For personal use only

A N Z N AT I O N A L B A N K L I M I T E D G R O U P

GENER A L SHORT F OR M
DISCLOSURE STATE ME NT

For the nine months ended 30 June 2008
Number 50 Issued August 2008

For personal use onlyFor personal use only

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

GENERAL SHORT FORMDISCLOSURE STATEMENTFOR THE NINE MONTHSENDED 30 JUNE 2008

CONTENTS
General Disclosures

2

Short Form Financial Statements

3 - 33

Conditions of Registration

34- 36

Credit Rating Information37

Directors’ Statement

38

Independent Review Report

39

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

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GENERAL DISCLOSURESThis Short Form Disclosure Statement has been issued inaccordance with the Registered Bank Disclosure Statement(Off-Quarter – New Zealand Incorporated Registered Banks)
Order 2008 (‘the Order’).

•the Ultimate Parent Bank should not enter into cross default
clauses whereby a default by the Bank on an obligation(whether financial or otherwise) is deemed to trigger a defaultof the Ultimate Parent Bank in its obligations;

In this Disclosure Statement unless the context otherwise
requires:•the Board of the Ultimate Parent Bank in determining limitson acceptable levels of exposure to the Bank should haveregard to:a. “Banking Group” means ANZ National Bank Limited and all its
subsidiaries; andb. any term or expression which is defined in, or in the mannerprescribed by, the Registered Bank Disclosure Statement (OffQuarter – New Zealand Incorporated Registered Banks) Order2008 shall have the meaning given in or prescribed by that
Order.
G eneral M atters

The full name of the registered bank is ANZ National Bank
Limited (‘the Bank’) and its address for service is Level 14, ANZ
Tower, 215-229 Lambton Quay, Wellington, New Zealand.
The Bank was incorporated under the Companies Act 1955 byvirtue of the ANZ Banking Group (New Zealand) Act 1979 on
23 October 1979, and was reregistered under the Companies Act
1993 on 13 June 1997.
The immediate parent company of the Bank is ANZ Holdings(New Zealand) Limited (incorporated in New Zealand). The
immediate parent company is owned by ANZ Funds Pty Limitedand Australia and New Zealand Banking Group Limited (bothincorporated in Australia).
The Ultimate Parent Bank is Australia and New Zealand Banking
Group Limited (‘ANZ’), which is incorporated in Australia, andits address for service is Level 14, 100 Queen Street, Melbourne,
Australia.
The Bank is wholly owned by its immediate parent company
and ultimately the Ultimate Parent Bank. The immediate parent
company has the power under the Bank’s Constitution toappoint any person as a Director of the Bank either to fill acasual vacancy or as an additional Director or to remove any
person from the office of Director, from time to time by giving
written notice to the Bank. No appointment of a new Director
may occur unless the Reserve Bank of New Zealand (‘RBNZ’)confirms that it does not object to the appointment.

•

the level of exposure that would be approved to third
parties of broadly equivalent credit status. In this regard,
prior consultation (and in cases approval) is required before
entering exceptionally large exposures; and•the impact on the Ultimate Parent Bank’s capital and liquidity
position and its ability to continue operating in the event of a
failure by the Bank.

•

the level of exposure to the Bank not exceeding:•

50% on an individual exposure basis2; and•150% in aggregate (being exposures to all similar regulated
entities related to the Ultimate Parent Bank)of the Ultimate Parent Bank’s capital base.
Additionally, the Ultimate Parent Bank may not provide material
financial support in breach of the Australian Banking Act (1959).
This requires APRA to exercise its powers and functions forthe protection of a bank’s depositors and in the event of abank becoming unable to meet its obligations or suspending
payment, the assets of the bank in Australia shall be available
to meet that bank’s deposit liabilities in Australia in priority toall other liabilities of the bank.
The Ultimate Parent Bank has not provided material
financial support to the Bank contrary to any of the above
requirements.
G uarantors

The material obligations of the Bank are not guaranteed.
D irectorate

There have been no changes to the Bank’s Board of Directors
since the authorisation date of the previous DisclosureStatement on 19 June 2008.

M aterial F inancial S upport

In accordance with the requirements issued by the Australian
Prudential Regulation Authority (‘APRA’) pursuant to thePrudential Standards, Australia and New Zealand Banking Group
Limited, as the Ultimate Parent Bank, may not provide material
financial support to the Bank1 contrary to the following:•

the Ultimate Parent Bank should not undertake any third party
dealings with the prime purpose of supporting the business of
the Bank;•

the Ultimate Parent Bank should not hold unlimited exposures(should be limited as to specified time and amount) in the
Bank (e.g. not provide a general guarantee covering any of theBank’s obligations);

1. Note that for material financial support purposes, the APRA requirements include any exposures to the Bank's parent company, ANZ Holdings (New Zealand) Limited.
2. In certain circumstances APRA may approve an increase in the individual exposure limit above this 50% limit.		
				

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INCOME STATEMENT
for the nine months ended 30 june 2008

Consolidated
Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007$mInterest income

7,310

5,988

8,309

Interest expense

5,599

4,344

6,059

Net interest income

1,711

1,644

2,250

Net trading gains

216

134

204

Other operating income

533

482

633

Share of profit of equity accounted
associates and jointly controlled entities

102

17

24

Operating income

2,562

2,277

3,111

Operating expenses

1,035

992

1,331

1,527

1,285

1,780

167

56

74

1,360

1,229

1,706

400

457

614

960

772

1,092

-

76

76

960

848

1,168

Note
C ontinuing operations

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

11

Profit before income tax
Income tax expense

3

Profit after income tax from continuing operations
D iscontinued operations

Profit from discontinued operations (net of income tax)

7

Profit after income tax
				The notes on pages 7 to 33 form part of and should be read in conjunction with these financial statements.

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STATEMENT OF RECOGNISED INCOME AND E XPENSE
for the nine months ended 30 June 2008

Consolidated
Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007
$m

36

-

(1)

-

(3)

(3)

(26)
(26)

88
(28)

78
(35)

Actuarial (loss) gain on defined benefit schemes

(12)

9

3

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

20

(20)

(12)

Note
Available - for - sale re valuation reserv e :Valuation gain (loss) taken to equity
Cumulative gain transferred to the income
statement on sale of financial assets
C as h flow h edging R E S E RV E :Valuation (loss) gain taken to equity
Transferred to income statement

(8)

46

30

Profit after income tax

960

848

1,168

Total recognised income and expense for the period

952

894

1,198

Net (expense) income recognised directly in equity

17

The notes on pages 7 to 33 form part of and should be read in conjunction with these financial statements.

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

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BALANCE SHEET
as at 30 June 2008

Consolidated

Note

Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007
$m

3,225
4,465
2,306
4,337
106
95,296

3,027
3,122
3,613
4,384
46
85,128

4,807
3,563
1,877
4,711
48
87,878

356
140
1,048
61
242
3,314

196
722
36
226
3,291

206
112
1,045
11
232
3,297

114,896

103,791

107,7872,620
75,266
4,253
1,598
157
16,713
1,655
2,979

4,219
66,053
4,800
1,423
61
153
13,575
2,846
1,894

3,170
70,030
4,924
1,351
165
14,6072,775
2,062

105,241

95,024

99,084

9,655

8,767

8,703

5,943
83
3,629

5,943
95
2,729

5,943
83
2,677

9,655

8,767

8,703

A ssets

Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances

456
8
9, 10, 11

Shares in controlled entities, associates
and jointly controlled entities
Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets
Total assets
L iabilities

Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Payables and other liabilities
Current tax liabilities
Provisions
Bonds and notes
Due to parent company
Loan capital

12
13

14
15

Total liabilities
Net assets
EquityOrdinary share capital
Reserves
Retained earnings

16
17
17

Total equity

The notes on pages 7 to 33 form part of and should be read in conjunction with these financial statements.

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cash flow statement
for the nine months ended 30 june 2008 1

Consolidated

Note

Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007
$m

7,057

5,707

7,892

-

2

3

785

676

926

C as h flow s from operating acti v ities

Interest received
Dividends received
Fees and other income received(5,194)(3,966)(5,486)

Operating expenses paid

Interest paid

(947)

(967)

(1,254)

Income taxes paid

(458)

(216)

(513)

Cash flows from operating profits before changes inoperating assets & liabilities

1,243

1,236

1,568

469

Net changes in operating assets and liabilities:(Increase) decrease in due from other financial institutions - term

(1,448)43

Increase in trading securities(328)(1,859)(73)

Increase in derivative financial instruments(167)(1,847)(1,136)(Increase) decrease in available-for-sale assets

(18)

314

312
(10,149)(7,282)(7,437)(Increase) decrease in other assets

Increase in loans and advances

(33)

243

(69)

(Decrease) increase in due to other financial institutions

(550)

232

(817)

Increase in deposits and other borrowings

4,654

3,682

6,857

76

64

(125)

23

(3,853)(5,329)(3,163)

-

-

5

7

-

585

585

1

18

17

(46)

(2)

(8)

Increase (decrease) in payables and other liabilities
Net cash flows used in operating activities
C as h flow s from in v esting acti v ities

Proceeds from sale of shares in associates and jointly controlled entities
Proceeds from sale of subsidiary companies2
Proceeds from sale of premises and equipment
Purchase of shares in associates and jointly controlled entities
Purchase of intangible assets

(23)

(8)

(17)

Purchase of premises and equipment

(39)

(37)

(51)

Net cash flows (used in) provided by investing activities

(107)

556

531

1. The comparative cash flow statements have not been restated for the classification of Truck Leasing Limited (‘TLL’) as a discontinued operation. For a detailed explanation of thefinancial impacts of the sale of TLL refer to Note 10 Discontinued Operations in the consolidated financial statements for the year ended 30 September 2007.
2. The cash proceeds from the sale of controlled entities includes $438 million relating to the repayment of TLL’s unsecured bank borrowings with UDC Finance Limited (‘UDC’)by the acquiree.

The notes on pages 7 to 33 form part of and should be read in conjunction with these financial statements.

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cash flow statement
for the nine months ended 30 june 2008 (continued)

Consolidated
Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007$m

Proceeds from bonds and notes

4,778

3,416

4,173

Redemptions of bonds and notes(2,815)

(635)

(684)

Proceeds from loan capital

835

250

800

Redemptions of loan capital

-

(125)

(550)

(1,120)

44

55

Note
C as h flow s from financing acti v ities(Decrease) increase in due to parent company
Dividends paid

-

(360)

(728)

Net cash flows provided by financing activities

1,678

2,590

3,066

Net cash flows used in operating activities
Net cash flows (used in) provided by investing activities(3,853)(107)(5,329)556(3,163)531

Net cash flows provided by financing activities

1,678

2,590

3,066

Net (decrease) increase in cash and cash equivalents(2,282)(2,183)434

Cash and cash equivalents at beginning of the period

7,130

6,696

6,696

Cash and cash equivalents at end of the period

4,848

4,513

7,130

Liquid assets

3,225

3,026

4,807

Due from other financial institutions - less than 90 days

1,623

1,487

2,323

Total cash and cash equivalents

4,848

4,513

7,130

R econciliation of cas h and cas he q ui valents to t h e balance s h eets 33.

Comparatives for cash and cash equivalents have been restated to remove “due to other financial institutions – less than 90 days” from the definition of cash and cash
equivalents. A reconciliation of cash and cash equivalents to the Banking Group’s core liquidity portfolio is included in Note 23 Notes to the Cash Flow Statements.

The notes on pages 7 to 33 form part of and should be read in conjunction with these financial statements.

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1.

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ACCOUNTING POLICIES(i) Basis of preparation
These financial statements have been prepared in accordance with NZ IAS 34 Interim Financial Reporting and the Registered
Bank Disclosure Statement (Off-Quarter - New Zealand Incorporated Registered Banks) Order 2008. These financial statements
should be read in conjunction with the consolidated financial statements for the year ended 30 September 2007.
(ii) Basis of measurement
The financial statements have been prepared on a going concern basis in accordance with historical cost concepts except thatthe following assets and liabilities are stated at their fair value: derivative financial instruments including (in the case of fairvalue hedging) the fair value of any applicable underlying exposure, assets treated as available-for-sale, financial instruments
designated at fair value through profit or loss, and defined benefit scheme assets and liabilities.
(iii) Changes in accounting policies / adoption of NZ IFRSThere have been no changes in accounting policies or methods of computation since the authorisation date of the previous
Disclosure Statement on 19 June 2008.
(iv) Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
(v) Consolidation
These financial statements consolidate the financial statements of ANZ National Bank Limited (the ‘Bank’) and its subsidiaries(the ‘Banking Group’).
(vi) Comparatives
To ensure consistency with the current period, comparative figures have been restated where appropriate.

2.

RISK MANAGEMENT POLICIESThere has been no material change in the Banking Group’s policies for managing risk, or material exposures to any new types of risk
since the authorisation date of the previous Disclosure Statement on 19 June 2008.

3.

I ncome Ta x E x pense

Consolidated

Income tax expense on profit from continuing operations
Effective tax rate (%)

Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007
$m

400

457

614

29.4%

37.2%

36.0%

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only4.

L i q uid A ssets

Consolidated
Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007$m

Cash and balances with central banks
Securities purchased under agreement to resell
Money at callBills receivable and remittances in transit

1,804
125
1,178
118

1,263
353
1,331
80

3,010
197
1,467
133

Total liquid assets

3,225

3,027

4,807

Included within liquid assets is the following balance:
Overnight balances with central banks

1,622

1,073

2,809

1,115

383

952

220

552

512

Certificates of deposit

2,596

1,391

1,634

Term loans and advances

534

796

465

4,465

3,122

3,563

Included within due from other financial institutions is
the following balance:
Assets used to secure deposit obligations

-

200

-

Included within due from other financial institutions is
the following related party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Company)

-

4

-

124

475

144

Certificates of deposit

655

2,582

866

Promissory notes

160

399

177

Other bank bonds

1,280

110

638

87

47

52

2,306

3,613

1,877

321

376

300

5.

D ue from ot h er F inancial I nstitutions

Able to be withdrawn without prior notice
Securities purchased under agreements to resell

Total due from other financial institutions

6.

T rading S ecurities

Government, Local Body stock and bonds

Other
Total trading securities
Included within trading securities is the following balance:
Assets encumbered through repurchase agreements

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(CONTINUED)P A G E1 0

7 . D iscontinued O perations

On 31 October 2006, UDC Finance Limited sold Truck Leasing Limited (‘TLL’) to Nikko Principal Investments Australia Limited, a private
equity business of Nikko Cordial Corporation, for consideration of $147 million. A gain of $76 million was realised.
The comparative income statements of the Banking Group have been restated to show the discontinued operation separately fromcontinuing operations.
For a detailed explanation of the financial impacts of the sale of TLL refer to Note 10 Discontinued Operations in the consolidated
financial statements for the year ended 30 September 2007.

8 . AVA I L A B L E - F O R - S A L E A S S E T S

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

Government, Local Body stock and bonds

3

3

4

Other debt securities

28

43

43

Equity securities

75

-

1

Total available-for-sale assets

106

46

48

9.

N et L oans and A d vances

Overdrafts

2,087

1,997

2,012

Credit card outstandings

1,414

1,322

1,338

Term loans - housing

53,19748,36349,751

Term loans - non-housing

38,72433,90635,156

Finance lease receivables

781

745

752

Gross loans and advances

96,20386,33389,009Provision for credit impairment (Note 11)

(563)

(466)

(466)

Unearned finance income

(343)

(275)

(290)

Fair value hedge adjustment

(60)

(529)

(442)

Deferred fee revenue and expenses

(56)

(52)

(53)

Capitalised brokerage/ mortgage origination fees
Total net loans and advances
Included within net loans and advances is the following
related party balance:
ANZ Holdings (New Zealand) Limited (Parent Company)

115

117

120

95,296

85,12887,878--89

The balance owing by the Parent Company is due within the next twelve months. Interest is received at variable bank rates.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 0 . I M PA I R E D A S S E T S , PA S T D U E A S S E T S A N D OT H E R A S S E T S U N D E R A D M I N I S T R AT I O NIndividually impaired assets

Unaudited 30/06/2008
Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs
Balance at end of the period

Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

7
61
(1)
(7)
(1)
59

20
98
(4)
(77)
37

88
100
(9)
(59)
(3)
117

115
259
(10)
(70)
(81)
213

Unaudited 30/06/2007
Balance at beginning of the period

9

19

123

151

Transfers from productive

3

69

59

131

Transfers to productive

-

-

(14)

(14)

Assets realised or loans repaid

(4)

(8)

(82)

(94)

Write offs

-

(54)

(8)

(62)

Balance at end of the period

8

26

78

112

Balance at beginning of the period

9

19

123

151

Transfers from productive

3

85

81

169

Audited 30/09/2007

Transfers to productive

-

-

(15)

(15)

Assets realised or loans repaid

(5)

(9)

(92)

(106)

Write offs

-

(75)

(9)

(84)

Balance at end of the period

7

20

88

115

254

Unaudited 30/06/2008
Past due assets (90 days past due assets)1

169

46

39

Other assets under administration

-

-

1

1

Undrawn facilities with impaired customers

-

-

8

8

Interest forgone on impaired assets

-

2

4

6

100

Unaudited 30/06/2007
Past due assets (90 days past due assets)1

52

21

27

Other assets under administration

-

-

-

-

Undrawn facilities with impaired customers

-

-

12

12

Interest forgone on impaired assets

-

2

4

6

102

Audited 30/09/2007
Past due assets (90 days past due assets)1

57

19

26

Other assets under administration

-

-

-

-

Undrawn facilities with impaired customers

-

-

6

6

Interest forgone on impaired assets

1

2

5

8

There are no undrawn facilities with 90 day past due customers or customers within the other assets under administration category as
at 30 June 2008 (30 June 2007 nil; 30 September 2007 nil).
As at 30 June 2008, the Banking Group did not have any restructured assets or material assets acquired through enforcement of security(30 June 2007 nil; 30 September 2007 nil).

1. 90 day past due assets are not classified as impaired assets as they are either 90 days or more past due and well secured, or are portfolio managed facilities that can be held for up
to 180 days past due.

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(CONTINUED)

1 1 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T

Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

Balance at beginning of the period
Transfer of credit valuation adjustment on derivative
financial instruments
Charge to income statement

58

130

234

422

5

16

3
40

3
61

Balance at end of the period

63

146

277

486

Unaudited 30/06/2008
Collective provision

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

4

9

31

44

Charge to income statement

12

76

18

106

Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

1 2

12

1

13

(77)

(3)

(81)

-

-

(5)

(5)

Balance at end of the period

15

20

42

77

Total provision for credit impairment

78

166

319

563

402

Unaudited 30/06/2007
Collective provision
Balance at beginning of the period

51

132

219

Charge to income statement

6

1

10

17

Balance at end of the period

57

133

229

419

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

3

16

39

58

Charge to income statement

-

39

-

39

Recoveries of amounts previously written off

-

15

-

15

Bad debts written off

-

(54)

(8)

(62)

Discount unwind1

-

-

(3)

(3)

Balance at end of the period

3

16

28

47

Total provision for credit impairment

60

149

257

466

402

Audited 30/09/2007
Collective provision
Balance at beginning of the period

51

132

219

Charge to income statement

7

(2)

15

20

Balance at end of the period

58

130

234

422

Balance at beginning of the period

3

16

39

58

Charge to income statement

1

55

(2)

54

Recoveries of amounts previously written off

-

17

3

20

Bad debts written off

-

(75)

(9)

(84)

Discount unwind1

-

-

(4)

(4)

Balance at end of the period

4

13

27

44

Total provision for credit impairment

62

143

261

466

Individual provision (individually impaired assets)

1.

P A G E(1)

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cashflows discounted to their present value.
As this discount unwinds during the period it is recognised as interest income.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 1 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T ( C O N T inued )Consolidated
Provision movement analysis

Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

12

88

27

127

-

-

(8)

(8)

12

88

19

119

Unaudited 30/06/2008
New and increased provisions
Provision releases
Recoveries of amounts previously written off

-

(12)

(1)

(13)

Individual provision charge

12

76

18

106

Collective provision charge

5

16

40

61

Charge to income statement

17

92

58

167

New and increased provisions

-

54

13

67

Provision releases

-

-

(13)

(13)

-

54

-

54

Recoveries of amounts previously written off

-

(15)

-

(15)

Individual provision charge

-

39

-

39

Collective provision charge

6

1

10

17

Charge to income statement

6

40

10

56

New and increased provisions

1

74

17

92

Provision releases

-

(2)

(16)

(18)

Unaudited 30/06/2007

Audited 30/09/2007

1

72

1

74

Recoveries of amounts previously written off

-

(17)

(3)

(20)

Individual provision charge

1

55

(2)

54

Collective provision charge

7

(2)

15

20

Charge to income statement

8

53

13

74

P A G E

1 3

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 2 .	due to ot h er financial institutions

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007
$m

673

803

1,140

321

376

300

Other financial institutions

1,626

3,040

1,730

Total due to other financial institutions

2,620

4,219

3,170

673

803

1,140

Australia and New Zealand Banking Group Limited(Ultimate Parent Company)
Securities sold under agreements to repurchase

Included within due to other financial institutions is thefollowing balance:
Balances owing to the Ultimate Parent Company by
ANZ National (Int’l) Limited guaranteed by the Bank

Balances owing to the Ultimate Parent Company are due within twelve months. Interest is paid at variable bank rates.

1 3 . D eposits and ot h er borrow ings

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

Amortised cost
Certificates of deposit

4,458

3,101

4,447

Term deposits

31,62827,56028,998Demand deposits bearing interest

21,06921,83921,128Deposits not bearing interest

3,943

3,993

4,354

Secured debenture stock

1,821

1,900

1,786

-

200

-

62,91958,59360,713

Secured deposits
Total deposits and other borrowings recognised at amortised cost
Fair value through the profit or loss
Commercial paper

12,347

7,460

9,317

Total deposits and other borrowings recognised at fair value

12,347

7,460

9,317

Total deposits and other borrowings

75,266

66,05370,030Included within deposits and other borrowings are thefollowing balances:
Commercial paper issued by ANZ National (Int'l) Limited guaranteedby the Bank at amortised cost

12,345

7,467

9,319

UDC Finance Limited secured debentures
Carrying value of total tangible assets

2,107

2,196

2,065

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, primarily loans and advances, of UDC Finance Limited.

P A G E

1 4

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 4 . B onds and notes

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

Australia and New Zealand Banking Group Limited(Ultimate Parent Company)

1,174

1,822

1,871

Other bonds and notes issued

15,53911,753

12,736

Total bonds and notes

16,713

13,575

14,607

Included within bonds and notes is the following balance:
Bonds and notes issued by ANZ National (Int’l) Limited
guaranteed by the Bank

15,256

12,58813,566In July 2008, the Banking Group issued NZD equivalent of NZD 3.4 billion of long-term unsubordinated debt. The most significant
transaction was a USD 2 billion (NZD 2.6 billion) 5 year fixed rate note issue.

1 5 . L oan C apital

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

AUD 207,450,000 term subordinated floating rate loan
AUD 265,740,000 perpetual subordinated floating rate loan
AUD 186,100,000 term subordinated floating rate loan
AUD 43,767,507 term subordinated floating rate loan
AUD 169,520,000 term subordinated floating rate loan
NZD term subordinated fixed rate bonds

261
334
234
55
213
1,882

228
292
205
48
1,121

242
309
217
51
197
1,046

Total loan capital

2,979

1,894

2,062

Included within loan capital is the following
related party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Company)

1,097

773

1,016

AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and has an ultimate maturity date of 31 August 2014. The Bank may elect to repay
the loan on 31 August each year commencing from 2009 through to 2013. All interest is payable half yearly in arrears, with interest
payments due 28 February and 31 August. Interest is based on BBSW + 0.40% p.a. up until, and including, 31 August 2009 and increases
to BBSW + 0.90% p.a. thereafter.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and 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.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. The Bank may elect to repay the loan
on 19 April each year commencing from 2010 through to 2015. All interest is payable half yearly in arrears, with interest payments
due 19 April and 19 October. Interest is based on BBSW + 0.32% p.a. to 19 April 2010 and increases to BBSW + 0.82% p.a. thereafter.

P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 5 . L oan C apital ( C ontinued )P A G E

1 6

AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The Bank may elect to repay
the loan on 15 September each year commencing from 2011 through to 2016. All interest is payable half yearly in arrears, with interest
payments due 15 March and 15 September. Interest is based on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW
+ 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The Bank may elect to repay
the loan on 17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest
payments due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW
+ 1.18% p.a. thereafter.
NZD term subordinated fixed rate bonds
The terms and conditions of these fixed rate and fixed term bonds are as follows:
New Zealand Exchange listed bonds
Issue date
15 September 2006
2 March 2007
23 July 2007

Amount $m

Coupon rate

Call date

Maturity date

350
250
350

7.16%
7.60%
8.23%

15 September 2011
2 March 201223 July 201215 September 2016
2 March 201723 July 2017

As at 30 June 2008, these bonds carried an AA- rating by Standard & Poor’s.
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to pay interest to maturity
at the five year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. for the 15 September 2006, 2 March 2007 and
23 July 2007 bonds respectively. Interest is payable half yearly in arrears based on the fixed coupon rate.
Perpetual Subordinated Bond
Issue date
18 April 2008

Amount $m

Coupon rate

Call date

835

9.66%

18 April 2013

The Bank may elect to redeem the bonds 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, beginning on 18 October 2008, up to and including
the Second Call Date.
As at 30 June 2008, these bonds carried an A+ rating by Standard and Poor’s.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds, ANZ National has a generalright and in certain specified circumstances an obligation, to defer payment of interest on the Bonds.
These bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirements ofListing Rules 10.4 and 10.5. Rule 10.4 relates to the provision of preliminary announcements of half yearly and annual results to the
NZX. Rule 10.5 relates to preparing and providing a copy of half yearly and annual reports to the NZX. The Bank has been granted awaiver from these rules on the conditions that the Bank’s quarterly General Disclosure Statement (‘GDS’) is available on the Bank’s
website, at any branch and at the NZX; that bondholders are advised by letter that copies of the GDS are available at the above
locations; that all bondholders are notified on an ongoing basis, by way of a sentence included on the notification of interest payments,that the latest GDS is available for review at the above locations; and that a copy of the GDS is sent to the NZX on an ongoing basis.
Non listed bondIssue dateAmount $m

Coupon rate

Call date

Maturity date

20 February 2003

100

6.46%

20 August 2008

20 August 2013

The Bank has elected to redeem these bonds on its call date. As at 30 June 2008, these bonds carried an AA- rating by Standard & Poor’s.
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.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for perpetual subordinated debt
which qualifies as Upper Level Tier Two Capital.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 6 . O rdinary s h are capital

Consolidated

Ordinary share capital at beginning and end of the period

Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007
$m

5,943

5,943

5,943

Voting rights
At a meeting: on a show of hands or vote by voice every member who is present in person or by proxy or by representative shall have one vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote for every share of which such member
is the holder.

1 7 . R eserv es and retained earnings

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

Balance at beginning of the period

(1)

3

3

Valuation gain (loss) recognised after tax(1)

Available-for-sale revaluation reserve
36-

Cumulative gain transferred to the income statement onsale of financial assets

-

(3)

(3)

Balance at end of the period

35

-

(1)

Balance at beginning of the period

84

52

52

Valuation (loss) gain recognised after tax

(19)

61

55

Transferred to income statement

(17)

(18)

(23)

Balance at end of the period

48

95

84

Total reserves

83

95

83

2,677

2,235

2,235

960

848

1,168

3,637

3,083

3,403

Cash flow hedging reserve

Retained earnings
Balance at beginning of the period
Profit after income tax
Total available for appropriation
Actuarial (loss) gain on defined benefit schemes after tax

(8)

6

2

Interim ordinary dividends paid

-

(360)

(728)

3,629

2,729

2,677

Balance at end of the period

P A G E

1 7

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 8 .	capital ade q uacy

Adoption of Basel II Accord
The Bank received accreditation from the RBNZ to adopt the internal ratings based approach under the Basel II Accord on 10 December
2007 for calculating capital adequacy ratios, effective 31 March 2008. The objective of the Basel II Accord is to develop capital adequacy
guidelines that more accurately reflect a bank’s individual risk profile. Basel II consists of three pillars - Pillar I covers the capitalrequirements for banks for credit, operational and market risks, Pillar II covers all other material risks not already included in Pillar I, andPillar III relates to market disclosure. These market disclosure requirements are set out below.
C A P I TA L A D E Q UA C Y R AT I O S U N D E R T H E B A S E L I I I N T E R N A L M O D E L S B A S E D A P P RO A C H 1

RBNZ minimum
ratios30/06/2008
Tier One Capital

4.00%

7.71%

Total Capital

8.00%

11.39%

Capital of the Banking Group as at 30 June 2008 (Unaudited)

1 8

$m

Tier One Capital
Ordinary share capital

5,943

Revenue and similar reserves

2,752

Current period's profit after tax

960

Less deductions from Tier One Capital--

Goodwill--

Other intangible assets

50--

Equity investment in ING NZ

206

--

Cash flow hedging reserve48-- 50% of total expected loss to the extent greater than total eligible
allowances for impairment
Total Tier One Capital

3,264

145
5,942

Tier Two Capital - Upper Level Tier Two Capital
Perpetual subordinated debt

1,169

Tier Two Capital - Lower Level Tier Two Capital
Term subordinated debt

1,810
2,979

Less deductions from Tier Two Capital-- 50% of total expected loss to the extent greater than total eligible
allowances for impairment

145

Total Tier Two Capital

2,834

Total Capital

8,776

1

P A G E

Consolidated
Unaudited
30/06/2008

Basel II capital ratios for the 30 June 2007 and 30 September 2007 comparative periods have not been provided as the information is not readily available. The Bank was accredited
to adopt the internal models based approach under Basel II on 10 December 2007.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 8 .	capital ade q uacy ( C ontinued )Total required capital of the Banking Group as at
30 June 2008 (Unaudited)

Exposure at default$mRisk weighted
exposure or implied
risk weighted
exposure$m

Total capitalrequirement$mInternal ratings based approach

132,280

54,462

4,357

Specialised lending subject to the slotting approach

8,960

9,171

734

Other internal ratings based exposures

2,505

743

59

Equity exposures

238

1,009

81

Standardised approach

261

233

19

Total credit risk

144,244

65,618

5,250

Operational risk

n/a

5,593

447

Market risk

n/a

3,723

298

Supervisory adjustment2
Total capital requirement

n/a

2,097

168

144,244

77,0316,163

C A P I TA L A D E Q UA C Y R AT I O S U N D E R T H E B A S E L I A P P RO A C HConsolidated
Unaudited
30/06/2008

Unaudited
30/06/2007

Registered Bank
Audited30/09/2007

Unaudited
30/06/2008

Unaudited
30/06/2007

Audited30/09/2007

Tier One Capital

7.76%

7.43%

7.19%

7.52%

7.10%

6.98%

Total Capital

11.56%

10.14%

10.08%

10.58%

8.94%

9.02%

Total risk-weighted
exposures

78,457

69,86471,311

76,385

68,214

69,489Tier One Capital

4.00%

4.00%

4.00%

4.00%

4.00%

4.00%

Total Capital

8.00%

8.00%

8.00%

8.00%

8.00%

8.00%

RBNZ minimum ratios:Basel I capital adequacy in respect of the Banking Group and Registered Bank has been derived in accordance with the RBNZ document
entitled ‘Capital Adequacy Framework (Basel I Approach)’ (BS2) dated March 2008.													I M P L E M E N TAT I O N O F T H E A D VA N C E D I N T E R N A L R AT I N G S B A S E D A P P RO A C H TO C R E D I T R I S K M E A S U R E M E N T

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 entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008 to measurecapital requirements.													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 loanorgination and for ongoing monitoring. For Retail Mortgage exposures the Banking Group has adopted the RBNZ prescribed exposure
weighted minimum PD of 1.25%.												Exposure at Default (‘EAD’) – the expected facility exposure at default, and													Loss 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 applies the downturn LGDs
according to LVR band as set out in BS2B. For Rural Banking exposures within the Corporate asset class the Banking Group has adopted
RBNZ prescribed downturn LGDs which are more conservative than internal estimates.													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 five minor portfolios where, due to systems constraints or other reasons, 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 entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A).													Refer to the Banking Group’s General Disclosure Statement for the six months ended 31 March 2008 for a more detailed description of
the Banking Group’s implementation of the IRB approach.
2

The supervisory adjustment includes an adjustment of 15% of risk-weighted retail mortgages and an adjustment, if required, in order to maintain the Basel II Minimum Capital
Requirements at no less than 90% of the Basel I Minimum Capital Requirements, in accordance with the Bank’s Conditions of Registration. No adjustment was required to maintainthe Basel II Minimum Capital Requirements at no less than 90% of the Basel I Minimum Capital Requirements at 30 June 2008.

P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 8 .	capital ade q uacy ( C ontinued )P A G E

2 0

C R E D I T R I S K E X P O S U R E S S U B J E C T TO T H E I N T E R N A L R AT I N G S B A S E D A P P RO A C H

The following tables analyse the capital requirements under the internal rating based approach exposures by asset class:
Consolidated as at 30/06/2008 (Unaudited)
Total
exposureor principal
amount$m

Exposureweighted
LGD used for
Exposure at
the capitaldefault
calculation$m%

Exposureweighted Risk weighted Total capitalrisk weight
exposure3 requirement%$m$m

On-balance sheet exposures
Corporate
Sovereign

34,69934,55740

64

23,339

1,867

976

958

5

1

12

1

Bank

6,034

5,857

67

15

936

75

Retail mortgages

49,51149,51122

24

12,755

1,020

Other retail

5,395

5,395

53

52

2,982

239

Total on-balance sheet exposures

96,61596,27833

39

40,024

3,202

Corporate

13,92813,310

51

55

7,730

619

Sovereign

106

96

5

2

2

-

1,347

1,233

55

29

376

30

Off-balance sheet exposures

Bank
Retail mortgages

5,639

6,296

23

31

2,064

165

Other retail

5,488

5,877

62

37

2,301

184

Total off-balance sheet exposures

26,50826,81247

44

12,473998

146,949

1,904

66

46

918

73

Market related contracts
Corporate
Sovereign

4,665

139

5

1

2

-

Bank

500,429

7,147

42

14

1,045

84

Total market related contracts

652,043

9,190

46

20

1,965

157

Total credit risk exposures subject tothe internal ratings based approach

775,166

132,28037

39

54,462

4,357

3. Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.													A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

1 8 .	capital ade q uacy ( C ontinued )Consolidated as at 30/06/2008 (Unaudited)

Probabilityof default%
Corporate
CCR rating
0-2
3-4
5
6
7-8
Default
Total corporate credit risk exposures
Sovereign
CCR rating
0
1
2
3
4-8
Default

7,176
20,26913,138
7,062
1,913
213
49,771

66
41
39
40
41
55
44

26
44
73
97
142
140
61

1,983
9,373
10,203
7,227
2,885
316
31,987

159
750
816
578
231
25
2,559

0.01%
n/a
n/a
n/a
n/a
n/a

1,193
-

5
-

1
-

16
-

1
-

1,193

5

1

16

1

12,235
979
947
40
36
-

53
57
52
68
70
-

14
16
27
115
217
-

1,787
164
274
49
83
-

143
13
22
4
7
-

14,237

53

16

2,357

189

13,17821,295
10,894
7,434
2,649
357

21
22
23
25
25
28

9
13
28
54
105
39

1,312
2,930
3,207
4,265
2,956
149

105
234
257
341
236
12

55,80723

25

14,819

1,185

1,182
4,561
2,817
1,972
639
101

80
55
56
54
53
55

20
24
59
70
90
16

249
1,172
1,774
1,460
610
18

20
94
142
117
49
1

11,272

58

44

5,283

423

0.01%
0.02%
0.08%
1.10%
5.80%
n/a

Total bank credit risk exposures
Retail mortgages
CCR rating
0-3
4
5
6
7-8
Default

0.23%
0.34%
0.94%
2.38%
11.65%
100.00%Total residential mortgage credit risk exposures
Other retail
CCR rating
0-2
3-4
5
6
7-8
Default
Total other retail credit risk exposures

Exposureweighted Risk weighted Total capitalrisk weight
exposure3 requirement
$m
$m
%

0.04%
0.33%
1.02%
2.24%
7.62%
100.00%Total sovereign credit risk exposuresBank
CCR rating
0
1
2-4
5-6
7-8
Default

Exposureweighted
LGD used for
Exposure at
the capitaldefault calculation
$m
%

0.10%
0.26%
1.12%
2.05%
11.65%
100.00%Credit risk exposures subject to the internal ratings based approach have been derived in accordance with the Reserve Bank of
New Zealand document entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008 and otherrelevant correspondence from the RBNZ setting out prescribed credit risk estimates.
3. Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.													P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 8 .	capital ade q uacy ( C ontinued )S P E C I A L I S E D L E N D I N G S U B J E C T TO T H E S L OT T I N G A P P RO A C HConsolidated as at 30/06/2008 (Unaudited)Risk
weighted Total capital
exposure3 requirement$m$m

Exposureamount$m

Riskweight%Strong

2,960

70

2,196

176

Good

2,415

90

2,304

184

Satisfactory

1,384

115

1,687

135

539

250

1,429

114

On-balance sheet exposures4

Weak
Default

47

-

-

-

7,345

98

7,616

609

Exposureamount$m

EAD$m

Averagerisk
weight%Undrawn commitments and other off balance sheet exposures

1,611

1,580

91

1,519

122

Market related contracts

3,203

35

97

36

3

Total off-balance sheet exposures subject to the slotting approach

4,814

1,615

91

1,555

125

Total on-balance sheet exposures subject to the slotting approach

Riskweighted Total capital
exposure3 requirement$m$m

Off-balance sheet exposures

Specialised lending subject to the slotting approach have been derived in accordance with the Reserve Bank of New Zealand document
entitled 'Capital Adequacy Framework (Internal Models Based Approach)' (BS2B) dated March 2008.
OT H E R I R B E X P O S U R E SConsolidated as at 30/06/2008 (Unaudited)

Cash and gold bullion
New Zealand dollar denominated claims on
the Crown and the RBNZ
Other assets
Total other IRB credit risk exposures

Exposureamount$m

Risk weight%

Risk weighted
exposure3$m

Total capitalrequirement
$m

182

0

-

-

1,622

0

-

-

701

100

743

59

2,505

28

743

59

Other IRB exposures have been calculated in accordance with the Reserve Bank of New Zealand document entitled ‘Capital Adequacy
Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.													A risk weight of 100% applies to premises and equipment and all other exposures not otherwise defined in the BS2B document, except
for cash, gold, New Zealand dollar denominated claims on the Crown and the RBNZ, and other sovereign claims with an internal
obligor rating of 1, which receive a 0% risk weight.
3.

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

4. The supervisory categories of specialised lending above are associated with a specific risk-weight. These categories broadly correspond to the following external credit
assessments using the Standard & Poor’s rating scale: Strong BBB- or better, Good BB+ or BB, Satisfactory BB- or B+ and Weak B to C-.

												P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 8 .	capital ade q uacy ( C ontinued )EQUITY EXPOSURES

Consolidated as at 30/06/2008 (Unaudited)

All other equity holdings (not deducted from capital)

Exposureamount$m
238

Risk weight%Riskweighted
exposure3$m

Total capitalrequirement
$m

400

1,009

81

Equity exposures have been calculated in accordance with the Reserve Bank of New Zealand document entitled ‘Capital Adequacy
Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.
C R E D I T R I S K E X P O S U R E S S U B J E C T TO T H E S TA N D A R D I S E D A P P RO A C HConsolidated as at 30/06/2008 (Unaudited)
Exposureamount$m

Risk weight%

Risk weighted
exposure3$m

Total capitalrequirement$m

Corporates

118

69

86

7

Total on-balance sheet exposures subject to the standardised approach

118

69

86

7

On-balance sheet exposures

Average
Exposurecreditamount conversion$mfactor %Credit Average
Risk
equivalentrisk weighted Total capitalamount weight exposure3 requirement
$m
%
$m
$m

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

416

34

143

97

147

12

Credit risk exposures subject to the standardised approach have been calculated in accordance with the Reserve Bank of New Zealanddocument entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A) dated November 2007.													O perational risk

Implied risk Total operational
weightedrisk capital
exposurerequirement$m$m
Operational risk capital requirement as at 30 June 2008 (Unaudited)
Advanced Measurement Approach for operational risk

5,593

447

The operational risk capital requirement has been calculated in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.
3.

Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.																										P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

M arket R isk	Implied risk
weighted
exposure$m

Aggregate
capital charge
$m

3,633

291

16

1

Market risk capital requirement as at 30 June 2008 (Unaudited)
Interest rate risk
Foreign currency risk
Equity risk

74

6

3,723

298

The market risk capital requirement has been calculated in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.													C R E D I T R I S K M I T I G AT I O N 													The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment.
Collateral security in the form of real property or a security interest in personal property is generally taken for business credit 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 30 June 2008, none of the credit risk exposures subject to the Standardised Approach were covered by eligible financial collateral.
The Banking Group is not engaged in any credit derivative activity. Information on the total value of exposures covered by guarantees
is not disclosed as the effect of these guarantees on the underlying credit risk exposures is not considered material.
R E TA I L M O RT G A G E S B Y L O A N - TO - VA L UAT I O N R AT I O 													As required by the RBNZ, LVRs are calculated as the current loan balance divided by the Bank’s valuation of the security property at
origination of the exposure.

LVR Range

Exposureamount5$m

0% - 59%

22,102

60% - 69%7,348

70% - 79%

9,525

80% - 89%7,452Over 90%

6,686

Total retail mortgage credit risk exposures subject to the internal ratings based approach 					53,113

P I L L A R I I C A P I TA L F O R OT H E R M AT E R I A L R I S K S 6

Total capitalrequirement$mInternal capital allocation for other material risks 		

					

154

The internal capital allocation for other material risks has been derived in accordance with the Bank’s Conditions of Registration.
The internal capital allocation for the Banking Group’s other material risks as at 30 June 2008 was $154 million, comprising premises
and equipment risk and capitalised origination fees risk.												Other material risks outside of the credit, operational and market risks that the Banking Group measures and manages are generally
already deducted from Tier One capital. As a result, the Banking Group has not included capital for these risks in the internal capital
allocation for other material risks.													5. The exposure amount used to calculate LVR excludes commitments to lend.
6. The internal capital allocation for other material risks for the 30 June 2007 and 30 September 2007 comparative periods has not been provided as the information is not readily
available. The Bank was only accredited to adopt the internal models based approach under Basel II on 10 December 2007.

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 9 . C oncentrations of credit risk

Concentrations of credit risk to individual counterparties
The number of individual counterparties other than banks or groups of closely related counterparties of which a bank is a parent(excluding OECD Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds
10% of equity (as at the end of the quarter) in ranges of 10% of equity, on the basis of limits:		
Consolidated
Unaudited 30/06/2008
Number of Counterparties

10% to 20% of equity

Unaudited 30/06/2007
Number of Counterparties

Audited 30/09/2007
Number of Counterparties

As at

Peak forthe quarter

As at

Peak forthe quarter

As at

Peak forthe quarter

1

1

2

2

2

2

As noted above, the number of individual counterparties disclosed within the various equity ranges is based on counterparty limits rather
than actual exposures outstanding. No account is taken of security and/or guarantees which the Banking Group may hold in respect of thevarious counterparty limits.
The amount and percentage of quarter end and peak end-of-day credit exposures to individual counterparties other than banks orgroups of closely related counterparties of which a bank is a parent (excluding OECD Governments and connected persons), where thequarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
Unaudited 30/06/2008

Unaudited 30/06/2007

Audited 30/09/2007

Amount$m% of Total
CreditExposureAmount$m% of Total
CreditExposureAmount$m% of Total
CreditExposure

1,926

100.0%

2,502

100.0%

2,509

100.0%

As at
Investment grade credit rating1

Concentrations of credit risk to bank counterparties
The number of bank counterparties or groups of closely related counterparties of which a bank is the parent (excluding OECD
Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity(as at the end of the quarter) in ranges of 10% of equity, on the basis of actual exposures:Consolidated
Unaudited 30/06/2008
Number of Counterparties

10% to 20% of equity

Unaudited 30/06/2007
Number of Counterparties

Audited 30/09/2007
Number of Counterparties

As at

Peak forthe quarter

As at

Peak for thequarter

As at

Peak for thequarter

2

3

2

3

1

3

The amount and percentage of quarter end and peak end-of-day credit exposures to bank counterparties or groups of closely related
counterparties of which a bank is a parent (excluding OECD Governments and connected persons), where the quarter end and peak
end-of-day credit exposures equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
Unaudited 30/06/2008

Unaudited 30/06/2007

Audited 30/09/2007

Amount$m% of Total
CreditExposureAmount$m% of Total
CreditExposureAmount$m% of Total
CreditExposure

2,926

100.0%

2,441

100.0%

1,193

100.0%

As at
Investment grade credit rating 1

1. All of the individual and bank counterparties included in the above tables have an investment credit grade rating. An investment grade credit rating means a credit ratingof BBB- or Baa3 or above, or its equivalent. In the case of a group of closely related counterparties, the credit rating applicable is that of the entity heading the group of
closely related counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars, orto an entity’s long term senior unsecured foreign currency obligations.

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 9 . C oncentrations of credit risk ( C ontinued )P A G E

2 6

Concentrations of credit risk to connected persons
Consolidated

Aggregate at end of period
Other connected persons2Non-bank connected persons3Peak end-of-day for the quarter4
Other connected persons
Non-bank connected persons
Rating-contingent limit5
Other connected persons
Non-bank connected persons

Unaudited 30/06/2008

Unaudited 30/06/2007

Audited 30/09/2007

Amount% of Tier$m One Capital

Amount$m% of Tier
One Capital

Amount$m% of Tier
One Capital

1,716
-

28.9%
0.0%

1,429
-

27.5%
0.0%

1,952
-

38.1%
0.0%

2,213
-

37.2%
0.0%

1,868
-

36.0%
0.0%

2,299
-

44.8%
0.0%

n/a
n/a

70.0%
15.0%

n/a
n/a

75.0%
15.0%

n/a
n/a

75.0%
15.0%

The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusive of exposuresof a capital nature. The peak end-of-day credit exposures for the quarter to connected persons are measured over Tier One Capital asat the end of the quarter. There were no individual provisions provided against credit exposures to connected persons as at 30 June2008 (30/06/2007 $nil; 30/09/2007 $nil). The Banking Group had no contingent exposures arising from risk lay-off arrangements toconnected persons as at 30 June 2008 (30/06/2007 $nil; 30/09/2007 $nil).
2. The Banking Group has amounts due from its Parent Company and Ultimate Parent Company and other entities within the Ultimate Parent Group arising from the ordinary courseof its business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate Parent Bank. As at 30 June 2008, theexposures to the Bank’s Parent Company were $nil (30/06/2007 $239 million; 30/09/2007 $249 million). As at 30 June 2008, the exposures to the Bank’s Ultimate Parent Company
were $1,716 million (30/06/2007 $1,191 million; 30/09/2007 $1,703 million).
3. Non-bank connected persons exposures consist of loans to directors of the Bank. Any loans are made in the ordinary course of business of the Bank, on an arm’s length basis and on
normal commercial terms and conditions.
4. The method of calculating the peak end-of-day disclosure above differs from that applied in determining the connected persons’ limit under the Bank’s Conditions of Registration.
The peak end-of-day disclosure is measured against Tier One Capital at quarter end whereas the connected persons’ exposure under the Conditions of Registration is measured
against Tier One Capital on a continuous basis. The Banking Group has complied with the limits on aggregate credit exposures (of a non-capital nature and net of individual
provisions) to connected persons and non-bank connected persons, as set out in the Conditions of Registration, at all times during the quarter.
5. Represents the maximum peak end-of-day aggregate credit exposures limit (exclusive of exposures of a capital nature and net of individual provisions) to all connected persons. Thisis based on the rating applicable to the Bank’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars (refer page 37 for the credit rating). Within
the overall limit a sub-limit of 15% of Tier One Capital applies to aggregate credit exposures (exclusive of exposures of a capital nature and net of individual provisions) to non-bankconnected persons. On 4 May 2007, the connected persons’ limit increased from 70% to 75% as a result of an improvement in the Bank’s credit rating. On 18 March 2008, the Bank
formally engaged Fitch Ratings to provide credit rating services. The Fitch Ratings rating of AA- has meant that from this date the connected persons’ limit has decreased from 75%
to 70% as the Fitch Ratings rating of AA- is lower than that given by Standard & Poor’s and Moody’s Investors Services.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

2 0 . M arket risk

RBNZ Market Risk Disclosure
The aggregate market risk exposures below have been calculated in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (B2SB) dated February 2008.
The peak end-of-day market risk exposures for the quarter are measured over equity at the end of the quarter.
Consolidated

Implied risk weighted exposure

Aggregate capital charge

Aggregate capital charge
as a percentage of the
Banking Group’s Equity

As at
$m

Peak
$m

As at
$m

Peak
$m

As at

As at

3,633

4,078

291

326

3.0%

3.4%

Foreign currency risk

16

151

1

12

0.0%

0.1%

Equity risk

74

76

6

6

0.1%

0.1%

Unaudited 30/06/2008
Interest rate risk

Unaudited 30/06/2007
3,673

3,673

294

294

3.4%

3.4%

Foreign currency risk

Interest rate risk

74

126

6

10

0.1%

0.1%

Equity risk

3

3

0

0

0.0%

0.0%

Audited 30/09/2007
3,778

4,668

302

373

3.5%

4.3%

Foreign currency risk

Interest rate risk

16

81

1

7

0.0%

0.1%

Equity risk

3

3

0

0

0.0%

0.0%

2 1 .	I N T E R E S T E A R N I N G A N D D I S C O U N T B E A R I N G A S S E T S A N D L I A B I L I T I E SConsolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$mInterest earning and discount bearing assets

105,467

94,77398,298Interest and discount bearing liabilities

95,33084,256

88,405P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

2 2 . S E G M E N TA L A N A LYS I S

For segment reporting purposes, the Banking Group is organised into three major business segments - Retail Banking, RelationshipBanking and Institutional. Centralised back office and corporate functions support these segments.
A summarised description of each business segment is shown below:
Retail Banking
Provides banking products and services to individuals and small businesses through separate ANZ and The National Bank branded
distribution channels and UDC. Personal banking customers have access to a wide range of financial services and products. Small
business banking services are offered to enterprises with annual revenues of less than $5 million. Included in this segment is Private
Banking, a stand-alone business unit, which offers a fully inclusive banking and investment service to high net worth individuals. This
segment also includes profit centres supporting the Retail Banking segment (e.g. Direct Banking and the ING NZ joint venture). UDC isprimarily involved in the financing and leasing of equipment, plant and machinery for small and medium sized businesses.
Relationship Banking
This segment provides services to Rural, Commercial and Corporate customers. A full range of banking products and services are provided
to Rural customers. Corporate and Commercial customers consist of primarily privately owned medium to large businesses with annual
revenues of $2 million and greater. The Banking Group’s relationship with these businesses ranges from simple banking requirementswith revenue from deposit and transactional facilities, and cashflow lending, to more complex funding arrangements with revenue
sourced from a wider range of products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group’s client base. The Institutional business unit ismade up of the following specialised units:• Institutional - provides financial services to large multi-banked corporates, often global, who require sophisticated product andstructuring solutions.
• Corporate Finance - provides complex financing and advisory services, structured financial products, leasing, private equity, project,export and leveraged finance.
• Markets - provides foreign exchange and commodity trading and sales-related services, origination, underwriting, structuring, risk
management and sale of credit and derivative products globally.
• Working Capital - provide cash management, trade finance, international payments, clearing and custodian services.
Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment. Truck Leasing Limited(trading as Esanda FleetPartners) is classified as a discontinued operation, and is included in the “Other” segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent with the 2008
segment definitions.
BUSINESS SEGMENT ANALYSIS - CONTINUING OPERATIONS1,2
Consolidated
RetailBanking$m

RelationshipBanking$m

Institutional
$m

Other
$m

Total
$m

Unaudited 9 months to 30/06/2008
Net operating income

1,387

533

411

231

2,562

Profit before income tax

530

324

283

223

1,360

Net operating income

1,313

483

308

173

2,277

Profit before income tax

575

306

210

138

1,229

Net operating income

1,794

648

435

234

3,111

Profit before income tax

766

409

307

224

1,706

Unaudited 9 months to 30/06/2007

Audited year to 30/09/2007

1.

Results are equity standardised

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

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For personal use only

2 3 . notes to t h e cas h flow statements

Consolidated
Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007$mProfit after income tax

960

848

1,168

Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Deferred fee revenue and expenses
Share-based payments expense
Amortisation of capitalised brokerage/ mortgage origination fees

33
167
(3)
11
42

43
56
2
10
50

55
74
3
12
45

Deferrals or accruals of past or future operating cash receipts or payments:
Increase in operating assets and liabilities
Decrease (increase) in interest receivable
Increase in interest payable
Increase in accrued income
Increase in accrued expenses
Decrease in provisions
Amortisation of premiums and discounts(Increase) decrease in income tax(5,096)
14
100
(5)
51
(8)
40
(58)

(6,565)
(76)
133
(1)
2
(21)
42
241

(4,731)
(94)
242
(1)
28
(9)
46
101

Items classified as investing/financing:
Share of profit of equity accounted associates and jointly controlled entities
Gain on disposal of controlled entities
Gain on disposal of associates and jointly controlled entities

(102)
-

(17)
(76)
-

(24)
(76)
(2)

1

-

-

(3,853)(5,329)(3,163)

Reconciliation of profit after income tax to net cash flows used inoperating activities

Loss (gain) on disposal of premises and equipment
Net cash flows used in operating activities
Reconciliation of core liquidity portfolio to cash and cash equivalents.
The Banking Group’s core liquidity portfolio held for managing liquidity risk comprises:

Consolidated

Note
Total liquidity portfolio

1

Unaudited
9 months to
30/06/2008$m

Unaudited
9 months to
30/06/2007$m

AuditedYear to30/09/2007
$m

6,239

4,415

6,168

Add back:
Liquid assets
Due from other financial institutions - less than 90 days

4
5

1,604
1,290

1,953
1,258

1,873
1,233

Deduct:Trading securities
Available-for-sale assets
Due from other financial institutions - greater than 90 days

6
8
5

(1,955)(2,330)(1,951)(1,162)(1,378)
(1)
(765)

4,848

4,513

7,130

Total cash and cash equivalents
1.

Assets held for managing liquidity risk includes short term cash held with the RBNZ or other banks, government securities and other securities that are readily acceptable in repurchaseagreements with the RBNZ and other New Zealand banks and securities issued by offshore Supranational and highly rated banks.

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(CONTINUED)P A G E

3 0

2 4 . PA R E N T C O M PA N Y A N D U LT I M AT E PA R E N T C O M PA N Y

The Parent Company is ANZ Holdings (New Zealand) Limited which is incorporated in New Zealand. The Ultimate Parent Company
is Australia and New Zealand Banking Group Limited which is incorporated in Australia.										2 5 .	S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D
D I S T R I B U T I O N O F I N S U R A N C E P RO D U C T S

Securitisation
The Banking Group has not securitised any of its own assets as at balance date. However, in May 2008, the RBNZ expanded therange of acceptable collateral that banks can pledge and borrow against as part of changes to its liquidity management arrangement
designed to help ensure adequate liquidity for New Zealand financial institutions in the event that global market disruptions wereto intensify. From 31 July 2008, acceptable collateral will include residential mortgage backed securities (‘RMBS’) that satisfy RBNZ
criteria. The Banking Group is establishing an in-house RMBS facility that will issue securities which meet these criteria, which
will significantly increase the Bank’s contingent funding ability from the RBNZ. The establishment of the RMBS will result in the
securitisation of some of its assets.
Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and investment and superannuation funds.
The Bank provides private banking services to a number of clients, including investment advice and portfolio management. The
Banking Group is not responsible for any decline in performance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by the Banking Group, they are not included in these financial statements. The
Banking Group derives fee and commission income from the sale and management of investment funds and superannuation bonds,
unit trusts and the provision of private banking services to a number of clients. The Banking Group derives commission income fromthe sale of third party funds management products.
Funds management activities conducted by the ING New Zealand joint venture are not included in the funds managed by the
Banking Group, as the Banking Group does not have control of the ING New Zealand joint venture.
Custodial services
The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by those customers.
Marketing and distribution of insurance products
The Banking Group markets and distributes a range of insurance products which are underwritten by several insurance companies.
These activities are managed in association with the ING New Zealand joint venture.
Insurance business
The Banking Group does not conduct any insurance business directly, although the Banking Group holds a 49% share in the ING NZ
joint venture which does conduct insurance business.
Provision of financial services
Financial services provided by the Banking Group to entities which are involved in trust, custodial, funds management and otherfiduciary 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.
The Banking Group has 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 the Banking Group (30/06/2007$nil; 30/09/2007 $nil).
Risk Management
The Bank and subsidiaries participating in the activities identified above have in place policies and procedures to ensure thatthose activities are conducted in an appropriate manner. Should adverse conditions arise, it is considered that these policies andprocedures will minimise the possibility that these conditions will adversely impact the Bank. The policies and procedures include
comprehensive and prominent disclosure of information regarding products, and formal and regular review of operations andpolicies by management and auditors.

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

2 5 .	S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D
D I S T R I B U T I O N O F I N S U R A N C E P RO D U C T S ( continued )Risk Management (continued)
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing insurance products:
Investment statements, prospectuses and brochures for insurance products include disclosures that the Bank and its subsidiaries do
not guarantee the insurer, nor the insurer’s subsidiaries, nor any of the products issued by the insurer or the insurer’s subsidiaries.
Where the insurance products are subject to the Securities Act 1978, investment statements, prospectuses and brochures additionally
include disclosures that:• the policies do not represent deposits or other liabilities of the Bank or its subsidiaries;• the policies are subject to investment risk, including possible loss of income and principal; and• the Bank and its subsidiaries do not guarantee the capital value or performance of the policies.
Application forms for insurance products contain acknowledgements to be signed by a purchaser which are consistent with thedisclosures for insurance products noted above.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing fund management
products:
Prospectuses, investment statements and brochures for funds management products include disclosures:• that the securities do not represent deposits or other liabilities of the Bank;• that the securities are subject to investment risk including possible loss of income and principal invested; and• that the Bank does not guarantee the capital value or performance of the securities.
Application forms for funds management products contain acknowledgements to be signed by a purchaser which are consistent withthe disclosures for funds management products noted above.

26. COMMITMENTS

Consolidated
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$m

Premises and equipment
Not later than 1 year

26

15

15

Total capital expenditure commitments

26

15

15

Premises and equipment
No later than one year
Later than 1 year but not later than 5 years
Later than five years

81
157
27

84
157
28

85
163
32

Total lease rental commitments

265

269

280

Total commitments

291

284

295

Capital expenditure
Contracts for outstanding capital expenditure:

Lease rentals
Future minimum lease payments under non-cancellable
operating leases:

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For personal use only

(CONTINUED)

2 7 . C O N T I N G E N T L I A B I L I T I E S , C R E D I T R E L AT E D C O M M I T M E N T S A N D M A R K E T R E L AT E D C O N T R A C T S

For contingent exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would have to pay if
the contingent is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
Consolidated
Face or contract value
Unaudited
30/06/2008$m

Unaudited
30/06/2007$m

Audited30/09/2007$mCommitments with certain drawdown due within one year
Commitments to provide financial services

803
24,124

1,767
20,7481,074
20,751

Total credit related commitments

24,92722,515

21,825

Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,996
487
777
348

1,900
528
404
150

1,933
528
398
123

Total contingent liabilities

3,608

2,982

2,982

Exchange rate contracts
Interest rate contracts
Equity contracts

103,285
551,961-

72,397
439,67720

94,287462,79120

Total foreign exchange, interest rate and equity contracts

655,246

512,094

557,098

Credit related commitments

Contingent liabilities

Foreign exchange, interest rate and equity contracts

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its ultimate parent company. 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.
The detailed and estimated maximum amount of contingent liabilities that may become payable are set out below.
Contingent tax liability
As previously disclosed, the New Zealand Inland Revenue Department (‘IRD’) is reviewing a number of structured finance transactions
as part of an audit of the 2000 to 2005 tax years. This is part of an industry-wide review by the IRD of these transactions undertaken in
New Zealand.
The Bank has received Notices of Proposed Adjustment (the ‘Notices’) in respect of some of these transactions. The Notices are formal
advice that the IRD is proposing to amend tax assessments. The Notices are not tax assessments and do not establish a tax liability but
are the first step in a formal disputes process.
As expected in March 2008 the IRD issued amended tax assessments as a follow up to the Notices in respect of four of these transactions
for the 2003 tax year (prior to that tax year becoming statute-barred). We expect assessments for the 2003 income year for a further
two transactions. The IRD has previously issued tax assessments as a follow up to the Notices in respect of two transactions for the 2000
tax year, four transactions for the 2001 tax year and five transactions in respect of the 2002 income year (in each case prior to that tax
year becoming statute-barred). Proceedings disputing the amended tax assessments with respect to the 2000, 2001 and 2002 tax years
have been commenced.
Based on the independent tax and legal advice obtained, the Bank is confident that the tax treatment it has adopted for these transactions
and all similar transactions is correct.
The tax adjustments proposed so far by the IRD cover the 2000 to 2005 tax years and imply a maximum potential liability of $224 million($338 million with interest tax effected).
The IRD is also investigating other transactions undertaken by the Banking Group, which have been subject to the same tax treatment.
Should the same position be taken by the IRD for all years on all these transactions, including those that the Notices cover, the maximum
potential liability would be approximately $365 million ($532 million with interest tax effected) as at 30 June 2008.

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For personal use only

(CONTINUED)

2 7 . C O N T I N G E N T L I A B I L I T I E S , C R E D I T R E L AT E D C O M M I T M E N T S A N D M A R K E T R E L AT E D C O N T R A C T S ( continued )Contingent Tax Liability (Continued)
Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($149 million with interest tax
effected) is subject to indemnities given by Lloyds TSB Bank plc under the agreement by which the Bank acquired the NBNZ Holdings
Limited Group, and which relate to transactions undertaken by NBNZ Group before December 2003.
This leaves a net potential tax liability as at 30 June 2008 of $266 million ($383 million with interest tax effected).
All of these transactions have now either matured or been terminated.
Commerce Commission
In November 2006, the Commerce Commission brought proceedings under the Commerce Act 1986 against Visa, MasterCard and all
New Zealand issuers of Visa and MasterCard credit cards, including ANZ National Bank Limited. The Commission alleges price fixing andsubstantially lessening competition in relation to the setting of credit card interchange fees and is seeking penalties and orders under
the Commerce Act.
Subsequently, several major New Zealand retailers have issued proceedings against ANZ National Bank Limited and the other above
mentioned defendants seeking unquantified damages, based on allegations similar to those contained in the Commerce Commission
proceedings.
ANZ National Bank Limited is defending the proceedings. The Bank has received independent legal advice. The Bank considers it has astrongly arguable case, but the matter is complex and difficult. At this stage any potential liabilities cannot be assessed with any certainty.
A trial has been scheduled for October 2009.
ING New Zealand Funds
The Bank markets and distributes a range of wealth management products which are managed by ING (NZ) Limited (a company of which
the Bank holds 49%). Trading in the ING Diversified Yield Fund and the ING Regular Income Fund was suspended on 13 March 2008 by
the fund manager, ING (NZ) Limited, due to the deterioration in liquidity in credit markets.
The matter is being reviewed by both the Bank and ING (NZ) Limited and it is too early to assess the nature or quantum, of any, if any
potential liability.
Other Contingent Liabilities
The Banking Group has other contingent liabilities in respect of actual and potential claims and 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 made where appropriate.
As at 30 June 2008, there were no other contingent assets or liabilities required to be disclosed (30/06/2007 nil; 30/09/2007 nil).

2 8 . subse q uent e v ents

The financial statements were authorised for issue by the Directors on 20 August 2008. No subsequent events occurred between
30 June 2008 and the date of issue.

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Conditions of registration

For personal use only

Conditions of Registration, applicable as at 20 August 2008. These Conditions of Registration have applied from 31 March 2008.
The Bank’s Conditions of Registration were revised on 31 March 2008 and 16 June 2008 in order to implement a new set of capital
adequacy conditions for banks that have adopted the internal models based approach to capital adequacy and to correct thedefinition of the Parent Bank capital ratios, respectively. The conditions that were amended were conditions 1, 1A, 1B, 1C and 4.
This has resulted in changes to the Banking Group’s capital adequacy disclosures (refer to Note 18 Capital Adequacy). Condition
11 was also changed on 27 June 2008 to exclude the outsourcing functions provided to the bank by Electronic Services Limited andInterchange and Settlement Limited until 31 December 2008.
The registration of ANZ National Bank Limited (‘the Bank’) as a registered bank is subject to the following conditions:
1. That the Banking Group complies with the following requirements:(a) the total capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 8%;(b) the tier one capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 4%; and(c) the capital of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008 is not less than $15 million.
For the purposes of this condition of registration the scalar referred to in the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is 1.06.
For the purposes of this condition of registration, the supervisory adjustment referred to in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is the sum of:(a) 15% of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and.
(b) 12.5 times the greater of: zero; and 90% of adjusted Basel I capital, less adjusted Basel II capital; where(i) “adjusted Basel I capital” means 8% of total risk-weighted exposures, plus deductions from tier one capital, plus deductions
from total capital, all calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy
framework (Basel I approach)” (BS2) dated March 2008;(ii) ”adjusted Basel II capital” means 8% of total Basel II risk-weighted exposures plus deductions from tier one capital, plus
deductions from total capital, less any amount included in tier two capital arising from the excess of eligible allowances
for impairment over EL (expected losses), all calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(iii) “total Basel II risk-weighted exposures” means scalar x (risk-weighted on and off balance sheet credit exposures) + 12.5 x
total capital charge for market risk exposure + 12.5 x total capital requirement for operational risk + 15% of risk-weighted
exposures secured by residential mortgages as defined in the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008.
1A. That(a) the Bank has an internal capital adequacy assessment process (“ICAAP”); that with effect from 31 August 2008 the Bank’s
ICAAP accords with the requirements set out in the document “Guidelines on a Bank’s internal capital adequacy process(“ICAAP”)” (BS12) dated December 2007;(b) under its ICAAP the Bank identifies and measures its “other material risks” defined as all material risks of the Banking Group
that are not explicitly captured in the calculation of tier one and total capital ratios under the requirements set out in the
document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(c) the Bank determines an internal capital allocation for each identified and measured “other material risk”.
1B.That the Banking Group complies with all requirements set out in the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008:
1C.That the Bank complies with the following requirements:
The total capital ratio of the Bank is not less than 8 %.
The tier one capital ratio of the Bank is not less than 4%

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Conditions of registration(CONTINUED)

For personal use only

For the purposes of this condition of registration:•

the total capital ratio is defined as capital as a percentage of risk-weighted exposures where capital and risk-weighted
exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)”(BS2) dated March 2008; and•the tier one capital ratio is defined as tier one capital as a percentage of risk-weighted exposures where tier one capitaland risk-weighted exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework(Basel I approach)” (BS2) dated March 2008.

2. That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total activities,
where the term material is based on generally accepted accounting practice, as defined in the Financial Reporting Act 1993.
3. That the Banking Group’s insurance business is not greater than 1% of its total consolidated assets. For the purposes of thiscondition:(i) Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings andInspections) Act 1994 (including those to which the Act is disapplied by sections 4(1)(a) and (b) and 9 of that Act), or any
business of the nature referred to in section 3(1) of the Life Insurance Act 1908;(ii) In measuring the size of the Banking Group’s insurance business:(a) Where insurance business is conducted by any entity whose business predominantly consists of insurance business, thesize of that insurance business shall be:•

The total consolidated assets of the group headed by that entity;•

Or if the entity is a subsidiary of another entity whose business predominantly consists of insurance business, thetotal consolidated assets of the group headed by the latter entity;(b) Otherwise, the size of each insurance business conducted by any entity within the Banking Group shall equal the total
liabilities relating to that insurance business, plus the equity retained by the entity to meet the solvency or financial
soundness needs of the insurance business;(c) the amounts measured in relation to parts a) and b) shall be summed and compared to the total consolidated assets of
the Banking Group. All amounts in parts a) and b) shall relate to on balance sheet items only, and shall be determinedin accordance with generally accepted accounting practice, as defined in the Financial Reporting Act 1993;(d) where products or assets of which an insurance business is comprised also contain a non-insurance component, thewhole of such products or assets shall be considered part of the insurance business.
4. That aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the Banking Group to all
connected persons do not exceed the rating-contingent limit outlined in the following matrix:
Credit Rating1

1.

Connected exposure limit (% of the
Banking Group’s Tier 1 capital)

AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

This table uses the rating scales of Standard & Poor’s, Fitch Ratings and Moody’s Investors Services. (Fitch Ratings’ scale is Identical to Standard & Poor’s.)

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to nonbank connected persons shall not exceed 15 percent of the Banking Group’s Tier One capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit is determinedin accordance with the Reserve Bank of New Zealand document entitled ‘Connected Exposure Policy’ (BS8) dated March 2008.
5. That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment, tenor,
interest rates, amortisation schedules and requirement for collateral) than corresponding exposures to non-connected persons.
6. That the board of the Bank contains at least two independent directors and that alternates for those directors, if any, arealso independent. In this context an independent director (or alternate) is a director (or alternate) who is not an employee of
the Bank, and who is not a director, trustee, or employee of any holding company (as that term is defined in section 5 of theCompanies Act 1993) of the Bank, or any other entity capable of controlling or significantly influencing the Bank.
7. That the chairperson of the Bank’s board is not an employee of the Bank.
8. That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing duties
as a director, to act other than in what he or she believes is the best interests of the company (i.e. the Bank).

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Conditions of registration

For personal use only

(CONTINUED)P A G E

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9. That a substantial proportion of the Bank’s business is conducted in and from New Zealand.
10. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief
executive officer, shall be made in respect of the Bank unless:(i) The Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee, and(ii) The Reserve Bank has advised that it has no objection to that appointment.
11. That the Bank has legal and practical ability to control and execute any business, and any functions relating to any business, of the
Bank that are carried on by a person other than the Bank, sufficient to achieve, under normal business conditions and in the eventof stress or failure of the Bank or of a service provider to the Bank, the following outcomes:(a) that the Bank’s clearing and settlement obligations due on a day can be met on that day;(b) that the Bank’s financial risk positions on a day can be identified on that day;(c) that the Bank’s financial risk positions can be monitored and managed on the day following any failure and on subsequent days;and(d) that the Bank’s existing customers can be given access to payments facilities on the day following any failure and on subsequentdays.
For the purposes of the this condition of registration, the term “legal and practical ability to control and execute” is explained in the
Reserve Bank of New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated January 2006.
Until 31 December 2008, functions provided to the Bank by Electronic Transaction Services Limited and Interchange and Settlement
Limited are not covered by this condition.
12. (a) That the business and affairs of the Bank are managed by, or under the direction and supervision of, the board of the Bank.
(b) That the employment contract of the chief executive officer of the Bank or person in an equivalent position (together “CEO”) iswith the Bank, and the terms and conditions of the CEO’s employment agreement are determined by, and any decision relating
to the employment or termination of employment of the CEO are made by, the board of the Bank.
(c) That all staff employed by the Bank shall have their remuneration determined by (or under the delegated authority of) the board
or the CEO of the Bank and be accountable (directly or indirectly) to the CEO of the Bank.
For the purposes of these conditions of registration, the term ‘Banking Group’ means ANZ National Bank Limited’s financial reportinggroup (as defined in section 2(1) of the Financial Reporting Act 1993).

A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

For personal use only

Credit rating information

The Bank has three current credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in
New Zealand in New Zealand dollars. The credit ratings are:Standard & Poor’s

AA

Moody’s Investors Service

Aa2

Fitch RatingsAA-

The Standard & Poor’s rating was issued on 22 February 2007. On this date Standard & Poor’s revised the Bank’s rating to AA from
AA-. There have been no other changes in the credit rating issued in the past two years ended 30 June 2008. The rating is not subject
to any qualifications.
The Moody’s Investors Service was issued on 4 May 2007. On this date Moody’s Investors Service revised the Bank’s rating to Aa2
from Aa3. There have been no other changes in the credit rating issued in the past two years ended 30 June 2008. The rating is not
subject to any qualifications.
Fitch Ratings was formally engaged by the Bank on 18 March 2008 to provide credit rating services. Previously Fitch Ratings
had rated the Bank on an unsolicited basis as AA- and this rating was last affirmed on 26 October 2007. The rating is not subject toany qualifications.
Description

Standard &Poor’sMoody’s
Investors
Service

Fitch Ratings

Ability to repay principal and interest is extremely strong. This is 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 although somewhat susceptible toadverse changes in economic, business or financial conditions.

A

A

A

Adequate ability to repay principal and interest. More vulnerable to adversechanges.

BBB

Baa

BBB

Significant uncertainties exist which could affect the payment of principal andinterest on a timely basis.

BB

Ba

BB

Greater vulnerability and therefore greater likelihood of default.

B

B

BB

Likelihood of default now considered high. Timely repayment of principal andinterest is dependent on favourable financial conditions.

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & DThe following grades display investment grade characteristics:

The following grades have predominantly speculative characteristics:

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 withinthe ‘AA’ to ‘B’ catergories. 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 the lower end of the rating category.

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DIRECTORS’ STATEMENTP A G E3 8

D I R E C TO R S ’ S TAT E M E N T

As at the date on which this General Short Form Disclosure Statement is signed, after due enquiry, each Director believes that:(i) The Short Form Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statement(Off-Quarter - New Zealand Incorporated Registered Banks) Order 2008;(ii) The Short Form Disclosure Statement is not false or misleading.
Over the nine months ended 30 June 2008, after due enquiry, each Director believes that:(i) ANZ National Bank Limited has complied with the Conditions of Registration;(ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ National Bank 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 businessrisks, and that those systems were being properly applied.
This General Short Form Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on,
20 August 2008. On that date, the Directors of the Bank were:

Dr D T Brash

Dr R J Edgar

N M T Geary, CBE

G K Hodges

P R Marriott

M R P Smith, OBE

Sir Dryden SpringA N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

For personal use only

Independent Re vie w Report FOR THE
nine MONTHS ENDED 30 june 2008

I ndependent R e v ie w R eport to D irectors of A N Z N ational B ank L imited

We have reviewed the interim financial statements on page 3 to 33 prepared and disclosed in accordance with Clause 19 of theRegistered Bank Disclosure Statement (Off-Quarter – New Zealand Incorporated Registered Banks) Order 2008 (the ‘Order’) andthe supplementary information prescribed in Schedules 2 to 8 of the Order. The interim financial statements, and supplementary
information, provide information about the past financial performance and cash flows of ANZ National Bank Limited and its subsidiarycompanies (the ‘Banking Group’) and their financial position as at 30 June 2008. This information is stated in accordance with theaccounting policies set out on page 8.
D irectors ’ responsibilities

The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of interim financial statements inaccordance with clause 19 of the Order which gives a true and fair view of the financial position of the Banking Group as at 30 June2008 and their financial performance and cash flows for the nine months ended on that date.
They are also responsible for the preparation of supplementary information which gives a true and fair view in accordance with Clause
19 of the order, of the matters to which it relates; and complies with schedules 2 to 8 of the order.
R e v ie w ers ’ responsibilities

We are responsible for reviewing the interim financial statements, including the supplementary information disclosed in accordancewith Clause 19, Schedules 2 to 8 of the Order and presented to us by the Directors.
In respect to the interim financial statements we are responsible for reviewing these financial statements in order to state whether,on the basis of the procedures described below, anything has come to our attention that would indicate that the interim financial
statements do not present a true and fair view of the matters to which they relate, and for reporting our findings to you.
In respect to the supplementary information we report as to whether it is fairly stated rather than “True and fair”, “True and fair view”
only has meaning in the context of the financial statements because of their prescribed basis of preparation, i.e. generally accepted
accounting practice (“GAAP”). This supplementary information does not and is not intended to comply with GAAP. As a result, we areresponsible for reviewing the supplementary information in order to state whether, on the basis of the procedures described below,
anything has come to our attention that would indicate that the supplementary information does not fairly state the matters to which
it relates, and for reporting our findings to you.
B asis of re v ie w opinion•

We have performed our review in accordance with the review engagement standard RS-1 Statement of Review Engagement Standards
issued by the New Zealand Institute of Chartered Accountants. A review is limited primarily to enquiries of Banking Group personnel
and analytical review procedures applied to the financial data, and thus provides less assurance than an audit. We have not performed
an audit and, accordingly, we do not express an audit opinion.

•

Our firm has also provided other services to the Registered Bank and Banking Group in relation to other audit related services. Partners
and employees of our firm may also deal with the Registered Bank and Banking Group on normal terms within the ordinary course of
trading activities of the business of the Registered Bank and Banking Group. There are, however, certain restrictions on borrowings which
the partners and employees of our firm can have with the Registered Bank and Banking Group. These matters have not impaired our
independence as auditors of the Registered Bank and Banking Group. The firm has no other relationship with, or interest in, the Registered
Bank and Banking Group.

R e v ie w O pinion

Based on our review, which is not an audit, nothing has come to our attention that would cause us to believe that:(a) the interim financial statements (excluding the supplementary information included in Notes 18, 19, 20, 21 and 25) do not present
a true and fair view of the financial position of the Banking Group as at 30 June 2008 and their financial performance and cash flows
for the nine months ended on that date;(b) the supplementary information disclosed in Notes 19, 20, 21 and 25 prescribed by Schedules 2, 3, and 5 to 8 of the Order is not fairly
stated in accordance with those Schedules; and(c) the supplementary information relating to Capital Adequacy disclosed in Note 18 of the financial statements, as required by
Schedule 4B of the Order, derived from the Registered Bank’s financial statements and sources other than the Registered Banks’
accounting records, is not in all material respects derived in accordance with the Bank’s Conditions of Registration, with the Reserve
Bank of New Zealand document Capital Adequacy Framework (Internal Models Based Approach) (BS2B), 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
4B of the Order.
Our review was completed on 20 August 2008 and our review opinion is expressed as at that date.

Wellington
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ANZ National Bank Limited