ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2016
NUMBER 81 | ISSUED MAY 2016

ANZ Bank New Zealand Limited

REGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2016

CONTENTS
General Disclosures

2

Income Statement

3Statement of Comprehensive Income

3

Balance Sheet

4

Condensed Cash Flow Statement

5

Statement of Changes in Equity

6

Notes to the Financial Statements

7

Directors' Statement

28

Independent Auditor’s Review Report

29

GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (DisclosureStatement) unless the context otherwise requires:(a) Bank means ANZ Bank New Zealand Limited;(b) Banking Group means the Bank and all its controlled
entities;(c) Immediate Parent Company means 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 controlled entities;(f) New Zealand business means all business, operations, orundertakings conducted in or from New Zealandidentified and treated as if it were conducted by acompany 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 Zealand business of
the Overseas Banking Group;(i) Registered Office is Ground Floor, ANZ Centre, 23-29
Albert Street, Auckland, New Zealand, which is also the
Banking Group’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 (New Zealand Incorporated Registered
Banks) Order 2014; 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.

ANZ Bank New Zealand Limited

2

GENERAL DISCLOSURESThis Disclosure Statement has been issued in accordancewith the Order.

Credit Rating Information
The Bank has three credit ratings, which are applicable to its
long-term senior unsecured obligations. The Bank’s credit
ratings are:
Current Credit
RatingAA-

Qualification
Outlook Stable

Moody’s Investors Service

Aa3

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Rating Agency
Standard & Poor’s

Guarantors
No obligations of the Bank are guaranteed as at 13 May 2016.

ANZNZ Covered Bond Trust
Certain debt securities (Covered Bonds) issued by the Bank’s
wholly owned subsidiary, ANZ New Zealand (Int’l) Limited,
are guaranteed by ANZNZ Covered Bond Trust Limited (theCovered Bond Guarantor), solely in its capacity as trustee of
ANZNZ Covered Bond Trust. The Covered Bond Guarantor
has guaranteed the payment of interest and principal of
Covered Bonds with a carrying value as at 31 March 2016 of
NZ$4,961 million, pursuant to a guarantee which is secured
over a pool of assets. The Covered Bond Guarantor’s addressfor service is Level 9, 34 Shortland Street, Auckland, New
Zealand. The Covered Bond Guarantor is not a member ofthe 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 along term rating of Aaa and AAA by Moody’s InvestorsService and Fitch Ratings respectively. Details of the pool ofassets that secure this guarantee are provided in Note 7.

Other Matters
APRA has reviewed the level of exposures that can beprovided to the respective New Zealand banking subsidiaries
and branches (New Zealand operations) of the four
Australian parent banks, including the Ultimate Parent Bank.
APRA has confirmed that by 1 January 2021 no more than
5% of the Ultimate Parent Bank’s Level 1 Tier 1 capital cancomprise non-equity exposures to its New Zealandoperations during ordinary times. Exposures in excess of thislimit must be reduced in equal percentages over the five
year transition period and may not increase above theexposures as at 30 June 2015. This limit does not include
holdings of capital instruments or eligible secured
contingent funding support provided to the Bank during
times of financial stress.
The Ultimate Parent Bank established a New Zealand branchwhich was registered on 5 January 2009. The Bank sells, fromtime-to-time, residential loans and mortgages into the NZ
Branch to provide funding for the Bank’s business. As at 31
March 2016, the NZ Branch held approximately NZ$7.1
billion of residential loans. To satisfy APRA’s requirements
described above, the Bank intends to repay this funding at
approximately NZ$1.6 billion per annum over the five year
transition period ending 31 December 2020.
APRA has also clarified that contingent funding support by
the Ultimate Parent Bank to the Bank during times offinancial stress must be provided on terms that are
acceptable to APRA and, in aggregate with all otherexposures to its New Zealand operations, must not exceed
50% of the Ultimate Parent Bank’s Level 1 Tier 1 capital. At
present, only covered bonds meet APRA’s criteria forcontingent funding. On this basis, we believe that the
Ultimate Parent Bank will continue to be able to provide
financial support to the Bank.

Directorate
Nigel Williams became a Director on 14 December 2015 andceased as alternate director for Michael Smith on 21
December 2015.
Michael Smith retired as a Director on 21 December 2015.

Auditor
The Banking Group’s auditor is KPMG, Chartered
Accountants, Level 9, 10 Customhouse Quay, Wellington,
New Zealand.

ANZ Bank New Zealand Limited

3

INCOME STATEMENT
Unaudited

Unaudited

6 months to

6 months toYear to31/03/2016

31/03/2015

30/09/2015

Note

Audited

NZ$m

NZ$m

NZ$m

Interest income

3,264

3,445

6,926

Interest expense

1,784

2,022

4,051

Net interest income

1,480

1,423

2,875

Net trading gains

19

149

262

Net funds management and insurance income

193

211

385

220

230

523

-

1

5

1,912

2,014

4,050

Other operating income2

Share of associates' profit
Operating income
Operating expenses

2

821

755

1,512

1,091

1,259

2,538

52

30

74

Profit before income tax

1,039

1,229

2,464

Income tax expense

283

340

681

Profit after income tax

756

889

1,783

AuditedProfit before credit impairment and income tax
Credit impairment charge

5

STATEMENT OF COMPREHENSIVE INCOME
Unaudited

Unaudited

6 months to

6 months toYear to31/03/2016
NZ$m

31/03/2015
NZ$m

30/09/2015
NZ$m

756

889

1,783

Actuarial loss on defined benefit schemes

(5)

(27)

(32)

Income tax credit relating to items that will not be reclassified

2

8

9

Total items that will not be reclassified to profit or loss

(3)

(19)

(23)

Profit after income tax
Items that will not be reclassified to profit or loss

Items that may be reclassified subsequently to profit or loss
Unrealised gains recognised directly in equity

56

7

12

Realised losses / (gains) transferred to income statement

2

(13)

(16)

Income tax credit / (expense) relating to items that may be reclassified

(17)

2

1

Total items that may be reclassified subsequently to profit or loss

41

(4)

(3)

Total comprehensive income for the period

794

866

1,757

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

ANZ Bank New Zealand Limited

4

BALANCE SHEET
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Cash

2,830

2,457

2,380

Settlement balances receivable

544

601

309

Collateral paid

2,114

2,123

1,929

Trading securities

12,49912,215

12,139

189

210

151

21,157

10,961

17,658

71

4

-

2,245

903

1,428

Note

AssetsInvestments backing insurance contract liabilities
Derivative financial instruments
Current tax assets
Available-for-sale assets
Net loans and advances

110,357

100,695

106,357

Other assets

4

765

711

740

Life insurance contract assets

552

567

554

Investments in associates

4

89

4

Premises and equipment

398

372

388

Goodwill and other intangible assets

3,416

3,462

3,492

Total assets

157,156

135,357

147,527

Interest earning and discount bearing assets

130,549

118,819

124,785

1,973

1,611

1,844

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

8

Derivative financial instruments

919

364

1,687

97,62988,142

90,67817,23022,23412,007

Current tax liabilities

-

-

87

Deferred tax liabilities

145

96

124

Payables and other liabilities

1,738

1,296

1,487

Provisions

187

189

191

17,547

17,686

19,403

Debt issuances

9

Subordinated debt

10

2,344

2,341

2,343

Total liabilities

144,716

123,732

135,074

Net assets

12,44011,625

12,453

8,888

8,213

8,888

31

(11)

(10)

3,521

3,423

3,575

EquityShare capital
Reserves
Retained earnings
Total equity

12,44011,625

12,453

Interest and discount bearing liabilities

112,725

103,041

108,629

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

ANZ Bank New Zealand Limited

5

CONDENSED CASH FLOW STATEMENT
Unaudited

Unaudited

6 months to

6 months to

AuditedYear to31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Cash flows from operating activities
Interest received

3,243

3,384

6,857

Interest paid

(1,830)(2,072)(3,985)

Other cash inflows provided by operating activities

476

450

1,054

Other cash outflows used in operating activities(1,974)(1,277)(1,085)

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

612

677

1,952

Net changes in operating assets and liabilities

1,005(1,195)(1,498)Net cash flows provided by / (used in) operating activities

1,617

(518)

454

Cash inflows provided by investing activities

38

-

-

Cash outflows used in investing activities

(48)

(44)

(132)

Net cash flows used in investing activities

(10)

(44)

(132)

Cash flows from investing activities

Cash flows from financing activities
Cash inflows provided by financing activities

2,883

3,971

6,384

Cash outflows used in financing activities(4,022)(2,764)(6,065)

Net cash flows provided by / (used in) financing activities319(1,139)1,207

Net increase in cash and cash equivalents

468

645

641

Cash and cash equivalents at beginning of the period

2,471

1,830

1,830

Cash and cash equivalents at end of the period

2,939

2,475

2,471

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

ANZ Bank New Zealand Limited

6

STATEMENT OF CHANGES IN EQUITY

As at 1 October 2014 (Audited)

Share capital

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

8,213

-

(7)

3,575

11,781889

Retainedearnings

Total
equityProfit after income tax

-

-

-

889

Unrealised gains recognised directly in equity

-

1

6

-

7

Realised gains transferred to the income statement

-

-

(13)

-

(13)

Actuarial loss on defined benefit schemes

-

-

-

(27)

(27)

Income tax credit on items recognised directly in equity

-

-

2

8

10

Total comprehensive income for the period

-

1

(5)

870

866

Ordinary dividend paid

-

-

-

(1,015)(1,015)Preference dividend paid

-

-

-

(7)

(7)

As at 31 March 2015 (Unaudited)

8,213

1

(12)

3,423

11,625As at 1 October 2014 (Audited)

8,213

-

(7)

3,575

11,781

Profit after income tax

-

-

-

1,783

1,783

Unrealised gains recognised directly in equity

-

-

12

-

12

Realised gains transferred to the income statement

-

-

(16)

-

(16)

Actuarial loss on defined benefit schemes

-

-

-

(32)

(32)

Income tax credit on items recognised directly in equity

-

-

1

9

10

Total comprehensive income for the period

-

-

(3)

1,760

1,757

Ordinary shares issued

675

-

-

-

675

Ordinary dividend paid

-

-

-

(1,745)(1,745)Preference dividend paid

-

-

-

(15)

(15)

As at 30 September 2015 (Audited)

8,888

-

(10)

3,575

12,453

Profit after income tax

-

-

-

756

756

Unrealised gains recognised directly in equity

-

-

56

-

56

Realised losses transferred to the income statement

-

-

2

-

2

Actuarial loss on defined benefit schemes

-

-

-

(5)

(5)

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

-

-

(17)

2

(15)

Total comprehensive income for the period

-

-

41

753

794

Ordinary dividend paid

-

-

-

(800)

(800)

Preference dividend paid

-

-

-

(7)

(7)

8,888

-

31

3,521

12,440As at 31 March 2016 (Unaudited)

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

ANZ Bank New Zealand Limited

7

NOTES TO THE FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIES(i)

Reporting entity and statement of compliance
These interim financial statements are for the Banking Groupfor the six months ended 31 March 2016. They have been
prepared in accordance with New Zealand Generally
Accepted Accounting Practice as appropriate for profit
oriented entities, the requirements of NZ IAS 34 Interim
Financial Reporting, IAS 34 Interim Financial Reporting and theOrder, and should be read in conjunction with the Banking
Group’s financial statements for the year ended 30
September 2015.

(ii)

Basis of measurement
These financial statements have been prepared on a going
concern basis in accordance with historical cost concepts
except that the following assets and liabilities are stated attheir fair value:
•
•
•
•

2.

derivative financial instruments, including in the caseof fair value hedging, the fair value of any applicable
underlying exposure;financial instruments held for trading;financial assets treated as available-for-sale; andfinancial instruments designated at fair value throughprofit and loss.

(iii) Changes in accounting policies
With the exception of software changes in note 2, theaccounting policies adopted by the Banking Group are
consistent with those adopted and disclosed in the previous
full year Disclosure Statement.
(iv) Presentation currency and rounding
The amounts contained in the financial statements arepresented in millions of New Zealand dollars, unlessotherwise stated.
(v)

Comparatives
Certain amounts in the comparative information have been
reclassified to ensure consistency with the current period’s
presentation.

(vi) Principles of consolidation
The financial statements consolidate the financial statementsof the Bank and its subsidiaries.

OTHER OPERATING INCOME AND EXPENSES

Other operating income
Unaudited

Unaudited

6 months to

6 months toYear to31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

207

203

404

Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value

(8)

7

64

Gain / (loss) on sale of mortgages to NZ Branch

1

(2)

1

Other income

20

22

54

Total other operating income

220

230

523

Net fee income

AuditedOperating expenses
During the March 2016 half, the Banking Group changed the application of its accounting policy for the capitalisation of expenditure on
internally generated software assets effective from 1 October 2015. The change aligns the accounting policy for software assets with therapidly changing technology landscape and the Banking Group’s evolving digital strategy by increasing the threshold for capitalisation ofsoftware development costs and directly expensing more project related costs. The change does not affect the Banking Group’s total
investment in technology but does affect the timing of recognition of costs in the profit and loss account. The impact of the change on
the March 2016 half was:•Higher amortisation of NZ$65 million relating to the accelerated amortisation of software assets where the original cost was below
the revised threshold at 1 October 2015. This brings forward amortisation which otherwise would have been recognised in future
periods.
•
Higher operating expenses of NZ$22 million relating to software development costs which otherwise would have been capitalised
and amortised in future periods.
The change in capitalised software treatment has no impact on regulatory capital ratios.

ANZ Bank New Zealand Limited

8

NOTES TO THE FINANCIAL STATEMENTS
3.

SEGMENT ANALYSIS

Commercial
Commercial provides services to Commercial & Agri(CommAgri) and UDC customers. CommAgri customers
consist of primarily privately owned medium to large
enterprises. Commercial'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.

The Banking Group is organised into four major businesssegments for segment reporting purposes - Retail,Commercial, Wealth and Institutional. Centralised back officeand corporate functions support these segments. Thesesegments are consistent with internal reporting provided tothe chief operating decision maker, being the Bank’s Chief
Executive Officer.
During the year ended 30 September 2015, Business Banking
was integrated with Retail, having been included inCommercial previously. Segment reporting has been
updated to reflect this change and other minor changes tothe Banking Group’s structure. Comparative data has beenadjusted to be consistent with the current period’s segment
definitions.

WealthWealth comprises the Private Wealth, Funds Management
and Insurance businesses, which provide private banking,investment, superannuation and insurance products andservices.

RetailRetail provides products and services to Retail and BusinessBanking 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). Retail customers have personalbanking requirements and Business Banking customers
consist primarily of small enterprises with annual revenues ofless than NZ$5 million. Core products include current andsavings accounts, unsecured lending (credit cards, personalloans and overdrafts) and home loans secured by mortgages
over property. The Retail segment distributes insurance andinvestment products on behalf of the Wealth segment.

Institutional
Institutional provides financial services through a number of
specialised units to large multi-banked corporations, often
global, which 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.

Business segment analysis1
RetailCommercial

WealthInstitutional

Other2

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Unaudited 6 months to 31/03/2016

External revenues

1,132

963

80

241

(504)

1,912

Intersegment revenues

(144)

(510)

79

(6)

581

-

Total revenues

988

453

159

235

77

1,912

Profit / (loss) after income tax

375

221

68

96

(4)

756

External revenues

996

1,038

73

461

(554)

2,014

Intersegment revenues

(53)

(577)

84

(127)

673

-

Total revenues

943

461

157

334

119

2,014

Profit after income tax

347

242

67

167

66

889

Unaudited 6 months to 31/03/2015

Audited year to 30/09/2015

External revenues

2,071

2,070

159

864

(1,114)4,050

Intersegment revenues(166)(1,149)

164

(200)

1,351

-

Total revenues

1,905

921

323

664

237

4,050

Profit after income tax

697

479

136

331

140

1,783

1
2

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
This segment has negative external revenues as this segment incurs funding costs on behalf of the Banking Group and is reimbursed internally.

ANZ Bank New Zealand Limited

9

NOTES TO THE FINANCIAL STATEMENTS
4.

NET LOANS AND ADVANCES
Note

Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

1,128

1,169

1,162

1,683

1,639

1,688

63,48756,15059,90443,26741,01742,880

Lease receivables

229

255

236

Hire purchase

999

878

946

-

125

-

110,793

101,233

106,816

(591)

(638)

(611)

Less: Unearned income

(213)

(215)

(214)

Add: Capitalised brokerage/mortgage origination fees

338

253

314

Add: Customer liability for acceptances

30

62

52

110,357

100,695

106,357

Overdrafts1
Credit card outstandings
Term loans - housing

1

Term loans - non-housing

Other
Total gross loans and advances
Less: Provision for credit impairment

5

Total net loans and advances
1

Comparative amounts have been changed to reclassify revolving credit facilities secured by residential property provided to corporate customers from Overdrafts to Termloans – housing (31/03/2015 NZ$471 million, 30/09/2015 NZ$476 million).

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$7,107 million as at 31 March 2016 (31/03/2015
NZ$8,323 million, 30/09/2015 NZ$8,011 million). These assets qualify for derecognition as the Bank does not retain a continuing
involvement in the transferred assets.

5.

PROVISION FOR CREDIT IMPAIRMENT

Credit impairment charge / (release)
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

8

57

39

104

Unaudited 31/03/2016

New and increased provisions
Write-backs

(16)

(9)

(16)

(41)

Recoveries of amounts written off previously

-

(11)

(2)

(13)

Individual credit impairment charge / (release)

(8)

37

21

50

Collective credit impairment charge / (release)

(1)

4

(1)

2

Credit impairment charge / (release)

(9)

41

20

52

New and increased provisions

12

50

41

103

Write-backs

(16)

(9)

(31)

(56)

Recoveries of amounts written off previously

(1)

(10)

(1)

(12)

Individual credit impairment charge / (release)

(5)

31

9

35

Collective credit impairment release

-

(1)

(4)

(5)

Credit impairment charge / (release)

(5)

30

5

30

New and increased provisions

31

107

76

214

Write-backs

(39)

(19)

(59)

(117)

Recoveries of amounts written off previously

(1)

(20)

(8)

(29)

Individual credit impairment charge / (release)

(9)

68

9

68

Collective credit impairment charge / (release)

(1)

9

(2)

6

Credit impairment charge / (release)

(10)

77

7

74

Unaudited 31/03/2015

Audited 30/09/2015

ANZ Bank New Zealand Limited

10

NOTES TO THE FINANCIAL STATEMENTS
Movement in provision for credit impairment
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

77

127

253

457

Unaudited 31/03/2016

Collective provision
Balance at beginning of the period
Charge / (release) to income statement

(1)

4

(1)

2

Balance at end of the period

76

131

252

459
154

Individual provision
Balance at beginning of the period

54

9

91

New and increased provisions net of write-backs

(8)

48

23

63

Bad debts written off

(1)

(50)

(29)

(80)

Discount unwind

(1)

-

(4)

(5)

Balance at end of the period

44

7

81

132

Total provision for credit impairment

120

138

333

591

Balance at beginning of the period

78

118

255

451

Release to income statement

-

(1)

(4)

(5)

Balance at end of the period

78

117

251

446

Balance at beginning of the period

72

15

128

215

New and increased provisions net of write-backs

(4)

41

10

47

Bad debts written off

-

(44)

(21)

(65)

Unaudited 31/03/2015

Collective provision

Individual provision

Discount unwind

(2)

-

(3)

(5)

Balance at end of the period

66

12

114

192

Total provision for credit impairment

144

129

365

638

Balance at beginning of the year

78

118

255

451

Charge / (release) to income statement

(1)

9

(2)

6

Balance at end of the year

77

127

253

457

Balance at beginning of the year

72

15

128

215

New and increased provisions net of write-backs

(8)

88

17

97

Bad debts written off

(4)

(94)

(54)

(152)

Audited 30/09/2015

Collective provision

Individual provision

Discount unwind

(6)

-

-

(6)

Balance at end of the year

54

9

91

154

Total provision for credit impairment

131

136

344

611

ANZ Bank New Zealand Limited

11

NOTES TO THE FINANCIAL STATEMENTS
6.

IMPAIRED ASSETS AND PAST DUE ASSETS
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

Balance at beginning of the period

97

32

253

382

Transfers from productive

32

67

107

206

Transfers to productive

(17)

(3)

(4)

(24)

Assets realised or loans repaid

(39)

(15)

(113)

(167)

Write offs

(1)

(50)

(29)

(80)

Total impaired assets

72

31

214

317

Undrawn facilities with impaired customers

-

-

12

12

Balance at beginning of the period

189

35

410

634

Transfers from productive

39

61

59

159

Transfers to productive

(46)

(4)

(33)

(83)

Assets realised or loans repaid

(53)

(13)

(105)

(171)

-

(44)

(21)

(65)

129

35

310

474

1

-

19

20

Unaudited 31/03/2016

Unaudited 31/03/2015

Write offs
Total impaired assets
Undrawn facilities with impaired customers
Audited 30/09/2015

Balance at beginning of the year

189

35

410

634

Transfers from productive

89

126

155

370

Transfers to productive

(69)

(7)

(46)

(122)

Assets realised or loans repaid

(108)

(28)

(212)

(348)

Write offs

(4)

(94)

(54)

(152)

Total impaired assets

97

32

253

382

Undrawn facilities with impaired customers

1

-

14

15

Credit quality of financial assets that are past due but not impaired
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair value of associatedsecurity should be sufficient to ensure that the Banking Group will recover the entire amount owing over the life of the facility and there isreasonable assurance that collection efforts will result in payment of the amounts due in a timely manner.
Ageing analysis of loans that are past due but not impaired
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

1 to 5 days

333

124

457

914

6 to 29 days

197

92

77

366

1 to 29 days

530

216

534

1,280

30 to 59 days

137

37

120

294

60 to 89 days

103

21

2

126

90 days or over

110

33

51

194

880

307

707

1,894

Unaudited 31/03/2016

ANZ Bank New Zealand Limited

12

NOTES TO THE FINANCIAL STATEMENTS
7.

ASSETS PLEDGED AS COLLATERAL FOR LIABILITIES
Carrying Amount
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Cash collateral given on derivative financial instruments

2,114

2,123

1,929

Securities sold under agreements to repurchase

140

43

47

Residential mortgages pledged as security for covered bonds

10,065

7,010

7,547

Assets pledged as collateral for UDC secured investments

2,571

2,423

2,441

Total financial assets pledged as collateral

14,89011,599

11,964ANZNZ 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 coveredbonds 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 theresidual assets of the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond Trust have been satisfied.
The Banking Group continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as
security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.

8.

DEPOSITS AND OTHER BORROWINGS

Note

Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Term deposits

37,57434,85534,982On demand and short term deposits

43,56937,591

41,436

Deposits not bearing interest

7,268

6,263

6,716

1,737

1,629

1,736

Total customer deposits

90,14880,33884,870

Certificates of deposit

1,859

1,462

745

Commercial paper

5,451

6,273

4,964

Deposits from banks

140

43

47

Deposits from other members of ANZ New Zealand

31

26

52

97,62988,142

90,678

UDC secured investments

Total deposits and other borrowings

9.

7

DEBT ISSUANCES
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Domestic bonds

4,000

3,325

3,525

U.S. medium term notes1

5,944

6,138

6,831

Euro medium term notes1

2,535

3,711

3,598

Covered bonds1

4,961

4,382

5,335

Index linked notes

36

35

35

17,476

17,591

19,324

Fair value hedge adjustment

206

148

175

Less debt issuances held by the Bank

(135)

(53)

(96)

17,547

17,686

19,403

Total debt issuances

Total debt issuances
1

These debt issuances are issued by ANZ New Zealand (Int’l) Limited and are guaranteed by the Bank.

Debt issuances, other than covered bonds, are unsecured and rank equally with other unsecured liabilities of the Banking Group.

ANZ Bank New Zealand Limited

13

NOTES TO THE FINANCIAL STATEMENTS
10. SUBORDINATED DEBT
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

NZD 1,003m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)

1,003

1,003

1,003

NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)2

495

494

494

NZD 835m perpetual subordinated bond2,3

835

835

835

AUD 10m perpetual subordinated floating rate loan

11

10

11

2,344

2,342

2,343

-

(1)

-

2,344

2,341

2,343

ANZ Capital Notes1

Perpetual subordinated debt

Total subordinated debt issued
Less subordinated debt instruments held by the Bank
Total subordinated debt

These instruments qualify as additional tier 1 capital.
These instruments are listed on the New Zealand Debt Market (NZDX). The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirements of Listing
Rules 10.3 (relating to the provision of preliminary announcements of half yearly and annual results to the NZX) and 10.4 (relating to preparing and providing a copy of half
yearly and annual reports to the NZX).
3
These instruments qualify as tier 2 capital under RBNZ’s transitional rules. Refer to note 12 for further details.
12

Subordinated debt is subordinated in right of payment in theevent of liquidation or wind up to the claims of depositors
and all creditors of the Bank.
ANZ Capital Notes••

On 5 March 2015, the Bank issued 10.0 million
convertible notes (ANZ NZ ICN) to the NZ Branch at
NZ$100 each, raising NZ$1,003 million.
On 31 March 2015, the Bank issued 500 million
convertible notes (ANZ NZ CN) at NZ$1 each, raising
NZ$500 million before issue costs.

Conversion features
On 24 March 2025 (ANZ NZ ICN) or 25 May 2022 (ANZ NZCN) or an earlier date under certain circumstances, therelevant notes will mandatorily convert into a variable
number of ordinary shares of the:••ANZ Capital Notes (the notes) are fully paid mandatorily
convertible non-cumulative perpetual subordinated notes.
As at 31 March 2016, ANZ NZ CN carried a BBB- credit ratingfrom Standard and Poor’s.
The notes are classified as debt given there arecircumstances beyond the Bank’s control where the principal
is converted into a variable number of shares of the Bank
(ANZ NZ ICN) or the Ultimate Parent Bank (ANZ NZ CN).
Interest
Interest on the notes is non-cumulative and payable asfollows:••

ANZ NZ ICN: payable semi-annually in arrears in Marchand September in each year. The interest rate is basedon a floating rate equal to the aggregate of the New
Zealand 6 month bank bill rate plus a 380 basis point
margin.
ANZ NZ CN: payable quarterly in arrears in February,
May, August and November in each year. The interest
rate is fixed at 7.2% per annum until 25 May 2020, andthereafter will be based on a floating rate equal to theaggregate of the New Zealand 3 month bank bill rateplus a 350 basis point margin.

Interest payments are subject to the Bank’s absolute
discretion and certain payment conditions being satisfied(including RBNZ and APRA (ANZ NZ CN only) requirements).
If interest is not paid on the notes the Bank may not, except
in limited circumstances, pay dividends or undertake a sharebuy-back or other capital reduction on its ordinary shares
until interest is next paid.

Bank based on the net assets per share in the Bank’s
most recently published Disclosure Statement (ANZ NZICN); orUltimate Parent Bank based on the average market
price of the Ultimate Parent Bank’s ordinary shares overa specified period prior to conversion less a 1%
discount, subject to a maximum conversion number(ANZ NZ CN).

The mandatory conversion will be deferred for a specified
period if the conversion tests are not met.
The Bank may be required to convert some or all of the notes
if a common equity capital trigger event, or an RBNZ or APRA(ANZ NZ CN only) non-viability trigger event occurs. The ANZ
ICN will convert into ordinary shares of the Bank and the ANZ
CN will convert into ordinary shares of the Ultimate Parent
Bank, subject to a maximum conversion number.
A common equity capital trigger event occurs if the:••Banking Group’s common equity tier 1 capital ratio is
equal to or less than 5.125%; orOverseas Banking Group’s Level 2 common equity tier1 capital ratio is equal to or less than 5.125% (ANZ CN
only).

An RBNZ non-viability trigger event occurs if the RBNZ
directs the Bank to convert or write off the notes or a
statutory manager is appointed to the Bank and decides the
Bank must convert or write off the notes. An APRA nonviability trigger event occurs if APRA notifies the Ultimate
Parent Bank that, without the conversion or write-off ofcertain securities or a public sector injection of capital (orequivalent support), it considers that the Ultimate Parent
Bank would become non-viable.
On 25 May 2020 the Bank has the right, subject to satisfying
certain conditions, to redeem (subject to receiving RBNZ’sand APRA’s prior approval), or to convert into ordinary shares

ANZ Bank New Zealand Limited

14

NOTES TO THE FINANCIAL STATEMENTS
of the Ultimate Parent Bank, all or some of the ANZ NZ CN at
its discretion on similar terms as mandatory conversion.
On 24 March 2023 the Bank has the right, subject tosatisfying certain conditions, to redeem (subject to receiving
RBNZ’s prior approval), or to convert into ordinary shares of
the Bank, all or some of the ANZ NZ ICN at its discretion on
similar terms as mandatory conversion.
Rights of holders in event of liquidation
The notes rank equally with each other and with the Bank’s
preference shares and lower than perpetual subordinateddebt. Holders of the notes do not have any right to vote ingeneral meetings of the Bank.
Perpetual subordinated debt
Perpetual subordinated debt instruments are classified as
debt reflecting an assessment of the key terms andconditions of the instruments, and an assessment of theability, and likelihood of interest payments being deferred.
These instruments have interrelationships that have been
considered in this assessment.
NZD 835,000,000 bondThis bond was issued by the Bank on 18 April 2008.

18 April 2018. Interest is payable semi-annually in arrears on
18 April and 18 October each year, up to and including theCall Date and then quarterly thereafter. Should the bond not
be called at the Call Date, the Coupon Rate from the Call
Date onwards will be based on a floating rate equal to theaggregate of the 3 month bank bill rate plus a 300 basis
point margin.
As at 31 March 2016, this bond carried a BBB+ rating byStandard and Poor's and an A3 rating by Moody’s.
The coupon interest on the bond is 5.28% per annum until
18 April 2018.
AUD 10,000,000 loan
This loan was drawn down by the Bank on 27 March 2013and has no fixed maturity. Interest is payable semi-annuallyin arrears on 15 March and 15 September each year. The
Bank may repay the loan on any interest payment date after
the NZD 835,000,000 bond has been repaid in full.
Coupon interest is based on a floating rate equal to theaggregate of the Australian 6 month bank bill rate plus a 240
basis point margin, increasing to the Australian 6 monthbank bill rate plus a 440 basis point margin from 15
September 2018.

The Bank may elect to redeem the bond on 18 April 2018(the Call Date) or any interest payment date subsequent to

11.

RELATED PARTY BALANCES
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Total due from related parties

5,422

2,960

4,195

Total due to related parties

6,404

4,173

5,487

ANZ Bank New Zealand Limited

15

NOTES TO THE FINANCIAL STATEMENTS
12. CAPITAL ADEQUACY
Basel III capital ratios

Banking GroupBank

31/03/2016

31/03/2015

30/09/2015

31/03/2016

31/03/2015

30/09/2015

Common equity tier 1 capital

10.0%

10.1%

10.5%

8.9%

8.8%

9.4%

Tier 1 capital

12.2%

12.4%

12.7%

11.2%

11.2%

11.8%

Total capital

12.8%

13.3%

13.6%

11.8%

12.2%

12.7%

Buffer ratio

4.8%

5.3%

5.6%

Common equity tier 1 capital

4.5%

4.5%

4.5%

Tier 1 capital

6.0%

6.0%

6.0%

Total capital

8.0%

8.0%

8.0%

Buffer requirement

2.5%

2.5%

2.5%

Unaudited

RBNZ minimum ratios:

Capital of the Banking Group
Unaudited
31/03/2016
NZ$m

Tier 1 capital
Common equity tier 1 capital
Paid up ordinary shares issued by the Bank

8,588

Retained earnings (net of appropriations)

3,521

Accumulated other comprehensive income and other disclosed reserves

31

Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities(3,404)

Cash flow hedge reserve(31)

Expected losses to the extent greater than total eligible allowances for impairment(237)

Common equity tier 1 capital

8,468

Additional tier 1 capitalPreference shares

300

ANZ Capital Notes1

1,503

Capital attributable to The Bonus Bonds Trust investors

38

Additional tier 1 capital

1,841

Total tier 1 capital

10,309Tier 2 capital
Qualifying tier 2 capital instruments subject to phase-out under RBNZ Basel III transition arrangements
NZD 835,000,000 perpetual subordinated bond1

835

Less deductions from tier 2 capitalBasel III transition adjustment2
Total tier 2 capital
Total capital
1
2

(367)
468
10,777

A summary of the terms of these instruments is included in note 10.
Certain instruments issued by the Bank qualify as tier 2 capital instruments subject to phase-out under RBNZ Basel III transition arrangements. Fixing the base at the nominal
amount of such instruments outstanding at 31 December 2012, their recognition is capped at 60% of that base from 1 January 2015; 40% from 1 January 2016; 20% from 1
January 2017; and from 1 January 2018 onwards these instruments will not be included in regulatory capital.

ANZ Bank New Zealand Limited

16

NOTES TO THE FINANCIAL STATEMENTS
Terms of ordinary share capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on the winding up of the Bank. 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 apoll every member shall have one vote for each share held.
Terms of preference shares
All preference shares were issued on 25 September 2013 by the Bank to the Immediate Parent and do not carry any voting rights. The
preference shares are wholly classified as equity instruments as there is no contractual obligation for the Bank to either deliver cash or
another financial instrument or to exchange financial instruments on a potentially unfavourable basis. The key terms of the preference
shares are as follows:
Dividends
Dividends are payable at the discretion of the Directors of the Bank and are non-cumulative. The Bank must not resolve to pay any
dividend or make any other distribution on its ordinary shares until the next preference share dividend payment date if the Directors electto not pay a dividend on the preference shares.
Should the Bank elect to pay a dividend, the dividend is payable at 72% of BKBM + 3.25% p.a., with dividend payments scheduled to bemade in March and September each year.
Redemption features
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of
the preference shares:
on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of thepreference shares; oron any dividend payment date on or after 1 March 2019; oron any date after 1 March 2019 if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.

•••

The preference shares may be redeemed for nil consideration should an RBNZ non-viability trigger event, as defined in the RBNZ
document Capital Adequacy Framework (Internal Models Based Approach) (BS2B), occur.
Rights of holders in event of liquidation
In the event of a liquidation of the Bank, holders of preference shares are entitled to available subscribed capital per share, pari passu withall holders of existing preference shares and ANZ Capital notes but in priority to all holders of ordinary shares. They have no entitlement toparticipate in further distribution of profits or assets.
Capital requirements of the Banking Group

Exposure atdefault

Risk weighted
exposure or
implied risk
weighted
exposure1

Total capitalrequirement

NZ$m

NZ$m

NZ$m

Corporate exposures

49,09629,741

2,379

Sovereign exposures

12,624329

26

Bank exposures

10,861

3,743

299

Retail mortgage exposures

69,556

16,543

1,324

Other retail exposures

10,712

8,563

685

Exposures subject to internal ratings based approach

152,849

58,9194,713

Specialised lending exposures subject to slotting approach

10,747

9,949

796

Exposures subject to standardised approach

2,137

347

27

Unaudited 31/03/2016

Equity exposures

6

25

2

Other exposures

3,671

1,719

138

Total credit risk

169,41070,9595,676

Operational risk

n/a

5,923

474

Market risk

n/a

7,474

598

169,41084,356

6,748

Total
1

Total credit risk weighted exposures include a scalar of 1.06 in accordance with the Bank's Conditions of Registration.

ANZ Bank New Zealand Limited

17

NOTES TO THE FINANCIAL STATEMENTS
Implementation of the advanced internal ratings based approach to credit risk measurement
The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based (IRB) banks in the
RBNZ document Capital Adequacy Framework (Internal Models Based Approach) (BS2B).
Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers and exposures,by way of the primary components of:
Probability of Default (PD): An estimate of the level of risk of borrower default graded by way of rating models used both at loan originationand for ongoing monitoring;
Exposure at Default (EAD): The expected facility exposure at default. Total credit risk-weighted exposures include a scalar of 1.06 in
accordance with the Bank’s Conditions of Registration; andLoss Given Default (LGD): An estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default
and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn LGDs
according to loan to value (LVR) bands as set out in BS2B. For farm lending exposures the Banking Group is required to adopt RBNZ
prescribed downturn LVR based LGDs, along with a minimum maturity of 2.5 years and the removal of the firm-size adjustment.
For exposures classified under Specialised Lending, the Banking Group uses slotting tables supplied by the RBNZ rather than internal
estimates.
The exceptions to IRB treatment are three minor portfolios where, due to systems constraints, determining these IRB risk estimates is not
currently feasible or appropriate. Risk weights for these exposures are calculated under a separate treatment as set out in the RBNZ
document Capital Adequacy Framework (Standardised Approach) (BS2A).
Capital requirements by asset class under the IRB approach

Unaudited 31/03/2016

Total exposure
or principal
amount
NZ$mExposureweighted LGD
used for the
ExposureExposure at
capital weighted risk Risk weighted
default
calculation
weightexposure
NZ$m
%
%
$m

Total capitalrequirement$mOn-balance sheet exposures
Corporate

36,01735,89536

57

21,668

Sovereign

11,93911,875

5

1

111

9

Bank

7,423

5,528

57

20

1,156

91

Retail mortgages

60,79561,02320

23

15,0301,203

Other retail

5,000

5,102

76

97

5,258

421

121,174

119,42328

34

43,2233,458

Corporate

12,637

10,342

50

49

5,418

433

Sovereign

252

149

5

2

4

-

Bank

1,346

1,062

51

18

206

17

Retail mortgages

8,151

8,533

18

17

1,513

121

Other retail

5,862

5,610

79

56

3,305

264

Total off-balance sheet exposures

28,24825,69645

38

10,446835

Corporate

134,701

2,859

60

88

2,655

212

Sovereign

11,302

600

5

34

214

17

Bank

715,651

4,271

61

53

2,381

191

Total market related contracts

861,654

7,730

56

64

5,250

420

Total credit risk exposures subject to the IRB approach

1,011,076

152,849

32

36

58,9194,713

Total on-balance sheet exposures

1,734

Off-balance sheet exposures

Market related contracts

ANZ Bank New Zealand Limited

18

NOTES TO THE FINANCIAL STATEMENTS
IRB exposures by customer credit rating

Unaudited 31/03/2016

Probability ofdefault%

Exposureweighted LGD
used for the
ExposureExposure at
capital weighted risk Risk weighted
default
calculation
weightexposure
NZ$m
%
%
NZ$m

Total capitalrequirement
NZ$m

Corporate
0-2

0.06

6,076

63

42

2,725

218

3-4

0.32

23,40337

41

10,153

812

5

1.05

11,840

38

67

8,448

676

6

2.22

5,821

38

87

5,349

428

7-8

8.67

1,588

42

156

2,624

210

Default

100.00

368

45

113

442

35

1.71

49,09640

57

29,741

2,379

0

0.01

12,479

5

2

324

26

1-8

0.42

145

5

3

5

-

Total sovereign exposures

0.01

12,624

5

2

329

26

0

0.03

33

65

31

11

1

1

0.03

9,557

57

30

3,089

247

2-4

0.08

1,255

62

47

623

50

5-8

1.46

16

65

121

20

1

Total bank exposures

0.04

10,861

58

33

3,743

299

0-3

0.20

16,720

12

5

882

71

4

0.46

25,304

19

15

3,967

317

5

0.92

21,554

25

33

7,458

597

6

2.02

5,292

28

64

3,613

289

7-8

5.30

464

29

106

523

42

Default

100.00

222

24

43

100

8

1.01

69,55620

22

16,543

1,324

Total corporate exposures
SovereignBank

Retail mortgages

Total retail mortgages exposures
Other retail
0-2

0.10

640

78

48

326

26

3-4

0.26

4,772

78

54

2,754

220

5

1.02

1,970

71

72

1,499

120

6

2.32

1,713

76

95

1,720

138

7-8

8.85

1,539

86

134

2,183

175

Default

100.00

78

79

98

81

6

Total other retail exposures

2.68

10,712

78

75

8,563

685

Total credit risk exposures subject to the IRB approach

1.20

152,849

32

36

58,919

4,713

Credit risk exposures subject to the IRB approach have been derived in accordance with BS2B and other relevant correspondence with
RBNZ setting out prescribed credit risk estimates.

ANZ Bank New Zealand Limited

19

NOTES TO THE FINANCIAL STATEMENTS
Specialised lending subject to the slotting approach
Exposure atdefault

Risk weight

Risk weighted
exposure

Total capitalrequirement

NZ$m

%

NZ$m

NZ$m

Strong

2,886

70

2,141

171

Good

5,785

90

5,519

442

Satisfactory

577

115

703

56

Weak

62

250

165

13

Unaudited 31/03/2016

On-balance sheet exposures

Default
Total on-balance sheet exposures

51

-

-

-

9,361

86

8,528

682

Average risk Risk weighted
weightexposure

Total capitalrequirement

ExposureamountExposure atdefault

NZ$m

NZ$m

%

NZ$m

NZ$m

Undrawn commitments and other off balance sheet exposures

1,441

1,264

91

1,224

98

Market related contracts

1,879

122

153

197

16

Total off-balance sheet exposures

3,320

1,386

97

1,421

114

Off-balance sheet exposures

Specialised lending exposures subject to the slotting approach have been calculated in accordance with BS2B.
The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to
the following external credit assessments using Standard & Poor's rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or
B+ and Weak: B to C-.
Credit risk exposures subject to the standardised approach
Exposure atdefault
NZ$m

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

Corporates

50

100

53

4

Default

1

150

2

-

Total on-balance sheet exposures

51

101

55

4

Average risk Risk weighted
weightexposure%
NZ$m

Total capitalrequirement
NZ$m

Unaudited 31/03/2016

On-balance sheet exposures

AveragecreditExposure conversion
amountfactor
NZ$m%

Exposure atdefault
NZ$m

Off-balance sheet exposures
Undrawn commitments and other off balance sheet exposures

510

47

241

99

253

20

Market related contracts

573,433

-

1,845

2

39

3

Total off balance sheet

573,943

n/a

2,086

13

292

23

Exposure atdefault
NZ$m

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

6

400

25

2

Credit exposures subject to the Standardised Approach have been calculated in accordance with BS2A.
Equity exposures

Unaudited 31/03/2016

All equity holdings not deducted from capital

Equity exposures have been calculated in accordance with BS2B.

ANZ Bank New Zealand Limited

20

NOTES TO THE FINANCIAL STATEMENTS
Other exposures
Exposure atdefault
NZ$m

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

Cash

264

-

-

-

New Zealand dollar denominated claims on the Crown and the RBNZ

1,785

-

-

-

Other assets

1,622

100

1,719

138

Total other IRB credit risk exposures

3,671

44

1,719

138

Unaudited 31/03/2016

Other exposures have been calculated in accordance with BS2B.
Credit risk mitigation
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment. The
Banking Group generally takes collateral security in the form of real property or a security interest in personal property, except for major
government, bank and corporate counterparties of strong financial standing. Longer term consumer finance, in the form of housing loans,is generally secured against real estate while short term revolving consumer credit is generally unsecured.
As at 31 March 2016, under the IRB approach, the Banking Group had NZ$1,200 million of Corporate exposures covered by guarantees
where the presence of the guarantees was judged to reduce the underlying credit risk of the exposures. Information on the total value of
exposures covered by financial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateralon the underlying credit risk exposures is not considered to be material.
Operational risk
The Banking Group uses the Advanced Measurement Approach for determining its regulatory capital requirement for operational risk
calculated in accordance with BS2B. As at 31 March 2016 the Banking Group had an implied risk weighted exposure of NZ$5,923 million
for operational risk and an operational risk capital requirement of NZ$474 million.
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures arefor the half-year ended 31 March 2016.

Implied risk weighted exposure
Period end

Aggregate capital charge

Peak

Peak

Period end

Peakoccurred on

Unaudited 31/03/2016

NZ$m

NZ$m

NZ$m

NZ$m

Interest rate risk

7,401

8,840

592

707

22/03/2016

Foreign currency risk

71

210

6

17

28/01/2016

Equity risk

2

2

-

-

1/10/2015

7,474

598

Pillar II Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's
Conditions of Registration.
Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group
include pension risk, insurance risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk, value in-force risk, business retention
risk and software risk.
The Banking Group's internal capital allocation for these other material risks is NZ$514 million (31/03/2015 NZ$437 million; 30/09/2015
NZ$479 million).
The Banking Group regularly reviews the methodologies used to calculate the economic capital allocated to other material risks. Updated
capital methodologies (particularly relating to software, strategic equity and value in-force risk) were applied in March 2015.

ANZ Bank New Zealand Limited

21

NOTES TO THE FINANCIAL STATEMENTS
Capital adequacy of the Ultimate Parent Bank
Basel III capital ratios

Ultimate Parent Bank
(Extended Licensed Entity)

Overseas Banking Group
31/03/2016

31/03/2015

30/09/2015

31/03/2016

31/03/2015

Common equity tier 1 capital

9.8%

8.7%

9.6%

10.2%

8.8%

9.6%

Tier 1 capital

11.6%

10.6%

11.3%

12.2%

10.9%

11.6%

Total capital

13.7%

12.6%

13.3%

14.4%

13.1%

13.7%

Unaudited

30/09/2015

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has accredited theOverseas Banking Group to use the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets andthe Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
Under prudential regulations, the Overseas Banking Group is required to maintain a Prudential Capital Ratio (PCR) as determined by APRA.
The Overseas Banking Group exceeded the PCR set by APRA as at 31 March 2016 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2016. The Overseas Banking
Group’s Pillar 3 disclosure document for the quarter ended 31 March 2016, in accordance with APS 330: Public Disclosure of Prudential
Information, discloses capital adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Residential mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group'svaluation of the security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn
residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing lending which have been
accepted by the customer.
31/03/2016
On-balancesheet

Off-balance
sheet

Total

NZ$m

NZ$m

NZ$m

Does not exceed 60%

23,641

4,348

27,989Exceeds 60% and not 70%

12,842

1,452

14,294

Exceeds 70% and not 80%

17,988

1,877

19,865

Does not exceed 80%

54,471

7,677

62,148

Exceeds 80% and not 90%

4,235

223

4,458

Exceeds 90%

2,089

251

2,340

Total

60,795

8,151

68,946

Unaudited

LVR range

Reconciliation of mortgage related amounts
Unaudited
31/03/2016

Term loans - housing

Note

NZ$m

4

63,487

Less: fair value hedging adjustment(207)

Less: housing loans made to corporate customers(2,514)

Add: Unsettled re-purchases of mortgages from the NZ BranchOn-balance sheet retail mortgage exposures subject to the IRB approach29
12

60,795

12

68,946

Add: off-balance sheet retail mortgage exposures subject to the IRB approach
Total retail mortgage exposures subject to the IRB approach (as per LVR analysis)

8,151

ANZ Bank New Zealand Limited

22

NOTES TO THE FINANCIAL STATEMENTS
13. FINANCIAL RISK MANAGEMENT
Concentrations of credit risk
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities within the samegeographic 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.
Analysis of financial assets by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.
Cash,
Tradingsettlements securities andreceivable and available-forsale assets
collateral paid

Derivative
financial Net loans andadvances3
instruments

Otherfinancial Credit related
assets commitments4

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Agriculture

-

-

23

18,41671

1,481

19,991

Forestry, fishing and mining

-

-

37

882

3

906

1,828

Business and property services

-

-

46

11,17143

2,874

14,134

Construction

-

-

17

1,468

6

844

2,335

Entertainment, leisure and tourism

-

-

31

1,254

5

244

1,534

Finance and insurance

3,703

7,681

18,847

1,329

383

1,414

33,357

Government and local authority1

12,258Unaudited 31/03/2016

Industry

1,785

6,965

1,111

1,179

5

1,213

Manufacturing

-

34

212

3,172

12

2,209

5,639

Personal lending

-

-

-

64,888252

19,49984,639Retail trade

-

-

58

1,907

7

949

2,921

Transport and storage

-

4

89

1,672

6

731

2,502

Wholesale trade

-

-

22

1,419

6

1,447

2,894

Other

2

-

60

664

2,066

8

1,755

4,553

5,488
-

14,744-

21,157-

110,823
(512)

807
-

35,566(79)

188,585(591)

Less: Unearned income

-

-

-

(213)

-

-

(213)

Add: Capitalised brokerage / mortgage
origination fees

-

-

-

338

-

-

338

5,488

14,744

21,157

110,436807

35,487

188,119

New Zealand

3,184

9,538

3,798

107,964

797

35,324

160,605

Overseas

2,304

5,206

17,359

2,472

10

163

27,514

Total financial assets

5,488

14,744

21,157

110,436807

35,487

188,119

Less: Provision for credit impairment

Total financial assets
Geography

12
3
4

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.
Excludes individual and collective provisions for credit impairment held in respect of credit related commitments.
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

ANZ Bank New Zealand Limited

23

NOTES TO THE FINANCIAL STATEMENTS
Interest rate sensitivity gap
The following tables represent the interest rate sensitivity of the Banking Group's assets, liabilities and off balance sheet instruments byshowing the periods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can bechanged.

Unaudited 31/03/2016

Total
NZ$m

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

Over
2 years
NZ$m

Not bearing
interest
NZ$m

2,830

2,566

-

-

-

-

264

AssetsCash
Settlement balances receivable

544

121

-

-

-

-

423

Collateral paid

2,114

2,114

-

-

-

-

-

Trading securities

12,499

1,185

412

492

3,428

6,982

-

Derivative financial instruments

21,157

-

-

-

-

-

21,157Available-for-sale assets

2,245

1,794

171

30

160

88

2

Net loans and advances

110,357

60,507

8,378

15,11018,997

7,824

(459)

Other financial assets

807

-

-

177

13

-

617

Total financial assets

152,553

68,287

8,961

15,80922,59814,89422,004

Settlement balances payable

1,973

764

-

-

-

-

1,209

Collateral received

919

919

-

-

-

-

-

Deposits and other borrowings

97,62967,183

10,949

8,612

2,216

1,401

7,268

Derivative financial instruments

22,234

-

-

-

-

-

22,234

Debt issuances

17,547

3,703

300

1,231

3,927

8,386

-

Subordinated debt

2,344

-

1,014

-

-

1,330

-

Payables and other liabilities

1,280

142

-

-

20

628

490

Total financial liabilities

143,926

72,711

12,263

9,843

6,163

11,74531,201

Hedging instruments

-

7,794

6,145

(1,793)(12,978)832-

Interest sensitivity gap

8,627

3,370

2,843

4,173

3,457

3,981

(9,197)

Liabilities

Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of
the Banking Group’s liquidity portfolio is based on the amount required to meet its liquidity policy and includes both items classified as
cash and those classified as operating assets in the Condensed Cash Flow Statement.
Unaudited
31/03/2016
NZ$m

Cash and balances with central banks

2,052

Certificates of deposit

378

Government, local body stock and bonds

5,932

Government treasury bills

833

Reserve Bank bills

1,082

Other bonds

6,216

Total liquidity portfolio

16,493

The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into
repurchase transactions with a value of NZ$6,482 million at 31 March 2016.

ANZ Bank New Zealand Limited

24

NOTES TO THE FINANCIAL STATEMENTS
Funding Composition
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs 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.
Analysis of funding liabilities by industry sector is based on ANZSIC codes.
Unaudited
31/03/2016
NZ$m

Funding composition
Customer deposits1
New Zealand

80,512

Overseas

9,636

Total customer deposits

90,148Wholesale funding
Debt issuances

17,547

Subordinated debt

2,344

Certificates of deposit

1,859

Commercial paper

5,451

Other borrowings

171

Total wholesale funding

27,372

Total funding

117,520

Concentrations of funding by industry
Households

57,969Agriculture

3,105

Forestry, fishing and mining

551

Manufacturing

1,791Entertainment, leisure and tourism

1,041

Finance and insurance

36,618Retail trade

1,136

Wholesale trade

1,360

Business and property services

6,835

Transport and storage

697

Construction

1,463

Government and local authority

3,186

Other2
Total funding

1,768
117,520

Concentrations of funding by geography
New Zealand

88,245Australia

1,091

United States

11,236

Europe9,740

Other countries

7,208

Total funding

117,52012Comprises term deposits, other deposits bearing interest and other borrowings, deposits not bearing interest and UDC secured investments
Other includes exposures to electricity, gas and water, communications and personal services.

ANZ Bank New Zealand Limited

25

NOTES TO THE FINANCIAL STATEMENTS
Contractual maturity analysis of financial assets and liabilities
The following tables present the Banking Group's financial assets and liabilities within relevant contractual maturity groupings, based on
the earliest date on which the Banking Group 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 and may 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 the Banking Group can be called upon to pay. The liquidity risk of credit related commitments and contingent liabilities may beless 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.
The Banking Group does not manage its liquidity risk on this basis.
Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specified

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Cash

2,830

2,049

781

-

-

-

-

Settlement balances receivable

544

121

423

-

-

-

-

Collateral paid

2,114

-

2,114

-

-

-

-

Trading securities

13,400

-

315

1,412

10,598

1,075-

Derivative financial assets (trading)

19,666-

19,666----

Available-for-sale assets

2,266

-

1,726

213

325

-

2

Net loans and advances

Unaudited 31/03/2016

Financial assets

142,627

191

15,86816,12649,41861,024-

Other financial assets

377

-

188

176

13

-

-

Total financial assets

183,824

2,361

41,081

17,92760,35462,0992

Settlement balances payable

1,973

1,071

902

-

-

-

-

Collateral received

919

-

919

-

-

-

-

Deposits and other borrowings

99,07851,10323,271

20,693

4,011

-

-

Derivative financial liabilities (trading)

19,580-19,580----Debt issuances

18,402

-

1,093

3,041

12,637

1,631-

Subordinated debt

2,803

-

11

34

681

1,231

846

Financial liabilities

Other financial liabilities

997

-

1

23

398

575

-

Total financial liabilities

143,752

52,17445,777

23,791

17,727

3,437

846
-

Derivative financial instruments used for balance sheet management- gross inflows

14,598

-

1,295

4,469

6,730

2,104

- gross outflows
Net financial assets / (liabilities) after balance
h tt(15,377)-(1,422)(4,919)(6,897)(2,139)-39,293(49,813)(4,823)(6,314)

42,46058,627(844)

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

BeyondTotal

1 year

1 year

NZ$m

NZ$m

NZ$m

486

99

387

Credit related commitments

33,13433,134-

Contingent liabilities

2,432
36,052

2,432
35,665387

Unaudited 31/03/2016

Non-credit related commitments

Total

ANZ Bank New Zealand Limited

26

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

Unaudited

31/03/2016
Carrying
amountFair value

Audited31/03/2015
Carrying
amountFair value

30/09/2015
Carrying
amountFair value

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

110,357

110,870

100,695

101,043

106,357

106,854

Deposits and other borrowings2

97,62997,792

88,142

88,21590,67890,832

Debt issuances1

17,547

17,656

17,686

17,862

19,403

19,516

Subordinated debt

2,344

2,252

2,341

2,343

2,343

2,288

AssetsNet loans and advances1
Liabilities

1

2

Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from theamortised cost.
Includes commercial paper (note 8) designated at fair value through profit or loss.

Financial assets and financial liabilities measured at fair value in the balance sheet
The Banking Group uses a valuation method within the following hierarchy to determine the carrying amount of assets and liabilities heldat fair value, all of which are recurring fair value measurements. There are no assets or liabilities measured at fair value on a non-recurring
basis.
•

Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices in active markets for identicalfinancial instruments. This category includes financial instruments valued using quoted yields where available for specific debt
securities.

•

Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted prices
within Level 1 that are observable for a similar financial asset or liability, either directly or indirectly.

•

Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are notbased on observable market data (unobservable inputs).

There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during the period.
Valuation hierarchy
Unaudited

Unaudited

31/03/2016
Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m

Audited31/03/2015
Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

30/09/2015
Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

Total
NZ$m

Financial assets
Trading securities
Derivative financial instruments
Available-for-sale assets

12,364135

14 21,138259- 12,139

5 21,157- 12,499 12,153

12 10,945

62

4 10,961- 12,215 11,880

12 17,640

6 17,658

1,885

358

2

2,245

581

321

1

903

900

526

2

1,428

Investments backing insurance contract
liabilities

-

189

-

189

3

207

-

210

2

149

-

151

Total financial assets held at fair value

14,263 21,820

7 36,090 12,749 11,535

5 24,289 12,794 18,574

8 31,376

Financial liabilities
Deposits and other borrowings-

Derivative financial instruments

47 22,187

5,451- 22,234

Payables and other liabilities

760-

Total financial liabilities held at fair value

807 27,638

-

-

5,451
760

- 28,445-

6,273

6 11,999
221-

227 18,272

-

6,273

-

4,964

2 12,007

19 17,209

-

309

221

2 18,501-

328 22,173

-

4,964

2 17,230-309

2 22,503

ANZ Bank New Zealand Limited

27

NOTES TO THE FINANCIAL STATEMENTS
15. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit risk to bank counterparties on the basis of approved exposures, and to non-bankcounterparties on the basis of limits.
For the six months ended 31 March 2016 there were no individual counterparties, excluding connected parties, governments and bankswith long term credit ratings of A- or above, where the Banking Group’s period end or peak end-of-day credit exposure equalled or
exceeded 10% of the Banking Group’s equity as at the end of the period.

16. INSURANCE BUSINESSThe Banking Group conducts insurance business through its subsidiary OnePath Life (NZ) Limited (OnePath Life).
The Banking Group’s aggregate amount of insurance business comprises the total assets of OnePath Life of NZ$943 million (31/03/2015:
NZ$958 million; 30/09/2015 NZ$884 million), which is 0.6% (31/03/2015: 0.7%; 30/09/2015 0.6%) of the total consolidated assets of the
Banking Group.

17. CREDIT RELATED COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES
Face or contract value
Unaudited

Unaudited

Audited31/03/2016

31/03/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Credit related commitments
Commitments with certain drawdown due within one year

1,166

1,348

1,130

Commitments to provide financial services

31,96829,31531,291

Total credit related commitments

33,13430,66332,421

Financial guarantees

727

906

920

Standby letters of credit

91

52

82

Transaction related contingent items

1,483

1,245

1,385

Trade related contingent liabilities

131

93

67

Total guarantees and contingent liabilities

2,432

2,296

2,454

Guarantees and contingent liabilities

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, 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
On 11 March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action against banks in
New Zealand for certain fees charged to New Zealand customers over the past six years. Proceedings were filed against the Bank on 25
June 2013. The potential outcome of this litigation cannot be determined with any certainty at this stage.
The Banking Group has other contingent liabilities in respect of actual and possible claims and court proceedings.
An assessment of the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision madewhere deemed necessary.

ANZ Bank New Zealand Limited

28

DIRECTORS' STATEMENT
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:(i)

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand
Incorporated Registered Banks) Order 2014; and(ii)

The Disclosure Statement is not false or misleading.

Over the six months ended 31 March 2016, after due enquiry, each Director believes that:(i)

ANZ Bank New Zealand Limited has complied with all Conditions of Registration that applied during that period;(ii)

Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including

credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks,
and that those systems were being properly applied.

This Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 13 May 2016.

Antony Carter

Shayne ElliottDavid Hisco

John Judge

Mark Verbiest

Nigel Williams

Joan Withers

ANZ Bank New Zealand Limited

29

INDEPENDENT AUDITOR’S REVIEW REPORTTo the Shareholder of ANZ Bank New Zealand Limited
We have reviewed pages 3 to 27 of the interim financial statements of ANZ Bank New Zealand Limited (the Bank) and its subsidiary companies(the Banking Group) prepared and disclosed in accordance with the Registered Bank Disclosure Statements (New Zealand Incorporated Registered
Banks) Order 2014 (the Order) and the supplementary information prescribed in Schedules 3, 5, 7, 11, 13, 16 and 18 of the Order. The interim
financial statements, and supplementary information, provide information about the past financial performance and cash flows of the Banking
Group and its financial position as at 31 March 2016.
This report is made solely to the shareholder as a body. Our review work has been undertaken so that we might state to the shareholder of the
Bank those matters we are required to state to them in the auditor's review report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the shareholder of the Bank as a body, for our review work, this report or any of
the opinions we have formed.
Directors' responsibility for the disclosure statement
The Directors of ANZ Bank New Zealand Limited are responsible for the preparation and presentation of the Disclosure Statement, which includes
interim financial statements prepared in accordance with Clause 25 of the Order which give a true and fair view of the financial position of the
Banking Group as at 31 March 2016 and its financial performance and cash flows for the six months ended on that date. The Directors are also
responsible for such internal controls as the Directors determine are necessary to enable the preparation of the Disclosure Statement that is freefrom material misstatement whether due to fraud or error.
They are also responsible for the preparation of supplementary information in the Disclosure Statement which fairly states the matters to which it
relates in accordance with Schedules 3, 5, 7, 11, 13, 16 and 18 of the Order.
Reviewer’s responsibility
We are responsible for reviewing the interim financial statements and the supplementary information, disclosed in accordance with Clause 25,
Schedules 5, 7, 11, 13, 16 and 18 of the Order and presented to us by the Directors.
Our responsibility is to express a conclusion on the interim financial statements (excluding the supplementary information) based on our review.
We conducted our review in accordance with NZ SRE 2410: Review of Financial Statements Performed by the Independent Auditor of the Entity. NZ SRE
2410 requires us to conclude whether anything has come to our attention that causes us to believe that the financial statements are not prepared,in all material respects, in accordance with NZ IAS 34: Interim Financial Reporting. As the auditor of the Bank, NZ SRE 2410 requires that we comply
with the ethical requirements relevant to the audit of the annual financial statements.
We are responsible for reviewing the supplementary information (excluding the supplementary information relating to capital adequacy) in orderto report to you whether, in our opinion on the basis of the procedures described below, anything has come to our attention that would cause us
to believe that the supplementary information does not fairly state the matters to which it relates in accordance with Schedules 5, 7, 13, 16 and 18of the Order.
We are responsible for reviewing the supplementary information relating to capital adequacy in order to state whether, on the basis of theprocedures described below, anything has come to our attention that would cause us to believe that the information disclosed in accordancewith Schedule 11 is not in all material respects prepared in accordance with the Bank’s Conditions of Registration and with the Bank’s internal
models for credit risk and operational risk as accredited by the Reserve Bank of New Zealand and disclosed in accordance with Schedule 11 of theOrder.
A review of interim financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures,primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and otherreview procedures. The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with
International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on those interim financial statements.
KPMG has also provided other audit related services to the Banking Group. In addition, certain partners and employees of our firm may also deal
with the Banking Group on normal terms within the ordinary course of trading activities of the Banking Group. These matters have not impaired
our independence as auditors of the Banking Group. We have no other relationship with, or interest in, the Banking Group.
Review opinion
We have examined the interim financial statements including the supplementary information and based on our review, which is not an audit,
nothing has come to our attention that causes us to believe that:a. the interim financial statements (excluding the supplementary information) do not present fairly, in all material respects, the financial positionof the Banking Group as at 31 March 2016 and its financial performance and cash flows for the six months ended on that date in accordancewith NZ IAS 34: Interim Financial Reporting;b. the supplementary information prescribed by Schedules 5, 7, 13, 16 and 18 of the Order does not fairly state the matters to which it relates inaccordance with those Schedules; andc. the supplementary information relating to capital adequacy as required by Schedule 11 of the Order, is not in all material respects prepared inaccordance with the Bank’s Conditions of Registration and with the Bank’s internal models for credit risk and operational risk as accredited by
the Reserve Bank of New Zealand, and disclosed in accordance with Schedule 11 of the Order.
Our review was completed on 13 May 2016 and our review opinion is expressed as at that date.

Wellington