ANZ BANK NEW ZEALAND LIMITEDINTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED 31 DECEMBER 2018

ANZ BANK NEW ZEALAND LIMITEDINTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED 31 DECEMBER 2018

CONTENTSCONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Income Statement

3Statement of Comprehensive Income

3

Balance Sheet

4

Cash Flow Statement

5

Statement of Changes in Equity

6

Notes to the Financial Statements

7

SUPPLEMENTARY INFORMATIONBank Financial Strength Dashboard

16

Other Information

18

GLOSSARY OF TERMS
In these Interim Financial Statements unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it wereconducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
OnePath means OnePath Life (NZ) Limited.
UDC means UDC Finance Limited.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.

UNAUDITEDINCOME STATEMENT
2018

2017

NZ$m

NZ$m

Interest income

1,656

1,593

Interest expense

(832)

(808)

824

785

109

210

92

111

For the three months ended 31 December

Note

Net interest income
Other operating income

2

Net funds management and insurance income
Share of associates' profit-

1

Operating income

1,025

1,107

Operating expenses

(385)

(386)

Profit before credit impairment and income tax

640

721

(13)

(12)

Profit before income tax

627

709

Income tax expense

(160)

(199)

Profit for the period

467

510

2018

2017

NZ$m

NZ$m

467

510

Unrealised gains recognised directly in equity

4

2

Realised losses transferred to the income statement

12

Income tax attributable to the above items

(1)

(1)

Other comprehensive income after tax

4

3

471

513

Credit impairment charge

5

STATEMENT OF COMPREHENSIVE INCOME
For the three months ended 31 December
Profit for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Reserve movements:

Total comprehensive income for the period

The notes appearing on pages 7 to 14 form an integral part of these financial statements

3

ANZ BANK NEW ZEALAND LIMITEDINTERIM FINANCIAL STATEMENTS
BALANCE SHEET
As at

Note

31 Dec 18

30 Sep 18

NZ$m

NZ$m

3,537

2,200

AssetsCash and cash equivalents
Settlement balances owed to the Banking Group

391

656

Collateral paid

2,190

1,919

Trading securities

8,935

8,024

Derivative financial instruments

8,540

8,086

Investment securities
Net loans and advances

4

Assets held for sale

12

6,705

6,502

128,157

126,466

-

897

6

6

3,284

3,289

Premises and equipment

323

325

Other assets

699

642

Total assets

162,767

159,012

1,735

2,161

530

845

112,501

108,008

9,061

8,095

34

161

Investments in associates
Goodwill and other intangible assets

Liabilities
Settlement balances owed by the Banking Group
Collateral received
Deposits and other borrowings

7

Derivative financial instruments
Current tax liabilities
Deferred tax liabilities
Liabilities held for sale

12

Payables and other liabilities

16

21

-

334

956

947

Provisions

8

313

196

Debt issuances

9

24,09425,135

Total liabilities

149,240

145,903

Net assets

13,527

13,10911,888

11,888EquityShare capital
Reserves

37

33

Retained earnings

1,602

1,188

Total equity

13,527

13,109The notes appearing on pages 7 to 14 form an integral part of these financial statements

4

UNAUDITEDCASH FLOW STATEMENT
For the three months ended 31 December

Note

Profit after income tax

2018

2017

NZ$m

NZ$m

467

510

Adjustments to reconcile to net cash provided by/(used in) operating activities:
Depreciation and amortisation

20

21

Net derivatives/foreign exchange adjustment

249

843

Proceeds from divestments net of intangibles disposed of, classified as investing activities

(589)

-

Other non-cash movements

(15)

10

Net (increase)/decrease in operating assets:
Collateral paid

(271)

(319)

Trading securities(911)(1,962)Net loans and advances(1,691)(915)

Other assets

1,004

46

Deposits and other borrowings

4,493

3,660

Settlement balances owed by the Banking Group

(426)

69

Collateral received

(315)

(230)

Other liabilities

(393)

196

1,155

1,419

1,622

1,929

(865)

(790)

653

870

690

-

Other assets

(13)

(14)

Net cash flows provided by investing activities

465

66

Issue proceeds

60

375

Redemptions

Net increase in operating liabilities:

Total adjustments
Net cash flows provided by operating activities

1

Cash flows from investing activities
Investment securities:
Purchases
Proceeds from sale or maturity
Proceeds from divestments

12

Cash flows from financing activities
Debt issuances2(810)(1,512)

Net cash flows used in financing activities(750)(1,137)

Net increase in cash and cash equivalents

1,337

858

Cash and cash equivalents at beginning of year

2,200

2,439

Cash and cash equivalents at end of year

3,537

3,297

1
2

Net cash provided by operating activities includes income taxes paid of NZ$287 million (2018: NZ$169 million).
Movement in debt issuances (Note 9 Debt Issuances) also includes a NZ$457 million decrease (2017: NZ$299 million increase) from the effect of foreign exchange rates, an NZ$183 million
increase (2017: NZ$74 million decrease) from changes in fair value hedging instruments and a NZ$17 million decrease (2017: NZ$9 million increase) of other changes.

The notes appearing on pages 7 to 14 form an integral part of these financial statements

5

ANZ BANK NEW ZEALAND LIMITEDINTERIM FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
SharecapitalNZ$m

Investment
securities
revaluation
reserve
NZ$m

Cash flow
hedging
reserve
NZ$m

Retainedearnings
NZ$m

Total
equity
NZ$m

8,888

5

43

3,845

12,781

-

-

-

510

510

Unrealised gains / (losses) recognised directly in equity

-

15

(13)

-

2

Realised losses transferred to the income statement

-

-

2

-

2

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

-

(4)

3

-

(1)

Note
As at 1 October 2017
Profit or loss

Total comprehensive income for the period
As at 31 December 2017

As at 1 October 2018
NZ IFRS 9 transition adjustment
As at 1 October 2018 (adjusted)

1

-

11

(8)

510

513

8,888

16

35

4,355

13,294

11,888

11

22

1,188

13,109

-

-

-

(53)

(53)

11,888

11

22

1,135

13,056

Profit or loss

-

-

-

467

467

Unrealised gains / (losses) recognised directly in equity

-

(6)

10

-

4

Realised losses transferred to the income statement

-

-

1

-

1

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

-

2

(3)

-

(1)

Total comprehensive income for the period

-

(4)

8

467

471

11,888

7

30

1,602

13,527As at 31 December 2018

The notes appearing on pages 7 to 14 form an integral part of these financial statements

6

UNAUDITEDNOTES TO THE FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIESStatement of compliance
These interim financial statements for the Banking Group were issued on 18 February 2019 and should be read in conjunction with the Banking
Group’s financial statements for the year ended 30 September 2018.
These financial statements comply with:• New Zealand Generally Accepted Accounting Practice, as defined in the Financial Reporting Act 2013;• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and• IAS 34 Interim Financial Reporting.
These is no requirement for the Bank’s directors to approve these financial statements.
Use of estimates, assumptions and judgements
The preparation of these interim financial statements requires the use of management judgement, estimates and assumptions that affect reported
amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or
subjective decisions or assessments are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an
ongoing basis.
Basis of measurement
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:• derivative financial instruments;• investment securities;• financial instruments held for trading; and• financial instruments designated at fair value through profit and loss.
Changes in accounting policies
The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year financial statements,
except as disclosed below.
The following new standards relevant to the Banking Group have been adopted from 1 October 2018 and have been applied in the preparation ofthese financial statements:
NZ IFRS 9 Financial Instruments (NZ IFRS 9)NZ IFRS 9 was effective for the Banking Group from 1 October 2018. NZ IFRS 9 stipulates new requirements for the impairment of financial assets,
classification and measurement of financial assets and financial liabilities and general hedge accounting. Details of the key requirements andestimated impacts on the Banking Group are outlined below.
Impairment
NZ IFRS 9 replaced the incurred loss impairment model under NZ IAS 39: Financial Instruments: Recognition and Measurement (NZ IAS 39) with an
expected credit loss (ECL) model incorporating forward looking information. The ECL model has been applied to all financial assets measured atamortised cost, debt instruments measured at fair value through other comprehensive income, lease receivables, certain loan commitments andfinancial guarantees. Under the ECL model, the following three-stage approach is applied to measuring ECL based on credit migration between thestages since origination:• Stage 1: At the origination of a financial asset, a provision equivalent to 12 months ECL is recognised.
• Stage 2: Where there has been a significant increase in credit risk since origination, a provision equivalent to lifetime ECL is recognised.
• Stage 3: Similar to the previous NZ IAS 39 requirements for individual impairment provisions, lifetime ECL is recognised for loans where there is
objective evidence of impairment.
Expected credit losses are probability weighted and determined by evaluating a range of possible outcomes, taking into account the time value ofmoney, past events, current conditions and forecasts of future economic conditions.
Classification and measurement
There are three measurement classifications under NZ IFRS 9: Amortised cost, Fair Value through Profit or Loss and Fair Value through Other
Comprehensive Income. Financial assets are classified into these measurement classifications taking into account the business model within which
they are managed, and their contractual cash flow characteristics.
The classification and measurement requirements for financial liabilities under NZ IFRS 9 are largely consistent with NZ IAS 39 with the exception thatfor financial liabilities designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included in othercomprehensive income. This part of the standard was early adopted by the Banking Group on 1 October 2013.
Transition to NZ IFRS 9
Other than as noted above under classification and measurement of financial liabilities, NZ IFRS 9 has a date of initial application for the Banking Groupof 1 October 2018. The classification and measurement, and impairment requirements, are applied retrospectively by adjusting opening retained
earnings at 1 October 2018. The Banking Group has not restated comparatives.

7

ANZ BANK NEW ZEALAND LIMITEDNOTES TO THE FINANCIAL STATEMENTS
ImpactImpairment
The application of NZ IFRS 9 as at 1 October 2018 resulted in higher aggregate impairment provisions of approximately NZ$72 million, with anassociated decrease in deferred tax liabilities of approximately NZ$19 million. The net impact on total equity is a reduction of approximately NZ$53
million. These remain subject to change until the Banking Group finalises its financial statements for the year ending 30 September 2019.
Classification and measurement of financial assets
There have been no changes in classification and measurement as a result of the application of the business model and contractual cash flow
characteristics tests.
NZ IFRS 15 Revenue from Contracts with Customers (NZ IFRS 15)
NZ IFRS 15 was effective for the Banking Group from 1 October 2018 and replaces existing guidance on the recognition of revenue from contracts
with customers. The standard requires identification of distinct performance obligations within a contract, and allocation of the transaction price ofthe contract to those performance obligations. Revenue is then recognised as each performance obligation is satisfied. The standard also provides
guidance on whether an entity is acting as a principal or an agent which impacts the presentation of revenue on a gross or net basis.
The Banking Group has assessed all revenue streams existing at the date of transition to the new standard and determined that the impact of NZIFRS
15 is immaterial given the majority of the Banking Group revenues are outside the scope of the standard. The Banking Group has adopted IFRS 15
retrospectively including restatement of prior period comparatives.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the Bank and its subsidiaries.

2.

OTHER OPERATING INCOME

For the three months ended 31 December

Notei) Fee and commission incomeii) Net foreign exchange earnings and other financial instruments income

2018

2017

NZ$m

NZ$m

96
(51)

105
78

-

(1)

iii) Other income
Loss on sale of mortgages to NZ Branch
Insurance proceeds
Sale of OnePath
Other

12

-

20

58

-

6

8

Other income

64

27

Other operating income

109

210

8

UNAUDITED

3.

SEGMENT REPORTING

The Banking Group is organised into three major business segments for segment reporting purposes - Retail, Commercial and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
RetailRetail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact
centres.
Commercial
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 and the agricultural business segment.
Institutional
The Institutional division services global institutional and corporate customers across three product sets: Transaction Banking, Loans & Specialised
Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance,
debt structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to
managing the Banking Group’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
Operating segment analysis
Commercial

Institutional

2018

Retail
2017

2018

2017

2018

2017

2018

Other
2017

2018

Total
2017

For the three months ended 31 December

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Net interest income
Fee and commission income
Net foreign exchange earnings and otherfinancial instruments income
Other income
Net funds management and insuranceincomeShare of associates' profits

460
73

441
76

252
5

241
5

85
18

82
24

27
-

21
-

824
96

785
105

2

3

-

-

17

68

(70)

7

(51)

78

-

-

-

-

1

3

63

24

64

27

85

96

-

-

-

-

7

15

92

111

-

1

-

-

-

-

-

-

-

1

Operating income

620

617

257

246

121

177

27

67

1,025

1,107

Profit after income tax

244

247

141

133

53

92

29

38

467

510

Other segment
The Other segment profit after income tax comprises:
2018

2017

NZ$m

NZ$m

4
69

15

Technology and Group Centre2
Economic hedges

For the three months ended 31 December
Central functions

1

5

(49)

6

Revaluation of insurance policies from changes in interest rates

5

12

Total

29

38

1

2

Central functions’ other income for the three months ended 31 December 2017 includes the $20 million insurance proceeds (Note 2 Other Operating Income) that were received from amember of the Overseas Banking Group.
Technology and Group Centre’s other income for the three months ended 31 December 2018 includes the $58 million gain on sale of OnePath (Note 2 Other Operating Income).

9ANZ BANK NEW ZEALAND LIMITEDNOTES TO THE FINANCIAL STATEMENTS
4.

NET LOANS AND ADVANCES

Note

31 Dec 18

30 Sep 18

NZ$m

NZ$m

828

Overdrafts
Credit cards

1,682

905
1,644

Term loans - housing

79,80078,395

Term loans - non-housing

44,44944,169Finance lease and hire purchase receivables

1,817

1,791

128,576

126,904

Unearned income

(248)

(239)

Capitalised brokerage/mortgage origination fees

314

313

128,642

126,978

(485)

(512)

128,157

126,466

Subtotal

Gross loans and advances
Provision for credit impairment

5

Net loans and advances

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$1,896 million as at 31 December 2018 (30 September 2018:
NZ$2,210 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

5.

PROVISION FOR CREDIT IMPAIRMENTPROVISION FOR CREDIT IMPAIRMENT – BALANCE SHEET

Provision for credit impairment
Individual provision2
Collective provision3
Total provision for credit impairment
1
2
3

Net loans andadvances
31 Dec 18
30 Sep 18
NZ$m
NZ$m
130
115
311
370
441
485

Off-balance sheet credit
related commitments1
31 Dec 18
30 Sep 18
NZ$m
NZ$m
71
81
71
81

Total
31 Dec 18
30 Sep 18
NZ$m
NZ$m
130
115
382
451
512
566

Collective provision relating to off-balance sheet credit related commitments is included in provisions from 1 October 2018.
Individual provision comprises Stage 3 ECL assessed individually from 1 October 2018.
Collective provision comprises Stage 1, 2 and 3 ECL assessed collectively from 1 October 2018.

Collective provision reconciliation

Off-balance
Net loanssheet credit
andrelatedadvances commitments
NZ$m
NZ$m

Total
NZ$m

As at 30 September 2018
NZ IFRS 9 transition adjustment

311
60

71
12

382
72

As at 1 October 2018

371

83

454

(1)

(2)

(3)

370

81

451

2018
NZ$m
32
(10)
(6)
16
(3)
13

2017
NZ$m
40
(12)
(6)
22
(10)
12

Collective credit impairment release
As at 31 December 2018

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
Credit impairment charge for the three months ended 31 December
New and increased provisions
Write-backs
Recoveries of amounts previously written-off
Individual credit impairment charge
Collective credit impairment release
Total credit impairment charge

10

UNAUDITED

6.

IMPAIRED AND PAST DUE LOANS

Loans that are at least 90 days past due but not impaired
Impaired loans

7.

31 Dec 18

30 Sep 18

NZ$m

NZ$m

270
295

205
321

31 Dec 18

30 Sep 18

DEPOSITS AND OTHER BORROWINGS

NZ$m

NZ$m

Term deposits
On demand and short term deposits

52,38342,65551,29841,602

Deposits not bearing interest

11,137

10,224

UDC secured investments

923

931

Total customer deposits

107,098

104,055

Certificates of deposit

1,598

910

Securities sold under repurchase agreements
Commercial paper
Deposits from Immediate Parent Company and NZ Branch
Deposits and other borrowings

8.

521

517

3,254

2,486

30

40

112,501

108,008

PROVISIONS

Employee entitlementsCollective provision on undrawn commitments

31 Dec 18

30 Sep 18

Note

NZ$m

NZ$m

5

124
81

120
-

Other1

108

76

Provisions

313

196

31 Dec 18
NZ$m

30 Sep 18
NZ$m

18,676
2,979

18,767

Covered bonds
Total unsubordinated debt

21,655

22,696

Subordinated debt (Additional Tier 1 capital)

2,439

2,439

Total debt issued

24,09425,135

1

Other provisions include accruals for customer remediation, make-good of leased premises and restructuring (including OnePath separation).

9. DEBT ISSUANCES

Senior debt

3,929

Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is nota member of the Banking Group.
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are
security for the guarantee by the Covered Bond Guarantor as trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its
wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of theBank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (if any) after all
prior ranking creditors of the Covered Bond Trust have been satisfied.

11

ANZ BANK NEW ZEALAND LIMITEDNOTES TO THE FINANCIAL STATEMENTS
10. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESFinancial assets and financial liabilities carried at fair value on the balance sheet
The Banking Group categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure fair value:•

Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical financial instruments;•

Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar financial asset or liability,
either directly or indirectly; and•Level 3 – valuations using inputs for the asset or liability that are not based on observable market date (unobservable inputs).

The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Using observable
Quoted market priceUsing unobservable
inputsTotal
inputs (Level 3)(Level 1)(Level 2)
31 Dec 18 30 Sep 18 31 Dec 18 30 Sep 18 31 Dec 18 30 Sep 18 31 Dec 18 30 Sep 18
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
AssetsTrading securities
Derivative financial instruments
Investment securities
Investments backing insurance contract liabilities1
Total
Liabilities
Deposits and other borrowings
Derivative financial instruments
Other financial liabilities
Total
1

7,032
5
6,654
13,691

6,795
7
6,457
13,259

1,903
8,532
50
10,485

1,229
8,076
44
127
9,476

3
1
4

3
1
4

8,935
8,540
6,705
24,180

8,024
8,086
6,502
127
22,739

11
94
105

10
110
120

3,254
9,049
12,303

2,486
8,084
10,570

1
1

1
1

3,254
9,061
94
12,409

2,486
8,095
110
10,691

Including items reclassified as held for sale.

Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories otherthan those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.

Carrying amount
31 Dec 18
30 Sep 18

Fair value
31 Dec 18
30 Sep 18

NZ$m

NZ$m

NZ$m

NZ$m

Net loans and advances1

128,157

126,466

128,536

126,745

Total

128,157

126,466

128,536

126,745

109,247

105,522

109,322

105,592

Financial assets

Financial liabilities
Deposits and other borrowings2
Debt issuances

24,09425,13524,221

25,462

Total

133,341

130,657

133,543

131,054

1

1
2

12

Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.
Excludes commercial paper (Note 7 Deposits and Other Borrowings) designated at fair value through profit or loss.

UNAUDITED

11. CREDIT RELATED COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES
31 Dec 18
NZ$m

30 Sep 18
NZ$m

Contract amount of:
Undrawn facilities

27,04027,245

Guarantees and letters of credit

1,367

1,531

Credit related commitments and contingencies

Performance related contingencies

1,424

1,329

Total

29,831

30,105The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore thesetransactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As thefacilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
There are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have notdisclosed 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 Banking Group.
In recent years there has been an increase in the number of matters on which the Banking Group engages with its regulators. Globally there havebeen significant increases in the nature and scale of regulatory investigations and reviews, enforcement actions (whether by court action or otherwise)
and the quantum of fines issued by regulators and customer claims. The Banking Group also instigates engagement with its regulators. The nature ofthese investigations and reviews can be wide-ranging and, for example, may include a range of matters including responsible lending practices,
product suitability, wealth advice and adequacy of product disclosure documentation. The Banking Group has received various notices and requests
for information from its regulators as part of both industry-wide and Banking Group specific reviews, and has also made disclosures to its regulators at
its own instigation. There may be exposures to customers which are additional to any regulatory exposures. These could include class actions,individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such reviews and possible
exposures remain uncertain.

13

ANZ BANK NEW ZEALAND LIMITEDNOTES TO THE FINANCIAL STATEMENTS
12. SALE OF CONTROLLED ENTITY
OnePath
On 30 November 2018, the Banking Group sold OnePath to Cigna Corporation. The Banking Group recognised a net gain of $58 million from thistransaction, which is included in other operating income. This net gain may change as the sale price and transaction costs are finalised in the first halfof the 2019 financial year.
Assets and liabilities sold
30 Nov 18
NZ$m
Investments backing insurance contract liabilities
Other assets, net of amounts payable to the Bank

101

Life insurance contract assets

675

Goodwill and other intangible assets

101

Total assets

883

Deposits and other borrowings (deposits with the Bank)(50)

Current tax liabilities

18

Deferred tax liabilities

178

Payables and other liabilities

146

Provisions

6

2

Total liabilities

294

Net assets sold589

13. SUBSEQUENT EVENTSOn 8 February 2019, the Bank’s Board resolved to pay a preference dividend of NZ$5.5 million on or before 6 March 2019 and to pay an ordinary
dividend of NZ$400 million on or before 29 March 2019.

14

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15

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDBANK FINANCIAL STRENGTH DASHBOARD
D1. CREDIT RATINGS

Background
This section does not form part of the Interim Financial Statements. It
contains information in respect of the Banking Group included on the
Bank Financial Strength Dashboard (Dashboard) published on RBNZ’s
website. There is no requirement for the Directors to review orapprove this information. Amounts below may differ slightly fromthose published by the RBNZ due to rounding differences. The tables
include reconciliations to amounts included in the Interim Financial
Statements where there are classification differences between thefinancial statements and the Dashboard.

As at 31 December 2018

Credit rating

S&P Global

AA-

Fitch

AA-

Moody's

A1

D2. CAPITAL ADEQUACY
Capital ratios

Risk weighted assets

As at 31 December 2018

As at 31 December 2018

NZ$m

Total capital ratio

15.2%

Sovereign / quasi-sovereign

128

Common equity tier 1 (CET1) capital ratio

11.8%

Public sector entities

Tier 1 capital ratio

15.2%

Registered banks

1,801

Buffer ratio

7.2%

Corporates

36,476

Total capital ratio regulatory minimum

8.0%

Retail / Residential mortgages

17,029351

Problem loans

Capital712

Equity holdings

As at 31 December 2018

NZ$m

CET1 capital

13,227

CET1 deductions(3,588)Net CET1 capital

9,639

Total additional tier 1 instruments

28

Credit risk supervisory adjustment

2,340

All other assets

11,885Credit risk

70,750Market risk

4,842

2,778

Operational risk

6,027

Total tier 1 capital

12,417

Total risk weighted assets

81,619Total capital

12,417

D3. ASSET QUALITY
As at 31 December 2018
Total loans

Housing
NZ$m

Consumer
NZ$mBusiness
NZ$m

Agriculture
NZ$m

All other
NZ$m

Total
NZ$m

77,354

3,569

29,073

17,422

1,262

128,680

Impaired loans

30

12

59

148

46

295

Loans 90 days past due but not impaired

179

24

54

13

-

270

Total non-performing loans

209

36

113

161

46

565

Non-performing loans ratio (%)

0.27%

1.01%

0.39%

0.92%

3.65%

0.44%

Individual provisions

8

7

32

32

36

115

Collective provisions

53

67

183

62

5

370

On-balance sheet residential mortgage exposures with LVRs that:
Exceeds 80% and not 90%

3.6%

Exceeds 90%

1.6%

A reconciliation of the amounts in this table to the financial statements is included in the Other Information on page 18.

The Supplementary Information does not form part of the Interim Financial Statements

16

BANK FINANCIAL STRENGTH DASHBOARD

D4. PROFITABILITY / PERFORMANCEClassification differences
Funds management
income and other
Financialstatements
commissions
NZ$m
NZ$m

3 months to 31 December 2018

Dashboard
NZ$m

Interest income

1,656

-

1,656

Interest expense

832

-

832

Net interest income

824

-

824

Gains/losses on trading and hedging

(51)

-

(51)

Fee and commission income

96

67

163

All other income

156

(67)

89

Operating expenses

385

-

385

Impaired asset expense

13

-

13

Profit before tax

627

-

627

Tax expense

160

-

160

Profit after tax

467

-

467

Return on assets (%)

1.1%

Return on equity (%)

13.9%

Net interest margin (%)

2.2%

D5. FINANCIAL POSITION

As at 31 December 2018

Financialstatements
NZ$m

Cash and bank deposits1

Classification differences
Securities
Other bank purchased underdeposits andagreements
other assets
to re-sell
NZ$m
NZ$m

Dashboard
NZ$m

5,727

(80)

(986)

Debt securities held2

4,661

15,640--15,640Net loans and advances

128,157--

128,157
8,540

Derivatives in an asset position

8,540

-

-

All other assets

4,703

80

986

5,769

Total assets

162,767--

162,767

Deposits

107,098--

107,098

Debt securities issued3

28,946--28,946

Other borrowings4

1,081

1,231

-

2,312

Derivatives in a liability position

9,061

-

-

9,061

All other liabilities

3,054(1,231)-

1,823

Total liabilities

149,240--

149,240

Equity13,527--

13,527

Comprises cash and cash equivalents and collateral paid
Comprises trading securities, investments backing insurance contract liabilities and investment securities
3
Comprises debt issuances plus certificates of deposit and commercial paper from deposits and other borrowings
4
Comprises collateral received and the remaining items of deposits and other borrowings
1

2

D6. LIQUIDITY

D7. LARGE EXPOSURES

3 months to 31 December 2018

As at 31 December 2018

Quarterly average core funding ratio

88.3%

Quarterly average 1-month mismatch ratio

4.8%

Quarterly average 1-week mismatch ratio

5.0%

Top 5 credit exposures to non-bank counterparties(ie corporates) as a ratio of CET1 capital
Credit exposures to non-bank counterparties(ie corporates) that are greater than 10% of CET1 capital
Top 5 credit exposures to banks as a ratio of
CET1 capital
Credit exposures to banks that are greater than
10% of CET1 capital

49.0%
2
57.2%
3

The Supplementary Information does not form part of the Interim Financial Statements

17

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDOTHER INFORMATION
Reconciliation of total loans by purpose and sector
The financial statements and Dashboard include amounts for total loans which are based on different definitions. The table below reconciles thevarious amounts. This information does not form part of the Interim Financial Statements.
Housing loans and residential mortgage definitions
Housing loans comprise loans for owner occupier property use and residential investor property use. Owner occupiers are borrowers who own or arein the process of buying or building the house or flat they will live in as their principal place of residence. An owner can occupy more than one
property e.g. a family home and a holiday home. Only households can have owner occupier property use loans. Investors are entities or persons
borrowing for the purpose of building or purchasing residential property to rent. This includes ‘Mum and dad’ investor loans and any person(s) thathave a separate residential investor property use loan which is not for their normal business purpose.
Residential mortgage exposures used in the loan-to-valuation ratio analysis are based on the definition of residential mortgage loans as defined in the
Banking Supervision Handbook document Capital Adequacy Framework (internal models based approach) (BS2B). This metric is based on a collateraldefinition and may include some other lending that is not defined as Housing lending in the asset quality section of the Dashboard. See the Banking
Supervision Handbook for a more detailed definition.
As at 31 December 2018
Total loans per Balance Sheet

Note

Housing
NZ$m

Consumer
NZ$mBusiness
NZ$m

Agriculture
NZ$m

All other
NZ$m

Total
NZ$m

4

79,800

n/a

n/a

n/a

48,776

128,576

(4)

-

-

-

-

(4)

Fair value hedge adjustment
Business loans secured by residential property(2,442)

-

-

321

2,121

-

Unearned income on finance leases

-

-

-

-

(204)

(204)

Deposit components of overdraft product

-

-

-

-

312

312

Consumer, business and agriculture lending

-

3,569

28,711

17,422(49,702)-77,354

3,569

28,711

17,743

1,303

128,680

-

-

362

(321)

(41)

-

77,354

3,569

29,073

17,422

1,262

128,680

Loans by purpose (RBNZ series S31)
Business loans secured by residential property
Total loans per Dashboard

D3

The Supplementary Information does not form part of the Interim Financial Statements

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