ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2020
NUMBER 93 | ISSUED MAY 2020

ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2020

CONTENTSDISCLOSURE STATEMENT
Condensed Consolidated Interim Financial Statements (Interim Financial Statements)
Income statement

3Statement of comprehensive income

3

Balance sheet

4

Cash flow statement

5

Statement of changes in equity

6

Notes to the interim financial statements

7

Registered Bank Disclosures
General disclosures

24

Additional financial disclosures

26

Asset quality

31

Capital adequacy under the internal models based approach, and regulatory liquidity ratios

35

Concentration of credit risk to individual counterparties

42

Insurance business42

Directors’ Statement

43

Independent Auditor’s Review Report44

GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it wereconducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
UDC means UDC Finance Limited.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by the Order.

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
INCOME STATEMENT
For the six months ended 31 March

Note

2020
NZ$m

2019
NZ$m

Interest income

2,998

3,284

Interest expense(1,332)(1,652)

1,666

1,632

483

395

Net income from insurance business-

27

Share of associates' profit

-

4

2,149

2,058

Net interest income
Other operating income

2

Operating income
Operating expenses

3

Profit before credit impairment and income tax

(836)

(744)

1,313

1,314

(233)

(34)

Profit before income tax

1,080

1,280

Income tax expense

(296)

(331)

Profit for the period

784

949

2020
NZ$m

2019
NZ$m

784

949

(17)

(16)

Credit impairment charge

7

STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 MarchProfit for the period
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity

(65)

-

Realised losses transferred to the income statement

14

4

Income tax attributable to the above items

19

3

Other comprehensive income after tax

(49)

(9)

Total comprehensive income for the period

735

940

The notes appearing on pages 7 to 23 form an integral part of these financial statements

3

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
BALANCE SHEETAs atAssetsCash and cash equivalents

Note

31 Mar 20
NZ$m

30 Sep 19
NZ$m

5

7,746

2,363

404

193

Collateral paid

2,527

2,324

Trading securities

11,6798,942

Derivative financial instruments

13,216

11,666

Investment securities

7,293

7,027

135,355

132,525

283

77

3,267

3,276

620

335

Settlement balances receivable

Net loans and advances

6

Deferred tax assets
Goodwill and other intangible assets
Premises and equipment
Other assets

670

688

Total assets

183,060

169,416

Settlement balances payable

2,265

1,607

Collateral received

1,290

991

121,040

113,427

12,68011,042

Liabilities

Deposits and other borrowings

8

Derivative financial instruments
Current tax liabilities
Payables and other liabilities

92

101

1,191

1,159

145

138

Other provisions

9

330

314

Debt issuances

10

28,883

26,207

Total liabilities

167,916

154,986

Net assets

15,144

14,43011,888

11,888

Employee entitlements

EquityShare capital

(15)

21

Retained earnings

3,271

2,521

Total equity

15,144

14,430Reserves

The notes appearing on pages 7 to 23 form an integral part of these financial statements

4

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDCASH FLOW STATEMENT
For the six months ended 31 MarchProfit after income tax

2020
NZ$m

2019
NZ$m

784

949

69

41

Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation
Loss on sale and impairment of premises and equipment
Net derivatives/foreign exchange adjustment

-

5

1,260

(13)

-

(646)

117

(147)

Collateral paid

(203)

(451)

Trading securities(2,737)481

Net loans and advances(2,830)(3,644)

(399)

611

Deposits and other borrowings

7,613

2,957

Settlement balances payable

658

458

Collateral received

299

(326)

Other liabilities

(278)

(398)

Total adjustments

3,569(1,072)

Net cash flows from operating activities1

4,353

(123)

(1,050)(1,054)

768

1,288

-

747

Proceeds from divestments net of intangibles disposed of, classified as investing activities
Other non-cash movements
Net (increase)/decrease in operating assets:

Other assets
Net increase/(decrease) in operating liabilities:

Cash flows from investing activities
Investment securities:
Purchases
Proceeds from sale or maturity
Proceeds from divestments
Other assets

(21)

(51)

Net cash flows from investing activities

(303)

930

Cash flows from financing activities
Debt issuances2
Issue proceeds

2,327

3,240

Redemptions(966)(3,145)(24)-

Repayment of lease liabilities3

(4)

(405)

Net cash flows from financing activities

1,333

(310)

Net change in cash and cash equivalents

5,383

497

Cash and cash equivalents at beginning of period

2,363

2,200

Cash and cash equivalents at end of period

7,746

2,697

Dividends paid

1
2

3

Net cash provided by operating activities includes income taxes paid of NZ$485 million (2019: NZ$519 million).
Movement in debt issuances (Note 10 Debt Issuances) also includes a NZ$901 million increase (2019: NZ$883 million decrease) from the effect of foreign exchange rates, a NZ$320 million
increase (2019: NZ$341 million increase) from changes in fair value hedging instruments and a NZ$94 million increase (2019: NZ$90 million decrease) from other changes.
Relates to repayments of lease liabilities which the Banking Group commenced recognising on 1 October 2019 following the adoption of NZ IFRS 16. Comparative information has not been
restated.

The notes appearing on pages 7 to 23 form an integral part of these financial statements

5

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITYNote
As at 1 October 2018
Impact on transition to NZ IFRS 9 Financial Instruments
As at 1 October 2018 (adjusted)

Investment
securities
Share revaluation
capitalreserve
NZ$m
NZ$m

Cash flow
hedging
reserve
NZ$m

Retainedearnings
NZ$m

Total
equityNZ$m11,888

11

22

1,188

13,109

-

-

-

(52)

(52)

11,888

11

22

1,136

13,057

Profit or loss

-

-

-

949

949

Unrealised gains / (losses) recognised directly in equity

-

(7)

7

-

-

Realised losses transferred to the income statement

-

-

4

-

4

Actuarial loss on defined benefit schemes

-

-

-

(16)

(16)

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

-

2

(3)

4

3

Total comprehensive income for the period

-

(5)

8

937

940

Ordinary dividends paid

-

-

-

(400)

(400)

Preference dividends paid

-

-

-

(5)

(5)

Transactions with Immediate Parent Company in its capacity as owner

-

-

-

(405)

(405)

As at 31 March 201911,888

6

30

1,668

13,592As at 1 October 201911,888

(6)

27

2,521

14,430

-

-

-

(17)

(17)

Transactions with Immediate Parent Company in its capacity as owner:

Impact on transition to NZ IFRS 16 Leases
As at 1 October 2019 (adjusted)

1

11,888

(6)

27

2,504

14,413

Profit or loss

-

-

-

784

784

Unrealised losses recognised directly in equity

-

(38)

(27)

-

(65)

Realised losses transferred to the income statement

-

-

14

-

14

Actuarial loss on defined benefit schemes

-

-

-

(17)

(17)

Income tax credit on items recognised directly in equity

-

11

4

4

19

Total comprehensive income for the period

-

(27)

(9)

771

735

-

-

-

(4)

(4)

Transactions with Immediate Parent Company in its capacity as owner:
Preference dividends paid
Transactions with Immediate Parent Company in its capacity as owner
As at 31 March 2020

The notes appearing on pages 7 to 23 form an integral part of these financial statements

6

-

-

-

(4)

(4)

11,888

(33)

18

3,271

15,144

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIESStatement of compliance
These interim financial statements (financial statements) for the Banking Group were issued on 26 May 2020 and should be read in conjunction with
the Banking Group’s financial statements for the year ended 30 September 2019.
These financial statements comply with:• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and• IAS 34 Interim Financial Reporting.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
Basis of measurement
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:• derivative financial instruments;• financial instruments measured at fair value through other comprehensive income; and• financial instruments designated at fair value through profit and loss.
Use of estimates, assumptions and judgements
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect reported amounts
and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective
decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an ongoingbasis.
A brief explanation of the key estimates, assumptions and judgements that have changed during the half year ended 31 March 2020 follows:Coronavirus (COVID-19) pandemic
The ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these financial statements. The estimation
uncertainty is associated with:• the extent and duration of the disruption to business arising from the actions by governments, businesses and consumers to contain the spreadof the virus;• the extent and duration of the expected economic downturn (and forecasts for key economic factors including GDP, employment and house
prices). This includes the disruption to capital markets, deteriorating credit quality, liquidity concerns, increasing unemployment, declines in
consumer discretionary spending, reductions in production because of decreased demand, and other restructuring activities; and• the effectiveness of government and central bank measures that have been and will be put in place to support businesses and consumers
through this disruption and economic downturn.
The Banking Group has developed various accounting estimates in these financial statements based on forecasts of economic conditions whichreflect expectations and assumptions as at 31 March 2020 about future events that the Directors believe are reasonable in the circumstances. There isa considerable degree of judgement involved in preparing forecasts, particularly given the substantial uncertainty as to how long the period ofsignificant lockdown restrictions and flow on impacts will last, and the outlook for recovery. The underlying assumptions are also subject touncertainties which are often outside the control of the Banking Group. Accordingly, actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting
estimates included in these financial statements.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses
and recoverable amount assessments of non-financial assets. The impact of the COVID-19 pandemic on each of these accounting estimates isdiscussed further below and/or in the relevant note to these financial statements. Readers should carefully consider these disclosures in light of theinherent uncertainty described above.
Allowance for expected credit losses
The Banking Group measures the allowance for expected credit losses (ECL) using an expected credit loss impairment model as required by NZ IFRS 9
Financial Instruments (NZ IFRS 9). The Banking Group’s accounting policy for the recognition and measurement of the allowance for ECL is described at
Note 12 to the Banking Group’s Financial Statements for the year ended 30 September 2019.
The table below shows the Banking Group’s allowance for ECL (refer to Note 7 and Note 11 for further information).
As at
Individually assessed
Collectively assessed
Total11.

Mar 20
NZ$m
98
675
773

Sep 19
NZ$m
108
486
594

Includes allowance for ECL for Net Loans and advances – at amortised cost and Off-balance sheet commitments – undrawn and contingent facilities.

7

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Individually assessed ECL
In estimating individually assessed ECL for Stage 3 exposures, the Banking Group makes judgements and assumptions in relation to expected
repayments, the realisable value of collateral, the business prospects for the customer, competing claims and the likely cost and duration of the workout process. Judgements and assumptions in respect of these matters have been updated to reflect the potential impact of COVID-19.
Collectively assessed ECL
During the six months ended 31 March 2020 the collectively assessed allowance for ECL increased by NZ$189 million. This was attributable to changes
in economic outlook of NZ$168 million and changes in portfolio composition and risk of NZ$21 million.
In estimating collectively assessed ECL, the Banking Group makes judgements and assumptions in relation to:• the selection of an estimation technique or modelling methodology, noting that the modelling of the Banking Group’s ECL estimates arecomplex; and• the selection of inputs for those models, and the interdependencies between those inputs.
The modelling methodology applied in estimating ECL in these financial statements is consistent with that applied in the Banking Group’s Financial
Statements for the year ended 30 September 2019.
The impact of COVID-19 on the global economy and how governments, businesses and consumers respond is uncertain. This uncertainty is reflectedin the Banking Group’s assessment of ECL from its credit portfolio which are subject to a number of management judgements and estimates.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between those
inputs, and highlights significant changes during the six months ended 31 March 2020.
The judgements and associated assumptions have been made within the context of the impact of COVID-19, and reflect historical experience andother factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the circumstances.
In relation to COVID-19, judgements and assumptions include the extent and duration of the pandemic, the impacts of actions of governments andother authorities, and the responses of businesses and consumers in different industries, along with the associated impact on the global economy.
Accordingly, the Banking Group’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.

8

Judgement/assumption

Description

Changes and considerations during the six months
ended 31 March 2020

Determining when asignificant increase incredit risk (SICR) has
occurredIn the measurement of ECL, judgement is involved insetting the rules and trigger points to determine
whether there has been a SICR since initialrecognition of a loan, which would result in thefinancial asset moving from ‘stage 1’ to ‘stage 2’. Thisis a key area of judgement since transition fromstage 1 to stage 2 increases the ECL from anallowance based on the probability of default in thenext 12 months, to an allowance for lifetime ECL.
Subsequent decreases in credit risk resulting intransition from stage 2 to stage 1 may similarly resultin significant changes in the ECL allowance. The
setting of precise trigger points requires judgement
which may have a material impact upon the size of
the ECL allowance.

Various initiatives, such as payment deferrals have beenoffered to customers in the six months ended 31 March
2020 recognising the potential detrimental impact of
COVID-19. Such offers, if accepted, are not automaticallyconsidered to indicate SICR but are used as necessary
within the broader set of indicators used to assess andgrade customer facilities.

Measuring both 12month and lifetime
credit losses

ECL is a function of the probability of default (PD),the loss given default (LGD) and the exposure atdefault (EAD) which are point-in-time measuresreflecting the relevant forward looking information
determined by management. Judgement is involved
in determining which forward-looking information
variables are relevant for particular lending portfolios
and for determining the sensitivity of the parameters
to movements in these forward looking variables.

The PD, EAD and LGD models are subject to the Banking
Group’s model risk policy that stipulates periodic model
monitoring, periodic re-validation and defines approval
procedures and authorities according to model
materiality. There were no material changes to the models
during the six months ended 31 March 2020.

In addition, judgement is required where
behavioural characteristics are applied in estimating
the lifetime of a facility to be used in measuring ECL.

There were no changes to behavioural lifetime estimatesduring the six months ended 31 March 2020.

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Judgement/assumption

Description

Changes and considerations during the six months
ended 31 March 2020

Base case economic
forecast

The Banking Group derives a forward looking “basecase” economic scenario which reflects our view ofthe most likely future macro-economic conditions.

There have been no changes to the types of forward
looking variables (key economic drivers) used as model
inputs in the six months ended 31 March 2020.
As at 31 March 2020, the base case assumptions havebeen updated to reflect the rapidly evolving global
situation with respect to COVID-19. This includes anassessment of the impact of central bank (monetary
policy), government (wage subsidies), and institution
specific responses (such as payment deferrals). These areconsidered in determining the length and severity of theforecast economic downturn.
The expected outcomes of key economic drivers for thebase case scenario as at 31 March 2020 and thosepreviously used at 30 September 2019 are described
below under the heading “Forecast base caseassumptions”.

Probability weighting ofeach scenario (basecase, upside1,
downside1 and severe
downside2 scenarios)

Probability weighting of each scenario is determinedby management considering the risks anduncertainties surrounding the base case scenario.

The key consideration for probability weightings in thecurrent period is the continuing impact of COVID-19.
In addition to the base case forecast which reflects largely
the negative economic consequences of COVID-19,
greater weighting has been applied to the downside andsevere downside scenarios (base 50%, upside 4%,
downside 36% and severe downside 10%) given the
Banking Group’s assessment of downside risks.
The assigned probability weightings are subject to a highdegree of inherent uncertainty and therefore the actual
outcomes may be significantly different to thoseprojected. The Banking Group considers these weightings
to provide the best estimate of the possible loss outcomes
and has analysed inter-relationships and correlations (overboth the short and long term) within the Banking Group’s
credit portfolios in determining them.

Management
temporary adjustments

Management temporary adjustments to the ECL
allowance are adjustments used in circumstanceswhere it is judged that our existing inputs,
assumptions and model techniques do not capture
all the risk factors relevant to our lending portfolios.
Emerging local or global macroeconomic,
microeconomic or political events, and natural
disasters that are not incorporated into our current
parameters, risk ratings, or forward-looking
information are examples of such circumstances. The
use of management temporary adjustments may
impact the amount of ECL recognised.

Temporary adjustments for agriculture industry exposuresincreased by NZ$15 million, to a total of NZ$30 million as
at 31 March 2020.
Also, temporary adjustments have been assessed in thecontext of COVID-19 and the extent that associated credit
loss exposures are captured within the modelled
economic scenarios, with no further temporary
adjustments considered necessary.

The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
2.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.
1.

Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the forecast resulting in an understatement or overstatement of the ECL
balance due to uncertainties around:• The extent and duration of measures to stop or reduce the speed of the spread of COVID-19;• The extent and duration of the economic downturn, along with the time required for economies to recover; and• The effectiveness of government stimulus measures, in particular their impact on the magnitude of the economic downturn and the extent andduration of the recovery.

9

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
The Banking Group’s base case economic forecast scenarios reflects a sharp deterioration in economic conditions in the second quarter with a gradualimprovement thereafter. It reflects a widespread shutdown in the second quarter of calendar 2020 followed thereafter by a progressive relaxation of
lockdown restrictions.
The economic drivers of the base case economic forecasts at 31 March 2020 and those that were used at 30 September 2019 are set out below. These
reflect the Banking Group’s view, at the respective reporting dates, of the most likely future macro-economic conditions.
New Zealand•GDP

Base case economic forecast as at 31 March 2020

Base case economic forecast as at 30 September 2019

Expected sizeable contraction in GDP in June quarter,
starting to recover partially over the remainder of theyear. Moderate GDP growth is expected in 2021.

Expected to improve modestly.

GDP is expected to contract by 17% in the June 2020
quarter, starting to recover in the September 2020
quarter once activity resumes, with an overall
contraction of 6.7% over the 2020 calendar year. GDP
is expected to grow by 4.2% in calendar year 2021.
•

Unemployment
rate

Unemployment is expected to increase significantly
over the June quarter, recovering gradually over theremainder of 2020 and 2021, but remaining
significantly higher than levels of first half of 2020. It is
expected to average 7.4% for calendar year 2020 and
7.7% for calendar year 2021.

Expected to remain stable.

•

Residential
property prices

Property prices are expected to contract by 1.9% in
calendar year in 2020, followed by 6.0% growth incalendar year 2021.

Expected to achieve modest levels of growth.

•Commercial
property prices

Property prices are expected to increase moderately
in 2020, continuing but less so in 2021.

Expected to grow, however, the growth rate is expected
to be modest through the forecast period.

Expected to grow by 3.1% in calendar year 2020 anda further 0.5% in 2021.
•

Consumer priceindex

CPI growth is forecast at slightly lower levels than
2019 across 2020 and 2021.

Expected to rise modestly.

CPI growth is forecast at 1.5% for calendar year 2020
and 1.5% for calendar year 2021.
Sensitivity analysis
The uncertainty of the impact of COVID-19 introduced significant estimation uncertainty in relation to the measurement of the Banking Group’s
allowance for ECL. While a combined 46% weighting has been applied to the downside and severe downside scenarios as at 31 March 2020, therapidly evolving consequences of COVID-19 and government, business and consumer responses could result in significant adjustments to theallowance within the current and next financial years.
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future periods,
expected credit losses reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of ECL to key factors used in determining it:
ECL sensitivity - weightings applied to forecast scenarios
100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario

Total ECL
NZ$m
322
575
766
986

Impact
NZ$m
(353)
(100)
91
311

Customer remediation and other provisions
The Banking Group holds provisions for various obligations including customer remediation, restructuring costs, leasehold make good andlitigation related claims (refer to Note 9). These provisions involve judgements regarding the outcome of future events, including estimates of
expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice, provisions
and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the cost of
settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of different
assumptions, including, the number of impacted customers, the average refund per customer and the associated remediation costs.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant
evidence and adjustments are made to the provisions where appropriate.

10

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Annual goodwill impairment testingManagement judgement is used to assess the recoverable value of goodwill. Goodwill is assessed for indicators of impairment half-yearly and tested
for impairment annually. The level at which goodwill is allocated, the estimation of future cash flows and the selection of discount rates applied
requires significant judgement.
For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a cash generating unit (CGU). The Banking Group’s CGUs are
consistent with the operating segments described in Note 4, and the allocation of goodwill to each CGU as at 31 March 2020 is the same as at 30
September 2019. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. To estimate therecoverable amount of the CGU to which each goodwill component is allocated, we use a value-in-use approach.
Value-in-use
These calculations use cash flow projections based on a number of financial budgets within each segment approved by management covering an
initial forecast period. These projections also incorporate economic assumptions including GDP, inflation, unemployment and residential andcommercial property prices. Cash flows beyond the forecast period are extrapolated using the terminal growth rate. These cash flow projections are
discounted using a discount rate derived using a capital asset pricing model.
Market observable information is not readily available at the CGU level therefore management performed stress tests for key sensitivities in eachsegment. Given the rapidly changing situation associated with COVID-19, a further specific stress scenario was applied as at 31 March 2020. Thisadditional stress scenario decreased the recoverable amount of each CGU by an average of 23.5% compared to the 29 February 2020 annual
impairment test, but did not cause the carrying amount of goodwill for any CGU to exceed its recoverable amount.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential write-off ofpart or all of the goodwill balances.

Forecast period andprojections

29 February 2020 annual impairment test

31 March 2020 stress scenario

Three years

Eight years - incorporating a two and a half year initial stressperiod followed by a three year recovery and a three year
return to maintainable earnings.

Projections based on a number of financial
budgets within each segment approved bymanagement.

The periods of initial stress included allowances for increased
credit impairment losses, based on stress scenarios used in
the Banking Group’s Internal Capital Adequacy Assessment
Process (ICAAP) and having regard to the economic forecasts
used in the calculation of ECL as at 31 March 2020, anddecreased revenue.

Terminal growth rate

2% - based on RBNZ long term inflation target.

2% - based on RBNZ long term inflation target

Discount rates

9.5% (2019: 11.1%). Pre-tax: 12.3% (2019: 14.7%).

7.1% for one year to 10.2% for the terminal cash flows. Pre-tax:
10.1% to 13.2%.

The main variables in the calculation of the
discount rate used are the risk free rate, beta andthe market risk premium. The risk free rate wasbased on a blended yield rate between the 10
year New Zealand government bond rate andthe associated 5 year forward rate. Beta and themarket risk premium were consistent withobservable and comparative market rates
applied in the regional banking sector.

Given RBNZ has stated that the Official Cash Rate will be held
at 0.25% for at least one year, a range of rates applicable tothe discounting period were used.

ResultCarrying amount did not exceed the recoverable
amount for any CGU.

Carrying amount did not exceed the recoverable amount for
any CGU.

Sensitivity testingSensitivity analysis was performed on key
assumptions in early March, and this did notcause the carrying amount of any CGU to
exceed its recoverable amount.

Cashflow forecasts were flexed for changes in credit
impairment charges.

The range of rates used was equivalent to using a flat rate of
10.0% (Pre-tax: 12.9%).

These were calculated on the same basis as for the annual
impairment test, using risk free rates applicable to thediscount period, and an updated market risk premium.

Credit impairment charges as a proportion of gross loans andadvances were increased for the initial stress period to at least
30% above the ICAAP scenario applied, equivalent to at least
30% higher than the levels experienced over 2008 to 2011
(covering the period of the global financial crisis).
Carrying amount did not exceed the recoverable amount for
any CGU.

Conclusion

No impairment of goodwill for any CGU

No impairment of goodwill for any CGU

11

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Other intangible assets
Management judgement is used to assess the recoverable value of other intangible assets, and the useful economic life of an asset, or if an asset
has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
At each reporting date, software and other intangible assets are assessed for indicators of impairment. In addition, software and intangible assets
not ready for use are tested annually for impairment. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the carrying value of the asset is written down immediately.
In addition, the expected useful life of intangible assets, including software assets, are assessed on a semi-annual basis. The assessment requires
management judgement, and in relation to our software assets, a number of factors can influence the expected economic useful lives. These
factors include changes to business strategy, significant divestments and the underlying pace of technological change.
Changes in accounting policies
The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year financial statements,
except as disclosed below.
The following new standard relevant to the Banking Group has been adopted from 1 October 2019 and has been applied in the preparation of thesefinancial statements:
NZ IFRS 16 Leases (NZ IFRS 16)
NZ IFRS 16 became effective for the Banking Group from 1 October 2019 and replaced the previous standard NZ IAS 17 Leases (NZ IAS 17). NZ IFRS 16
primarily impacts the Banking Group’s property and technology leases which were previously classified as operating leases. Under NZ IAS 17,
operating leases were not recognised on the balance sheet and rent payments were expensed over the lease term.
Under NZ IFRS 16, the Banking Group recognises all leases (except for leases of low value assets and short term leases) on the balance sheet under asingle accounting model. Accordingly, the Banking Group recognises its right to use an underlying leased asset over the lease term, as a right-of-use(ROU) asset, and its obligation to make lease payments as a lease liability. In the income statement, the Banking Group recognises depreciation
expense on the ROU asset and interest expense on the lease liability. As a result, lease expenses will be higher in the early periods of a lease and lower
in the later periods of the lease compared to the previous standard where expenses were constant over the lease term. Cumulative expenses over thelife of a lease will not change.
As permitted by the standard, the Banking Group does not recognise ROU assets and lease liabilities for leases of low value items and short term leases(less than 12 months). Instead, the lease payments associated with these leases are recognised as operating expense in the income statement on astraight-line basis over the lease term.
The Banking Group has applied the modified retrospective transition approach whereby initial lease liabilities are recognised based on the present
value of remaining lease payments as of the transition date. The initial ROU asset recognised for certain large commercial leases was measured as if NZ
IFRS 16 had always been applied to the leases. For all other leases, the initial ROU asset was measured as equal to the initial lease liability plus any
future make good obligations associated with exiting the lease.
The implementation of NZ IFRS 16 requires management to make certain key judgements including the determination of lease terms, discount rates
and identifying arrangements that contain a lease.
Based on the modified retrospective transition approach, the Banking Group recognised lease liabilities of $333 million presented within Payables andother liabilities and right-of-use assets of $309 million presented within Premises and equipment. This resulted in a reduction to opening retained
earnings of $17 million and an increase in deferred tax assets of $7 million as of 1 October 2019. Comparatives have not been restated.
In addition, the Banking Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:• Impairment of ROU assets at the transition date were assessed by relying on onerous lease provisions previously recognised as of 30 September
2019 under NZ IAS 17;• Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised attransition;• No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases
were treated as short-term leases with all lease payments recognised in rent expense as incurred; and• Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
The following table reconciles the operating lease commitments disclosed under NZ IAS 17 as at 30 September 2019 to the opening lease liabilities
recognised under NZ IFRS 16 as at 1 October 2019.
Operating lease commitments as at 30 September 2019
Increase in lease term for extension options
Total undiscounted lease payments
Effect of discounting at a weighted average incremental borrowing rate of 2.75%
Total lease liabilities under NZ IFRS 16

12

NZ$m
279
93
372
(39)
333

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDInterest Rate Benchmark Reform
Background
Interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), play a critical role in global financial markets, serving as reference
rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments.
Uncertainty surrounding the integrity of IBOR rates has in recent years, led regulators, central banks and market participants to work towards atransition to alternative risk-free benchmark reference rates (RFRs) and market-led working groups in respective jurisdictions have recommended
alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant
uncertainty in the future of IBOR benchmarks beyond 1 January 2022.
Accounting amendments
In response to the uncertainty about the long-term viability of these benchmark rates, and LIBOR in particular, the International Accounting Standards
Board (IASB) has established a project to consider the financial reporting implications of the reform. The transition from LIBOR is expected to have an
impact on various elements of financial instrument accounting, including hedge accounting, as well as fair value methodologies and disclosures.
In November 2019, the External Reporting Board (XRB) issued XRB amending standard Interest Rate Benchmark Reform, which amends certain existinghedge accounting requirements to provide relief from potential effects of the uncertainty caused by the interest rate benchmark reform. The Banking
Group elected to early adopt the amendments from 1 October 2019 which have not had a significant impact on the Banking Group.
These amendments address the accounting effects of uncertainty in the period leading up to the reform arising from the Banking Group’s ability tosatisfy the existing prospective hedge effectiveness requirements of NZ IAS 39 Financial Instruments: Recognition and Measurement. This uncertainty
arises as it is not known when the hedged items (such as debt issuances) and associated hedging instruments (such as interest rate swaps) will bechanged to reference the RFRs, or if both the hedging item and the associated hedging instrument will move to the new rates at the same time. The
Banking Group has applied this amendment to all hedge accounted relationships (cash flow or fair value hedges) where the reform gives rise touncertainties about the timing or amount of IBOR based cash flows of the hedged item or hedging instrument.
The IASB has commenced working on Phase 2 of its IBOR Reform project, which focuses on potential issues that might affect financial reporting oncethe existing rate is replaced with an alternative rate. The Banking Group is monitoring these developments and continues to assess the expectedfinancial impact.
Impact of IBOR reform
The Banking Group has exposure to IBOR through its issuance of debt, the structural interest rate risk position, products denominated in foreign
currencies and associated hedging activities in our markets and treasury businesses within Institutional and Other segments respectively.
The Banking Group has established a programme to manage the transition. The programme includes the assessment and actions necessary toaccommodate the transition to RFRs as they apply to internal processes and systems including pricing, risk management, documentation and hedge
arrangements. The programme includes management of the impact on customers.
Impact of IBOR reform on the Banking Group’s hedging relationships
The most significant interest rate benchmarks to which the Banking Group's hedging relationships are exposed are US dollar LIBOR, Euro Interbank
Offered Rate (Euribor), Bank Bill Swap Rate (BBSW) and Bank Bill Market (BKBM).
Of these benchmarks the Banking Group expects BBSW, BKBM and Euribor to exist as benchmark rates for the foreseeable future and therefore does
not believe its BBSW, BKBM or Euribor benchmark fair value or cash flow hedges to be directly impacted by IBOR reform.
The table below details the carrying values of the Banking Group's exposures designated in hedge accounting relationships that will be impacted by
IBOR reform, principally US dollar LIBOR. The nominal value of the associated hedging instruments are also included:
US dollar LIBOR
As at 31 March 2020
NZ$m
Hedged items
Debt issuances
12,572As at 31 March 2020

Notional designatedup to
31 December 2021
NZ$m

Notional designatedbeyond31 December 2021
NZ$m

Total notionalamount
NZ$m

Hedging Instruments
Fair value hedges

5,393

6,637

12,030As at 31 March 2020 the Banking Group also has Swiss franc LIBOR exposures designated in hedge accounting relationships of NZ$1,080 million.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the Bank and its subsidiaries.

13

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
2.

OTHER OPERATING INCOME

For the six months ended 31 March(i) Fee and commission revenue
Lending fees
Non-lending fees
Commissions
Funds management income
Fee and commission income
Fee and commission expense
Net fee and commission income(ii) Other income
Net trading gains
Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value
Net foreign exchange earnings and other financial instruments income
Sale of OnePath Life (NZ) Limited (OnePath)
Sale of investment in Paymark Limited (Paymark)
Other
Other income
Other operating income

3.

2

2019
NZ$m

17
374
21
133
545
(260)
285

16
410
23
127
576
(241)
335

68
119
187
11
198
483

73
(121)
(48)
59
39
10
60
395

2020
NZ$m

2019
NZ$m

454
15
24
493

413
14
10
437

12
65
77

41
34
75

24
60
22
106

24
53
24
101

24
31
21
41
43
160
836

21
27
22
26
35
131
744

OPERATING EXPENSES

For the six months ended 31 March
Personnel
Salaries and related costs
Superannuation costs
Other
Personnel
Premises
Rent1
Other2Premises
Technology
Depreciation and amortisation
Licences and outsourced services
Other
Technology (excluding personnel)
Other
Advertising and public relations
Professional fees
Freight, stationery, postage and communication
Charges from Ultimate Parent Bank
Other
Other
Operating expenses
1

2020
NZ$m

Following the adoption of NZ IFRS 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with operating leases are shown as
depreciation of the right-of-use asset and interest expense associated with the lease liability (comparatives are not restated).
Includes depreciation and amortisation on right-of-use assets which the Banking Group commenced recognising on the adoption of NZ IFRS 16 (comparatives not restated).

14

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

4. SEGMENT REPORTING
The Banking Group is organised into three major business segments for segment reporting purposes - Retail, Commercial and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
RetailRetail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact
centres.
Commercial
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions throughdedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment, government and government
related entities.
Institutional
The Institutional division services government, global institutional and corporate customers across three product sets: Transaction Banking, Loans &Specialised Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance,
debt structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to
managing the Banking Group’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
RetailCommercial

Institutional

Other

Total

For the six months

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

ended 31 March

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Net interest income

921

926

549

517

177

169

19

20

1,666

1,632

8

8

-

-

9

8

-

-

17

16

- Non-lending fees

343

371

5

9

26

30

-

-

374

410

- Commissions

21

23

-

-

-

-

-

-

21

23

Net fee and commission income- Lending fees

- Funds management fees

133

127

-

-

-

-

-

-

133

127

- Fee and commission expense

(260)

(241)

-

-

-

-

-

-

(260)

(241)

Net fee and commission income

245

288

5

9

35

38

-

-

285

335

Other income

8

7

1

1

46

75

143

(23)

198

60

Net income from insurance
business

-

19

-

-

-

-

-

8

-

27

Share of associates' profits

-

4

-

-

-

-

-

-

-

4

253

318

6

10

81

113

143

(15)

483

426

Operating income

1,174

1,244

555

527

258

282

162

5

2,149

2,058

Operating expenses

(574)

(514)

(147)

(128)

(96)

(86)

(19)

(16)

(836)

(744)

Profit before credit impairment
and income tax

600

730

408

399

162

196

143

(11)

1,313

1,314

Credit impairment charge

(83)

(31)

(106)

(2)

(44)

(1)

-

-

(233)

(34)

Other operating income

Profit before income tax

517

699

302

397

118

195

143

(11)

1,080

1,280

Income tax expense

(145)

(200)

(85)

(111)

(33)

(55)

(33)

35

(296)

(331)

Profit after income tax

372

499

217

286

85

140

110

24

784

949

15

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
RetailCommercial

Institutional

Other

Total

31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
As at

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Financial position
Goodwill

1,039

1,039

1,052

1,052

1,069

1,069

-

-

3,160

3,160

Net loans and advances

84,676

81,78943,55943,464

7,110

7,270

10

2

135,355

132,525

Customer deposits

76,40873,866

17,218

16,13819,785

19,232--

113,411109,236

Other segment
The Other segment profit after income tax comprises:
2020
NZ$m
3
11
96
110

For the six months ended 31 MarchCentral functions
Technology and Group Centre1, 2Economic hedges
Revaluation of insurance policies from changes in interest rates2
Total
1

2

Technology and Group Centre’s other income for the six months ended 31 March 2019 includes the NZ$59 million gain on sale of OnePath and the NZ$39 million gain on sale of Paymark(Note 2 Other Operating Income).
Amounts for the six months ended 31 March 2019 include the transfer of NZ$86 million of accumulated after tax gains previously recognised in revaluation of insurance policies from changes
in interest rates to Technology and Group Centre. These gains were transferred upon the sale of OnePath.

5.

CASH AND CASH EQUIVALENTS
31 Mar 20
NZ$m
755
557
6,052
382
7,746

Coins, notes and bank deposits
Securities purchased under agreements to resell in less than 3 months
Balances with central banks1
Settlement balances receivable within 3 months
Cash and cash equivalents
1

2019
NZ$m
195
(90)
(81)
24

30 Sep 19
NZ$m
192
297
1,448
426
2,363

From 20 March 2020, RBNZ removed allocated credit tiers for Exchange and Settlement Account System (ESAS) holders, with all ESAS credit balances earning interest at the Official Cash Rate
(OCR).

6. NET LOANS AND ADVANCES
Note
Overdrafts
Credit cards
Term loans - housing
Term loans - non-housing
Finance lease and hire purchase receivables
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Gross loans and advances
Allowance for ECL
Net loans and advances

7

31 Mar 20
NZ$m
816
1,426
87,26944,5391,844
135,894(221)
326
135,999(644)
135,355

30 Sep 19
NZ$m
927
1,569
84,00744,586
1,863
132,952(237)
307
133,022(497)
132,525

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$326 million as at 31 March 2020 (30 September 2019:
NZ$739 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

16

ANZ BANK NEW ZEALAND LIMITED7.

UNAUDITEDALLOWANCE FOR EXPECTED CREDIT LOSSES

This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.

ALLOWANCE FOR EXPECTED CREDIT LOSSES – BALANCE SHEETNet loans and advances - at amortised cost
Allowance for ECL is included in net loans and advances.

As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020

Stage 1
NZ$m
164
22
20
42
206

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
194
42
97
(25)
3
122
16
72
(15)
(14)
97
19
43
(64)
14
(4)
291
61
86

Total
NZ$m
497
230
(15)
(14)
201
(64)
14
(4)
644

Off-balance sheet credit related commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions
As at 1 October 2019
Transfer between stages
New and increased provisions (net of releases)
Credit impairment charge
As at 31 March 2020

60
4
18
22
82

24
(4)
13
9
33

2
2

11
1
1
12

97
32
32
129

2020
NZ$m

2019
NZ$m

189
73
(15)
(14)
233

1
64
(20)
(11)
34

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT

For the six months ended 31 March
New and increased provisions- Collectively assessed- Individually assessed
Write-backs
Recoveries of amounts previously written-off
Total credit impairment charge

17

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
8.

DEPOSITS AND OTHER BORROWINGS

Term deposits
On demand and short term deposits
Deposits not bearing interest
UDC secured investments
Total customer deposits
Certificates of deposit
Deposits from banks and securities sold under repurchase agreements
Commercial paper
Deposits from Immediate Parent Company and NZ Branch
Deposits and other borrowings

9. OTHER PROVISIONSECL allowance on undrawn facilities
Customer remediation
Restructuring costs
Leasehold make good
Other1
Total other provisions
1

Note
7

31 Mar 20
NZ$m
51,76947,215
14,427
113,411
1,695
1,461
4,456
17
121,040

30 Sep 19
NZ$m
54,98442,329
11,795
128
109,236
1,484
203
2,461
43
113,427

31 Mar 20
NZ$m
129
124
27
23
27
330

30 Sep 19
NZ$m
97
139
25
23
30
314

Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities provided in connection with various
disposals of businesses and assets.

10. DEBT ISSUANCES
Senior debt
Covered bonds
Total unsubordinated debt
Subordinated debt (Additional Tier 1 capital)
Total debt issued

31 Mar 20
NZ$m
21,812
4,630
26,442
2,441
28,88330 Sep 19
NZ$m
19,307
4,460
23,7672,440
26,207

Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is nota member of the Banking Group.
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are
security for the guarantee by the Covered Bond Guarantor as trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its
wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of theBank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (if any) after all
prior ranking creditors of the Covered Bond Trust have been satisfied.

18

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

11. CREDIT RISKThis note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, thesedifferences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject tomarket risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
ReportedOn-balance sheet positions
Net loans and advances
Other financial assets:
Cash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Other financial assets2
Total other financial assets
Subtotal
Off-balance sheet commitments
Undrawn and contingent facilities3
Total
1
2
3

Maximum exposure tocredit risk

Excluded1

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m135,355

132,525--

135,355

132,525

7,746
404
2,527
11,67913,216
7,293
586
43,451
178,806

2,363
193
2,324
8,942
11,666
7,027
622
33,137
165,662

355
355
355

192
192
192

7,391
404
2,527
11,67913,216
7,293
586
43,096
178,451

2,171
193
2,324
8,942
11,666
7,027
622
32,945
165,470

30,018208,824

29,253
194,915355

192

30,018208,469

29,253
194,723

Excluded comprises bank notes and coins and cash at bank within cash and cash equivalents.
Other financial assets mainly comprise accrued interest, insurance receivables and acceptances.
Undrawn facilities and contingent facilities include guarantees, letters of credit and performance related contingencies, net of allowance for ECL.

Credit quality
We use the Banking Group’s internal customer credit rating (CCR) to manage the credit quality of financial assets. To enable wider comparisons, theBanking Group’s CCRs are mapped to external rating agency scales as follows:
Credit quality
description

Internal CCR

The Banking Group customer requirements

Moody’s
RatingS&P Global
Ratings

Strong

CCR 0+ to 4-

Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.

Aaa – Baa3

AAA – BBB-

Satisfactory

CCR 5+ to 6-

Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible tocyclical trends or variability in earnings.

Ba1 – B1

BB+ – B+Weak

CCR 7+ to 8=

Demonstrated some operational and financial instability, withvariability and uncertainty in profitability and liquidity projected tocontinue over the short and possibly medium term.

B2 – Caa

B - CCC

Defaulted

CCR 8- to 10

When doubt arises as to the collectability of a credit facility, thefinancial instrument (or ‘the facility’) is classified as defaulted.

n/a

n/a

19

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Net loans and advances

Stage 1
NZ$m
100,607
24,510580
125,697(206)
125,491
0.16%

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
2,243
4,565
2,537
577
275
9,345
577
275
(291)
(61)
(86)
9,054
516
189
3.11%
10.57%
31.27%

95,58926,402
1,224
123,215(164)
123,051
0.13%

2,270
4,621
2,117
9,008
(194)
8,814
2.15%

As at 31 March 2020
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in Other provisions (refer to Note 9)
Net undrawn and contingent facilities
Coverage ratio

Stage 1
NZ$m
25,0194,196
20
29,235(82)
29,153
0.28%

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
131
594
160
4
23
885
4
23
(33)
(2)
(12)
852
2
11
3.73%
50.00%
52.17%

Total
NZ$m
25,1504,790
180
2730,147(129)
30,0180.43%

As at 30 September 2019
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in Other provisions (refer to Note 9)
Net undrawn and contingent facilities
Coverage ratio

23,2964,883
312
28,491(60)
28,431
0.21%

59
641
137
837
(24)
813
2.87%

23,3555,524
449
22
29,350(97)
29,2530.33%

As at 31 March 2020
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amountAs at 30 September 2019
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amount

444
444
(42)
402
9.46%

285
285
(97)
188
34.04%

Total
NZ$m
102,850
29,075
3,117
852
135,894(644)
135,250
0.47%
(221)
326
135,355

97,85931,023
3,341
729
132,952(497)
132,455
0.37%
(237)
307
132,525

Off-balance sheet commitments - undrawn and contingent facilities

20

3
3
(2)
1
66.67%

19
19
(11)
8
57.89%

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESFinancial assets and financial liabilities carried at fair value on the balance sheet
The Banking Group categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure fair value:• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Using observable
Quoted market priceUsing unobservable
inputs
Total(Level 1)
inputs (Level 3)(Level 2)
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
AssetsTrading securities
Derivative financial instruments
Investment securities
Total
Liabilities
Deposits and other borrowings
Derivative financial instruments
Other financial liabilities
Total

9,265
28
7,292
16,585

8,319
10
7,026
15,3552,414
13,185
15,599623
11,653
12,276

3
1
4

3
1
4

11,67913,216
7,293
32,188

8,942
11,666
7,027
27,635

11
154
165

11
213
224

4,456
12,66917,1252,461
11,031
13,492--

4,456
12,680154
17,2902,461
11,042
213
13,716

Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories otherthan those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.
Carrying amountFinancial assets
Net loans and advances1
Total
Financial liabilities
Deposits and other borrowings2
Debt issuances1
Total
1
2

Fair value

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m135,355
135,355

132,525
132,525

136,160
136,160

133,087
133,087

116,584
28,883
145,467

110,966
26,207137,173

116,772
28,192
144,964

111,098
26,585
137,683

Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.
Excludes commercial paper (Note 7 Deposits and Other Borrowings) designated at fair value through profit or loss.

21

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENT LIABILITIESCredit related commitments and contingencies
Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total

31 Mar 20
NZ$m

30 Sep 19
NZ$m27,3991,232
1,516
30,147

26,6001,248
1,502
29,350

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 to customers, therefore thesetransactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As thefacilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
There are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have notdisclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudiceseriously the interests of the Banking Group.
Regulatory and customer exposures
In recent years there have been significant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement
actions (whether by court action or otherwise), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued byregulators, particularly against financial institutions globally. There has also been an increase in the number of matters on which the Banking Group
engages with its regulators. The Banking Group has received various notices and requests for information from its regulators as part of both industrywide and Banking Group-specific reviews, and has also made disclosures to its regulators at its own instigation. The nature of these interactions can bewide ranging and, for example, may include a range of matters including responsible lending practices, regulated lending financial transactions,product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance
distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering andcounter-terrorism financing obligations, reporting and disclosure obligations and product disclosure documentation. There may be exposures tocustomers which are additional to any regulatory exposures. These could include class actions, individual claims or customer remediation orcompensation activities. The outcomes and total costs associated with such reviews and possible exposures remain uncertain.
Commerce Commission settlement
Between June 2015 and May 2016, the Bank had an issue with a loan calculator which meant some interest to be charged to customers was left out
when calculating their repayments or loan term. On 2 March 2020, The Commerce Commission announced it had agreed with the Bank that the Bank
would pay some customers affected by the issue a further NZ$29.4 million, in addition to the NZ$8.4 million the Bank has paid previously. All amounts
in relation to this matter were provided for in the period to 30 September 2019.
Reviews under section 95 of the Reserve Bank of New Zealand Act 1989 (RBNZ Act)
On 5 July 2019, the RBNZ issued a notice under section 95 of the RBNZ Act, requiring the Bank to obtain two external reviews, the first on the Bank’s
compliance with certain aspects of the RBNZ Banking Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach)(BS2B) and the second on the effectiveness of the Bank’s directors’ attestation and assurance framework.
• The director attestation and assurance framework review was completed in December 2019, and the Bank is committed to implementing therecommendations identified and addressing the issues raised. On 11 December 2019 RBNZ issued a further notice under section 95 of the RBNZ
Act, requiring the Bank to obtain an external review of the improvements made to the Bank’s directors’ attestation and assurance framework.
• The report regarding the Bank's compliance with the RBNZ's capital adequacy requirements was completed in April 2020. This report identified
instances of both current and historical non-compliance with capital adequacy requirements. The Bank has accepted the findings of this review,
and is working with the RBNZ to rectify the issues identified. The RBNZ has stated that it is confident the Bank will resolve this matter without
issue, and has emphasised that the Banking Group remains sound and well capitalised.
The Section 95 reviews have highlighted the need for a broader programme of improving the Bank's processes covered by those reviews, and thisprogramme is underway.
Warranties and indemnities
The Banking Group has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments.

22

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

14. SUBSEQUENT EVENTSOn 2 April 2020, RBNZ announced that locally incorporated banks, including the Bank, cannot pay dividends on ordinary shares and should notredeem capital notes at this time. Accordingly, the Bank was not permitted to, and did not, redeem NZ$500 million of mandatory convertible
perpetual subordinated securities (ANZ NZ CN) on 25 May 2020 (the Optional Exchange Date). Further, the Bank did not exercise its option to convert
ANZ NZ CN into ordinary shares of the Ultimate Parent Bank on the Optional Exchange Date.

23

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES
Guarantees
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. Thisobligation is guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered
Bond Trust. The Covered Bond Guarantor’s address for service is Level 9, 34 Shortland Street, Auckland, New Zealand. The Covered Bond Guarantor is
not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The covered bonds have been
assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 18 for further details, and topage 26 for the amount of assets of the ANZ Covered Bond Trust pledged as security for covered bonds.
No other material obligations of the Bank are guaranteed as at 26 May 2020.
Changes in the Bank’s Board of Directors
As at 26 May 2020 there have been changes to the Directors of the Bank since 30 September 2019, the balance date of the last full year disclosurestatement. These changes were:• Alison Gerry was appointed as a Non-Executive Director on 18 October 2019; and• Antonia Watson was appointed as an Executive Director on 18 December 2019.
Conditions of registration
Non-compliance with conditions of registrationa) Condition of Registration 1B – compliance with BS2B
The report completed under section 95 of the RBNZ Act regarding the Bank's compliance with the RBNZ's capital adequacy requirements wascompleted in April 2020. The Bank has accepted the findings of this review, and is working with the RBNZ to rectify the issues identified. The RBNZ has
stated that it is confident the Bank will resolve this matter without issue, and has emphasised that the Banking Group remains sound and wellcapitalised.
As reported in the disclosure statement for the year ended 30 September 2019, the Bank has not complied with condition of registration 1B in relation
to the implementation of changes to rating models and processes that were not approved by RBNZ. Applying the last RBNZ approved methodologies
to the affected exposures as at 30 September 2019 would have decreased Risk Weighted Assets (RWA) by NZ$47 million (0.05%) in aggregate, which
was not sufficient to affect the reported capital ratios.
Affected models and the initial dates of non-compliance are:• Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development) - 2011
• Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds) - 2009
• Project and Structured Finance - 2009
• Bank, Country & Sovereigns - 2008
The Bank’s model compendium required under section 1.3B of BS2B is non-compliant as it includes unapproved model changes.
Further to the above, in May 2020 the Bank identified that its approach to enhancing wholesale risk grades in the presence of a guarantee is notcompliant with BS2B. The estimated impact as at 31 March 2020 is an understatement of RWA of NZ$26 million (0.03%), which is not sufficient to affectthe reported capital ratios. The Bank is working with the RBNZ to resolve this issue.
b) Condition of Registration 5 - Exposures to connected persons not on more favourable terms (BS8)As reported in the disclosure statement for the year ended 30 September 2019, from time to time, the Bank provides a guarantee or standby letter ofcredit to a third party in respect of an obligation of a customer of the Ultimate Parent Bank. The Ultimate Parent Bank provides a counter-guarantee orstandby letter of credit to the Bank, giving the Bank recourse directly to the Ultimate Parent Bank if the guarantee or standby letter of credit the Bank
provides in respect of the customer's obligations is called upon. The Bank charges the Ultimate Parent Bank a fee for this service. However, through aninternal review, the Bank identified that since January 2014 this fee had been lower than the fee charged for this same service provided to unrelatedbanks and, as a result, the Bank has not complied with condition of registration 5. The Bank has implemented a revised pricing methodology for all
new transactions entered into from 1 January 2020. As at 31 December 2019, the value of the exposure under the previous pricing arrangements was
NZ$374 million across 232 individual transactions.
c) Condition of Registration 13 - Liquidity ratios (BS13)
The following matters of non-compliance with BS13 were reported in the disclosure statement for the year ended 30 September 2019. These errors
were not sufficient to affect the reported liquidity ratios and processes have been updated with effect from 31 January 2020 to ensure the calculations
comply with BS13.
• The Bank calculated the next cash inflow on variable-rate housing loans based on a current wholesale rate plus the existing margin rather thanusing the current interest rate to calculate the inflow. This calculation error had existed since 2010.
• The liquidity ratio calculation system and the system of record for certain bond liabilities and certain swaps calculate future cash flows
differently. The difference had been known since 2017.
d) Condition of Registration 24 – Outsourcing (BS11 dated September 2017)
BS11 requires the Bank to apply specified risk mitigants against each outsourcing arrangement.

24

ANZ BANK NEW ZEALAND LIMITED••UNAUDITED

During the year ended 30 September 2019, the Bank outsourced two arrangements to the Overseas Banking Group without the requiredprescribed contractual terms. These arrangements were remediated in December 2019.
During the six months ended 31 March 2020, one of the Bank’s independent third party contracts expired nine days before a replacement
contract was entered into. During those nine days the relevant outsourcing arrangement did not include the prescribed contractual terms.

BS11 requires the Bank to have a compendium of information about outsourcing arrangements in place from 1 October 2019.
• In November 2019, the Bank informed the RBNZ that minor data discrepancies had been identified for certain information entered in thecompendium during the year ended 30 September 2019. The discrepancies were corrected in December 2019.
• Additional data discrepancies and instances of potentially incomplete information have been identified during the six months ended 31 March
2020, which will be investigated and corrected by 30 September 2020.
Changes since 31 March 2020
Effective 2 April 2020, the Bank’s conditions of registration have been amended to:• include restrictions on payments of dividends on ordinary shares;• reduce the minimum requirement for the core funding ratio from 75% to 50%; and• refer to the revised version of the RBNZ Banking Supervision Handbook document BS11 which extends the transition period to 6 years, with thisrevised version of BS11 becoming fully effective from 1 October 2021.
Effective 1 May 2020, the Bank’s conditions of registration have been amended to remove restrictions on high loan-to-valuation residential mortgage
lending.
Other matters
The Bank has identified one counterparty that had been misclassified as sovereign, inconsistent with the definition in BS2B paragraph 4.5, since
December 2017. The estimated impact as at 31 March 2020 is an understatement of RWA of NZ$383 million (0.38%), and an overstatement of the
Banking Group’s capital ratios of 0.05%. This did not result in non-compliance with the Bank’s conditions of registration over the six months ended 31
March 2020. However, until 31 December 2018, Condition of Registration 1B required compliance with all aspects of BS2B and, as a result, the Bank
had not complied with Condition of Registration 1B in respect of this matter between December 2017 and 31 December 2018. The Bank is working
with the RBNZ to resolve this issue.
There are several matters under review, including the calculation of the market risk capital requirement (under BS2B) and liquidity ratios (under BS13
and BS13A), where there may be more than one valid interpretation of the respective policy wording or requirement. Where there may be someuncertainty about the interpretation the Bank has applied, where appropriate, it will seek further guidance from the RBNZ on these matters. In the
Bank’s current view, the potential impact of the application of other interpretations is immaterial to reported ratios.
Other material matters
RBNZ review of capital requirements
Between May 2017 and December 2019, the RBNZ conducted a comprehensive review of the capital adequacy framework applying to New Zealand
locally incorporated registered banks. The RBNZ's final decisions on the capital review as they relate to the Bank are set out below. In response to the
COVID-19 pandemic, the RBNZ has delayed the start date for the increased capital requirements by 12 months to support credit availability, withfurther delays possible if the conditions warrant it in 2021. The new regime is currently expected to be implemented in stages from 1 July 2021, with atransition period of seven years before banks are required to fully comply with the new rules.
• The Banking Group’s total capital requirement will increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to 2.5% can bemade up of additional tier 1 (AT1) capital, with the remaining 13.5% made up of common equity tier 1 (CET1) capital. AT1 capital must consist ofredeemable perpetual preference shares. The total capital requirement can also include tier 2 capital of up to 2% of RWA. Tier 2 capital must
consist of long-term subordinated debt.
• The tier 1 capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include a 2% prudential capital buffer; a 1.5%
'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or temporarily increased to prevent
asset price bubbles from developing; and a 5.5% conservation buffer.
• Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 31 March 2020, the Bank had approximately
NZ$2,741 million of AT1 instruments that will progressively lose their eligible regulatory capital treatment over a seven year transition period.
• As an internal ratings based (IRB)-approach accredited bank, the Banking Group’s RWA outcomes will be increased to approximately 90% ofwhat would be calculated under the standardised approach. This will be achieved by applying an 85% output floor, and increasing the credit
RWA scalar from 1.06 to 1.2.
• The Banking Group will be required to report RWA, and resulting capital ratios, using both internal models and the standardised approach.
The RBNZ’s reforms will result in a material increase in the level of capital that the Banking Group is required to hold, although the amount of theincrease is currently uncertain. The reforms could have a material impact on the Banking Group and its business, including on its capital allocation andbusiness planning.
The Banking Group has started preparing for the changes. Of the Banking Group’s NZ$1.8 billion net profit after tax in for the year ended 30
September 2019, approximately 80% was retained in response to the proposals and no ordinary dividends were paid during the six months ended 31
March 2020.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effecton the Bank or the Banking Group is included in Note 13 Commitments and Contingent Liabilities.

25

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Credit rating
As at 26 May 2020 the Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.
The Bank’s credit ratings are:Rating agency
S&P Global Ratings
Fitch Ratings
Moody’s Investors Service

Credit rating
AAA+
A1

Qualification
Outlook Negative
Outlook Negative
Outlook Stable

Directors’ statements
The Directors' statement is included on page 43.
Auditor’s review report
The auditor’s review report is included on page 44.

B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2020
Total interest earning and discount bearing assets
Total interest and discount bearing liabilities
Total amounts due from related entities
Total amounts due to related entities

NZ$m
164,760
138,007
4,969
7,210

Assets charged as security for liabilities
These amounts exclude the amounts disclosed as collateral paid on the balance sheet that relate to derivative liabilities. The terms and conditions of
the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association
Master Agreement.
Assets charged as security for liabilities include the following types of instruments:• Securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements.
• Specified residential mortgages provided as security for notes and bonds issued to investors as part of the Bank’s covered bond programme.
The carrying amounts of assets pledged as security are as follows:
As at 31 March 2020
Securities sold under agreements to repurchase
Residential mortgages pledged as security for covered bonds

NZ$m
1,161
12,063

Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 Other Operating Income. The Banking Group does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, all other items of other income (all in Note 2 Other Operating Income), net income from insurance business and share of
associates’ profit (both shown on the income statement).

26

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Additional information on concentrations of credit risk
Analysis of financial assets by industry is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.
Composition of financial instruments that give rise to credit risk by industry group are presented below:

As at 31 March 2020
New Zealand residents
Agriculture
Forestry and fishing, agriculture services
Manufacturing
Electricity, gas, water and waste services
Construction
Wholesale trade
Retail trade and accommodation
Transport, postal and warehousing
Finance and insurance services
Public administration and safety1
Rental, hiring & real estate services
Professional, scientific, technical, administrative and support services
Households
All other New Zealand residents2

Loans andadvances3
NZ$m

Off-balance
Othersheet credit
relatedfinancialassets commitments4
NZ$m
NZ$m

Total
NZ$m

17,449
1,188
2,802
1,246
1,710
1,536
2,884
1,452
565
338
35,031
1,062
64,153
2,535

79
10
454
538
30
199
27
175
12,514
12,377
1,325
11
189
258

1,024
173
2,122
1,764
929
1,585
846
735
1,708
1,122
2,224
475
14,133
1,201

18,552
1,371
5,378
3,548
2,669
3,320
3,757
2,362
14,787
13,837
38,5801,548
78,475
3,994

Subtotal
Overseas
Finance and insurance services
Households
All other non-NZ residents

133,951

28,18630,041

192,178

77
1,193
673

14,830476

106-

15,013
1,197
749

Subtotal
Gross subtotal
Allowance for ECL
Subtotal
Unearned income
Capitalised brokerage / mortgage origination fees
Maximum exposure to credit risk

1,943
135,894(644)
135,250(221)
326
135,355

14,91043,09643,09643,09610630,147(129)
30,01830,018

16,959209,137(773)
208,364(221)
326
208,469

1
2
3
4

Public administration and safety includes exposures to local government administration and central government administration, defence and public safety.
Other includes exposures to mining, information media and telecommunications, education and training, health care and social assistance and arts, recreation and other services.
Excludes individual and collective provisions for credit impairment held in respect of off-balance sheet credit related commitments.
Off-balance sheet credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

27

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Additional information on concentrations of funding
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
As at 31 March 2020

Note

NZ$m

8

113,411

Funding composition
Customer deposits
Wholesale funding
Debt issuances

28,883

Certificates of deposit and commercial paper

6,151

Other borrowings

1,478

Total wholesale funding

36,512

Total funding

149,923

Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing

3,990

Manufacturing

2,318

Construction

2,563

Wholesale trade

2,081

Retail trade and accommodation

2,053

Financial and insurance services

11,959Rental, hiring and real estate services

3,637

Professional, scientific, technical, administrative and support services

5,806

Public administration and safety

1,441

Arts, recreation and other services

2,074Households

60,917All other New Zealand residents1

4,426
103,265

Customer deposits by industry - overseas
Households

9,508

All other638
10,146

Total customer deposits

113,411Wholesale funding (financial and insurance services industry)
New Zealand

8,714

Overseas

27,798

Total wholesale funding

36,512

Total funding

149,923

Concentrations of funding by geography
New ZealandAustralia

111,979
832

United States

18,603

Europe11,152Other countries

7,357

Total funding

149,923

1

Other includes mining; electricity, gas, water and waste services; transport, postal and warehousing; information media and telecommunications; education and training; health care and social
assistance.

28

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Additional information on interest rate sensitivity
The following tables represent the interest rate sensitivity of the Banking Group's assets, liabilities and off balance sheet instruments by showing theperiods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.

As at 31 March 2020
AssetsCash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Other financial assets
Total financial assets
Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Other financial liabilities
Total financial liabilities
Hedging instruments
Interest sensitivity gap
1

Total
NZ$m

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

Over Not bearing
2 years
interest1
NZ$m
NZ$m

7,746
404
2,527
11,67913,216
7,293
135,355586
178,806

7,358
2,527
2,255
294
63,16375,597870
12,34013,210505
298
21,662
22,4651,652
1,737
30,85434,243

6,397
4,963
7,885
19,245388
404
13,216
1(549)
586
14,0462,265
1,290
121,040
12,68028,883929
167,087
11,719743
1,290
77,652
4,117
167
83,96914,5696,197

15,4203,712
12
19,144
1,196(4,738)10,011
1,984
23
12,018(9,812)
635

2,137
5,987
56
8,180
(14,832)
11,231

1,393
13,083220
14,696
8,879
13,428

1,522
14,427
12,680451
29,080(15,034)

Excludes non-coupon bearing discounted financial assets and financial liabilities which are shown as repricing on their maturity date.

Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2020 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts represent principal
and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.

As at 31 March 2020

Less than
3 months
NZ$m

3 to 12months
NZ$m

1 to 5
years
NZ$m

After
5 years
NZ$m

Total
NZ$m

1,325

951

-

-

-

2,276

-

1,290

-

-

-

1,290

On demand
NZ$m

Settlement balances payable
Collateral received

61,64328,18828,6313,819

1122,282

Derivative financial liabilities (trading)-

10,957---

10,957

Debt issuances

-

358

5,854

18,093

5,577

29,882

-

53

5

107

58

223

- gross inflows

-

736

1,422

8,369

796

11,323- gross outflows

-

(830)

(1,674)(8,800)(809)(12,113)

Deposits and other borrowings
1

Other financial liabilities
Derivative financial instruments(balance sheet management)

1

Any callable wholesale debt instruments have been included at their next call date.

At 31 March 2020, NZ$51 million of the Banking Group’s NZ$124 million of non-credit related commitments and all NZ$30,147 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which the Banking Group may be required to
pay.

29

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking
Group’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity scenario metrics.
As at 31 March 2020
Coins, notes and bank deposits
Balances with central banks
Settlement balances receivable within 3 months
Certificates of deposit
Government, local body stock and bonds
Government treasury bills
Reserve Bank bills
Other bonds
Total liquidity portfolio

NZ$m
755
6,052
170
547
9,186
469
400
7,152
24,731The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into repurchasetransactions with a value of NZ$7,087 million at 31 March 2020.
Reconciliation of mortgage related amounts
As at 31 March 2020
Term loans - housing1
Less: fair value hedging adjustment
Less: fair value adjustment on mortgages repurchased from the NZ BranchLess: housing loans made to corporate customers
Add: unsettled re-purchases of mortgages from the NZ BranchOn-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis)
Add: off-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis)
Total residential mortgage exposures subject to the IRB approach (per LVR analysis)1Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.

30

Note
6

B3, B4B3, B4B4NZ$m
87,269(9)(1)(2,062)
4
85,201
8,527
93,728ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1, andNote 7 and Note 11, to the financial statements.
Movements in components of loss allowance - total
Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
194
42
97
(25)
3
122
16
72
(15)
(14)
97
19
43
(64)
14
(4)
291
61
86

Net loans and advances - total
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020

Stage 1
NZ$m
164
22
20
42
206

Total
NZ$m
497
230
(15)
(14)
201
(64)
14
(4)
644

Off-balance sheet credit related commitments - total
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge
As at 31 March 2020

60
4
18
22
82

24
(4)
13
9
33

2
2

11
1
1
12

97
32
32
129

Gross loans and advances - total
As at 1 October 2019
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

123,285
19,434
19,434(935)(16,087)(17,022)
125,697
206

9,008
708
772
1,480
(1,143)(1,143)
9,345
291

444
191
36
227
(94)
(94)
577
61

285
36
106
142
(88)
(88)
(64)
275
86

133,022935
20,34821,283(935)(17,412)(18,347)(64)
135,894644

Off-balance sheet credit related commitments - total
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

28,491
5,149
5,149
(87)
(4,318)(4,405)29,235
82

837
81
122
203
(155)
(155)
885
33

3
4
1
5
(4)
(4)
4
2

19
2
17
19
(15)
(15)
23
12

29,350
87
5,289
5,376
(87)
(4,492)(4,579)30,147129

Impacts of changes in gross financial assets on loss allowances - total

Explanation of how changes in the gross carrying amounts of gross amounts contributed to changes in loss allowance
Overall, loss allowances are 0.5% of gross balances as at 31 March 2020, up from 0.4% as at 30 September 2019. While gross balances have increased,
and there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$179 million (30.1%) increase in loss allowances
is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to the financial
statements.

31

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Movements in components of loss allowance - residential mortgages

Net loans and advances - residential mortgages
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge
As at 31 March 2020

Stage 1
NZ$m
18
7
(1)
6
24

-

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
25
12
22
(8)
1
40
11
2
(3)
32
12
(1)
57
24
21

Total
NZ$m
77
52
(3)
49
126

-

-

-

-

Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

79,12812,543
12,543(408)(9,176)(9,584)82,087
24

2,475
301
330
631
(358)
(358)
2,748
57

273
99
23
122
(54)
(54)
341
24

25
8
13
21
(21)
(21)
25
21

81,901408
12,90913,317(408)(9,609)(10,017)
85,201
126

Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

8,232
1,235
1,235
(6)
(976)
(982)
8,485
-

36
6
7
13
(7)
(7)
42
-

-

-

8,268
6
1,242
1,248
(6)
(983)
(989)
8,527
-

Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
While gross balances have increased, and there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$49
million (63.6%) increase in loss allowances on residential mortgage exposures is primarily driven by changes in the forward looking economic
scenarios and changes in probability weightings as described in Note 1 to the financial statements. Overall loss allowances and individually impaired
exposures remain low, reflecting that approximately 94% of on-balance sheet residential mortgage exposures have loan to valuation ratios notexceeding 80% (refer to page 39).

32

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Movements in components of loss allowance - other retail exposures

Net loans and advances - other retail exposures
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge
As at 31 March 2020

Stage 1
NZ$m
26
8
(6)
2
28

17
3
(1)
2
19

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
51
24
14
(8)
17
2
39
(7)
(10)
9
2
22
(34)
10
60
26
12

Total
NZ$m
115
52
(7)
(10)
35
(34)
10
126

11
(3)
5
2
13

2
2

-

30
4
4
34

Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

3,135
773
773
(47)
(1,127)(1,174)
2,734
28

305
13
20
33
(62)
(62)
276
60

45
18
1
19
(19)
(19)
45
26

30
16
30
46
(16)
(16)
(34)
26
12

3,515
47
824
871
(47)
(1,224)(1,271)
(34)
3,081
126

Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

4,578
321
321
(7)
(227)
(234)
4,665
19

46
4
7
11
(8)
(8)
49
13

3
3
1
4
(3)
(3)
4
2

-

4,627
7
329
336
(7)
(238)
(245)
4,718
34

Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
While there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$15 million (10.3%) increase in loss allowances
is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to the financial
statements. This has been partially offset by a decrease in gross balances.

33

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Movements in components of loss allowance - corporate exposures

Net loans and advances - corporate exposures
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge
As at 31 March 2020

Stage 1
NZ$m
120
7
27
34
154

43
1
19
20
63

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
118
6
61
(9)
2
65
3
31
(5)
(4)
56
5
22
(30)
4
(4)
174
11
53

Total
NZ$m
305
126
(5)
(4)
117
(30)
4
(4)
392

13
(1)
8
7
20

-

11
1
1
12

67
28
28
95

Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

41,022
6,118
6,118
(480)
(5,784)(6,264)40,876
154

6,228
394
422
816
(723)
(723)
6,321
174

126
74
12
86
(21)
(21)
191
11

230
12
63
75
(51)
(51)
(30)
224
53

47,606
480
6,615
7,095
(480)
(6,579)(7,059)(30)
47,612392

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

15,681
3,593
3,593
(74)
(3,115)(3,189)16,085
63

755
71
108
179
(140)
(140)
794
20

1
1
(1)
(1)
-

19
2
17
19
(15)
(15)
23
12

16,455
74
3,718
3,792
(74)
(3,271)(3,345)
16,902
95

Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
While there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$115 million (30.9%) increase in loss
allowances is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 tothe financial statements. This has been partially offset by a net decrease in Stage 3 individually assessed exposures as a result of amounts written-off.

34

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Past due assets and other asset quality information
As at 31 March 2020
Past due assets
Less than 30 days past due
At least 30 days but less than 60 days past due
At least 60 days but less than 90 days past due
At least 90 days past due
Total past due but not individually impaired
Other asset quality information
Undrawn facilities with impaired customers
Other assets under administration

Residential
mortgages
NZ$m

Other retail
exposures
NZ$m

Corporate
exposures
NZ$m

Total
NZ$m

677
186
169
338
1,370

198
34
19
36
287

437
136
1
11
585

1,312
356
189
385
2,242

3

1

23
-

23
4

The Banking Group does not have any loans and advances designated at fair value.

B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND
REGULATORY LIQUIDITY RATIOSRBNZ Basel III capital ratios

As at 31 MarchBanking Group
RBNZ minimum
2020

2019

11.1%
13.9%
13.9%
5.9%

11.4%
14.6%
14.6%
6.6%

Common equity tier 1 capital
Tier 1 capital
Total capital
Buffer ratio

4.5%
6.0%
8.0%
2.5%

Bank
(Solo Consolidated)
2020
2019
10.7%
13.5%
13.5%
n/a

10.2%
13.5%
13.5%
n/a

Capital of the Banking GroupAs at 31 March 2020
Tier 1 capital
Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
Retained earnings (net of appropriations)
Accumulated other comprehensive income and other disclosed reserves
Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
Deferred tax assets less deferred tax liabilities relating to temporary differences
Cash flow hedge reserve
Expected losses to the extent greater than total eligible allowances for impairment
Common equity tier 1 capital
Additional tier 1 capitalPreference shares1
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)2
NZD 1,003m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)2NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)2
Retained earnings of the Bonus Bonds Scheme3Less deductions from additional tier 1 capital
Surplus retained earnings of the Bonus Bonds Scheme3
Additional tier 1 capital
Total tier 1 capital
Tier 2 capital
Total capital
1
2
3

NZ$m

11,5883,271(15)(3,267)
(314)
(18)
(181)
11,064
300
500
1,003
938
59
(20)
2,780
13,844
13,844

Classified as equity on the balance sheet under NZ GAAP.
Classified as a liability on the balance sheet under NZ GAAP.
Bonus Bonds Scheme is not consolidated on the balance sheet under NZ GAAP but is classified as AT1 capital for capital adequacy purposes as set out in BS2B.

35

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Capital requirements of the Banking GroupAs at 31 March 2020
Total credit risk
Operational risk
Market risk
Supervisory adjustment
Total
1

Total
exposures
after credit
risk mitigation
NZ$m
202,828
n/a
n/a
n/a
n/a

Risk weighted
exposure or
implied risk
weighted Total capital
exposure1 requirement
NZ$m
NZ$m
71,289
5,703
9,987
799
5,226
418
13,303
1,064
99,805
7,984

The calculation of capital requirements for total credit risk weighted includes a scalar of 1.06 in accordance with the Bank's Conditions of Registration.

Capital structure
Ordinary shares– common equity tier 1 capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On a show of hands
every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll every member shallhave one vote for each share held.
Preference shares– additional tier 1 capital
All preference shares were issued by the Bank to the Immediate Parent and do not carry any voting rights. The preference shares are wholly classified
as equity instruments as there is no contractual obligation for the Bank to either deliver cash or another financial instrument or to exchange financial
instruments on a potentially unfavourable basis. The key terms of the preference shares are as follows:
Dividends are payable at the discretion of the directors of the Bank and are non-cumulative. The Bank must not resolve to pay any dividend or makeany other distribution on its ordinary shares until the next preference dividend payment date if the dividend on the preference shares is not paid.
Should the Bank elect to pay a dividend, the dividend is based on a floating rate equal to the aggregate of the New Zealand 6 month bank bill rateplus a 325 basis point margin, multiplied by one minus the New Zealand company tax rate, with dividend payments due on 1 March and 1 September
each year.
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of thepreference shares:• on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of the preference shares; or• on any dividend payment date; or• on any date if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.
The preference shares may be redeemed for nil consideration should a non-viability trigger event occur.
The preference shares qualify as AT1 capital for RBNZ’s capital adequacy purposes.
In the event of liquidation, holders of preference shares are entitled to available subscribed capital per share, pari passu with all holders of existing
preference shares and ANZ capital notes but in priority to all holders of ordinary shares. They have no entitlement to participate in further distributionof profits or assets.
Additional tier 1 (AT1) capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. The AT1 capital notes rank equally with each other and with
the Bank’s preference shares. Holders of AT1 capital notes do not have any right to vote in general meetings of the Bank.
As at 31 March 2020, ANZ NZ CN carried a BBB- credit rating from S&P Global Ratings.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) or the Ultimate Parent Bank (ANZ NZ CN).
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions(including regulatory requirements).
Where specified, AT1 capital notes provide the Bank with an early redemption or conversion option on a specified date and in certain othercircumstances (such as a tax or regulatory event). This option is subject to RBNZ’s prior written approval.

36

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Each of the AT1 capital notes will immediately convert into a variable number of ordinary shares of the:• Bank based on the net assets per share in the Bank’s most recently published Disclosure Statement (ANZ NZ ICN and ANZ NZ ICN2); or• Ultimate Parent Bank based on the average market price of the Ultimate Parent Bank’s ordinary shares immediately prior to conversion less a 1%
discount, subject to a maximum conversion number (ANZ NZ CN)
if:• the Banking Group’s, or in the case of the ANZ NZ CN the Overseas Banking Group’s Level 2, common equity tier 1 capital ratio is equal to or lessthan 5.125% - known as a Common Equity Capital Trigger Event; or• RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert
or write-off the notes, or in the case of the ANZ NZ CN, APRA notifies the Ultimate Parent bank that, without the conversion or write-off ofcertain securities or a public injection of capital (or equivalent support), it considers that the Ultimate Parent Bank would become non-viable –known as a Non-Viability Trigger Event.
Where specified, AT1 capital notes mandatorily convert into a variable number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) (basedon the net assets per share in the Bank’s recently published Disclosure Statement) or Ultimate Parent Bank (ANZ NZ CN) (based on the average market
value of the shares immediately prior to conversion less a 1% discount):• on a specified mandatory conversion date; or• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
The table below show the key details of the AT1 capital notes on issue at 31 March 2020:
IssuerIssue dateIssue amount
Face value
Interest frequency

Interest rate

Issuer's early redemption or conversion option
Mandatory conversion dateCommon equity capital trigger event
Non-viability trigger event
Carrying value as at 31 March 2020 (net of issue costs)
1

ANZ NZ CN
ANZ NZ ICNANZ NZ ICN2The Bank
The Bank
The Bank
31 March 2015
5 March 201515 June 2016
NZ$500 million
NZ$1,003 million
NZ$938 million
NZ$1
NZ$100
NZ$100Quarterly in arrears
Semi-annually in arrears
Semi-annually in arrears
Fixed at 7.2% p.a. until 25
May 2020. Resets in May 2020
Floating rate: (New Zealand 6 Floating rate: (New Zealand 6
to a floating rate: (Newmonth Bank Bill rate + 3.8%) month Bank Bill rate + 6.29%)
Zealand 3 month Bank billrate + 3.5%)
15 June 2026 and each 5th
n/a1
24 March 2023
anniversary
25 May 2022
24 March 2025
n/a
Yes
Yes
Yes
Yes
Yes
Yes
NZ$500 million
NZ$1,003 million
NZ$938 million

On 2 April 2020, RBNZ announced that locally incorporated banks, including the Bank, should not redeem capital notes at this time. Accordingly, the Bank was not permitted to, and did not,redeem ANZ NZ CN on 25 May 2020 (the Optional Exchange Date). Further, the Bank did not exercise its option to convert ANZ NZ CN into ordinary shares of the Ultimate Parent Bank on the
Optional Exchange Date.

Reserves – common equity tier 1 capital
Accumulated other comprehensive income and other disclosed reserves includes the cash flow hedging reserve of NZ$18 million less the investment
securities revaluation reserve of NZ$33 million as at 31 March 2020.
Retained earnings of the Bonus Bonds Scheme – additional tier 1 capital
The Bonus Bonds Scheme is consolidated for capital adequacy purposes, and its retained earnings are included in additional tier 1 capital less 8.5% of
the consolidated risk-weighted assets that relate to the Bonus Bonds Scheme.

37

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating

As at 31 March 2020
Corporate
0-2
3-4
5
6
7-8
Default
Total corporate exposures
Sovereign0
1-8
Total sovereign exposures
Bank
1
2-4
5-8
Total bank exposures
Residential mortgages
0-3
4
5
6
7-8
Default
Total residential mortgages exposures
Other retail
0-2
3-4
5
6
7-8
Default
Total other retail exposures
Total credit risk exposures subject
to the IRB approach38

Probabilityof default%

Exposure at
Total valuedefault
NZ$m
NZ$m

Exposureweighted
LGD used
for thecapitalcalculation%

Exposureweighted
risk weight%Riskweighted
assetsNZ$m

Minimum
capitalrequirement
NZ$m

0.06
0.32
1.00
2.31
18.87
100.002.36

61,86145,43314,364
5,127
2,265
463
129,513

5,025
23,908
12,213
4,758
1,970
461
48,335

59
38
33
35
41
41
39

28
42
57
80
184
113
55

1,515
10,664
7,372
4,054
3,845
552
28,002

121
853
590
324
308
44
2,240

0.01
0.01
0.01

28,8981,309
30,207

14,475
1,292
15,767

5
5
5

1
2
1

173
22
195

14
2
16

0.03
0.11
1.69
0.04

986,034
45,9381
1,031,973

9,960
749
1
10,710

55
64
65
56

26
38
131
27

2,791
299
2
3,092

223
24
247

0.20
0.45
0.91
1.97
4.79
100.000.99

29,38938,22821,330
4,088
282
411
93,72829,76638,377
21,426
4,092
282
410
94,353

12
19
24
26
26
18
18

5
15
31
58
91
14
18

1,707
6,229
7,117
2,514
272
58
17,897

137
498
569
201
22
5
1,432

0.10
0.26
1.07
2.35
8.99
100.00
2.64

544
4,618
1,850
1,965
1,189
85
10,251

547
4,702
1,826
2,002
1,224
86
10,387

77
78
71
69
85
76
76

49
55
75
88
134
62
74

287
2,717
1,447
1,871
1,733
56
8,111

23
217
116
150
139
4
649

1.31

1,295,672

179,55228

30

57,2974,584

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDIRB credit exposures include the following undrawn commitments and other off-balance sheet amounts:

As at 31 March 2020
Undrawn commitments and other off-balance sheet amounts excluding market related contracts
Corporate
SovereignBank
Residential mortgages
Other retailMarket related contracts
Corporate
SovereignBank
Residential mortgages
Other retail

Total value
NZ$m

Exposure atdefault
NZ$m

12,534
289
1,337
8,527
5,336

11,622
281
1,148
8,954
5,400

81,70913,8691,022,598
-

2,194
152
3,462
-

Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn residential mortgage loans as wellas commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance Off-balance
sheet
sheet
NZ$m
NZ$m

As at 31 March 2020
LVR range
Does not exceed 60%
Exceeds 60% and not 70%
Exceeds 70% and not 80%
Does not exceed 80%
Exceeds 80% and not 90%
Exceeds 90%
Total

Total
NZ$m

42,255
19,35818,71080,3233,666
1,212
85,201

5,894
1,355
951
8,200
145
182
8,527

48,14920,713
19,661
88,523
3,811
1,394
93,728

Total
exposures
after
credit risk
mitigation
NZ$m

Risk weight%Riskweighted
assetsNZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

4,895
6,469
247
233
12

70
90
115
250
-

3,632
6,172
302
618
-

291
494
24
48
-

Exposure atdefault
NZ$m

Averagerisk weight%Riskweighted
assetsNZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

1,375

92

1,343

108

Specialised lending subject to the slotting approach

As at 31 March 2020
On-balance sheet exposures
StrongGood
Satisfactory
Weak
Default

As at 31 March 2020
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet exposures

The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to thefollowing external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.

39

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Credit risk exposures subject to the standardised approach

Total
exposure
after credit
risk Average risk
mitigation
weight
NZ$m%

As at 31 March 2020
On-balance sheet exposures
Cash and gold bullion
Sovereign and central banks
Multilateral development banks and other international organisations
Public sector entities
Banks
Corporate
Residential mortgages
Past due assets
Other assets

As at 31 March 2020
Off-balance sheet exposures
Total off-balance sheet exposures subject to thestandardised approach
Market related contracts subject to thestandardised approach
Foreign exchange contracts
Interest rate contracts
Other - OTC etc

Risk
weighted
exposure
NZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

6
150
100

94
1
1,393

8
111

Creditequivalent Average risk
amountweightNZ$m%

Risk
weighted
exposure
NZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

355
6,052
1,510
1
1,314

Total
exposure or
principal
amount
NZ$m

Averagecreditconversion
factor
%

598

68

405

96

411

33

341,817
-

n/a
n/a
n/a

407
-

5
-

21
-

2
-

Risk weight
%
300
400

Risk
weighted
exposure
NZ$m
5

Minimum
Pillar 1
capitalrequirement
NZ$m-

Equity exposures

As at 31 March 2020
Equity holdings (not deducted from capital) that are publicly traded
All other equity holdings (not deducted from capital)

Total
exposure
NZ$m
1

Credit risk mitigation
As at 31 March 2020, the Banking Group had NZ$900 million of Corporate exposures covered by guarantees where the presence of the guarantees
was judged to reduce the underlying credit risk of the exposures. Information on the total value of exposures covered by financial guarantees andeligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk exposures is not considered tobe material.
Operational risk
As required by its conditions of registration, the Banking Group uses the standardised approach to the calculation of its operational risk capitalrequirement. As at 31 March 2020, the Banking Group had an implied risk weighted exposure of NZ$9,987 million for operational risk and an
operational risk capital requirement of NZ$799 million.

40

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures are for the six
months ended 31 March 2020.

As at 31 March 2020
Interest rate risk
Foreign currency risk
Equity risk

Implied risk weighted
exposure
Period end
Peak
NZ$m
NZ$m
5,187
7,015
38
110
1
1

Aggregate capital charge
Period end
Peak
NZ$m
NZ$m
415
561
3
9
-

Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions ofRegistration. Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group include
pension risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk and software risk. The Banking Group's internal capital allocation forthese other material risks is NZ$343 million. (March 2019: NZ$282 million).
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
As at 31 March
Common equity tier 1 capital
Tier 1 capital
Total capital

Ultimate Parent Bank
Overseas Banking Group (Extended Licensed Entity)
2020
2019
2020
2019
11.5%
11.2%
10.8%
10.6%
13.4%
13.2%
12.5%
12.6%
15.3%
15.3%
15.5%
15.8%

The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal tothat specified under the Basel III capital framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets. There are however small portfolios(mainly retail and local corporates in Pacific, and local corporates in Asia) where the Overseas Banking Group applies the standardised approach.
• the AMA for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 31 March 2020 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2020. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2020, in accordance with APS 330: Public Disclosure of Prudential Information, discloses capital
adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risks. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. The minimum amount of core funding is currently
set at 75% of a bank’s total loans. The Banking Group must maintain its core funding ratio above 75% on a daily basis. This measure of the core funding
ratio is averaged over the quarter. Effective 2 April 2020, RBNZ has reduced the minimum core funding ratio to 50%.
For the three months ended
Quarterly average 1-week mismatch ratio
Quarterly average 1-month mismatch ratio
Quarterly average core funding ratio

31 Mar 20
6.5%
6.6%
87.2%

31 Dec 19
5.6%
5.6%
88.0%

41

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
B5. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit risk to individual counterparties at the reporting date on the basis of actual exposures. Peakend-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting date forthe previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:• connected persons (ie other members of the Overseas Banking Group and Directors of the Bank);• the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and• any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.

Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capitalwith a long-term credit rating of A- or A3 or above, or its equivalent- 10% to less than 15% of CET1 capital- 15% to less than 20% of CET1 capital- 20% to less than 25% of CET1 capitalwith a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1
with a long-term credit rating of A- or A3 or above, or its equivalent- 10% to less than 15% of CET1 capitalwith a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent

B6. INSURANCE BUSINESSAs at 31 March 2020, the Banking Group does not conduct any insurance business.

42

As at
31 Mar 20

Peak end of
day over 6
months to
31 Mar 20

3
3
1
1
1
-

3
3
1
1
1
-

4
4
4
-

4
4
4
-

ANZ BANK NEW ZEALAND LIMITED

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

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014; and•The Disclosure Statement is not false or misleading.

Over the six months ended 31 March 2020, after due enquiry, each Director believes that, except as noted on pages 24 and 25:•

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

Credit exposures to connected persons were not contrary to the interests of the Banking Group; and•ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that thosesystems were being properly applied.

This Disclosure Statement is dated, and has been signed by all Directors of the Bank on, 26 May 2020.

Antony Carter

Shayne Elliott

Alison Gerry

Michelle Jablko

Rt Hon Sir John Key, GNZM ACMark Verbiest

Antonia Watson

Joan Withers

43

ANZ BANK NEW ZEALAND LIMITEDINDEPENDENT AUDITOR’S REVIEW REPORTTO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITEDREPORT ON THE HALF YEAR DISCLOSURE STATEMENTREPORT ON THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5
AND B6

CONCLUSION
Based on our review of the interim financial statements and the registered bank disclosures (together referred to as ‘the disclosure statement’) of
ANZ Bank New Zealand Limited and its subsidiaries (the Banking Group) on pages 3 to 42, nothing has come to our attention that causes us tobelieve that:••the interim financial statements on pages 3 to 23 do not present fairly in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34
Interim Financial Reporting, in all material respects, the Banking Group’s financial position as at 31 March 2020 and its financial performanceand cash flows for the six month period ended on that date; andthe registered bank disclosures in sections B2, B3, B5 and B6 disclosed in accordance with Schedules 5, 7, 13, 16 and 18 of the Registered
Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly
state, in all material respects, the matters to which they relate in accordance with those schedules.

We have completed a review of the accompanying half year disclosure statement which comprises:••

the interim financial statements formed of:• the consolidated balance sheet as at 31 March 2020;• the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the six month period
then ended; and• notes, including a summary of significant accounting policies and other explanatory information.
the registered bank disclosures prescribed in Schedules 5, 7, 13, 16 and 18 of the Order.

BASIS FOR CONCLUSION
A review of the half year disclosure statement in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of the Banking Group, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These mattershave not impaired our independence as reviewer of the Banking Group. The firm has no other relationship with, or interest in, the Banking Group.
EMPHASIS OF MATTER – ESTIMATION UNCERTAINTY IN THE PREPARATION OF THE INTERIM FINANCIAL
STATEMENTS
We draw attention to Note 1 Use of estimates, assumptions and judgements in the interim financial statements, which describes increased estimation
uncertainty in the preparation of the interim financial statements, specifically as it relates to the potential impacts of Coronavirus (COVID-19) pandemic
on the Banking Group’s allowance for credit losses (ECL) and annual goodwill impairment testing. These disclosures include:• key judgements and assumptions in relation to the ECL model inputs and the interdependencies between those inputs, and highlightsignificant changes made during the six months ended 31 March 2020; and• key changes made in the goodwill impairment test to reflect a further specific stress scenario associated with COVID-19.
As described in Note 1 Use of estimates, assumptions and judgements the underlying forecasts and assumptions are subject to uncertainties which areoften outside the control of the Banking Group. Actual economic conditions are likely to be different from those forecast since anticipated events
frequently do not occur as expected, and the effect of those differences may significantly impact the resulting accounting estimates.
In our view, this issue is fundamental to the users’ understanding of the interim financial Statements and the financial position and performance of the
Banking Group.
Our conclusion on the interim financial statements and registered bank disclosures is not modified in respect of this matter.

44

EMPHASIS OF MATTER – NON-COMPLIANCE WITH CERTAIN CONDITIONS OF REGISTRATION
We draw attention to section B1 of the half year disclosure statement, in which the Banking Group discloses that it has identified non-compliance withaspects of its Conditions of Registration relating to:• Capital adequacy;• Exposures to connected persons; and• Outsourcing.
Further details of the matters relating to capital adequacy are described below in our qualified review conclusion on the registered bank disclosures in
section B4 relating to capital adequacy and regulatory liquidity ratios.
Our conclusion on the interim financial statements and registered bank disclosures in sections B2, B3, B5 and B6 is not modified in respect of thesematters.
DIRECTORS' RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK DISCLOSURESIN SECTIONS B1, B2, B3, B5 AND B6The Directors, on behalf of the Banking Group, are responsible for:• the preparation and fair presentation of the interim financial statements and registered bank disclosures in accordance with IAS 34, NZ IAS 34
and Schedules 3, 5, 7, 13, 16 and 18 of the Order;• implementing necessary internal controls to enable the preparation of interim financial statements that are fairly presented and free frommaterial misstatement, whether due to fraud or error; and• assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE INTERIM FINANCIAL STATEMENTS AND REGISTEREDBANK DISCLOSURES IN SECTIONS B2, B3, B5 AND B6
Our responsibility is to express a conclusion on the interim financial statements and registered bank disclosure statements in sections B2, B3, B5 andB6 based on our review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has cometo attention that causes us to believe that:• the interim financial statements do not present fairly, in all material respects, the Banking Group’s financial position as at 31 March 2020 and its
financial performance and cash flows for the six month period ended on that date;• the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34; and• the registered bank disclosures in sections B2, B3, B5 and B6 does not, fairly state, in all material respects, the matters to which it relates inaccordance with Schedules 5, 7, 13, 16 and 18 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the interim financial statements and the registered bank disclosures in
sections B2, B3, B5 and B6. This description forms part of our independent review report.
REPORT ON THE REGISTERED BANK DISCLOSURES IN SECTION B4 RELATING TO CAPITAL ADEQUACY ANDREGULATORY LIQUIDITY RATIOS (SECTION B4)QUALIFIED REVIEW CONCLUSION
We have reviewed the registered bank disclosures, as disclosed in section B4 of the disclosure statement for the six month period ended 31 March
2020, which are required to be disclosed in accordance with Schedule 11 of the Order.
Based on our review, with the exception of the matter described below, nothing has come to our attention that causes us to believe that the
information relating to Capital Adequacy and Regulatory Liquidity Ratios, disclosed in section B4 of the half year disclosure statement, is not, in allmaterial respects disclosed in accordance with Schedule 11 of the Order.

BASIS FOR QUALIFIED CONCLUSION ON THE REGISTERED BANK DISCLOSURES IN SECTION B4
A review of the registered bank disclosures in section B4 in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs
procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. Our responsibilities under that standard are further described in the ‘Auditor’s Responsibilities for the review of theregistered bank disclosures in section B4’ section of our report.
As the auditor of the Banking Group, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
As described in section B1, the Banking Group has identified that it was not compliant with Condition of Registration 1B in relation to the operation ofversions of the following rating models and processes, which were not approved by the Reserve Bank of New Zealand (in some cases since 2008):

45

ANZ BANK NEW ZEALAND LIMITEDINDEPENDENT AUDITOR’S REVIEW REPORT••••

Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development);
Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds);
Project and Structured Finance; andBank, Country and Sovereigns.

In this respect, the Capital Adequacy Ratios disclosed in section B4 of the disclosure statement have not been disclosed in accordance with Schedule
11 of the Order, with section B1 disclosing the Banking Group’s calculation of the corresponding impact on risk weighted assets. The Banking Group is
working with the Reserve Bank of New Zealand to remediate this matter.
The above matters do not affect the Regulatory Liquidity information, which is also disclosed in section B4.
DIRECTORS’ RESPONSIBILITIES FOR THE REGISTERED BANK DISCLOSURES IN SECTION B4
The Directors, on behalf of the Banking Group, are responsible for the preparation of the registered bank disclosures in section B4 of the DisclosureStatement in accordance with Schedule 11 of the Order.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE REGISTERED BANK DISCLOSURES IN SECTION B4
Our responsibility is to express a conclusion on the registered bank disclosures in section B4 based on our review. We conducted our review inaccordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that theregistered bank disclosures in section B4 is not, in all material respects, disclosed in accordance with Schedule 11 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the registered bank disclosures in section B4. This description forms
part of our independent review report.
USE OF THIS INDEPENDENT REVIEW REPORTThis independent review report is made solely to the shareholder of the Banking Group. Our review work has been undertaken so that we might state
to the shareholder those matters we are required to state to them in the independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the shareholder for our review work, this independent review
report, or any of the opinions or conclusions we have formed.

KPMG
Auckland
26 May 2020

46

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