Australia and New Zealand Banking Group Limited New Zealand Branch
Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2012 | NUMBER 16 ISSUED NOVEMBER 2012Australia and New Zealand Banking Group Limited - New Zealand Branch

Disclosure Statement
For the year ended 30 September 2012

Contents
General Disclosures
Summary of Financial Statements
Income Statements
Statements of Comprehensive Income
Statements of Changes in Equity
Balance Sheets
Cash Flow Statements
Notes to the Financial Statements
Directorate and Auditors
Conditions of Registration
Directors’ Statement
Independent Auditor’s Report
Index

General Disclosures
1
4
5
5
6
7
8
9
68
70
71
72
74

Glossary of Terms
In this Disclosure Statement unless the context
otherwise requires:(a) “Bank” means ANZ Bank New Zealand Limited;(b) “Banking Group” means ANZ Bank New Zealand
Limited and all its subsidiaries;(c) “Immediate Parent Company” means ANZ Funds Pty
Limited, which is the immediate parent company of
ANZ Holdings (New Zealand) Limited;(d) “Ultimate Parent Bank” means Australia and New
Zealand Banking Group Limited;(e) “Overseas Banking Group” means the worldwide
operations of Australia and New Zealand Banking
Group Limited including its subsidiaries;(f) “New Zealand business” means all business,
operations, or undertakings conducted in or fromNew Zealand identified and treated as if it wereconducted by a company formed and registered in
New Zealand;(g) “NZ Branch” means the New Zealand business of
the Ultimate Parent Bank;(h) “ANZ New Zealand” means the New Zealandbusiness of the Overseas Banking Group;(i) “Registered
Office”
is
Level
10,
170-186
Featherston Street, Wellington, New Zealand, whichis also ANZ New Zealand’s address for Service;(j) “RBNZ” means the Reserve Bank of New Zealand;(k) “APRA” means the Australian Prudential Regulation
Authority;(l) “the Order” means the Registered Bank DisclosureStatements (Overseas Incorporated Registered
Banks) Order (No 2) 2012; and(m) Any term or expression which is defined in, or in themanner prescribed by, the Order shall have themeaning given in or prescribed by the Order.

General Matters
The Disclosure Statement has been issued in accordancewith the Order.
The address for service for the Ultimate Parent Bank is
ANZ Centre Melbourne, Level 9, 833 Collins Street,
Docklands, Victoria 3008, Australia.
Financial Statements of the Ultimate Parent Bankand Overseas Banking Group
Copies of the most recent publicly available financial
statements of the Ultimate Parent Bank and Overseas
Banking Group will be provided immediately, free ofcharge, to any person requesting a copy where request
is made at the Registered Office. The most recent
publicly available financial statements for the Ultimate
Parent Bank and Overseas Banking Group can also beaccessed at the internet address anz.com.

Credit Rating Information
As at 27 November 2012 the Ultimate Parent Bank has
three current credit ratings, which are applicable to its
long-term senior unsecured obligations which arepayable in New Zealand in New Zealand dollars.
The Ultimate Parent Bank’s credit ratings are:Rating Agency
Standard & Poor’s

Current Credit
Rating
Qualification
AAOutlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Changes in credit ratings over the last two years:
On 18 May 2011, Moody’s downgraded the Ultimate
Parent Bank’s long-term senior unsecured debt anddeposit ratings from Aa1 to Aa2. This followed a similaraction on other major Australian banks.
On 1 December 2011, Standard and Poor’s downgraded
the Ultimate Parent Bank’s long-term senior unsecured
debt and deposit ratings from AA outlook stable to AAoutlook stable.
This occurred simultaneously to asimilar downgrade of other major Australian banks.
On 30 January 2012, Fitch changed the Outlook on the
Ultimate Parent Bank’s long-term senior unsecured debt
and deposit ratings from positive to negative. Thisoccurred simultaneously to a similar change in theoutlook of ratings of other major Australian banks.
On 24 February 2012, Fitch changed the Outlook on the
Ultimate Parent Bank’s long-term senior unsecured debt
and deposit ratings from negative to stable.
There were no other changes to the Parent Bank’s credit
ratings or qualifications during the two years ended 30
September 2012.

Australia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures
The following table describes the credit rating grades available:
Standard & Poor's

Moody's InvestorsService

Fitch Ratings

The following grades display investment grade characteristics:
Ability to repay principal and interest is extremely strong. Thisis the highest investment category.

AAA

Aaa

AAA

Very strong ability to repay principal and interest.

AA

Aa

AA

Strong ability to repay principal and interest althoughsomewhat susceptible to adverse changes in economic,
business or financial conditions.

A

A

A

Adequate ability to repay principal and interest. Morevulnerable to adverse changes.

BBB

Baa

BBB

The following grades have predominantly speculative characteristics:
Significant uncertainties exist which could affect the paymentof principal and interest on a timely basis.

BB

Ba

BB

Greater vulnerability and therefore greater likelihood of
default.

B

B

B

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & D

Likelihood of default now considered high. Timely repayment ofprincipal and interest is dependent on favourable financial
conditions.
Highest risk of default.
Obligations currently in default.

Credit ratings from Standard & Poor's and Fitch Ratings may be modified by the addition of "+" or "-" to show the relative standing within the “AA” to “B”
categories. Moody's Investors Service applies numerical modifiers 1, 2, and 3 to each of the “Aa” to “Caa” classifications, with 1 indicating the higher end and 3 thelower end of the rating category.

Ranking of Local Creditors in Liquidation
There are material legislative restrictions in Australia
which subordinate the claims of a class of unsecured
creditors of the NZ Branch on the assets of the Ultimate
Parent Bank to those of another class of unsecured
creditors of the Ultimate Parent Bank, in liquidation of
the Ultimate Parent Bank.
The Banking Act 1959 of the Commonwealth of Australia(the "Banking Act") gives priority over Australian assetsof the Ultimate Parent Bank to deposits/liabilities inAustralia if the Ultimate Parent Bank is unable to meetits obligations or suspends payment.
Accordingly,
deposits/liabilities in New Zealand (together with allother senior unsecured creditors of the Ultimate ParentBank) will rank after deposits/liabilities in Australia of
the Ultimate Parent Bank in relation to claims against
Australian assets.
Specifically, pursuant to section 13A(3) of the Banking
Act, if an Authorised Deposit-Taking Institution (definedin that Act to include a bank like the Ultimate ParentBank) (an "ADI") becomes unable to meet its obligations
or suspends payment, the assets of the ADI in Australia
are to be available to meet the ADI's liabilities in thefollowing order:(a) first, the ADI's liabilities to APRA (if any), becauseof the rights APRA has against the ADI because
APRA has made, or is required to make, payments
to depositors under the Financial Claims Scheme(defined below);(b) second, the ADI's debts to APRA for costs incurredby APRA in administration of the Financial Claims
Scheme in respect of the ADI;(c) third, the ADI's liabilities (if any) in Australia in
relation to protected accounts that account-holders
keep with the ADI;(d) fourth, the ADI’s debts (if any) to the Reserve Bank
of Australia;(e) fifth, the ADI’s liabilities (if any) under an industry
support contract that is certified by APRA; and(f) sixth, the ADI's other liabilities in the order of theirpriority (apart from section 13A(3)).
Under section 13A(1) of the Banking Act, in certain
circumstances APRA may take control of an ADI’sbusiness or appoint an administrator (defined in the
Banking Act) to take control of the ADI’s business.
Section 16(1) and (2) of the Banking Act provide that,
despite anything contained in any law relating to thewinding up of companies, but subject to section 13A(3)of the Banking Act, the debts of an ADI to APRA in
respect of APRA's costs (including costs in the nature of
remuneration and expenses) of being in control of the
ADI's business or of having an administrator in controlof the ADI's business have priority in a winding-up of
the ADI over all other unsecured debts.
Section 86 of the Reserve Bank Act 1959 of theCommonwealthofAustralia
providesthat
notwithstanding anything contained in any law relating
to the winding up of companies, but subject to section
13A(3) of the Banking Act, debts due to the Reserve
Bank of Australia by any ADI shall, in a winding up,
have priority over all other debts.
Section 13A(3) of the Banking Act affects all of theunsecured deposit liabilities of the NZ Branch, which as
at 30 September 2012 amounted to $nil (30/09/2011$nil).

Australia and New Zealand Banking Group Limited - New Zealand Branch

3

General Disclosures
Requirement to Hold Excess Assets overDeposit Liabilities
Section 13A(4) of the Banking Act states that it is anoffence for an ADI not to hold assets (other than
goodwill) in Australia of a value that is equal to or
greater than the total amount of its deposit liabilities inAustralia, unless APRA has authorised the ADI to holdassets of a lesser value. During the year ended 30
September 2012, the Ultimate Parent Bank has at all
times held assets (other than goodwill and any assets orother amounts prescribed by APRA) in Australia of notless than the value of the Ultimate Parent Bank's total
deposit liabilities in Australia.
Section 13E of the Banking Act states that APRA may
give the Ultimate Parent Bank a direction that requires it
to increase its level of capital.
The requirements of these sections of the Act have thepotential to impact on the management of the liquidityof ANZ New Zealand.

Guarantors
As at the date of signing this Disclosure Statement, theUltimate Parent Bank has guarantees from theCommonwealth of Australia under:(a) in the case of deposits and certain other accounts
up to A$250,000, a scheme (the "Financial Claims
Scheme") pursuant to the Financial System
Legislation Amendment (Financial Claims Scheme
and
Other
Measures)
Act
2008
of
the
Commonwealth of Australia (the "Financial Claims
Scheme Act"). Term deposits which existed on or
before 10 September 2011 are covered up to A$1
million until 30 December 2012 or until the deposit
matures, whichever occurs first;(b) in the case of specified wholesale funding, by a
Deed of Guarantee executed by the Treasurer (andrelated scheme rules) (the "Wholesale Funding
Guarantee"). The Australian government closed
this scheme to new debt securities on 31 March2010.
As at the date of signing this Disclosure Statement, theNZ Branch has no obligations guaranteed under theseschemes.

New Zealand Guarantee Arrangements
The Crown guarantees wholesale funding of participating
New Zealand financial institutions under the New
Zealand Wholesale Funding Guarantee Facility. The NZ
Branch does not have a guarantee under this Scheme.
However, a member of ANZ New Zealand, ANZ New
Zealand (Int’l) Limited, has debt securities with acarrying value at 30 September 2012 of $205 million forwhich the Crown has issued a Guarantee Eligibility
Certificate.
ANZNZ Covered Bond Trust
Certain debt securities (“Covered Bonds”) issued by the
Bank or its wholly owned subsidiary, ANZ New Zealand(Int’l) Limited, 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 Guarantor has guaranteed thepayment of interest and principal of Covered Bonds witha carrying value as at 30 September 2012 of $2,962
million, pursuant to a guarantee which is secured over apool of assets. The Covered Bond Guarantor’s addressfor service is Level 10, 141 Willis Street, Wellington,
New Zealand. The Covered Bond Guarantor is not amember of the Banking Group and has no credit ratings
applicable to its long term senior unsecured obligations
payable in New Zealand dollars. The Covered Bonds
have been assigned a long term rating of Aaa and AAA
by Moody’s Investors Service and Fitch Ratings
respectively. Details of the pool of assets that secure
this guarantee are provided in Note 37.

Australia and New Zealand Banking Group Limited - New Zealand Branch

4

Summary of Financial Statements
ANZ New Zealand$ millions

Year toYear toYear toYear toYear to30/09/2012

30/09/2011

30/09/2010

30/09/2009

30/09/2008

Interest income

6,568

6,757

6,447

7,578

9,858

Interest expense

3,859

4,157

3,952

5,181

7,829

Net interest income

2,709

2,600

2,495

2,397

2,029

905

809

745

581

1,126

Operating income

3,614

3,409

3,240

2,978

3,155

Operating expenses

1,743

1,688

1,565

1,479

1,445

202

190

456

883

302

1,669

1,531

1,219

616

1,408

404

446

352

422

418

Profit after income tax

1,265

1,085

867

194

990

Dividends paid

(485)

(421)

(492)

(1,000)(1,169)

As at

As at

As at

As at

As at

30/09/2012

30/09/2011

30/09/2010

30/09/2009

30/09/2008

Other operating income

Provision for credit impairment
Profit before income tax
Income tax expense

ANZ New Zealand$ millions

Total impaired assets

1,405

1,792

2,047

1,188

327

Total assets

130,868

131,511

127,029

126,314123,078

Total liabilities

121,691

123,046

119,208

118,999

115,951

-

-

1

-

-

9,177

8,465

7,821

7,315

7,127

Non-controlling interests
Equity & head office account

The amounts included in this summary have been taken from the audited financial statements of ANZ New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

5

Income Statements
ANZ New Zealand$ millions
Note

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

Interest income

4

6,568

6,757

546

581

Interest expense

5

3,859

4,157

422

444

Net interest income

2,709

2,600

124

137

Net trading gains

4

131

228

-

-

Net funds management and insurance income

4

298

265

-

-

Other operating income / (loss)

4

472

312

(19)

(32)

4

4

-

-

3,614

3,409

105

105

1,743

1,688

27

29

1,871

1,721

78

76

202

190

9

13

1,669

1,531

69

63

404

446

19

19

1,265

1,085

50

44

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

1,265

1,085

50

44

46

72

-

-

Realised gains transferred to the income statement

(95)

(38)

-

-

Actuarial loss on defined benefit schemes

(25)

(64)

-

-

6

11

-

-

1,197

1,066

50

44

Share of associates' profit
Operating income
Operating expenses

5

Profit before provision for credit impairment and income tax
Provision for credit impairment

15

Profit before income tax
Income tax expense
Profit after income tax

6

Statements of Comprehensive Income
ANZ New Zealand$ millions

Profit after income tax
Unrealised gains recognised directly in equity

Income tax credit on items recognised directly in equity
Total comprehensive income for the year

NZ Branch

The notes to the financial statements form part of and should be read in conjunction with these financial statements

Australia and New Zealand Banking Group Limited - New Zealand Branch

6

Statements of Changes in Equity
ANZ New Zealand$ millions

As at 1 October 2010

Ordinary sharecapital and Available-forhead office sale revaluationaccount
reserve

Cash flow
hedging
reserve

Retainedearnings

Total equity
attributable toowners of the Non-controllingparent entity
interests

Total equity

6,424

58

102

1,236

7,820

1

7,821

Profit after income tax
Unrealised gains recognised directly inequityRealised losses / (gains) transferred to theincome statement

-

-

-

1,085

1,085

-

1,085

-

21

51

-

72

-

72

-

(42)

4

-

(38)

-

(38)

Actuarial loss on defined benefit schemes
Income tax credit / (expense) on items
recognised directly in equity

-

-

-

(64)

(64)

-

(64)

-

9

(16)

18

11

-

11

Total comprehensive income for the year

-

(12)

39

1,039

1,066

-

1,066

Ordinary dividend paid

-

-

-

(215)

(215)

-

(215)

Preference dividend paid

-

-

-

(206)

(206)

-

(206)

Movement in non-controlling interests

-

-

-

-

-

(1)

(1)

6,424

46

141

1,854

8,465

-

8,465

Profit after income tax
Unrealised gains recognised directly inequityRealised gains transferred to the income
statement

-

-

-

1,265

1,265

-

1,265

-

34

12

-

46

-

46

-

(83)

(12)

-

(95)

-

(95)

Actuarial loss on defined benefit schemes
Income tax credit on items recognised
directly in equity

-

-

-

(25)

(25)

-

(25)

-

-

-

6

6

-

6

Total comprehensive income for the year

-

(49)

-

1,246

1,197

-

1,197

Ordinary dividend paid

-

-

-

(400)

(400)

-

(400)

Preference dividend paid

-

-

-

(85)

(85)

-

(85)

6,424

(3)

141

2,615

9,177

-

9,177

Total equity
attributable toowners of the Non-controllinginterests
parent entity

Total equity

As at 30 September 2011

As at 30 September 2012

NZ Branch$ millions

Ordinary sharecapital and Available-forhead office sale revaluationaccount
reserve

Cash flow
hedging
reserve

Retainedearnings

As at 1 October 2010

11

-

-

122

133

-

133

Profit after income tax

-

-

-

44

44

-

44

As at 30 September 2011
Profit after income tax
As at 30 September 2012

11

-

-

166

177

-

177

-

-

-

50

50

-

50

11

-

-

216

227

-

227

The notes to the financial statements form part of and should be read in conjunction with these financial statements

Australia and New Zealand Banking Group Limited - New Zealand Branch

7

Balance Sheets
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

AssetsLiquid assets

8

2,831

2,455

-

-

Due from other financial institutions

9

1,760

4,577

38

-

Trading securities

10

12,338

9,466

-

-

Derivative financial instruments

11

12,70915,76952

172-

Current tax assets

24

-

-

Available-for-sale assets

12

57

411

-

-

Net loans and advances

13

96,094

93,613

9,396

9,931

Due from related entities

26

-

-

304

338

Investments backing insurance policy liabilities

142

97

-

-

Insurance policy assets

301

200

-

-

Investments in subsidiaries and associates

16

99

100

-

Other assets

17

596

866

-

-

Deferred tax assets

18

92

125

8

8

323

325

-

-

19

3,502

3,507

-

-

Total assets

130,868

131,511

9,798

10,449Interest earning and discount bearing assets

112,783

109,070

9,422

9,892

10,011

Premises and equipment
Goodwill and other intangible assets

Liabilities
Due to other financial institutions

20

11,012

13,722

9,273

Deposits and other borrowings

21

73,652

69,238--Due to related entities

26

-

-

-

51

Derivative financial instruments

11

14,085

15,122

222

117

Payables and other liabilities

22

1,481

2,425

57

73

-

4

19

20

Current tax liabilities
Provisions

23

339

309

-

-

Bonds and notes

24

18,18818,472--

Term funding

26

1,766

1,766

-

-

Loan capital

25

1,168

1,988

-

-

121,691

123,046

9,571

10,272

9,177

8,465

227

177

6,424

6,424

11

11

138

187

-

-

Retained earnings

2,615

1,854

216

166

Total equity & head office account

9,177

8,465

227

177

Interest and discount bearing liabilities

100,543

100,513

9,273

10,011

Total liabilities (excluding head office account)
Net assets (excluding head office account)
EquityOrdinary share capital and head office accountReserves

28

For and on behalf of the Board of Directors:

John MorschelChairmanAustralia and New Zealand Banking Group Limited
27 November 2012

Michael Smith
Executive Director
Australia and New Zealand Banking Group Limited
27 November 2012

The notes to the financial statements form part of and should be read in conjunction with these financial statements

Australia and New Zealand Banking Group Limited - New Zealand Branch

8

Cash Flow Statements
ANZ New Zealand
Note

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

6,549

6,661

553

590

4

4

-

-

Net funds management & insurance income

196

203

-

-

Fees and other income received

619

651

1

1

Interest paid

(3,845)(4,088)

(438)

(440)

Operating expenses paid

(1,616)(1,633)

(27)

(29)

Income taxes paid

(393)

(233)

(20)

(46)

Cash flows from operating profits before changes in operating
assets and liabilities

1,514

1,565

69

76
-

$ millions

Cash flows from operating activities
Interest received
Dividends received

Net changes in operating assets and liabilities:
Change in due from other financial institutions - term

264

447

-

(3,761)(1,695)

-

-

2,204

(1,382)225(10)Change in available-for-sale assets

391

1,745

-

-

Change in insurance investment assets

(44)

(10)

-

-

(2,829)

1,914

499

103

Change in due from related entities

-

-

34

(36)

Change in due to related entities

-

-

(51)

51

87

166

-

3

Change in due to other financial institutions(2,710)

1,351

(738)

(187)

Change in deposits and other borrowings

3,813(1,570)

-

-

29

(55)

-

-

(2,556)

911

(31)

(76)

(1,042)

2,476

38

-

Change in trading securities
Change in derivative financial instruments

Change in loans and advances

Change in other assets

Change in payables and other liabilities
Net changes in operating assets and liabilities
Net cash flows provided by / (used in) operating
activities

34

Cash flows from investing activities
Proceeds from sale of shares in associates and joint venture

5

49

-

-

11

20

-

-

Purchase of intangible assets

(40)

(54)

-

-

Purchase of premises and equipment

(55)

(65)

-

-

Net cash flows used in investing activities

(79)

(50)

-

-

Proceeds from sale of intangible assets

Cash flows from financing activities
Proceeds from issue of bonds and notes

5,678

3,992

-

-

(5,445)(3,687)

-

-

(816)

(405)

-

-

-

(1)

-

-

(485)

(421)

-

-

Net cash flows used in financing activities(1,068)

(522)

-

-

Net increase / (decrease) in cash and cash equivalents(2,189)

1,904

38

-

5,482

3,578

-

-

3,293

5,482

38

-

Redemptions of bonds and notes
Redemptions of loan capital
Distributions to non-controlling interests
Dividends paid

Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

34

The notes to the financial statements form part of and should be read in conjunction with these financial statements

Australia and New Zealand Banking Group Limited - New Zealand Branch

9

Notes to the Financial Statements
1. Significant Accounting Policies(v)(a) Basis of preparation

The amounts contained in the financial statements
have been rounded to the nearest million dollars,
except where otherwise stated.

(i)Statement of compliance

These financial statements have been prepared inaccordance with the requirements of the Companies
Act 1993, the Financial Reporting Act 1993 and theOrder. The NZ Branch’s financial statements are forAustralia and New Zealand Banking Group Limited New Zealand Branch as a separate entity and ANZ
New Zealand’s financial statements are for the NZ
Branch’s
consolidated
group,
which
includessubsidiaries, associates and joint ventures.
These financial statements have been prepared inaccordance with New Zealand Generally Accepted
Accounting Practice. They comply with New Zealandequivalents to International Financial ReportingStandards (“NZ IFRS”) and other applicable Financial
Reporting Standards, as appropriate for profitoriented entities. The financial statements comply
with International Financial Reporting Standards(“IFRS”).
The principal accounting policies adopted in the
preparation of these financial statements are set out
below.
(ii)

Use of estimates and assumptions

Preparation of the financial statements requires theuse of management judgement, estimates andassumptions that affect reported amounts and theapplication of policies. The estimates and associatedassumptions are based on historical experience andvarious other factors that are believed to bereasonable. Actual results may differ from theseestimates.
Discussion of the critical accounting estimates, which
includecomplexor
subjective
decisionsorassessments, are covered in Note 2. Such estimates
will require review in future periods.

(vi) Comparatives
Certain amounts in the comparative information havebeen reclassified to ensure consistency with thecurrent
year'spresentation.
This
includesreclassifying:•collateral received of $1,475 million fromderivative financial instruments asset to due toother financial institutions for ANZ New Zealand
only; and•collateral paid of $944 million from derivative
financial instruments liability to due from otherfinancial institutions for ANZ New Zealand only.

The comparative figures in the cash flow statements
and notes to the financial statements relating to these
items have reclassified accordingly.
(vii)

•

derivative financial instruments, including in thecase of fair value hedging, the fair value
adjustment on the underlying hedged exposure;•available-for sale financial assets;•financial instruments held for trading;•financial instruments designated at fair value
through profit and loss.

Insurance policy assets are measured using the
Margin on Services model, and defined benefit
obligations are measured using the Projected Unit
Credit method.
(iv) Changes
inaccounting
policiesandapplication of new accounting standards
The accounting policies adopted by ANZ New Zealandare consistent with those adopted and disclosed in theprior period. ANZ New Zealand has applied, where
relevant, all new or revised NZ IFRSs and NZ IFRSInterpretations applicable to the year ended 30
September 2012.
The initial application of thesestandards and interpretations has only resulted inchanges to disclosures.

Principles of consolidation

Subsidiaries
The consolidated financial statements of ANZ New
Zealand comprise the financial statements of the NZ
Branch and all the New Zealand businesses of all thesubsidiaries of the Ultimate Parent Bank (thoseentities where it is determined that the Ultimate
Parent Bank has capacity to control).
Control means the power to govern, directly or
indirectly, the financial and operating policies of anentity so as to obtain benefits from its activities. Allof the facts of a particular situation are consideredwhen determining whether control exists. Control isusually present when an entity has:•power over more than one-half of the voting
rights of the other entity;•

power to govern the financial and operating
policies of the other entity;•

power to appoint or remove the majority of themembers of the board of directors or equivalent
governing body; or•

power to cast the majority of votes at meetingsof the board of directors or equivalent governing
body of the entity.

(iii) Basis of measurement
The financial statements have been prepared inaccordance with the historical cost basis except thatthe following assets and liabilities are stated at theirfair value:

Rounding

In addition, potential voting rights that are presently
exercisable or convertible are taken into account indetermining whether control exists.
In relation to special purpose entities control isdeemed to exist where:•in substance, the majority of the residual risks
and rewards from their activities accrue to ANZ
New Zealand; or•in substance, ANZ New Zealand controls
decision making powers so as to obtain the
majority of the risks and rewards from theiractivities.

Where subsidiaries have been sold or acquired during
the year, their operating results have been included
to the date of disposal or from the date of acquisition.

Australia and New Zealand Banking Group Limited - New Zealand Branch

10

Notes to the Financial Statements
Associates and joint ventures
ANZ New Zealand adopts the equity method of
accounting for associates and ANZ New Zealand'sinterest in joint ventures.
ANZ New Zealand’s share of results of associates andjoint ventures is included in the consolidated income
statement. Shares in associates and joint venture
entities are carried in the consolidated balance sheet
at cost plus ANZ New Zealand’s share of postacquisition net assets. Interests in associates andjoint ventures are reviewed for any indication of
impairment at least at each reporting date. This
impairment review may use a discounted cash flow
methodology and other methodologies to determine
the reasonableness of the valuation.
In the NZ Branch’s financial statements investments
in subsidiaries, associates and joint ventures arecarried at cost less accumulated impairment losses.
(viii)

Foreign currency translation

Functional and presentation currency
Items included in the financial statements of each of
ANZ New Zealand’s entities are measured using thecurrency of the primary economic environment inwhich the entity operates (the functional currency).
ANZ New Zealand’s financial statements arepresented in New Zealand dollars, which is ANZ New
Zealand’s functional and presentation currency.

For assets subject to prepayment, expected life isdetermined on the basis of the historical behaviour ofthe particular asset portfolio, taking into accountcontractual obligations and prepayment experienceassessed on a regular basis.
(ii)

Fee and commission income

Fees and commissions received that are integral tothe effective interest rate of a financial asset arerecognised using the effective interest method. For
example, loan commitment fees, together withrelated direct costs, are deferred and recognised as
an adjustment to the effective interest rate on a loan
once drawn. Commitment fees to originate a loan
which is unlikely to be drawn down are recognised asfee income as the service is provided.
Fees and commissions that relate to the execution ofa significant act (for example, advisory services orarrangement
services,
placementfeesandunderwriting fees) are recognised when thesignificant act has been completed.
Fees charged for providing ongoing services (forexample, maintaining and administering existing
facilities) are recognised as income over the period
the service is provided.
(iii) Dividend income
Dividends are recognised as revenue when the rightto receive payment is established.

Foreign currency transactions(iv) Gain or loss on sale of assets

Foreign currency transactions are translated into thefunctional currency using the exchange rates
prevailing at the dates of the transactions. Monetary
assets and liabilities resulting from foreign currencytransactions are subsequently translated at the spot
rate at reporting date.

The gain or loss on the disposal of assets isdetermined as the difference between the carrying
amount of the assets at the time of disposal and theproceeds of disposal, and is recognised as an item ofother income in the period in which the significant
risks and rewards of ownership are transferred to thebuyer.

Exchange differences arising on the settlement ofmonetary items or on translating monetary items at
rates different to those at which they were initiallyrecognised or included in a previous financial report,
are recognised in the income statement in the period
in which they arise.
Translation differences on non-monetary items
measured at fair value through profit or loss arereported as part of the fair value gain or loss on these
items.
Translation differences on non-monetary items
measured at fair value through equity, such as
equities classified as available-for-sale financial
assets, are included in the available-for-salerevaluation reserve in equity.
(b) Income recognition
Income is recognised to the extent that it is probablethat economic benefits will flow to ANZ New Zealandand that revenue can be reliably measured.
(i)Interest income

Interest income is recognised as it accrues, using theeffective interest method.
The effective interest method calculates theamortised cost of a financial asset or financial liability
and allocates the interest income or interest expense,
including any fees and directly related transaction
costs that are an integral part of the effective interest
rate, over the expected life of the financial asset or
liability so as to achieve a constant yield on thefinancial asset or liability.

(c) Expense recognition
Expenses are recognised in the income statement on
an accruals basis.
(i)Interest expense

Interest expense on financial liabilities measured atamortised cost is recognised in the income statement
as it accrues using the effective interest method.
(ii)

Loan origination expenses

Certain loan origination expenses are an integral partof the effective interest rate of a financial asset
measured at amortised cost. These loan origination
expenses include:•

fees and commissions payable to brokers andcertain customer incentive payments in respectof originating lending business; and•other expenses of originating lending business,such as external legal costs and valuation fees,
provided these are direct and incremental costs
related to the issue of a financial asset.

Such loan origination expenses are initially recognisedas part of the cost of acquiring the financial asset andamortised as part of the expected yield of thefinancial asset over its expected life using theeffective interest method.
(iii) Lease payments
Leases entered into by ANZ New Zealand as lessee
are predominantly operating leases, and theAustralia and New Zealand Banking Group Limited - New Zealand Branch

11

Notes to the Financial Statements
operating lease payments are recognised as an
expense on a straight-line basis over the lease term.
(d) Income tax(i)Financial assets(i)

Income tax expense

Income tax on earnings for the year comprises
current and deferred tax and is based on theapplicable tax law. It is recognised in the income
statement as tax expense, except when it relates toitems credited directly to equity, in which case it isrecorded in equity, or where it arises from the initialaccounting for a business combination, in which case
it is included in the determination of goodwill.
(ii)(e) Assets

Current tax

Current tax is the expected tax payable on taxable
income for the year, based on tax rates (and taxlaws) which are enacted or substantively enacted by
the reporting date and including any adjustment for
tax payable in previous periods. Current tax for
current and prior periods is recognised as a liability(or asset) to the extent that it is unpaid (orrefundable).

Financial assets and liabilities at fair value
through profit or loss

Trading securities are financial instruments acquired
principally for the purpose of selling in the short-termor which are a part of a portfolio which is managed
for short-term profit-taking. Trading securities are
initially recognised and subsequently measured in thebalance sheet at their fair value.
Derivatives that are neither financial guarantee
contracts nor effective hedging instruments arecarried at fair value through profit or loss.
In
addition, certain financial assets and liabilities aredesignated and measured at fair value through profit
or loss where the following applies:•

investments backing insurance policy liabilities;•

doing so eliminates or significantly reduces ameasurement or recognition inconsistency thatwould otherwise arise from measuring assets
and liabilities, or recognising the gains or losses
thereon, on different bases;(iii) Deferred tax
Deferredtax
isaccounted
for
using
the
comprehensive tax balance sheet method.
It isgenerated by providing for temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and their tax base.

•a group of financial assets or financial liabilities
or both is managed and its performance
evaluated on a fair value basis; or•Deferred tax assets, including those related to the tax
effects of income tax losses and credits available tobe carried forward, are recognised only to the extent
that it is probable that future taxable profits will beavailable against which the deductible temporary
differences or unused tax losses and credit can beutilised.

the financial instrument contains an embedded
derivative, unless the embedded derivative does
not significantly modify the cash flows or it isclear, with little or no analysis, that it would not
be separately recorded.

Changes in the fair value (gains or losses) of thesefinancial instruments are recognised in the income
statement in the period in which they occur.

Deferred tax liabilities are recognised for all taxable
temporary differences, other than those relating totaxable temporary differences arising from goodwill.
They are also recognised for taxable temporary
differences arising on investments in subsidiaries,
branches, associates and joint ventures, except
where ANZ New Zealand is able to control thereversal of the temporary differences and it isprobable that the temporary differences will notreverse in the foreseeable future. Deferred tax assets
associated with these interests are recognised only tothe extent that it is probable that the temporary
difference will reverse in the foreseeable future andthere will be sufficient taxable profits against which toutilise the benefits of the temporary difference.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)when the asset and liability giving rise to them arerealised or settled, based on tax rates and tax lawsthat have been enacted or substantively enacted by
the reporting date. The measurement reflects the tax
consequences that would follow from the manner inwhich ANZ New Zealand, at the reporting date,recovers or settles the carrying amount of its assets
and liabilities.
(iv) Offsetting
Current and deferred tax assets and liabilities areoffset only to the extent that they relate to income
taxes imposed by the same taxation authority, there
is a legal right and intention to settle on a net basis
and it is allowed under the tax law of the relevant
jurisdiction.

Purchases and sales ofrecognised on trade date.
(ii)

tradingsecurities

areDerivative financial instruments

Derivative financial instruments are contracts whose
value is derived from changes in one or more
underlying price index or other variable, require little
or no initial net investment and are settled at a later
date. They include swaps, forward rate agreements,
futures,
options
andcombinationsof
these
instruments.
Derivative financial instruments are entered into for
trading
purposes(including
customer-related
reasons) or for hedging purposes (where thederivative instruments are used to hedge ANZ New
Zealand’s exposures to interest rate risk, currency
risk, price risk, credit risk and other exposuresrelating to non-trading positions).
Derivative financial instruments are recognised
initially at fair value with gains or losses from
subsequent measurement at fair value being
recognised in the income statement. Included in thedetermination of fair value of derivatives is a credit
valuation adjustment to reflect the credit worthinessof the counterparty. The valuation adjustment is
influenced by the mark-to-market of the derivativetrades and by the movement in credit spreads.
Where the derivative is designated and is effective asa hedging instrument, the timing of the recognition of
any resultant gain or loss in the income statement isdependent on the hedging designation.
These
hedging designations and associated accounting are
as follows:Australia and New Zealand Banking Group Limited - New Zealand Branch

12

Notes to the Financial Statements
Fair value hedge
Where ANZ New Zealand hedges the fair value of arecognised asset or liability or firm commitment,changes in the fair value of the derivative designatedas a fair value hedge are recognised in the income
statement. Changes in the fair value of the hedged
item attributable to the hedged risk are reflected inadjustments to the carrying value of the hedged item,
which are also recognised in the income statement.
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercisedor no longer qualifies for hedge accounting. The
resulting adjustment to the carrying amount of thehedged item arising from the hedged risk is amortised
to the income statement over the period to maturityof the hedged item. If the hedged item is sold or
repaid, the unamortised fair value adjustment isrecognised immediately in the income statement.
Cash flow hedge
ANZ New Zealand designates derivatives as cash flow
hedges where the instrument hedges the variability incash flows of a recognised asset or liability, a foreignexchange component of a firm commitment, or ahighly probable forecast transaction. The effective
portion of changes in the fair value of derivatives
qualifying and designated as cash flow hedges isdeferred to the hedging reserve, which forms part ofshareholders’ equity.
Any ineffective portion isrecognised immediately in the income statement.
Amounts deferred in equity are recognised in theincome statement in the period during which thehedged forecast transactions take place.
When the hedge expires, is sold, terminated,
exercised, or no longer qualifies for hedge accounting,the cumulative amount deferred in equity remains in
the hedging reserve, and is subsequently transferredto the income statement when the hedged item isrecognised in the income statement.
When a forecast hedged transaction is no longer
expected to occur, the amount deferred in equity isrecognised immediately in the income statement.
Derivatives
accounting

that

do

not

qualify

for

hedge

All gains and losses from changes in the fair value ofderivatives that are not designated in a hedging
relationship but are entered into to manage theinterest rate and foreign exchange risk of funding
instruments are recognised in the income statement.
Under certain circumstances, the component of thefair value change in the derivative which relates tocurrent period realised and accrued interest is
included in net interest income. The remainder of thefair value movement is included in other income.
(iii) Available-for-sale assets
Available-for-sale assets comprise non-derivative
financial assets which ANZ New Zealand designates
as available-for-sale but which are not deemed to beheld principally for trading purposes, and include
equity investments, certain loans and advances andquoted debt securities.
They are initially recognised at fair value plustransaction costs. Subsequent gains or losses arisingfrom changes in fair value are included as a separate
component of equity in the available-for-salerevaluation reserve. When the asset is sold, thecumulative gain or loss relating to the asset istransferred to the income statement.

Where there is objective evidence of impairment on
an available-for-sale asset, the cumulative loss
related to that asset is removed from equity andrecognised in the income statement, as an
impairment expense for debt instruments or as noninterest income for equity instruments.
If, in a
subsequent period, the amount of an impairment loss
relating to an available-for-sale debt instrument
decreases and the decrease can be linked objectively
to an event occurring after the impairment event, theloss is reversed through the income statement
through the impairment expense line.
Purchases and sales of available-for-sale financial
assets are recognised on trade date, being the dateon which ANZ New Zealand commits to purchase or
sell the asset.
(iv) Net loans and advances
Loans and advances are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They arise when ANZ
New Zealand provides money to a debtor with nointention of trading the loans and advances. The
loans and advances are initially recognised at fairvalue plus transaction costs that are directly
attributable to the issue of the loan or advance. They
are subsequently measured at amortised cost using
the effective interest method, unless specificallydesignated on initial recognition at fair value throughprofit or loss.
All loans are graded according to the level of credit
risk.
Net loans and advances include direct financeprovided to customers such as bank overdrafts, credit
cards, term loans, finance lease receivables andcommercial bills.
Impairment of loans and advances
Loans and advances are reviewed at least at eachreporting date for impairment. Credit impairment
provisions are raised for exposures that are known to
be impaired. Exposures are impaired and impairment
losses are recorded if, and only if, there is objective
evidence of impairment as a result of one or more
loss events, that occurred after the initial recognitionof the loan and prior to the reporting date, and thatloss event, or events, has had an impact on theestimated future cash flows of the individual loan or
the collective portfolio of loans that can be reliably
estimated.
Impairment is assessed for assets that are
individually significant (or on a portfolio basis forsmall value loans) and then on a collective basis for
those exposures not individually known to be
impaired.
Exposures that are assessed collectively are placed inpools of similar assets with similar risk characteristics.
The required provision is estimated on the basis ofhistorical loss experience for assets with credit risk
characteristics similar to those in the collective pool.
The historical loss experience is adjusted based on
current observable data such as changed economic
conditions. The provision also takes account of the
impact of inherent risk of large concentrated losses
within the portfolio and an assessment of theeconomic cycle.
The estimated impairment losses are measured as thedifference between the asset’s carrying amount andthe estimated future cash flows discounted to theirpresent value. As this discount unwinds during theAustralia and New Zealand Banking Group Limited - New Zealand Branch

13

Notes to the Financial Statements
period between recognition of impairment andrecovery of the cash flow, it is recognised in interest
income. The process of estimating the amount andtiming
of
cash
flows
involvesconsiderable
management judgement.
These judgements arereviewed regularly to reduce any differences between
loss estimates and actual loss experience.
Impairment of capitalised acquisition expenses isassessed through comparing the actual behaviour ofthe portfolio against initial expected life assumptions.
The provision for impairment loss (individual andcollective) is deducted from loans and advances in thebalance sheet and the movement for the reporting
period is reflected in the income statement.
When a loan is uncollectible, either partially or in full,
it is written off against the related provision for loan
impairment.
Unsecured facilities are normally
written-off when they become 180 days past due or
earlier in the event of the customer's bankruptcy orsimilar legal release from the obligation. However, acertain level of recoveries is expected after the writeoff, which is reflected in the amount of the provision
for credit losses. In the case of secured facilities,
remaining balances are written-off after proceedsfrom the realisation of collateral have been received,
if there is a shortfall.
Where impairment losses recognised in previous
periods have subsequently decreased or no longer
exist, such impairment losses are reversed in theincome statement.
A provision is also raised for off-balance sheet items
such as commitments that are considered likely toresult in an expected loss.
(v)

Lease receivables

Contracts to lease assets and hire purchaseagreements are classified as finance leases if theytransfer substantially all the risks and rewards ofownership of the asset to the customer or an
unrelated third party. All other lease contracts areclassified as operating leases.
(vi) Repurchase agreements
Securities sold under repurchase agreements are
retainedinthefinancialstatements
wheresubstantially all the risks and rewards of ownership
remain with ANZ New Zealand, and a counterparty
liability is disclosed under the classifications of due toother financial institutions or payables and otherliabilities. The difference between the sale price andthe repurchase price is accrued over the life of the
repurchase agreement and charged to interest
expense in the income statement.
Securities purchased under agreements to resell,
where ANZ New Zealand does not acquire the risks
and rewards of ownership, are recorded asreceivables in liquid assets, net loans and advances,or due from other financial institutions, depending on
the term of the agreement and the counterparty. The
security is not included in the balance sheet. Interest
income is accrued on the underlying loan amount.
Securities borrowed are not recognised in the balance
sheet, unless these are sold to third parties, at which
point the obligation to repurchase is recorded as afinancial liability at fair value with fair value
movements included in the income statement.
(vii) Derecognition
ANZ New Zealand enters into transactions where it
transfers financial assets recognised on its balance

sheet yet retains either all the risks and rewards ofthe transferred assets or a portion of them. If all, or
substantially all, the risks and rewards are retained,
the transferred assets are not derecognised from thebalance sheet.
In transactions where substantially all the risks andrewards of ownership of a financial asset are neither
retained nor transferred, ANZ New Zealandderecognises the asset if control over the asset islost. In transfers where control over the asset isretained, ANZ New Zealand continues to recognise
the asset to the extent of its continuing involvement,
determined by the extent to which it is exposed tochanges in the value of the transferred asset. The
rights and obligations retained or created in thetransfer are recognised separately as assets andliabilities as appropriate.
(viii) Investments
liabilities

backing

insurance

policySecurities held to back insurance and investment
contract liabilities are classified as insurance policy
assets. These insurance policy assets are designatedat fair value through profit or loss.
Non-financial assets(ix) Goodwill
Goodwill represents the excess of the purchaseconsideration over the fair value of the identifiable
net assets of a controlled entity at the date of gaining
control. Goodwill is recognised as an asset and notamortised, but is assessed for impairment at least
annually or more frequently if there is an indicationthat the goodwill may be impaired.
Where theassessment results in the goodwill balance exceeding
the value of expected future benefits, the difference ischarged to the income statement. Any impairment of
goodwill is not subsequently reversed.
(x)

Other intangible assets

Other intangible assets include costs incurred inacquiring and building software and computer
systems (“software”) and management rights andcustomer
relationships
acquiredinbusiness
combinations.
Software is amortised using the straight-line method
over its expected useful life to ANZ New Zealand. The
period of amortisation is between 3 and 5 years,
except for certain core infrastructure projects where
the useful life has been determined to be 7 or 10
years.
Management rights and customer relationships,
including the value of in force insurance contracts,
are initially measured at fair value. Management
rights and customer relationships with a definite
useful life are amortised over the expected useful life.
Where management rights and customer relationships
do not have finite terms and the cash flows
associated with these management rights are
expected to continue indefinitely, the intangible
assets associated with these items are treated ashaving an indefinite useful life. Management rights
and customer relationships with an indefinite usefullife are not amortised.
At each reporting date, the software assets and otherintangible assets are reviewed for impairment. If any
such indication exists, the recoverable amount of theassets is estimated and compared against the existing
carrying value. Where the existing carrying value
exceeds the recoverable amount, the difference ischarged to the income statement.

Australia and New Zealand Banking Group Limited - New Zealand Branch

14

Notes to the Financial Statements
Costs incurred in planning or evaluating software
proposals,orinmaintaining
systems
after
implementation, are not capitalised.
(xi) Premises and equipment
Premises and equipment are carried at cost lessaccumulated depreciation and impairment.
Borrowing costs incurred for the construction ofqualifying assets are capitalised during the period oftime that is required to complete and prepare theasset for its intended use.
The calculation ofborrowing costs is based on an internal measure of
the costs associated with the borrowing of funds.
Assets other than freehold land are depreciated at
rates based upon their expected useful lives to ANZ
New Zealand, using the straight-line method. The
depreciation rates used for each class of asset are:
Buildings
Building integrals
Furniture & equipment
Computer & office equipment

1.5%
10%
10%
12.5 % - 33%

Leasehold improvements are amortised on a straightline basis over the shorter of their useful lives orremaining terms of the lease.
At each reporting date, the carrying amounts ofpremisesandequipment
arereviewedfor
impairment. If any such indication exists, therecoverable amount of the assets is estimated andcompared against the existing carrying value. Wherethe existing carrying value exceeds the recoverable
amount, the difference is charged to the income
statement.
If it is not possible to estimate therecoverable amount of an individual asset, ANZ New
Zealand estimates the recoverable amount of the
cash generating unit to which the asset belongs.
A previously recognised impairment loss is reversed if
there has been a change in the estimates used todetermine the recoverable amount.
(xii) Insurance policy assets / liabilities
Net insurance policy assets / liabilities include
liabilities arising from life investment contracts andassets / liabilities arising from life insurance
contracts.
Provisions for liabilities under life investment
contracts are measured at fair value. The provisionconsists of a deposit component, being a financial
instrument, which is recognised as an increase ininvestment contract liabilities, and an investment
management services element.
Fair value isdetermined as the net present value of fees, inrespect of the investment management service,discounted at the risk free rate.
Life insurance contract assets / liabilities are
determined using either a projection method or an
accumulation method. Using a projection method,
expected policy cash flows are projected into the
future. The asset / liability is determined as the netpresent value of the expected cash flows.
An
accumulation method is used where the policy assets/ liabilities determined are not materially different
from those determined under the projection method.
Profits from life insurance contracts are brought toaccount using the Margin on Services model, underwhich profit is recognised as premiums are received
and services are provided to policyholders. Where
premiums are received but the service has not been

provided, the profit is deferred. Losses are expensed
when identified.
(f)Liabilities
Financial liabilities(i)

Deposits and other borrowings

Deposits and other borrowings include certificates ofdeposit, interest bearing deposits, debentures,commercial paper and other related interest and noninterest bearing financial instruments. Deposits andother borrowings, excluding commercial paper, areinitially recognised at fair value plus transaction costs
and subsequently measured at amortised cost. Theinterest expense is recognised using the effective
interest method. Commercial paper is designated atfair value through profit or loss, with fair value
movements recorded directly in the income
statement, which reflects the basis on which it ismanaged.
(ii)

Bonds, notes and loan capital

Bonds, notes and loan capital are accounted for in thesame way as deposits and other borrowings, except
for those bonds and notes which are designated atfair value through profit or loss on initial recognition,with fair value movements recorded in the income
statement.
(iii) Financial guarantee contracts
Financial guarantee contracts are contracts that
require the issuer to make specified payments toreimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due.
Financial guarantees are issued in the ordinary courseof business, consisting of letters of credit, guarantees
and acceptances. Financial guarantees are initiallyrecognised in the financial statements at fair value on
the date the guarantee was given; typically this is thepremium received. Subsequent to initial recognition,
ANZ New Zealand's liabilities under such guarantees
are measured at the higher of their amortised amountand the best estimate of the expenditure required tosettle any financial obligation arising at the balance
sheet date. These estimates are determined basedon experience of similar transactions and history of
past losses.
(iv) Derecognition
Financial liabilities are derecognised when the
obligation specified in the contract is discharged,
cancelled or expires.
Non-financial liabilities(v)

Employee leave benefits

The amounts expected to be paid in respect of
employees’ entitlements to annual leave are accrued
at expected salary rates including on-costs. Liability
for long service leave is calculated and accrued for in
respect of all applicable employees (including oncosts) using an actuarial valuation. Expected future
payments for long service leave are discounted using
market yields at the reporting date on national
government bonds with terms to maturity that match,as closely as possible, the estimated future cash
outflows.
(vi) Provisions
ANZ New Zealand recognises provisions when there isa present obligation, the future sacrifice of economic
benefits is probable, and the amount of the provision
can be measured reliably.

Australia and New Zealand Banking Group Limited - New Zealand Branch

15

Notes to the Financial Statements
The amount recognised is the best estimate of theconsideration required to settle the present obligation
at the reporting date, taking into account the risks
and uncertainties surrounding the obligation at thereporting date. Where a provision is measured using
the cash flows estimated to settle the present
obligation, its carrying amount is the present value of
those cash flows.

Certain cash flows have been netted in order toprovide more meaningful disclosure, as many of the
cash flows are received and disbursed on behalf ofcustomers and reflect the activities of the customers
rather than those of ANZ New Zealand. These include
customer loans and advances, customer deposits,
certificates of deposit, related party balances andtrading securities.

(g) Equity(iv) Segment reporting(iii) Reserves

Operating segments are distinguishable componentsof ANZ New Zealand that provide products or services
that are subject to risks and rewards that are
different to those of other operating segments. ANZ
New Zealand operates predominately in the banking
industry within New Zealand. ANZ New Zealand hasvery limited exposure to risk associated with
operating in different economic environments orpolitical conditions. On this basis no geographicalsegment information is provided.

Available-for-sale revaluation reserve(v)

This reserve includes changes in the fair value ofavailable-for-sale financial assets, net of tax. Thesechanges are transferred to the income statement (innon-interest income) when the asset is derecognised.
Where the asset is impaired, the changes aretransferred to the impairment expense line in theincome statement for debt instruments and in thecase of equity instruments to non-interest income.

Income, expenses and assets are recognised net ofthe amount of goods and services tax (“GST”) except
where the amount of GST incurred is not recoverablefrom the Inland Revenue Department (“IRD”). In
these circumstances, the GST is recognised as part ofthe cost of acquisition of the asset or as part of theexpense.

(i)

SharesIssued shares are recognised at the amount paid pershare net of directly attributable issue costs.
(ii)

Non-controlling interests

Non-controlling interests represent the share in the
net assets of subsidiaries attributable to equity
interests not owned directly or indirectly by the Bank.

Receivables and payables are stated with the amountof GST included. The net amount of GST recoverable
from, or payable to, the IRD is included as otherassets or other liabilities in the balance sheet.

Cash flow hedging reserve
This reserve includes the fair value gains and losses
associated with the effective portion of designatedcash flow hedging instruments.

Cash flows are included in the cash flow statement on
a net basis. The GST components of cash flows
arising from investing and financing activities, which
are recoverable from, or payable to, the IRD areclassified as operating cash flows.

(h) Presentation(i)

Offsetting of income and expenses

Income and expenses are not offset unless requiredor permitted by an accounting standard.
This
generally arises in the following circumstances:

Goods and services tax

(i)

Other
(i)

Contingent liabilities•

where transaction costs form an integral part ofthe effective interest rate of a financial
instrument which is measured at amortisedcost, these are offset against the interest
income generated by the financial instrument;•

where gains and losses relating to fair value
hedges are assessed as being effective; or•where gains and losses arise from a group ofsimilar transactions, such as foreign exchange
gains and losses.

Other contingent liabilities are not recognised in thebalance sheet but disclosed in Note 36 unless it isconsidered remote that ANZ New Zealand will be
liable to settle the possible obligation.

(ii)

Offsetting of financial assets and liabilities(ii)

Assets and liabilities are offset and the net amountreported in the balance sheet only where there is:•a current enforceable legal right to offset theasset and liability; and•an intention to settle on a net basis, or to
realise the asset and settle the liability
simultaneously.

(iii) Statement of cash flows
For cash flow statement presentation purposes, cash
and cash equivalents includes: cash on hand;deposits held at call with other financial institutions;and other short term, highly liquid, investments withoriginal terms of maturity of three months or less thatare readily convertible to cash and which are subject
to an insignificant risk of changes in value.

Contingent liabilities acquired in a businesscombination are individually measured at fair value atthe acquisition date. At subsequent reporting dates
the value of such contingent liabilities is reassessed
based on the estimate of expenditure required tosettle the contingent liability.

Accounting Standards not early adopted

The following standards and amendments wereavailable for early adoption but have not been applied
by ANZ New Zealand in these financial statements.
ANZ New Zealand currently does not intend to apply
any of these pronouncements until their effective dateand is assessing their impact on its financial
statements.
Standards and amendments effective
periods commencing after 1 January 2013for

NZ IFRS 10 Consolidated Financial Statements
Establishes a new approach to determining whichinvestees should be consolidated and provides asingle model to be applied in the control analysis for
all investors.
NZ IFRS 11 Joint Arrangements
Introduces a new approach to joint arrangements,
which focuses on the rights and obligations of theAustralia and New Zealand Banking Group Limited - New Zealand Branch

16

Notes to the Financial Statements
arrangement rather than its legal form, and requires
the equity method of accounting for joint ventures.
NZ IFRS 12 Disclosure of Interests in Other Entities
Provides a single, consistent approach for disclosuresof all interests in subsidiaries, joint arrangements,
associates and unconsolidated structured entities.
NZ IFRS 13 Fair Value Measurement
Provides a single source of guidance on fair value
measurement and requires certain disclosures
regarding fair value.

Refer to Note 15 for details of credit impairment
provisions.

NZ IAS 27 (2011) Separate Financial Statements
Carries forward the existing accounting and disclosure
requirements for separate financial statements.

Management regularly reviews and adjusts theestimates and methodologies as improved analysis
becomes available. Changes in these assumptions
and methodologies could have a direct impact on thelevel of provision and impairment charge recorded in
the financial statements.

Standards and amendments effective
periods commencing after 1 January 2015

Critical judgements in applying
Zealand’s accounting policies

for

NZ IFRS 9 Financial Instruments
Specifies a simpler methodology for classifying andmeasuring financial assets, with two primarymeasurement categories: amortised cost and fairvalue. Requires the amount of change in the fairvalue attributable to changes in credit risk of certain
liabilities designated under the fair value option to bepresented in other comprehensive income.

2.

provisioning is calculated using estimated future cash
flows discounted to their present value.
Themethodology and assumptions used for estimating
both the amount and timing of future cash flows arerevised regularly to reduce any differences between
loss estimates and actual loss experience.

Critical Estimates and Judgement Usedin Applying Accounting Policies
There are a number of critical accounting treatments
which include complex or subjective judgements andestimates that may affect the reported amounts ofassets and liabilities in the financial statements.
Estimates and judgements are continually evaluatedand are based on historical experience and otherfactors, including expectations of future events thatarebelievedtobereasonable
under
the
circumstances.
An explanation of the judgements and estimates
made by ANZ New Zealand, in the process of applying
its accounting policies, that have the most significant
effect on the amounts recognised in the financial
statements are set out below.
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring theimpairment of loans and advances requires ANZ New
Zealand to assess impairment at least at eachreporting date.
The credit provisions raised(collective and individual) represent management's
best estimate of the losses incurred in the loan
portfolio at balance date based on their experienced
judgement.
The collective provision is estimated on the basis ofhistorical loss experience for assets with credit
characteristics similar to those in the collective pool.
The historical loss experience is adjusted based on
current observable data and events and anassessment of the impact of model risk.
Theprovision also takes into account the impact of large
concentrated losses within the portfolio.
The use of such judgements and reasonableestimates is considered by management to be an
essential part of the process and does not impact onreliability.
Individual provisioning is applied when the fullcollectability of one of ANZ New Zealand's loans is
identified as being doubtful. Individual and collective

ANZ

New

Financial instruments at fair value
ANZ New Zealand’s financial instruments measured atfair value are stated in note 1(a)(iii). In estimating
fair value ANZ New Zealand uses, wherever possible,
quoted market prices in an active market for thefinancial instrument.
In the event that there is no active market for the
instrument, fair value is based on present value
estimates or other market accepted valuation
techniques. The valuation models incorporate theimpact of bid/ask spread, counterparty credit spreads
and other factors that would influence the fair value
determined by a market participant. The selection of
appropriate valuation techniques, methodology andinputs requires judgement. These are reviewed andupdated as market practice evolves.
The majority of valuation techniques employ only
observable market data. However, for certain
financial instruments, the fair value cannot be
determined with reference to current market
transactions or valuation techniques whose variables
only include data from observable markets. In respectof the valuation component where market observabledata is not available, the fair value is determinedusing data derived and extrapolated from market
data and tested against historic transactions andobserved market trends. These valuations are based
upon assumptions established by application of
professional judgement to analyse the data available
tosupporteach
assumption.
Changing
theassumptions changes the resulting estimate of fairvalue.
Derivatives and hedging
ANZ New Zealand buys and sells derivatives as partof its trading operations and to hedge its interest raterisk, currency risk, price risk, credit risk and otherexposures relating to non-trading positions.
A hedging instrument is a designated derivative
whose fair value or cash flows are expected to offset
changes in the fair value or cash flows of adesignated hedged item. A hedged item is an asset,
liability, firm commitment or highly probable forecast
transaction that: (a) exposes ANZ New Zealand to therisk of changes in fair value or future cash flows; and(b) is designated as being hedged.
Judgement is required in selecting and designating
hedging
relationships
andassessinghedge
effectiveness.
NZ IAS 39 Financial Instruments:
Recognition and Measurement does not specify asingle method for assessing hedge effectivenessprospectively or retrospectively. ANZ New ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

17

Notes to the Financial Statements
adopts the hypothetical derivative approach todetermine hedge effectiveness in line with current
risk management strategies. Hedge ineffectivenesscan arise for a number of reasons and whilst a hedge
may pass the effectiveness tests above it may not be
perfectly effective, leaving some volatility in theincome statement.

personnel on the basis of recognised actuarial
methods, with due regard to relevant actuarial
principles and standards. Deferred policy acquisition
costs are connected with the measurement basis of
the policy liabilities and are equally sensitive to thefactors that are considered in the liability
measurement.

Goodwill

The key factors that affect the estimation of theseliabilities and related assets are: the cost of providing
the benefits and administering the contracts;
mortality and morbidity experience; discontinuance
rates; for life investment contracts, the amounts
credited to policyholders' accounts compared to thereturns on invested assets; interest rates; inflation;
rates of taxation; and general market and economic
conditions.

Refer to Note 19 for details of goodwill held by ANZ
New Zealand.
The carrying value of goodwill is subject to an
impairment test to ensure that the current carrying
value does not exceed its recoverable value at thebalance sheet date. Any excess of carrying value
over recoverable amount is taken to the income
statement as an impairment write down.
Goodwill has been allocated for impairment purposes
to the cash generating units at which the goodwill ismonitored for internal reporting purposes. Each ofthese cash generating units is represented by anindividual reporting segment – Retail, Commercial,
Wealth and Institutional. Refer to Note 7.
Impairment testing of purchased goodwill is
performed annually, or more frequently where there
is an indication that the goodwill may be impaired, bycomparing the recoverable value of each cash
generating unit with the current carrying amount of
its net assets, including goodwill.
Judgement isrequired in identifying the cash-generating units towhich goodwill and other assets are allocated for the
purpose of impairment testing.
The recoverable amount is based on value-in-use
calculations.
These calculations use cash flow
projections based on a number of financial budgets
within each segment approved by management
covering a three year period. Cash flow projections
are based on a range of readily available economic
assumptions including GDP and CPI.
Cash flows
beyond the three year period are extrapolated using a
3% growth rate.
These cash flow projections are discounted using acapital asset pricing model. As at 31 March 2012
when the last valuation was prepared, a discount rateof 10.63% was applied to each segment. The main
variables in the calculation of the discount rate used
are the risk free rate, the beta rate and the market
risk premium. The risk free rate is based on the 10
year Government Bond Rate. The beta rate and themarket risk premium are consistent with observableand comparative market rates applied in the regionalbanking sector. Market observable information is notreadily available at the segment level therefore
management performed stress tests for key
sensitivities in each segment.
Management believes any reasonable possible change
in the key assumptions on which the recoverable
amount is based would not cause ANZ New Zealand’s
carrying amount to exceed its recoverable amount.
Insurance policy assets
Insurance policy assets represent deferred policy
acquisition costs less policy liabilities for life
investment contracts and life insurance contracts.
Policy liabilities are computed using statistical ormathematicalmethods,
expected
togive
approximately the same results as if an individual
liability was calculated for each contract.
The
computations are made by suitably qualified

3.

Risk Management Policies
ANZ New Zealand recognises the importance ofeffective risk management to its business success.
Management is committed to achieving strong control
and a distinctive risk management capability thatenables ANZ New Zealand business units to meettheir performance objectives.
ANZ New Zealand approaches risk through managing
the various elements of the system as a whole rather
than viewing them as independent and unrelatedparts.
The risk management division (“RiskManagement”) is independent of the business, withclear delegations from the Board of the Ultimate
Parent Bank and operates within a comprehensive
framework comprising:•

The Boards of the entities making up ANZ New
Zealand (“the Boards”) providing leadership,
setting risk appetite/strategy and monitoring
progress;•

A strong framework for development andmaintenance of ANZ New Zealand-wide risk
management policies, procedures and systems,
overseen by an independent team of risk
professionals;•

The use of sophisticated risk tools, applications
and processes to execute the global risk
management strategy as it is deemed to apply
to each entity across ANZ New Zealand;•Business unit level accountability, as the “firstline of defence”, for the management of risks inalignment with ANZ New Zealand’s strategy;
and•Independent oversight to ensure business unit
level compliance with policies, regulations andlaws, and to provide regular risk evaluation andreporting.

ANZ New Zealand manages risk through an approval,delegation and limits structure. Regular reviews of
the policies, systems and risk reports, including theeffectiveness of the risk management systems,
discussions covering ANZ New Zealand’s response to
emerging risk issues and trends, and that therequisite culture and practices are in place across ANZ
New Zealand, are conducted within ANZ New Zealandand also by the Ultimate Parent Bank. The Boards
have responsibility for reviewing all aspects of risk
management.
The
Boardshaveultimate
responsibility
foroverseeing the effective deployment of risk
management frameworks, policies and processes
within New Zealand. The Bank’s Risk Committee

Australia and New Zealand Banking Group Limited - New Zealand Branch

18

Notes to the Financial Statements
assists the Boards in this function. The role of the
Risk Committee is to assist the Boards in the effective
discharge of its responsibilities for business, market,
credit, operational, compliance, liquidity, product andreputational risk management, and to liaise andconsult with the Ultimate Parent Bank Risk Committee
as required. Risk Management, via the Chief Risk
Officer, coordinates risk management activities
directly between Business Unit risk functions andUltimate Parent Bank Group Risk Management
functions.

approval of operational risk policies and frameworks
and monitoring key operational risk metrics.

ANZ New Zealand’s risk management policies are
essentially the same as the Ultimate Parent Bank, but
are tailored where required to suit the local New
Zealand regulatory and business environment.

Risk Management, in conjunction with business unit
staff ensure ANZ New Zealand operates within acompliance infrastructure and framework thatincorporates new and changing business obligations
and processes.

The Bank’s Audit Committee, which is a subcommittee of the Board of the Bank, has
responsibility for reviewing all aspects of publishedfinancial statements and internal and external audit
processes.
The Bank’s Audit Committee has aquorum of two directors, both of whom must be nonexecutive directors. It meets at least four times ayear and reports directly to the Board of the Bank.
Financial risk management
Refer to Note 30 for detailed disclosures on ANZ New
Zealand's financial risk management policies.
Operational Risk
Operational risk is the risk arising from day to day
operational activities which may result in direct orindirect loss. These losses may result from failure tocomplywithpolicies,
procedures,laws
andregulations, from fraud or forgery, from a breakdown
in the availability or integrity of services, systems andinformation, or damage to ANZ New Zealand’s
reputation.
Examples include failure to comply with policy andlegislation, human error, natural disasters, fraud andother malicious acts. Where appropriate, risks are
mitigated by insurance.
Risk Management is responsible for establishing ANZ
New Zealand’s operational risk framework andassociated ANZ New Zealand-wide policies. Business
units are responsible for the identification, analysis,
assessment and treatment of operational risks on a
day-to-day basis.
Business units have primary responsibility for theidentification and management of operational risk
with executive oversight provided by the relevant
Retail and Wholesale Risk Committees. The Bank’s
Operational Risk Executive Committee (“OREC”)
undertakes the governance function through the bimonthly monitoring of operational risk performanceacross ANZ New Zealand.
The Boards and Risk
Management conduct effective oversight through theCompliance
ANZ New Zealand conducts its business in accordancewith all relevant compliance requirements. In order
to assist ANZ New Zealand identify, manage, monitor
and measure its compliance obligations, ANZ New
Zealand has a comprehensive regulatory complianceframework in place, which addresses both external(regulatory) and internal compliance.

The compliance policies and their supporting
framework seek to minimise material risks to ANZ
New Zealand’s reputation and value that could arise
from non-compliance with laws, regulations, industry
codes and internal standards and policies. Business
units have primary responsibility for the identificationand management of compliance. Risk Management
provides policy and framework, measurement,
monitoring and reporting, as well as leadership inareas such as anti-money laundering procedures andmatters of prudential compliance. The Board and the
Risk Committee of the Ultimate Parent Bank Board
conduct Board and Executive oversight.
Global Internal Audit
Global Internal Audit is a function independent ofmanagement whose role is to provide the Board andmanagement with an effective and independent
appraisal of the internal controls established bymanagement. Operating under a Board approved
Charter, the reporting line for the outcomes of work
conducted by Global Internal Audit is direct to the
Chair of the Bank’s Audit Committee, with a directcommunication line to the Chief Executive Officer ofthe Bank and the external auditor.
The Global Internal Audit Plan is developed utilising arisk based approach and is refreshed on a quarterly
basis. The Bank’s Audit Committee approves the plan,
the associated budget and any changes thereto.
All audit activities are conducted in accordance withlocal and international auditing standards, and theresults thereof are reported to the Audit Committeesof the Ultimate Parent Bank and the Bank asappropriate, Risk Committee and management. These
results influence the performance assessment ofbusiness heads.
Furthermore, Global Internal Audit monitors theremediation of audit issues and highlights the current
status of any outstanding audits.

Australia and New Zealand Banking Group Limited - New Zealand Branch

19

Notes to the Financial Statements
4. Income
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

446

404

-

-

446

404

-

-

Liquid assets

67

64

-

-

Other financial institutions

38

43

-

-

$ millions

Note

Interest income
Financial assets at fair value through profit or loss
Trading securities

Financial assets not at fair value through profit or loss

Available-for-sale assets

8

34

-

-

Lending on productive loans

5,858

6,008

544

579

Lending on impaired assets

53

78

2

2

Other

98

126

-

-

6,122

6,353

546

581

6,568

6,757

546

581

144

137

-

-

Total interest income
Net trading gains
Net gain on foreign exchange trading
Net gain on trading securities

101

204

-

-

Net loss on trading derivatives

(114)

(113)

-

-

131

228

-

-

Net trading gains
Net funds management and insurance income
Fee income on trust and other fiduciary activities

63

61

-

-

Other funds management and insurance income

235

204

-

-

Total funds management and insurance income

298

265

-

-

52

41

1

1

564

566

-

-

Other operating income
Lending and credit facility fee income
Other fee income
Total fee income

616

607

1

1

Direct fee expense

(186)

(185)

-

-

Net fee income

430

422

1

1

Net gain / (loss) on financial liabilities designated at fair value

(1)

2

-

-

(69)

(136)

(19)

(26)

(4)

11

(1)

(7)

12

(4)

-

-

83

-

-

-

21

17

-

-

472

312

(19)

(32)

Net loss on hedges not qualifying for hedge accounting
Net ineffectiveness on qualifying fair value hedges
Net cash flow hedge gain / (loss) transferred to income
statement
Net gain on available for sale equity securities transferred toincome statement
Other income
Total other operating income

11Australia and New Zealand Banking Group Limited - New Zealand Branch

20

Notes to the Financial Statements
5. Expenses
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

174

158

-

-

174

158

-

-

Interest expense
Financial liabilities at fair value through profit or loss
Commercial paper

Financial liabilities not at fair value through profit or loss
Other financial institutions

467

473

422

444

2,184

2,347

-

-

820

911

-

-

Term funding

70

68

-

-

Loan capital

134

177

-

-

10

23

-

-

3,685

3,999

422

444

3,859

4,157

422

444

804

794

-

-

77

75

-

-

35

36

-

-

6

6

-

-

Share-based payments expense

20

22

-

-

Building occupancy costs

66

41

-

-

Depreciation of premises and equipment

55

49

-

-

Leasing and rental costs

85

84

-

-

Related parties (Note 26)

118

93

-

-

Technology expenses

144

141

-

-

Impairment of intangibles and other assets

11

41

-

-

Amortisation of software and other intangible assets

34

25

-

-

204

216

-

-

84

65

27

29

1,743

1,688

27

29

Deposits and other borrowings
Bonds and notes

Other

Total interest expense
Operating expenses
Personnel costs
Employee entitlements
Pension costs- Defined contribution schemes- Defined benefit schemes

Administrative expenses
Other costs
Total operating expenses

Operating expenses for ANZ New Zealand include costs of $192 million (30/09/2011 $162 million) incurred in relation to
the New Zealand Simplification programme, including implementation of a single core banking system, a single bankbrand and an optimised branch network.
$ thousands

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

3,163

2,663

104

105

573

287

-

-

3,736

2,950

104

105

-

55

-

-

Fees paid to principal auditors (KPMG New Zealand)
Audit or review of financial statements
Other services
Total auditors' remuneration
Audit fees paid to Ernst & Young for subsidiary company
financial statement audits

It is ANZ New Zealand’s policy that, subject to the approval of the Ultimate Parent Bank’s Audit Committee, KPMG canprovide assurance and other audit-related services that, while outside the scope of the statutory audit, are consistent withthe role of auditor. KPMG may not provide services that are perceived to be in conflict with the role of auditor. Services
that are perceived to be in conflict with the role of auditor include consulting advice and subcontracting of operational
activities normally undertaken by management, and engagements where the auditor may ultimately be required toexpress an opinion on its own work.
Other services include taxation services and services for the audit or review of financial information other than financial
reports including prudential supervision reviews, prospectus reviews and other audits required for local regulatory
purposes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

21

Notes to the Financial Statements
6. Income Tax Expense
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

Reconciliation of the prima facie income tax payable on profit
Profit before income tax

1,669

1,531

69

63

Prima facie income tax at 28% (2011: 30%)

467

459

19

19

Imputed and non-assessable dividends

(6)

(6)

-

-

-

(5)

-

-

Change in tax provisions

(12)

(11)

-

-

Non-deductible expenses / (non-assessable income)

(35)

7

-

-

Income tax under / (over) provided in prior years

(10)

2

-

-

Total income tax expense

404

446

19

19

24.2%

29.1%

28.0%

30.0%

Current tax

365

265

19

20

Deferred tax

39

181

-

(1)

404

446

19

19

-

(9)

-

-

Effect of changes in tax legislation

Effective tax rate (%)
Amounts recognised in the income statement

Total income tax expense recognised in the income statement
Amounts recognised directly in equity
Current income tax
Net loss on revaluation of financial instruments
Deferred income tax
Net gain on revaluation of financial instruments

-

16

-

-

Actuarial loss on defined benefit schemes

(6)

(18)

-

-

Total income tax benefit recognised directly in equity

(6)

(11)

-

-

1,457

1,062

-

-

Imputation credits available

A number of companies within ANZ New Zealand are members of an imputation group. The imputation credit balance for
ANZ New Zealand includes the imputation credit balance in relation to both the imputation group and other companies
within ANZ New Zealand that are not in the imputation group. The imputation credit balance available includes imputationcredits that will arise from the payment of the amount of provision for income tax as at the reporting date.

Australia and New Zealand Banking Group Limited - New Zealand Branch

22

Notes to the Financial Statements
7. Segmental Analysis
For segment reporting purposes, ANZ New Zealand is organised into four major business segments - Retail, Commercial,
Wealth 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.
Segmental reporting has been updated to show the Wealth division as a separate reportable segment, following theformation of a global Wealth division by the Overseas Banking Group, and to reflect other minor changes to ANZ New
Zealand’s structure. Comparative data has been adjusted to be consistent with the current year’s segment definitions.
RetailRetail provides products and services to personal customers via the branch network, mortgage specialists, the contact
centre and a variety of self service channels (internet banking, phone banking, ATMs, website and mobile phone banking).
Core products include current and savings accounts, unsecured lending (credit cards, personal loans and overdrafts) andhome loans secured by mortgages over property. Retail distributes insurance and investment products on behalf of the
Wealth segment.
Commercial
Commercial provides services to Business Banking, Commercial & Agri, and UDC customers. Business Banking services
are offered to small enterprises (typically with annual revenues of less than $5 million). Commercial & Agri customers
consist of primarily privately owned medium to large enterprises. ANZ New Zealand's relationship with these businesses
ranges from simple banking requirements with revenue from deposit and transactional facilities, and cash flow lending, tomore complex funding arrangements with revenue sourced from a wider range of products. UDC is principally involved in
the financing and leasing of plant, vehicles and equipment, mainly for small and medium sized businesses, as well as
investment products.
WealthWealth includes private banking and investment services provided to high net worth individuals, the OnePath wealthmanagement and insurance businesses, and other investment products.
Institutional
Institutional provides financial services through a number of specialised units to large multi-banked corporations, often
global, who require sophisticated product and risk management solutions.
Those financial services include loan
structuring, foreign exchange, wholesale money market services and transaction banking.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

23

Notes to the Financial Statements
Business segment analysis1
ANZ New Zealand$ millions

RetailCommercial

External interest income

2,265

3,247

79

962

15

6,568

External interest expense(1,033)

(581)

(196)

(419)

(1,630)(3,859)Net intersegment interest(312)(1,322)

138

(132)

1,628

-

Net interest income

920

1,344

21

411

13

2,709

Other external operating income

301

132

228

216

24

901

-

-

-

-

4

4

Operating income

1,221

1,476

249

627

41

3,614

Operating expenses

683

501

145

184

230

1,743

Profit before provision for credit impairment

538

975

104

443

(189)

1,871

62

128

1

11

-

202

Profit before income tax

476

847

103

432

(189)

1,669

Income tax expense

133

235

17

114

(95)

404

Profit after income tax

343

612

86

318

(94)

1,265

30/09/2012

Share of associates' profit

Provision for credit impairment

WealthInstitutional

Other

Total

Other information
Depreciation and amortisation

19

8

14

-

48

89

544

1,466

180

1,072

-

3,262

Other intangible assets

38

3

137

1

61

240

Investment in associates

-

-

-

12

87

99

Total external assets

36,81554,294

1,457

36,661

1,641

130,868

Total external liabilities

31,13819,271

4,318

28,33538,629121,691

RetailCommercial

WealthInstitutional

Other

Total

External interest income

2,447

3,443

86

781

-

6,757

External interest expense(1,085)

(625)

(223)

(457)

(1,767)(4,157)

Net intersegment interest(498)(1,469)

154

82

1,731

-

Net interest income

864

1,349

17

406

(36)

2,600

Other external operating income

295

127

274

239

(130)

805

-

-

-

-

4

4

Operating income

1,159

1,476

291

645

(162)

3,409

Operating expenses

685

495

154

177

177

1,688

Profit before provision for credit impairment

474

981

137

468

(339)

1,721

Provision for credit impairment

78

139

-

(26)

(1)

190

Profit before income tax

396

842

137

494

(338)

1,531

Income tax expense

119

253

37

145

(108)

446

Profit after income tax

277

589

100

349

(230)

1,085

Goodwill

30/09/2011

Share of associates' profit

Other information
Depreciation and amortisation

18

8

11

-

37

74

Goodwill

544

1,466

180

1,072

-

3,262

Other intangible assets

46

7

161

1

30

245

Investment in associates

-

-

-

12

88

100

Total external assets

36,51452,354

1,528

36,9394,176

131,511

Total external liabilities

28,541

17,956

4,322

35,79136,436

123,046

1

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.

Australia and New Zealand Banking Group Limited - New Zealand Branch

24

Notes to the Financial Statements
8. Liquid Assets
ANZ New Zealand$ millions

Cash and balances with central banks

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

2,177

1,954

-

-

Securities purchased under agreement to resell

325

50

-

-

Money at call

237

330

-

-

92

121

-

-

2,831

2,455

-

-

30/09/2011

30/09/2012

30/09/2011

Bills receivable and remittances in transit
Total liquid assets

9. Due from Other Financial Institutions
ANZ New Zealand$ millions

Able to be withdrawn without prior notice

30/09/2012

NZ Branch

96

380

-

-

228

1,085

-

-

Security settlements

42

606

-

-

Certificates of deposit

100

1,562

-

-

38

-

38

-

Cash collateral given on derivative financial instruments

1,256

944

-

-

Total due from other financial institutions

1,760

4,577

38

-

229

1,133

-

-

30/09/2012

30/09/2011

30/09/2012

30/09/2011

8,600

5,961

-

-

455

334

-

-

Promissory notes

41

59

-

-

Other bank bonds

3,202

3,047

-

-

40

65

-

-

12,338

9,466

-

-

Securities purchased under agreement to resell

Term loans and advances

Fair value of securities purchased under agreement to resell

10. Trading Securities
ANZ New Zealand$ millions

Government, local body stock and bonds
Certificates of deposit

Other
Total trading securities

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

25

Notes to the Financial Statements
11. Derivative Financial Instruments
The use of derivatives and their sale to customers as risk management products is an integral part of ANZ New Zealand’s
trading activities. Derivatives are also used to manage ANZ New Zealand’s own exposure to fluctuations in exchange andinterest rates as part of its own asset and liability management activities.
Derivatives are subject to the same types of credit and market risk as other financial instruments and ANZ New Zealandmanages these risks in a consistent manner.
Derivatives, except for those that are specifically designated as effective hedging instruments, are classified as held for
trading. The held for trading classification includes two categories of derivative instruments: those held as trading
positions and those used for ANZ New Zealand’s balance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include thestructuring and marketing of derivative products to customers which enable them to take or mitigate risks. Market
making activities consist of derivatives entered into principally for the purpose of generating profits from short-term
fluctuations in price or margins. Positions may be traded actively or held over a period of time to benefit from expectedchanges in market rates.
Balance sheet risk management
ANZ New Zealand designates certain balance sheet risk management derivatives into hedging relationships in order tominimise income statement volatility. This volatility is created by differences in the timing of recognition of gains andlosses between the derivative and the hedged item. Hedge accounting is not applied to all balance sheet risk
management positions as other balance sheet risk management derivatives are classified as held for trading.
ANZ New Zealand

NZ Branch

Notional

Notional

30/09/2012

Principal

Fair values$ millions

AmountAssetsLiabilities

Principal

Fair values

AmountAssetsLiabilities

Derivatives held for trading
Spot and forward contracts

59,825

647

1,240

38

-

-

Swap agreements

132,963

2,811

4,446

9,273

39

168

Options purchased

1,798

22

-

-

-

-

Options sold

1,651

1

39

-

-

-

196,237

3,481

5,725

9,311

39

168

Foreign exchange derivatives
Forward rate agreements

45,071

3

2

1,580

-

-

Swap agreements

509,981

8,628

8,032

3,013

13

19

Futures contracts

29,818

2

4

-

-

-

Options purchased

2,237

15

-

-

-

-

Options sold

1,833

-

14

-

-

-

Interest rate derivatives

588,940

8,648

8,052

4,593

13

19

Commodity derivatives

281

44

42

-

-

-

785,458

12,173

13,81913,90452

187

Total derivatives held for trading
Derivatives in hedging relationships
Foreign exchange swap agreements

70

3

-

-

-

-

Interest rate swap agreements

22,534

293

194

3,535

-

35

Total fair value hedges

22,604

296

194

3,535

-

35

Interest rate swap agreements

13,524

240

72

-

-

-

Total cash flow hedges

13,524

240

72

-

-

-

Total derivatives in hedging
relationships

36,128

536

266

3,535

-

35

821,586

12,70914,085

17,43952

222

Total derivative financial instruments

Australia and New Zealand Banking Group Limited - New Zealand Branch

26

Notes to the Financial Statements
ANZ New Zealand

NZ Branch

Notional

Notional

30/09/2011

Principal

Fair values$ millions

AmountAssetsLiabilities

Principal

Fair values

AmountAssetsSpot and forward contracts

62,682

2,111

1,437

154

3

-

Swap agreements

126,313

4,727

5,609

9,875

145

31

Options purchased

2,271

66

1

-

-

-

Options sold

2,280

-

69

-

-

-

193,546

6,904

7,116

10,029148

31

Liabilities

Derivatives held for trading

Foreign exchange derivatives
Forward rate agreements

73,346

13

11

295

-

-

Swap agreements

617,014

8,137

7,488

3,446

24

27

Futures contracts

12,841

18

8

-

-

-

Options purchased

4,623

24

-

-

-

-

Options sold

6,446

-

26

-

-

-

Interest rate derivatives

714,270

8,192

7,533

3,741

24

27

Commodity derivatives

182

13

12

-

-

-

907,998

15,10914,661

13,770172

58

Total derivatives held for trading
Derivatives in hedging relationships
Foreign exchange swap agreements

76

3

-

-

-

-

Interest rate swap agreements

23,699

382

382

4,460

-

59

Total fair value hedges

23,775

385

382

4,460

-

59

Interest rate swap agreements

11,090

275

69

-

-

-

Interest rate futures contracts

13,431

-

10

-

-

-

Total cash flow hedges

24,521

275

79

-

-

-

Total derivatives in hedging
relationships

48,296

660

461

4,460

-

59

Total derivative financial instruments

956,294

15,76915,122

18,230

172

117

Fair value hedges
ANZ New Zealand’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in
the fair value of fixed-rate long-term financial instruments due to movements in market interest rates.
Gain / (loss) on fair value hedges attributable to the hedged risk
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Gain / (loss) arising from fair value hedges:- hedged item

5

(100)

(20)

(3)

- hedging instrument

(9)

111

19

(4)

Net ineffectiveness on qualifying fair value hedges

(4)

11

(1)

(7)

Australia and New Zealand Banking Group Limited - New Zealand Branch

27

Notes to the Financial Statements
Cash flow hedges
ANZ New Zealand’s cash flow hedges consist principally of interest rate swaps that are used to protect against exposures
to variability in future interest cash flows on non-trading assets and liabilities which bear interest at variable rates or
which are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing
both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of theirforecast repricing profile. This forms the basis for identifying gains and losses on the effective portions of derivatives
designated as cash flow hedges.
Analysis of the cash flow hedging reserve
ANZ New Zealand

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Variable rate loan assets

208

219

-

-

Variable rate liabilities
Short term re-issuances of fixed rate customer and wholesale
deposit liabilities

(29)

(33)

-

-

(38)

(45)

-

-

Total cash flow hedging reserve

141

141

-

-

Deferred gain / (loss) attributable to hedges of:

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur,
which is anticipated to take place over the next 0-10 years (30/09/2011 0-10 years).

12. Available-for-sale Assets
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Government, local body stock and bonds

13

247

-

-

Other debt securities

41

42

-

-

3

122

-

-

57

411

-

-

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Overdrafts

1,881

1,847

-

-

Credit card outstandings

1,395

1,367

-

-

Term loans - housing

55,52653,547

9,402

9,916

Term loans - non-housing

37,74937,398--Finance lease receivables

806

768

-

-

Gross loans and advances

97,357

94,927

9,402

9,916

Provision for credit impairment (Note 15)(1,081)(1,183)

(27)

(27)

(258)

(256)

-

-

34

134

17

37

Deferred fee revenue and expenses

(60)

(51)

-

(1)

Capitalised brokerage / mortgage origination fees

102

42

4

6

96,094

93,613

9,396

9,931

Equity securities
Total available-for-sale assets

13. Net Loans and Advances
ANZ New Zealand$ millions

Unearned finance income
Fair value hedge adjustment

Total net loans and advances

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

28

Notes to the Financial Statements
14. Impaired Assets and Other Assets Under Administration
ANZ New Zealand$ millions

Retail Other retailmortgages

NZ BranchNon-retail

Retail Other retail

Non-retail

exposures

exposuresTotal

mortgages

exposures

exposures

Total

66

30/09/2012
Balance at beginning of the year

517

61

1,194

1,772

66

-

-

Transfers from productive

332

110

572

1,014

55

-

-

55

Transfers to productive

(73)

(1)

(246)

(320)

(12)

-

-

(12)

Assets realised or loans repaid

(390)

(43)

(515)

(948)

(63)

-

-

(63)

Write offs

(62)

(83)

(131)

(276)

(7)

-

-

(7)

Individually impaired assets

324

44

874

1,242

39

-

-

39

Restructured items

28

-

135

163

-

-

-

-

Total impaired assets

352

44

1,009

1,405

39

-

-

39

-

-

-

-

-

-

-

-

-

-

24

24

-

-

-

-

Other assets under administration
Undrawn facilities with impaired
customers
30/09/2011
Balance at beginning of the year

554

81

1,403

2,038

43

-

-

43

Transfers from productive

527

158

774

1,459

85

-

-

85

Transfers to productive

(83)

(1)

(101)

(185)

(6)

-

-

(6)

Assets realised or loans repaid

(407)

(71)

(691)

(1,169)

(50)

-

-

(50)

Write offs

(74)

(106)

(191)

(371)

(6)

-

-

(6)

Individually impaired assets

517

61

1,194

1,772

66

-

-

66

Restructured items

20

-

-

20

-

-

-

-

Total impaired assets

537

61

1,194

1,792

66

-

-

66

-

-

6

6

-

-

-

-

-

-

26

26

-

-

-

-

Other assets under administration
Undrawn facilities with impaired
customers

Other assets under administration
Other assets under administration are any loans, not being impaired or 90 days past due, where the customer is in any
form of voluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management.

Australia and New Zealand Banking Group Limited - New Zealand Branch

29

Notes to the Financial Statements
15. Provision for Credit Impairment
ANZ New Zealand$ millions

Retail Other retailmortgages

exposures

NZ BranchNon-retail
exposures

Retail Other retail

Non-retailTotal

mortgages

exposures

exposures

Total

30/09/2012
Collective provision
Balance at beginning of the year

130

147

395

672

10

-

-

10

Charge / (credit) to income statement

(10)

(22)

(20)

(52)

6

-

-

6

Balance at end of the year

120

125

375

620

16

-

-

16

Individual provision (individually impaired assets)
Balance at beginning of the year

165

36

310

511

17

-

-

17

Charge to income statement
Recoveries of amounts previously
written off

39

55

160

254

3

-

-

3

1

17

7

25

-

-

-

-

Bad debts written off

(62)

(83)

(131)

(276)

(7)

-

-

(7)

Discount unwind1

(13)

-

(40)

(53)

(2)

-

-

(2)

Balance at end of the year

130

25

306

461

11

-

-

11

Total provision for credit impairment

250

150

681

1,081

27

-

-

27

122

149

533

804

11

-

-

11

8

(2)

(138)

(132)

(1)

-

-

(1)

130

147

395

672

10

-

-

10

30/09/2011
Collective provision
Balance at beginning of the year
Charge / (credit) to income statement
Balance at end of the year

Individual provision (individually impaired assets)
Balance at beginning of the year

218

50

348

616

12

-

-

12

Charge to income statement
Recoveries of amounts previously
written off

37

79

206

322

14

-

-

14

2

17

3

22

-

-

-

-

Bad debts written off

(74)

(106)

(191)

(371)

(7)

-

-

(7)

Discount unwind1

(18)

(4)

(56)

(78)

(2)

-

-

(2)

Balance at end of the year

165

36

310

511

17

-

-

17

Total provision for credit impairment

295

183

705

1,183

27

-

-

27

1

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cash flows discounted toits present value using the original effective interest rate for the asset. This discount unwinds as interest income over the period the asset is held.

Provision movement analysis$ millions

ANZ New Zealand
Retail Other retailmortgages

exposures

NZ BranchNon-retail
exposures

Retail Other retail
Total

Non-retailmortgages

exposures

exposures

Total

30/09/2012
New and increased provisions

130

87

267

484

20

-

-

20

Provision releases
Recoveries of amounts previously
written off

(90)

(15)

(100)

(205)

(17)

-

-

(17)

(1)

(17)

(7)

(25)

-

-

-

-

Individual provision charge

39

55

160

254

3

-

-

3

(10)

(22)

(20)

(52)

6

-

-

6

29

33

140

202

9

-

-

9

New and increased provisions

165

115

319

599

20

-

-

20

Provision releases
Recoveries of amounts previously
written off

(126)

(19)

(110)

(255)

(6)

-

-

(6)

(2)

(17)

(3)

(22)

-

-

-

-

Individual provision charge

37

79

206

322

14

-

-

14

Collective provision charge / (credit)

8

(2)

(138)

(132)

(1)

-

-

(1)

Total charge to income statement

45

77

68

190

13

-

-

13

Collective provision charge / (credit)
Total charge to income statement
30/09/2011

Australia and New Zealand Banking Group Limited - New Zealand Branch

30

Notes to the Financial Statements
16. Investments in Subsidiaries and Associates
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Investments in associates

99

99

-

-

Investment in joint venture

-

1

-

-

99

100

-

-

Total investments in subsidiaries and associates

Subsidiaries

Ownership

Balance

Interest %DateNature of business

Alos Holdings Limited

100

30 September

Investment company

ANZ Bank New Zealand Limited1

100

30 September

Registered bank

ANZ Capel Court Limited (New Zealand Branch)

100

30 September

Securitisation services company

ANZ Capital NZ Limited

100

30 September

Investment company

ANZ Holdings (New Zealand) Limited

100

30 September

Investment company

ANZ Investment Services (New Zealand) Limited

100

30 September

Funds management company

ANZ National Staff Superannuation Limited

100

30 September

Staff superannuation scheme trustee

ANZ New Zealand (Int'l) Limited2

100

30 September

Investment company

ANZ New Zealand Securities Limited3

100

30 September

On-line share broker

ANZ Nominees Limited (New Zealand Branch)

100

30 September

Nominee company

ANZ Securities (NZ) Limited

100

30 September

Nominee company

ANZMAC Securities (NZ) Nominees Limited

100

30 September

Nominee company-

30 September

Securitisation entity

Arawata Assets Limited

100

30 September

Property company

Arawata Finance Limited

100

30 September

Investment company

Arawata Holdings Limited

100

30 September

Investment company-

30 September

Investment entity

Arawata Trust Company

100

30 September

Investment company

AUT Investments Limited

100

30 September

Investment company

Control Nominees Limited

100

30 September

Investment company

Direct Nominees Limited

100

30 September

Nominee company

EFTPOS New Zealand Limited

100

30 September

EFTPOS service provider

Endeavour Finance Limited

100

30 September

Investment company

Harcourt Corporation Limited

100

30 September

Investment company

Karapiro Investments Limited

100

30 September

Investment company

Kingfisher NZ Trust 2008-1-

30 September

Securitisation entity

Medical Properties Holding Company No.1 Limited

100

30 September

Holding company

National Bank of New Zealand Custodians Limited

100

30 September

Nominee company

NBNZ Holdings Hong Kong Limited (registered in Hong Kong)100

31 December

Non operative

NBNZ Holdings Limited

100

30 September

Investment company

OneAnswer Nominees Limited

100

30 September

Nominee company

OnePath (NZ) Limited

100

30 September

Funds management company

OnePath Holdings (NZ) Limited

100

30 September

Holding company

OnePath Insurance Holdings (NZ) Limited

100

30 September

Holding company

OnePath Insurance Services (NZ) Limited

100

30 September

Insurance company

OnePath Life (NZ) Limited

100

30 September

Insurance company

OnePath Nominees (NZ) Limited

100

30 September

Nominee company

31 March

Mortgage finance (non-operative)

ANZNZ Covered Bond Trust

Arawata Trust

Origin Mortgage Management Services (2011) Limited-

Private Nominees Limited

100

30 September

Nominee company

Rural Growth Fund Limited

100

30 September

Investment company

Samson Funding Limited

100

30 September

Investment company

Silver Fern Life Brokers Limited

100

30 September

Non operative

South Pacific Merchant Finance Limited

100

30 September

Investment company

UDC Finance Limited

100

30 September

Finance company

12
3

Previously known as ANZ National Bank Limited
Previously known as ANZ National (Int’l) Limited
Previously known as Direct Broking Limited

All subsidiaries are incorporated in New Zealand, unless stated.
For all companies, with the exception of Origin Mortgage Management Services (2011) Limited, the ownership interest
percentage equates to the voting power held. In relation to this company, control exists through ANZ New Zealandhaving 100% of the voting rights.

Australia and New Zealand Banking Group Limited - New Zealand Branch

31

Notes to the Financial Statements
In relation to Arawata Trust control exists through the Bank being trustee of the Trust. In relation to Kingfisher NZ Trust
2008-1 and ANZNZ Covered Bond Trust control exists as ANZ New Zealand retains substantially all the risks and rewardsof the operations.
Associates
30/09/2012

30/09/2011

Ownership BalanceBook ValueBook Value

Interest Date

$m

$m

%

Cards NZ Limited

85

85

19 30 September

Card services

Paymark Limited

2

2

25 31 March

EFTPOS settlements

10

10

40 31 MarchRest home operator

Wyma Engineering (NZ) Limited

2

2

30 31 March

Agricultural machinery

Total investment in associates

99

99

UCG Investments Limited

Nature of businessAll associates are incorporated in New Zealand.
Movements in subsidiaries, associates and joint venture
In November 2011 ANZ New Zealand sold its interest in Argenta Limited, which was a joint venture.
In December 2011 the Diversified Yield Fund and Regular Income Fund were wound up.
In January 2012 ANZ New Zealand sold its interests in Vital Healthcare Management Limited, Australian Properties Limited
and their subsidiaries Eastern Specialists Consulting Limited and Vital Healthcare Australian Properties Proprietary Limited.
In February 2012 BHI Limited amalgamated with its immediate parent company NBNZ Holdings Limited.
In August 2012 Southpac Corporation Limited and Radiola Corporation Limited amalgamated with their immediate parent
company South Pacific Merchant Finance Limited.
In September 2012 ANZ New Zealand ceased to hold the voting rights for Origin Mortgage Management Services Limited
and Origin Mortgages Management Services (2008) Limited.

17. Other Assets
ANZ New Zealand$ millions

Accrued interest and prepaid discounts

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

356

343

-

-

Accrued commission

25

22

-

-

Share-based payments asset

60

66

-

-

Prepaid expenses

23

29

-

-

Security settlements

29

250

-

-

Other assets

103

156

-

-

Total other assets

596

866

-

-

30/09/2011

30/09/2012

30/09/2011

18. Deferred Tax Assets and Liabilities
ANZ New Zealand$ millions

30/09/2012

NZ Branch

Deferred tax assets / (liabilities) comprise the following temporary differences:
Provision for credit impairment

303

331

8

8

Premises and equipment, software and intangibles

(2)

(17)

-

-

Provisions and accruals

108

126

-

-

(112)

(90)

-

-

Financial instruments

(55)

(55)

-

-

Carried forward losses

16

16

-

-

(165)

(147)

-

-

(1)

(39)

-

-

92

125

8

8

Deferred acquisition costs and insurance policy assets

Lease finance
Other deferred tax assets and liabilities (including tax provisions)1

Net deferred tax assets
1

Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same income tax authority on either the same taxable entity or
different taxable entities within the same taxable group.

Australia and New Zealand Banking Group Limited - New Zealand Branch

32

Notes to the Financial Statements
19. Goodwill and Other Intangible Assets
ANZ New Zealand

NZ Branch$ millions

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Goodwill

3,262

3,262

-

-

Software

103

85

-

-

Other intangibles

137

160

-

-

3,502

3,507

-

-

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Other due to other financial institutions
Securities sold under agreements to repurchase from other financial
institutions

10,50911,033

9,273

10,011

46

1,164

-

-

Securities sold under agreements to repurchase from central banks

200

50

-

-

Cash collateral received on derivative financial instruments

257

1,475

-

-

11,012

13,722

9,273

10,011

Refer to note 2 for discussion of impairment testing for goodwill.

20. Due to Other Financial Institutions
ANZ New Zealand$ millions

Total due to other financial institutions

NZ Branch

21. Deposits and Other Borrowings
ANZ New Zealand$ millions

Note

30/09/2012

NZ Branch

30/09/2011

30/09/2012

30/09/2011

Amortised cost
Certificates of deposit

2,156

2,454

-

-

Term deposits

33,922

33,799--Demand deposits bearing interest

25,81522,230

-

-

4,838

4,477

-

-

1,476

1,488

-

-

68,20764,448

-

-

5,445

4,790

-

-

73,652

69,238----Deposits not bearing interest
Secured debenture stock
Total deposits and other borrowings recognised at amortised cost

31

Fair value through profit or loss
Commercial paper
Total deposits and other borrowings

Amortised cost of balances included within deposits and other borrowings recognised at fair value:
Commercial paper

5,444

4,790

Deposits from customers are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand. In theunlikely event that the Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in
the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.

Australia and New Zealand Banking Group Limited - New Zealand Branch

33

Notes to the Financial Statements
22. Payables and Other Liabilities
ANZ New Zealand$ millions

30/09/2012

Creditors

NZ Branch

30/09/2011

30/09/2012

30/09/2011

73

78

-

-

Accrued interest and unearned discounts

616

679

55

71

Defined benefit schemes deficit

103

84

-

-

Share-based payments liability

36

39

-

-

Accrued charges

259

255

2

2

Security settlements and short sales

290

1,242

-

-

Other liabilities

104

48

-

-

1,481

2,425

57

73

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Employee entitlements1

135

135

-

-

Restructuring costs and surplus leased space2

111

71

-

-

1

1

-

-

92

102

-

-

339

309

-

-

Total payables and other liabilities

23. Provisions
ANZ New Zealand$ millions

Non-lending losses, frauds and forgeries
Other3
Total provisions
1
2

3

NZ Branch

The aggregate liability for employee entitlements largely comprises provisions for annual leave and long service leave.
Restructuring costs and surplus leased space provisions arise from activities related to material changes in the scope of business undertaken by ANZ New
Zealand or the manner in which that business is undertaken and includes termination benefits. Costs relating to on-going activities are not provided for.
Provision is made when ANZ New Zealand is demonstrably committed, it is probable that the costs will be incurred, though their timing is uncertain, and thecosts can be reliably estimated. The balance includes provisions related to the New Zealand Simplification programme, including implementation of a corebanking system, a single bank brand and an optimised branch network.
Other provisions include provisions relating to make-good of leased premises, seismic obligations and the deferred settlement of obligations arising frommanaged funds relating to OnePath Holdings (NZ) Limited.

24. Bonds and notes
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Domestic bonds

2,535

2,025

-

-

U.S. medium term notes1

7,423

9,088

-

-

Euro medium term notes1

4,179

5,999

-

-

2,962

-

-

-

Trust securities2

898

981

-

-

Index linked notes

81

78

-

-

226

331

-

-

(116)

(30)

-

-

18,18818,472--

Covered bonds1

Fair value hedge adjustment
Less bonds and notes held by the Bank
Total bonds and notes

37

Bonds and notes, other than covered bonds, are unsecured and rank equally with other unsecured liabilities of ANZ New
Zealand. Refer to note 37 for guarantee arrangements and other details about the covered bonds.
1
2

These bonds and notes are issued by ANZ New Zealand (Int’l) Limited and are guaranteed by the Bank.
These notes were issued by Samson Funding Limited on 26 November 2003. The notes are ‘stapled’ to preference shares issued by the Ultimate Parent Bank
and, prior to a conversion event, may not be traded separately from them.

Australia and New Zealand Banking Group Limited - New Zealand Branch

34

Notes to the Financial Statements
25. Loan Capital
ANZ New Zealand$ millions

AUD 265,740,000 perpetual subordinated floating rate loan

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

333

338

-

-

AUD 169,520,000 term subordinated floating rate loan 1

-

216

-

-

NZD 350,000,000 term subordinated fixed rate bond 2

-

350

-

-

NZD 250,000,000 term subordinated fixed rate bond 3

-

250

-

-

835

835

-

-

1,168

1,989

-

-

-

(1)

-

-

1,168

1,988

-

-

NZD 835,000,000 perpetual subordinated bondTotal loan capital issued
Less loan capital instruments held by ANZ New Zealand
Total loan capital
1
2
3

The Bank elected to repay this loan on 17 September 2012. Interest was based on BBSW +0.68%.
The Bank elected to redeem this bond on 2 March 2012. The coupon rate was 7.60%.
The Bank elected to redeem this bond on 23 July 2012. The coupon rate was 8.23%.

Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all
creditors of the Bank.
The perpetual subordinated debt qualifies as Upper Level Tier Two Capital for capital adequacy purposes.
AUD 265,740,000 loan
This loan has no fixed maturity. Interest is payable half yearly in arrears based on BBSW + 0.95% p.a., with interest
payments due 15 March and 15 September.
NZD 835,000,000 bond
The Bank may elect to redeem the bond on 18 April 2013, 18 April 2018 or any interest payment date subsequent to 18
April 2018. Interest is payable half yearly in arrears on 18 April and 18 October each year, up to and including theSecond Call Date and then quarterly thereafter. If the bond is not called at the First Call Date, the coupon rate will resetto the five year interest swap rate plus 2.00%. Should the bond not be called at the Second Call Date, the Coupon Ratefrom the Second Call Date onwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 30 September 2012, this bond carried a BBB rating by Standard and Poor's and an A3 rating by Moody’s. On 5
October 2012, Standard and Poor’s upgraded this bond to BBB+.
The current coupon interest on the bond is 9.66%. The Bank has a general right and in certain specified circumstances anobligation, to defer payment of interest on the bond.
This bond is listed on the New Zealand Exchange (“NZX”). The Market Surveillance Panel of the NZX granted the Bank awaiver from the requirements of Listing Rules 10.4 (relating to the provision of preliminary announcements of half yearly
and annual results to the NZX) and 10.5 (relating to preparing and providing a copy of half yearly and annual reports to
the NZX).

Australia and New Zealand Banking Group Limited - New Zealand Branch

35

Notes to the Financial Statements
26. Related Party Transactions
Key management personnel
ANZ New Zealand$ thousands

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

Key management personnel compensation
Salaries and short-term employee benefits

11,605

13,557--

Post-employment benefits

201

344

-

-

Other long-term benefits

87

153

-

-

-

2,656

-

-

4,537

2,929

-

-

16,43019,639--Loans to key management personnel

2,726

3,300

-

-

Deposits from key management personnel

7,055

6,387

-

-

Termination benefits
Share-based payments expense
Total compensation of key management personnel

Key management personnel are defined as the Directors and senior management of ANZ New Zealand - those persons
having the authority and responsibility for planning, directing and controlling the activities of the entity. The information
above includes transactions with those individuals, their close family members and their subsidiaries.
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal
commercial terms and conditions no more favourable than those given to other employees or customers. Loans are on
terms of repayment that range between fixed, variable and interest only, all of which have been made in accordance with
the Bank's lending policies.
All transactions with key management personnel (including personally related parties) are conducted on an arm's length
basis in the ordinary course of business and on commercial terms and conditions. These transactions principally consist of
the provision of financial and investment services.
Transactions with other related parties
The NZ Branch and ANZ New Zealand undertake transactions with the Immediate Parent Company, Ultimate Parent Bank,other members of the Overseas Banking Group, associates and joint ventures.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment
services, technology and process support, and compensation for share based payments made to ANZ New Zealandemployees. Transactions with related parties outside of ANZ New Zealand are conducted on an arm’s length basis and on
normal commercial terms.
In addition the Bank undertakes similar transactions with subsidiaries, which are eliminated in the consolidated ANZ New
Zealand financial statements. Included within the Bank’s transactions with subsidiaries is the provision of administrative
functions to some subsidiaries for which no payments have been made.
Transactions with related parties$ millions

ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

-

6

-

-

530

534

422

444

70

68

-

-

2

2

-

-

4

4

-

-

118

93

-

-

-

-

26

29

Interest income
Received from associates
Interest expense
Paid to the Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Paid to the Immediate Parent Company
Paid to associates
Other operating income
Dividends received from associates
Operating expenses
Paid to the Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Paid to the Bank

Australia and New Zealand Banking Group Limited - New Zealand Branch

36

Notes to the Financial Statements
Balances with related parties
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Due from other financial institutions
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

302

133

38

-

Derivative financial assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

2,659

2,754

52

172
-

Net loans and advances
Due from associates

4

4

-

Due from joint ventures

-

33

-

-

Due from related entities

-

-

304

338

Shares in subsidiaries and associates

99

100

-

-

Other assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

61

66

-

-

3,125

3,090

394

510

9,478

10,786

9,273

10,011

85

85

-

-

-

-

-

51

Derivative financial liabilities
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

3,205

4,210

222

117

Payables and other liabilities
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

85

84

55

71

Bonds and notes
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

2,201

3,356

-

-

Term funding due to Immediate Parent Company

1,766

1,766

-

-

333

554

-

-

17,153

20,841

9,550

10,250Total due from related parties
Due to other financial institutions
Due to Ultimate Parent Bank
Deposits and other borrowings
Due to associates
Due to related entities

Loan capitalDue to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Total due to related parties

Balances due from / to related parties are unsecured other than that ANZ New Zealand and the Bank have provided
guarantees and commitments to related parties as follows:
ANZ New Zealand$ millions

Financial guarantees provided to the Ultimate Parent BankNZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

256

1,296

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

37

Notes to the Financial Statements
27. Current and Non-current Assets and Liabilities
ANZ New Zealand$ millions

30/09/2012

Noncurrent

Current

NZ Branch

30/09/2011

Current

30/09/2012

Non-current

30/09/2011

Noncurrent

Current

Current

Non-current

AssetsLiquid assets
Due from other financial institutions

2,831

-

2,455

-

-

-

-

-

1,760

-

4,577

-

38

-

-

-

Trading securities

12,338

-

9,466

-

-

-

-

-

Derivative financial instruments

12,709-15,769

-

52

-

172

-

Current tax assets

24

-

-

-

-

-

-

-

Available-for-sale assets

16

41

393

18

-

-

-

-

Net loans and advances

28,45367,641

28,10565,508

467

8,929

201

9,730

-

-

-

-

304

-

338

-

140

2

71

26

-

-

-

-

-

301

-

200

-

-

-

-

-

99

-

100

-

-

-

-

Due from related entities
Investments backing insurance policy
liabilities
Insurance policy assets
Investments in subsidiaries andassociates
Other assets

536

60

809

57

-

-

-

-

Deferred tax assets

-

92

-

125

-

8

-

8

Premises and equipment

-

323

-

325

-

-

-

-

Goodwill and other intangible assets

-

3,502

-

3,507

-

-

-

-

58,80772,061

61,64569,866

861

8,937

711

9,738

Due to other financial institutions

3,991

7,021

6,159

7,563

2,407

6,866

2,585

7,426

Deposits and other borrowings

70,7932,859

66,659

2,579

-

-

-

-

-

-

-

-

-

-

51

-

14,085-

15,122

-

222

-

117

-

1,342

139

2,311

114

57

-

73

-

-

-

4

-

19

-

20

-

240

99

211

98

-

-

-

-

Bonds and notes

4,089

14,0994,882

13,590----Term funding

1,766

-

1,766

-

-

-

-

-

Loan capital

-

1,168

-

1,988

-

-

-

-

96,30625,385

97,11425,932

2,705

6,866

2,846

7,426

Total assets
Liabilities

Due to related entities
Derivative financial instruments
Payables and other liabilities
Current tax liability
Provisions

Total liabilities

Assets and liabilities are classified as current if:• it is expected they will be realised, consumed or settled in the normal operating cycle or within twelve months after theend of the reporting date; or• they are held primarily for trading; or• they are assets that are cash or a cash equivalent; or• they are liabilities where there is no unconditional right to defer settlement for at least twelve months.
Non-current assets include premises and equipment and intangible assets as well as financial assets of a long-term
nature. Non-current liabilities include financial and non-financial liabilities which are expected to be settled after twelve
months from balance date.
For the purposes of this disclosure, the fair value of both trading and hedging derivatives has been classified as current.
For more information on the contractual timing of expected outflows and inflows in relation to hedging derivatives refer toNote 30.

Australia and New Zealand Banking Group Limited - New Zealand Branch

38

Notes to the Financial Statements
28. Share Capital and Head Office Account
ANZ New Zealand

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Issued share capital
Number of shares

Ordinary shares at beginning and end of the year
Redeemable preference shares at beginning and end of
the year

381,655,112

381,655,112--

4,005,295,229

4,005,295,229--

Total number of issued shares

4,386,950,341

4,386,950,341--

Ordinary share capital at beginning and end of the year
Redeemable preference share capital at beginning andend of the year

1,453

1,453

-

-

4,960

4,960

-

-

Paid in share capital at end of the year

6,413

6,413

-

-

11

11

11

11

6,424

6,424

11

11

Share capital & head office account$ millions

Head office accountTotal capital & head office account at end of the year

Ordinary shares
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. On ashow of hands every member who is present at a meeting in person or by proxy or by representative is entitled to one
vote, and upon a poll every member shall have one vote for each share held.
During the year ended 30 September 2012 ANZ Holdings (New Zealand) Limited (“ANZH”) paid an ordinary dividend of$400 million (30/09/2011 $215 million) to the Immediate Parent Company (equivalent to $1.05 (30/09/2011 $0.57) per
share).
Redeemable preference shares
All redeemable preference shares (“RPS”) were issued by ANZH to members of the Overseas Banking Group. RPS carry no
voting rights and are redeemable by ANZH providing notice in writing to holders of the RPS. Dividends are payable at thediscretion of the directors of ANZH and are non-cumulative.
There are five classes of RPS, relating to issues in 1988, 2005, 2007, 2008 and 2009. During the year ended 30
September 2012 ANZH paid dividends on the 2007 class of RPS of $85 million (equivalent to $0.04 per share).
(30/09/2011 ANZH paid $206 million of dividends on the 2007 class of RPS (equivalent to $0.10 per share)).
In a liquidation, holders of RPS are entitled to available subscribed capital per share, pari passu with all holders of existing
RPS but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of
profits or assets.
Head office account
The head office account comprises funds provided by the Ultimate Parent Bank. It is non-interest bearing and there is no
fixed date of repayment.

29. Capital Adequacy
Capital management policies
ANZ New Zealand’s core capital objectives are to:• Protect the interests of depositors, creditors and shareholders;• Ensure the safety and soundness of ANZ New Zealand’s capital position; and• Ensure that the capital base supports ANZ New Zealand’s risk appetite, and strategic business objectives, in an
efficient and effective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting,monitoring and obtaining assurance for ANZ New Zealand’s Internal Capital Adequacy Assessment Process (“ICAAP”)
policy and framework; standardised risk definitions for all material risks; materiality thresholds; capital adequacy targets;internal economic risk capital principles; and risk appetite.
ANZ New Zealand has minimum and trigger levels for both tier one and total capital that ensure sufficient capital ismaintained to:• Meet minimum prudential requirements imposed by regulators;• Ensure consistency with ANZ New Zealand’s overall risk profile and financial positions, taking into account its strategic
focus and business plan; and• Support the economic risk capital requirements of the business.

Australia and New Zealand Banking Group Limited - New Zealand Branch

39

Notes to the Financial Statements
ANZ New Zealand’s Asset & Liability Committee and its related Capital Management Forum are responsible for developing,
implementing and maintaining ANZ New Zealand's ICAAP framework, including ongoing monitoring, reporting andcompliance. ANZ New Zealand’s ICAAP is subject to independent and periodic review conducted by Internal Audit.
ANZ New Zealand has complied with all externally imposed capital requirements to which it is subject during the current
and comparative periods.
Overseas Banking Group

Ultimate Parent Bank

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Tier One Capital

10.8%

10.9%

11.4%

11.5%

Total Capital

12.2%

12.1%

12.7%

12.3%

For calculation of minimum capital requirements under Pillar 1 of the Basel II Accord, APRA has accredited the Overseas
Banking Group to use the Advanced Internal Ratings Based methodology for calculation of credit risk weighted assets andthe Advanced Measurement Approach for the operational risk weighted asset equivalent.
Under prudential regulations, the Ultimate Parent Bank is required to hold a minimum Prudential Capital Ratio as
determined by APRA. The Overseas Banking Group exceeded the minimum capital adequacy requirements set by APRA as
at 30 September 2012 and for the comparative prior period.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2012. The
Overseas Banking Group's Basel II Pillar 3 Disclosure document for the year ended to 30 September 2012, prepared inaccordance with APS 330, discloses capital adequacy ratios calculated under the Basel II methodology. These documents
can be accessed at the website anz.com.
Market risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B.
The peak end-of-day market risk exposures are for the half-year ended 30 September 2012.

Implied risk weighted
exposure
ANZ New ZealandUnaudited 30/09/2012

Interest rate risk

Aggregate capital charge

Peak

Period end

Peak

Period end

Peak

$m

$m

$m

$m

occurred on

4,631

5,288

371

423

4/09/2012

Foreign currency risk

6

93

-

7

21/08/2012

Equity risk

3

130

-

10

15/08/2012

4,640

371

Retail mortgages by loan-to-valuation ratio (“LVR”)
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by ANZ
New Zealand's valuation of the security property at origination of the exposure. Off-balance sheet exposures include
undrawn and partially undrawn residential mortgage loans as well as commitments to lend. Commitments to lend areformal offers for housing lending which may or may not be accepted by the customer.
Unaudited 30/09/2012

On-balancesheet

Off-balance
sheet

Total

0% - 59%

19,946

3,379

23,32560% - 69%

8,662

992

9,654

70% - 79%

12,698

1,289

13,987Less than 80%$ millions

LVR range

41,306

5,660

46,96680% - 89%

7,853

1,100

8,953

Over 90%

4,296

424

4,720

53,455

7,184

60,639Total

Australia and New Zealand Banking Group Limited - New Zealand Branch

40

Notes to the Financial Statements
Reconciliation of mortgage related amounts
ANZ New ZealandUnaudited$ millions

Note

30/09/2012

Term loans - housing

13

55,526

Plus: short-term housing loans classified as overdrafts

514

Less: housing loans made to corporate customers
On-balance sheet retail mortgage exposures / Gross retail mortgage loans(2,585)30

Plus: off-balance sheet retail mortgage exposures
Total retail mortgage exposures as per LVR analysis

53,455
7,184

29

60,63930. Financial Risk Management
Strategy in using financial instruments
Financial instruments are fundamental to ANZ New Zealand’s business, constituting the core element of its operations.
Accordingly, the risks associated with financial instruments are a significant component of the risks faced by ANZ New
Zealand. Financial instruments create, modify or reduce the credit, market and liquidity risks of ANZ New Zealand’sbalance sheet. ANZ New Zealand’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of ANZ New Zealand.
The risk management and policy control framework applicable to the entities comprising ANZ New Zealand has been set
by the Board and Risk Committee of the Bank or the Ultimate Parent Bank, as appropriate. Likewise oversight andmonitoring of material risk exposures of ANZ New Zealand is undertaken by the Risk Management functions of the Bankand also the Ultimate Parent Bank. Throughout this document, references to the Risk Management of the operations
within the entities comprising ANZ New Zealand, implicitly involves oversight by both related entities.

Credit risk
Credit risk is the risk of financial loss from counterparties being unable to fulfil their contractual obligations. ANZ New
Zealand assumes credit risk in a wide range of lending and other activities in diverse markets and many jurisdictions.
Credit risks arise not only from traditional lending to customers, but also from inter-bank, treasury, international tradeand capital market activities around the world.
ANZ New Zealand has an overall lending objective of sound growth for appropriate returns. The credit risk objectives of
ANZ New Zealand are set by each Board and are implemented and monitored within a tiered structure of delegatedauthority, designed to oversee multiple facets of credit risk, including business writing strategies, credit policies/controls,
single exposures, portfolio monitoring and risk concentrations.
Credit risk management
A credit risk management framework is in place across ANZ New Zealand with the aim of ensuring a structured anddisciplined approach is maintained in achieving the objectives set by each Board. The framework focuses on policies,
people, skills, controls, risk concentrations and portfolio balance. It is supported by portfolio analysis and businesswriting strategies, which guide lending decisions and identify segments of the portfolio requiring attention. The
effectiveness of the framework is monitored through a series of compliance and reporting processes.
An independent Risk Management function is staffed by risk specialists. In regard to credit risk management, theobjective is for Risk Management to provide robust credit policies, to make independent credit decisions, and to provide
strong support to front line staff in the application of sound credit practices. In addition to providing independent credit
assessment on lending decisions, Risk Management also performs key roles in portfolio management by development andvalidation of credit risk measurement systems, loan asset quality reporting, and development of credit standards andpolicies.
The credit risk management framework is top down. The framework is defined by ANZ New Zealand's credit principles andpolicies. The effectiveness of the credit risk management framework is validated through the compliance and monitoringprocesses.
Risk Management's responsibilities for credit risk policy and management are executed through dedicated departments,
which support the business units. All major business unit credit decisions require approval from both business writers andindependent risk personnel.
Credit risk is controlled through a combination of approvals, limits, reviews and monitoring procedures that are carried out
on a regular basis, the frequency of which is dependent upon the level of risk. For the key operating entities within ANZ
New Zealand, credit risk policy and management is executed through the Chief Risk Officer, who is responsible for various
dedicated areas within the Risk Management division. A formal outsourcing agreement provides for credit risk functions
to be provided to a number of ANZ New Zealand entities by staff of the Bank.
The credit risk review function within Global Internal Audit also provides a further independent check mechanism toensure the quality of credit decisions. This includes providing independent periodic checks on asset quality andcompliance with the agreed standards and policies across ANZ New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

41

Notes to the Financial Statements
Country risk management
Some customer credit risks involve country risk, whereby actions or events at a national or international level could
disrupt servicing of commitments. Country risk arises when payment or discharge of an obligation will, or could, involvethe flow of funds from one country to another or involve transactions in a currency other than the domestic currency of
the relevant country.
Country ratings are assigned to each country where ANZ New Zealand incurs country risk and have a direct bearing on
ANZ New Zealand's risk appetite for each country. The country rating is determined through a defined methodology
based around external ratings agencies’ ratings and internal specialist opinion. It is also a key risk consideration in ANZ
New Zealand's capital pricing model for cross border flows.
The recording of country limits provides ANZ New Zealand with a means to identify and control country risk. Country
limits ensure that there is a country-by-country ceiling on exposures that involve country risk. They are recorded by time
to maturity and purpose of exposure, e.g., trade, markets and project finance. Country limits are managed centrally by
the Ultimate Parent Bank, through a global country risk exposure management system managed by a specialist unit within
Institutional Risk.
Portfolio stress testing
Stress testing is integral to strengthening the predictive approach to Risk Management and is a key component tomanaging risk appetite and business writing strategies. It creates greater understanding of impacts on financial
performance through modelling relationships and sensitivities between geographic, industry and business unit exposures
under a range of macro economic scenarios.
The Ultimate Parent Bank has a dedicated stress testing team that assists business and risk executives in ANZ New
Zealand to model and report periodically to management and the Board Risk Committee on a range of scenarios andstress tests.
Portfolio analysis and reporting
Credit portfolios are actively monitored at each layer of the risk structure to ensure credit deterioration is quickly detected
and mitigated through the implementation of remediation strategies.
Businesses incurring credit risk undertake regular and comprehensive analysis of their credit portfolios.
Issue
identification and adherence to performance benchmarks are reported to Risk Management and business executives
through a series of reports including monthly ‘asset quality’ reporting. This process is undertaken by or overseen by Risk
Management ensuring an efficient and independent conduit exists to identify and communicate emerging credit issues to
ANZ New Zealand executives and each Board.
Collateral management
ANZ New Zealand credit principles specify lending only what the counterparty has the capacity and ability to repay and
ANZ New Zealand sets limits on the acceptable level of credit risk. Acceptance of credit risk is firstly based on the
counterparty’s assessed capacity to meet contractual obligations (i.e., interest and capital repayments). Obtaining
collateral is only used to mitigate credit risk. Procedures are designed to ensure collateral is managed, legally
enforceable, conservatively valued and adequately insured where appropriate. ANZ New Zealand policy sets out the typesof acceptable collateral, including:
•
•
•
•
•

Cash;
Mortgages over property;
Charges over business assets, e.g., premises, stock and debtors;
Charges over financial instruments, e.g., debt securities and equities in support of trading facilities; andFinancial guarantees.

In the event of customer default, any loan security is usually held as mortgagee in possession while action is taken to
realise it. Therefore ANZ New Zealand does not usually hold any real estate or other assets acquired through theenforcement of security.
ANZ New Zealand uses ISDA Master Agreements to document derivatives' activities to limit exposure to credit losses. The
credit risk is reduced by a master agreement to the extent that, if an event of default occurs, all contracts with thecounterparty are terminated and settled on a net basis. Further, it is ANZ New Zealand's preferred practice to include all
products covered by the ISDA in the Credit Support Annex (“CSA”) in order to achieve further credit exposure reduction.
Under a CSA, collateral is passed between the parties, depending on the aggregate mark-to-market (positive or negative)of derivative trades between the two entities, to mitigate the market contingent counterparty risk inherent in theoutstanding positions.
Concentrations of credit risk
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities
within the same geographic region, or when they have similar risk characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other conditions.
ANZ New Zealand monitors its portfolios to identify and assess risk concentrations. Concentration limits are used to guard
against large single customer or correlated credit risks. Risk Management, Business Unit executives and senior
management monitor large exposure concentrations through a monthly list of ANZ New Zealand's top corporate
exposures. The ANZ Credit and Market Risk Committee and Board Risk Committee regularly review a comprehensive listof single customer concentration limits and customers’ adherence to these limits.
Analyses of financial assets by industry sector are based on Australian and New Zealand Standard Industrial Classification(“ANZSIC”) codes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

42

Notes to the Financial Statements
Concentrations of credit risk analysis
ANZ New Zealand$ millions

30/09/2012

Liquid assets
Tradingand due from securities andother financial available-forinstitutions
sale assets

Derivative
financial
instruments

Net loans and Other financial
advances
assetsCredit related
commitments
3

Total

19,072

Industry
Agriculture

-

-

60

17,343123

1,546

Forestry, fishing and mining

24

-

14

894

6

322

1,260

Business and property services

19

-

51

9,034

64

2,542

11,710Construction

-

-

2

1,017

7

1,035

2,061

Entertainment, leisure and tourism

-

-

41

1,166

8

483

1,698

Finance and insurance

2,383

3,696

11,278

501

36

1,099

18,993Government and local authority -13,433

2,002

8,574

405

1,332

9

1,111

Manufacturing

43

6

98

2,915

21

2,509

5,592

Personal lending

-

-

-

56,729335

11,093

68,157Retail trade

28

6

43

1,774

13

1,102

2,966

Transport and storage

25

50

93

1,657

12

579

2,416

Wholesale trade

54

-

21

1,195

8

1,375

2,653

Other2

13

63

603

1,800

13

2,302

4,794

4,591

12,395

12,70997,357655

27,098

154,805

Provision for credit impairment

-

-

-

(1,081)--(1,081)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

34

-

-

34

-

-

-

(216)

-

-

(216)

4,591

12,395

12,70996,094655

27,098

153,542

3,871

10,524

3,440

94,154642

27,098

139,729

720

1,871

9,269

1,940

13

-

13,813

4,591

12,395

12,70996,094655

27,098

153,542

Total financial assets
Geography
New ZealandOverseas
Total financial assets

Australia and New Zealand Banking Group Limited - New Zealand Branch

43

Notes to the Financial Statements
Concentrations of credit risk analysis
ANZ New Zealand$ millions

30/09/2011

Liquid assets
Tradingand due from securities andother financial available-forinstitutions
sale assets

Derivative
financial
instruments

Net loans and Other financial
advances
assetsCredit related
commitments
3

Total

19,417

Industry
Agriculture

38

-

95

17,682125

1,477

Forestry, fishing and mining

9

-

12

499

4

326

850

Business & property services

24

-

19

8,850

62

2,054

11,009Construction

-

-

4

1,075

7

863

1,949

Entertainment, leisure and tourism

-

-

43

1,238

8

419

1,708

Finance and insurance

4,852

3,501

14,293

1,042

258

1,505

25,451Government and local authority1

11,262

1,887

6,253

537

1,505

10

1,070

Manufacturing

41

10

197

2,640

19

3,304

6,211

Personal lending

-

-

-

53,861

332

9,577

63,770Retail trade

75

2

32

1,780

11

878

2,778

Transport and storage

19

57

42

1,630

11

639

2,398

Wholesale trade

51

-

106

1,218

8

1,306

2,689

Other2

36

54

389

1,907

13

2,278

4,677

7,032

9,877

15,76994,927868

25,696

154,169

Provision for credit impairment

-

-

-

(1,183)--(1,183)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

134

-

-

134

-

-

-

(265)

-

-

(265)

7,032

9,877

15,76993,613868

25,696

152,855

New Zealand

5,604

8,017

4,080

91,895868

25,696

136,160

Overseas

1,428

1,860

11,689

1,718

-

-

16,695

Total financial assets

7,032

9,877

15,76993,613868

25,696

152,855

Total financial assets
Geography

NZ Branch$ millions

30/09/2012

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
financialfor-saleassets instruments

Net loansandadvances

Due from
relatedentities

Other Credit related
financial commitments
3
assets

Total

Industry
Agriculture

-

-

-

1

-

-

-

1

Business and property services

-

-

-

4

-

-

-

4

Construction

-

-

-

2

-

-

-

2

Entertainment, leisure and tourism

-

-

-

1

-

-

-

1

38

-

52

-

304

-

-

394

Government and local authority1

-

-

-

1

-

-

-

1

Personal lending

-

-

-

9,389

-

-

103

9,492

Retail trade

-

-

-

2

-

-

-

2

Other2

-

-

-

2

-

-

-

2

38

-

52

9,402

304

-

103

9,899

Provision for credit impairment

-

-

-

(27)

-

-

-

(27)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

17

-

-

-

17

-

-

-

4

-

-

-

4

38

-

52

9,396

304

-

103

9,893

Finance and insurance

Total financial assets
Geography
New Zealand

-

-

13

9,102

304

-

103

9,522

Overseas

38

-

39

294

-

-

-

371

Total financial assets

38

-

52

9,396

304

-

103

9,893

Australia and New Zealand Banking Group Limited - New Zealand Branch

44

Notes to the Financial Statements
NZ Branch$ millions

30/09/2011

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
for-salefinancialassets instruments

Net loansandadvances

Due from
relatedentities

Other Credit related
financial commitments
3
assets

Total

Industry
Agriculture

-

-

-

2

-

-

-

2

Business and property services

-

-

-

3

-

-

-

3

Construction

-

-

-

2

-

-

-

2

Finance and insurance

-

-

172

1

338

-

-

511

Government and local authority1

-

-

-

1

-

-

-

1

Personal lending

-

-

-

9,903

-

-

88

9,991

Retail trade

-

-

-

2

-

-

-

2

Other2

-

-

-

2

-

-

-

2

-

-

172

9,916

338

-

88

10,514

Provision for credit impairment

-

-

-

(27)

-

-

-

(27)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

37

-

-

-

37

-

-

-

5

-

-

-

5

Total financial assets

-

-

172

9,931

338

-

88

10,529New Zealand

-

-

145

9,621

338

-

88

10,192

Overseas

-

-

27

310

-

-

-

337

Total financial assets

-

-

172

9,931

338

-

88

10,529Geography

1
2
3

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications and personal services.
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

Maximum exposure to credit risk
The following table presents the maximum exposure to credit risk for on and off balance sheet financial instruments
before taking account of the financial effect of any collateral held or other credit enhancements, unless such collateralmeets the offsetting criteria in NZ IAS 32 Financial Instruments: Presentation.
The table also provides a quantification of the value of the financial charges ANZ New Zealand holds over a borrower’s
specific asset (or assets) where ANZ New Zealand is able to enforce the collateral in satisfying a debt in the event of theborrower failing to meet its contractual obligations. For the purposes of this disclosure, where the collateral held is valued
at more than the corresponding credit exposure, the financial effect is capped at the value of the credit exposure. In
respect of derivative financial instruments, the assessed collateral is the amount of cash collateral received and does notinclude the effect of any netting arrangements under ISDAs.
The most common types of collateral include:•••

Security over real estate including residential, commercial, industrial and rural property
Cash deposits
Other security over business assets including specific plant and equipment, inventory and accounts receivables.

ANZ New Zealand also manages its credit risk by accepting other types of collateral such as guarantees and security
interests over the assets of a customer’s business. The assignable value of such credit mitigants is less certain and theirfinancial effect has not been quantified for disclosure purposes. Credit exposures shown as not fully secured may benefit
from such credit mitigants.

Australia and New Zealand Banking Group Limited - New Zealand Branch

45

Notes to the Financial Statements
ANZ New Zealand$ millions
30/09/2012

Maximum
exposure tocredit risk

NZ Branch

UnsecuredFinancial effect portion of creditof collateralexposure

Maximum
exposure tocredit risk

UnsecuredFinancial effect portion of creditof collateralexposure

On and off-balance sheet
positions
Liquid assets

2,627

325

2,302

-

-

-

Due from other financial institutions

1,760

270

1,490

38

-

38

Trading securities

12,338-12,338---Derivative financial instruments

12,709257

12,45252-

52

Available-for-sale assets

54

-

54

-

-

-

Net loans and advances

96,09487,779

8,315

9,396

9,318

78

Due from related entities

-

-

-

304

-

304

655

351

304

-

-

-

Credit related commitments

27,09812,41014,688

103

103

-

Total exposure to credit risk

153,335

101,392

51,943

9,893

9,421

472

Other financial assets

30/09/2011

On and off-balance sheet
positions
Liquid assets

2,266

50

2,216

-

-

-

Due from other financial institutions

4,577

1,691

2,886

-

-

-

Trading securities

9,466

-

9,466

-

-

-

Derivative financial instruments

15,7691,475

14,294

172

-

172

Available-for-sale assets

289

-

289

-

-

-

Net loans and advances

93,61385,374

8,239

9,931

9,864

67

Due from related entities

-

-

-

338

-

338

868

560

308

-

-

-

Credit related commitments

25,696

11,527

14,16988

88-

Total exposure to credit risk

152,544

100,677

51,867

10,529

9,952

577

Other financial assets

Credit quality
A core component of ANZ New Zealand’s credit risk management capability is the risk grading framework used across all
major business units. A set of risk grading principles and policies is supported by a complementary risk grading
methodology. Pronouncements by the International Basel Committee on Banking Supervision have been encapsulated inthese principles and policies including governance, validation and modelling requirements.
ANZ New Zealand’s risk grade profile changes dynamically through new counterparty lending and existing counterparty
movements in either risk or volume. All counterparty risk grades are subject to frequent review, including statistical andbehavioural reviews in consumer and small business segments, and individual counterparty reviews in segments withlarger single name borrowers.
Impairment and provisioning of financial assets
ANZ New Zealand's policy relating to the recognition and measurement of impaired assets conforms to the RBNZ'sguidelines.
Loans are classified as either performing or impaired. Impaired assets are credit exposures where: there is doubt as towhether the full contractual amount (including interest) will be received; a material credit obligation is 90 days past due
but not well secured; they are portfolio managed and can be held for up to 180 days past due; or concessional terms havebeen provided due to the financial difficulties of the customer.
An exposure is classified as past due but not impaired (less than 90 days) where the value of collateral is sufficient to
repay both the principal debt and all other potential interest and there is no concern as to the creditworthiness of thecounterparty in question.
The past due but not impaired (over 90 days) classification applies where contractual payments are past due by 90 daysor more, or where the facility remains outside of contractual arrangements for 90 or more consecutive days, but ANZ New
Zealand believes that impairment is not appropriate on the basis of the level of security/collateral available, or the facility
is portfolio managed.
The provision for credit impairment represents management’s best estimate of the losses incurred in the loan portfolio atbalance date based on its experienced judgement.
Distribution of gross loans and advances assets by credit quality
The credit quality of the portfolio of loans and advances is assessed by reference to ANZ New Zealand’s risk grading
principles and policies supported by a complementary risk grading methodology.

Australia and New Zealand Banking Group Limited - New Zealand Branch

46

Notes to the Financial Statements
Distribution by asset class of gross loans and advances by credit quality
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

NZ BranchNon-retail
exposures

Total

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

30/09/2012

Strong risk rating

40,4001,140

19,993

61,533

7,141

-

-

7,141

Satisfactory risk rating
Substandard but not past due or
impaired

10,3352,466

15,591

28,392

1,700

-

-

1,700

1,129

408

2,118

3,655

238

-

-

238

Total neither past due nor impaired

51,864

4,014

37,702

93,580

9,079

-

-

9,079

1 to 5 days

386

139

458

983

60

-

-

60

6 to 29 days

522

92

181

795

159

-

-

159

1 to 29 days

908

231

639

1,778

219

-

-

219

30 to 59 days

164

32

67

263

37

-

-

37

60 to 89 days

60

17

28

105

12

-

-

12

107

33

86

226

16

-

-

16

1,239

313

820

2,372

284

-

-

284

352

44

1,009

1,405

39

-

-

39

53,455

4,371

39,531

97,357

9,402

-

-

9,402

Strong risk rating

38,881

1,071

17,29757,249

7,919

-

-

7,919

Satisfactory risk rating
Substandard but not past due or
impaired

8,688

2,312

16,561

27,561

1,412

-

-

1,412

1,689

557

3,489

5,735

205

-

-

205

Total neither past due nor impaired

49,2583,940

37,34790,545

9,536

-

-

9,536

1 to 5 days

433

126

545

1,104

97

-

-

97

6 to 29 days

497

94

119

710

132

-

-

132

1 to 29 days

930

220

664

1,814

229

-

-

229

30 to 59 days

216

35

99

350

49

-

-

49

60 to 89 days

77

18

24

119

17

-

-

17

90 days and over

152

38

117

307

19

-

-

19

1,375

311

904

2,590

314

-

-

314

537

61

1,194

1,792

66

-

-

66

51,1704,312

39,44594,927

9,916

-

-

9,916

Past due but not impaired:

90 days and overTotal past due but not impaired
Total impaired assets

30/09/2011

Past due but not impaired:

Total past due but not impaired
Total impaired assets

Credit quality of gross loans and advances neither past due nor impaired
The credit quality of financial assets is assessed by ANZ New Zealand using internal ratings which aim to reflect therelative ability of counterparties to fulfil, on time, their credit-related obligations, and is based on their current probabilityof default.
Internal ratings
Strong risk rating - Corporate customers demonstrating superior stability in their operating and financial performanceover the long-term, and whose debt servicing capacity is not significantly vulnerable to foreseeable events. Retailcustomers with low expected loss. This rating band broadly corresponds to ratings “Aaa” to “Ba1” and “AAA” to “BB+” of
Moody's Investors Service and Standard & Poor's respectively.
Satisfactory risk rating - Corporate customers consistently demonstrating sound operational and financial stability overthe medium to long term, even though some may be susceptible to cyclical trends or variability in earnings. Retailcustomers with moderate expected loss. This rating band broadly corresponds to ratings “Ba2” to “B1” and “BB” to “B+”of Moody's Investors Service and Standard & Poor's respectively.
Substandard but not past due or impaired - Corporate customers demonstrating some operational and financial
instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly
medium term. Retail customers with higher expected loss. This rating band broadly corresponds to ratings “B2” to “Caa”
and “B” to “CCC” of Moody's Investors Service and Standard & Poor's respectively.
Movements in the rating categories between balance dates are due to both changes in the underlying internal ratings
applied to customers and to new loans written or loans rolling off.

Australia and New Zealand Banking Group Limited - New Zealand Branch

47

Notes to the Financial Statements
Credit quality of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by ANZ New Zealand to measure and manage credit quality. Financial assetsthat are past due but not impaired include those:•
Assessed, approved and managed on a portfolio basis within a centralised environment (for example, credit cards andpersonal loans);•
Held on a productive basis until they are 180 days past due; and•Managed on an individual basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair valueof associated security is sufficient to ensure that ANZ New Zealand will recover the entire amount owing over the life of
the facility and there is reasonable assurance that collection efforts will result in payment of the amounts due in a timely
manner.

Market risk
Market risk is the risk to ANZ New Zealand’s earnings arising from changes in interest rates, currency exchange rates,
credit spreads, or from fluctuations in bond, commodity or equity prices. Market risk is generated through both trading
activities and the interest rate risk inherent in the banking book.
ANZ New Zealand conducts trading operations in interest rates, foreign exchange, commodities and debt securities.
Trading operations largely focus on supporting customer hedging and investing activities, rather than outright proprietary
trading. A medium market risk appetite has been set for ANZ New Zealand, which is reflected in its low/moderate market
risk limit framework.
ANZ New Zealand has a detailed risk management and control framework to support its trading and balance sheet
management activities. The framework incorporates a risk measurement approach to quantify the magnitude of market
risk within trading and balance sheet portfolios. This approach, and related analysis, identifies the range of possible
outcomes that can be expected over a given period of time, establishes the relative likelihood of those outcomes andallocates an appropriate amount of capital to support these activities.
Market risk management and control responsibilities
The Board Risk Committee has delegated responsibility for the oversight of market risk to the Asset & Liability Committee(“ALCO”), chaired by the Chief Executive Officer of ANZ New Zealand. ALCO are required to ensure that market risk
exposure across Traded and Non-Traded portfolios remains within the risk appetite specified by the Board Risk
Committee. ALCO receive regular reporting on a range of trading and balance sheet market risk exposures.
The Risk Management division of ANZ New Zealand, through the Chief Risk Officer, is responsible for the day-to-day
oversight of market risk. This includes the implementation of a comprehensive limit and policy framework to control theamount of risk that the Banking Group will accept. Market risk limits are allocated at various levels and are reported andmonitored on a daily basis. The detailed limit framework allocates individual limits to manage and control asset classes(e.g., interest rates, foreign exchange), risk factors (e.g., interest rates, volatilities) and profit and loss limits (to monitor
and manage the performance of the trading portfolios).
Additional oversight and monitoring of material risk exposures of ANZ New Zealand is undertaken by the Risk
Management functions of the Ultimate Parent Bank.
Within overall strategies and policies, the control of market risk is the joint responsibility of business units and Risk
Management, with the delegation of market risk limits from the Board Risk Committee to both Risk Management and thebusiness units.
These risks are monitored daily against a comprehensive limit framework that includes Value at Risk, aggregate market
position and sensitivity, product and geographic thresholds. To facilitate the management, control, measurements andreporting of market risk, ANZ New Zealand has grouped market risk into two broad categories:a.

Traded market riskThis is the risk of loss from changes in the value of financial instruments due to movements in price factors for both
physical and derivative trading positions. They arise in trading transactions where ANZ New Zealand acts as principalwith clients or with the market. The principal risk categories monitored are:•

Currency risk is the potential loss arising from the decline in the value of a financial instrument due to changes inforeign exchange rates or their implied volatilities.

•

Interest rate risk is the potential loss arising from the change in the value of a financial instrument due to changes
in market interest rates or their implied volatilities.

•

Credit spread risk is the potential loss arising from a change in value of an instrument due to a movement of its
margin or spread relative to a bench mark.

Australia and New Zealand Banking Group Limited - New Zealand Branch

48

Notes to the Financial Statementsb.

Non-traded market risk (or balance sheet risk)This comprises the management of non-traded interest rate risk, liquidity, and the risk to capital and earnings as aresult of movements in market rates.
Some instruments do not fall into either category but also expose ANZ New Zealand to market risk. These include
equity securities classified as available-for-sale. Regular reviews are performed to substantiate the valuation of thesetypes of instruments.

In all trading areas ANZ New Zealand has implemented models that calculate Value at Risk (“VaR”) exposures, monitor
risk exposures against defined limits on a daily basis, and “stress test” trading portfolios.
VaR measure
A key measure of market risk is VaR. VaR is a statistical estimate of the likely daily loss and is based on historical market
movements.
The confidence level is such that there is 97.5% or 99% probability that the loss will not exceed the VaR estimate on any
given day. Conversely there is a 2.5% or 1% probability of the decrease in market value exceeding the VaR estimate on
any given day. The 99% confidence level encompasses a wider range of potential outcomes.
ANZ New Zealand’s standard VaR approach for both traded and non-traded risk is historical simulation. ANZ New Zealandcalculates VaR using historical changes in market rates and prices over the previous 500 business days. Traded and NonTraded VaR is calculated using a one-day holding period.
It should be noted that because VaR is driven by actual historical observations, it is not an estimate of the maximum loss
that ANZ New Zealand could experience from an extreme market event. As a result of this limitation, ANZ New Zealandutilises a number of other risk measures (e.g. stress testing) and associated detailed control limits to measure andmanage market risk.
Traded market risks
ANZ New Zealand$ millions

30/09/2012
Foreign exchange
riskInterest rate risk
Credit spread risk
Diversification
benefit
Total VaR
30/09/2011
Foreign exchange
riskInterest rate risk

ANZ New Zealand

Value at risk at 97.5% confidenceHigh forLow for Average for

Value at risk at 99% confidenceHigh forLow for Average for

Period end

year

year

year

Period end

year

year

year

0.1

1.0

0.1

0.3

0.2

1.4

0.2

0.4

1.9
0.3

4.4
1.1

1.3
0.2

2.6
0.6

2.7
0.4

6.4
1.2

1.6
0.2

3.6
0.7

(0.4)

n/a

n/a

(0.9)

(0.7)

n/a

n/a

(1.2)

1.9

4.4

1.2

2.6

2.6

6.3

1.5

3.5

0.4
1.9

0.9
4.3

0.2
1.2

0.4
2.8

0.4
2.3

1.3
7.2

0.3
1.6

0.5
3.9

Credit spread risk
Diversification
benefit

0.8

1.0

0.3

0.6

0.9

1.1

0.4

0.7

(1.1)

n/a

n/a

(1.0)

(1.4)

n/a

n/a

(1.3)

Total VaR

2.0

4.4

1.4

2.8

2.2

6.7

1.8

3.8

Traded market risk VaR is calculated separately for foreign exchange and for interest rate/debt markets businesses as well
as for ANZ New Zealand. The diversification benefit reflects the historical correlation between foreign exchange, interest
rate and debt markets.
To supplement the VaR methodology, ANZ New Zealand applies a wide range of stress tests, both on individual portfolios
and at ANZ New Zealand level. ANZ New Zealand's stress-testing regime provides senior management with anassessment of the financial impact of identified extreme events on market risk exposures of ANZ New Zealand.
Non-traded market risk (or balance sheet risk)
The principal objectives of balance sheet management are to manage net interest income sensitivity while maintaining
acceptable levels of interest rate and liquidity risk and to manage the market value of ANZ New Zealand’s capital.
Liquidity risk is dealt with in the next section.

Australia and New Zealand Banking Group Limited - New Zealand Branch

49

Notes to the Financial Statements
Interest rate risk
The objective of balance sheet interest rate risk management is to mitigate the negative impact of movements inwholesale interest rates on the earnings of ANZ New Zealand's banking book. Non-traded interest rate risk relates to thepotential adverse impact to earnings from changes in market interest rates. This risk arises from two principal sources:
mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital and othernon-interest bearing liabilities in interest bearing assets.
As part of normal business activity ANZ New Zealand has additional risks from fixed rate mortgage prepayments and basis
risk:•

Prepayment risk is the potential risk to earnings or market value from when a customer prepays all or part of a fixed
rate mortgage and where any customer fee charged is not sufficient to offset the loss in value to ANZ New Zealand of
this financial asset due to movements in interest rates and other pricing factors. As far as possible the true economic
cost is passed through to customers in line with their terms and conditions and relevant legislation.

•

Basis risk is the potential risk to earnings or market value from differences between customer pricing and wholesalemarket pricing. This is managed through active review of product margins.

Non-traded interest rate risk is managed to both value and earnings at risk limits. Interest rate risk is reported using
three measures: VaR; scenario analysis (to a 1% shock); and interest rate sensitivity gap. This treatment excludes theeffect of prepayment and basis risk.
a.

Non-traded interest rate risk VaR
ANZ New ZealandHigh forLow for

Average for

Period end

year

year

year

8.7

10.9

7.3

8.8

7.9

13.5

7.3

9.3

$ millions

30/09/2012

Value at risk at 97.5% confidence
30/09/2011

Value at risk at 97.5% confidenceb.

Scenario analysis – A 1% shock on the next 12 months’ net interest income

A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest
income over the succeeding 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and comparative periods –expressed as a percentage of reported net interest income. The sign indicates the nature of the rate sensitivity with apositive number signifying that a rate increase is positive for net interest income over the next 12 months. Conversely, anegative number signifies that a rate increase is negative for the next 12 months’ net interest income.
ANZ New Zealand
30/09/2012

30/09/2011

Period end

1.0%

1.3%

Maximum exposure

2.3%

1.4%

Minimum exposure

0.8%

-0.1%

Average exposure (in absolute terms)

1.7%

0.7%

Impact of 1% rate shock

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities at any
point has implications for future net interest income. ANZ New Zealand quantifies the potential variation in future netinterest income as a result of these repricing mismatches each month using a static gap model.
The majority of ANZ New Zealand’s non-traded interest exposure exists in New Zealand. A separate balance sheet
simulation process supplements the static gap information. This allows the net interest income outcomes of a number ofdifferent scenarios, with different market interest rate environments and future balance sheet structures, to be identified.
This better enables ANZ New Zealand to quantify the interest rate risks associated with the balance sheet and toformulate strategies to manage current and future risk profiles.

Australia and New Zealand Banking Group Limited - New Zealand Branch

50

Notes to the Financial Statements
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about ANZ New Zealand's exposure to interest rate risk.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding
liability funding. These mismatches are managed within policy guidelines for mismatch positions.
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet
instruments by showing the periods in which these instruments may reprice (that is, when interest rates applicable toeach asset or liability can be changed).
The repricing gaps are based upon contractual repricing information except where the contractual terms are notconsidered to be reflective of actual interest rate sensitivity, for example, those assets and liabilities priced at ANZ New
Zealand’s discretion. In such cases, the rate sensitivity is based upon historically observed and/or anticipated ratesensitivity. This treatment excludes the effect of basis risk between customer pricing and wholesale market pricing.
ANZ New Zealand
30/09/2012

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

Total

3 months

monthsmonthsyears

2 years

interest

Liquid assets

2,831

2,626

-

-

-

-

205

Due from other financial institutions

1,760

1,691

-

-

-

-

69

Trading securities

12,338

1,465

161

3,042

1,121

6,549

-

Derivative financial instruments

12,709

-

-

-

-

-

12,709$ millions

AssetsAvailable-for-sale assets

57

46

5

3

-

-

3

Net loans and advances

96,09469,446

3,651

7,847

10,242

4,746

162

Other financial assets

655

104

11

27

-

-

513

Total financial assets

126,444

75,378

3,828

10,91911,363

11,295

13,661

Due to other financial institutions

11,012

10,347

-

-

-

154

511

Deposits and other borrowings

73,65247,398

11,939

6,694

1,641

1,142

4,838

Derivative financial instruments

14,085

-

-

-

-

-

14,085

Bonds and notes

18,188

6,311

-

2,495

1,152

8,230

-

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

1,168

-

333

835

-

-

-

Other financial liabilities

1,040

14

3

1

-

88

934

Total financial liabilities

120,91165,836

12,275

10,025

2,793

9,614

20,368

Hedging instruments

-

3,023

3,865

(10,360)

2,169

1,303

-

Interest sensitivity gap

5,533

12,565(4,582)(9,466)

10,7392,984(6,707)

Liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

51

Notes to the Financial Statements
ANZ New Zealand
30/09/2011

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

Total

3 months

monthsmonthsyears

2 years

interest

Liquid assets

2,455

2,266

-

-

-

-

189

Due from other financial institutions

4,577

3,929

-

-

-

-

648

Trading securities

9,466

2,684

18

496

2,218

4,050

-

Derivative financial instruments

15,769

-

-

-

-

-

15,769$ millions

AssetsAvailable-for-sale assets

411

94

72

122

-

-

123

Net loans and advances

93,61368,355

5,115

7,974

7,680

3,900

589

Other financial assets

868

66

4

7

14

6

771

Total financial assets

127,159

77,394

5,209

8,599

9,912

7,956

18,089Due to other financial institutions

13,722

13,249

-

-

-

62

411

Deposits and other borrowings

69,23846,510

11,227

4,427

1,080

1,517

4,477

Derivative financial instruments

15,122

-

-

-

-

-

15,122

Bonds and notes

18,472

6,960

-

2,110

4,348

5,054

-

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

1,988

-

250

903

835

-

-

Other financial liabilities

1,995

24

-

-

2

189

1,780

Total financial liabilities

122,303

68,50911,477

7,440

6,265

6,822

21,790Hedging instruments-(3,707)

6,748(4,850)

680

1,129

-

Interest sensitivity gap

4,856

5,178

480

(3,691)

4,327

2,263

(3,701)Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

Total

3 months

monthsmonthsyears

2 years

Due from other financial institutions

38

38

-

-

-

-

-

Derivative financial instruments

52

-

-

-

-

-

52

Net loans and advances

9,396

6,257

507

1,029

1,275

316

12

Due from related entities

304

-

-

-

-

-

304

9,790

6,295

507

1,029

1,275

316

368

Due to other financial institutions

9,273

9,273

-

-

-

-

-

Derivative financial instruments

222

-

-

-

-

-

222

Other financial liabilities

55

-

-

-

-

-

55

Total financial liabilities

9,550

9,273

-

-

-

-

277

Hedging instruments

-

1,713

999

(1,183)(1,219)(310)-

Interest sensitivity gap

240(1,265)

1,506

(154)

56

6

91

Liabilities

NZ Branch
30/09/2012$ millions

interest

AssetsTotal financial assets
Liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

52

Notes to the Financial Statements
NZ Branch
30/09/2011$ millions

Total

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

3 months

monthsmonthsyears

2 years

interest
172

AssetsDerivative financial instruments

172

-

-

-

-

-

Net loans and advances

9,931

6,203

762

1,297

1,243

387

39

Due from related entities

338

-

-

-

-

-

338

10,441

6,203

762

1,297

1,243

387

549

Total financial assets
Liabilities
Due to other financial institutions

10,011

10,011

-

-

-

-

-

Due to related entities

51

-

-

-

-

-

51

Derivative financial instruments

117

-

-

-

-

-

117

Other financial liabilities

71

-

-

-

-

-

71

Total financial liabilities

10,25010,011

-

-

-

-

239

Hedging instruments

-

3,263

(295)

(1,405)(1,167)(396)-

Interest sensitivity gap

191

(545)

467

(108)

76

(9)

310

Equity price risk
The portfolio of financial assets classified as available-for-sale contains equity investment holdings held for longer term
strategic intentions. These equity investments are also subject to market risk which is not captured by the VaR measures
for traded and non-traded market risks. The fair value of these securities as at 30 September 2012 was $3 million(30/09/2011 $122 million). A 10 per cent reduction in the value of the available-for-sale equity securities would not bematerial.
Foreign currency related risksThis risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes inforeign exchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk
arising from individual funding and other transactions is actively managed. The total amounts of unmatched foreign
currency assets and liabilities, and consequent foreign currency exposures arising from each class of financial asset andliability, whether recognised or unrecognised, within each currency are not material.
The net open position in each foreign currency represents the net on-balance sheet assets and liabilities in that foreign
currency aggregated with the net expected future cash flows from off-balance sheet purchases and sales from foreignexchange transactions in that foreign currency. The amounts are stated in New Zealand dollar equivalents translatedusing the spot exchange rates as at balance sheet date.
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Australian dollar

1

(3)

-

1

Euro

1

-

-

-

Japanese yen

1

-

-

-

Pound sterling

1

-

-

-

US dollar

1

2

-

-

Other

1

-

-

-

Total net open position

6

(1)

-

1

Net open position

Australia and New Zealand Banking Group Limited - New Zealand Branch

53

Notes to the Financial Statements
Liquidity risk
Liquidity risk is the risk that ANZ New Zealand is unable to meet its payment obligations as they fall due. The timing
mismatch of cash flows and the related liquidity risk is inherent in all banking operations and is closely monitored by ANZ
New Zealand.
ANZ New Zealand’s liquidity and funding risks are governed by a detailed policy framework which is approved by the Risk
Committees of the Bank’s and Ultimate Parent Bank’s Boards. The core objective of ANZ New Zealand’s framework is to
manage liquidity to meet obligations as they fall due, without incurring unacceptable losses.
Central to ANZ New Zealand’s liquidity risk management approach is the establishment of a liquidity risk appetite
framework to which ANZ New Zealand must conform at all times. The risk appetite for liquidity has been set as low, andthis objective is achieved by ANZ New Zealand managing liquidity risks within the boundaries of the following
requirements and principles:
•
•
•
•
•
•
•
•
•

Maintaining the ability to meet all payment obligations in the immediate term.
Ensuring the ability to meet “survival horizons” under a range of ANZ New Zealand specific and general market
liquidity stress scenarios.
Maintaining strength in ANZ New Zealand’s balance sheet structure to ensure long term resilience in ANZ New
Zealand’s liquidity and funding risk profile.
Limiting the potential earnings at risk associated with unexpected increases in funding costs or the liquidation ofassets under stress.
Ensuring the liquidity management framework is compatible with regulatory requirements.
Daily liquidity reporting and scenario analysis, quantifying ANZ New Zealand’s positions.
Targeting a diversified funding base, avoiding undue concentrations by investor type, maturity, market source andcurrency.
Holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-today operations.
Establishing detailed contingency plans to cover different liquidity crisis events.

Management of liquidity and funding risks are overseen by ALCO.
Supervision and Regulation
The RBNZ requires the Bank to have a comprehensive Board approved liquidity strategy defining: policy, systems andprocedures for measuring, assessing, reporting and managing domestic and foreign currency liquidity. This also includes
a formal contingency plan for dealing with a liquidity crisis. The Banking Group is required to meet one week and one
month liquidity mismatch ratios and a one year core funding ratio each day.
Scenario Modelling
A key component of ANZ New Zealand’s liquidity management framework is scenario modelling.
under different scenarios, including “going-concern”, “name-crisis” and various “survival horizons”.

Liquidity is assessed“Going-concern”: reflects the normal behaviour of cash flows in the ordinary course of business. ANZ New Zealandmust be able to meet all commitments and obligations under a going concern scenario, within ANZ New Zealand normal
funding capacity (‘available to fund’ limit), over at least the following 30 calendar days. In estimating the funding
requirement, ANZ New Zealand models expected cash flows by reference to historical behaviour and contractual maturity
data.
“Name-crisis”: refers to a potential name-specific liquidity crisis scenario which models the behaviour of cash flows
where there is a problem (real or perceived) which may include, but is not limited to, operational issues, doubts about thesolvency of ANZ New Zealand, or adverse rating changes. Under this scenario ANZ New Zealand may have significant
difficulty rolling over or replacing funding. Under the liquidity policy ANZ New Zealand must be cash flow positive over aneight calendar day period.
“Survival horizons”: The global financial crisis has highlighted the importance of differentiating between stressed andnormal market conditions in a name-specific crisis and the different behaviour that offshore and domestic wholesalefunding markets can exhibit during market stress events.
ANZ New Zealand has linked its liquidity risk appetite todefined liquidity “survival horizons” (i.e. the time period under which ANZ New Zealand must maintain a positive cash flow
position). The following stressed scenarios are modelled:••••

Extreme Short Term Crisis Scenario: A name-specific stress during a period of market stress.
Short Term Crisis Scenario: A name-specific stress during a period of normal markets conditions.
Global Funding Market Disruption: Stressed global wholesale funding markets leading to a closure of domestic andoffshore markets.
Offshore Funding Market Disruption: Stressed global wholesale funding markets leading to a closure of offshore
markets only.

As of 30 September 2012 ANZ New Zealand was in compliance with all of the above scenarios.

Australia and New Zealand Banking Group Limited - New Zealand Branch

54

Notes to the Financial Statements
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealandemploys funding metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including
customer liabilities, longer-dated wholesale debt (with remaining term exceeding one year) and equity. This approach
recognises that long-term wholesale debt and other sticky liabilities have favourable liquidity characteristics.
ANZ New Zealand$ millions

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

58,38355,044

-

-

7,668

6,950

-

-

66,051

61,994--

Funding composition
Customer deposits1
New ZealandOverseas
Total customer deposits
Wholesale funding
Bonds and notes

18,18818,472--

Loan capital

1,168

1,988

-

-

Certificates of deposit

2,156

2,454

-

-

Commercial paper

5,445

4,790

-

-

-

-

-

51

Due to related entities
Term funding

1,766

1,766

-

-

Due to other financial institutions

11,012

13,722

9,273

10,011

Total wholesale funding

39,73543,192

9,273

10,062

105,786

105,186

9,273

10,062

Households

42,761

40,595--Agriculture

2,259

2,240

-

-

488

504

-

-

1,595

2,464

-

-

585

668

-

-

48,45650,276

9,273

10,062Retail trade

718

690

-

-

Wholesale trade

975

873

-

-

3,616

3,281

-

-

Transport and storage

672

507

-

-

Construction

753

762

-

-

Government and local authority

1,754

1,347

-

-

Other2

1,154

979

-

-

105,786

105,186

9,273

10,062

New Zealand

64,17561,184-34

Australia

13,26815,667

9,189

9,936

United States-

Total funding
Concentrations of funding by industry

Forestry, fishing and mining
ManufacturingEntertainment, leisure and tourism
Finance and insurance

Business and property services

Total funding
Concentrations of funding by geography

313,231

14,635-

Europe

9,291

8,552

-

-

Other countries

5,821

5,148

84

92

105,786

105,186

9,273

10,062

Total funding
1
2
3

Represents term deposits, demand deposits bearing interest, deposits not bearing interest and secured debenture stock.
Other includes exposures to electricity, gas and water, communications and personal services.
Funding via ANZ New Zealand (Int’l) Limited is classified as either from the United States or Europe, as the company conducts overseas funding activities
through its London branch which is passed through to the Bank.

Analysis of funding liabilities by industry sector is based on Australian and New Zealand Standard Industrial Classification(“ANZSIC”) codes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

55

Notes to the Financial Statements
Wholesale funding
ANZ New Zealand’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds thatbalances cost efficiency while targeting diversification by markets, investors, currencies, maturities and funding
structures. Short-term wholesale funding requirements, with a contractual maturity of less than one year, are managed
through the Treasury and Markets operations. Long-term wholesale funding is managed and executed through Treasury
operations.
ANZ New Zealand also uses maturity concentration limits under the wholesale funding and liquidity management
framework. Maturity concentration limits ensure that ANZ New Zealand does not become reliant on issuing large volumesof new wholesale funding within a short time period. Funding instruments used to meet the wholesale borrowing
requirement must be on a pre-established list of approved products.
Funding capacity and debt issuance planning
ANZ New Zealand adopts a conservative approach to determine its funding capacity. Funding capacity limits are
determined at the Ultimate Parent Bank level and allocated to individual sites based on their requirements. Annually, afunding plan is approved by the Bank’s Board. The plan is supplemented by monthly updates and is linked to ANZ New
Zealand’s three year strategic planning cycle.
Liquidity portfolio management
ANZ New Zealand holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity risk
management. The size of ANZ New Zealand’s liquidity portfolio is based on the amount required to meet its liquidity
policy.
Total liquidity portfolio$ millions

Balances with central banks

ANZ New Zealand

NZ Branch

30/09/2012

30/09/2011

30/09/2012

30/09/2011

1,973

1,765

-

-

Securities purchased under agreement to resell

105

992

-

-

Certificates of deposit

100

1,562

-

-

8,220

4,329

-

-

17

169

-

-

3,768

3,269

-

-

14,18312,086--

Government, local body stock and bonds
Government treasury bills
Other bonds
Total liquidity portfolio

Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand Government securities,
securities issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned
Enterprises, Local Authorities and highly rated NZ domestic corporates. These assets would be accepted as collateral by
the RBNZ in repurchase transactions. At 30 September 2012 ANZ New Zealand would be eligible to enter into repurchasetransactions with a value of $13,770 million. The Banking Group also held unencumbered internal residential mortgage
backed securities (“RMBS”) which would entitle ANZ New Zealand to enter into repurchase transactions with a value of$3,735 million at 30 September 2012 (the RBNZ has imposed a cap limiting the amount of RMBS deemed as eligible in theliquidity portfolio to 4% of total assets).
Liquidity crisis contingency planning
ANZ New Zealand maintains liquidity crisis contingency plans defining an approach for analysing and responding to aliquidity-threatening event on a group wide basis. The framework includes:
•
•
•
•
•
•
•

the establishment of crisis severity/stress levels;
clearly assigned crisis roles and responsibilities;
early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;
outlined action plans, and courses of action for altering asset and liability behaviour;
procedures for crisis management reporting, and covering cash-flow shortfalls;
guidelines determining the priority of customer relationships in the event of liquidity problems; andassigned responsibilities for internal and external communications.

Australia and New Zealand Banking Group Limited - New Zealand Branch

56

Notes to the Financial Statements
Contractual maturity analysis of financial assets and liabilities
The following tables present ANZ New Zealand's financial assets and liabilities within relevant contractual maturity
groupings, based on the earliest date on which the NZ Branch or ANZ New Zealand may be required to realise an asset or
settle a liability. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows andmay differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using
the earliest date at which ANZ New Zealand or the NZ Branch can be called upon to pay. The liquidity risk of credit
related commitments and contingent liabilities may be less than the contract amount, and does not necessarily represent
future cash requirements as many of these facilities are expected to be only partially used or to expire unused.
ANZ New Zealand does not manage its liquidity risk on this basis.
ANZ New Zealand$ millions

Less than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedTotal

At callLiquid assets

2,834

2,506

328

-

-

-

-

Due from other financial institutions

1,761

177

1,584

-

-

-

-

Trading securities

13,353

-

152

3,667

6,969

2,565

-

Derivative financial assets (trading)

11,304-

11,304----

Available-for-sale assets

65

-

1

13

48

-

3

Net loans and advances

30/09/2012

Financial assets

133,338-

15,18017,852

39,77460,532-Other financial assets

298

-

220

76

2

-

-

Total financial assets

162,953

2,683

28,76921,60846,79363,097

3

Financial liabilities
Due to other financial institutions

11,976

932

1,296

2,101

7,458

189

-

Deposits and other borrowings
Derivative financial liabilities(trading)

74,97730,272

22,682

18,840

3,183

-

-

13,104-

13,104----

Bonds and notes

19,403

-

1,648

2,908

12,687

2,160-

Term funding

1,840

-

18

1,822

-

-

-

Loan capital

1,829

-

24

71

472

94

1,168

Other financial liabilities

497

-

374

10

65

48

-

Total financial liabilities

123,626

31,204

39,14625,752

23,865

2,491

1,168

39,327(28,521)(10,377)(4,144)22,92860,606(1,165)

Net financial assets / (liabilities)

Derivative financial instruments used for balance sheet management- gross inflows

26,499

-

2,037

5,665

17,182

1,615-- gross outflows(25,671)-(1,929)(5,364)(16,773)(1,605)-40,155(28,521)(10,269)(3,843)23,33760,616(1,165)

Net financial assets / (liabilities)
after balance sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New ZealandLess than

Beyond30/09/2012

Total

1 year

1 yearNon-credit related commitments

355

124

231

25,29325,293

-

1,805

1,805

-

27,45327,222

231$ millions

Credit related commitments
Contingent liabilities
Total

Australia and New Zealand Banking Group Limited - New Zealand Branch

57

Notes to the Financial Statements
ANZ New Zealand$ millions

Less than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedTotal

At callLiquid assets

2,455

2,455

-

-

-

-

-

Due from other financial institutions

4,585

972

3,613

-

-

-

-

Trading securities

10,220

-

1,797

851

6,984

588

-

Derivative financial assets (trading)

13,901-

13,901----

Available-for-sale assets

418

-

73

201

-

21

123

Net loans and advances

30/09/2011

Financial assets

130,422-

10,473

22,11634,39263,441-Other financial assets

525

-

494

11

14

6

-

Total financial assets

162,526

3,427

30,351

23,17941,39064,056123

Financial liabilities
Due to other financial institutions

15,024

726

3,887

2,074

8,275

62

-

Deposits and other borrowings
Derivative financial liabilities(trading)

70,611

26,34024,483

16,785

2,887

116

-

13,518-13,518----

Bonds and notes

19,663

-

1,450

3,751

14,139323-

Term funding

1,841

-

19

1,822

-

-

-

Loan capital

3,135

-

40

120

797

1,005

1,173

Other financial liabilities

1,345

-

1,104

6

198

37

-

Total financial liabilities

125,137

27,06644,501

24,55826,296

1,543

1,173

Net financial assets / (liabilities)

37,389(23,639)(14,150)(1,379)15,09462,513(1,050)Derivative financial instruments used for balance sheet management- gross inflows

30,523

-

3,596

7,375

19,48270-- gross outflows(29,602)-(3,781)(7,223)(18,521)(77)-

Net financial assets / (liabilities)
after balance sheet management

38,310(23,639)(14,335)(1,227)

16,05562,506(1,050)Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New ZealandLess than

Beyond30/09/2011

Total

1 year

1 yearNon-credit related commitments

257

93

164

Credit related commitments

22,891

22,891-

Contingent liabilities

2,805

2,805

-

Total

25,95325,789164$ millions

Australia and New Zealand Banking Group Limited - New Zealand Branch

58

Notes to the Financial Statements
NZ Branch$ millions
30/09/2012

Total

At callLess than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedFinancial assets
Due from other financial institutions

38

-

38

-

-

-

-

Net loans and advances

16,021

-

361

667

3,517

11,476-Due from related entities

304

-

304

-

-

-

-

16,363

-

703

667

3,517

11,476-

Total financial assets
Financial liabilities
Due to other financial institutions

10,205

-

688

2,096

7,421

-

-

Other financial liabilities

55

-

55

-

-

-

-

Total financial liabilities

10,260

-

743

2,096

7,421

-

-

6,103

-

(40)

(1,429)(3,904)

11,476-

Net financial assets / (liabilities)

Derivative financial instruments used for balance sheet management- gross inflows

9,944

-

831

1,989

7,124

-

-

- gross outflows(9,916)-(824)(1,951)(7,141)

-

-

6,131

-

(33)

(1,391)(3,921)

11,476-

Net financial assets / (liabilities)
after balance sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
Bank$ millions

Less than

Beyond30/09/2012

Total

1 year

1 yearCredit related commitments

103

103

-

Total

103

103

-

NZ Branch$ millions

Less than

3 to 12

Beyond No maturity

months 1 to 5 years

5 years

specifiedTotal

At call

3 months

Net loans and advances

17,762

-

375

507

2,472

14,408-Due from related entities

338

-

338

-

-

-

-

18,100

-

713

507

2,472

14,408-30/09/2011

Financial assets

Total financial assets
Financial liabilities
Due to other financial institutions

11,384

-

1,118

2,065

8,201

-

-

Due to related entities

51

-

51

-

-

-

-

Total financial liabilities

11,435

-

1,169

2,065

8,201

-

-

Net financial assets / (liabilities)

6,665

-

(456)

(1,558)(5,729)14,408-Derivative financial instruments used for balance sheet management- gross inflows

11,174

-

1,025

2,048

8,101

-

-

- gross outflows(10,743)-(982)(1,938)(7,823)

-

-

7,096

-

(413)

(1,448)(5,451)

14,408-

Net financial assets / (liabilities)
after balance sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
NZ BranchLess than

BeyondTotal

1 year

1 yearCredit related commitments

88

88

-

Total

88

88

-

$ millions
30/09/2011

Australia and New Zealand Banking Group Limited - New Zealand Branch59

Notes to the Financial Statements
31. Financial Assets Pledged as Collateral
ANZ New Zealand$ millions

Cash collateral given on derivative financial instruments

Note

9

Trading securities encumbered through repurchase agreements
Residential mortgages pledged as security for covered bonds
Total tangible assets of UDC Finance Limited pledged ascollateral for secured stock
Total financial assets pledged as collateral37

30/09/2012

NZ Branch

30/09/2011

30/09/2012

30/09/2011

1,256

944

-

-

252

1,219

-

-

4,977

-

-

-

2,103

2,007

-

-

8,588

4,170

-

-

Registered secured debenture stock is constituted and secured by a trust deed between UDC Finance Limited and its
independent trustee, Trustees Executors Limited. The trust deed creates floating charges over all the assets, primarilyloans and advances, of UDC Finance Limited.

32. Concentrations of Credit Risk to Individual Counterparties
ANZ New Zealand measures its concentration of credit risk in respect to bank counterparties on the basis of approved
exposures and in respect to non-bank counterparties on the basis of limits.
For the three month period ended 30 September 2012 there were no individual counterparties (excluding connectedparties, governments and banks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or
peak end-of-day credit exposure equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of theperiod).
This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

60

Notes to the Financial Statements
33. Fair Value of Financial Assets and Financial Liabilities
ANZ New Zealand$ millions

At amortised
cost

Carrying amountAt fair value through profit or
loss
Designated on
initialHeld forrecognition
trading

Hedging

Available-forsale assets

Total

Fair value

30/09/2012
Liquid assets

2,831

-

-

-

-

2,831

Due from other financial institutions

1,660

-

-

-

100

1,760

2,831
1,760

Trading securities--

12,338--12,33812,338Derivative financial instruments1--

12,173536-

12,70912,709Available-for-sale assets

-

-

-

-

57

57

57

Net loans and advances2

96,094----96,09496,279Other financial assets

513

142

-

-

-

655

655

Total financial assets

101,098

142

24,511

536

157

126,444

126,629

Due to other financial institutions

11,012----

11,012

11,184

Deposits and other borrowings

68,207

5,445

-

-

-

73,65273,744--

13,819266-

14,085

14,08518,188----18,18818,447

Term funding

1,766

-

-

-

-

1,766

1,766

Loan capital

1,168

-

-

-

-

1,168

1,030

Other financial liabilities

1,040

-

-

-

-

1,040

1,040

Total financial liabilities

101,381

5,445

13,819266-

120,911

121,296

Liquid assets

2,455

-

-

-

-

2,455

2,455

Due from other financial institutions

3,015

-

-

-

1,562

4,577

4,577

Trading securities

-

-

9,466

-

-

9,466

9,466

Derivative financial instruments1--

15,109660-

15,76915,769Available-for-sale assets

-

-

-

-

411

411

411

Net loans and advances2

93,613----

93,61393,762Other financial assets

771

97

-

-

-

868

868

Total financial assets

99,85497

24,575660

1,973

127,159

127,308

Due to other financial institutions

13,722----

13,722

13,928Deposits and other borrowings

64,448

4,790

-

-

-

69,23869,343--

14,661

461-

15,122

15,122

Bonds and notes2

18,472----

18,472

18,344

Term funding

1,766

-

-

-

-

1,766

1,766

Loan capital

1,988

-

-

-

-

1,988

1,922

Other financial liabilities

1,995

-

-

-

-

1,995

1,995

Total financial liabilities

102,391

4,790

14,661

461-

122,303

122,420

Derivative financial instruments1
Bonds and notes2

30/09/2011

Derivative financial instruments1

Australia and New Zealand Banking Group Limited - New Zealand Branch

61

Notes to the Financial Statements
NZ Branch$ millions

At amortised
cost

Carrying amountAt fair value throughprofit or loss
Designatedon initial
Held forrecognition
trading

Availablefor-saleHedging
assets

Total

Fair Value

38

30/09/2012
Due from other financial institutions

38

-

-

-

-

38

-

-

52

-

-

52

52

Net loans and advances2

9,396

-

-

-

-

9,396

9,408

Due from related entities

304

-

-

-

-

304

304

Total financial assets

9,738

-

52

-

-

9,790

9,802

Due to other financial institutions

9,273

-

-

-

-

9,273

9,445

Derivative financial instruments1

-

-

187

35

-

222

222

Other financial liabilities

55

-

-

-

-

55

55

Total financial liabilities

9,328

-

187

35

-

9,550

9,722

Derivative financial instruments1

30/09/2011
Derivative financial instruments1

-

-

172

-

-

172

172

Net loans and advances2

9,931

-

-

-

-

9,931

9,938

Due from related entities

338

-

-

-

-

338

338

Total financial assets

10,269

-

172

-

-

10,441

10,448Due to other financial institutions

10,011----

10,011

10,217

51

-

-

-

-

51

51

-

-

58

59

-

117

117

Other financial liabilities

71

-

-

-

-

71

71

Total financial liabilities

10,133

-

58

59

-

10,25010,456

Due to related entities
Derivative financial instruments1

1

2

Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting
hedges.
Fair value hedging is applied to certain financial assets within loans and advances and certain financial liabilities within bonds and notes. The resulting fair value
adjustment means that the carrying value differs from the amortised cost.

Australia and New Zealand Banking Group Limited - New Zealand Branch

62

Notes to the Financial Statements
Estimation of fair value
Liquid assets, due from / to other financial institutions and balances with related parties
Where these financial instruments are short-term in nature, defined as those that reprice or mature in 90 days or less, or
are receivable on demand, the carrying values are considered to approximate the fair values. When longer term innature, fair value is based on quoted market prices, or for those debt issues where quoted market prices are notavailable, a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of that debt
instrument.
Trading securities, derivative financial instruments and available for sale assets
Fair value is based on quoted market prices, or broker or dealer price quotations. If this information is not available, fairvalue is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics, ormarket accepted valuation models as appropriate (including discounted cash flow models) based on current market yields
for similar types of instruments and the maturity of each instrument.
Net loans and advances
Fair value has been estimated through discounting future cash flows. For fixed rate loans and advances, the discount rateapplied incorporates changes in wholesale market rates, ANZ New Zealand’s cost of wholesale funding and movements incustomer margin. For floating rate loans, only changes in wholesale market rates and ANZ New Zealand’s cost ofwholesale funding are incorporated in the discount rate. For variable rate loans where ANZ New Zealand sets theapplicable rate at its discretion, the carrying value is considered to approximate the fair value.
Other financial assets / liabilities
Included in this category are accrued interest and fees receivable / payable. For these balances the carrying value isconsidered to approximate the fair values, as they are short term in nature or are receivable / payable on demand.
Deposits and other borrowings
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates
of interest for debt with a similar maturity are used to discount contractual cash flows. The fair value of a deposit liability
without a specified maturity or at call is deemed to be the amount payable on demand at the reporting date. The fairvalue is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
Certain items included in deposits and other borrowings have been designated as financial liabilities at fair value throughprofit or loss and are carried at fair value.
Bonds and notes and loan capital
The aggregate fair value of bonds and notes and loan capital is calculated based on quoted market prices. For those debt
issues where quoted market prices are not available, a discounted cash flow model using a yield curve appropriate for theremaining term to maturity of the debt instrument is used.

Valuation hierarchy
In determining the carrying amount of financial instruments held at fair value ANZ New Zealand uses a valuation method
within the following hierarchy:“Level 1” - Quoted market price
Where an active market exists fair value is based on quoted market prices for identical financial instruments. The quoted
market price is not adjusted for any potential impact that may be attributed to a large holding of the financial instrument.
“Level 2” - Valuation technique using observable inputs
In the event that there is no quoted market price for the instruments, fair values are based on present value estimates orother market accepted valuation techniques which include data from observable markets wherever possible.
“Level 3” - Valuation technique with significant non observable inputs
The majority of valuation techniques employ only observable market data. However, ANZ New Zealand holds someinvestments in unlisted funds or other investments which do not trade in an active market. For these instruments the fairvalue cannot be determined in whole with reference to current market transactions or valuation techniques whose
variables only include data from observable markets. Where observable market data is not available, the fair value isdetermined using broker quotes or valuation techniques, including discounted cash flow analysis, using data derived andextrapolated from market data and tested against historic transactions and observed market trends.

Australia and New Zealand Banking Group Limited - New Zealand Branch

63

Notes to the Financial Statements
Valuation technique$millions

ANZ New Zealand
Level 1NZ Branch

Level 2

Level 3

Total

Level 1

Level 2

Level 3Total-

30/09/2012
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Other financial assets
Total financial assets held at fair
value

-

100

-

100

-

-

-

7,599

4,739

-

12,338

-

-

-

-

2

12,707-

12,709

-

52

-

52

13

42

2

57

-

-

-

-

3

138

1

142

-

-

-

-

7,617

17,726

3

25,346

-

52

-

52

Deposits and other borrowings

-

5,445

-

5,445

-

-

-

-

Derivative financial instruments

4

14,081-

14,085

-

222

-

222

Total financial liabilities held at fair
value

4

19,526-

19,530

-

222

-

222

-

30/09/2011
Due from other financial institutions

-

1,562

-

1,562

-

-

-

5,565

3,901

-

9,466

-

-

-

-

Derivative financial instruments

18

15,7501

15,769

-

172

-

172

Available-for-sale assets

334

72

5

411

-

-

-

-

Other financial assets

27

70

-

97

-

-

-

-

5,944

21,355

6

27,305

-

172

-

172

Trading securities

Total financial assets held at fairvalue
Deposits and other borrowings

-

4,790

-

4,790

-

-

-

-

Derivative financial instruments

18

15,104-

15,122

-

117

-

117

Total financial liabilities held at fair
value

18

19,894-

19,912

-

117

-

117

Movements in level 3 valuations
ANZ New Zealand$ millions

30/09/2012

NZ Branch

30/09/2011

30/09/2012

30/09/2011

Opening balance

6

119

-

-

Purchases

-

11

-

-

Revaluations

(3)

38

-

-

Foreign exchange movements

-

4

-

-

Sales

-

(166)

-

-

Closing balance

3

6

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

64

Notes to the Financial Statements
34. Notes to the Cash Flow Statements
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2012

30/09/2011

30/09/2012

30/09/2011

1,265

1,085

50

44

Reconciliation of profit after income tax to net cash flows
provided by / (used in) operating activities
Profit after income tax
Non-cash items:
Depreciation and amortisation

89

74

-

-

Provision for credit impairment

202

190

9

13

Deferred fee revenue and expenses

14

4

-

-

Amortisation of capitalised brokerage / mortgage origination fees

32

42

7

9

Amortisation of premiums and discounts
Fair value gains and losses
Loss on disposal and impairment of premises and equipment andintangibles
Deferrals or accruals of past or future operating cash receipts or
payments:
Change in net operating assets less liabilities

235

109

-

-

(178)

(165)

20

33

13

49

-

-

(76)

(2,556)911(31)

Change in interest receivable

(13)

48

-

-

Change in interest payable

(63)

(16)

(16)

4

Change in accrued income

(3)

3

-

-

Change in accrued expenses

4

(56)

-

(1)
-

Change in provisions

20

(6)

-

(101)

(62)

-

-

Change in other receivables and payables

(9)

58

-

1

Change in net income tax assets / liabilities

11

213

(1)

(27)

(4)

(5)

-

-

(1,042)

2,476

38

-

30/09/2012

30/09/2011

30/09/2012

30/09/2011

2,831

2,455

-

-

462

3,027

38

-

3,293

5,482

38

-

30/09/2012

30/09/2011

30/09/2012

30/09/2011

Not later than 1 year

43

13

-

-

Total capital expenditure commitments

43

13

-

-

Change in insurance policy assets

Items classified as investing / financing:
Gain on disposal of interests in associates
Net cash flows provided by / (used in) operating activities

ANZ New Zealand$ millions

NZ Branch

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

35. Commitments
ANZ New Zealand$ millions

NZ Branch

Contracts for outstanding capital expenditure

Future minimum lease payments under non-cancellable operating leases
Not later than 1 year

81

80

-

-

139

135

-

-

92

29

-

-

Total lease rental commitments

312

244

-

-

Total commitments

355

257

-

-

Later than 1 year but not later than 5 years
Later than 5 years

Australia and New Zealand Banking Group Limited - New Zealand Branch

65

Notes to the Financial Statements
36. Credit Related Commitments, Guarantees and Contingent Liabilities$ millions

ANZ New Zealand

NZ Branch

Face or contract value

Face or contract value

30/09/2012

30/09/2012

30/09/2011

30/09/2011

Credit related commitments
Commitments with certain drawdown due within one year

742

527

-

-

Commitments to provide financial services

24,551

22,364103

88

Total credit related commitments

25,29322,891

103

88

731

1,753

-

-

44

60

-

-

Transaction related contingent items

913

882

-

-

Trade related contingent liabilities

117

110

-

-

1,805

2,805

-

-

Guarantees and contingent liabilities
Financial guarantees
Standby letters of credit

Total guarantees and contingent liabilities

ANZ New Zealand 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 inextending loan facilities to customers, therefore these transactions are subjected to the same credit origination, portfolio
management and collateral requirements for customers applying for loans. As the facilities may expire without being
drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
ANZ New Zealand has other contingent liabilities in respect of actual and possible claims and court proceedings. An
assessment of ANZ New Zealand’s likely loss in respect of these matters has been made on a case-by-case basis andprovision made where deemed necessary.

37. Securitisation, Funds Management, Other Fiduciary Activities and Insurance
Kingfisher NZ Trust 2008-1 (“the Kingfisher Trust”)
ANZ New Zealand has established the Kingfisher Trust as an in-house residential mortgage backed securities facility that
can issue securities meeting the RBNZ criteria to use as collateral in repurchase transactions with the RBNZ.
These assets do not qualify for derecognition as the Bank retains substantially all of the risks and rewards of thetransferred assets.
As at 30 September 2012 and 30 September 2011 ANZ New Zealand had not entered into any repurchase agreementswith the RBNZ for residential mortgage backed securities and therefore no collateral had been accepted by the RBNZ
under this facility.
ANZNZ Covered Bond Trust (“the Covered Bond Trust”)
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 ANZNZ Covered Bond Trust Limited 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 the Bank, although the
Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (ifany) after all prior ranking creditors of the Covered Bond Trust have been satisfied.
ANZ New Zealand continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they arepledged as security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.
The Bank has purchased securities issued by both the Kingfisher Trust and the Covered Bond Trust in exchange for thetransfer of the rights to the cash flows associated with the identified residential mortgages. As at 30 September 2012,$10,079 million of assets were held in the Kingfisher Trust and the Covered Bond Trust (30/09/2011 $9,458 million).

Australia and New Zealand Banking Group Limited - New Zealand Branch

66

Notes to the Financial Statements
Funds management
Certain entities that form part of ANZ New Zealand act as trustee and/or manager for a number of unit trusts andinvestment and superannuation funds. ANZ New Zealand provides private banking services to a number of clients,
including investment advice and portfolio management. ANZ New Zealand is not responsible for any decline inperformance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by ANZ New Zealand, they are not included in these financial statements.
ANZ New Zealand derives fee and commission income from the sale and management of investment funds andsuperannuation bonds, unit trusts and the provision of private banking services to a number of clients. ANZ New Zealandderives commission income from the sale of third party funds management products.
Some funds under management are invested in products owned or securities issued by ANZ New Zealand and arerecorded as liabilities in the balance sheet. At 30 September 2012, $3,114 million of funds under management were
invested in ANZ New Zealand's own products or securities (30/09/2011 $2,832 million).
Aggregate value of funds managed by ANZ New Zealand
ANZ New Zealand$ millions

30/09/2012

30/09/2011

Funds managed by OnePath

7,324

6,709

The Bonus Bonds Trust

3,188

2,996

Other discretionary funds

5,173

5,016

15,685

14,721

Total funds under management

Custodial services
ANZ New Zealand provides custodial services to customers in respect of assets that are beneficially owned by thosecustomers.
Provision of financial services
Financial services provided by ANZ New Zealand to entities which are involved in trust, custodial, funds management andother fiduciary activities, and to affiliated insurance companies which conduct marketing or distribution of insurance
products, or on whose behalf the marketing or distribution of insurance products are conducted, are provided on arm’s
length terms and conditions and at fair value. Any assets purchased from such entities have been purchased on an arm’s
length basis and at fair value.
Except for standard lending facilities provided in the normal course of business on arm’s length terms, ANZ New Zealandhas not provided any funding to entities which conduct any of the following activities: trust, custodial, funds management
or other fiduciary activities established, marketed and/or sponsored by a member of ANZ New Zealand (30/09/2011 $nil).
Insurance business
ANZ New Zealand conducts an insurance business through OnePath Insurance Holdings (NZ) Limited and its subsidiaries(“OnePath Insurance”), the assets, liabilities and operations of which are fully consolidated into ANZ New Zealand.
OnePath Insurance provides risk transfer and investment contract life insurance products. In addition, other entities
within ANZ New Zealand market and distribute a range of insurance products which are underwritten by OnePath
Insurance, or by third party insurance companies.
The aggregate insurance business conducted by OnePath Insurance comprises assets totalling $564 million (30/09/2011:$438 million), which is 0.4% (30/09/2011: 0.3%) of the total consolidated assets of ANZ New Zealand.
Risk management
The Bank and entities that form part of ANZ New Zealand participating in the activities identified above have in placepolicies and procedures to ensure that those activities are conducted in an appropriate manner. Should adverse
conditions arise, it is considered that these policies and procedures will minimise the possibility that these conditions will
adversely impact the Bank or ANZ New Zealand. The policies and procedures include comprehensive and prominent
disclosure of information regarding products, and formal and regular review of operations and policies by management.

Australia and New Zealand Banking Group Limited - New Zealand Branch

67

Notes to the Financial Statements
38. Additional Disclosures
Overseas Banking Group profitability and size
AUD millions

30/09/2012

Net profit after tax for the year1

5,667

Net profit after tax for the year as a percentage of average total assets

0.91%

Total assets
Percentage change in total assets over the preceding year1642,127
6.3%

Net profit after tax for the year includes $6m of profit attributable to non-controlling interests.

Overseas Banking Group asset quality
AUD millions

30/09/2012

Gross impaired assets

5,196

Gross impaired assets as a percentage of total assets

0.81%

Total individually assessed provisions for impairment

1,773

Individually assessed provisions for impairment as a percentage of gross impaired assets

34.1%

Collective provision for credit impairment

2,765

Australia and New Zealand Banking Group Limited - New Zealand Branch

68

Directorate and Auditors
Any document or communication may be sent to any
Director or the Chief Executive Officer – NZ Branch at
the Registered Office. The document or communication
should be marked for the attention of that Director or
the Chief Executive Officer.
Directors’ Interests
The Board of the Ultimate Parent Bank has adopted
procedures to ensure that conflicts and potential
conflicts of interest between a Director’s duties to the
Ultimate Parent Bank and their own interests are
avoided or dealt with. Pursuant to these procedures:a.

b.

each Director should disclose to all Directors any
material personal interest they have in any matter
which relates to the affairs of the Ultimate Parent
Bank and any other interest which the Director
believes is appropriate to disclose in order to avoid
an actual conflict of interest or the perception of aconflict of interest. This disclosure should be madeas soon as practicable after the Director becomesaware of their interest or the need to make adisclosure; anda Director who has an interest of the type referred
to in a. above in a matter that is to be considered at
a Directors' meeting, must not vote on the matternor be present while the matter is considered at themeeting, unless a majority of Directors who do nothave such an interest in the matter agree that theinterest should not disqualify such Director frombeing present while the matter is being considered
and from voting on the matter. The minutes of themeeting should record the decision taken by the
Directors who do not have an interest in the matter.

In addition, Standing Notices about Interests aremaintained for each Director. If the Director's interestschange, the Director shall disclose the change as soon
as practicable and an updated Standing Notice shall betabled at the next Board meeting and recorded in theminutes of that meeting.
Transactions with Directors
Executive Officer, NZ Branch

and

the

Chief

There are no transactions entered into by any Director,
the Chief Executive Officer – NZ Branch, or any
immediate relative or close business associate of any
Director or the Chief Executive Officer – NZ Branch, withany part of ANZ New Zealand which has been either
entered into on terms other than those which would in
the ordinary course of business be given to any otherperson of like circumstances or means or which could
otherwise be reasonably likely to influence materiallythe exercise of the Directors' or Chief Executive Officer –NZ Branch duties in respect of the NZ Branch and ANZ
New Zealand.

Board Members as at 27 November 2012
The names, qualifications, occupation, country ofresidence and material external directorships of eachdirector of the Ultimate Parent Bank as at the date thisDisclosure Statement was signed were:

ChairmanJohn Powell Morschel
DipQS, FAICD
Company Director
Sydney, Australia
Mr Morschel is an ex-officio member of all Board
Committees.
External Directorships: CapitaLand Limited and Tenix
Group Pty Limited.

Chief Executive Officer – Australia and New
Zealand Banking Group Limited
Michael Roger Pearson Smith, OBE
BSc (Hons)
Chief Executive Officer and Executive Director
Melbourne, Australia
External Directorships
Chairman: Australian Bankers’ Association
Incorporated.
Director: The Financial Markets Foundation forChildren, Financial Literacy Australia Limited, The
International Monetary Conference and The Institute ofInternational Finance.
Member: Chongqing Mayor's International Economic
Advisory Council, Asia Business Council, AustralianGovernment Financial Literacy Advisory Board, Shanghai
International Financial Advisory Council, and theBusiness Council of Australia.
Fellow: The Hong Kong Management Association.

Non-Executive Directors
Dr Gregory John Clark
BSc (Hons), PhD, FAPS, FTSE
Company Director
Based in New York, United States of America and also
resides in Sydney, Australia
Dr Clark is Chair of the Technology Committee and amember of the Risk Committee and Human Resources
Committee.
External Directorships
Chairman: KaComm Communications Pty Limited.
Member: The Royal Institution of Australia.
Paula Jane Dwyer
BCom, FCA, F Fin, FAICD
Company Director
Melbourne, Australia
Ms Dwyer is a member of the Audit Committee, Risk
Committee and Human Resources Committee.
External Directorships
Chairman: Tabcorp Holdings Limited
Deputy Chairman: Baker IDI Heart and Diabetes
Institute.
Director: Leighton Holdings Limited and Lion Pty Ltd.
Member: Australian Government Takeovers Panel.

Australia and New Zealand Banking Group Limited - New Zealand Branch

69

Directorate and Auditors
Peter Algernon Franc Hay

Alison Mary Watkins

LLB (Melb), FAICD
Company Director
Melbourne, Australia

BCom, FCA, F Fin, FAICD
Chief Executive Officer and Managing Director –GrainCorp Limited.
Melbourne, Australia

Mr Hay is Chair of the Governance Committee and amember of the Audit Committee and Human Resources
Committee.
External Directorships
Chairman: Lazard Pty Ltd Advisory Board.
Director: Alumina Limited, Landcare Australia Limited,
GUD Holdings Limited and Myer Holdings Limited.
Member: Australian Government Takeovers Panel.
Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is a member of the Human Resources
Committee, Risk Committee and Technology Committee.
External Directorships
Chairman: Fraser & Neave, Limited, The Islamic Bankof Asia Limited, Asia Pacific Investments Pte Ltd, andCivil Aviation Authority of Singapore.
Director: Singapore Exchange Limited and Kwa Geok
Choo Pte Ltd.
Member: Governing Board of Lee Kuan Yew School of
Public Policy and Rolls Royce International Advisory
Council.
Consultant: Capital International Inc Advisory Board.
Ian John Macfarlane, AC
BEc (Hons), MEc, Hon DSc (Syd), Hon DSc (UNSW), Hon
DCom (Melb), Hon DLitt (Macq), Hon LLD (Monash)
Company Director
Sydney, Australia
Mr Macfarlane is Chair of the Risk Committee and amember of the Governance Committee and Audit
Committee.
External Directorships
Director: Woolworths Limited, Leighton Holdings
Limited, and the Lowy Institute for International Policy.
Member: Council of International Advisors to the China
Banking Regulatory Commission, International Advisory
Board of Goldman Sachs JB Were, and International
Advisory Board of CHAMP Private Equity.
David Edward Meiklejohn, AM
BCom, Dip Ed, FCPA, FAICD, FAIM
Company Director
Melbourne, Australia
Mr Meiklejohn is Chair of the Audit Committee and amember of the Technology Committee and Risk
Committee.
External Directorships
Chairman: Manningham Centre Association Board ofGovernance.
Director: Coca Cola Amatil Limited and Mirrabooka
Investments Limited.

Ms Watkins is Chair of the Human Resources Committee
and a member of the Audit Committee and GovernanceCommittee.
External Directorships
Chairman: Allied Mills Australia Pty Limited.
Member: Australian Government Takeovers Panel.

Chief Executive Officer, Australia and New
Zealand Banking Group – New Zealand
BranchAnthony John Bradshaw
BCA, CA
Chief Executive Officer– NZ Branch
Wellington, New ZealandAuditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

70

Conditions of Registration
Conditions of Registration, applicable as at 30
September 2012. These Conditions of Registration
have applied from 30 September 2011.
The registration of Australia and New Zealand Banking
Group Limited (the registered bank) in New Zealand issubject to the following conditions:
1.

2.

That Australia and New Zealand Banking Group
Limited complies with the requirements imposed on it
by the Australian Prudential Regulation Authority.

6.

That Australia and New Zealand Banking Group
Limited complies with the following minimum capital
adequacy requirements, as administered by theAustralian Prudential Regulation Authority:

In this condition of registration, the meaning of“material” is based on generally accepted accounting
practice.

a)tier one capital of the Australia and New Zealand
Banking Group Limited is not less than 4 percent
of risk weighted exposures;That the banking group’s insurance business is not
greater than 1% of its total consolidated assets.

b)capital of Australia and New Zealand Banking
Group Limited is not less than 8 percent of risk
weighted exposures.

a)b)

If the entity conducts insurance business and its
business does not predominantly consist of
insurance business and the entity is not a
subsidiary of another entity in the banking groupwhose business predominantly consists of
insurance business, the amount of the insurance
business to sum is the total liabilities relating to
the entity’s insurance business plus the equity
retained by the entity to meet the solvency or
financial soundness needs of its insurance
business.

a)

all amounts must relate to on balance sheet
items only, and must comply with generally
accepted accounting practice; andb)

if products or assets of which an insurance
business is comprised also contain a noninsurance component, the whole of suchproducts or assets must be considered part ofthe insurance business.

For the purpose of this condition of registration:“insurance business” means the undertaking orassumption of liability as an insurer under acontract of insurance;“insurer” and “contract of insurance” have thesame meaning as provided in sections 6 and 7 of
the Insurance (Prudential Supervision) Act 2010.
That the business of the registered bank in New
Zealand does not constitute a predominant proportionof the business of Australia and New Zealand Banking
Group Limited.
That no appointment to the position of the New
Zealand chief executive officer of the registered bankshall be made unless:a)7.

If the business of an entity predominately consistsof insurance business and the entity is not a
subsidiary of another entity in the banking groupwhose business predominantly consists of
insurance business, the amount of the insurance
business to sum is the total consolidated assets ofthe group headed by the entity; andIn determining the total amount of the banking
group’s insurance business:4.

the Reserve Bank has advised that it has no
objection to that appointment.

5.

That the banking group does not conduct any nonfinancial activities that in aggregate are material
relative to its total activities.

For the purposes of this condition of registration, thebanking group’s insurance business is the sum of thefollowing amounts for entities in the banking group:3.

b)

the Reserve Bank has been supplied with a copyof the curriculum vitae of the proposed appointee;
andThat the business of the registered bank in New
Zealand is restricted to:a)acquiring for fair value, and holding, mortgages
originated by ANZ Bank New Zealand Limited; andb)

any other business for which the prior written
approval of the Reserve Bank of New Zealand has
been obtained; andc)activities that are necessarily incidental to thebusiness specified in paragraphs (a) and (b).

8.

That the value of the mortgages held by the registeredbank in New Zealand must not exceed $15 billion inaggregate.

9.

That the registered bank in New Zealand may notincur any liabilities except:a)to the government of New Zealand in respect oftaxation and other charges; andb)to other branches or the head office of theregistered bank; andc)to trade creditors and staff; andd)to ANZ Bank New Zealand Bank Limited in respectof activities, other than borrowing, that arenecessarily incidental to the business specified inparagraphs (a) and (b) of condition 7; ande)any other liabilities for which the prior written
approval of the Reserve Bank has been obtained.

In these conditions of registration:“banking group” means the New Zealand business of
the registered bank and its subsidiaries as required tobe reported in the financial statements for the group's
New Zealand business under section 9(2) of the
Financial Reporting Act 1993;“business of the registered bank in New Zealand”
means the New Zealand business of the registeredbank as required to be reported in the financial
statements under section 8(2) of the Financial
Reporting Act 1993;“generally accepted accounting practice” has the same
meaning as in section 2 of the Financial Reporting Act
1993.

Australia and New Zealand Banking Group Limited - New Zealand Branch

71

Directors’ and New Zealand Chief Executive Officer’s
Statement
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director of the Ultimate Parent Bankand the Chief Executive Officer – NZ Branch believes that:i.

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements(Overseas Incorporated Registered Banks) Order (No 2) 2012;

ii.

The Disclosure Statement is not false or misleading.

Over the year ended 30 September 2012, after due enquiry, each Director of the Ultimate Parent Bank and the Chief
Executive Officer – NZ Branch believes that:i.

The Ultimate Parent Bank has complied with all the conditions of registration;ii.

The NZ Branch had systems in place to monitor and control adequately ANZ New Zealand’s material risks, including
credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and other businessrisks, and that those systems were being properly applied.

This Disclosure Statement is dated 27 November 2012, and has been signed by the Chairman of the Ultimate
Parent Bank, on behalf of all Directors, and by the Chief Executive Officer – NZ Branch.

J P MorschelChairman
On behalf of the Directors:
Mr M R P Smith, OBE
Dr G J Clark
Ms P J Dwyer
Mr P A F Hay
Mr H Y Lee
Mr I J Macfarlane, AC
Mr D E Meiklejohn, AM
Ms A M Watkins

A J Bradshaw
Chief Executive Officer – NZ BranchAustralia and New Zealand Banking Group Limited - New Zealand Branch

72

Independent Auditor’s Report
To the Directors of Australia and New Zealand Banking Group Limited – New Zealand
BranchReport on the NZ Branch and ANZ New Zealand Disclosure Statement
We have audited the accompanying financial statements and supplementary information of Australia and New Zealand
Banking Group Limited – New Zealand Branch (the “NZ Branch”) and its related entities (“ANZ New Zealand”) on pages 5
to 67 of the Disclosure Statement. The financial statements comprise the balance sheets as at 30 September 2012,
income statements, the statements of comprehensive income, changes in equity and cash flows for the year then ended,
and a summary of significant accounting policies and other explanatory information of the NZ Branch and ANZ New
Zealand. The supplementary information comprises the information that is required to be disclosed under the Registered
Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order (No 2) 2012 (the “Order”).
Directors' Responsibility for the Disclosure Statement
The Directors are responsible for the preparation of the NZ Branch and ANZ New Zealand Disclosure Statement, including
financial statements prepared in accordance with Clause 25 of the Order and generally accepted accounting practice in
New Zealand, and that give a true and fair view of the matters to which they relate. The Directors are also responsible forsuch internal controls as they determine are necessary to enable the preparation of the NZ Branch and ANZ New Zealandfinancial statements that are free from material misstatement whether due to fraud or error.
The Directors are responsible for the preparation and fair presentation of supplementary information, in accordance with
Schedules 4, 7, 10, 11 and 13 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Disclosure Statement, including the financial statements prepared inaccordance with Clause 25 of the Order and the supplementary information disclosed in accordance with Schedules 4, 7,
10, 11 and 13 of the Order. We conducted our audit in accordance with International Standards on Auditing (New
Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the NZ Branch and ANZ New Zealand financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the NZ Branch and
ANZ New Zealand financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the NZ Branch and ANZ New Zealand’s
preparation of the financial statements that gives a true and fair view of the matters to which they relate in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the NZ Branch and ANZ New Zealand’s internal controls. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating thepresentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Our firm has provided other services to the NZ Branch and ANZ New Zealand in relation to audit related services.
Partners and employees of our firm may also deal with the NZ Branch and ANZ New Zealand on normal terms within theordinary course of trading activities of the business of the NZ Branch and ANZ New Zealand. There are, however, certain
restrictions on dealings which the partners and employees of our firm can have with the NZ Branch and ANZ New Zealand.
These matters have not impaired our independence as auditors of the NZ Branch and ANZ New Zealand. The firm has noother relationship with, or interest in, the NZ Branch or ANZ New Zealand.
Opinion on the Disclosure Statement
In our opinion the Disclosure Statement of the NZ Branch and ANZ New Zealand on pages 5 to 67:•••

complies with generally accepted accounting practice in New Zealand;
complies with International Financial Reporting Standards; andgives a true and fair view of the financial position as at 30 September 2012 and of their financial performance andcash flows for the year ended on that date.

Australia and New Zealand Banking Group Limited - New Zealand Branch73

Opinion on Supplementary Information
In our opinion, the supplementary information that is required to be disclosed in accordance with Schedules 4, 7, 10, 11
and 13 of the Order, and is included within notes 14, 30, 32, 37 and 38 of the Disclosure Statement:•

has been prepared, in all material respects, in accordance with the guidelines issued pursuant to section 78(3) of theReserve Bank of New Zealand Act 1989 and any Conditions of Registration;••is in accordance with the books and records of the NZ Branch and ANZ New Zealand; andfairly states the matters to which it relates in accordance with those Schedules.

Report on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
We have reviewed the Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy, as
disclosed in note 29 of the Disclosure Statement for the year ended 30 September 2012.
Directors’ Responsibility for the Supplementary Information Relating to Credit and Market Risk Exposures
and Capital Adequacy
The Directors are responsible for the preparation of supplementary information relating to Credit and Market Risk
Exposures and Capital Adequacy that is required to be disclosed under Schedule 9.
Auditor’s Responsibility
Our responsibility is to express an opinion on the supplementary information relating to Credit and Market Risk Exposures
and Capital Adequacy based on our review. We conducted our review in accordance with the Review Engagement
Standards issued by the New Zealand Institute of Chartered Accountants. Those standards require that we comply withethical requirements and plan and perform the review to obtain limited assurance about whether the supplementary
information relating to Credit and Market Risk Exposures and Capital Adequacy is, in all material respects:•

prepared in accordance with Capital Adequacy Framework (Basel I Approach) (BS2) and Capital Adequacy Framework(Standardised Approach) (BS2A); and•disclosed in accordance with Schedule 9 of the Order.

A review is limited primarily to enquiries of NZ Branch and ANZ New Zealand personnel and analytical review procedures
applied to the financial data, and thus provides less assurance than an audit. We have not performed an audit in respectof the Credit and Market Risk Exposures and Capital Adequacy disclosures, and accordingly, we do not express an audit
opinion on these disclosures.
Opinion on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
Based on our review, nothing has come to our attention that causes us to believe that the supplementary information
relating to Credit and Market Risk Exposures and Capital Adequacy, disclosed in note 29 of the Disclosure Statement, isnot, in all material respects:•

prepared in accordance with the Capital Adequacy Framework (Basel I Approach) (BS2) and Capital Adequacy
Framework (Standardised Approach) (BS2A); and•disclosed in accordance with Schedule 9 of the Order.

Report on Other Legal and Regulatory Requirements
In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, and clauses2(1)(d) and 2(1)(e) of Schedule 1 of the Order, we report that:••

we have obtained all the information and explanations we have required; andin our opinion, proper accounting records have been kept by the NZ Branch and ANZ New Zealand, as far as appears
from our examination of those records.

Wellington
27 November 2012Australia and New Zealand Banking Group Limited - New Zealand Branch

74

Index
Contents and Glossary of Terms

1

General Disclosures

1

Summary of Financial Statements

4

Income Statements

5Statements of Comprehensive Income

5Statements of Changes in Equity

6

Balance Sheets

7

Cash Flow Statements

8

1. Significant Accounting Policies

9

2. Critical Estimates and Judgement Used in Applying Accounting Policies

16

3. Risk Management Policies

17

4. Income19

5. Expenses

20

6. Income Tax Expense

21

7. Segmental Analysis

22

8. Liquid Assets

23

9. Due from Other Financial Institutions

24

10. Trading Securities

24

11. Derivative Financial Instruments

25

12. Available-for-sale Assets

27

13. Net Loans and Advances27

14. Impaired Assets and Assets Under Administration

27

15. Provision for Credit Impairment29

16. Investments in Subsidiaries and Associates

29

17. Other Assets

31

18. Deferred Tax Assets and Liabilities

31

19. Goodwill and Other Intangible Assets

31

31. Assets Pledged as Collateral59

20. Due to Other Financial Institutions32

21. Deposits and Other Borrowings

32

22. Payables and Other Liabilities

32

23. Provisions

33

24. Bonds and Notes

33

25. Loan Capital

33

26. Related Party Transactions

35

27. Current and Non-current Assets and Liabilities

36

28. Ordinary Share Capital37

29. Capital Adequacy

38

30. Financial Risk Management40

31. Financial Assets Pledged as Collateral59

32. Concentrations of Credit Risk to Individual Counterparties

59

33. Fair Value of Financial Assets and Financial Liabilities

59

34. Notes to the Cash Flow Statements

64

35. Commitments

64

36. Credit Related Commitments and Contingent Liabilities

64

37. Securitisation, Funds Management, Other Fiduciary Activities and Insurance

65

38. Additional Disclosures

67

Directorate and Auditors

68

Conditions of Registration70

Directors’ Statement

71

Independent Auditor’s Report

72

Index

74