For personal use only

General Short Form
Disclosure Statement
Australia and New Zealand Banking Group Limited– New Zealand Branch
For the nine months ended 30 June 2009
No 3. issued August 2009

For personal use only

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED- NEW ZEALAND BRANCHGENERAL SHORT FORMDISCLOSURE STATEMENTFOR THE NINE MONTHSENDED 30 JUNE 2009

CONTENTS

Page

General Disclosures

2-6

Income Statement

7

Statement of Recognised Income and Expense

8Balance Sheet

9

Cash Flow Statement

10

Notes to the Financial Statements

11 - 32

Conditions of Registration

33 - 34

Credit Rating Information

35

Directors’ and New Zealand Chief Executive Officer’s Statement
Independent Review Report

36
37

1

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURESThis Disclosure Statement has been issued in accordance with the Registered Bank Disclosure Statement (OffQuarter - Overseas Incorporated Registered Banks) Order 2008 ("the Order").

For personal use only

In this Disclosure Statement unless the context otherwise requires:(a) "Overseas Banking Group" means the worldwide operations of Australia and New Zealand Banking
Group Limited including its controlled entities;(b) "Overseas Bank" or "Ultimate Parent Bank" means the worldwide operations of Australia and New
Zealand Banking Group Limited excluding its controlled entities;(c) "NZ Banking Group" means the aggregated NZ operations of Australia and New Zealand Banking Group
Limited, including those operations conducted through the New Zealand Branch and controlled entitiesof the Overseas Bank registered in New Zealand;(d) "NZ Branch" or "Registered Bank" means the New Zealand operations of Australia and New Zealand
Banking Group Limited, as conducted through the NZ Branch;(e) "Bank" means ANZ National Bank Limited;(f) any term or expression which is defined in, or in the manner prescribed by, the Registered Bank
Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks) Order 2008 shall havethe meaning given in or prescribed by that Order.

GENERAL MATTERS
Australia and New Zealand Banking Group Limited - New Zealand Branch ("NZ Branch") was established on 5
January 2009. The full name of the NZ Branch is Australia and New Zealand Banking Group Limited New
Zealand Branch and its address for service is Level 14, ANZ Tower, 215-229 Lambton Quay, Wellington, New
Zealand.
The full name of the Overseas Bank is Australia and New Zealand Banking Group Limited and its address forservice is Level 14, 100 Queen Street, Melbourne, Australia.
RANKING OF LOCAL CREDITORS IN LIQUIDATION
There are material legislative restrictions in the Overseas Bank's country of incorporation which subordinate theclaims of a class of unsecured creditors of the Registered Bank on the assets of the Overseas Bank to those ofanother class of unsecured creditors of the Overseas Bank, in liquidation of the Overseas Bank.
The Banking Act 1959 of the Commonwealth of Australia (the "Banking Act") gives priority over Australianassets of the Overseas Bank to Australian depositors if the Overseas Bank is unable to meet its obligations orsuspends payment. Accordingly, New Zealand depositors (together with all other senior unsecured creditors of
the Overseas Bank) will rank after Australian depositors of the Overseas Bank in relation to claims against
Australian assets.
Specifically, pursuant to section 13A(3) of the Banking Act, if an Authorised Deposit-Taking Institution (definedin that Act to include a Bank like the Overseas Bank) (an "ADI") becomes unable to meet its obligations orsuspends payment, the assets of the ADI in Australia are to be available to meet the ADI's liabilities in thefollowing order:(a) first, the ADI's liabilities to the Australian Prudential Regulation Authority ("APRA") (if any), because of
the rights APRA has against the ADI because APRA has made, or is required to make, payments todepositors under the Financial Claims Scheme (defined below);(b) second, the ADI's debts to APRA for costs incurred by APRA in administration of the Financial Claims
Scheme in respect of the ADI;(c) third, in payment of the ADI's deposit liabilities in Australia (other than liabilities covered underparagraph (a)); and(d) fourth, the ADI's other liabilities (in order of priority apart from section 13A(3)).

Under section 13A(1) of the Banking Act, in certain circumstances APRA may take control of an ADI or appoint
an administrator (defined in the Banking Act) to take control of its business. Section 16(1) and (2) of the
Banking Act provide that, despite anything contained in any law relating to the winding up of companies, but
subject to section 13A(3) of the Banking Act, the debts of an ADI to APRA in respect of APRA's costs (including
costs in the nature of remuneration and expenses) of being in control of the ADI's business or of having an
administrator in control of the ADI's business have priority in a winding up of the ADI over all other unsecured
debts.
Section 86 of the Reserve Bank Act provides that notwithstanding anything contained in any law relating to thewinding up of companies, but subject to section 13A(3) of the Banking Act, debts due to the Reserve Bank ofAustralia by any ADI shall, in a winding up, have priority over all other debts other than debts due to the
Commonwealth of Australia.
Section 13A(3) affects all of the unsecured deposit liabilities of the NZ Branch which as at 30 June 2009amounted to $nil. (30/06/2008 $nil; 30/09/2008 $nil).
2

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)

For personal use only

REQUIREMENT TO HOLD EXCESS ASSETS OVER DEPOSIT LIABILITIESSection 13A(4) of the Banking Act (the "Act") states that it is an offence for an ADI not to hold assets (otherthan goodwill) in Australia of a value that is equal to or greater than the total amount of its deposit liabilities inAustralia, unless APRA has authorised the ADI to hold assets of a lesser value. During the nine months ended
30 June 2009, the Overseas Bank has at all times held assets (other than goodwill) in Australia of not less thanthe value of the Overseas Bank's total deposit liabilities in Australia. The requirements of this section of the Act
have the potential to impact on the management of the liquidity of the NZ Banking Group.
GUARANTEESThe Overseas Bank has guarantees from the Commonwealth of Australia under:(a) in the case of deposits and certain other accounts up to A$1 million, a scheme (The "Financial Claims
Scheme") pursuant to the Financial System Legislation Amendment (Financial Claims Scheme and Other
Measures) Act 2008 of the Commonwealth of Australia (The "Financial Claims Scheme Act");(b) in the case of wholesale funding, by a Deed of Guarantee executed by the Treasurer (and related
scheme rules) (the "Wholesale Funding Guarantee").

The Financial Claims Scheme applies to the Registered Bank, as it is a foreign branch of an eligible Australian
ADI. The Wholesale Funding Guarantee may also apply as described below.
Financial Claims Scheme
Under the Financial Claims Scheme if:•
APRA has applied for an ADI to be wound up; and•the responsible Minister makes a declaration that the Financial Claims Scheme applies to that particular
ADI

then each account holder of a Protected Account (defined below) with that ADI is entitled to be paid by APRA an
amount equal to the balance of the protected account plus accrued interest which has been credited to theaccount (subject to various adjustments and preconditions described in the Financial Claims Scheme Act). Oncethe responsible Minister has made a declaration, there are no other material conditions to payment other thanthe ADI being unable to meet its obligations or suspending payment. The deposit must be for an amount lessthan A$1 million. Deposits for a greater amount are covered by the Wholesale Funding Guarantee (to theextent that is applicable as described below).
A protected account is:•accounts or covered financial products (defined below) kept under an agreement between the accountholder and the ADI requiring the ADI to pay the account holder, on demand by the account holder or ata time agreed by them, the net credit balance of the account at the time of the demand or the agreed
time; and•an account prescribed by regulations.

A covered financial product is a financial product declared by the Australian Treasurer to be a covered financial
product. A list is available at www.treasury.gov.au. The list includes accounts such as saving, call, current,
cheque, debit card, transaction and mortgage offset accounts.
Deposit holders do not have to be Australian residents to obtain the benefit of the Financial Claims Scheme andit applies to deposits denominated in any currency.
From 12 October 2011 the Financial Claims Scheme is to apply to Australian dollar deposits only.
Wholesale Funding Guarantee
The Wholesale Funding Guarantee is a deed governed by the laws of the State of New South Wales and has
been executed by the Australian Treasurer on behalf of the Australian Government. Australian institutions
which are ADIs under the Banking Act, which includes the Overseas Bank, are entitled to apply for the
Wholesale Funding Guarantee to apply to deposit accounts over A$1 million and certain funding liabilities.

Foreign banks authorised to carry on banking business in Australia may also apply to have certain deposits andfunding liabilities held by Australian residents guaranteed by the Australian Government. The Reserve Bank ofAustralia administers the Wholesale Funding Guarantee.

3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)

For personal use only

Wholesale Funding Guarantee (continued)
Under the Wholesale Funding Guarantee, the Commonwealth of Australia irrevocably guarantees the payment ofliabilities covered by an eligibility certificate issued by the Australian Government in response to an application
made by the ADI, and irrevocably undertakes that whenever the ADI does not pay a liability on the date on
which it becomes due or payable, it shall, upon a claim by a person to whom a guaranteed liability is owed, andfollowing the expiry of any applicable grace period, pay the guaranteed liability in accordance with the scheme
rules. A claim must be made in the form provided in the scheme rules. In the case of a liability of an Australian
ADI, such as the Overseas Bank, the claimant need not be a resident of Australia.
In order to have the Wholesale Funding Guarantee apply, an ADI must apply to the Reserve Bank of Australia
for an eligibility certificate. Fees will also be payable, calculated by reference to the term and amount of theliabilities guaranteed and the credit rating of the ADI (as at the date of this document, the fee which will apply
to the Overseas Bank based on its rating by Standard and Poor’s of AA, is 70 basis points per annum applied in
respect of its guaranteed liabilities in accordance with the Wholesale Funding Guarantee). The fees will belevied on a monthly or quarterly basis depending on the liability. An ADI may apply for an eligibility certificate inrespect of a programme under which it issues debt instruments from time to time or on a series-by-series basis.
A person to whom a guaranteed liability is owed may rely on the eligibility certificate issued by the AustralianGovernment as conclusive evidence that the liability satisfies the criteria for eligibility to be guaranteed under
the Wholesale Funding Guarantee.
An application must set out details of the liabilities to be guaranteed and be accompanied by an executedcounter indemnity in favour of the Australian Government, external legal opinions in a prescribed form, an
executed fee letter and a letter of prudential compliance. Further information with respect to the application
procedure
and
fees
can
be
found
at
the
AustralianGovernment
Guarantee
websiteatwww.guaranteescheme.gov.au.
If the ADI is an Australian ADI (such as the Overseas Bank) or an Australian subsidiary of a bank incorporated
overseas, it may apply for the guarantee to apply to:•
Deposit liabilities for amounts over A$1 million: The deposit can be at call or with maturity of up to
60 months in excess of $1 million per customer per ADI, be in any currency and may pre-date theWholesale Funding Guarantee. There are no restrictions on the types of depositors;•
Deposits held in overseas branches: Deposits held in overseas branches of Australian-owned ADIs
can be covered by the Wholesale Funding Guarantee. There are no restrictions on the types ofdepositors;•
Short Term Wholesale Funding Liabilities: The liability (which may be in any currency) must be asenior and unsecured debt instrument with a maturity not exceeding 15 months. In addition, theinstrument must be "not complex" and be either a bank bill, a certificate of deposit or transferable
deposit, a debenture or commercial paper; and•Term Wholesale Funding Liabilities: The liability (which may be in any currency) must be a senior
and unsecured debt instrument with a maturity not exceeding 60 months but greater than 15 months.
The instrument must also be "not complex" and be either a bond, a note or a debenture.
In the case of all instruments, they may be issued in bearer, registered or dematerialised form. An instrument
will not be granted an eligibility certificate unless it is "not complex". The Government has published a list of thefeatures that are likely to be regarded by the Government as "complex".
If the Australian Government does not perform its obligations under the Wholesale Funding Guarantee, abeneficiary of the guarantee could sue the Commonwealth of Australia under the Judiciary Act 1903 of Australia.
In such a suit, the rights of parties are as nearly as possible the same as in a suit between subjects of theCommonwealth of Australia. Jurisdiction to hear claims against the Commonwealth of Australia in contract isvested in certain Australian courts under the Judiciary Act 1903 of Australia. If a judgment is obtained against
the Australian Government, no execution or attachment can be issued against the property or revenues of theCommonwealth of Australia. However, if any judgment is given against the Australian Government, the Ministerfor Finance is obliged to satisfy the judgment out of money legally available, on receipt of a certificate of thejudgment issued by an officer of a court in which such judgment has been obtained.
In order to render money legally available, specific appropriation by legislation passed by the Parliament of theCommonwealth of Australia would be necessary before any payment is made, unless the amount involved issuch that it could be paid out of funds available under an existing standing appropriation. The AustralianGovernment has enacted legislation which appropriates funds from consolidated revenue for the purposes ofpaying claims under the Wholesale Funding Guarantee. The Wholesale Funding Guarantee does not contain any
submission to the courts of a foreign jurisdiction or any waiver of any immunity which might be available to the
Commonwealth of Australia under the law of any foreign jurisdiction.
4

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Wholesale Funding Guarantee (continued)
The Wholesale Funding Guarantee is subject to being withdrawn or changed, which may have a negative impact
on the availability of funding in the markets in which the Overseas Bank operates.

For personal use only

The Australian Government has announced the Wholesale Funding Guarantee will be reviewed on an ongoingbasis and revised if necessary.
The Australian Government shall not be liable to perform its obligations under the Wholesale Funding Guarantee
in respect of liabilities which have been varied, amended, waived, released, novated, supplemented, extended
or restated in any material respect without the written consent of the Australian Government.
The Australian Government may also amend the terms of the Wholesale Funding Guarantee at any time at its
discretion, provided that (except insofar as such amendment is required by law) such amendment does not
reduce the Australian Government’s obligations to the beneficiaries under the Wholesale Funding Guarantee in amanner which is prejudicial to the interests of the beneficiaries in respect of any subsisting liability of theOverseas Bank guaranteed under the Wholesale Funding Guarantee.
Further information on the Wholesale Funding Guarantee including the Wholesale Deed of Guarantee is available
in the most recent Supplemental Disclosure Statement.
Copies of eligibility certificates issued by the Reserve Bank of Australia under the Wholesale Funding Guarantee
are available at www.guaranteescheme.gov.au.

The name of the Guarantor and address for service is: The Scheme Administrator, Australian Government
Guarantee Scheme for Large Deposits and Wholesale Funding, c/- The Secretary, Reserve Bank of Australia, 65
Martin Place, Sydney, New South Wales 2001, Australia.
Further details of the arrangements, together with relevant legislation, regulations and other documents settingout the terms and conditions of the current guarantee arrangements, are available at the Treasury website
www.treasury.gov.au, www.apra.gov.au and www.guaranteescheme.gov.au.

The most recent audited financial statements of the Commonwealth of Australia can be obtained at theTreasury's Budget website www.budget.gov.au. As at the date of signing of the General Disclosure Statement,
the following ratings were assigned to the Commonwealth of Australia's long term, AUD denomination debt: AAA
Outlook Stable (Standard & Poor's), Aaa Outlook Stable (Moody's) and AAA Outlook Stable (Fitch). These
ratings have remained unchanged in the two preceding years. Refer to 'Credit Rating Information' for a fulldescription of credit rating scales.
New Zealand Guarantee Arrangements
The Crown guarantees retail deposits and wholesale funding of participating New Zealand financial institutions
under the New Zealand Deposit Guarantee Scheme ("Crown Retail Guarantee") and New Zealand Wholesale
Funding Guarantee Facility ("Crown Wholesale Guarantee") respectively. The Registered Bank does not have aguarantee under either Scheme.
OTHER MATERIAL MATTERS
There are no matters relating to the business or affairs of the NZ Branch and the NZ Banking Group which are
not contained elsewhere in the General Short Form Disclosure Statement and which would, if disclosed,materially adversely affect the decision of a person to subscribe for debt securities of which the NZ Branch or
any member of the NZ Banking Group is the issuer.
SUPPLEMENTAL DISCLOSURE STATEMENT
A copy of the most recent Supplemental Disclosure Statement for the nine months ended 30 June 2009 can beobtained immediately where request is made within normal banking hours at the NZ Branch head office, Level
14, ANZ Tower, 215-229 Lambton Quay, Wellington. It is also available at no charge:(a) on the NZ Banking Group's website at www.anz.com;(b) immediately if request is made at the NZ Banking Group's head office; and(c) 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 NZ Banking Group's most recent Supplemental Disclosure Statement contains a copy of the 31 March 2009
Interim Financial Report for the Overseas Banking Group and a copy of the Deed of Guarantee for the Guarantee
Scheme.

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)

For personal use only

FINANCIAL STATEMENTS OF THE OVERSEAS BANK AND OVERSEAS BANKING GROUP
Copies of the most recent publicly available financial statements of the Overseas Bank and Overseas Banking
Group, will be provided immediately, free of charge, to any person requesting a copy where the request is madeat the NZ Branch's head office, Level 14, ANZ Tower, 215-229 Lambton Quay, Wellington. The most recent
publicly available financial statements for the Overseas Bank and Overseas Banking Group can also be accessedat the internet address www.anz.com
DIRECTORATE
Since the authorisation date of the previous General Disclosure Statement on 26 May 2009, there have been nochanges to the Directors of the Overseas Banking Group.

6

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHINCOME STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2009
Consolidated
Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008$m

Interest income

5,912

7,244

9,858

Interest expense

4,147

5,726

7,829

Net interest income

1,765

1,518

2,029

Net trading gains

191

216

272

Other operating income

339

535

743

10

102

111

Operating income

2,305

2,371

3,155

Operating expenses

1,094

1,035

1,445

Profit before provision for credit impairment
and income tax

1,211

1,336

1,710

532

167

302

679

1,169

1,408

201

336

418

478

833

990

For personal use only

Unaudited
9 months to
30/06/2009
$m

Note

Share of profit of equity accounted associates
and jointly controlled entities

Provision for credit impairment

10

Profit before income tax

Income tax expense

3

Profit after income tax

The notes on pages 11 to 32 form part of and should be read in conjunction with these financial statements

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHSTATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE NINE MONTHS ENDED 30 JUNE 2009
Consolidated
Unaudited
9 months to
30/06/2008

AuditedYear to30/09/2008

$m

$m

$m

3

36

26

For personal use only

Note

Unaudited
9 months to
30/06/2009

Available-for-sale revaluation reserve:- Valuation gain taken to equity

Cash flow hedging reserve:- Valuation loss taken to equity

(6)

(26)

(47)

- Transferred to income statement

(13)

(26)

(37)

Actuarial loss on defined benefit schemes

(38)

(12)

(33)

Income tax credit on items recognised directly in equity

19

20

34

Net expense recognised directly in equity

(35)

(8)

(57)

Profit after income tax

478

833

990

Total recognised income and expense for the period

443

825

933

The notes on pages 11 to 32 form part of and should be read in conjunction with these financial statements

8

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHBALANCE SHEETAS AT 30 JUNE 2009

For personal use only

Note

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

Unaudited
30/06/2009

Consolidated
Unaudited
30/06/2008

Audited30/09/2008

$m

$m

$m

2,076
5,460
2,950
11,930767
97,681
398
156
960
269
258
3,325

3,226
4,465
2,306
4,353
105
95,296
356
215
1,049
58
239
3,315

4,839
5,032
2,624
7,603
109
97,679
1
363
154
1,000
118
242
3,314

126,230

114,983

123,078

9,653
70,846
11,743
1,635
370
19,769
2,867
1,766

2,619
75,266
4,141
1,609
157
19,425
2,979
1,766

3,311
77,136
6,472
1,874
190
22,382
2,820
1,766

118,649

107,962

115,951

7,581

7,021

7,127

6,424
39
1,118

5,413
83
1,525

5,413
47
1,667

7,581

7,021

7,127

4
5
6
7
8

Total assets

Liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Payables and other liabilities
Provisions
Bonds and notes
Loan capital
Term Funding

11
12

13
14
15

Total liabilities (excluding Head Office Account)
Net assets (excluding Head office Account)Represented by:
Ordinary share capital & Head Office AccountReserves
Retained earnings

16
17
17

Total equity & Head Office AccountThe notes on pages 11 to 32 form part of and should be read in conjunction with these financial statements

9

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCASH FLOW STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2009

For personal use only

Note

Unaudited
9 months to
30/06/2009$mConsolidated
Unaudited
9 months to
30/06/2008

AuditedYear to$m

30/09/2008$m

CASH FLOWS FROM OPERATING ACTIVITIESInterest received
Dividends received
Fees and other income received
Interest paid
Operating expenses paid
Income taxes paid

5,933
1
668
(4,148)(1,032)
(335)

6,991
787
(5,320)
(946)
(394)

9,503
4
1,062
(7,216)(1,313)(461)

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

1,087

1,118

1,579

Net changes in operating assets and liabilities:
Increase in due from other financial institutions - term
Increase in trading securities(Increase) decrease in derivative financial instruments
Increase in available-for-sale assets
Decrease (increase) in loans and advances(Increase) decrease in other assets
Increase (decrease) in due to other financial institutions
Increase in deposits(Decrease) increase in other borrowings(Decrease) increase in payables and other liabilities(1,835)(293)(1,477)
(651)
5
(85)
6,298
456
(5,216)(53)(1,448)
(328)
(114)
(18)
(7,372)
(34)
(551)
1,911
2,589
10

(630)
(617)
1,361
(36)
(9,522)
28
141
3,373
2,044
159

Net cash flows used in operating activities(1,764)(4,237)(2,120)CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of premises and equipment
Purchase of shares in associates and jointly controlled entities
Purchase of intangible assets
Purchase of premises and equipment

36
(25)
(19)
(61)

4
(46)
(27)
(39)

2
(48)
(30)
(51)

Net cash flows (used in) provided by investing activities

(69)

(108)

(127)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bonds and notes
Redemptions of bonds and notes
Proceeds from loan capital
Redemptions of loan capital
Increase (decrease) in due to parent company
Issue of RPS
Dividends paid

2,113
(4,618)1,011(1,000)4,815(2,928)835
510(1,169)9,263(6,433)
835
(100)
510
(1,169)Net cash flows provided by financing activities(2,494)

2,063

2,906

Net cash flows used in operating activities
Net cash flows used in investing activities
Net cash flows (used in) provided by financing activities(1,764)(69)(2,494)(4,237)
(108)
2,063

(2,120)
(127)
2,906

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period(4,327)7,790(2,282)
7,131

659
7,131

Cash and cash equivalents at end of the period1

3,463

4,849

7,790

1.

23

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 11 to 32 form part of and should be read in conjunction with these financial statements

10

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS
1.

ACCOUNTING POLICIESFor personal use only(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 - Overseas 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 that the following assets and liabilities are stated at their fair value:• derivative financial instruments including in the case of fair value hedging the fair value of any
applicable underlying exposure,• financial instruments held for trading,• assets recognised as available-for-sale,• financial instruments designated at fair value through profit or loss, and• defined benefit scheme asset or liability.

(iii) Changes in accounting policies

There have been no changes in accounting policies since the authorisation date of the previous DisclosureStatement on 26 May 2009.

(iv) Presentation currency and rounding

The amounts contained in the financial statements are presented in millions of New Zealand dollars, unlessotherwise stated.

(v) Basis of aggregation

These financial statements aggregate the financial statements of the New Zealand geographic activities ofAustralia and New Zealand Banking Group Limited as conducted through the NZ Branch (the "NZ Branch")
and its controlled entities in New Zealand (the "NZ Banking Group")(vi) Comparatives

To ensure consistency with the current period, comparative figures have been reclassified whereappropriate.

2. RISK MANAGEMENT POLICIESThere has been no material change in the Banking Group's policies for managing risk, or material exposures toany new types of risk since the authorisation date of the previous Disclosure Statement on 26 May 2009.

11

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAX EXPENSE

For personal use only

Unaudited
9 months to
30/06/2009$m

Income tax expense

Consolidated
Unaudited
9 months to
30/06/2008

AuditedYear to30/09/2008

$m

$m

201

336

418

29.6%

28.7%

29.7%

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

1,617
402
57

1,804
125
1,178
118

3,950
807
82

Total liquid assets

2,076

3,225

4,839

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

1,445

1,622

3,779

Effective tax rate (%)

4. LIQUID ASSETS

5. DUE FROM OTHER FINANCIAL INSTITUTIONS
Able to be withdrawn without prior notice
Securities purchased under agreement to resell
Securities purchased under agreement to resell with central banks
Security settlements
Certificates of deposit
Reserve Bank bills
Term loans and advances

79
340
41
4,041
744
215

1,115
220
2,596
534

437
304
1,328
2,447
516

Total due from other financial institutions

5,460

4,465

5,032

-

-

1,328

Included within due from other financial institutions
is the following related party balance:
Subsidiary of the Ultimate Parent Bank

6. TRADING SECURITIES
Government, Local Body stock and bonds
Certificates of deposit
Promissory notes
Other bank bonds
Other

665
458
69
1,631

124
655
160
1,280

252
926
39
1,331

127

87

76

Total trading securities

2,950

2,306

2,624

79

321

97

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

12

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7. AVAILABLE-FOR-SALE ASSETS
Consolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Government, Local Body stock and bonds
Other debt securities
Equity securities

634
59
74

3
28
74

3
41
65

Total available-for-sale assets

767

105

109

Overdrafts
Credit card outstandings
Term loans - housing
Term loans - non-housing
Finance lease receivables

2,018
1,410
53,53540,348
699

2,087
1,414
53,19738,724
781

2,140
1,434
53,35040,583
777

Gross loans and advances
Provision for credit impairment (Note 10)
Unearned finance income
Fair value hedge adjustment
Deferred fee revenue and expenses
Capitalised brokerage/ mortgage origination fees

98,010(1,038)
(279)
954
(53)
87

96,203
(563)
(343)
(60)
(56)
115

98,284
(666)
(346)
353
(55)
109

Total net loans and advances

97,681

95,296

97,679For personal use only

Unaudited
30/06/2009$m

8. NET LOANS AND ADVANCESThe NZ Banking Group has entered into repurchase agreements for residential mortgage-backed securities with
the RBNZ with a book value of $1,806 million (30/06/2008 $nil, 30/09/2008 $nil). The underlying collateral
accepted by the RBNZ under this transaction are mortgages to the value of $2,250 million (30/06/2008 $nil;
30/09/2008 $nil).

13

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION
Individually impaired assets

For personal use only

Unaudited 30/06/2009

Retailmortgages$mConsolidated
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

83
373
(18)
(137)
(16)

30
188
(20)
(26)
(108)

214
470
(18)
(98)
(45)

327
1,031
(56)
(261)
(169)

Individually Impaired Asset balance at end of the period

285

64

523

872

1

-

-

1

286

64

523

873

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

7
61
(1)
(7)
(1)

20
98
(4)
(77)

88
100
(9)
(59)
(3)

115
259
(10)
(70)
(81)

Individually Impaired Asset balance at end of the period

Restructured items
Total impaired assets
Unaudited 30/06/2008

59

37

117

213

Restructured items

-

-

-

-

Total impaired assets

59

37

117

213

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

7
103
(2)
(18)
(7)

20
122
(14)
(98)

88
228
(8)
(86)
(8)

115
453
(10)
(118)
(113)

Individually Impaired Asset balance at end of the period

Audited 30/09/2008

83

30

214

327

Restructured items

-

-

-

-

Total impaired assets

83

30

214

327

Restructured assets include impaired loans where concessionary terms and conditions have been formally
granted because of the customer’s financial difficulties and a loss is not expected to incur.

14

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For personal use only

9. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION(CONTINUED)
Retailmortgages$mConsolidated
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Unaudited 30/06/2009

Balance at end of period
Past due assets (90 days past due assets)1

375

73

84

532

Other assets under administration

-

-

36

36

Undrawn facilities with impaired customers

-

-

32

32

Interest not recognised on impaired assets

18

5

17

40

169

46

39

254

-

-

1

1

Unaudited 30/06/2008

Balance at end of period
Past due assets (90 days past due assets)1

Other assets under administration
Undrawn facilities with impaired customers

-

-

8

8

Interest not recognised on impaired assets

-

2

4

6

244

54

11

309

Other assets under administration

-

-

1

1

Undrawn facilities with impaired customers

-

-

6

6

Interest not recognised on impaired assets

6

2

10

18

Audited 30/09/2008

Balance at end of period
Past due assets (90 days past due assets)1

There are no undrawn facilities with 90 day past due customers or customers within the other assets underadministration category as at 30 June 2009 (30/06/2008 $nil; 30/09/2008 $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 thatcan be held for up to 180 days past due.

15

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT
Retailmortgages$m

For personal use only

Unaudited 30/06/2009
Collective provision
Balance at beginning of the period
Charge to income statement

Consolidated
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

81
22

164
(14)

289
92

534
100

Balance at end of the period

103

150

381

634

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

28
100
1
(16)
-

10
116
13
(108)
-

94
216
(45)
(5)

132
432
14
(169)
(5)

Balance at end of the period

113

31

260

404

Total provision for credit impairment

216

181

641

1,038

Collective provision
Balance at beginning of the period
Charge to income statement
Other

58
5
-

130
16
-

234
40
3

422
61
3

Balance at end of the period

63

146

277

486

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

4
12
(1)
-

13
76
12
(77)
-

27
18
1
(3)
(5)

44
106
13
(81)
(5)

Unaudited 30/06/2008

Balance at end of the period

15

24

38

77

Total provision for credit impairment

78

170

315

563

Collective provision
Balance at beginning of the year
Charge to income statement

58
23

130
34

234
55

422
112

Balance at end of the year

81

164

289

534

Individual provision (individually impaired assets)
Balance at beginning of the year
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

4
40
(7)
-

13
93
15
(98)
-

27
57
2
(8)
(6)

44
190
17
(113)
(6)

Balance at end of the year

37

23

72

132

Total provision for credit impairment

118

187

361

666

Audited 30/09/2008

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 its
present value using the original effective interest rate for the asset. This discount unwinds over the period the asset is held as interest income.

16

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT (CONTINUED)
Provision Movement Analysis

Retailmortgages$mConsolidated
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

104
(3)

131
(2)

221
(5)

456
(10)

Recoveries of amounts previously written off

101
(1)

129
(13)

216
-

446
(14)

Individual provision charge
Collective provision charge

100
22

116
(14)

216
92

432
100

Charge to income statement

122

102

308

532

Unaudited 30/06/2008
New and increased provisions
Provision releases

12
-

88
-

27
(8)

127
(8)

Recoveries of amounts previously written off

12
-

88
(12)

19
(1)

119
(13)

Individual provision charge
Collective provision charge

12
5

76
16

18
40

106
61

Charge to income statement

17

92

58

167

Audited 30/09/2008
New and increased provisions
Provision releases

40
-

108
-

75
(16)

223
(16)

Recoveries of amounts previously written off

40
-

108
(15)

59
(2)

207
(17)

Individual provision charge
Collective provision charge

40
23

93
34

57
55

190
112

Charge to income statement

63

127

112

302

For personal use only

Unaudited 30/06/2009
New and increased provisions
Provision releases

11. DUE TO OTHER FINANCIAL INSTITUTIONS

Unaudited
30/06/2009

Consolidated
Unaudited
30/06/2008

Audited30/09/2008

$m

$m

$m

7,051

672

1,001

79

321

97

1,806
717

1,626

2,213

9,653

2,619

3,311

Included within due to other financial institutions are the following balances:
Balances owing to the Ultimate Parent Bank by
ANZ National (Int'l) Limited guaranteed by the Bank
2,220
Australia and New Zealand Banking Group Limited - NZ Branch
4,600

672
-

1,001
-

Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)
Securities sold under agreements to repurchasefrom other financial institutions
Securities sold under agreements to repurchasefrom central banks1
Other financial institutions
Total due to other financial institutions

1.

The NZ Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $1,806 million(30/06/2008 $nil; 30/09/2008 $nil). The underlying collateral accepted by the Reserve Bank under this transaction are mortgages to the value of $2,250 million(30/06/2008 $nil; 30/09/2008 $nil).
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. The net effect on the Consolidated Group is to reflect additional cash or liquid assets and aliability being Securities sold under agreements to repurchase from central banks (refer Note 25 for further details).

17

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. DEPOSITS AND OTHER BORROWINGS
Consolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Amortised cost
Certificates of deposit
Term deposits
Demand deposits bearing interest
Deposits not bearing interest
Secured debenture stock

5,072
32,153
21,936
4,424
1,621

4,458
31,62821,069
3,943
1,821

5,527
31,26022,085
3,928
1,683

Total deposits and other borrowings recognised at amortised cost

65,206

62,91964,483

Fair value through the profit or loss
Commercial paper

5,640

12,347

12,653

Total deposits and other borrowings recognised at fair value

5,640

12,347

12,65370,84675,266

77,136

For personal use only

Unaudited
30/06/2009$m

Total deposits and other borrowings

The NZ Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed
funds during the period ended 30 June 2009 (30/06/2008 $nil; 30/09/2008 $nil). Deposits from customers are
unsecured and rank equally with other unsecured liabilities of the NZ Banking Group. In the unlikely event thatthe Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in theSeventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.
Included within deposits and other borrowings are the following balances:
Commercial paper issued by ANZ National (Int'l) Limited
guaranteed by the Bank at amortised cost

5,637

12,345

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

1,921

2,107

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 theassets, primarily loans and advances, of UDC Finance Limited.

13. BONDS AND NOTES

Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

19,76919,42522,382

2,508

1,174

2,538

16,782

17,495

19,572

Total bonds and notes

Included within bonds and notes are the following related party balances:
Subsidiaries of the Australia and New Zealand Banking Group Limited
Bonds and notes issued by ANZ National (Int'l) Limited
guaranteed by the Bank

Bonds and notes are unsecured and rank equally with other unsecured liabilities of the Banking Group.

18

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14.

LOAN CAPITAL
Consolidated
Unaudited
30/06/2008$m

Audited30/09/2008
$m

258
330
231
54
210
950
835

261
334
234
55
213
1,050
835

248
317
222
52
202
950
835

Total loan capital issued
Less loan capital instruments held by the Banking Group

2,868
(1)

2,982
(3)

2,826
(6)

Total loan capital

2,867

2,979

2,820

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

1,083

1,097

1,041

For personal use only

Unaudited
30/06/2009$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
Term subordinated fixed rate bonds
Perpetual subordinated bond

AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and has an ultimate maturity date of 31 August 2014. On 31 July2009 the Bank elected to repay the loan on 31 August 2009. All interest is payable half yearly in arrears, withinterest payments due 28 February and 31 August. Interest is based on BBSW + 0.40% p.a. up until, andincluding, 31 August 2009.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly inarrears 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 mayelect to repay the loan on 19 April each year commencing from 2010 through to 2015. All interest is payablehalf 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 loan on 15 September each year commencing from 2011 through to 2016. Allinterest is payable half yearly in arrears, with interest payments due 15 March and 15 September. Interest isbased on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW + 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The
Bank may elect to repay the loan on 17 September each year commencing from 2012 through to 2016. Allinterest is payable half yearly in arrears, with interest payments due 17 March and 17 September. Interest isbased on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW + 1.18% p.a. thereafter.

19

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. LOAN CAPITAL (CONTINUED)
NZD subordinated bonds
The terms and conditions of the term subordinated fixed rate bonds are as follows:

For personal use only

Term subordinated fixed rate bonds
Issue dateAmount $m
350
15 September 2006
2 March 2007
250
23 July 2007
350

Coupon rate
7.16%
7.60%
8.23%

Call date
15 September 2011
2 March 201223 July 2012

Maturity date
15 September 2016
2 March 201723 July 2017

As at 30 June 2009, these bonds carried an AA- rating by Standard & Poor's.
The NZ Banking Group may elect to redeem the bonds on their call date. If the bonds are not called the NZ
Banking Group 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.
The terms and conditions of the perpetual subordinated bond are as follows:
Perpetual subordinated bondIssue dateAmount $m
18 April 2008
835

Coupon rate
9.66%

1st Call date
18 April 2013

2nd Call date
18 April 2018

The NZ Banking Group 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 eachyear, 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 the five 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 Dateonwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 30 June 2009, these bonds carried an A+ rating by Standard and Poor's.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds, ANZ
National has a general right and in certain specified circumstances an obligation, to defer payment of interest on
the Bonds.
All of the NZD subordinated bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the
NZ Banking Group a waiver from the requirements of Listing Rules 10.4 and 10.5. Rule 10.4 relates to theprovision of preliminary announcements of half yearly and annual results to the NZX. Rule 10.5 relates topreparing and providing a copy of half yearly and annual reports to the NZX. The NZ Banking Group has been
granted a waiver from these rules on the conditions that the NZ Banking Group's quarterly General DisclosureStatement ('GDS') is available on the Bank's website, at any branch and at the NZX; that bondholders areadvised 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 isavailable 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 NZ Banking Group.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for theperpetual subordinated debt which qualifies as Upper Level Tier Two Capital.

20

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For personal use only

15. TERM FUNDING

ANZ Funds Pty Limited

Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008
$m

1,766

1,766

1,766

ANZ Funds Pty Limited (Related Company)
This New Zealand dollar loan was made on 1 December 2003 and is repayable upon demand being made by the
ANZ Funds Pty Limited, where 12 months prior written notice is given, unless a shorter notice period is agreed
upon. Interest is payable quarterly in arrears based on BKBM + 0.20% p.a., with interest payments due 1
March, 1 June, 1 September and 1 December. As part of the annual review of terms and conditions of the loan
the margin was increased to + 0.32% p.a., effective from 1 December 2007.

16. ORDINARY SHARE CAPITAL & HEAD OFFICE ACCOUNT

Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Ordinary share capital at beginning and end of the period

1,453

1,453

1,453

Redeemable preference shares at beginning of the period
Redeemable preference shares issued during the period

3,960
1,000

3,450
510

3,450
510

4,960

3,960

3,960

Paid in share capital at end of period
Head Office Account

6,413
11

5,413
-

5,413
-

Total Capital & Head Office Account at end of period

6,424

5,413

5,413

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 byrepresentative shall have one vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote forevery share of which such member is the holder.

21

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17. RESERVES AND RETAINED EARNINGS

For personal use only

Consolidated
Unaudited
Unaudited
30/06/2009
30/06/2008$m$m

Audited30/09/2008$m

Available-for-sale revaluation reserve
Balance at beginning of the period
Valuation gain recognised after tax

23
4

(1)
36

(1)
24

Balance at end of the period

27

35

23

Cash flow hedging reserve
Balance at beginning of the period
Valuation loss recognised after tax
Transferred to income statement

24
(4)
(8)

84
(19)
(17)

84
(34)
(26)

Balance at end of the period

12

48

24

Total reserves

39

83

47

1,667

1,869

1,869

478

833

990

Retained earnings
Balance at beginning of the period
Profit after income tax
Total available for appropriation

2,145

2,702

2,859

Actuarial loss on defined benefit schemes after tax
Interim Ordinary dividend paid

(27)
(1,000)(8)(1,169)(23)(1,169)Balance at end of the period

1,118

1,525

1,667

22

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. CAPITAL ADEQUACYOVERSEAS BANKING GROUP CAPITAL ADEQUACY RATIO
Overseas Bank
(Extended Licensed Entity)
Unaudited
Unaudited
Unaudited
31/03/2009
31/03/2008
30/09/2008
Basel II
Basel II
Basel II

For personal use only

Overseas Banking Group
Unaudited
30/06/2009
Basel II

Tier One Capital
Total Capital

Unaudited
30/09/2008
Basel II

9.7%

7.7%

9.0%

8.1%

8.4%

12.4%

11.1%

11.5%

11.7%

11.6%

Basel II came into force on 1 January 2008. The Overseas Banking Group received accreditation from APRA to
apply the Advanced Internal Ratings Based (Advanced IRB) methodology for credit risk weighted assets and theAdvanced Measurement Approach (AMA) for operational risk weighted asset equivalent.
The Overseas Banking Group is required by APRA to hold minimum capital at least equal to that specified underthe Advanced IRB methodology. The Overseas Banking Group exceeded the minimum capital adequacy
requirements as specified by APRA as at 30 June 2009. Comparatives for 30 June 2008 have not been provided
as these are not publicly available.
Further details of the Overseas Banking Group's capital adequacy requirements and credit risk management
processes can be found in its 2008 Annual Report. This report can be accessed at the following website
address: www.anz.com.

RISK WEIGHTED CREDIT RISK EXPOSURES
Risk weighted exposures for the NZ Banking Group and NZ Branch have been derived in accordance with the
RBNZ document entitled 'Capital Adequacy Framework (Basel I Approach)' (BS2) dated March 2008.
Total Risk Weighted Exposures of the NZ Banking Group as at 30 June 2009 (unaudited) were:

On-balance sheet exposures

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential Mortgages
Other
Non risk weighted assets

Risk
weightRiskweighted
exposure

$m
2,552
498
7,576
630
54,36945,26915,336

0%
10%
20%
20%
50%
100%
n/a

$m
50
1,515
126
27,18545,269-126,230

Principal
amount
$m
2,239
792
1,033
77

Off-balance sheet exposures1.

Principal
amountDirect credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

Creditconversion
factor
100%
100%
50%
20%

Average
Credit counterpa
equivalent
rty riskamountweight
$m
2,239
36%
792
63%
517
70%
15
65%

Risk
weighted
exposure
$m
796
499
362
10

5,762

50%

2,881

100%

2,881

17,419

0%

-

n/a

-

110,035
471,420
44

5,706
10,522
10

22%
23%
60%

1,263
2,459
6

608,821

22,682The credit equivalent amounts for market related contracts are calculated using the current exposure method.

23

74,145

8,276

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. CAPITAL ADEQUACY (CONTINUED)

For personal use only

Total Risk Weighted Exposures of the NZ Branch as at 30 June 2009 (unaudited) were:Principal
amount
$m
4,518
190
26

On-balance sheet exposures
Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential Mortgages
Other
Non risk weighted assets

Risk
weight
0%
10%
20%
20%
50%
100%
n/a

4,734

Principal
amount$m-

Off-balance sheet exposures
Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

Creditconversion
factor
100%
100%
50%
20%

Risk
weighted
exposure
$m
2,259
190
2,449

Average
Credit counterpa
rty risk
equivalentamountweight
$m
n/a
n/a
n/a
n/a

Risk
weighted
exposure
$m
-

-

50%

-

n/a

-

-

0%

-

n/a

-

12,153
8,315
-

68
55
-

20%
20%
0%

14
11

20,468

123

25

RETAIL MORTGAGES BY LOAN-TO-VALUATION ("LVR") RATIOAs required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage 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.
Retail mortgages by LVR ratio for the NZ Banking Group as at 30 June 2009 (unaudited):
ExposureAmount$m

LVR range
0% - 80%
80% - 90%
Over 90%1.

40,247
7,151
5,973
53,371

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

24

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19. CONCENTRATIONS OF CREDIT RISKFor personal use only

The NZ Banking Group has no credit exposures, on the basis of limits, to individual counterparties or groups ofclosely related counterparties (whether bank or non-bank exposures) which equal or exceed 10% of theOverseas Banking Group's equity as at 31 March 2009, 31 March 2008 or 30 September 2008, or in respect ofpeak end-of-day aggregate credit exposures for the quarter ended 31 March 2009. The peak end-of-day
exposures have been calculated using the Overseas Banking Group equity as at 31 March 2009. These
calculations exclude credit exposures to the central government of any country with a long term credit rating of
A- or A3 or above, or its equivalent.

20. MARKET RISKRBNZ 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 (Standardised Approach)' (BS2A) dated November
2007.
The peak end-of-day market risk exposures for the quarter are measured as a percentage of the Overseas
Banking Group's most recently publicly disclosed equity, as at 31 March 2009.
NZ Banking Group

Implied risk weighted
exposure

Aggregate capital charge asa percentage of theOverseas Banking Group's
EquityAggregate capital charge

As at
$m

Peak
$m

As at
$m

Peak
$m

As at
$m

Peak
$m

3,714
18
81

3,714
140
91

297
1
6

297
11
7

0.9%
0.0%
0.0%

0.9%
0.0%
0.0%

3,633
16
74

4,078
151
76

291
1
6

326
12
6

1.1%
0.0%
0.0%

1.2%
0.0%
0.0%

3,736
35
64

3,984
160
75

299
3
5

319
13
6

0.9%
0.0%
0.0%

1.0%
0.0%
0.0%

Unaudited 30/06/2009

Interest rate risk
Foreign currency risk
Equity risk
Unaudited 30/06/2008

Interest rate risk
Foreign currency risk
Equity risk
Audited 30/09/2008

Interest rate risk
Foreign currency risk
Equity risk

21. INTEREST EARNING ASSETS AND DISCOUNT BEARING LIABILITIES
Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Interest earning and discount bearing assets

108,799

105,467

109,017

Interest and discount bearing liabilities

100,576

98,152

103,583

25

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22. SEGMENTAL ANALYSIS
For segment reporting purposes, the NZ Banking Group is organised into three major business segments Retail, Commercial and Institutional. Centralised back office and corporate functions support these segments.

For personal use only

A summarised description of each business segment is shown below:
RetailProvides banking products and services to individuals and small businesses through separate ANZ and The
National Bank of New Zealand branded distribution channels. 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. ING NZ joint venture).
Commercial
This segment provides services to Rural, Corporate and Commercial and UDC 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 requirements with revenue from
deposit and transactional facilities, and cashflow lending, to more complex funding arrangements with revenue
sourced from a wider range of products. UDC is primarily involved in the financing and leasing of plant, vehicles
and equipment, primarily for small and medium sized businesses, as well as investment products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group's client base. The
Institutional business unit is made up of the following specialised units:•••

Markets - provides foreign exchange and commodity trading and sales-related services, origination,
underwriting, structuring, risk management and sale of credit and derivative products globally.
Transaction Banking - provides cash management, trade finance, international payments, clearing andcustodian services.
Specialised Lending - provides origination, credit analysis, structuring and execution of specific customertransactions.

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 beconsistent with the 2009 segment definitions.
BUSINESS SEGMENT ANALYSIS - CONTINUING OPERATIONS1,2
Consolidated
Retail Banking3$mCommercial
Banking$m

Institutional
$m

Other
$m

Total
$m

Unaudited 9 months to 30/06/2009
Net operating income3
Profit before income tax3

1,040
85

612
201

611
411

42
(18)

2,305
679

Unaudited 9 months to 30/06/2008
Net operating income
Profit before income tax

1,328
507

591
344

402
270

50
48

2,371
1,169

Audited year to 30/09/2008
Net operating income
Profit before income tax

1,760
612

795
418

539
364

61
14

3,155
1,408

1.
2.
3.

Results are equity standardisedIntersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Includes $211 million charge in relation to ING New Zealand Funds. Refer to Note 27 for further details.

26

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23. NOTES TO THE CASH FLOW STATEMENT
Unaudited
9 months to
30/06/2009$mConsolidated
Unaudited
9 months to
30/06/2008

AuditedYear to30/09/2008$m$m

For personal use only

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

Profit after income tax

478

833

990

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

35
532
4
14
40

33
167
(3)
11
42

46
302
(3)
13
57

(2,851)
115
(268)
(2)
43
180
77
(134)

(5,355)
14
101
(5)
52
(8)
40
(58)

(3,699)
2
206
(8)
46
25
56
(43)

(10)
(17)

(102)
1

(111)
1

(1,764)(4,237)(2,120)

Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Cash and balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government, Local Body stock and bonds
Available-for-sale assets
Other bank bonds

1,445
275
4,459
1,225
622
1,625

1,622
67
3,222
15
1,313

3,779
134
3,343
180
1,300

Total liquidity portfolio1

9,651

6,239

8,736

632
324

1,605
1,290

1,060
1,948

Non-cash items included within liquidity portfolio
Trading securities
Available-for-sale assets
Due from other financial institutions - greater than 90 days

(2,525)(622)(3,997)(1,955)(2,330)(2,376)(1,578)

Total cash and cash equivalents

3,463

4,849

7,790

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

2,077
1,386

3,226
1,623

4,839
2,951

Total cash and cash equivalents

3,463

4,849

7,790

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
Increase in accrued expenses
Increase (decrease) in provisions
Amortisation of premiums and discounts
Increase in income tax assets

Items classified as investing/financing:
Share of profit of equity accounted associates andjointly controlled entities(Gain) Loss on disposal of premises and equipment
Net cash flows used in operating activities
Reconciliation of core liquidity portfolio to cash and cash equivalents

The NZ Banking Group's core liquidity portfolio held for managing liquidity risk comprises:

Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:
Liquid assets not with central banks
Due from other financial institutions - less than 90 days

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 repurchase agreements with the RBNZ and other New Zealand banks and securities issued by offshore Supranational and highly rated banks.

27

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
24. ULTIMATE PARENT BANKThe Parent Company is Australia and New Zealand Banking Group Limited which is incorporated in Australia.

For personal use only

25. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS

Securitisation
The NZ Banking Group 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 NZ Banking Group transfers its contractual right to receive cash flows
from the financial assets, or retains the right but assumes an obligation to pass on the cash flows fromthe 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 NZ Banking Group sells or otherwise transfers financial assets insuch a way that some but not substantially all of 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 NZ
Banking Group'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 event that 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 NZ Banking Group established an in-house RMBS facility in order to issue securities
that meet the RBNZ criteria. The establishment of the facility resulted in the Bank’s financial statements
recognising a payable and a receivable of RMBS securities of equal amount totalling $3,721 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 further payable and receivable of RMBS
securities of equal amount. These assets and liabilities do not qualify for derecognition as the NZ Banking
Group retains a continuing involvement in the transferred assets, therefore the NZ Banking Group's financial
statements do not change as a result of establishing these facilities.
The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent thatany loans are found to be ineligible in terms of the RBNZ criteria, they are automatically removed from thefacility. Additional lending to existing RMBS customers is added into the facility on a monthly basis.
The establishment of this facility increases the NZ Banking Group's contingent funding ability from the RBNZ.
Funds management
Certain subsidiaries of the NZ Banking Group act as trustee and/or manager for a number of unit trusts andinvestment and superannuation funds. The Bank provides private banking services to a number of clients,
including investment advice and portfolio management. The NZ 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 NZ Banking Group, they are not included in thesefinancial statements. The NZ Banking Group derives fee and commission income from the sale and managementof investment funds and superannuation bonds, unit trusts and the provision of private banking services to anumber of clients. The NZ Banking Group derives commission income from the sale of third party funds
management products.
Custodial services
The NZ Banking Group provides custodial services to customers in respect of assets that are beneficially ownedby those customers.
Marketing and distribution of insurance products
The NZ 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.

28

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
25. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS (CONTINUED)

For personal use only

Insurance business
The NZ Banking Group does not conduct any insurance business directly, although the NZ 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 NZ Banking Group to entities which are involved in trust, custodial, funds
management and other fiduciary activities, and to affiliated insurance companies which conduct marketing or
distribution of insurance products, or on whose behalf the marketing or distribution of insurance products are
conducted, are provided on arm’s length terms and conditions and at fair value. Any assets purchased fromsuch entities have been purchased on an arm’s length basis and at fair value.
The NZ Banking Group has not provided any funding to entities except standard lending facilities provided in thenormal course of businesses on 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 (30/06/2008 $nil; 30/09/2008 $nil).
Risk management
The subsidiaries of the NZ Banking Group 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 registered Bank. The policies and procedures include comprehensive andprominent 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 registered Bank of marketingand distributing insurance products:
Investment statements, prospectuses and brochures for insurance products include disclosures that theregistered Bank nor any member of the NZ Banking Group does 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 NZ Banking Group or its subsidiaries;
the policies are subject to investment risk, including possible loss of income and principal; andthe NZ Banking Group and its subsidiaries do not guarantee the capital value or performance of thepolicies.

Application forms for insurance products contain acknowledgements to be signed by a purchaser which
are consistent with the disclosures for insurance products noted above.

In addition, the following measures have been taken to manage any risk to the Bank of marketing anddistributing fund management products:
Prospectuses,
disclosures:•••investment

statements

andbrochures

for

funds

management

products

includethat the securities do not represent deposits or other liabilities of the NZ Banking Group;that the securities are subject to investment risk including possible loss of income and principal
invested; andthat the NZ Banking Group does not guarantee the capital value or performance of the securities.

Application forms for funds management products contain acknowledgements to be signed by apurchaser which are consistent with the disclosures for funds management products noted above.

29

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
26. COMMITMENTS
Unaudited
30/06/2009$mConsolidated
Unaudited
30/06/2008$m

Audited30/09/2008$m

Premises and equipment
Not later than 1 year

32

26

26

Total capital expenditure commitments

32

26

26

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

84
149
30

81
157
27

86
167
27

Total lease rental commitments

263

265

280

Total commitments

295

291

306

For personal use only

Capital expenditure
Contracts for outstanding capital expenditure:

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

27. CONTINGENT LIABILITIES, CREDIT RELATED COMMITMENTS AND MARKET RELATED CONTRACTS
For contingent exposures, the maximum exposure to credit risk is the maximum amount that the NZ Banking
Group would have to pay if the contingent is called upon. For undrawn facilities, the maximum exposure tocredit risk is the full amount of the committed facilities.
The NZ Banking Group guarantees the performance of customers by issuing standby letters of credit andguarantees to third parties, including its ultimate parent bank. The risk involved is essentially the same as thecredit risk involved in extending loan facilities to customers, therefore these transactions are subjected to thesame 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.
Consolidated
Face or contract value
Unaudited
Unaudited
Audited30/06/2009
30/06/2008
30/09/2008
$m
$m
$m

Credit related commitments
Commitments with certain drawdown due within one year
Commitments to provide financial services

792
23,181803
24,124659
23,150Total credit related commitments

23,97324,92723,809Contingent liabilities
Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,799
440
1,033
77

1,996
487
777
348

2,017
401
1,090
118

Total contingent liabilities

3,349

3,608

3,626

Foreign exchange, interest rate and commodity contracts
Exchange rate contracts
Interest rate contracts
Commodity contracts

110,035
471,420
44

100,704
553,398-

108,372
539,11136

Total foreign exchange, interest rate and commodity contracts

581,499

654,102647,519

30

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27. CONTINGENT LIABILITIES, CREDIT RELATED COMMITMENTS AND MARKET RELATED CONTRACTS(CONTINUED)

For personal use only

Contingent tax liability
As previously disclosed, the New Zealand Inland Revenue Department ("IRD") is reviewing a number ofstructured finance transactions as part of an audit of the 2000 to 2005 tax years. This is part of an industrywide review by the IRD of these transactions undertaken in New Zealand. Consequently a number of cases are
before the courts. The first of these decisions was issued on 16 July 2009 against another bank in favour of the
IRD.
The IRD has issued amended tax assessments in respect of seven of these transactions which cover the 2000 to
2004 income years.
Proceedings disputing the amended tax assessments with respect to the 2000-2004
income years have been commenced.
The Bank considers that its position in relation to the application of the tax laws is correct and as noted above isdisputing the IRD’s position. The Bank considers the taxation and accounting positions it has adopted for thesetransactions, and all similar transactions, in these accounts appropriate.
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 ($492 million with interest tax effected).
The IRD is also investigating other transactions undertaken by the Banking Group, which have been subject tothe 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($568 million with interest tax effected) as at 30 June 2009.
The possible application of penalties has yet to be considered by the IRD, but may be imposed following anadverse judgement. Having regard to the circumstances and the advice received, the Bank considers theapplication of penalties to be both inappropriate and unlikely.
Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($159
million with interest tax effected) is subject to indemnities given by Lloyds TSB Bank plc under the agreement
by which the Bank acquired the NBNZ Holdings Limited Group, and which relate to transactions undertaken by
NBNZ Group before December 2003.
This leaves a net potential tax liability as at 30 June 2009 of $266 million ($409 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 Commerce Commission alleges price fixing and substantially lessening competition in relation to
the setting of credit card interchange fees and is seeking penalties and orders under the Commerce Act.
Subsequently, several major New Zealand retailers have issued proceedings against ANZ National Bank Limited
and the other abovementioned defendants seeking unquantified damages, based on allegations similar to thosecontained in the Commerce Commission proceedings.
ANZ National Bank Limited is defending the proceedings. The Bank has received independent legal advice. The
matter is complex and difficult. At this stage any potential liability 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 and Consumer Finance Act 2003 ("CCCFA"). In its 2008-2011 Statement of Intent theCommission stated that:

31

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27. CONTINGENT LIABILITIES, CREDIT RELATED COMMITMENTS AND MARKET RELATED CONTRACTS(CONTINUED)

For personal use only

Commerce Commission (continued)"The Commission is turning more to litigation under the Credit Contracts and Consumer Finance Act toensure credit contract fees are reasonable and disclosed. Currently the credit industry is not fullycompliant with the legislation and taking more action through the courts 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 and the level of currency conversion charges on overseas transactions using credit cards under
the CCCFA. We have also been notified that the Commission is investigating early repayment charges on fixed
rate mortgages. At this stage the possible outcome of these investigations and any liability or impact on feescannot be determined with any certainty.
ING New Zealand Funds
Trading in the ING Diversified Yield Fund and the ING Regular Income Fund ("the Funds") was suspended 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 Bank customers.
On 5 June 2009, ING NZ AUT Investments Limited, a subsidiary of ING (NZ) Limited, made an offer to investors
in the Funds. The offer closed on 13 July 2009. Investors holding approximately 99% of the funds accepted theoffer and will receive a payment of 60 cents per unit in the ING Diversified Yield Fund or 62 cents per unit in the
ING Regular Income Fund, as applicable, either (i) in cash no later than 28 August 2009, or (ii) by way ofdeposit in an on-call account with ANZ National, paying 8.30% per annum fixed for up to five years.
The Bank considers it has adequately provided for these obligations at this time. Allowance for the estimatedcost of this offer is recognised as a reduction in "other operating income" in the income statement for the ninemonths ended 30 June 2009 with a corresponding provision in the balance sheet.
Although acceptance of this offer includes a waiver of claims, ANZ National Bank customers were offered an
additional opportunity to access the ANZ National Bank customers complaints team (and, where still unsatisfied,
the New Zealand Banking Ombudsman) even where the investors have accepted the offer.
The ultimate cost to ANZ National Bank will depend on the final value of units in the Funds, any recoveries
under insurance, the number of complaints and the results of any litigation and regulatory proceedings that may
be brought in connection with the Funds or their sale. The Commerce Commission has sought information
regarding the Funds and the sale of units in the Funds and is investigating this matter. At this stage it is notpossible to predict the outcome of any investigation.

Other contingent liabilities
The NZ Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings.
As assessment of the NZ Banking Group's likely loss in respect of these matters has been made on a case-bycase basis and provision made where appropriate. As at 30 June 2009, there were no other contingent assets or
liabilities required to be disclosed (30/06/2008 $nil; 30/09/2008 $nil).

28. SUBSEQUENT EVENTSOn 31 July 2009, the Bank elected to repay an Australian dollar denominated loan of AUD 207,450,000 on 31
August 2009.

32

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION
Conditions of Registration, applicable as at 31 August 2009.
The Conditions of Registration imposed on the NZ Branch, which apply from the date of registration are:

For personal use only

1. That the New Zealand banking group does not conduct any non-financial activities that in aggregate arematerial relative to its total activities, where the term material is based on generally accepted accounting
practice, as defined in the Financial Reporting Act 1993.
2. That the New Zealand 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 bysections 4(1)(a) and (b) and 9 of that Act), or any business of the nature referred to in section 3(1) of
the Life Insurance Act 1908;

ii. In measuring the size of the New Zealand banking group’s insurance business:a.

where insurance business is conducted by any entity whose business predominantly consistsof insurance business, the size of that insurance business shall be:• The total consolidated assets of the group headed by that entity;• Or if the entity is a subsidiary of another entity whose business predominantly consistsof insurance business, the total consolidated assets of the group headed by the latterentity;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 tothe total consolidated assets of the banking group. All amounts in parts (a) and (b) shallrelate to on balance sheet items only, and shall be determined in accordance with generally
accepted accounting practice, as defined in the Financial Reporting Act 1993;d.

where products or assets of which an insurance business is comprised also contain a noninsurance component, the whole of such products or assets shall be considered part of theinsurance business.

3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of
the business of the Australia and New Zealand Banking Group Limited.
4. That no appointment to the position of the New Zealand chief executive officer of the registered bank shallbe made unless:i.
ii.

the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed
appointee; andthe Reserve Bank has advised that it has no objection to that appointment.

5. That Australia and New Zealand Banking Group Limited complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.
6. That Australia and New Zealand Banking Group Limited complies with the following minimum capital
adequacy requirements, as administered by the Australian Prudential Regulation Authority:-tier one capital of the Australia and New Zealand Banking Group Limited is not less than 4
percent of risk weighted exposures;
capital of Australia and New Zealand Banking Group Limited is not less than 8 percent ofrisk weighted exposures.

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION (CONTINUED)

For personal use only

7. That the business of the registered bank in New Zealand is restricted to:i. acquiring for fair value, and holding, mortgages originated by ANZ National Bank Limited; andii. any other business for which the prior written approval of the Reserve Bank of New Zealand has
been obtained; andiii. activities that are necessarily incidental to the business specified in paragraphs (i) and (ii).
8. That the value of the mortgages held by the registered bank in New Zealand must not exceed $15 billion inaggregate.
9. That the registered bank in New Zealand may not incur any liabilities except:
i.
ii.
iii.
iv.
v.

to the government of New Zealand in respect of taxation and other charges; andto other branches or the head office of the registered bank; andto trade creditors and staff; andto ANZ National Bank Limited in respect of activities, other than borrowing, that are necessarily
incidental to the business specified in paragraphs (i) and (ii) of condition 7; andany other liabilities for which the prior written approval of the Reserve Bank has been obtained.

For the purposes of these Conditions of Registration, the term "banking group” means the New Zealandoperations of Australia and New Zealand Banking Group Limited whose business is required to be reported in
the financial statements for the group's New Zealand business, prepared in accordance with section 9(2) of the
Financial Reporting Act 1993.

34

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCREDIT RATING INFORMATION
Credit Ratings applicable as at 31 August 2009

For personal use only

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

Current Credit Rating

Qualification

AA

Outlook Stable

Moody’s Investors Service

Aa1

Outlook Negative

Fitch Ratings

AA-

Outlook Stable

During the two-year period ended 30 June 2009, the Standard and Poor's credit rating and qualification
remained at AA and Outlook Stable.
During the two-year period ended 30 June 2009, the Moody's Investors Service credit rating and qualification
remained at Aa1. On 2 March 2009 the Outlook changed from Stable to Negative.
During the two-year period ended 30 June 2009, the Fitch Ratings credit rating and qualification remained at
AA- and Outlook Stable. Fitch Ratings were formally engaged by the Overseas Bank on 18 March 2008 toprovide credit rating services. Previously Fitch Ratings had rated the Overseas Bank on an unsolicited basis as
AA-.
Moody's
Standard Investors& Poor's
Service

The following grades display investment grade characteristics:
Ability to repay principal and interest is extremely strong. This is the highest investment
category.
Very strong ability to repay principal and interest.
Strong ability to repay principal and interest although somewhat susceptible to adversechanges in economic, business or financial conditions.
Adequate ability to repay principal and interest. More vulnerable to adverse changes.

Fitch
Ratings

AAA

Aaa

AAA

AA

Aa

AA

A

A

A

BBB

Baa

BBB

BB

Ba

BB

B

B

BB

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & DThe following grades have predominantly speculative characteristics:

Significant uncertainties exist which could affect the payment of principal and interest on atimely basis.
Greater vulnerability and therefore greater likelihood of default.
Likelihood of default now considered high. Timely repayment of principal and interest isdependent on favourable financial conditions.
Highest risk of default.
Obligations currently in default.

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

35

For personal use onlyFor personal use only