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 FOR M
DISCLOSURE STATEME NT

For the three months ended 31 December 2008
Number 52 Issued March 2009

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 THREE MONTHSENDED 31 DECEMBER 2008

CONTENTS
General Disclosures

2-4

Short Form Financial Statements

5 - 35

Conditions of Registration

36 - 38

Credit Rating Information

39

Directors’ Statement

40

Independent Review Report41

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

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 Board of the Ultimate Parent Bank in determining
limits on acceptable levels of exposure to the Bank shouldhave regard to:•

In this Disclosure Statement unless the context otherwise
requires:			a) “Banking Group” means ANZ National Bank Limited and allits subsidiaries; andb) any term or expression which is defined in, or in the mannerprescribed by, the Registered Bank Disclosure Statement(Off-Quarter - New Zealand Incorporated Registered
Banks) Order 2008 shall have the meaning given in orprescribed 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.
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 thebusiness of the Bank;•

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

the Ultimate Parent Bank should not enter into crossdefault clauses whereby a default by the Bank on an
obligation (whether financial or otherwise) is deemed
to trigger a default of the Ultimate Parent Bank in its
obligations;•the impact on the Ultimate Parent Bank’s capital andliquidity 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 basis1; and•150% in aggregate (being exposures to all similar
regulated entities related to the Ultimate ParentBank)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 Bank has guarantees under the:			a) New Zealand Deposit Guarantee Scheme (‘Crown Retail
Guarantee’); andb) New Zealand Wholesale Funding Guarantee Facility(‘Crown Wholesale Guarantee’).
As at the date of this General Short Form Disclosure Statement
the only material obligations of the Bank that are guaranteed
are the Debt Securities guaranteed under the Crown Retail
Guarantee. No material obligations of the Bank are guaranteed
under the Crown Wholesale Guarantee.
Crown Retail Guarantee			The Crown Retail Guarantee is provided under a Crown Deed of
Guarantee (Registered Bank) entered into by the Bank and the
Crown on 14 November 2008 (‘Retail Deed’).
The Crown Retail Guarantee does not extend to subordinateddebt securities issued by the Bank or debt securities that areissued by the Bank to Related Parties (as defined in the RetailDeed) of the Bank or to Financial Institutions.
As defined in the Retail Deed, ‘Financial Institutions’ meansa financial institution, as defined in section 2 of the Reserve
Bank of New Zealand Act 1989, which carries on the business ofborrowing and lending money, such as a life insurance company,a building society or a registered bank, and, without limiting thegenerality of the foregoing, includes:

1. In certain circumstances APRA may approve an increase in the individual exposure limit above this 50% limit.

P A G E2

the level of exposure that would be approved tothird parties of broadly equivalent credit status.
In this regard, prior consultation (and in cases
approval) is required before entering exceptionallylarge exposures; and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 disclosures

For personal use only

(CONTINUED)a) a ‘collective investment scheme’ as that term is defined in
section 157B of the Reserve Bank of New Zealand Act 1989
(including any ‘superannuation fund’ or ‘superannuation
scheme’);b) an ‘insurer’ as that term is defined in section 2 of the
Insurance Companies (Rating and Inspections) Act 1994
or any other person carrying on the business of providing
insurance cover (of whatever nature);c) a person carrying on business as a sharebroker, aninvestment adviser or a fund manager (to the extent that
person is acting in that capacity); ord) a person who is a subsidiary of, or who is controlled by afinancial institution within a), b), or c) above.
The Crown Retail Guarantee applies for a period commencing on
12 October 2008 and expiring on 12 October 2010 (‘Guarantee
Period’).
Under the Crown Retail Guarantee the Crown absolutely andirrevocably guarantees:a) all obligations of the Bank to pay money to a creditor
under Debt Securities (‘Indebtedness’) that become dueand payable during the Guarantee Period; andb) if a Default Event, as defined in the Retail Deed, occurs
during the Guarantee Period, all Indebtedness that exists
on the date of that Default Event (whether or not that
Indebtedness is due and payable during the Guarantee
Period); andc) all interest accruing on the amounts referred to in b) after
the occurrence of the Default Event.
The Crown undertakes that if the Bank does not pay an amountreferred to in a), b) or c) above, the Crown will pay that amountto the creditor when it is due and payable (except to the extent
that that Indebtedness or interest is not paid solely as a resultof an administrative error or technical error and is subsequently
paid within 7 days of its due date).
The Crown’s obligation to pay any amount under the Crown
Retail Guarantee is subject to the Crown receiving a notice ofclaim from the creditor in respect of the relevant Indebtedness
and to the Crown satisfying itself as to the amount of therelevant Indebtedness and such other matters as the Crown
reasonably considers appropriate in order to ascertain theextent of its liability under the Crown Retail Guarantee inrespect of that Indebtedness. Notice may be served on the
Crown in respect of the Crown Retail Guarantee by service on
the Solicitor-General at Crown Law Office, Unisys House, 56
The Terrace, Wellington.
The maximum liability of the Crown to each creditor under the
Crown Retail Guarantee is one million New Zealand dollars(NZ$1,000,000). For this purpose amounts owed to creditors
by the Bank under any Debt Security will be aggregated withother amounts owed to the same creditor by the Bank which
are supported by the Crown Retail Guarantee.

Crown Wholesale Guarantee			The Crown Wholesale Guarantee is provided under the Crown
Wholesale Funding Guarantee in respect of the Bank enteredinto by the Crown on 23 December 2008 and supplemented on
19 February 2009 (“Wholesale Deed”).
Newly issued senior unsecured (except for covered bonds, which
are also eligible) negotiable or transferrable debt securities issued
by the Bank, or issued by a subsidiary of the Bank and guaranteedby the Bank, maybe eligible to benefit from the Crown Wholesale
Guarantee. For the Crown Wholesale Guarantee to apply, theBank will need to apply to the Crown for a Guarantee Eligibility
Certificate (as defined in the Wholesale Deed) in respect of
the issue of debt securities. The decision to issue a Guarantee
Eligibility Certificate in respect of any issue of debt securities isat the sole and absolute discretion of the Crown.
If a Guarantee Eligibility Certificate is issued in respect of any
debt securities, the Crown (subject to any special conditions
specified in a Guarantee Eligibility Certificate and provided
the debt securities are not varied, amended, waived, released,
novated, supplemented, extended or restated in any respect
without the prior written consent of the Crown) irrevocably:a) guarantees the payment by the Bank of any liabilityof the Bank to pay principal and interest (excluding any
penalty interest or other amount only payable following
a default) in respect of the debt securities for which the
Crown has issued a Guarantee Eligibility Certificate; andb) undertakes that if the Bank does not pay any such liabilityon the date on which it becomes due and payable, theCrown shall, within five Business Days of a demand
being made in accordance with the Wholesale Deed andfollowing the expiry of any applicable grace period, pay
such liability.
The Crown Wholesale Guarantee does not extend to debt
securities held by a Related Party (as defined in the Wholesale
Deed) of the Bank.
In the event of a claim made on the Crown, the Crown will
only pay the interest and principal due to the holders of thedebt security on the originally scheduled dates for payment ofinterest and principal.
The Crown’s obligations in respect of any debt security
terminate on the date falling 30 days after the earlier of:a) the scheduled maturity date for the debt security underwhich the guaranteed liability arises; andb) the date falling five years after the date of issue of the debt
security under which the guaranteed liability arises, unlessvalid demand has been made on the Crown prior to thattime.
Any demand on the Crown in respect of debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate
may only be made in the prescribed form by delivery by handto the Minister of Finance, Parliament Buildings, Wellington,
New Zealand or to one of the other addresses specified in the
Wholesale Deed.

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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

general disclosures

For personal use only

(CONTINUED)P A G E

4No Guarantee Eligibility Certificate shall be issued by the Crown
in respect of any proposed debt security unless the aggregate
amount of the proposed debt security and all of the Bank’s
outstanding liabilities to pay principal and interest in respect ofthe debt securities for which the Crown has issued a Guarantee
Eligibility Certificate will not exceed the maximum amountas the Crown may from time to time determine and notify inwriting to the Bank.
The Bank will not be permitted to have guarantees for debt inexcess of 125% of the total stock of eligible types of debt on
issue, as per the last published General Disclosure Statement on
28 November 2008.
Further information			
Further information about the Crown Retail Guarantee andthe Crown Wholesale Guarantee, including a copy of the Retail
Deed and Wholesale Deed, is available in the most recent
Supplemental Disclosure Statement and on The Treasury
website at www.treasury.govt.nz.
Further information about the Crown, including a copy of its
most recent audited financial statements and details of its
credit ratings is also available at www.treasury.govt.nz.
The Crown’s long-term foreign currency issuer credit rating
is Aaa (Moody’s Investors Service), AA+ (Standard & Poor’s),
AA+ (Fitch Ratings) and has not changed in the two years
immediately before the date of this General Short Form
Disclosure Statement.
Credit ratings are assigned to sovereigns and businesses by
the international credit rating agencies. Credit ratings provide
investors with an indication of the credit-worthiness of anentity in which they are considering investing. There arethree major internationally recognised credit rating agencies:
Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
AAA is the highest rating level while a rating in the AA range isalso seen as a very high level of credit-worthiness.

S upplemental D isclosure S tatement

The most recent Supplemental Disclosure Statement for thequarter ended 31 December 2008 is available at no charge:			a) on the Bank’s websites at www.anznational.co.nz,
www.anz.co.nz and www.nationalbank.co.nz;b) immediately if request is made at the Banks head office,located at Level 14, ANZ Tower, 215-229 Lambton Quay,
Wellington, New Zealand; andc) within five working days of a request, if a request is
made at any branch of the ANZ or National Bank of
New Zealand.
The Bank’s most recent Supplemental Disclosure Statement
contains a copy of the bilateral netting agreement (refer Note19) and a copy of the Crown Retail Guarantee and Crown
Wholesale Guarantee.
D irectorate

Since the publication of the previous General DisclosureStatement on 28 November 2008, Mr John Frederick Judge wasappointed a Director of the Bank on 22 December 2008.			

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

INCOME STATEMENT
for the THREE months ended 31 DECEMBER 2008

Consolidated
Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$mInterest income

2,323

2,365

9,857

Interest expense

1,722

1,795

7,568

Net interest income

601

570

2,289

Net trading gains

70

62

271

Other operating income

93

198

742

Share of profit of equity accounted
associates and jointly controlled entities

6

6

111

Note

AuditedYear to30/09/2008$m

C ontinuing operations

Operating income

770

836

3,413

Operating expenses

380

350

1,444

390

486

1,969

94

32

302

296

454

1,667

86

144

504

210

310

1,163

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

10

Profit before income tax
Income tax expense

3

Profit after income tax

The notes on pages 10 to 35 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

For personal use only

STATEMENT OF RECOGNISED INCOME AND E XPENSE
for the three months ended 31 December 2008

Consolidated
Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008
$m

10

1

26

25
(9)

12
(5)

(47)
(37)

Actuarial (loss) gain on defined benefit schemes

-

-

(35)

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

(7)

(2)

34

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

19

6

(59)

Profit after income tax

210

310

1,163

Total recognised income and expense for the period

229

316

1,104

Net income (expense) recognised directly in equity

17

The notes on pages 10 to 35 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

For personal use only

balance sheet
as at 31 December 2008

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008
$m

3,049
7,127
2,484
15,102
101
99,268
370
884
167
247
3,328

4,059
4,150
2,180
4,351
67
89,884
216
1,000
27
237
3,297

4,838
5,032
2,624
7,533
109
97,679
363
57
1,000
121
242
3,317

132,127

109,468

122,915

6,395
74,145964
13,9171,692
91
355
21,706
2,826

3,765
71,601
2,396
4,678
1,632
31
161
14,146
2,039

3,312
77,136
404
6,710
1,841
190
20,695
2,820

Total liabilities

122,091

100,449

113,108

Net assets

10,036

9,019

9,807

5,943
66
4,027

5,943
89
2,987

5,943
47
3,817

10,036

9,019

9,807

Note
A ssets

Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Shares in associates and jointly controlled entities
Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets

45
6
7
8, 9, 10

Total assets
L iabilities

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

11
12

13
14

EquityOrdinary share capital
Reserves
Retained earnings

16
17
17

Total equity

The notes on pages 10 to 35 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

For personal use only

cash flow statement
for the three months ended 31 December 2008

Consolidated
Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008
$m

2,210

2,305

9,502

-

-

4

325

268

1,060

Interest paid

(1,616)(1,662)(6,959)Operating expenses paid

(366 )(335)(1,313)

8

(20)

(524)

561

556

1,770

(1,420)

(873)

(630)

162

(272)

(617)

2,456

149

1,512

17

(19)

(36)

Increase in loans and advances(872)(2,134)(9,433)

Decrease in other assets

115

18

28

Increase in due to other financial institutions

3,083

595

142

(Decrease) increase in deposits and other borrowings(3,990)

1,274

5,464

(Decrease) increase in payables and other liabilities

(122)

234

208

(10)

(472)

(1,592)

Proceeds from sale of premises and equipment

33

-

2

Purchase of shares in associates and jointly controlled entities

(1)

(4)

(48)

Purchase of intangible assets

(19)

(2)

(29)

Purchase of premises and equipment

(30)

(14)

(51)

Net cash flows used in investing activities

(17)

(20)

(126)

Note
C as h flow s from operating acti v ities

Interest received
Dividends received
Fees and other income received

Income taxes (paid)/refunded
Cash flows from operating profits before changes inoperating assets & liabilities
Net changes in operating assets and liabilities:
Increase in due from other financial institutions - term
(Decrease) increase in trading securities
Decrease in derivative financial instruments
Decrease (increase) in available-for-sale assets

Net cash flows used in operating activities

23

C as h flow s from in v esting acti v ities

The notes on pages 10 to 35 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

For personal use only

cash flow statement
for the three months ended 31 December 2008 ( C O N T I N U E D )Consolidated

Note

Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008$m

C as h flow s from financing acti v ities

Proceeds from bonds and notes

135

547

9,283

Redemptions of bonds and notes(1,868)(761)(5,270)

Proceeds from loan capital

-

-

835

Redemptions of loan capital

-

-

(100)

560

(379)

(2,371)(1,173)

(593)

2,377

(10)
(17)

(472)
(20)

(1,592)
(126)
2,377

Increase (decrease) in due to parent company
Net cash flows (used in) provided by financing activities
Net cash flows used in operating activities
Net cash flows used in investing activities
Net cash flows (used in) provided by financing activities(1,173)(593)

Net (decrease) increase in cash and cash equivalents(1,200)(1,085)659

Cash and cash equivalents at beginning of the period

7,789

7,130

7,130

Cash and cash equivalents at end of the period

6,589

6,045

7,789

Liquid assets

3,049

4,059

4,838

Due from other financial institutions - less than 90 days

3,540

1,986

2,951

Total cash and cash equivalents

6,589

6,045

7,789

R econciliation of cas h and cas he q ui valents to t h e balance s h eets 1

1. 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 10 to 35 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

notes to the financial statements

For personal use only

1.

P A G E

1 0

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 2008.
(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, financial instruments held for trading, assets treated asavailable-for-sale, financial instruments designated at fair value through profit or loss, and defined benefit scheme assets andliabilities.
(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 November 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 reclassified 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 November 2008.

3.

I ncome Ta x E x pense

Consolidated

Income tax expense
Effective tax rate (%)

Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008
$m

86

144

504

29.1%

31.7%

30.2%

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
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008$m

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

2,386
586
77

2,146
180
1,652
81

3,949
807
82

Total liquid assets

3,049

4,059

4,838

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

2,112

1,816

3,779

Able to be withdrawn without prior notice

254

1,389

437

Securities purchased under agreements to resell

592

304

304

-

-

1,328
2,447

5.

D ue from ot h er F inancial I nstitutions

Security settlements
Certificates of deposit

4,891

2,009

Term loans and advances

1,390

448

516

Total due from other financial institutions

7,127

4,150

5,032

-

46

-

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

6.

T rading S ecurities

Government, Local Body stock and bonds

430

171

252

Certificates of deposit

392

723

926

Promissory notes

177

361

39

Other bank bonds

1,369

727

1,331

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

116

198

76

2,484

2,180

2,624

131

418

97

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For personal use only

7.

P A G E

1 2

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

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

Government, Local Body stock and bonds

3

3

3

Other debt securities

34

63

41

Equity securities

64

1

65

Total available-for-sale assets

101

67

109

Overdrafts

1,855

2,038

2,140

Credit card outstandings

1,488

1,432

1,434

Term loans - housing

53,49851,35753,350Term loans - non-housing

41,50635,56040,583Finance lease receivables

769

775

777

Gross loans and advances

99,116

91,162

98,284

(725)

(478)

(666)

Unearned finance income

(330)

(325)

(346)

Fair value hedge adjustment

1,163

(541)

353

(58)

(57)

(55)

8 . N et L oans and A d vances

Provision for credit impairment (Note 10)

Deferred fee revenue and expenses
Capitalised brokerage/ mortgage origination fees
Total net loans and advances

102

123

109

99,26889,884

97,679The Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book valueof $1,370 million. The underlying collateral accepted by the Reserve Bank under this transaction are mortgages to the value of $1,711
million. These assets are eliminated on consolidation as they are part of an in-house residential mortgage-backed securities facility.

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)

9 . 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 31/12/2008
Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

83
71
(5)
(17)

30
82
(14)
(22)

214
27
(15)
(12)

327
180
(34)
(51)

(2)

(33)

(4)

(39)

130

43

210

383

Balance at beginning of the period

7

20

88

115

Transfers from productive

1

21

24

46

Transfers to productive

-

-

(4)

(4)

Assets realised or loans repaid

-

-

(11)

(11)

Write offs

-

(23)

-

(23)

Balance at end of the period

8

18

97

123

Balance at end of the period
Unaudited 31/12/2007

Audited 30/09/2008
Balance at beginning of the period
Transfers from productive

7

20

88

115

103

122

228

453

Transfers to productive

(2)

-

(8)

(10)

Assets realised or loans repaid

(18)

(14)

(86)

(118)

Write offs

(7)

(98)

(8)

(113)

Balance at end of the period

83

30

214

327

430

Unaudited 31/12/2008
Balance at end of the period
Past due assets (90 days past due assets)1

312

61

57

Other assets under administration

-

-

7

7

Undrawn facilities with impaired customers

-

-

10

10

Interest forgone on impaired assets

3

1

4

8

Unaudited 31/12/2007
Balance at end of the period
Past due assets (90 days past due assets)1

99

34

20

153

Other assets under administration

-

-

-

-

Undrawn facilities with impaired customers

-

-

15

15

Interest forgone on impaired assets

-

-

3

3

244

54

11

309

-

-

1

1

Audited 30/09/2008
Balance at end of the period
Past due assets (90 days past due assets)1
Other assets under administration
Undrawn facilities with impaired customers

-

-

6

6

Interest forgone on impaired assets

6

2

10

18

There are no undrawn facilities with 90 day past due customers or customers within the other assets under administration category as
at 31 December 2008 (31 December 2007 nil; 30 September 2008 nil).
As at 31 December 2008, the Banking Group did not have any material restructured assets or material assets acquired throughenforcement of security (31 December 2007 nil; 30 September 2008 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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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 . 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

81

164

289

534

Charge to income statement

1

(1)

22

22

Balance at end of the period

82

163

311

556

Balance at beginning of the period

37

23

72

132

Charge to income statement

16

31

25

72

-

5

-

5

Bad debts written off

(2)

(33)

(4)

(39)

Discount unwind1

-

-

(1)

(1)

Unaudited 31/12/2008
Collective provision

Individual provision (individually impaired assets)

Recoveries of amounts previously written off

Balance at end of the period

51

26

92

169

Total provision for credit impairment

133

189

403

725

422

Unaudited 31/12/2007
Collective provision
Balance at beginning of the period

58

130

234

Charge to income statement

2

5

7

14

Balance at end of the period

60

135

241

436

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

4

13

27

44

Charge to income statement

-

15

3

18

Recoveries of amounts previously written off

-

4

-

4

Bad debts written off

-

(22)

(1)

(23)

Discount unwind1

-

-

(1)

(1)

Balance at end of the period

4

10

28

42

Total provision for credit impairment

64

145

269

478

Balance at beginning of the period

58

130

234

422

Charge to income statement

23

34

55

112

Balance at end of the period

81

164

289

534

Balance at beginning of the period

4

13

27

44

Charge to income statement

40

93

57

190

Audited 30/09/2008
Collective provision

Individual provision (individually impaired assets)

Recoveries of amounts previously written off

-

15

2

17

Bad debts written off

(7)

(98)

(8)

(113)

Discount unwind1

-

-

(6)

(6)

Balance at end of the period

37

23

72

132

Total provision for credit impairment

118

187

361

666

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.

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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)

1 0 . 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 ( continued )Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

New and increased provisions

16

36

27

79

Provision releases

-

-

(2)

(2)

Provision Movement Analysis
Unaudited 31/12/2008

16

36

25

77

Recoveries of amounts previously written off

-

(5)

-

(5)

Individual provision charge

16

31

25

72

Collective provision charge

1

(1)

22

22

Charge to income statement

17

30

47

94

New and increased provisions

-

19

6

25

Provision releases

-

-

(3)

(3)

-

19

3

22

Unaudited 31/12/2007

Recoveries of amounts previously written off

-

(4)

-

(4)

Individual provision charge

-

15

3

18

Collective provision charge

2

5

7

14

Charge to income statement

2

20

10

32

40

108

75

223

-

-

(16)

(16)

40

108

59

207

-

(15)

(2)

(17)

Audited 30/09/2008
New and increased provisions
Provision releases
Recoveries of amounts previously written off
Individual provision charge

40

93

57

190

Collective provision charge

23

34

55

112

Charge to income statement

63

127

112

302

P A G E

1 5

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 1 .	due to ot h er financial institutions

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008
$m

1,002

Australia and New Zealand Banking Group Limited
3,125

956

Securities sold under agreements to repurchase(Ultimate Parent Bank)

1,751

418

97

Other financial institutions

1,519

2,391

2,213

Total due to other financial institutions

6,395

3,765

3,312

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

3,125

956

1,002

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

1 2 . D eposits and ot h er borrow ings

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

Amortised cost
Certificates of deposit

6,493

3,949

5,527

Term deposits

30,71429,88031,260Demand deposits bearing interest

22,662

20,53422,085

Deposits not bearing interest

4,127

4,664

3,928

Secured debenture stock

1,796

1,755

1,683

Total deposits and other borrowings recognised at amortised cost

65,79260,78264,483

Fair value through the profit or loss
Commercial paper

8,353

10,81912,653

Total deposits and other borrowings recognised at fair value

8,353

10,81912,653

Total deposits and other borrowings

74,14571,601

77,136

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

8,321

10,815

12,670UDC Finance Limited secured debentures
Carrying value of total tangible assets

2,102

2,048

2,032

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.

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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 3 . B onds and notes

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

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

2,658

1,160

2,538

Other bonds and notes issued

19,04812,98618,157

Total bonds and notes

21,70614,146

20,695

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

20,222

13,022

19,572

1 4 . L oan C apital

Consolidated
Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$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

248
317
222
52
202
1,785

235
302
211
50
193
1,048

248
317
222
52
202
1,779

Total loan capital

2,826

2,039

2,820

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

1,041

991

1,041

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.
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 loanon 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.

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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)

1 4 . L oan C apital ( C ontinued )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 dateAmount $m

Coupon rate

Call date

Maturity date

15 September 2006

350

7.16%

15 September 201115 September 2016

2 March 2007

250

7.60%

2 March 2012

2 March 201723 July 2007

350

8.23%

23 July 201223 July 2017

As at 31 December 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

1st Call date

2nd Call date

835

9.66%

18 April 201318 April 2018

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 and then quarterly thereafter. If the bonds are not called at the First Call Date, the coupon rate will reset to thefive year interest swap rate plus 2.00%. Should the bonds not be called at the Second Call Date, the Coupon Rate from the Second
Call Date onwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 31 December 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, the Bank has a general rightand 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.
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 the perpetual subordinated debt
which qualifies as Upper Level Tier Two Capital.

1 5 . I N G N e w zealand funds

There has been recent publicity in New Zealand regarding the suspension of trading in the ING Diversified Yield Fund and the ING
Regular Income Fund (‘the funds’) on 13 March 2008 due to deterioration in the liquidity and credit markets. These funds are managed
by the joint venture partner ING (NZ) Limited. Some of these funds were sold to ANZ National customers.
On 25 February 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them either aguaranteed value in five years time or the ability to exit the investment immediately for a cash amount.
The estimated cost of this proposal to the Bank is approximately $161m and this amount has been recognised in ‘other operating
income’ in the Income Statement.
The ultimate cost to the Bank will depend on the final value of units, recoveries under insurance cover and approval of the offer byunitholders. In addition the Commerce Commission has sought information regarding the two Funds and may be investigating thismatter, although at this stage, it is not possible to determine the outcome of any investigation.

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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 6 . O rdinary s h are capital

Consolidated

Ordinary share capital at beginning and end of the period

Unaudited
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008
$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 haveone 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
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

Available-for-sale revaluation reserve
Balance at beginning of the period

23

(1)

(1)

Valuation gain recognised after tax

7

1

24

Balance at end of the period

30

-

23

Balance at beginning of the period

24

84

84

Cash flow hedging reserve

Valuation gain (loss) recognised after tax

18

9

(34)

Transferred to income statement

(6)

(4)

(26)

Balance at end of the period

36

89

24

Total reserves

66

89

47

3,817

2,677

2,677

210

310

1,163

4,027

2,987

3,840

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

-

-

(23)

4,027

2,987

3,817

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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

P A G E

2 0

Adoption of Basel II Accord
On 10 December 2007, the Bank was accredited by the RBNZ to adopt the Basel II Accord’s internal ratings based approach for calculating
capital adequacy ratios. The Bank has reported on this basis with effect from 31 March 2008. Basel II consists of three pillars - Pillar
I covers the capital requirements for banks for credit, operational and market risks, Pillar II covers all other material risks not alreadyincluded in Pillar I, and Pillar 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
ratios31/12/2008

Consolidated
Unaudited
31/12/2008

Tier One Capital

4.00%

8.19%

Total Capital

8.00%

11.68%

Capital of the Banking Group as at 31 Decmeber 2008 (Unaudited)$mTier One Capital
Ordinary share capital

5,943

Revenue and similar reserves

3,883

Current period's profit after tax

210

Less deductions from Tier One Capital--

Goodwill--

Other intangible assets--

Defined benefit schemes surplus (net of tax)--

Equity investment in ING NZ

216

--

Cash flow hedging reserve36-- 50% of total expected loss to the extent greater than total eligible
allowances for impairment
Total Tier One Capital

3,265
63
-

128
6,328

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

1,152

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

1,674
2,826

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

128

Total Tier Two Capital

2,698

Total Capital

9,026

1. Basel II capital ratios for the 31 December 2007 comparative period have not been provided as the information is not readily available. The Bank first reported under the Basel II internal
models based approach as at 31 March 2008.		

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
31 December 2008 (Unaudited)

Exposure atdefault$m

Risk weighted
exposure or implied
risk weighted
exposure$m

Total capitalrequirement$mInternal ratings based approach

141,738

54,066

4,324

Specialised lending subject to the slotting approach

9,573

9,694

776

Other internal ratings based exposures

2,955

604

48

227

962

77

Equity exposures
Standardised approach

266

236

19

Total credit risk

154,759

65,562

5,244

Operational risk

n/a

5,638

451

Market risk

n/a

4,059

325

Supervisory adjustment2
Total capital requirement

n/a

2,001

160

154,759

77,2606,180

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
31/12/2008

Unaudited
31/12/2007

Registered Bank
Audited30/09/2008

Unaudited
31/12/2008

Unaudited
31/12/2007

Audited30/09/2008

Tier One Capital

7.71%

7.37%

7.75%

7.62%

7.14%

7.65%

Total Capital

11.09%

10.14%

11.24%

10.94%

9.09%

11.09%

Total risk-weighted
exposures

83,71873,50580,717

81,79371,891

78,860Tier 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 30 September 2008 General Disclosure Statement 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 31 December 2008.

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For personal use only

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

2 2

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 31/12/2008 (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

36,34436,34438

58

22,202

1,776

Sovereign

1,161

1,152

5

1

12

1

Bank

8,530

7,996

64

14

1,203

96

Retail mortgages

49,67049,67022

24

12,651

1,012

Other retail

5,336

5,336

53

51

2,905

232

101,041

100,498

33

37

38,973

3,117

12,428

11,608

46

53

6,565

525

Total on-balance sheet exposures
Off-balance sheet exposures
Corporate
Sovereign
Bank

8

8

5

1

-

-

2,081

1,987

59

18

378

30

Retail mortgages

5,377

5,319

21

26

1,491

119

Other retail

5,136

5,378

60

32

1,808

145

Total off-balance sheet exposures

25,03024,30045

40

10,242819

100,909

4,326

59

47

2,135

171

Market related contracts
Corporate
Sovereign

5,290

622

5

1

6

-

Bank

445,101

11,992

65

21

2,710

217

Total market related contracts

551,300

16,940

61

27

4,851

388

Total credit risk exposures subject tothe internal ratings based approach

677,371

141,73838

36

54,066

4,324

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(CONTINUED)

For personal use only

1 8 .	capital ade q uacy ( C ontinued )Consolidated as at 31/12/2008 (Unaudited)

Probabilityof default%
Corporate
CCR rating
0-2
3-4
5
6
7-8
Default

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

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

0.05%
0.34%
1.00%
2.27%
7.89%
100.00%7,668
22,963
12,113
6,858
2,370
306

61
38
37
39
40
49

28
41
68
89
134
37

2,286
9,918
8,736
6,488
3,354
120

183
793
699
519
268
10

Total corporate credit risk exposures

1.63%

52,2784156

30,902

2,472

Sovereign
CCR rating
0
1
2
3
4-8
Default

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

1,782
-

5
-

1
-

18
-

1
-

Total sovereign credit risk exposures

0.01%

1,782

5

1

18

1

Bank
CCR rating
0
1
2-4
5-6
7-8
Default

0.01%
0.02%
0.08%
1.15%
6.02%
n/a

18,062
2,966
886
30
31
-

65
61
53
63
65
-

17
20
24
110
206
-

3,338
625
226
35
67
-

267
50
18
3
5
-

Total bank credit risk exposures

0.02%

21,975

64

18

4,291

343

0.25%
0.36%
1.00%
2.43%
12.85%
100.00%13,511
21,674
10,306
6,541
2,395
562

21
22
22
24
25
29

10
13
28
53
110
25

1,395
3,042
3,050
3,705
2,803
147

112
243
244
296
224
12

2.26%

54,98922

24

14,142

1,131

0.10%
0.27%
1.14%
2.06%
12.03%
100.00%

1,217
4,525
2,589
1,658
602
123

80
55
52
51
54
55

20
25
55
66
94
5

262
1,184
1,511
1,152
598
6

21
95
121
92
48
-

2.54%

10,714

56

41

4,713

377

Retail mortgages
CCR rating
0-3
4
5
6
7-8
Default
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

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 other relevantcorrespondence 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.

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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 31/12/2008 (Unaudited)Risk
weighted Total capital
exposure3 requirement$m$m

Exposureamount$m

Riskweight%Strong

2,571

70

1,908

153

Good

2,997

90

2,859

229

Satisfactory

1,912

115

2,331

186

Weak

419

250

1,112

89

Default

97

-

-

-

7,996

97

8,210

657

On-balance sheet exposures4

Total on-balance sheet exposures subject to the slotting approach

Exposureamount$m

Average
EAD risk weight
$m
%

Risk
weighted Total capital
exposure3 requirement$m$m

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

1,395

Market related contracts
Total off-balance sheet exposures subject to the slotting approach

1,332

89

1,250

100

3,660

245

90

234

19

5,055

1,577

89

1,484

119

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 31/12/2008 (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

274

-

-

-

2,112

-

-

-

569

100

604

48

2,955

19

604

48

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 31/12/2008 (Unaudited)
Exposureamount$m

Risk weight%

Risk weighted
exposure3$m

Total capitalrequirement
$m

227

400

962

77

All other equity holdings (not deducted from capital)

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 31/12/2008 (Unaudited)
Exposureamount$m

Risk weight%

Risk weighted
exposure3$m

Total capitalrequirement$m

Corporates

121

69

88

7

Total on-balance sheet exposures subject to the standardised approach

121

69

88

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

428

34

145

97

148

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.

Implied risk Total operational
weightedrisk capital
exposurerequirement$m$m
Operational risk capital requirement as at 31 December 2008 (Unaudited)
Advanced Measurement Approach for operational risk

5,638

451

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.

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For personal use only

1 8 .	capital ade q uacy ( C ontinued )market risk

Implied risk
weighted
exposure$m

Aggregate
capital charge
$m

3,959

317

37

3

Market risk capital requirement as at 31 December 2008 (Unaudited)
Interest rate risk
Foreign currency risk
Equity risk

63

5

4,059

325

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 31 December 2008, under the IRB approach the Banking Group had $938m of Corporate exposures covered by guarantees. Noneof the credit risk exposures subject to the Standardised approach were covered by eligible financial collateral. Under the IRB approach
the Banking Group currently has no exposures backed by credit derivatives.				
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. The exposure amount used to calculate LVR excludes commitments to lend.

LVR Range

Exposure amount$m

0% - 59%

22,633

60% - 69%7,381

70% - 79%9,430

80% - 89%7,481

Over 90%

6,348

Total retail mortgage credit risk exposures subject to the internal ratings based approach 					53,273

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 5

Total capitalrequirement$mInternal capital allocation for other material risks 		

					

143

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 31 December 2008 was $143 million, comprisingpremises 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 1 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 internal capital allocation for other material risks for the 31 December 2007 comparative period has not been provided as the information is not readily available. The Bank firstreported under Basel II IRB with effect from 31 March 2008.		

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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 31/12/2008
Number of Counterparties

10% to 20% of equity

Unaudited 31/12/2007
Number of Counterparties

Audited 30/09/2008
Number of Counterparties

As at

Peak forthe quarter

As at

Peak forthe quarter

As at

Peak forthe quarter

1

1

1

2

1

1

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 credit exposures to 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), by credit rating:Consolidated
Unaudited 31/12/2008

As at
Investment grade credit rating1

Unaudited 31/12/2007

Audited 30/09/2008

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

1,662

100.0%

1,621

100.0%

1,329

100.0%

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 (asat the end of the quarter) in ranges of 10% of equity, on the basis of actual exposures:Consolidated
Unaudited 31/12/2008
Number of Counterparties

Unaudited 31/12/2007
Number of Counterparties

Audited 30/09/2008
Number of Counterparties

As at

Peak forthe quarter

As at

Peak for thequarter

As at

Peak for thequarter

10% to 20% of equity

2

3

2

2

1

2

20% to 30% of equity

2

1

-

-

1

1

30% to 40% of equity

-

1

-

-

-

-

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 31/12/2008

As at
Investment grade credit rating 1
1

Unaudited 31/12/2007

Audited 30/09/2008

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

7,609

100.0%

2,285

100.0%

3,416

100.0%All of the individual and bank counterparties included in the above tables have an investment grade credit rating. An investment grade credit rating means a credit rating of 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, or to an entity’s long term seniorunsecured 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 ( continued )P A G E

2 8

Concentrations of credit risk to connected persons
Credit exposures to connected persons reported in the table below have been calculated partially on a bilateral net basis, and partiallyon a gross basis. With effect from 11 August 2008, netting has occurred in respect of certain transactions which are the subject of abilateral netting agreement disclosed in the Bank’s most recent Supplemental Disclosure Statement for the period ended 31 December
2008. There is a limit of 125% of the Banking Group Tier One Capital in respect of the gross amount of aggregate credit exposure toconnected persons that can be netted off in determining the net exposure.
Consolidated

Aggregate at end of period4
Other connected persons(on gross basis, before netting)2
Other connected persons (amount netted off)2
Other connected persons(on partial bilateral net basis)2
Non-bank connected persons3Peak end-of-day for the quarter4
Other connected persons(on gross basis, before netting)
Other connected persons (amount netted off)
Other connected persons(on partial bilateral net basis)Non-bank connected persons3
Rating-contingent limit5
Other connected persons
Non-bank connected persons

Unaudited 31/12/2008

Unaudited 31/12/2007

Audited 30/09/2008

Amount% of Tier$m One Capital

6

Amount$m% of Tier
One Capital

Amount$m% of Tier
One Capital

4,657

73.6%

2,409

44.3%

3,011

49.1%

3,433
1,224

54.3%
19.3%

n/a
n/a

n/a
n/a

2,187
824

35.6%
13.5%

-

0.0%

-

0.0%

-

0.0%

5,889

93.1%

3,487

64.2%

4,250

69.3%

3,962
1,927

62.6%
30.5%

n/a
n/a

n/a
n/a

2,889
1,361

47.1%
22.2%

-

0.0%

-

0.0%

-

0.0%

n/a
n/a

70.0%
15.0%

n/a
n/a

75.0%
15.0%

n/a
n/a

70.0%
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 as at
the end of the quarter. There were no individual provisions provided against credit exposures to connected persons as at 31 December
2008 (31/12/2007 $nil; 30/09/2008 $nil). The Banking Group had no contingent exposures arising from risk lay-off arrangements toconnected persons as at 31 December 2008 (31/12/2007 $nil; 30/09/2008 $nil).
2. The Banking Group has amounts due from its Parent Company and Ultimate Parent Bank and other entities within the Ultimate Parent Group arising from the ordinary course of its
business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate Parent Bank. As at 31 December 2008, thegross exposures to the Bank’s Parent Company were $nil (31/12/2007 $48 million; 30/09/2008 $14 million). As at 31 December 2008, the gross exposures to the Bank’s Ultimate
Parent Bank were $4,657 million (31/12/2007 $2,361 million; 30/09/2008 $2,997 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 Banking Group has complied with the limits on aggregate credit exposure (of a non-capital nature and net of individual provisions) to connected persons and non-bankconnected 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 (of a non-capital nature and net of individual provisions) to all connected persons. This is basedon the rating applicable to the Bank’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars (refer page 39 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-bank connected 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 Service.
6

The connected exposure balances for 31 December 2007 have been amended for the credit equivalent adjustment for derivatives, in addition to the fair value which was alreadyincluded. The revised balances remain within limits.

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 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

Peak

Unaudited 31/12/2008
Interest rate risk

3,959

3,975

317

318

3.2%

3.2%

Foreign currency risk

37

58

3

5

0.0%

0.0%

Equity risk

63

66

5

5

0.1%

0.1%

3,555

3,646

284

292

3.2%

3.2%

Foreign currency risk

35

74

3

6

0.0%

0.1%

Equity risk

3

3

0

0

0.0%

0.0%

Unaudited 31/12/2007
Interest rate risk

Audited 30/09/2008
3,736

3,984

299

319

3.0%

3.3%

Foreign currency risk

Interest rate risk

35

160

3

13

0.0%

0.1%

Equity risk

64

75

5

6

0.1%

0.1%

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
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

Interest earning and discount bearing assets

112,009100,289

109,017

Interest and discount bearing liabilities

102,175

89,268100,581P 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 $2 million and greater. The Banking Group’s relationship with these businesses ranges from simple banking requirementswith revenue from deposit and transactional facilities, and cashflow lending, to more complex funding arrangements with revenue
sourced from a wider range of products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group’s client base. The Institutional business unit ismade up of the following specialised units:• Institutional - provides financial services to large multi-banked corporates, often global, who require sophisticated product andstructuring solutions.
• Corporate Finance - provides complex financing and advisory services, structured financial products, leasing, private equity, project,export and leveraged finance.
• Markets - provides foreign exchange and commodity trading and sales-related services, origination, underwriting, structuring, risk
management and sale of credit and derivative products globally.
• Working Capital - provide cash management, trade finance, international payments, clearing and custodian services.
Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent with the 2008
segment definitions.
BUSINESS SEGMENT ANALYSIS - CONTINUING OPERATIONS1,2
Consolidated
RetailBanking$m

RelationshipBanking$m

Net operating income3

273

188

Profit before income tax3

(41)

95

Net operating income

467

173

128

68

836

Profit before income tax

188

113

90

63

454

Net operating income

1,840

718

546

309

3,413

Profit before income tax

650

395

373

249

1,667

Total
$m

216

93

770

168

74

296

Unaudited 3 months to 31/12/2007

Audited year to 30/09/2008

Results are equity standardised.

2. Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3. Includes $161m in relation to ING New Zealand Funds. Refer to note 15 for further details.

3 0

Other
$m

Unaudited 3 months to 31/12/2008

1.

P A G E

Institutional$m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 3 . notes to t h e cas h flow statements

Consolidated
Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008$m

Profit after income tax

210

310

1,163

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

12
94
1
4
14

11
32
4
4
14

46
302
(3)
13
57

Deferrals or accruals of past or future operating cash receipts or payments:
Increase in operating assets and liabilities
Decrease in interest receivable(Decrease) increase in interest payable
Increase in accrued income(Decrease) increase in accrued expenses
Increase (decrease) in provisions
Amortisation of premiums and discounts(Decrease) increase in income tax

(571)
1
(15)
(3)
(11)
165
13
94

(1,028)
25
29
(1)
5
(4)
10
124

(3,362)
2
202
(8)
45
25
56
(20)

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

(6)
(12)

(6)
-

(111)
1

Net cash flows used in operating activities

(10)

(471)

(1,592)

Reconciliation of profit after income tax to net cash flows used inoperating 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
Unaudited
3 months to
31/12/2008$m

Unaudited
3 months to
31/12/2007$m

AuditedYear to30/09/2008$m

Total liquidity portfolio1

9,201

5,183

8,736

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

1,003
897

2,243
1,694

1,059
1,948

Deduct:Trading securities
Due from other financial institutions - greater than 90 days

(1,140)(3,372)(1,359)(1,716)(2,376)(1,578)

Total cash and cash equivalents

6,589

6,045

7,789

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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For personal use only

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 bank

The Parent Company is ANZ Holdings (New Zealand) Limited which is incorporated in New Zealand. The Ultimate Parent Bank isAustralia 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 Bank enters into transactions in the normal course of business by which it transfers financial assets directly to third parties or to
special purpose entities. These transfers may give rise to the full or partial derecognition of those financial assets.
•

Full derecognition occurs when the Bank transfers its contractual right to receive cash flows from the financial assets, or retains the rightbut assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks and rewards of ownership.
These risks include credit, interest rate, currency, prepayment and other price risks.

•Partial derecognition occurs when the Bank sells or otherwise transfers financial assets in such a way that some but not substantially allof the risks and rewards of ownership are transferred but control is retained. These financial assets are recognised on the balance sheet
to the extent of the Bank’s continuing involvement.

In May 2008 the RBNZ expanded the range 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 eventthat global market disruption was to intensify. From 31 July 2008, acceptable collateral includes residential mortgage backed securities(“RMBS”) that satisfy RBNZ criteria.					On 10 October 2008, the Banking Group established an in-house RMBS facility that could issue securities meeting the RBNZ criteria. The
establishment of the facility resulted in the Parent financial statements recognising a payable and receivable of equal amount totalling$3,720 million to Kingfisher NZ Trust 2008-1 (‘the Trust’), a newly established consolidated entity. On 12 December 2008, a further
tranche totalling $5,521 million was also sold to the Trust, creating a second payable and receivable of equal amount. These assets do
not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets, therefore the Consolidated Group’s
financial statements do not change as a result of establishing these facilities.
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 from the sale ofthird 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 fairvalue. 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 except standard lending facilities provided in the normal course of businesson arms length terms 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 (31/12/2007 $nil; 30/09/2008 $nil).

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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
The Bank and subsidiaries participating in the activities identified above have in place policies and procedures to ensure that those
activities are conducted in an appropriate manner. Should adverse conditions arise, it is considered that these policies and procedures
will minimise the possibility that these conditions will adversely impact the Bank. The policies and procedures include comprehensive
and prominent disclosure of information regarding products, and formal and regular review of operations and policies by management
and auditors.
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
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$m

Premises and equipment
Not later than 1 year

27

20

26

Total capital expenditure commitments

27

20

26

Premises and equipment
Not later than one year
Later than 1 year but not later than 5 years
Later than five years

85
168
34

81
160
31

86
167
27

Total lease rental commitments

287

272

280

Total commitments

314

292

306

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

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
31/12/2008$m

Unaudited
31/12/2007$m

Audited30/09/2008$mCommitments with certain drawdown due within one year
Commitments to provide financial services

481
22,882

1,018
24,161

659
23,150Total credit related commitments

23,36325,17923,809Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,972
413
1,031
74

1,948
568
439
105

2,017
401
1,090
118

Total contingent liabilities

3,490

3,060

3,626

Exchange rate contracts
Interest rate contracts
Commodity contracts
Equity contracts

103,412451,47276-

89,819473,42120

109,771
537,469
36-

Total foreign exchange, interest rate and equity contracts

554,960

563,260

647,276

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 bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio management and collateral requirements
for customers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect
future cash requirements.
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 November 2008 the IRD issued amended tax assessments as a follow up to the Notices in respect of six of thesetransactions for the 2004 income year (prior to that tax year becoming statute-barred) and a further two in respect of the 2003 income
year. 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, five transactions in respect of the 2002 income year and four in respect of the 2003 income year
(in each case prior to that tax year becoming statute-barred). Proceedings disputing the amended tax assessments with respect to the
2000-2004 income 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 $313 million($480 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 ($554 million with interest tax effected) as at 31 December 2008.

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For personal use only

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 ($155 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 31 December 2008 of $266 million ($399 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 otherabovementioned defendants seeking unquantified damages, based on allegations similar to those contained in the CommerceCommission proceedings.
ANZ National Bank Limited is defending the proceedings. The Bank has received independent legal advice. The Bank considers it has
a strongly 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.
In addition, the Bank is aware that the Commerce Commission is looking closely at credit contract fees under the Credit Contracts andConsumer Finance Act 2003 (CCCFA). In its 2008-2011 Statement of Intent the Commission stated that:					“The Commission is turning more to litigation under the Credit Contracts and Consumer Finance Act to ensure credit contract fees arereasonable and disclosed. Currently the credit industry is not fully compliant with the legislation and taking more action through thecourts will encourage better compliance and clarify any areas of the law that may be uncertain.”In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged on credit cards andthe level of currency conversion charges on overseas transactions using credit cards under the CCCFA. We have also been notified that
the Commission will be investigating early repayment charges on fixed rate mortgages. At this stage the possible outcome of theseinvestigations and any liability or impact on fees cannot be determined with any certainty.
ING New Zealand Funds
Refer to note 15 of these financial statements for further details.
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
31 December 2008, there were no other contingent assets or liabilities required to be disclosed (31/12/2007 nil; 30/09/2008 nil).
2 8 . subse q uent e v ents

Australia and New Zealand Banking Group Limited - NZ Branch
A New Zealand Branch of the Australia and New Zealand Banking Group Limited was registered on 5 January 2009. Effective 20 February
2009, $5 billion of residential mortgage assets were sold at fair value to the NZ Branch.
ING New Zealand Funds
There has been recent publicity in New Zealand regarding the suspension of trading in the ING Diversified Yield Fund and the ING Regular
Income Fund (‘the Funds’) on 13 March 2008 due to deterioration in the liquidity and credit markets. These funds are managed by thejoint venture partner ING (NZ) Limited. Some of these funds were sold to ANZ National customers.
On 25 February 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them either aguaranteed value in five years time or the ability to exit the investment immediately for a cash amount.
The estimated cost of this proposal to the Bank is approximately $161m and this amount has been recognised in ‘other operating income’in the Income Statement.
The ultimate cost to the Bank will depend on the final value of the units, recoveries under insurance cover and approval of the offer byunitholders.

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conditions of registration

For personal use only

Conditions of Registration, applicable as at 5 March 2009. These Conditions of Registration have applied from 15 October 2008.

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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 the definitionof 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).
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 $30 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 thatare 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%

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

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 capital andrisk-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 this condition:(i) Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings and Inspections)
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 thenature 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, the sizeof 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, the total
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 determined inaccordance 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, the wholeof 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 non-bankconnected 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, are also
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 the Companies 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.

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8. That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing duties as adirector, to act other than in what he or she believes is the best interests of the company (i.e. the Bank).
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 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 31 December 2008. The rating is not subject
to any qualifications.
The Moody’s Investors Service rating 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 31 December 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.
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’ categories. Moody’s Investors Service applies numerical modifiers 1, 2, and 3 to each of the ‘Aa’ to ‘Caa’ classifications, with
1 indicating the higher end and 3 the lower end of the rating category.

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directors’ statement

For personal use only

D irectors ’ S tatement

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 three months ended 31 December 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,
5 March 2009. On that date, the Directors of the Bank were:

Dr D T BrashJ F Judge

Dr R J Edgar

N M T Geary, CBE

G K Hodges

P R Marriott

M R P Smith, OBE

Sir Dryden Spring

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independent re vie w report for the three months
ended 31 december 2008

I n depe n de n t R e v ie w R eport to T H E D irectors o f A NZ Natio n al B a n k L imited

We have reviewed the interim financial statements on pages 5 to 35 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 31 December 2008. This information is stated in accordance with theaccounting policies set out on page 10.
D irectors ’ respo n sibilities

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 31 December
2008 and its financial performance and cash flows for the three 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 ’ respo n sibilities

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.
B asis o f opi n io n

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.
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 give a true and fair view of the matters to which they relate, and for reporting our findings toyou.
• the supplementary information does not fairly state the matters to which it relates. In respect to the supplementary information wereport as to whether it is fairly stated rather than “True and fair”.
• the supplementary information relating to Capital Adequacy is derived from the relevant sources.
Partners and employees of our firm may also deal with the Registered Bank and Banking Group on normal terms and conditions in
the ordinary course of trading activities of the Registered Bank and Banking Group. However, so as not to impair our independence asauditor, there are restrictions on borrowings which the partners and employees of KPMG 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. KPMG has no otherrelationship with, or interest in, the Registered Bank and Banking Group.
R e v ie w O pi n io n

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 give a trueand fair view of the financial position of the Banking Group as at 31 December 2008 and its financial performance and cash flows forthe three 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; andc. 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 4Bof the Order.
Our review was completed on 5 March 2009 and our review opinion is expressed as at that date.

Wellington

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Anz National Bank Limited