DECEMBER 2018 BASEL III PILLAR 3 /FIRST QUARTER FY19 CHART PACK19 February 2019
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED

To be read in conjunction with ‘ANZ Basel III Pillar 3 disclosure as at 31 December 2018’Longer term Pillar 3 trends available within the analyst toolkit on the ANZ shareholder website shareholder.anz.com

OVERVIEWFINANCIAL INFORMATION AS AT 31 DECEMBER 20181•Capital: Level 2 Common Equity Tier 1 (CET1) ratio 11.3% continues to meet APRA’s ‘unquestionably strong’requirements well ahead of 2020 implementation•Funding and liquidity: LCR 132% (Dec-18 quarter avg) and NSFR 114%. Both short term and long term funding
costs increased in the lead up to the Christmas period and into January. Spreads have however moderated inrecent weeks•

Credit quality: Gross impaired assets $2b, stable quarter on quarter. Total group residential mortgage 90+ day
past due loans (Aus, NZ & Standardised) 62bp, increased 1bp in the quarter. In Australia Division, gross impaired
assets increased 2% and residential mortgage 90+ day arrears increased 3bp (refer slide 6)•

Individual provisions: charge of $186m in the December quarter, $14m above 2H18 quarterly average of $172m.
Total provision charge was $156m•

Credit RWAs: $10b increase in the quarter, included +$4b in lending largely in the Corporate asset class. Othermovements included foreign exchange impacts, regulatory determined adjustments relating to Mortgages andimprovement in the portfolio risk profile•

Lending volumes in the Australia Division declined in the quarter, housing portfolio contracted 0.2% ($534m)2•$6.3b of interest only loans switched to principal and interest in 1Q19, compared with $5.8b per quarter on
average of the 8 quarters from 1Q17 to 4Q18 (refer slide 7)

1. Growth rates refer to Dec 18 vs Sep 18 unless otherwise stated.
2. Source: APRA Monthly banking statistics

2

CAPITAL, LIQUIDITY & FUNDING

APRA LEVEL 2 CET1 RATIO - CAPITAL MOVEMENTAPRA Level 2 CET1 ratio of 11.3% is in excess of APRA’s‘unquestionably strong’ benchmark1 well ahead of the 2020
implementation timeframe•%
11.44

Dec 18 CET1 impacted bypayment of 2018 finaldividendSep-18

APRA LEVEL 2 CET1 RATIO

11.25

-0.05

-0.58

Both short term and long term funding costs increased in thelead up to the Christmas period and into January. Spreads have
however moderated in recent weeks

•

0.28

0.16

Funding and liquidity position remains strong with LCR 132%
(Dec-18 quarter avg) and NSFR 114% (as at 31-Dec-18)•Dividends

Asset sales

Equivalent to ~11.6%
on a pro forma basis2

Share Buy Backs

Organic Cap
Gen & OtherDec-18

FUNDING COSTS%%

9.6

9.5

10.1

9.8

10.6

10.8

11.011.1

11.4

11.3

0.7

1.4

0.6

1.3

0.5

1.2
1.1

0.4

1.0

0.3

0.9

0.2

0.8

0.1
Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17Mar-18Jun-18

Sep-18Dec-18

0.0
Sep17

0.7
Dec17

Mar18

3mth Bills/OIS spread (Current) (LHS)
1.
2.
3.

Based on APRA information paper “Strengthening banking system resilience – establishing unquestionably strong capital ratios” released in July 2017
Taking into consideration announced asset divestments yet to settle (~60bps) and ~$1b (~-25bps) remaining 2nd tranche of share buy back announced in June 2018
Average across senior USD, EUR & AUD

Jun18

Sep18

Dec18

0.6

Marginal 5yr Wholesale Funding Cost (over 3mBBSW) (RHS)33

PORTFOLIO MOVEMENTRISK WEIGHTED ASSETSTOTAL RISK WEIGHTED ASSETS BY CATEGORYTOTAL RWA MOVEMENT DRIVERS$b$b4093918398
391739137173963716391
38
16398
38
13152

143

133

141

139

146

200

199

204

202

198

201

Sep-16

Mar-17

Sep-17Mar-18

Sep-18Dec-18CRWA (ex. Insto)

CRWA (Insto)

Mkt. & IRRBB RWA

10.1

0.4

390.8

398.4-1.9-1.0

IRRBB RWA

Mkt RWA

Dec-183.4

347.7

FX accounted for$3.5b of the$10b increase in
CRWA in the
Dec-18 quarterSep-18Credit RWA

Op RWA

Op-RWA

CREDIT RWA MOVEMENT DRIVERSTOTAL RISK WEIGHTED ASSETS BY DIVISION1$b1.

409
2460

398
2257

391
1556

396
1258

391
1157

398
1058

168

159

159

166

164

169

157

160

161

161

159

161

Sep-16

Mar-17

Sep-17Mar-18

Sep-18Dec-18Australia

Institutional

New Zealand

337.6

Sep-184.1

3.5-0.9

FXRiskOther

predominately from theimpact of regulatory
determined adjustments

Lending Mvmt.

Data /Methodology
changesDec-18Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 2017 and backdated to September 2016 for the purposes of chart time series

4PORTFOLIO MOVEMENTCREDIT RISK WEIGHTED ASSETS & EXPOSURE AT DEFAULT (EAD)EXPOSURE AT DEFAULT (EAD) & CRWA/EAD1

CREDIT RWA MOVEMENT BY SEGMENT

$b$b

4.4
3.5

337.6

899

894

930

903

944

977

977
53

Other58

QRR & Other Retail381

Residential Mortgage

37.3FXResidential
Mortgage

Corporate

Sovereign& Banks

Other

Dec-18$b (Dec-18 vs Sep-18) FX Adjusted
35.8

35.6
213

Sovereign & Banks

Largely the impact ofregulatory determinedadjustments
3.0272Mar-17

CRWA/EAD %
1.

-0.3

CREDIT RWA & EAD MOVEMENT BY ASSET CLASS
36.9

38.0

Sep-16-0.5

Largely the impact ofregulatory determinedadjustments

Sep-18

39.4

347.7

3.0

Sep-17Mar-18

Sep-18Dec-18Dec-18EAD

Corporate

12.6
8.1

Increase inexposure to highly
rated sovereigns

4.4
0.80.7

Residential
Mortgage (Housing)
Credit RWA

Corporate-0.5
Sovereign & Bank-0.3
OtherEAD

EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330

5

CREDIT QUALITYPROVISION CHARGE$m
Annualised
loss rate:
25bp

556

Annualised
loss rate:
19bp

556
482

362
573

319

448

599

437

283
325

243
462

Annualised
loss rate:
10bp

Annualised
loss rate:
14bp
236

308

202

206

121

159

156

43-17

34-43-42-25-65

246
-10

220
-18

210
-4

160-39

183
-24

186
-30

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

Individual Provision charge

Collective Provision charge

PAST DUE LOANS > 90 DAYS AS A % OF EADGROSS IMPAIRED ASSETS1,2%$m

4,000

0.56

3,172
3,000

2,384

2,000

2,162

2,034

1,877

2,013

2,012

Dec-17Mar-18Jun-18

Sep-18Dec-18

0.55
0.39

0.50

0.63

0.62

0.60

0.59

0.56

0.58

0.61 0.62

0.62 0.64

Sep-18Dec-180.50

0.44

1,0000

Sep-16Australia1.
2.

Sep-17

New ZealandInstitutional

Other includes Retail Asia & Pacific and Australia WealthExcluding unsecured 90 days past dueOther

Sep-16

Mar-17

Sep-17

Total Group Residential Mortgage

Dec-17Mar-18Jun-18Retail (Pillar 3 QRR & Other Retail categories)

6

ANZ AUSTRALIA RETAIL - VOLUMES
HOUSING PORTFOLIO•ANZ Home loan portfolio contracted $534m (-0.2%) in theDecember quarter with owner-occupied and investor lending both
trending below system1•Interest only new business in the December quarter (1Q19) was
11.4% of total new business flows•$6.3b of interest only loans switched to principal and interest in1Q19, compared with $5.8b per quarter on average of the 8quarters from 1Q17 to 4Q18

ANZ MORTGAGE LENDING 1% (12 month rolling growth)151050

ANZ DECEMBER 2018 QUARTER HOUSING MOVEMENT 1
5.4$b (Dec 18 v Sep 18)

-5Dec
16

Mar
17

Jun17

Sep
17

Dec
17

Mar18

Jun18

Sep
18

Housing: Total (ANZ)

Housing: Investor (ANZ)

Housing: Owner-occupied (ANZ)

Housing: Total (SYSTEM)Jan
19

SWITCHING INTEREST ONLY TO PRINCIPAL & INTEREST2$b0.7
-0.5

-1.1

8-6.2

Total housing1,3 Owner-Occupied1

Investor1

P&I4

Housing portfolio change (Dec 18 v Sep 18)1Total Housing

Owner-occupied

ANZ-0.2%

+0.4%

-1.4%

System+0.9%

+1.3%

+0.1%

1.

Investor

Interest only4

1Q194442667

1H172H17

1H1829899742H18

1H19

Contractual conversions

2H19

1H20

Early conversions

2H20

1H21443

2H21

1H22

2H225
1H23+

Contractual (still to convert)

ANZ analysis of APRA monthly banking statistics; 2.Includes construction loans; 3. includes securitisation; 4. ANZ Australia Division total housing portfolio
7AUSTRALIA HOME LOANSUNDERWRITING PRACTICES AND POLICY CHANGES1 - JUNE 2015 TO DECEMBER 2018

ANZ LVR caps
• LVR cap reduced to 70% in high risk mining towns; reduced to 90% for investment loans; reduced to 80% for Interest Only (IO) 2 lending• Restricted new housing lending (new security to ANZ) to max. 80% LVR for all apartments within 7 inner city Brisbane postcodes• Restricted investment lending (new security to ANZ) to max 80% LVR for all apartments within 4 inner city Perth postcodes
ANZ Assessment• Interest rate floor (new & existing lending) at 7.25% (implemented August 2015);• Income adjusted living expense floor (HEM); 20% haircut for overtime & commission; Increased income discount factor for residential rental income from 20% to 25%• Limited acceptance of foreign income to demonstrate serviceability and tightened controls on verification.
• Minimum default housing expense (rent/board) applied to all borrowers not living in their own home & seeking RILs 3 or EMAs4• IO renewals become Credit Critical events (full income verification & serviceability test) including P&I to IO & converting to or extending IO term
• Enhanced Responsible Lending Requirements including additional enquiry and increase in minimum monthly credit card expense.
ANZ Product and other limitations• Decreased max. IO term of owner occupied loans & investor lending to 5 years; IO lending no longer available on new Simplicity PLUS owner occupied loans• Withdraw lending to non-residents; tightened acceptances for guarantees; clarified residential lending to trading companies is not acceptable

ANZ PORTFOLIO BORROWING CAPACITY SUMMARYCUSTOMER BORROWING CAPACITY5($)>20% reduction in borrowing capacity

Drivers of reduction in borrowing capacity
45%
Borrowing
capacity basedon policy at 2015

HEM changes

40%
Servicingrate floor

91%

89%

89%

89%

9%

11%

11%

11%

11% ofcustomers
borrowing attheirmaximumcapacity

15%
Income haircuts

Borrowing
capacity 2018

2015
2016
2017
Customers with additional borrowing capacity

2018

Customers borrowing at maximum capacity

1. 2015 to 2018 material changes to lending standards and underwriting 2. Excludes investment lending for specific medical practitioners (eligible Medicos) where LVR cap is a maximum of 90% of lending. 3. Residential
Investment Loans 4. Equity Manager Accounts. 5. ANZ modelled outcome of 4 borrowing scenarios 2018 v 2015: i. Couple, no dependents, ii. Single, no dependents, iii. Couple 2 dependents, iv. Couple, no dependents, higher
income earners.

8AUSTRALIA HOME LOANS
CREDIT QUALITY

HOME LOANS – 90+ DAYS PAST DUE (BY VINTAGE)1HOME LOANS PAST DUE LOANS2%%

2.0

2.2

1.5

2.0

1.0
1.8

0.5

1.6

0.0

Sep
121.4

Sep
1330+ DPD %1.21.0Sep
14Sep
1590+ Owner Occupied

HOME LOANS PAST DUE LOANS2%0.8

Sep16Sep17Dec1890+ Investor
Australian Residential Mortgage 90+ day past
due loans (as a % of Residential Mortgage GLA)
increased 3bps in the December quarter

2.5
0.6

2.0
1.5

0.4
Since FY15, quality has improved year-on-year,with FY17 & FY18 vintages performing better
than FY15 & FY16 vintages

0.2

1.0
0.5

0.06810

FY151.
2.

1214

FY161618202224
Month on book

FY17FY182628303234360.0

VIC & TAS
Sep 12

NSW & ACT
Sep 13

Sep 14QLD
Sep 15WASA & NT

Sep 16

Sep 17

Home loans 90+ dpd vintages % ratio of ever delinquent (measured by # accounts) contains at least 6 application months of that fiscal year contributing to each data point.
Includes Non Performing Loans. ANZ delinquencies calculated on a missed payment basis. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification
at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances

Portfolio
Sep 18Dec 18

9FURTHER INFORMATIONOur Shareholder information

shareholder.anz.com

DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general backgroundinformation about the Bank’s activities current at the date of the presentation. It is information
given in summary form and does not purport to be complete. It is not intended to be relied uponas advice to investors or potential investors and does not take into account the investment
objectives, financial situation or needs of any particular investor. These should be considered, withor without professional advice when deciding if an investment is appropriateThis presentation may contain forward-looking statements including statements regarding ourintent, belief or current expectations with respect to ANZ’s business and operations, marketconditions, results of operations and financial condition, capital adequacy, specific provisions andrisk management practices. When used in this presentation, the words “estimate”, “project”,“intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ
and its management, are intended to identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the datehereof. Such statements constitute “forward-looking statements” for the purposes of the UnitedStates Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to
publicly release the result of any revisions to these forward-looking statements to reflect events orcircumstances after the date hereof to reflect the occurrence of unanticipated events.

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