exposures tocustomers which are additional to any regulatory exposures. These could include class actions, individual claims or customer remediation orcompensation activities. The outcomes and total costs associated with such reviews and possible exposures remain uncertain.
BENCHMARK/RATE ACTIONSIn July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including theCompany – one action relating to the bank bill swap rate (BBSW), and one action relating to the Singapore Interbank Offered Rate (SIBOR) and theSingapore Swap Offer Rate (SOR). The class actions are expressed to apply to persons and entities that engaged in US-based transactions in financial
instruments that were priced, benchmarked, and/or settled based on BBSW or SIBOR. The claimants seek damages or compensation in amounts not
specified, and allege that the defendant banks, including the Company, violated US anti-trust laws and (in the BBSW case only) anti-racketeering laws,
the Commodity Exchange Act, and unjust enrichment principles. The Company is defending the proceedings.
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 ACTIONSIn June 2018, the Commonwealth Director of Public Prosecutions commenced criminal proceedings against the Company and a senior employee
alleging that they were knowingly concerned in cartel conduct by the joint lead managers of the Company’s August 2015 underwritten institutional
equity placement of approximately 80.8 million ordinary shares. The Company and its senior employee are defending the allegations.
In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company alleging
failure to comply with continuous disclosure obligations in connection with the Company’s August 2015 underwritten institutional equity placement.
ASIC alleges the Company should have advised the market that the joint lead managers took up approximately 25.5 million ordinary shares of theplacement. The Company is defending the allegations.
CONSUMER CREDIT INSURANCE LITIGATIONIn February 2020, a class action was brought against the Company alleging breaches of financial advice obligations, misleading or deceptive conduct
and unconscionable conduct in relation to the distribution of consumer credit insurance products. The issuers of the insurance products, QBE and
OnePath Life, are also defendants to the claim. The Company is defending the allegations.
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.
ROYAL COMMISSION
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019.
The findings and recommendations of the Commission are resulting in additional costs and may lead to further exposures, including exposuresassociated with further regulator activity or potential customer exposures such as class actions, individual claims or customer remediation orcompensation activities. The outcomes and total costs associated with these possible exposures remain uncertain.

ANZ 2020 Annual Report

221

221

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
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 AND INDEMNITIESThe 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.
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 GUARANTEESThe Company has issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under these letters andguarantees, the Company undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to certain conditions
including that the entity remains a controlled entity of the Company.
SALE OF GRINDLAYS BUSINESSESOn 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.

222

222

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

34. AUDITOR FEES
2020
$’000

2019
$’000

Audit or review of financial reports

8,059

9,036

Audit-related services

3,693

3,392

25

114

11,777

12,542

Audit or review of financial reports

6,049

5,691

Audit-related services

1,677

2,316

98

2

KPMG Australia
1

Non-audit services2
Total

3

Overseas related practices of KPMG Australia

Non-audit services2

1

Total

7,824

8,009

Total auditor fees

19,601

20,5511.

Comprises prudential and regulatory services of $3.61 million (2019: $4.47 million), comfort letters $0.75 million (2019: $0.48 million) and other services $1.01 million (2019: $0.76 million).
The nature of the non-audit services includes training and methodology and procedural reviews. Further details are provided in the Directors’ Report.
3.
Inclusive of goods and services tax.
2.

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.

ANZ 2020 Annual Report 223

223

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
There have been no significant events from 30 September 2020 to the date of signing this report.

224

224

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements (continued)

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 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 Consolidated Entity as at 30 September 2020 and of its
performance for the year ended on that date;b) the notes to the financial statements of the Consolidated Entity include a statement that the financial statements and notes of the Consolidated
Entity comply with International Financial Reporting Standards;c) 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
ChairmanShayne C ElliottManaging Director

4 November 2020

ANZ 2020 Annual Report 225

225

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

CONSOLIDATED GROUP DIRECTORS’ DECLARATION

TO THE SHAREHOLDERS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDREPORT ON THE AUDIT OF THE FINANCIAL REPORTOPINION
We have audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year
end and from time to time during the financial year (together, the Group).
In our opinion, the accompanying Financial Report of the Group is in accordance with the Corporations Act 2001, including: giving a true and fair view of the Group’s financial position as at 30 September 2020 and of its financial performance for the year ended on that
date; and
 complying with Australian Accounting Standards and the Corporations Regulations 2001.
The Financial Report comprises the: consolidated balance sheet as at 30 September 2020;
 consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, andconsolidated statement of cash flows for the year then ended; notes 1 to 35 including a summary of significant accounting policies; and Directors’ Declaration.

BASIS FOR OPINION
We conducted our audit 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 audit of the Financial Report section of
our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional andEthical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report inAustralia. We have fulfilled our other ethical responsibilities in accordance with the Code.

KEY AUDIT MATTERS
The Key Audit Matters we identified are:
 Allowance for expected credit losses;
 Subjective and complex valuation of Financial Instruments held at Fair Value; Carrying value of goodwill; Carrying value of investment in Asian associates; Provisions for Customer Remediation; and IT Systems and controls.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of thecurrent period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters.

©2020 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.

226

226

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Independent auditor's report (continued)

KEY AUDIT MATTERS (continued)
ALLOWANCE FOR EXPECTED CREDIT LOSSES ($5,899m)
Refer to the critical accounting estimates and judgements disclosures in relation to the allowance for expected credit losses in Note 13 to the Financial Report.
The Key Audit Matter
Allowance for expected credit losses is a key audit matter due to the significance of the loans and advances balance to the financial statements andthe inherent complexity of the Group’s Expected Credit Loss (ECL) models (ECL models) used to measure ECL allowances. These models are reliant ondata and a number of estimates including the impact of multiple economic scenarios and other assumptions such as defining a significant increase incredit risk (SICR).
AASB 9 Financial Instruments requires the Group to measure ECLs on a forward-looking basis reflecting a range of economic conditions, of which GDP
and unemployment levels are considered key assumptions. Post-model adjustments are made by the Group to address known ECL model limitations
or emerging trends in the loan portfolios. We exercise significant judgement in challenging the economic scenarios used and the judgemental postmodel adjustments the Group applies to the ECL results.
The Group’s criteria selected to identify a SICR, such as a decrease in customer credit rating (CCR), are key areas of judgement within the Group’s ECL
methodology as these criteria determine if a forward-looking 12 month or lifetime allowance is recorded.
The COVID-19 pandemic has meant that assumptions regarding the economic outlook are more uncertain which, combined with varying
government responses, increases the level of judgement required by the Group in calculating the ECL, and the associated audit risk.
Additionally, allowances for individually assessed wholesale loans exceeding specific thresholds are individually assessed by the Group. We exercise
significant judgment in challenging the assessment of specific allowances based on the expected future cash repayments and estimated proceedsfrom the value of the collateral held by the Group in respect of the loans.
How the matter was addressed in our audit
Our audit procedures for the allowance for ECL and disclosures included assessing the Group’s significant accounting policies against therequirements of the accounting standard. Additionally, our procedures covered:
Testing key controls of the Group 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 theGroup’s 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;
 Counterparty risk grading for wholesale loans (larger customer exposures are monitored individually). This covered elements such as: approval of
new lending facilities against the Group’s lending policies, monitoring of counterparty credit quality against the Group’s exposure criteria forinternal factors specific to the counterparty or external macroeconomic factors, and accuracy and timeliness of counterparty risk assessments andrisk grading against the requirements of the Group’s lending policies and regulatory requirements; and 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 Group’s oversight of the portfolios, with a focus on controls
over delinquency monitoring.
We tested relevant General Information Technology Controls (GITCs) over the key IT applications used by the Group in measuring ECL allowances asdetailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:
 Re-performing credit assessments of a sample of wholesale loans controlled by the Group’s specialist workout and recovery team assessed as
higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Group as showing signs of deterioration, or inareas of emerging risk (assessed against external market conditions and in particular considering the impacts of COVID-19 and climate change).
For each loan sampled, we challenged the Group’s CCR and Security Indicator (SI), taking into account our assessment of the customer’s financial
position and, where relevant, the risk of stranded assets, and our overall assessment of loan recoverability, the valuation of security, and the impact
on the credit allowance. To do this, we used the information on the Group’s loan file, discussed the facts and circumstances of the case with theloan officer, and performed our own assessment of recoverability. Exercising our judgment, our procedures included using our understanding of
relevant industries and the macroeconomic environment and comparing data and assumptions used by the Group in recoverability assessments
to externally sourced evidence, such as commodity prices, publicly available audited financial statements and comparable external valuations ofcollateral held. Where relevant we assessed the forecast timing of future cash flows in the context of underlying valuations and approved businessplans and challenged key assumptions in the valuations; Obtaining an understanding of the Group’s processes to determine ECL allowances, evaluating the Group’s ECL model methodologies against
established market practices and criteria in the accounting standards;

ANZ 2020 Annual Report 227

227

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
 Working with KPMG risk consulting specialists, we assessed the accuracy of the Group’s ECL model estimates by re-performing, for a sample ofloans, the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Group; Working with KPMG economic specialists, we challenged the Group’s forward-looking macroeconomic assumptions and scenarios incorporated in
the Group’s ECL models. We compared the Group’s forecast GDP, unemployment rates, CPI and property price indices to relevant publicly
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
identify contradictory indicators;
 Testing the implementation of the Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
consideration movements in the CCR from loan origination CCR and comparing our expectation to actual staging applied on an individual
account level in the Group’s ECL model; and Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
source systems.
We challenged key assumptions in the components of the Group’s post-model adjustments to the ECL allowance balance. This included:
 Assessing the requirement for additional allowances considering the Group’s ECL model and data deficiencies identified by the Group’s ECL
model validation processes, particularly in light of the extreme volatility in economic scenarios caused by the current COVID-19 pandemic andgovernment responses;
 Evaluating underlying data used in concentration risk and economic cycle allowances by comparing underlying loan portfolio characteristics torecent loss experience, current market conditions and specific risks in the Group’s loan portfolios; Assessing the impacts on the modelled ECL and the requirement for out of model adjustments to account for the portion of customers on loandeferral packages that are not aged. We also assessed assumptions used to determine whether a SICR event has occurred; and Assessing the completeness of additional allowance overlays by checking the consistency of risks we identified in the loan portfolios against theGroup’s assessment.
We assessed the appropriateness of the Group’s disclosures in the financial report using our understanding obtained from our testing and against therequirements of the accounting standard.
SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,183m- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $145,559m- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $55m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $138,786m
Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 17 to the Financial Report.
The Key Audit Matter
The fair value of the Group’s Level 2 and 3 financial instruments is determined by the Group through the application of valuation techniques which
often involve the exercise of judgement and the use of assumptions and estimates.
The valuation of Level 3 and level 2 financial instruments held at fair value is considered 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; and The complexity associated with the valuation methodology and models of certain more complex Level 2 financial instruments leading to anincrease in subjectivity and estimation uncertainty. Level 2 financial instruments represented 53% of the Group’s financial assets carried at fairvalue and 97% of the Group’s financial liabilities carried at fair value.
Level 3 financial instruments represented 0.4% of the Group’s financial assets carried at fair value and 0.04% of the Group’s financial liabilities carriedat fair value. This population is made up of: Investment securities at fair value through other comprehensive income; Derivative assets and liabilities; and Net loans and advances.

228

228

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Independent auditor's report (continued)

KEY AUDIT MATTERS (continued)
How the matter was addressed in our audit
Our audit procedures for the valuation of financial instruments held at fair value included:
 We performed an assessment of the population of Financial instruments held at fair value to identify portfolios that have a higher risk of
misstatement arising from significant judgements over valuation either due to unobservable inputs or complex models.
 We tested the design and operating effectiveness of key controls relating specifically to these financial instruments, including:Controls in relation to Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;Controls in relation to model validation at inception and periodically, including assessment of model limitation and assumptions;

Controls in relation to the review and challenge of daily profit and loss (P&L) by a control function;Controls over the collateral management process, including review of margin reconciliations with clearing houses; andControls over fair value adjustments (FVAs), including exit price and portfolio level adjustments.

 With the assistance of KPMG valuation experts, we independently re-valued a selection of financial instruments and FVAs. This involved sourcing
independent inputs from markets data providers or external sources and using our own valuation models. We challenged the Group where ourrevaluations significantly differed from the Group’s.
 In relation to the subjective valuation of Level 3 Investment Securities, with our valuation specialists, we:

Assessed the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives; andCompared the Group’s valuation methodology to industry practice and the criteria in the accounting standards.

 We assessed the Group’s financial statements disclosures, including key judgements and assumptions using our understanding obtained from our
testing and against the relevant accounting standard requirements.
CARRYING VALUE OF GOODWILL ($3,264m)
Refer to the critical accounting estimates, judgements and disclosures in Notes 20 to the Financial Report.
The Key Audit Matter
Carrying value of goodwill is a key audit matter as:
 The Group’s net assets exceeded its market capitalisation at year-end. This increased the potential for impairment and our audit effort in this area.
 We focussed on the significant forward-looking assumptions the Group applied in their value in use (VIU) and fair value less costs of disposal(FVLCOD) models, including:Growth rates, and terminal growth rates in the VIU model, and future maintainable earnings and price earnings multiples applied in the
FVLCOD model. The Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom or indicating
possible impairment. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy; and

Discount rates in the VIU model and the control premium in the FVLCOD. These are complicated in nature and vary according to theconditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time.

 Significant judgement was required by the Group as a result of the current COVID-19 environment. COVID-19 has caused significant estimation
uncertainty and as a result there is increased judgement in forecasting cash flows and assumptions used in the discounted cash flow models andfuture maintainable earnings and market multiples used in its fair value calculations. These conditions and the uncertainty of their continuation
increase the possibility of goodwill being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes, for us
to consider.
 The Group recorded an impairment charge of $50m against goodwill in the Pacific CGU further increasing our audit effort in this key audit area.
 We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:
 We considered the appropriateness of the valuation method (value in use or fair value less costs of disposal) applied by the Group to perform theirannual test for impairment against the requirements of the accounting standards;
 We assessed the integrity of the value in use and fair value less costs of disposal models used, including the accuracy of the underlying calculation
formulas; We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models; We assessed the Group’s key assumptions used in the fair value less costs of disposal model, such as, future maintainable earnings, the control
premium and compared the implied multiples from comparable market transactions to the implied multiple used in the model;

ANZ 2020 Annual Report 229

229

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
 We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings andterminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice; We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted
for factors specific to the Group and industry it operates in; We compared the forecast cash flows contained in the models to revised Strategic Plan reflecting the Group’s COVID-19 impacts; We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of thelikely recovery period; We considered the sensitivity of the models by varying key assumptions, such as market multiples, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
 We recalculated the impairment charge against the recorded amount disclosed; and We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of theaccounting standards.
CARRYING VALUE OF INVESTMENT IN ASIAN ASSOCIATES ($2,140M)
Refer to the critical accounting estimates, judgements and disclosures in Notes 26 to the Financial Report.
The Key Audit Matter
Carrying value of investment in Asian associates (PT Panin and AmBank) is a key audit matter as:
 The Group’s impairment assessment of non-lending assets identified that two of the Group’s associate investments (PT Panin and AmBank) had
indicators of impairment.
 Significant judgement was required by the Group as a result of the business disruption and economic impacts of COVID-19 pandemic, raisingestimation uncertainty. These conditions and the uncertainty of their continuation increase the possibility of the associates being impaired, plus
the risk of inaccurate forecasts or a significantly wider range of possible outcomes in the cash flow models.
 Our evaluation of potential impairment involves critically evaluating the Group’s judgement in relation to the Group’s Asian associates key
forward-looking assumptions. Instances where the Group’s judgement is evaluated include:Forecast earnings and terminal growth rates – The Group’s models are highly sensitive to small changes in these assumptions, reducing
available headroom or indicating possible impairment. This drives additional audit effort specific to their feasibility and consistency of
application to the Group’s strategy; and

Discount rates – These are complicated in nature and vary according to the conditions and environment the specific associate investments
operate in.

 The Group recorded impairment charges in relation to the investment in Ambank of $595m and PT Panin of $220m further increasing our audit
effort in this key audit area.
 We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:
 We considered the appropriateness of the value in use valuation method applied by the Group to perform their annual test for impairment
against the requirements of the accounting standards;
 We assessed the integrity of the models used, including the accuracy of the underlying calculation formulas; We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings andterminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice; We independently developed a discount rate estimate or range considered comparable using publicly available market data for comparable
entities, adjusted for factors specific to the Asian associates and the market and industry they operate in; We compared the forecast cash flows contained in the models to recent broker consensus reports, reflecting the COVID-19 impacts; We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of thelikely recovery period; We considered the sensitivity of the models by varying key assumptions, such as, forecast growth rates, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
 We recalculated the impairment charge against the recorded amount disclosed; and We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of theaccounting standards.

230

230

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Independent auditor's report (continued)

KEY AUDIT MATTERS (continued)
PROVISIONS FOR CUSTOMER REMEDIATION ($1,109m)
Refer to the critical accounting estimates, judgements and disclosures in Notes 21 and 33 to the Financial Report.
The Key Audit Matter
The Group has assessed the need to recognise provisions in relation to certain customer remediation activities arising from both internal and external
investigations and reviews.
The provision for customer remediation activities is a Key Audit Matter due to the number of investigations, the quantum of amounts involved,
and the judgements required by us in assessing the Group’s determination of: The existence of a present legal or constructive obligation arising from a past event using the conditions of the event against the criteria in theaccounting standards;
 The number of investigations and the quantum of amounts being paid arising from the present obligation;
 Reliable estimates of the amounts which may be paid arising from investigations, including estimates of related costs; and The potential for legal proceedings, further investigations, and reviews from its regulators leading to a wider range of estimation outcomes for us
to consider.
How the matter was addressed in our audit
Our audit procedures for customer remediation provisions included:
 Obtaining an understanding of the Group’s processes and controls for identifying and assessing the potential impact of the investigations into
customer remediation activities;
 Enquiring with the Group regarding ongoing legal, regulatory and other investigation into remediation activities;
 Conducting independent discussions on significant matters with external legal counsel;
 Reading the minutes and other relevant documentation of the Group’s Board of Directors, Board Committees, various management committees,
and attending the Group’s Audit and Risk Committee meetings;
 Inspecting correspondence with relevant regulatory bodies; For a sample of individual customer remediation matters, assessing the basis for recognition of a provision and associated costs against therequirements of the accounting standards. We did this by understanding and challenging the provisioning methodologies and underlying
assumptions; Testing completeness by evaluating where exposures may have arisen based upon our knowledge and experience of broader industry matters,
the Group's documentation and the current regulatory environment. We also checked the features of these exposures against the criteria defining
a provision or a contingency in the accounting standards;
 Assessing the appropriateness of the Group’s conclusions against the requirements of Australian Accounting Standards where estimates wereunable to be reliably made for a provision to be recognised; and Evaluating the related disclosures using our understanding obtained from our testing and against the requirements of Australian AccountingStandards.

ANZ 2020 Annual Report

231

231

Overview
ANZ 2020
ANNUAL REPORT How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
IT SYSTEMS AND CONTROLSThe Key Audit Matter
As a major Australian bank, the Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to process and record ahigh volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial information and the preparationof a financial report which provides a true and fair view of the Group’s financial position 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 approach could
significantly differ depending on the effective operation of the Group’s IT controls. We work with our KPMG IT specialists as a core part of our audit
team.
How the matter was addressed in our audit
We tested the technology control environment for key IT applications (systems) used in processing significant transactions and recording balances in
the general ledger. We also tested automated controls embedded within these systems which link the technology-enabled business processes. Our
further audit procedures included:
 Assessing the governance and higher-level controls across the IT Environment, including those regarding Group policy design, review andawareness, and IT Risk Management practices; Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on-boarded,
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles andfunctions are managed across each IT Application and the supporting infrastructure; Design and operating effectiveness testing of controls to enable Change Management including how changes are initiated, documented,
approved, tested and authorised prior to migration into the production environment of critical IT Applications. We assessed the appropriatenessof users with access to release changes to IT application production environments across the Group; Design and operating effectiveness testing of controls used by the Group’s technology teams to schedule system jobs and monitor system
integrity; Design and operating effectiveness testing of controls related to significant IT application programs delivered per the ANZ Delivery Framework; Design and operating effectiveness testing of automated business process controls including those relating to enforcing segregation of duties toavoid conflicts from inappropriate role combinations within IT applications. We tested:Configurations in place to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (bothbetween systems and intra-system); and

Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate
financial reporting.

OTHER INFORMATIONOther Information is both financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does 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 audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the
Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to bematerially 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
performed on the Other Information that we obtained prior to the date of this Auditor’s Report, we have nothing to report.

RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL REPORTThe Directors are responsible for:
 preparing a Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
 implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error
 assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This
includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend toliquidate the Group or to cease operations or have no realistic alternative but to do so.

232

232

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Independent auditor's report (continued)

KEY AUDIT MATTERS (continued)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORTOur objective is: to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error;and to issue an Auditor’s Report that includes our opinion.
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 theaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report 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.

REPORT ON THE REMUNERATION REPORT
In our opinion, the Remuneration Report of Australia and New Zealand Banking Group Limited for the year ended 30 September 2020, 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 2020.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian AuditingStandards.

KPMG

Alison Kitchen
Partner
Melbourne
4 November 2020

ANZ 2020 Annual Report 233

233

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportShareholder
information

FinancialreportShareholder information – unaudited
Ordinary shares
At 6 October 2020, the 20 largest holders of ANZ ordinary shares held 1,627,664,599 ordinary shares, equal to 57.30% of the total issued
ordinary capital. At 6 October 2020 the issued ordinary capital was 2,840,370,225 ordinary shares.
Number of shares% of shares

1

Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

711,409,499

25.05

2

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

431,679,959

15.20

3

CITICORP NOMINEES PTY LIMITED

222,226,442

7.82

4

NATIONAL NOMINEES LIMITED

90,831,873

3.20

5

BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C>

44,015,726

1.55

6

BNP PARIBAS NOMS PTY LTD <DRP>

33,012,594

1.16

7

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED <NT-COMNWLTH SUPER CORP A/C>

17,897,890

0.63

8

CITICORP NOMINEES PTY LIMITED <COLONIAL FIRST STATE INV A/C>>

13,647,454

0.48

9

ARGO INVESTMENTS LIMITED

9,765,275

0.34

10

AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED

8,487,710

0.30

11

NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

7,560,585

0.27

12

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

5,466,883

0.19

13

ANZEST PTY LTD <DEA CONTROL A/C>

5,291,196

0.19

14

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

4,820,912

0.17

15

AMP LIFE LIMITED

4,579,609

0.16

16

NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

3,745,006

0.13

17

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS SUPER A/C>

3,701,581

0.13

18

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

3,556,359

0.13

19

CUSTODIAL SERVICES LIMITED <BENEFICIARIES HOLDING A/C>

3,269,647

0.11

20

CS THIRD NOMINEES PTY LIMITED <HSBC CUST NOM AU LTD 13 A/C>

2,698,399

0.09

1,627,664,599

57.30

Total

Distribution of shareholdings
At 6 October 2020 – Range of shares

Number of holders% of holders

Number of shares% of shares

1 to 1,000

323,157

58.42

118,469,937

4.17

1,001 to 5,000

182,42132.98

418,262,457

14.73

5,001 to 10,000

30,568

5.52

213,392,126

7.51

10,001 to 100,000

16,5833.00

331,840,238

11.68

431

0.08

1,758,405,467

61.91

553,160

100.002,840,370,225

100.00Over 100,000
Total
At 6 October 2020:• the average size of holdings of ordinary shares was 5,134 (2019:
5,595) shares; and• there were 27,189 holdings (2019: 21,559 holdings) of less than amarketable parcel (less than $500 in value or 28 shares based on
the market price of $17.89 per share), which is less than 4.92% of
the total holdings of ordinary shares.
On 12 May 2017 ANZ was notified by BlackRock Group that it held asubstantial shareholding of 148,984,864 ordinary shares in ANZ (5.07%)
and on 2 December 2019, BlackRock Group’s interest increased to172,225,527 ordinary shares in ANZ (6.07%). As at 6 October 2020
ANZ has received no further update in relation to this substantial
shareholding.
234

On 3 July 2018 ANZ was notified by The Vanguard Group, Inc that itheld a substantial shareholding of 144,730,016 ordinary shares in ANZ(5.001%) and on 17 March 2020 The Vanguard Group, Inc’s interest
increased to 170,502,797 ordinary shares in ANZ (6.012%). As at
6 October 2020 ANZ has received no further update in relation
to this substantial shareholding.
VOTING RIGHTS OF ORDINARY SHARESThe Constitution provides for votes to be cast as follows:i) on show of hands, one vote for each shareholder; andii) on a poll, one vote for every fully paid ordinary share.
A register of holders of ordinary shares is held at:
452 Johnston Street, Abbotsford, Victoria, Australia
Telephone: +61 3 9415 4010

ANZ Capital Notes
ANZ CN1
On 7 August 2013 the Company issued convertible subordinated perpetual notes (ANZ CN1) which were offered pursuant to a prospectus
dated 10 July 2013.
At 6 October 2020 the 20 largest holders of ANZ CN1 held 2,994,981 securities, equal to 26.74% of the total issued securities. At 6 October 2020
the total number of ANZ CN1 on issue was 11,200,000.
Name

Number of shares% of shares

1

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

990,169

8.84

2

BNP PARIBAS NOMS PTY LTD <DRP>

223,051

1.99

3

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

191,519

1.71

4J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

176,833

1.58

5

NATIONAL NOMINEES LIMITED

172,760

1.54

6NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

149,604

1.34

7

NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

137,558

1.23

8

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

115,425

1.03

9

CITICORP NOMINEES PTY LIMITED

111,5200.99

10

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS SUPER A/C>

110,918

0.99

11

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

109,892

0.98

12

MUTUAL TRUST PTY LTD

101,2220.90

13

BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C>

60,944

0.54

14

SERVCORP HOLDINGS PTY LTD

58,3250.52

15

BERNE NO 132 NOMINEES PTY LTD <684168 A/C>

56,680

0.51

16

DIMBULU PTY LTD

50,0000.45

17MARROSAN INVESTMENTS PTY LTD

50,0000.45

18

MCCUSKER FOUNDATION LTD <THE MCCUSKER CHARITABLE FNDN>

46,0000.41

19

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS IDPS A/C>

42,561

0.38

20

THORSEN INVESTMENTS PTY LTD

40,0000.36

2,994,981

26.74

Total

Distribution of ANZ CN1 holdings
At 6 October 2020 – Range of securities

Number of holders% of holders

Number of shares% of shares

1 to 1,000

14,71791.51

4,526,930

40.42

1,001 to 5,000

1,231

7.65

2,500,696

22.33

5,001 to 10,000

85

0.53

652,8105.83

10,001 to 100,000

37

0.23

929,093

8.29

Over 100,000
Total
At 6 October 2020 there were 7 holdings (2019: 6 holdings) of lessthan a marketable parcel (less than $500 in value or 5 securities
based on the market price of $101.19 per security), which is lessthan 0.05% of the total holdings of ANZ CN1.

12

0.08

2,590,471

23.13

16,082100.00

11,200,000

100.00VOTING RIGHTS OF ANZ CN1

ANZ CN1 do not confer on holders a right to vote at any meetingof members of the Company.
A register of holders of ANZ CN1 is held at:
452 Johnston Street, Abbotsford, Victoria, Australia(Telephone: +61 3 9415 4010)

ANZ 2020 Annual Report 235

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Shareholder information – unaudited (continued)

ANZ CN2
On 31 March 2014 the Company issued convertible subordinated perpetual notes (ANZ CN2) which were offered pursuant to a prospectus
dated 19 February 2014.
At 6 October 2020 the 20 largest holders of ANZ CN2 held 4,624,957 securities, equal to 28.73% of the total issued securities.
At 6 October 2020 the total number of ANZ CN2 on issue was 16,100,000.
Number of shares% of shares

1

Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

1,414,747

8.79

2

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

429,5352.67

3NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

301,303

1.87

4

BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C>

298,939

1.86

5

BNP PARIBAS NOMS PTY LTD <DRP>

244,195

1.52

6NETWEALTH INVESTMENTS LIMITED <SUPER SERVICES A/C>

230,193

1.43

7

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

201,587

1.25

8

JOHN E GILL TRADING PTY LTD

165,026

1.03

9NATIONAL NOMINEES LIMITED

161,490

1.00

10NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

153,793

0.96

11

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS SUPER A/C>

140,346

0.87

12

CITICORP NOMINEES PTY LIMITED

127,783

0.79

13

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

114,9330.71

14

BERNE NO 132 NOMINEES PTY LTD <684168 A/C>

113,1150.70

15HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2

112,508

0.70

16

MUTUAL TRUST PTY LTD

109,063

0.68

17

LIGHTNINGEDGE PTY LTD

100,000

0.62

18

NAVIGATOR AUSTRALIA LTD <JB WERE LIST FIX INT SMA A/C>

86,076

0.53

19

BNP PARIBAS NOMINEES PTY LTD <PITCHER PARTNERS DRP>

60,325

0.38

20

RAKIO PTY LTD <PIEKARSKI GYMPIE A/C>

60,0000.37

4,624,957

28.73

Total

Distribution of ANZ CN2 holdings
At 6 October 2020 – Range of securities

Number of holders% of holders

Number of shares% of shares

1 to 1,000

17,74690.20

5,869,094

36.46

1,001 to 5,000

1,730

8.79

3,411,449

21.19

5,001 to 10,000

110

0.56

808,317

5.02

10,001 to 100,000

73

0.37

1,692,584

10.51

Over 100,000

16

0.08

4,318,556

26.82

19,675100.00

16,100,000

100.00Total
At 6 October 2020 there were 6 holdings (2019: 6 holdings) of lessthan a marketable parcel (less than $500 in value or 5 securities
based on the market price of $101.10 per security), which is lessthan 0.04% of the total holdings of ANZ CN2.

236

VOTING RIGHTS OF ANZ CN2

ANZ CN2 do not confer on holders a right to vote at any meetingof members of the Company.
A register of holders of ANZ CN2 is held at:
452 Johnston Street, Abbotsford, Victoria, Australia(Telephone: +61 3 9415 4010)

ANZ CN3
On 5 March 2015 the Company acting through its New Zealand branch, issued convertible subordinated perpetual notes (ANZ CN3) whichwere offered pursuant to a prospectus dated 5 February 2015.
At 6 October 2020 the 20 largest holders of ANZ CN3 held 2,490,252 securities, equal to 25.67% of the total issued securities.
At 6 October 2020 the total number of ANZ CN3 on issue was 9,701,791.
Name

Number of shares % of shares

1

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

632,543

6.52

2

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

298,703

3.08

3

NATIONAL NOMINEES LIMITED

178,109

1.84

4

LONGHURST MANAGEMENT SERVICES PTY LTD

173,868

1.79

5NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

160,683

1.66

6

CITICORP NOMINEES PTY LIMITED

132,360

1.36

7

BNP PARIBAS NOMS PTY LTD <DRP>

124,821

1.29

8

RAKIO PTY LTD <PIEKARSKI GYMPIE A/C>

100,000

1.03

9

JDB SERVICES PTY LTD <RAC & JD BRICE INVEST A/C>

90,7550.94

10HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

79,5350.82

11

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

67,301

0.69

12

BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C>

62,0450.64

13

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

59,9950.62

14NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

57,994

0.60

15

MUTUAL TRUST PTY LTD

54,7720.56

16

INVIA CUSTODIAN PTY LIMITED <INCOME POOL A/C>

50,8500.52

17

HAWAII INVESTMENTS PTY LTD

44,2500.46

18

NAVIGATOR AUSTRALIA LTD <JB WERE LIST FIX INT SMA A/C>MR RONI G SIKH

42,602

0.44

19

MR PAUL WILLIAM BROTCHIE + MR KENNETH FRANCIS WALLACE <STAFFORD FOX FOUNDATION A/C>

40,0000.41

20

BNP PARIBAS NOMINEES PTY LTD <PITCHER PARTNERS DRP>

39,0660.40

2,490,252

25.67

Total

Distribution of ANZ CN3 holdings
At 6 October 2020 – Range of securities

Number of holders% of holders

Number of shares% of shares

1 to 1,000

10,95289.99

3,624,550

37.36

1,001 to 5,000

1,085

8.91

2,289,990

23.61

5,001 to 10,000

74

0.61

588,1816.06

10,001 to 100,000

52

0.43

1,497,983

15.44

Over 100,000

7

0.06

1,701,087

17.53

12,170100.009,701,791

100.00Total
At 6 October 2020 there were 3 holdings (2019: 2 holdings) of lessthan a marketable parcel (less than $500 in value or 5 securities
based on the market price of $101.91 per security), which is lessthan 0.03% of the total holdings of ANZ CN3.

VOTING RIGHTS OF ANZ CN3

ANZ CN3 do not confer on holders a right to vote at any meetingof members of the Company.
A register of holders of ANZ CN3 is held at:
452 Johnston Street, Abbotsford, Victoria, Australia(Telephone: +61 3 9415 4010)

ANZ 2020 Annual Report 237

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Shareholder information – unaudited (continued)

ANZ CN4
On 27 September 2016 the Company issued convertible subordinated perpetual notes (ANZ CN4) which were offered pursuant
to a prospectus dated 24 August 2016.
At 6 October 2020 the 20 largest holders of ANZ CN4 held 4,853,100 securities, equal to 29.92% of the total issued securities.
At 6 October 2020 the total number of ANZ CN4 on issue was 16,220,000.
Number of shares% of shares

1

Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

1,665,438

10.27

2

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

570,488

3.52

3

CITICORP NOMINEES PTY LIMITED

340,4312.10

4NATIONAL NOMINEES LIMITED

304,330

1.88

5NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

253,291

1.56

6

BNP PARIBAS NOMS PTY LTD <DRP>

243,030

1.50

7

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS SUPER A/C>

192,418

1.19

8

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

181,869

1.12

9

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

159,661

0.98

10

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

146,153

0.90

11NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

141,106

0.87

12

MUTUAL TRUST PTY LTD

135,957

0.84

13

PAMDALE INVESTMENTS PTY LTD

96,4980.59

14

AUSTRALIAN EXECUTOR TRUSTEES LIMITED <NO 1 ACCOUNT>79,9870.49

15MARROSAN INVESTMENTS PTY LTD

78,5000.48

16

BNP PARIBAS NOMINEES PTY LTD <AGENCY LENDING DRP A/C>

61,0130.38

17

MR PHILIP WILLIAM DOYLE

60,0000.37

18

JMB PTY LIMITED

50,300

0.31

19

RETFORD PTY LTD

50,3000.31

20NETWEALTH INVESTMENTS LIMITED <SUPER SERVICES A/C>

42,3300.26

4,853,100

29.92

Total

Distribution of ANZ CN4 holdings
At 6 October 2020 – Range of securities

Number of holders% of holders

Number of shares% of shares

1 to 1,000

16,58689.41

5,577,489

34.39

1,001 to 5,000

1,747

9.42

3,632,303

22.39

5,001 to 10,000

131

0.71

987,003

6.09

10,001 to 100,000

74

0.40

1,689,033

10.41

Over 100,000

12

0.06

4,334,172

26.72

18,550100.0016,220,000

100.00Total
At 6 October 2020 there were 5 holdings (2019: 5 holdings) of lessthan a marketable parcel (less than $500 in value or 5 securities
based on the market price of $105.07 per security), which is lessthan 0.03% of the total holdings of ANZ CN4.

238

VOTING RIGHTS OF ANZ CN4

ANZ CN4 do not confer on holders a right to vote at any meetingof members of the Company.
A register of holders of ANZ CN4 is held at:
452 Johnston Street, Abbotsford Victoria, Australia(Telephone: +61 3 9415 4010)

ANZ CN5
On 28 September 2017 the Company issued convertible subordinated perpetual notes (ANZ CN5) which were offered pursuant toa prospectus dated 24 August 2017.
At 6 October 2020 the 20 largest holders of ANZ CN5 held 2,383,063 securities, equal to 25.59% of the total issued securities.
At 6 October 2020 the total number of ANZ CN5 on issue was 9,310,782.
Number of shares% of shares

1

Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

965,51710.37

2

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

136,613

1.47

3

CITICORP NOMINEES PTY LIMITED

119,154

1.28

4

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD <DRP A/C>

108,380

1.16

5HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

103,224

1.11

6

NETWEALTH INVESTMENTS LIMITED <WRAP SERVICES A/C>

95,8871.03

7

BNP PARIBAS NOMS PTY LTD <DRP>

91,926

0.99

8

NULIS NOMINEES (AUSTRALIA) LIMITED <NAVIGATOR MAST PLAN SETT A/C>

85,950

0.92

9

DIMBULU PTY LTD

85,0000.91

10LONGHURST MANAGEMENT SERVICES PTY LTD

78,2460.84

11NAVIGATOR AUSTRALIA LTD <MLC INVESTMENT SETT A/C>

73,7950.79

12AUSTRALIAN EXECUTOR TRUSTEES LIMITED <IPS SUPER A/C>

72,0840.77

13

EASTCOTE PTY LTD <VAN LIESHOUT FAMILY A/C>

50,0000.54

14

FEDERATION UNIVERSITY AUSTRALIA

50,0000.54

15

MARROSAN INVESTMENTS PTY LTD

50,0000.54

16NETWEALTH INVESTMENTS LIMITED <SUPER SERVICES A/C>

46,0570.49

17

BNP PARIBAS NOMINEES PTY LTD <PITCHER PARTNERS DRP>

45,892

0.49

18

G C F INVESTMENTS PTY LTD

44,811

0.48

19

MUTUAL TRUST PTY LTD

40,527

0.44

20

MR RONALD MAURICE BUNKER

40,0000.43

2,383,063

25.59

Total

Distribution of ANZ CN5 holdings
At 6 October 2020 – Range of securities

Number of holders% of holders

Number of shares% of shares

1 to 1,000

10,43290.50

3,682,742

39.55

1,001 to 5,000

975

8.46

2,097,705

22.53

5,001 to 10,000

65

0.57

501,417

5.39

10,001 to 100,000

50

0.43

1,596,030

17.14

Over 100,000

5

0.04

1,432,888

15.39

11,527100.009,310,782

100.00Total
At 6 October 2020 there were 4 holdings (2019: 4 holdings) of lessthan a marketable parcel (less than $500 in value or 5 securities
based on the market price of $103.15 per security), which is lessthan 0.04% of the total holdings of ANZ CN5.

VOTING RIGHTS OF ANZ CN5

ANZ CN5 do not confer on holders a right to vote at any meetingof members of the Company.
A register of holders of ANZ CN5 is held at:
452 Johnston Street, Abbotsford Victoria, Australia(Telephone: +61 3 9415 4010)

ANZ 2020 Annual Report 239

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Shareholder information – unaudited (continued)

Employee Shareholder Information

American Depositary Receipts

In order to comply with the requirements of the ANZ Employee Share
Acquisition Plan Rules and the ANZ Share Option Plan Rules, sharesor options must not be issued under these plans if the aggregate
number of shares and options that remain subject to the rules of
either plan exceed 7% of the total number of ANZ shares of allclasses on issue (including preference shares). At 30 September 2020
participants under the following plans/schemes held 0.71% (2019:
0.69%) of the total number of ANZ shares of all classes on issue:

The Company has American Depositary Receipts (ADRs)
representing American Depositary Shares (ADSs) that are traded on
the over-the-counter securities market ‘OTC Pink’ electronic platform
operated by OTC Markets Group Inc. in the United States under the
ticker symbol: ANZBY and the CUSIP number: 052528304.

• ANZ Employee Share Acquisition Plan;• ANZ Employee Share Save Scheme;• ANZ Share Option Plan; and• ANZ Directors’ Share Plan.

Stock Exchange Listings
Australia and New Zealand Banking Group Limited’s ordinary sharesare listed on the Australian Securities Exchange and New Zealand’s
Exchange (NZX).
The Group’s other stock exchange listings include:• Australian Securities Exchange – ANZ Capital Notes (CN1, CN2,
CN3, CN4 and CN5), ANZ Capital Securities, senior debt (including
covered bonds) and subordinated debt [Australia and New
Zealand Banking Group Limited], and residential mortgage
backed securities;• London Stock Exchange – Senior (including covered bonds) debt
[Australia and New Zealand Banking Group Limited] and senior(including covered bonds) debt [ANZ New Zealand (Int’l) Limited];• Luxembourg Stock Exchange – Perpetual subordinated debt
[Australia and New Zealand Banking Group Limited];• NZX – ANZ NZ Capital Notes and senior debt [ANZ BankNew Zealand Limited];• SIX Swiss Exchange – Senior debt [ANZ New Zealand (Int’l)Limited]; and• Taipei Exchange – Senior debt [Australia and New Zealand
Banking Group Limited].
For more information on the ANZ Capital Notes, ANZ Capital
Securities and ANZ NZ Capital Notes please refer to Note 15
to the Financial Report.

240

With effect from 23 July 2008, the ADR ratio changed from one ADS
representing five ANZ ordinary shares to one ADS representing one
ANZ ordinary share.
The Bank of New York Mellon (BNY Mellon) is the Depositary for
the Company’s ADR program in the United States. For further
information about ADRs, please call BNY Mellon at 1-888-269-2377 if
you are calling from within the United States. If you are calling fromoutside the United States, please call 1-201-680-6825. You may also
visit BNY Mellon’s website at www.adrbnymellon.com.

Important dates for shareholders1
MAY 2021

NOVEMBER 2021

5 May

Half Year Results Announcement

8 November

Final Dividend Ex-Date

10 MayInterim Dividend Ex-Date

9 November

Final Dividend Record Date

11 MayInterim Dividend Record Date

10 November

DRP/BOP/Foreign Currency Record Date

12 MayDRP/BOP/Foreign Currency Record Date

DECEMBER 2021

JULY 2021
1 JulyInterim Dividend Payment Date

16 December

Final Dividend Payment Date

16 December

Annual General Meeting (Adelaide)

OCTOBER 2021
14 OctoberClosing date for receipt of Director Nominations

28 October

Annual Results Announcement

OUR INTERNATIONAL PRESENCE AND EARNING COMPOSITION BY GEOGRAPHY2

INTERNATIONAL$(57) MILLION

AUSTRALIA$2,522 MILLIONNEW ZEALAND$1,293 MILLIONINTERNATIONAL
ASIA

China
Hong Kong
India
Indonesia
Japan
Laos
Malaysia

PACIFIC

Myanmar
The Philippines
Singapore
South Korea
TaiwanThailand
VietnamAmerican Samoa
Cook Islands
Fiji
Guam
Kiribati
New Caledonia
Papua New Guinea

Samoa
Solomon Islands
Timor-Leste
Tonga
Vanuatu

EUROPEMIDDLE EAST

FranceGermany
United Kingdom

United ArabEmirates (Dubai)
UNITED STATESOF AMERICA

1. If there are any changes to these dates, the Australian Securities Exchange will be notified accordingly. 2. On a Cash profit (continuing operations) basis. Excludes non-core items included
in statutory profit and discontinued operations included in cash profit. It is provided to assist readers in understanding the result of the ongoing business activitives of the Group. For further
information on adjustments between statutory and cash profit refer to page 56.

ANZ 2020 Annual Report241Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Contacts
REGISTERED OFFICEANZ Centre Melbourne
Level 9, 833 Collins Street
Docklands VIC 3008 Australia
Telephone: +61 3 9273 5555
Facsimile: +61 3 8542 5252
Company Secretary: Simon Pordage
INVESTOR RELATIONS
Level 10, 833 Collins Street
Docklands VIC 3008 Australia
Telephone: +61 3 8654 7682
Facsimile: +61 3 8654 8886
Email: investor.relations@anz.com
Web: shareholder.anz.com
Group General Manager
Investor Relations: Jill Campbell
COMMUNICATIONSAND PUBLIC AFFAIRSLevel 10, 833 Collins Street
Docklands VIC 3008 Australia
Telephone: +61 2 6198 5001
Email: Tony.Warren@anz.com
Group General Manager Communications
and Public Affairs: Tony Warren
SHARE AND SECURITIESREGISTRAR AUSTRALIA
AUSTRALIA

Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001Australia
Telephone within Australia: 1800 11 33 99
International Callers: +61 3 9415 4010
Facsimile: +61 3 9473 2500
Email: anzshareregistry@computershare.com.au
Austraclear Services Limited
20 Bridge Street
Sydney NSW 2000 Australia
Telephone:1300 362 257
JAPANJapan Securities Depository Center,
Incorporated
1-1, Nihombashi Kayabacho 2-chome,
Chuo-ku, Tokyo 103-0025 Japan
Telephone: +81-3-3661-0161 (Main) /+81-3-3661-7193 (Book-Entry
Transfer Department)

242

LUXEMBOURG

Deutsche Bank Luxembourg S.A.
2, Boulevard Konrad Adenauer
L-1115 Luxembourg, Luxembourg
Telephone: +352 4 21 22 656
NEW ZEALAND

Computershare Investor
Services Limited
Private Bag 92119
Auckland 1142 New Zealand
Telephone: 0800 174 007
Facsimile: +64 9 488 8787
UNITED KINGDOM

Computershare Investor
Services PLC
The Pavilions Bridgwater Road
Bristol BS99 6ZZ UK

MORE INFORMATION

General Information on ANZ can beobtained from our website: anz.com.
Shareholders can visit our Shareholder
Centre at anz.com/shareholder/centre.
ANZ Corporate Governance: For
information about ANZ’s approach to
Corporate Governance and to obtaincopies of ANZ’s Constitution, Board/Board
Committee Charters, Code of Conduct
and summaries of other ANZ policies ofinterest to shareholders and stakeholders,
visit anz.com/corporategovernance.
Australia and New Zealand Banking
Group Limited ABN 11 005 357 522.
This Annual Report has been prepared forAustralia and New Zealand Banking Group
Limited (“the Company”) together with its
subsidiaries which are variously described
as: “ANZ”, “Group”, “ANZ Group”, “the Bank”,“us”, “we” or “our”.

Telephone: +44 870 702 0000
Facsimile: +44 870 703 6101
UNITED STATESThe Bank of New York Mellon
240 Greenwich St, Floor 7E
New York, NY 10286 USA

Founding Signatory of:

Telephone: +1 1800 254 2826
BNY Mellon Shareowner Services
PO Box 505000
Louisville, KY 40233-5000 USA
USA Toll Free Telephone:1888 269 2377
Telephone for International Callers:
1201 680 6825
Web:
www-us.computershare.com/investor
Email: shrrelations@bnymellon.com
Deutsche Bank Trust Company Americas
60 Wall Street, 24th Floor Mailstop
NYC 60-2407
New York, NY 10005 USA
Telephone: +1 212 250 2500
GERMANY

Deutsche Bank Aktiengesellschaft
COO Global Markets Operations
Schuldschein Operations
Mainzer Landstr. 11-174
60272 60329 Frankfurt am Main Germany
Telephone: +49 69 910 31441
Facsimile: +49 69 910 85025
Email: GTO-FFT.SDO@db.com

DISCLOSURE INSIGHT ACTION

Glossary
AASs Australian Accounting Standards.
AASB Australian Accounting Standards
Board. The term “AASB” is commonly used
when identifying AASs issued by the AASB.
In doing so, the term is used together with
the AAS number.
ADI Authorised Deposit-taking Institution.
APRA Australian Prudential Regulation
Authority.
APS ADI Prudential Standard.
BCBS Basel Committee on Banking

Supervision.
Cash and cash equivalents comprisecoins, notes, money at call, balances heldwith central banks, liquid settlement balances(readily convertible to known amountsof cash which are subject to insignificant
risk of changes in value) and securities
purchased under agreements to resell(reverse repos) in less than three months.
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.
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 othernon-core items not associated withthe ongoing operations of the Group;2.	treasury shares, revaluation of policy
liabilities, economic hedging impacts
and similar accounting items that
represent timing differences thatwill reverse through earnings in
the future; andCash profit is not a measure of cash
flow or profit determined on a cash
accounting basis.
Collectively assessed provision under
AASB 139 is the provision for credit losses

that are inherent in the portfolio but not able
to be individually identified. A collectively
assessed provision may only be recognised
when a loss event has already occurred.
Losses expected as a result of future events,
no matter how likely, are not recognised.
Collectively assessed allowance for
expected credit loss under AASB 9

represent the Expected Credit Loss (ECL).
This incorporates forward-looking
information and does not require an
actual loss event to have occurred for an
impairment provision to be recognised.
Covered bonds are bonds issued by an

Derivative credit valuation adjustment(CVA) Over the life of a derivative

instrument, ANZ uses a model to adjust fairvalue to take into account the impact ofcounterparty credit quality. The methodology
calculates the present value of expected
losses over the life of the financial instrument
as a function of probability of default, loss
given default, expected credit risk exposureand an asset correlation factor. Impaired
derivatives are also subject to a CVA.
Dividend payout ratio is the total

ordinary dividend payment divided byprofit attributable to shareholders of
the Company.
Fair value is an amount at which an asset

or liability could be exchanged between
knowledgeable and willing parties in anarm’s length transaction.

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 coverpool cannot be otherwise pledged or
disposed of but may be repurchased andsubstituted in order to maintain the credit
quality of the pool. The Group issues coveredbonds as part of its funding activities.

Group is Australia and New Zealand
Banking Group Limited (the Company) andthe entities it controlled at the year end andfrom time to time during the financial year
(together, the Group).

Credit risk is the risk of financial loss

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. Financial assets
are impaired if there is objective evidenceof impairment as a result of a loss event that
occurred prior to the reporting date, andthat loss event has had an impact, which
can be reliably estimated, on the expected
future cash flows of the individual asset or
portfolio of assets.

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.
Customer remediation includes

Gross loans and advances (GLA)

is made up of loans and advances,
acceptances and capitalised brokerage/
mortgage origination fees less unearned
income.
IFRS International Financial ReportingStandards.
Impaired assets are those financial assets

Impaired loans comprise drawn facilities

where the customer’s status is defined as
impaired.

provisions for expected refunds tocustomers, remediation project costs andrelated customer and regulatory claims,
penalties and litigation outcomes.

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

ANZ 2020 Annual Report 243

Overview

How wecreate value

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportShareholder
information

Glossary continued

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 resultof changes in the overall level of interest
rates and/or the relativity of these rates
across the yield curve;
2.	basis risk – the risk to earnings ormarket value arising from volatility
in the interest margin applicable tobanking book items; and3.	optionality risk – the risk to earnings
or market value arising from theexistence of stand-alone or embedded
options in banking book items.
Internationally comparable ratios are

ANZ’s interpretation of the regulations
documented in the Basel Committee
publications; “Basel lll: A global regulatory
framework for more resilient banks andbanking systems” (June 2011) and“International Convergence of Capital
Measurement and Capital Standards”(June 2006). They also include differences
identified in APRA’s information paper
entitled “International Capital Comparison
Study” (13 July 2015).

244

Level 1 in the context of APRA supervision,

Return on average assets is theAustralia and New Zealand Banking Group
Limited consolidated with certain approved
subsidiaries.

profit attributable to shareholders of theCompany, divided by average total assets.

Level 2 in the context of APRA supervision,

the consolidated ANZ Group excluding
associates, insurance and funds management
entities, commercial non-financial entities
and certain securitisation vehicles.
Net interest margin is net interest

income as a percentage of averageinterest earning assets.
Net loans and advances represent

gross loans and advances less allowancefor expected credit losses.
Net Stable Funding Ratio (NSFR) is

the ratio of the amount of available stable
funding (ASF) to the amount of required
stable funding (RSF) defined by APRA.
The amount of ASF is the portion of an
Authorised Deposit-taking Institution’s (ADI)
capital and liabilities expected to be areliable source of funds over a one year
time horizon. The amount of RSF is afunction of the liquidity characteristics andresidual maturities of an ADI’s assets andoff- 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).
Regulatory deposits are mandatory

reserve deposits lodged with local central
banks in accordance with statutory
requirements.
Restructured items comprise facilities

in which the original contractual terms
have been modified for reasons related to
the financial difficulties of the customer.
Restructuring may consist of reduction ofinterest, principal or other payments legallydue, or an extension in maturity materiallybeyond those typically offered to new
facilities with similar risk.

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.

50 years as a Brand, 185 years as a Bank
On 1 October 1970, in what was then the largest
merger in Australian banking history, ANZ Bank Ltd
merged with the English, Scottish and Australian Bank
Limited to form Australia and New Zealand Banking
Group Limited – the modern ANZ.

1835

1887

1951

1970

A NEW
BANK

WOMEN IN THE
WORKFORCEANZBEGINS

MERGER
WITH ES&A

The Bank ofAustralasia opens
in Sydney.

Bank of Australasia employs
its first female typist,
believed to be the firstwoman employed by anAustralian bank. Mary
Switte was appointed to theposition of 'lady typewriter'.

In London, the Bank
of Australasia merges
with the Union Bank
of Australia to form
ANZ Bank Limited.

ANZ Bank Limited
merges with the English,
Scottish and Australian
Bank to become Australia
and New Zealand
Banking Group Limited.

1996
CONNECTED

anz.com launches,
followed closely byphone banking andinternet banking.

2003

2010

2012

2016

NATIONAL
BANK OFNEW ZEALANDANZ GOMONEY™
LAUNCHES

BRINGING IT
ALL TOGETHERAPPLE PAY AND
ANDROID PAY

COVID-19 SUPPORTPACKAGEANZ is the first bank inAustralia to offer customersa mobile-to-mobile payment
application.

National Bank of
New Zealand integrates
into the ANZ brand.

With the launch ofApple Pay and Android
Pay, ANZ customers
in Australia now able
to make tap and go
payments wherevercontactless payments
accepted.

ANZ launches anunprecedented
support package forsmall business andhome loan customers
with the potential toinject $6 billion into
the Australianeconomy and assist
in the recovery fromthe COVID-19 crisis.

ANZ Bank Limited
acquires National
Bank of New Zealandfrom Lloyds TSB.

The evolution of the ANZ brand2020

We are adapting to the changing
environment, protecting our people,
customers and shareholders, engaging
proactively with our stakeholders and,
together, preparing for the future.

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.