ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2017
NUMBER 85 | ISSUED MAY 2017

ANZ Bank New Zealand Limited

REGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2017

CONTENTS
General Disclosures

2

Income Statement

3Statement of Comprehensive Income

3

Balance Sheet

4

Condensed Cash Flow Statement

5

Statement of Changes in Equity

6

Notes to the Financial Statements

7

Directors' Statement

29

Independent Auditor’s Review Report30

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 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 itwere conducted 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 forservice.
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 theOrder.

ANZ Bank New Zealand Limited

2

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

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

Current Credit
Rating
Qualification
AAOutlook Negative

Moody’s Investors Service

Aa3

Outlook Negative

Fitch Ratings

AA-

Outlook Stable

Guarantors
No material obligations of the Bank are guaranteed as at 12
May 2017.

ANZNZ Covered Bond Trust
Certain debt securities (Covered Bonds) issued by the Bank’s
wholly owned subsidiary, ANZ New Zealand (Int’l) Limited,
are guaranteed by ANZNZ Covered Bond Trust Limited (theCovered Bond Guarantor), solely in its capacity as trustee of
ANZNZ Covered Bond Trust. The Covered Bond Guarantor
has guaranteed the payment of interest and principal of
Covered Bonds with a carrying value as at 31 March 2017 of
NZ$5,011 million, pursuant to a guarantee which is secured
over a pool of assets. The Covered Bond Guarantor’s addressfor service is Level 9, 34 Shortland Street, Auckland, New
Zealand. The Covered Bond Guarantor is not a member ofthe Banking Group and has no credit ratings applicable to its
long term senior unsecured obligations payable in New
Zealand dollars. The Covered Bonds have been assigned along term rating of Aaa and AAA by Moody’s InvestorsService and Fitch Ratings respectively. Details of the pool ofassets that secure this guarantee are provided in note 7.

Other Matters
APRA has reviewed the level of exposures that can beprovided to the respective New Zealand banking subsidiaries
and branches (New Zealand operations) of the four
Australian parent banks, including the Ultimate Parent Bank.
APRA has confirmed that by 1 January 2021 no more than
5% of the Ultimate Parent Bank’s Level 1 Tier 1 capital cancomprise non-equity exposures to its New Zealandoperations during ordinary times. Exposures in excess of thislimit must be reduced in equal percentages over the five
year transition period and may not increase above theexposures as at 30 June 2015. This limit does not include
holdings of capital instruments or eligible secured
contingent funding support provided to the Bank during
times of financial stress.
The Ultimate Parent Bank established a New Zealand branchwhich was registered on 5 January 2009. The Bank sells, fromtime-to-time, residential loans and mortgages into the NZ
Branch to provide funding for the Bank’s business. As at 31
March 2017, the NZ Branch held approximately NZ$5.3
billion of residential loans. To satisfy APRA’s requirements
described above, the Bank intends to repay this funding at
approximately NZ$1.6 billion per annum over the five year
transition period ending 31 December 2020.
APRA has also clarified that contingent funding support by
the Ultimate Parent Bank to the Bank during times offinancial stress must be provided on terms that are
acceptable to APRA and, in aggregate with all otherexposures to its New Zealand operations, must not exceed
50% of the Ultimate Parent Bank’s Level 1 Tier 1 capital. At
present, only covered bonds meet APRA’s criteria forcontingent funding. On this basis, we believe that the
Ultimate Parent Bank will continue to be able to provide
financial support to the Bank.

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

ANZ Bank New Zealand Limited

3

INCOME STATEMENT

Note

Unaudited

Unaudited

6 months to

6 months to

AuditedYear to31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

Interest income

3,075

3,264

6,423

Interest expense

1,562

1,784

3,421

Net interest income

1,513

1,480

3,002

Net trading gains

136

19

12

133

193

414

165

220

421

1

-

5

1,948

1,912

3,854

Net funds management and insurance income
Other operating income2

Share of associates' profit
Operating income
Operating expenses

730

821

1,599

Profit before credit impairment and income tax

1,218

1,091

2,255

Credit impairment charge

42

52

150

Profit before income tax

5

1,176

1,039

2,105

Income tax expense

330

283

570

Profit after income tax

846

756

1,535

AuditedSTATEMENT OF COMPREHENSIVE INCOME
Unaudited

Unaudited

6 months to

6 months toYear to31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

846

756

1,535

Actuarial gain / (loss) on defined benefit schemes

19

(5)

18

Income tax credit / (expense) relating to items that will not be reclassified

(5)

2

(5)

Total items that will not be reclassified to profit or loss

14

(3)

13

(15)

56

91

6

2

9

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

2

(17)

(28)

Total items that may be reclassified subsequently to profit or loss

(7)

41

72

853

794

1,620

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

Items that may be reclassified subsequently to profit or loss
Unrealised gains / (losses) recognised directly in equity
Realised losses transferred to income statement

Total comprehensive income for the period

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

ANZ Bank New Zealand Limited

4

BALANCE SHEET

Note

Unaudited

Unaudited

Audited31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

1,894

2,830

2,274

AssetsCash
Settlement balances receivable

678

544

396

Collateral paid

1,642

2,114

2,310

Trading securities

10,84012,49911,979

145

189

119

14,14621,157

21,110Investments backing insurance contract liabilities
Derivative financial instruments
Current tax assets
Available-for-sale assets
Net loans and advances

4

70

71

-

3,729

2,245

2,859

114,944

110,357

114,623

Other assets

618

765

701

Life insurance contract assets

583

567

630

7

4

7

Investments in associates
Premises and equipment

378

398

387

Goodwill and other intangible assets

3,290

3,416

3,424

UDC assets held for sale

2,837

-

-

Total assets

18

155,801

157,156

160,819

Interest earning and discount bearing assets

136,207

130,549

134,489

1,784

1,973

1,771

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

8

Derivative financial instruments

401

919

529

99,68997,62999,066
21,956

14,50822,234Current tax liabilities

-

-

21

Deferred tax liabilities

162

145

145

Payables and other liabilities

1,084

1,738

1,119

Provisions

188

187

206

Debt issuances

920,601

17,54720,014

Subordinated debt

10

3,283

2,344

3,282

UDC liabilities held for sale

18

1,328

-

-

Total liabilities

143,028

144,716

148,109

Net assets

12,773

12,44012,710

8,888

8,888

8,888

55

31

62

3,830

3,521

3,760

EquityShare capital
Reserves
Retained earnings
Total equity

12,773

12,44012,710Interest and discount bearing liabilities

117,500

112,725

115,961

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

ANZ Bank New Zealand Limited

5

CONDENSED CASH FLOW STATEMENT
Unaudited

Unaudited

6 months to

6 months to

AuditedYear to31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

Cash flows from operating activities
Interest received

3,084

3,243

6,443

Interest paid

(1,560)(1,830)(3,416)

Other cash inflows provided by operating activities

451

476

976

Other cash outflows used in operating activities(1,121)(1,277)(2,143)

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

854

612

1,860

Net changes in operating assets and liabilities

(802)

1,005

(4,434)52

1,617(2,574)

Net cash flows provided by / (used in) operating activities
Cash flows from investing activities
Cash inflows provided by investing activities

-

38

40

Cash outflows used in investing activities

(26)

(48)

(100)

Net cash flows used in investing activities

(26)

(10)

(60)

Cash flows from financing activities
Cash inflows provided by financing activities

2,943

2,883

8,318

Cash outflows used in financing activities(3,388)(4,022)(5,840)Net cash flows provided by / (used in) financing activities(445)(1,139)2,478

Net increase / (decrease) in cash and cash equivalents

(419)

468

(156)

Cash and cash equivalents at beginning of the period

2,315

2,471

2,471

Cash and cash equivalents at end of the period

1,896

2,939

2,315

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

ANZ Bank New Zealand Limited

6

STATEMENT OF CHANGES IN EQUITY

Share capital

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

Retainedearnings

Total
equity

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

8,888

-

(10)

3,575

12,453

Profit after income tax

-

-

-

756

756

Unrealised gains recognised directly in equity

-

-

56

-

56

Realised losses transferred to the income statement

-

-

2

-

2

Actuarial loss on defined benefit schemes

-

-

-

(5)

(5)

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

-

-

(17)

2

(15)

Total comprehensive income for the period

-

-

41

753

794

Ordinary dividend paid

-

-

-

(800)

(800)

As at 1 October 2015 (Audited)

Preference dividend paid

-

-

-

(7)

(7)

As at 31 March 2016 (Unaudited)

8,888

-

31

3,521

12,440As at 1 October 2015 (Audited)

8,888

-

(10)

3,575

12,453

Profit after income tax

-

-

-

1,535

1,535

Unrealised gains / (losses) recognised directly in equity

-

(2)

93

-

91

Realised losses transferred to the income statement

-

2

7

-

9

Actuarial gain on defined benefit schemes

-

-

-

18

18

Income tax expense on items recognised directly in equity

-

-

(28)

(5)

(33)

Total comprehensive income for the period

-

-

72

1,548

1,620

Ordinary dividend paid

-

-

-

(1,350)(1,350)Preference dividend paid

-

-

-

(13)

(13)

8,888

-

62

3,760

12,710

Profit after income tax

-

-

-

846

846

Unrealised gains / (losses) recognised directly in equity

-

7

(22)

-

(15)

Realised losses transferred to the income statement

-

-

6

-

6

Actuarial gain on defined benefit schemes

-

-

-

19

19

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

-

(2)

4

(5)

(3)

Total comprehensive income for the period

-

5

(12)

860

853

Ordinary dividend paid

-

-

-

(785)

(785)

As at 30 September 2016 (Audited)

Preference dividend paid
As at 31 March 2017 (Unaudited)

-

-

-

(5)

(5)

8,888

5

50

3,830

12,773The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ Bank New Zealand Limited

7

NOTES TO THE FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIES(i)

Reporting entity and statement of compliance
These interim financial statements are for the Banking Groupfor the six months ended 31 March 2017. They have been
prepared in accordance with the requirements of the Orderand New Zealand Generally Accepted Accounting Practice(NZ GAAP) as applicable to interim financial statements. The
Banking Group is a publicly accountable for-profit entity forthe purposes of complying with NZ GAAP.
These financial statements comply with NZ IAS 34 Interim
Financial Reporting, IAS 34 Interim Financial Reporting and theOrder, and should be read in conjunction with the Banking
Group’s financial statements for the year ended 30
September 2016.

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

Certain amounts in the comparative information have been
reclassified to ensure consistency with the current period’s
presentation.
(vi) Principles of consolidation

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

2.

Comparatives

The financial statements consolidate the financial statementsof the Bank and its subsidiaries.

derivative financial instruments
financial instruments held for trading
financial assets treated as available-for-salefinancial instruments designated at fair value throughprofit and loss.

OTHER OPERATING INCOME
Unaudited

Unaudited

6 months to

6 months to

AuditedYear to31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

Net fee income

197

207

422

Fair value loss on hedging activities and financial liabilities designated at fair value

(49)

(8)

(40)

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

(1)

1

1

Other income

18

20

38

Total other operating income

165

220

421

ANZ Bank New Zealand Limited

8

NOTES TO THE FINANCIAL STATEMENTS
3.

SEGMENT ANALYSISThe Banking Group is organised into three major businesssegments for segment reporting purposes - Retail,Commercial and Institutional. Centralised back office andcorporate functions support these segments. Thesesegments are consistent with internal reporting provided tothe chief operating decision maker, being the Bank’s Chief
Executive Officer.

cards, personal loans and overdrafts), home loans secured by
mortgages over property, investment products,
superannuation and insurance services.
Commercial

During the year ended 30 September 2016, Wealth was
integrated with Retail, having been disclosed separately
previously. Segment reporting has been updated to reflect
this change and other minor changes to the Banking Group’s
structure. Comparative data has been adjusted to beconsistent with the current period’s segment definitions.

Commercial provides services to Commercial & Agri(CommAgri) and UDC customers. CommAgri customers
consist of primarily privately owned medium to large
enterprises. Commercial's relationship with these businesses
ranges from simple banking requirements with revenue from
deposit and transactional facilities, and cash flow lending, tomore complex funding arrangements with revenue sourced
from a wider range of products. UDC is principally involved in
the financing and leasing of plant, vehicles and equipment,
mainly for small and medium sized businesses, as well as
investment products.

RetailInstitutional

Retail provides products and services to Retail, Private
Banking, and Business Banking customers via the branch
network, mortgage specialists, relationship managers, thecontact centre and a variety of self-service channels (internet
banking, phone banking, ATMs, website and mobile phonebanking). Retail and Private Banking customers have personalbanking requirements and Business Banking customers
consist primarily of small enterprises with annual revenues ofless than NZ$5 million. Core products and services include
current and savings accounts, unsecured lending (credit

Institutional provides financial services through a number of
specialised units to large multi-banked corporations, often
global, which require sophisticated product and risk
management solutions. Those financial services include loan
structuring, foreign exchange and interest rate products,
wholesale money market services and transaction banking.
Other
Other includes treasury and back office support functions,none of which constitutes a separately reportable segment.

Business segment analysis1
RetailCommercial

Institutional

Other

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

1,315

893

342

(602)

1,948

Intersegment revenues

(137)

(437)

23

551

-

Total revenues

1,178

456

365

(51)

1,948

Profit / (loss) after income tax

478

219

197

(48)

846

1,214

966

237

(505)

1,912

Unaudited 6 months to 31/03/2017

External revenues

Unaudited 6 months to 31/03/2016

External revenues
Intersegment revenues

(65)

(510)

(7)

582

-

Total revenues

1,149

456

230

77

1,912

Profit / (loss) after income tax

444

223

94

(5)

756

2,543

1,890

453

(1,032)

3,854Intersegment revenues

(198)

(980)

19

1,159

-

Total revenues

2,345

910

472

127

3,854

Profit after income tax

904

417

196

18

1,535

Audited

Audited year to 30/09/2016

External revenues

1

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

Other segment
The table below sets out the profit/(loss) after tax impact of items included in Other.
Unaudited

Unaudited

6 months to

6 months toYear to31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$mOperations and support

(1)

13

3

Economic hedges

(36)

(6)

(29)

Revaluation of insurance policies

(35)

14

42

Other

24

(26)

2

Total

(48)

(5)

18

ANZ Bank New Zealand Limited

9

NOTES TO THE FINANCIAL STATEMENTS
4.

NET LOANS AND ADVANCES
Unaudited

Unaudited

Audited31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

Overdrafts

1,267

1,128

1,133

Credit card outstandings

1,645

1,683

1,663

Term loans - housing

69,744

63,487

67,298Term loans - non-housing

43,651

Note

44,02543,267

Lease receivables

217

229

226

Hire purchase

1,220

999

1,098

118,118

110,793

115,069

(614)

(591)

(622)

Less: Unearned income

(219)

(213)

(211)

Add: Capitalised brokerage/mortgage origination fees

344

338

360

Add: Customer liability for acceptances

42

30

27

117,671

110,357

114,623(2,727)--

114,944

110,357

114,623

Total gross loans and advances
Less: Provision for credit impairment

5

Net loans and advances (including assets classified as held for sale)Less: UDC net loans and advances held for sale18

Net loans and advances

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$5,277 million as at 31 March 2017 (31/03/2016
NZ$7,107 million, 30/09/2016 NZ$6,020 million). These assets qualify for derecognition as the Bank does not retain a continuing
involvement in the transferred assets.

5.

PROVISION FOR CREDIT IMPAIRMENT

Credit impairment charge / (release)
Retailmortgages
NZ$m

Other retail
exposures
NZ$m

Non-retail
exposures
NZ$m

Total
NZ$m

Unaudited 31/03/2017

New and increased provisions

4

46

66

116

(11)

(5)

(18)

(34)

Recoveries of amounts written off previously

-

(11)

(1)

(12)

Individual credit impairment charge / (release)

(7)

30

47

70

Collective credit impairment release

(2)

(4)

(22)

(28)

Credit impairment charge / (release)

(9)

26

25

42

Write-backs

Unaudited 31/03/2016

New and increased provisions

8

57

39

104

(16)

(9)

(16)

(41)

Recoveries of amounts written off previously

-

(11)

(2)

(13)

Individual credit impairment charge / (release)

(8)

37

21

50

Collective credit impairment charge / (release)

(1)

4

(1)

2

Credit impairment charge / (release)

(9)

41

20

52

New and increased provisions

16

110

111

237

Write-backs

(28)

(18)

(30)

(76)

Recoveries of amounts written off previously

-

(22)

(3)

(25)

Individual credit impairment charge / (release)136

Write-backs

Audited 30/09/2016

(12)

70

78

Collective credit impairment charge

1

3

10

14

Credit impairment charge / (release)

(11)

73

88

150

ANZ Bank New Zealand Limited

10

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

Other retail
exposures
NZ$m

Non-retail
exposures
NZ$m

Total
NZ$m

Balance at beginning of the period

78

130

263

471

Release to income statement

(2)

(4)

(22)

(28)

Balance at end of the period

76

126

241

443
151

Unaudited 31/03/2017

Collective provision

Individual provision
Balance at beginning of the period

37

6

108

New and increased provisions net of write-backs

(7)

41

48

82

Bad debts written off

-

(41)

(16)

(57)

Discount unwind

(1)

-

(4)

(5)

Balance at end of the period

29

6

136

171

Total provision for credit impairment

105

132

377

614

77

127

253

457

Unaudited 31/03/2016

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

(1)

4

(1)

2

Balance at end of the period

76

131

252

459
154

Individual provision
Balance at beginning of the period

54

9

91

New and increased provisions net of write-backs

(8)

48

23

63

Bad debts written off

(1)

(50)

(29)

(80)

Discount unwind

(1)

-

(4)

(5)

Balance at end of the period

44

7

81

132

Total provision for credit impairment

120

138

333

591

Balance at beginning of the year

77

127

253

457

Charge to income statement

1

3

10

14

Balance at end of the year

78

130

263

471

Balance at beginning of the year

54

9

91

154

New and increased provisions net of write-backs

(12)

92

81

161

Bad debts written off

(2)

(95)

(55)

(152)

Audited 30/09/2016

Collective provision

Individual provision

Discount unwind

(3)

-

(9)

(12)

Balance at end of the year

37

6

108

151

Total provision for credit impairment

115

136

371

622

ANZ Bank New Zealand Limited

11

NOTES TO THE FINANCIAL STATEMENTS
6.

IMPAIRED ASSETS AND PAST DUE ASSETS
Retailmortgages
NZ$m

Other retail
exposures
NZ$m

Non-retail
exposures
NZ$m

Total
NZ$m

Balance at beginning of the period

57

27

342

426

Transfers from productive

18

52

260

330

Transfers to productive

(10)

(5)

(9)

(24)

Assets realised or loans repaid

(21)

(13)

(155)

(189)

Write offs

-

(41)

(16)

(57)

Total impaired assets

44

20

422

486

Other assets under administration

7

2

-

9

Undrawn facilities with impaired customers

-

-

23

23

Balance at beginning of the period

97

32

253

382

Transfers from productive

32

67

107

206

Transfers to productive

(17)

(3)

(4)

(24)

Assets realised or loans repaid

(39)

(15)

(113)

(167)

Write offs

(1)

(50)

(29)

(80)

Total impaired assets

72

31

214

317

Other assets under administration

8

3

-

11

Undrawn facilities with impaired customers

-

-

12

12

Unaudited 31/03/2017

Unaudited 31/03/2016

Audited 30/09/2016

Balance at beginning of the year

97

32

253

382

Transfers from productive

64

129

395

588

Transfers to productive

(31)

(8)

(7)

(46)

Assets realised or loans repaid

(71)

(31)

(244)

(346)

Write offs

(2)

(95)

(55)

(152)

Total impaired assets

57

27

342

426

Other assets under administration

9

2

-

11

Undrawn facilities with impaired customers

-

1

57

58

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

Other retail
exposures
NZ$m

Non-retail
exposures
NZ$m

Total
NZ$m

1 to 5 days

374

114

803

1,291

6 to 29 days

164

80

74

318

1 to 29 days

538

194

877

1,609

30 to 59 days

146

37

44

227

60 to 89 days

88

19

18

125

90 days or over

108

32

17

157

880

282

956

2,118

Unaudited 31/03/2017

ANZ Bank New Zealand Limited

12

NOTES TO THE FINANCIAL STATEMENTS
7.

ASSETS CHARGED AS SECURITY FOR LIABILITIESThe carrying amounts of assets pledged as security are as follows. These amounts exclude the amounts disclosed as collateral paid in thebalance 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 Agreements.
Carrying Amount

Related Liability

Unaudited

Unaudited

AuditedUnaudited

Unaudited

Audited31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

Securities sold under agreements to repurchase

425

140

77

425

140

76

Residential mortgages pledged as security for covered bonds

11,035

10,065

10,265

5,011

4,961

6,218

Assets pledged as collateral for UDC secured investments

2,803

2,571

2,665

1,303

1,737

1,592

UDC Secured Investments are secured by a security interest granted under the Trust Deed over all of UDC's present and future assets andundertakings, to Trustees Executors Limited, as supervisor. The assets subject to the security interest comprise mainly loans to UDC'scustomers and certain plant and equipment. The security interest secures all amounts payable by UDC on the UDC Secured Investments
and all other moneys payable by UDC under the Trust Deed.
ANZNZ Covered Bond Trust (the Covered Bond Trust)
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank
which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of the Covered Bond Trust of issuances of coveredbonds by the Bank, or its wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond
Trust are not available to creditors of the Bank, although the Bank (or its liquidator or statutory manager) may have a claim against theresidual assets of the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond Trust have been satisfied.
The Banking Group continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as
security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.

8.

DEPOSITS AND OTHER BORROWINGS
Unaudited

Unaudited

Audited31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

Term deposits

44,01337,574

39,665On demand and short term deposits

42,37543,56942,323

Deposits not bearing interest

8,568

7,268

7,780

1,303

1,737

1,592

Total customer deposits

96,25990,14891,360

Certificates of deposit

1,011

1,859

2,237

Commercial paper

2,949

5,451

5,364

Deposits from banks and securities sold under agreements to repurchase

750

140

76

Deposits from other members of ANZ New Zealand

23

31

29

100,992

97,62999,066Note

UDC secured investments

7

Deposits and other borrowings (including liabilities classified as held for sale)Less: UDC secured investments held for sale
Deposits and other borrowings

9.

18(1,303)--

99,68997,62999,066

DEBT ISSUANCES
Unaudited

Unaudited

Audited31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

Domestic bonds

4,025

4,000

3,975

U.S. medium term notes1

8,586

5,944

6,883

Euro medium term notes1

3,064

2,535

2,792

Covered bonds1

5,011

4,961

6,218

-

36

-

20,686

17,476

19,868
192

Index linked notes
Total debt issuances
Fair value hedge adjustment

(51)

206

Less debt issuances held by the Bank

(34)

(135)

(46)

20,601

17,54720,014

Total debt issuances
1

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

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

ANZ Bank New Zealand Limited

13

NOTES TO THE FINANCIAL STATEMENTS
10. SUBORDINATED DEBT
Unaudited

Unaudited

Audited31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

ANZ Capital Notes1
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)2

496

495

496

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

1,003

1,003

1,003

NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)

938

-

938

NZD 835m perpetual subordinated bond2,3

835

835

835

AUD 10m perpetual subordinated floating rate loan

11

11

10

3,283

2,344

3,282

Perpetual subordinated debt

Total subordinated debt
These instruments qualify as additional tier 1 capital.
These instruments are quoted on the NZX Debt Market.
3
These instruments qualify as tier 2 capital, subject to the RBNZ’s Basel III transition adjustment.
12

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

On 5 March 2015, the Bank issued 10.03 million
convertible notes (ANZ NZ ICN) to the NZ Branch at
NZ$100 each, raising NZ$1,003 million.
On 31 March 2015, the Bank issued 500 million
convertible notes (ANZ NZ CN) at NZ$1 each, raising
NZ$500 million before issue costs.
On 15 June 2016, the Bank issued 9.38 million
convertible notes (ANZ NZ ICN2) to the NZ Branch at
NZ$100 each, raising NZ$938 million.

ANZ Capital Notes (the notes) are fully paid convertible noncumulative perpetual subordinated notes.
As at 31 March 2017, ANZ NZ CN carried a BBB- credit ratingfrom Standard and Poor’s.
The notes are classified as debt given there arecircumstances beyond the Bank’s control where the principal
is converted into a variable number of shares of the Bank
(ANZ NZ ICN and ANZ NZ ICN2) or the Ultimate Parent Bank
(ANZ NZ CN).
Interest
Interest on the notes is non-cumulative and payable asfollows:•••

ANZ NZ ICN: payable semi-annually in arrears in Marchand September in each year. The interest rate is basedon a floating rate equal to the aggregate of the New
Zealand 6 month bank bill rate plus a 380 basis point
margin.
ANZ NZ CN: payable quarterly in arrears in February,
May, August and November in each year. The interest
rate is fixed at 7.2% per annum until 25 May 2020, andthereafter will be based on a floating rate equal to theaggregate of the New Zealand 3 month bank bill rateplus a 350 basis point margin.
ANZ NZ ICN2: payable semi-annually in arrears in Juneand December in each year. The interest rate is basedon a floating rate equal to the aggregate of the New
Zealand 6 month bank bill rate plus a 629 basis point
margin.

Interest payments are subject to the Bank’s absolute
discretion and certain payment conditions being satisfied(including RBNZ and APRA (ANZ NZ CN only) requirements).
If interest is not paid on the notes the Bank may not, except
in limited circumstances, pay dividends or undertake a sharebuy-back or other capital reduction on its ordinary shares
until interest is next paid.
Conversion features
On 24 March 2025 (ANZ NZ ICN) or 25 May 2022 (ANZ NZCN) or an earlier date under certain circumstances, therelevant notes will mandatorily convert into a variable
number of ordinary shares of the:••Bank based on the net assets per share in the Bank’s
most recently published Disclosure Statement (ANZ NZICN) orUltimate Parent Bank based on the average market
price of the Ultimate Parent Bank’s ordinary shares overa specified period prior to conversion less a 1%
discount (ANZ NZ CN).

The mandatory conversion will be deferred for a specified
period if the conversion tests are not met.
The Bank will be required to convert some or all of the notes
if a common equity capital trigger event, or an RBNZ or APRA(ANZ NZ CN only) non-viability trigger event occurs. The ANZNZ ICN and ANZ NZ ICN2 will convert into ordinary shares of
the Bank and the ANZ NZ CN will convert into ordinary
shares of the Ultimate Parent Bank, subject to a maximum
conversion number.
A common equity capital trigger event occurs if the:••Banking Group’s common equity tier 1 capital ratio is
equal to or less than 5.125% orOverseas Banking Group’s Level 2 common equity tier1 capital ratio is equal to or less than 5.125% (ANZ NZ
CN only).

An RBNZ non-viability trigger event occurs if the RBNZ
directs the Bank to convert or write off the notes or a
statutory manager is appointed to the Bank and decides the
Bank must convert or write off the notes. An APRA nonviability trigger event occurs if APRA notifies the Ultimate
Parent Bank that, without the conversion or write-off ofcertain securities or a public sector injection of capital (orANZ Bank New Zealand Limited

14

NOTES TO THE FINANCIAL STATEMENTS
equivalent support), it considers that the Ultimate Parent
Bank would become non-viable.

NZD 835,000,000 bond

On 25 May 2020 the Bank has the right, subject to satisfying
certain conditions, to redeem (subject to receiving RBNZ’sand APRA’s prior approval), or to convert into ordinary sharesof the Ultimate Parent Bank, all or some of the ANZ NZ CN at
its discretion on similar terms as mandatory conversion.

The Bank may elect to redeem the bond on 18 April 2018(the Call Date) or any interest payment date subsequent to18 April 2018. Interest is payable semi-annually in arrears on
18 April and 18 October each year, up to and including theCall Date and then quarterly thereafter. Should the bond not
be called at the Call Date, the Coupon Rate from the Call
Date onwards will be based on a floating rate equal to theaggregate of the 3 month bank bill rate plus a 300 basis
point margin.

On 24 March 2023 the Bank has the right, subject tosatisfying certain conditions, to redeem (subject to receiving
RBNZ’s prior approval), or to convert into ordinary shares of
the Bank, all or some of the ANZ NZ ICN at its discretion on
similar terms as mandatory conversion.
On 15 June 2026 and each 5th anniversary thereafter the
Bank has the right, subject to satisfying certain conditions, toredeem (subject to receiving RBNZ’s prior approval), all orsome of the ANZ NZ ICN2 at its discretion.
Rights of holders in event of liquidation
The notes rank equally with each other and with the Bank’s
preference shares and lower than perpetual subordinateddebt. Holders of the notes do not have any right to vote ingeneral meetings of the Bank.
Perpetual subordinated debt
Perpetual subordinated debt instruments are classified as
debt reflecting an assessment of the key terms andconditions of the instruments, and an assessment of theability, and likelihood of interest payments being deferred.
Certain of these instruments have interrelationships thathave been considered in this assessment.

11.

This bond was issued by the Bank on 18 April 2008.

As at 31 March 2017, this bond carried a BBB+ rating byStandard and Poor's and an A3 rating by Moody’s.
The coupon interest on the bond is 5.28% per annum until
18 April 2018.
AUD 10,000,000 loan
This loan was drawn down by the Bank on 27 March 2013and has no fixed maturity. Interest is payable semi-annuallyin arrears on 15 March and 15 September each year. The
Bank may repay the loan on any interest payment date after
the NZD 835,000,000 bond has been repaid in full.
Coupon interest is based on a floating rate equal to theaggregate of the Australian 6 month bank bill rate plus a 240
basis point margin, increasing to the Australian 6 monthbank bill rate plus a 440 basis point margin from 15
September 2018.

RELATED PARTY BALANCES
Unaudited

Unaudited

Audited31/03/2017

31/03/2016

30/09/2016

NZ$m

NZ$m

NZ$m

Total due from related parties

3,908

5,422

4,929

Total due to related parties

6,001

6,404

7,154

ANZ Bank New Zealand Limited

15

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

31/03/2017

31/03/2016

30/09/2016

31/03/2017

31/03/2016

30/09/2016

Common equity tier 1 capital

10.2%

10.0%

10.0%

9.2%

8.9%

8.9%

Tier 1 capital

13.5%

12.2%

13.2%

12.7%

11.2%

12.2%

Total capital

13.8%

12.8%

13.7%

13.0%

11.8%

12.8%

Buffer ratio

5.7%

4.8%

5.5%

Common equity tier 1 capital

4.5%

4.5%

4.5%

Tier 1 capital

6.0%

6.0%

6.0%

Total capital

8.0%

8.0%

8.0%

Buffer requirement

2.5%

2.5%

2.5%

RBNZ minimum ratios:

Capital of the Banking Group
31/03/2017
Unaudited

NZ$m

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

8,588

Retained earnings (net of appropriations)

3,830

Accumulated other comprehensive income and other disclosed reserves

55

Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities(3,409)Cash flow hedge reserve(51)

Expected losses to the extent greater than total eligible allowances for impairment(324)

Common equity tier 1 capital

8,689

Additional tier 1 capitalPreference shares

300

ANZ Capital Notes1

2,441

Capital attributable to the Bonus Bonds Scheme investors

37

Additional tier 1 capital

2,778

Total tier 1 capital

11,467

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

835

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

(601)
234
11,701A summary of the terms of these instruments is included in note 10.
Certain instruments issued by the Bank qualify as tier 2 capital instruments subject to phase-out under RBNZ Basel III transition arrangements. Fixing the base at the nominal
amount of such instruments outstanding at 31 December 2012, their recognition is capped at 20% of that base from 1 January 2017; and from 1 January 2018 onwards these
instruments will not be included in regulatory capital.

ANZ Bank New Zealand Limited

16

NOTES TO THE FINANCIAL STATEMENTS
Terms of ordinary share capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on the winding up of the Bank. On ashow of hands every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon apoll every member shall have one vote for each share held.
Terms of preference shares
All preference shares were issued by the Bank to the Immediate Parent and do not carry any voting rights. The preference shares arewholly classified as equity instruments as there is no contractual obligation for the Bank to either deliver cash or another financial
instrument or to exchange financial instruments on a potentially unfavourable basis. The key terms of the preference shares are as follows:
Dividends
Dividends are payable at the discretion of the directors of the Bank and are non-cumulative. The Bank must not resolve to pay any
dividend or make any other distribution on its ordinary shares until the next preference share dividend payment date if the 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 bankbill plus a 325 basis point margin, multiplied by one minus the New Zealand company tax rate, with dividend payments due on 1 Marchand 1 September each year.
Redemption features
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of
the preference shares:
on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of thepreference shares oron any dividend payment date on or after 1 March 2019 oron any date after 1 March 2019 if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.

•••

The preference shares may be redeemed for nil consideration should a non-viability trigger event occur.
Rights of holders in event of liquidation
In the event of a 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 distribution of profits or assets.
The preference shares qualify as “additional tier 1 capital” for capital adequacy purposes.
Capital requirements of the Banking Group

Unaudited 31/03/2017

Exposure atdefault
NZ$m

Risk weighted
exposure or
implied risk
weighted
exposure1
NZ$m

Total capitalrequirement
NZ$m

Corporate exposures

49,80130,285

2,423

Sovereign exposures

11,593164

13

Bank exposures

11,545

3,416

273

Retail mortgage exposures

76,197

17,247

1,380

Other retail exposures

10,814

8,602

688

Exposures subject to internal ratings based approach

159,950

59,714

4,777

Specialised lending exposures subject to slotting approach

11,631

10,766

861

Exposures subject to standardised approach

2,264

396

32

Equity exposures

7

30

2

Other exposures

3,048

1,646

132

Agri business supervisory adjustment

n/a

1,305

104

Total credit risk

176,900

73,857

5,908

Operational risk

n/a

5,874

470

Market risk
Total
1

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

n/a

5,216

418

176,900

84,947

6,796

ANZ Bank New Zealand Limited

17

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

Unaudited 31/03/2017

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

Total capitalrequirement$mOn-balance sheet exposures
Corporate

35,60735,59435

57

21,668

1,733

Sovereign

11,481

11,279

5

1

113

9

Bank

7,161

6,230

58

18

1,177

94

Retail mortgages

67,22867,45320

22

15,838

1,267

Other retail

5,087

5,181

75

95

5,241

419

126,564

125,73727

33

44,0373,522

Corporate

12,413

10,558

47

49

5,460

437

Sovereign

222

156

5

1

1

-

Bank

1,367

1,106

50

18

207

17

Retail mortgages

8,350

8,744

17

15

1,409

113

Total on-balance sheet exposures
Off-balance sheet exposures

Other retail

5,573

5,633

79

56

3,361

269

Total off-balance sheet exposures

27,92526,19744

38

10,438836

Corporate

115,783

3,649

61

82

3,157

253

Sovereign

16,893

158

5

30

50

4

Bank

1,024,287

4,209

61

46

2,032

162

Total market related contracts

1,156,963

8,016

60

62

5,239

419

Total credit risk exposures subject to the IRB approach

1,311,452

159,95031

35

59,7144,777

Market related contracts

ANZ Bank New Zealand Limited

18

NOTES TO THE FINANCIAL STATEMENTS
IRB exposures by customer credit rating

Unaudited 31/03/2017

Probability ofdefault%

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

Total capitalrequirement
NZ$m

Corporate
0-2

0.06

6,913

63

45

3,334

267

3-4

0.32

21,761

36

41

9,485

759

5

1.03

13,520

35

62

8,861

709

6

2.31

5,317

36

84

4,713

377

7-8

15.47

1,750

40

168

3,113

249

Default

100.00

540

42

136

779

62

2.30

49,80140

57

30,285

2,423

0

0.01

11,388

5

1

159

13

1-8

0.03

205

5

2

5

-

Total sovereign exposures

0.01

11,593

5

1

164

13

Total corporate exposures
Sovereign

Bank
0

0.03

45

65

23

11

1

1

0.03

10,473

58

26

2,907

233

2-4

0.11

1,022

60

45

491

39

5-8

1.35

5

65

116

7

-

Total bank exposures

0.04

11,545

58

28

3,416

273

0-3

0.20

20,020

12

5

1,156

92

4

0.46

29,032

19

15

4,661

373

5

0.92

21,607

24

33

7,512

601

6

2.00

4,956

28

65

3,418

273

7-8

4.94

403

28

104

445

36

Default

100.00

179

21

29

55

5

0.88

76,19719

21

17,247

1,380

Retail mortgages

Total retail mortgages exposures
Other retail
0-2

0.10

636

78

48

322

26

3-4

0.27

4,865

78

55

2,827

226

5

1.03

1,796

73

75

1,418

113

6

2.20

1,759

73

91

1,698

136

7-8

8.13

1,686

83

128

2,296

184

Default

100.00

72

79

54

41

3

Total other retail exposures

2.59

10,814

77

75

8,602

688

Total credit risk exposures subject to the IRB approach

1.31

159,95031

35

59,714

4,777

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

ANZ Bank New Zealand Limited

19

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

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

Strong

3,174

70

2,355

188

Good

6,177

90

5,893

471

Satisfactory

781

115

953

76

Weak

104

250

276

23

Default

32

-

-

-

10,268

87

9,477

758

Average risk Risk weighted
weightexposure%
NZ$m

Total capitalrequirement
NZ$m

Unaudited 31/03/2017

On-balance sheet exposures

Total on-balance sheet exposures

Exposureamount
NZ$mExposure atdefault
NZ$m

Undrawn commitments and other off balance sheet exposures

1,307

1,265

85

1,141

91

Market related contracts

2,115

98

143

148

12

Total off-balance sheet exposures

3,422

1,363

89

1,289

103

Unaudited 31/03/2017

Off-balance sheet exposures

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

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

Corporates

52

100

55

4

Default

1

150

1

-

Total on-balance sheet exposures

53

101

56

4

Average risk Risk weighted
weightexposure
NZ$m%

Total capitalrequirement
NZ$m

Unaudited 31/03/2017

On-balance sheet exposures

Unaudited 31/03/2017

AveragecreditExposure conversion
amountfactor
NZ$m%

Exposure atdefault
NZ$m

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

498

51

256

95

257

21

Market related contracts

508,246

-

1,955

4

83

7

Total off balance sheet

508,744

n/a

2,211

15

340

28

Exposure atdefault
NZ$m

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

7

400

30

2

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

Unaudited 31/03/2017

All equity holdings not deducted from capital

Equity exposures have been calculated in accordance with BS2B.

ANZ Bank New Zealand Limited

20

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

Risk weight%

Risk weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

Cash

207

-

-

-

New Zealand dollar denominated claims on the Crown and the RBNZ

1,288

-

-

-

Other assets

1,553

100

1,646

132

Total other IRB credit risk exposures

3,048

51

1,646

132

Unaudited 31/03/2017

Other exposures have been calculated in accordance with BS2B.
Credit risk mitigation
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment. The
Banking Group generally takes collateral security in the form of real property or a security interest in personal property, except for major
government, bank and corporate counterparties of strong financial standing. Longer term consumer finance, in the form of housing loans,is generally secured against real estate while short term revolving consumer credit is generally unsecured.
As at 31 March 2017, under the IRB approach, the Banking Group had NZ$1,093 million of Corporate exposures covered by guarantees
where the presence of the guarantees was judged to reduce the underlying credit risk of the exposures. Information on the total value of
exposures covered by financial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateralon the underlying credit risk exposures is not considered to be material.
Operational risk
The Banking Group uses the Advanced Measurement Approach for determining its regulatory capital requirement for operational risk
calculated in accordance with BS2B. As at 31 March 2017 the Banking Group had an implied risk weighted exposure of NZ$5,874 million
for operational risk and an operational risk capital requirement of NZ$470 million.
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures arefor the six months ended 31 March 2017.

Implied risk weighted exposure

Aggregate capital charge

Peak

Period end

Peak

Period end

Peak

Unaudited 31/03/2017

NZ$m

NZ$m

NZ$m

NZ$m

Interest rate risk

occurred on

5,145

8,138

412

651

7/10/2016

Foreign currency risk

70

110

6

9

1/02/2017

Equity risk

1

1

-

-

1/10/2016

5,216

418

Pillar II Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's
Conditions of Registration.
Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group
include pension risk, insurance risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk, value in-force risk, business retention
risk and software risk.
The Banking Group's internal capital allocation for these other material risks is NZ$435 million (31/03/2016 NZ$514 million; 30/09/2016
NZ$441 million).
The Banking Group regularly reviews the methodologies used to calculate the economic capital allocated to other material risks.

ANZ Bank New Zealand Limited

21

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

Ultimate Parent Bank
(Extended Licensed Entity)

Overseas Banking Group
31/03/2017

31/03/2016

30/09/2016

31/03/2017

31/03/2016

30/09/2016

Common equity tier 1 capital

10.1%

9.8%

9.6%

10.2%

10.2%

9.7%

Tier 1 capital

12.1%

11.6%

11.8%

12.3%

12.2%

12.1%

Total capital

14.5%

13.7%

14.3%

14.8%

14.4%

14.7%

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has accredited theOverseas Banking Group to use the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets andthe Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
Under prudential regulations, the Overseas Banking Group is required to maintain a Prudential Capital Ratio (PCR) as determined by APRA.
The Overseas Banking Group exceeded the PCR set by APRA as at 31 March 2017 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2017. The Overseas Banking
Group’s Pillar 3 disclosure document for the quarter ended 31 March 2017, in accordance with APS 330: Public Disclosure of Prudential
Information, discloses capital adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Residential mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group'svaluation of the security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn
residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing lending which have been
accepted by the customer.
31/03/2017
On-balance
sheet
NZ$m

Off-balance
sheet
NZ$m

Total
NZ$m

Does not exceed 60%

30,437

5,145

35,582

Exceeds 60% and not 70%

15,1201,422

16,542

Exceeds 70% and not 80%

16,927

1,422

18,349Does not exceed 80%

62,484

7,989

70,473

Exceeds 80% and not 90%

3,155

166

3,321

Unaudited

LVR range

Exceeds 90%

1,589

195

1,784

Total

67,2288,350

75,578Note

31/03/2017
NZ$m

4

69,744

Reconciliation of mortgage related amounts
Unaudited

Term loans - housing
Less: fair value hedging adjustment(45)

Less: housing loans made to corporate customers(2,505)

Add: Unsettled re-purchases of mortgages from the NZ BranchOn-balance sheet retail mortgage exposures subject to the IRB approach34
12

67,22812

75,578Add: off-balance sheet retail mortgage exposures subject to the IRB approach
Total retail mortgage exposures subject to the IRB approach (as per LVR analysis)

8,350

ANZ Bank New Zealand Limited

22

NOTES TO THE FINANCIAL STATEMENTS
13. FINANCIAL RISK MANAGEMENT
Concentrations of credit risk
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities within the samegeographic region, or when they have similar risk characteristics that would cause their ability to meet contractual obligations to be
similarly affected by changes in economic or other conditions.
Analysis of financial assets by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The
significant categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture isshown separately as required by the Order.
The presentation of these tables has changed from previous periods to align this disclosure with the classifications in the new data series
S34 – Banks: Assets – Loans by industry published by the RBNZ. This series uses ANZSIC 2006 industry classifications rather than ANZSIC 1996
that were previously used. Updated corresponding amounts as at 30 September 2016 have been provided for comparative purposes. The
most significant changes to the 30 September 2016 amounts from the previous presentation are:1)
2)

Industry classification is now shown separately for New Zealand residents and non-New Zealand residents
The reduction in exposures to households, previously described as personal lending, is due to the reclassification of loans
secured by rental properties to the relevant customer’s industry, of which the majority are now included in rental, hiring and realestate services.
Cash,
Tradingsettlements securities andreceivable and available-forcollateral paid
sale assets

Unaudited 31/03/2017

Derivative
financial Net loans andadvances3
instruments

Otherfinancial Credit related
assets commitments4

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Agriculture

-

-

25

17,56560

1,699

19,349Forestry and fishing, agriculture services

-

-

1

1,308

4

235

1,548

Manufacturing

-

3

187

3,016

10

2,090

5,306

Electricity, gas, water and waste services

-

41

442

1,623

6

1,244

3,356

Construction

-

-

3

1,458

5

968

2,434

Wholesale trade

-

-

40

1,673

6

1,437

3,156

Retail trade and accommodation

-

1

16

2,953

10

1,080

4,060

Transport, postal and warehousing

-

15

59

1,444

5

1,138

2,661

2,182

2,199

968

1,247

292

1,294

8,182

New Zealand residents

Finance and insurance services
Public administration and safety

1

-

6,653

563

368

5

723

8,312

Rental, hiring & real estate services
Professional, scientific, technical, administrativeand support services
Households

-

-

108

29,544102

3,670

33,424

-

-

5

1,171

4

601

1,781

-

-

-

49,712

171

11,583

61,466All other New Zealand residents2

-

2

203

2,545

9

1,806

4,565

2,182

8,914

2,620

115,627689

29,568

159,600

1,825

4,939

11,41973--

18,256
1,425

Overseas
Finance and insurance services
Households

-

-

-

1,420

5

-

All other non-NZ residents

-

716

107

1,040

4

162

2,029

1,825
-

5,655
-

11,526
-

2,533
(536)

9
-

162
(78)

21,710
(614)

-

-

-

(219)

-

-

(219)

-

-

-

344

-

-

344

4,007

14,56914,146

117,749698

29,652

180,821

Less: Provision for credit impairment
Less: Unearned income
Add: Capitalised brokerage / mortgage
origination fees
Total financial assets

ANZ Bank New Zealand Limited

23

NOTES TO THE FINANCIAL STATEMENTS
Cash,
Tradingsettlements securities andreceivable and available-forsale assets
collateral paid
Audited 30/09/2016

Derivative
financial Net loans andadvances3
instruments

Otherfinancial Credit related
assets commitments4

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Agriculture

-

-

23

17,77961

1,366

19,229Forestry and fishing, agriculture services

-

-

21

1,231

4

242

1,498

Manufacturing

-

12

185

3,555

12

2,012

5,776

Electricity, gas, water and waste services

-

21

642

1,298

4

1,255

3,220

Construction

-

-

17

1,579

5

1,030

2,631

Wholesale trade

-

-

23

1,645

6

1,596

3,270

Retail trade and accommodation

-

-

63

3,059

11

1,110

4,243

Transport, postal and warehousing

-

5

91

1,380

5

924

2,405
9,160

New Zealand residents

Finance and insurance services

2,931

2,569

1,186

807

282

1,385

Public administration and safety1

-

7,028

1,049

352

5

750

9,184

Rental, hiring & real estate services
Professional, scientific, technical, administrativeand support services
Households

-

-

75

28,23097

3,562

31,964

-

-

9

1,154

4

734

1,901

-

-

-

47,923

165

11,48659,574

All other New Zealand residents2

-

46

244

2,529

8

2,122

4,949

2,931

9,681

3,628

112,521669

29,574

159,004

Overseas
Finance and insurance services

1,856

4,703

17,47095--

24,124

Households

-

-

-

1,353

5

-

1,358

All other non-NZ residents

-

454

12

1,127

4

183

1,780

1,856
-

5,157
-

17,482
-

2,575
(518)

9
-

183
(104)

27,262
(622)

-

-

-

(211)

-

-

(211)

-

-

-

360

-

-

360

4,787

14,838

21,110114,727678

29,653

185,793

Less: Provision for credit impairment
Less: Unearned income
Add: Capitalised brokerage / mortgage
origination fees
Total financial assets
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 otherservices.
Excludes individual and collective provisions for credit impairment held in respect of credit related commitments.
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

ANZ Bank New Zealand Limited

24

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

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

Over
2 years
NZ$m

Not bearing
interest
NZ$m

Cash

1,894

1,687

-

-

-

-

207

Settlement balances receivable

678

51

-

-

-

-

627

Collateral paid

1,642

1,642

-

-

-

-

-

Trading securities

10,840

1,637

150

1,550

2,932

4,571

-

Derivative financial instruments

14,146

-

-

-

-

-

14,146

Unaudited 31/03/2017

AssetsAvailable-for-sale assets

3,729

646

187

451

539

1,905

1

Net loans and advances1

117,671

61,174

9,583

15,592

21,314

10,451(443)

Other financial assets1

698

62

40

26

15

2

553

Total financial assets

151,298

66,8999,960

17,61924,80016,92915,091

Settlement balances payable

1,784

499

-

-

-

-

1,285

Collateral received

401

401

-

-

-

-

-

Deposits and other borrowings1

100,992

69,40010,535

9,074

2,164

1,251

8,568

Derivative financial instruments

14,508

-

-

-

-

-

14,508Debt issuances

20,601

3,373

400

2,748

2,851

11,229-Subordinated debt

3,283

938

1,003

-

846

496

-

Liabilities

1

Payables and other liabilities

754

91

-

-

1

200

462

142,323

74,702

11,938

11,822

5,862

13,17624,823

Hedging instruments-

18,923(11,369)

10,555(16,368)(1,741)-

Interest sensitivity gap

8,975

11,120(13,347)

16,352

2,570

2,012

(9,732)

Total financial liabilities

1

Includes UDC items classified as held for sale.

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 the requirements of its liquidity policy and includes both
items classified as cash and those classified as operating assets in the Condensed Cash Flow Statement.
Unaudited

Cash and balances with central banks

31/03/2017
NZ$m

1,616

Certificates of deposit

528

Government, local body stock and bonds

5,834

Government treasury bills

502

Reserve Bank bills

240

Other bonds

7,042

Total liquidity portfolio

15,762The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into
repurchase transactions with a value of NZ$7,709 million at 31 March 2017.

ANZ Bank New Zealand Limited

25

NOTES TO THE FINANCIAL STATEMENTS
Funding composition
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs funding
metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longer-dated
wholesale debt (with remaining term exceeding one year) and equity.
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one New ZealandStandard Industry Output Categories (NZSIOC).
The presentation of these tables has changed from previous periods to align this disclosure with the classifications in the new data series
S41 – Banks: Liabilities – Deposits by industry published by the RBNZ. This series uses ANZSIC 2006 industry classifications rather than ANZSIC
1996 that were previously used. Updated corresponding amounts as at 30 September 2016 have been provided for comparative
purposes.
Unaudited

AuditedNote

31/03/2017
NZ$m

30/09/2016
NZ$m

896,25991,360Debt issuances

20,601

20,014

Subordinated debt

3,283

3,282

Certificates of deposit

1,011

2,237

Commercial paper

2,949

5,364

Other borrowings

773

105

Total wholesale funding

28,61731,002

Total funding

124,876

122,362

Agriculture, forestry and fishing

3,726

3,334

Manufacturing

2,016

1,978

Construction

1,446

1,598

Wholesale trade

1,371

1,284

Retail trade and accommodation

1,550

1,328

Financial and insurance services

8,748

8,918

Rental, hiring and real estate services

2,519

2,321

Professional, scientific, technical, administrative and support services

5,790

4,958

Public administration and safety

1,245

1,258

Arts, recreation and other services

1,984

1,833

Households

51,61349,492

Funding composition
Customer deposits
Wholesale funding

Customer deposits by industry - New Zealand residents

All other New Zealand residents1

4,093

3,040

86,101

81,342

Households

9,402

8,948

All other non-NZ residents

756

1,070

10,15810,01896,25991,360

Customer deposits by industry - overseas

Total customer deposits
Wholesale funding (financial and insurance services industry)
New Zealand

8,922

9,080

Overseas

19,69521,922

Total wholesale funding

28,61731,002

Total funding

124,876

122,362

95,02390,422Concentrations of funding by geography
New ZealandAustralia

863

1,017

United States

12,338

12,215

Europe9,341

11,448Other countries

7,311

7,260

Total funding

124,876

122,362

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.

ANZ Bank New Zealand Limited

26

NOTES TO THE FINANCIAL STATEMENTS
Contractual maturity analysis of financial assets and liabilities
The following tables present the Banking Group's financial assets and liabilities within relevant contractual maturity groupings, based on
the earliest date on which the Banking Group may be required to realise an asset or settle a liability. The amounts disclosed in the tables
represent undiscounted future principal and interest cash flows and may differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using the earliest date
at which the Banking Group can be called upon to pay. The liquidity risk of credit related commitments and contingent liabilities may beless than the contract amount, and does not necessarily represent future cash requirements as many of these facilities are expected to be
only partially used or to expire unused.
The Banking Group does not manage its liquidity risk on this basis.
Total
NZ$m

At call
NZ$m

Up to
3 months
NZ$m

Over 3 to
12 months
NZ$m

Over 1 to
5 years
NZ$m

Over
5 years
NZ$m

No maturity
specified
NZ$m

Cash

1,894

1,496

398

-

-

-

-

Settlement balances receivable

678

98

580

-

-

-

-

Collateral paid

1,642

-

1,642

-

-

-

-

Trading securities

11,591

-

1,044

2,146

7,934

467

-

Derivative financial assets (trading)

13,117-

13,117----

Unaudited 31/03/2017

Financial assets

Available-for-sale assets

3,989

-

204

975

2,360

449

1

Net loans and advances1

154,352

139

16,373

17,14452,761

67,935-

Other financial assets1

293

-

210

66

17

-

-

Total financial assets

187,556

1,733

33,56820,331

63,072

68,851

1

Settlement balances payable

1,784

987

797

-

-

-

-

Collateral received

401

-

401

-

-

-

-

Deposits and other borrowings1

102,380

51,187

26,27821,160

3,755

-

-

Derivative financial liabilities (trading)

12,252-

12,252----

Debt issuances

21,844

-

1,102

3,836

14,5252,381-

Subordinated debt

3,715

-

11

33

1,516

2,155

-

Financial liabilities

1

Other financial liabilities

406

-

98

11

205

92

-

Total financial liabilities

142,782

52,17440,93925,04020,001

4,628-

Derivative financial instruments used for balance sheet management- gross inflows

15,021

-

794

3,396

8,063

2,768

-

- gross outflows(16,037)-(839)(3,735)(8,572)(2,891)-

Net financial assets / (liabilities) after balance
sheet management

43,758(50,441)(7,416)(5,048)42,56264,1001

1Includes UDC items classified as held for sale.

Contractual maturity of off-balance sheet commitments and contingent liabilities

Unaudited 31/03/2017

Non-credit related commitments

Total
NZ$m

Less than

Beyond1 year
NZ$m

1 year
NZ$m

499

87

412

Credit related commitments

27,411

27,411-

Contingent liabilities
Total

2,319
30,2292,319
29,817412

ANZ Bank New Zealand Limited

27

NOTES TO THE FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS
Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair value of financial asset and liability categories
other than those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument
are discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or ayield curve appropriate for the remaining term to maturity.
Unaudited
31/03/2017

Unaudited
31/03/2016

Audited30/09/2016

Carrying
amountNZ$mFair value
NZ$m

Carrying
amountNZ$mFair value
NZ$m

Carrying
amountNZ$mFair value
NZ$m

117,671

117,740

110,357

110,870

114,623

114,891

100,992

101,042

97,62997,792

99,06699,169Debt issuances

20,601

20,78017,547

17,65620,014

20,148Subordinated debt

3,283

3,441

2,344

2,252

3,282

3,351

AssetsNet loans and advances1, 2Liabilities
Deposits and other borrowings2, 3
1

1

2
3

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

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

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

•

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

•

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

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

Unaudited

Audited31/03/2017

31/03/2016

30/09/2016

Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m

Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

Total
NZ$m

Financial assets
Trading securities
Derivative financial instruments
Available-for-sale assets
Investments backing insurance contract
liabilities
Total financial assets held at fair value

9,994

846

16 14,125- 10,840 12,364
5 14,146

135

14 21,137- 12,499 11,937
6 21,157

42- 11,979

3 21,100

7 21,110

3,634

94

1

3,729

1,885

358

2

2,245

1,671

1,187

1

2,859

5

140

-

145

-

189

-

189

5

114

-

119

13,649 15,205

6 28,860 14,263 21,819

8 36,090 13,616 22,443--

8 36,067

Financial liabilities
Deposits and other borrowings-

Derivative financial instruments

20 14,486

2,949

Payables and other liabilities

249

Total financial liabilities held at fair value

269 17,435

-

2,949

-

5,451

5,451

-

5,364

2 14,508

47 22,187- 22,234

46 21,908

-

760

-

157

249

2 17,706-

807 27,638

760- 28,445-

203 27,272

-

5,364

2 21,956-

157

2 27,477

ANZ Bank New Zealand Limited

28

NOTES TO THE FINANCIAL STATEMENTS
15. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit risk using actual exposures for bank counterparties and limits for non bankcounterparties. No account is taken of collateral, security and/or netting agreements which the Banking Group may hold in respect of thevarious counterparty exposures.
For the three months ended 31 March 2017 there were no individual counterparties (excluding connected parties, governments andbanks with long term credit ratings of A- or above) where the Banking Group’s period end or peak end-of-day credit exposure equalled or
exceeded 10% of equity (as at the end of the period).

16. INSURANCE BUSINESSThe Banking Group conducts insurance business through its subsidiary OnePath Life (NZ) Limited (OnePath Life).
The Banking Group’s aggregate amount of insurance business comprises the total assets of OnePath Life of NZ$907 million (31/03/2016:
NZ$943 million; 30/09/2016 NZ$926 million), which is 0.6% (31/03/2016: 0.6%; 30/09/2016 0.6%) of the total consolidated assets of the
Banking Group.

17. CREDIT RELATED COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES
Unaudited

Unaudited

Audited31/03/2017
NZ$m

31/03/2016
NZ$m

30/09/2016
NZ$m

27,411

27,76627,296

Contract amount of:
Credit related commitments - facilities provided
Undrawn facilities1
Guarantees and contingent liabilities
Guarantees and letters of credit

860

818

850

Performance related contingencies

1,459

1,614

1,611

Total guarantees and contingent liabilities

2,319

2,432

2,461

Total Credit Related Commitments, Guarantees and Contingent Liabilities

29,73030,19829,757¹ The comparative amount for undrawn facilities as at 31 March 2016 has been reduced by NZ$5,368 million following a review of the composition of commitments.

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio management and collateral requirements
for customers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect
future cash requirements.
Other contingent liabilities
The Banking Group has other contingent liabilities in respect of actual and possible claims and court proceedings.
An assessment of the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision madewhere deemed necessary.

18. DISPOSAL GROUP HELD FOR SALE
On 11 January 2017, the Bank announced that it had entered into a conditional agreement to sell UDC to HNA Group for approximately
NZ$660 million. Completion is expected late in the second half of the 2017 calendar year. The assets and liabilities of UDC are classified asheld for sale as at 31 March 2017.
The sale is subject to closing steps and conditions including engaging with investors on the replacement of the Secured Investment
programme and regulatory approvals.

ANZ Bank New Zealand Limited

29

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

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

(ii)

The Disclosure Statement is not false or misleading.

Over the six months ended 31 March 2017, after due enquiry, each Director believes that:(i)

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

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

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

This Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 12 May 2017.

Antony Carter

Shayne ElliottDavid Hisco

John Judge

Mark Verbiest

Nigel Williams

Joan Withers

ANZ Bank New Zealand Limited

30

INDEPENDENT AUDITOR’S REVIEW REPORTTo the Shareholder of ANZ Bank New Zealand Limited
We have reviewed pages 3 to 28 of the half year disclosure statementof ANZ Bank New Zealand Limited (the Bank) and its related entities(the Banking Group) which includes interim financial statements
prepared and disclosed in accordance with the Registered Bank
Disclosure Statements (New Zealand Incorporated Registered Banks)
Order 2014 (as amended) (the Order) and supplementary informationprescribed in schedules 3, 5, 7, 11, 13, 16 and 18 of the Order. Theinterim financial statements and supplementary information provide
information about the past financial performance and cash flows of
the Banking Group for the six month period ended 31 March 2017 andits financial position as at 31 March 2017.
This report is made solely to the shareholder of the Bank. Our review
work has been undertaken so that we might state to the shareholderof the Bank 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 toanyone other than the shareholder of the Bank, for our review work,
this report or any of the conclusions we have formed.
Directors' responsibilities
The directors of ANZ Bank New Zealand Limited are responsible for the
preparation and presentation of the half year disclosure statement,
which includes interim financial statements prepared in accordancewith Clause 25 of the Order, NZ IAS 34 Interim Financial Reporting and
IAS 34 Interim Financial Reporting, which present fairly, in all material
respects, the financial position of the Banking Group as at 31 March2017 and its financial performance and cash flows for the six month
period ended on that date. The directors are also responsible for suchinternal controls as they determine are necessary to enable thepreparation of the half year disclosure statement that is free frommaterial misstatement whether due to fraud or error.
They are also responsible for the preparation of supplementary
information in the half year disclosure statement which fairly states thematters to which it relates in accordance with schedules 3, 5, 7, 11, 13,
16 and 18 of the Order.
Our responsibilities
Our responsibility is to express an independent review opinion on thehalf year disclosure statement, which includes the interim financial
statements disclosed in accordance with Clause 25 of the Order, andsupplementary information disclosed in accordance with schedules 5,7, 11, 13, 16 and 18 of the Order, as presented to us by the directors,
and report our opinion to you.
We are responsible for reviewing the interim financial statements(excluding the supplementary information) in order to report to you
whether, in our opinion, on the basis of the procedures described
below, anything has come to our attention that would cause us tobelieve that the interim financial statements have not been prepared,in all material respects, in accordance with NZ IAS 34 Interim Financial
Reporting and IAS 34 Interim Financial Reporting and do not present
fairly, in all material respects, the financial position of the Banking
Group as at 31 March 2017 and its financial performance and cash
flows for the six month period ended on that date.
We are responsible for reviewing the supplementary information(excluding the supplementary information relating to capital
adequacy) in order to report to you whether, in our opinion, on thebasis of the procedures described below, anything has come to ourattention that would cause us to believe that the supplementary
information does not fairly state the matters to which it relates inaccordance with schedules 5, 7, 13, 16 and 18 of the Order.

We are responsible for reviewing the supplementary information
relating to capital adequacy in order to state whether, on the basis of
the procedures described below, anything has come to our attention
that would cause us to believe that the information disclosed inaccordance with schedule 11 is not, in all material respects, prepared inaccordance with the Capital Adequacy Framework (Standardised
Approach) (BS2A) and disclosed in accordance with schedule 11 of theOrder.
Basis of opinion
We have performed our review in accordance with the review
engagement standard NZ Standard on Review Engagements 2410,
Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) issued by the External Reporting Board. As theauditor of the Banking Group, NZ SRE 2410 requires that we comply
with the ethical requirements relevant to the audit of the annual
financial statements.
A review is limited primarily to enquiries of the Banking Group’s
personnel and analytical review procedures applied to the financial
data, and thus provides less assurance than an audit. The procedures
performed in a review are substantially less than those performed in anaudit conducted in accordance with International Standards on
Auditing (New Zealand). Accordingly we do not express an audit
opinion on those interim financial statements.
Our firm has also provided other services to the Banking Group in
relation to review and other assurance engagements. Subject tocertain 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 auditors of the Banking Groupfor this engagement. The firm has no other relationship with, orinterest in, the Banking Group.
Review opinion
We have examined the interim financial statements andsupplementary information and based on our review nothing hascome to our attention that causes us to believe that:a) the interim financial statements on pages 3 to 28 (excluding the
supplementary information disclosed in accordance withschedules 5, 7, 11, 13, 16 and 18 of the Order) have not been
prepared, in all material respects, in accordance with NZ IAS 34
Interim Financial Reporting and IAS 34 Interim Financial Reportingand do not present fairly, in all material respects, the financial
position of the Banking Group as at 31 March 2017 and its
financial performance and cash flows for the six month period
ended on that dateb) the supplementary information (excluding supplementary
information relating to capital adequacy) disclosed inaccordance with schedules 5, 7, 13, 16 and 18 of the Order, does
not fairly state, in all material respects, the matters to which it
relates in accordance with those schedulesc) the supplementary information relating to capital adequacy
disclosed in accordance with schedule 11 of the Order is not, inall material respects, prepared in accordance with the Capital
Adequacy Framework (Standardised Approach) (BS2A) anddisclosed in accordance with schedule 11 of the Order.
Our review was completed on 12 May 2017 and our opinion isexpressed as at that date.

Wellington