31 March 2009 NUMBER 53

For personal use only

ANZ NATIONAL BANK LIMITED GROUP GENERAL DISCLOSURE STATEMENT 							Anz National Bank Limited

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

G E NE R A L DISC LO SUR E S TATE M E N T

For the six months ended 31 March 2009
Number 53 Issued May 2009

For personal use onlyFor personal use only

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

GENERAL DISCLOSURE STATEMENT
for the six months ended
31 March 2009

CONTENTS
General Disclosures			2-4Summary of Financial Statements			

5

Income Statements 			6Statements of Recognised Income and Expense			

7

Balance Sheets			

8

Cash Flow Statements			

9 - 10Notes to the Financial Statements			 11 - 119
Directorate and Auditors			120 - 121
Conditions of Registration			122 - 124
Credit Rating Information			125

Directors’ Statement			126

Independent Review Report			127

Index			128A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E S

For personal use only

GENERAL DISCLOSURESThis Disclosure Statement has been issued in accordance with
the Registered Bank Disclosure Statement (Full and Half-Year New Zealand Incorporated Registered Banks) Order 2008 (‘theOrder’).

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

In this Disclosure Statement unless the context otherwise requires:• the Ultimate Parent Bank should not enter into cross default clauses
whereby a default by the Bank on an obligation (whether financial
or otherwise) is deemed to trigger a default of the Ultimate Parent
Bank in its obligations;a) “Banking Group” means ANZ National Bank Limited and all its
subsidiaries; andb) any term or expression which is defined in, or in the mannerprescribed by, the Registered Bank Disclosure Statement (Full andHalf-Year - New Zealand Incorporated Registered Banks) Order2008 shall have the meaning given in or prescribed by that Order.
G eneral M atters

The full name of the registered bank is ANZ National Bank Limited(‘the Bank’) and its address for service is Level 14, ANZ Tower, 215229 Lambton Quay, Wellington, New Zealand.
The Bank was incorporated under the Companies Act 1955 by virtue ofthe ANZ Banking Group (New Zealand) Act 1979 on 23 October 1979,
and was reregistered under the Companies Act 1993 on 13 June 1997.
The immediate parent company of the Bank is ANZ Holdings(New Zealand) Limited (incorporated in New Zealand). The immediate
parent company is owned by ANZ Funds Pty Limited and Australia
and New Zealand Banking Group Limited (both incorporated inAustralia).
The Ultimate Parent Bank is Australia and New Zealand Banking Group
Limited (‘ANZ’), which is incorporated in Australia, and its address forservice is Level 14, 100 Queen Street, Melbourne, Australia.
The Bank is wholly owned by its immediate parent company andultimately the Ultimate Parent Bank. The immediate parent company
has the power under the Bank’s Constitution to appoint any person asa Director of the Bank either to fill a casual vacancy or as an additional
Director or to remove any person from the office of Director, fromtime to time by giving written notice to the Bank. No appointmentof a new Director may occur unless the Reserve Bank of New Zealand(‘RBNZ’) confirms that it does not object to the appointment.
A New Zealand Branch (NZ Branch) of the Australia and New Zealand
Banking Group Limited was established on 5 January 2009. The fullname of the NZ branch is Australia and New Zealand Banking Group
Limited New Zealand Branch and its address for service is Level 14,
ANZ Tower, 215-229 Lambton Quay, Wellington, New Zealand.
N ature o f B usiness

The principal activities of the Banking Group during the period wereretail, corporate and rural banking, mortgage lending, asset and general
finance, international and investment banking, and nominee andcustodian services. Life insurance and funds management activities
are carried out through the ING New Zealand joint venture. 		
M aterial Financial S upport

In accordance with the requirements issued by the Australian
Prudential Regulatory Authority (‘APRA’) pursuant to the Prudential
Standards, Australia and New Zealand Banking Group Limited, as the
Ultimate Parent Bank, may not provide material financial support to
the Bank contrary to the following:		
• the Ultimate Parent Bank should not undertake any third party dealings
with the prime purpose of supporting the business of the Bank;

1.

P A G E2

• the Board of the Ultimate Parent Bank in determining limits on
acceptable levels of exposure to the Bank should have regard to:• the level of exposure that would be approved to third parties ofbroadly equivalent credit status. In this regard, prior consultation(and in cases approval) is required before entering exceptionallylarge exposures; and• the impact on the Ultimate Parent Bank’s capital and liquidity
position and its ability to continue operating in the event of a failure
by the Bank.
• the level of exposure to the Bank not exceeding:• 50% on an individual exposure basis1; and• 150% in aggregate (being exposures to all similar regulated
entities related to the Ultimate Parent Bank)of the Ultimate Parent Bank’s capital base.
Additionally, the Ultimate Parent Bank may not provide material
financial support in breach of the Australian Banking Act (1959). Thisrequires APRA to exercise its powers and functions for the protectionof a bank’s depositors and in the event of a bank becoming unable tomeet its obligations or suspending payment, the assets of the bankin Australia shall be available to meet that bank’s deposit liabilities inAustralia in priority to all other liabilities of the bank.		
The Ultimate Parent Bank has not provided material financial support
to the Bank contrary to any of the above requirements.		
P ending P roceedings or A rbitration

Other than disclosed in the Disclosure Statement, there are no pending
proceedings or arbitration concerning any member of the Banking
Group that may have a material adverse effect on the Bank or the
Banking Group as at the date of the General Disclosure Statement.
The Banking Group has received amended tax assessments from the
New Zealand Inland Revenue Department (‘IRD’) in respect of its
review of certain structured finance transactions. The Banking Groupis confident, based on independent tax and legal advice obtained, thatits tax treatment of these transactions is correct and disagrees with
the IRD’s position.
The Commerce Commission has brought proceedings under theCommerce Act 1986 against Visa, MasterCard and all New Zealandissuers of Visa and MasterCard credit cards, including the Bank
regarding credit card interchange fees. Several major New Zealandretailers have also issued proceedings. The Bank has received
independent legal advice. This matter is complex and difficult. The
Bank is defending the proceedings. This matter is scheduled for trial
in October 2009.
The Bank markets and distributes a range of wealth management
products which are managed by ING (NZ) Limited (of which the Bankholds 49%). Trading in the ING Diversified Yield Fund and the ING
Regular Income Fund was suspended on 13 March 2008 by the fundmanager, ING (NZ) Limited, due to the deterioration in liquidity incredit markets.

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

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

GENERAL DISCLOSURESFor personal use only

( continued )On 25 February 2009, ING (NZ) Limited announced that investors in
the Funds will be receiving a proposal which allows them the ability
to exit the Funds. We understand further details on the proposal will
be released shortly.
The estimated cost of this proposal to the Banking Group is $166m andthis amount has been recognised in ‘other operating income’ in the Income
Statement.
Further details on pending proceedings or arbitration are set out in Note
42 Contingent Liabilities and Credit Related Commitments.
Ot h er M aterial M atters

There are no matters relating to the business or affairs of the
Bank and the Banking Group which are not contained elsewherein the General Disclosure Statement and which would, if disclosed,materially adversely affect the decision of a person to subscribe fordebt securities of which the Bank or any member of the Banking
Group is the issuer.
G uarantors

The Bank has guarantees under the:a) New Zealand Deposit Guarantee Scheme (‘Crown Retail Guarantee’);andb) New Zealand Wholesale Funding Guarantee Facility (‘Crown
Wholesale Guarantee’).
This section provides a brief description of the Crown Retail Guarantee
and Crown Wholesale Guarantee and also sets out from where
further information may be obtained. As at the date of this General
Disclosure Statement the only material obligations of the Bank thatare guaranteed are the debt securities (as defined in the Retail Deed)guaranteed under the Crown Retail Guarantee and debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate under
the Crown Wholesale Guarantee (copies of which are available on the
Treasury website www.treasury.govt.nz).
Crown Retail Guarantee
The Crown Retail Guarantee is provided under a Crown Deed of
Guarantee (Registered Bank) entered into by the Bank and the Crownon 14 November 2008 and supplemented on 9 December 2008(‘Retail Deed’).
The Crown Retail Guarantee does not extend to subordinated debt
securities issued by the Bank or debt securities that are issued by the
Bank to Related Parties (as defined in the Retail Deed) of the Bank or
to Financial Institutions.
As defined in the Retail Deed, ‘Financial Institutions’ means a financial
institution, as defined in section 2 of the Reserve Bank of New
Zealand Act 1989, which carries on the business of borrowing andlending money, such as a life insurance company, a building society
or a registered bank, and, without limiting the generality of theforegoing, includes:a) a “collective investment scheme” as that term is defined in section
157B of the Reserve Bank of New Zealand Act 1989 (including any“superannuation fund” or “superannuation scheme”);b) an “insurer” as that term is defined in section 2 of the Insurance
Companies (Rating and Inspections) Act 1994 or any other person
carrying on the business of providing insurance cover (of whatevernature);c) a person carrying on business as a sharebroker, an investment
adviser or a fund manager (to the extent that person is acting in thatcapacity); ord) a person who is a subsidiary of, or who is controlled by a financial
institution within (a), (b) or (c) above.

The Crown Retail Guarantee applies for a period commencing on
12 October 2008 and expiring on 12 October 2010 (‘Guarantee
Period’).
Under the Crown Retail Guarantee, the Crown absolutely and irrevocably
guarantees:a) all obligations of the Bank to pay money to a creditor under Debt
Securities (“Indebtedness”) that become due and payable during the
Guarantee Period; andb) if a Default Event, as defined in the Retail Deed, occurs during the
Guarantee Period, all Indebtedness that exists on the date of that
Default Event (whether or not that Indebtedness is due and payable
during the Guarantee Period); andc) all interest accruing on the amounts referred to in (b) after theoccurrence of the Default Event.
The Crown undertakes that if the Bank does not pay an amount referred
to in (a), (b) or (c) above, the Crown will pay that amount to the creditor
when it is due and payable (except to the extent that that Indebtedness
or interest is not paid solely as a result of an administrative error or
technical error and is subsequently paid within 7 days of its due date).
The Crown’s obligation to pay any amount under the Crown Retail
Guarantee is subject to the Crown receiving a notice of claim fromthe creditor in respect of the relevant Indebtedness and to the Crown
satisfying itself as to the amount of the relevant Indebtedness and suchother matters as the Crown reasonably considers appropriate in order
to ascertain the extent of its liability under the Crown Retail Guarantee
in respect of that Indebtedness. Notice may be served on the Crown
in respect of the Crown Retail Guarantee by service on The Treasury at
1 The Terrace, Wellington.
The maximum liability of the Crown to each creditor under the Crown
Guarantee is one million New Zealand dollars (NZ$1,000,000). For thispurpose amounts owed to creditors by the Bank under any Debt Security
will be aggregated with other amounts owed to the same creditor by the
Bank which are supported by the Crown Retail Guarantee.
Crown Wholesale Guarantee
The Crown Wholesale Guarantee is provided under the Crown
Wholesale Funding Guarantee in respect of the Bank entered into by
the Crown on 23 December 2008 and supplemented on 19 February
2009 (‘Wholesale Deed’).
Newly issued senior unsecured (except for covered bonds, which
are also eligible) negotiable or transferable debt securities issued
by the Bank, or issued by a subsidiary of the Bank and guaranteedby the Bank, may be eligible to benefit from the Crown Wholesale
Guarantee. For the Crown Wholesale Guarantee to apply, the Bank
will need to apply to the Crown for a Guarantee Eligibility Certificate(as defined in the Wholesale Deed) in respect of the issue of debt
securities. The decision to issue a Guarantee Eligibility Certificate
in respect of any issue of debt securities is at the sole and absolute
discretion of the Crown.
If a Guarantee Eligibility Certificate is issued in respect of any debt
securities, the Crown (subject to any special conditions specified ina Guarantee Eligibility Certificate and provided the debt securities
are not varied, amended, waived, released, novated, supplemented,
extended or restated in any respect without the prior written consent
of the Crown) irrevocably:a) guarantees the payment by the Bank of any liability of the Bank to
pay principal and interest (excluding any penalty interest or otheramount only payable following a default) in respect of the debt
securities for which the Crown has issued a Guarantee Eligibility
Certificate; andP A G E

3

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

GENERAL DISCLOSURESFor personal use only

( continued )P A G E

4

G uarantors ( continued )S upplemental D isclosure S tatementb) undertakes that if the Bank does not pay any such liability on thedate on which it becomes due and payable, the Crown shall, within
five Business Days of a demand being made in accordance with the
Wholesale Deed and following the expiry of any applicable grace
period, pay such liability.

A copy of the most recent Supplemental Disclosure Statement for thesix months ended 31 March 2009 can be obtained immediately where
request is made within normal banking hours at Level 14, ANZ Tower,215-229 Lambton Quay, Wellington, New Zealand. It is available atno charge:

The Crown Wholesale Guarantee does not extend to debt securities
held by a Related Party (as defined in the Wholesale Deed) of theBank.

a) on the Bank’s websites at www.anznational.co.nz, www.anz.co.nz
and www.nationalbank.co.nz;

In the event of a claim made on the Crown, the Crown will only pay
the interest and principal due to the holders of the debt security on
the originally scheduled dates for payment of interest and principal.
The Crown’s obligations in respect of any debt security terminate on
the date falling 30 days after the earlier of:a) the scheduled maturity date for the debt security under which theguaranteed liability arises; andb) the date falling five years after the date of issue of the debt security
under which the guaranteed liability arises, unless valid demand has
been made on the Crown prior to that time.
Any demand on the Crown in respect of debt securities for which
the Crown has issued a Guarantee Eligibility Certificate may only bemade in the prescribed form by delivery by hand to the Minister ofFinance, Parliament Buildings, Wellington, New Zealand or to one ofthe other addresses specified in the Wholesale Deed.
No Guarantee Eligibility Certificate shall be issued by the Crown inrespect of any proposed debt security unless the aggregate amountof the proposed debt security and all of the Bank’s outstanding
liabilities to pay principal and interest in respect of the debt securities
for which the Crown has issued a Guarantee Eligibility Certificate will
not exceed the maximum amount as the Crown may from time totime determine and notify in writing to the Bank (which, at the dateof this General Disclosure Statement, is set at $65 billion).
Further information
Further information about the Crown Retail Guarantee and the Crown
Wholesale Guarantee, including a copy of the Retail Deed, Wholesale
Deed and any Guarantee Eligibility Certificate issued by the Crown
in respect of the Bank, is available on The Treasury website at www.
treasury.govt.nz.
Further information about the Crown, including a copy of its mostrecent audited financial statements can be obtained at www.treasury.
govt.nz. The Crown’s credit ratings are available on the New Zealand
Debt Management office website www.nzdmo.govt.nz.
The Crown’s long-term foreign currency issuer credit rating is Aaa(Moody’s Investors Services), AA+ (Standard & Poor’s), AA+ (Fitch
Ratings) and long-term domestic currency issuer credit rating is Aaa(Moody’s Investors Services), AAA (Standard & Poor’s), AAA (Fitch
Ratings) and has not changed in the two years immediately before
the date of this General Disclosure Statement.
Credit ratings are assigned to sovereigns and businesses by theinternational credit rating agencies. Credit ratings provide investors
with an indication of the credit-worthiness of an entity in which
they are considering investing. There are three major internationallyrecognised credit rating agencies: Standard & Poor’s, Moody’s
Investors Service and Fitch Ratings. AAA is the highest rating level
while a rating in the AA range is also seen as a very high level ofcredit-worthiness. Refer to ‘Credit Rating Information’ for a fulldescription of credit rating scales.

b) immediately if request is made at the Bank’s registered head office;andc) within five working days of a request, if a request is made at any
branch of the ANZ or National Bank of New Zealand.
The Bank’s most recent Supplemental Disclosure Statement contains
a copy of the bilateral netting agreement (refer Note 32) and a copyof the Crown Retail Guarantee and Crown Wholesale Guarantee.
D irectorate

Since the publication of the previous General Disclosure Statement
on 5 March 2009, Graham Kennedy Hodges resigned as a director of
the Board on 30 April 2009 and Jennifer Anne Fagg was appointed asa director on 1 May 2009. Robert John Edgar also resigned effective
8 May 2009.

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

For personal use only

summary of financial STATEMENTS		Consolidated							Previous
Previous		
NZ IFRSNZ IFRS1NZ IFRS1NZ IFRS1, 2
NZ IFRS1, 2
GAAP
GAAP
		
Unaudited
Audited
Audited
Audited
Audited
Audited
Audited
6 months toYear toYear toYear toYear toYear toYear to		
31/03/2009 30/09/2008 30/09/2007 30/09/2006 30/09/2005 30/09/2005 30/09/2004
		
$m
$m
$m
$m
$m
$m
$m

C ontinuing operations

Interest income
Interest expense

4,226
2,951

9,857
7,568

8,309
6,059

7,206
5,077

6,009
4,069

5,985
4,069

4,481
2,797

Net interest income
Other operating income

1,275
440

2,289
1,124

2,250
861

2,129
802

1,940
794

1,916
851

1,684
751

Operating income
Operating expenses

1,715
738

3,413
1,444

3,111
1,331

2,931
1,323

2,734
1,312

2,767
1,506

2,435
1,265

Profit before provision for credit impairment and income tax
Collective provision charge (credit)
Individual provision charge3

977
73
212

1,969
112
190

1,780
20
54

1,608
(10)
28

1,422
121
-

1,261
122
-

1,170
133
-

Provision for credit impairment

285

302

74

18

121

122

133

Profit before income tax
Income tax expense

692
204

1,667
504

1,706
614

1,590
523

1,301
398

1,139
404

1,037
357

Profit after income tax from continuing operations

488

1,163

1,092

1,067

903

735

680

D iscontinued operations

Profit from discontinued operations (net of income tax)

-

-

76

5

14

-

-

488

1,163

1,168

1,072

917

735

680

3,817

2,677

2,235

2,003

1,438

1,438

958

Adjustment on adoption of NZ IFRS on 1 October 2004
Adjustment on adoption of NZ IAS 39 on 1 October 2005

-

-

-

61

4
-

-

-

Total available for appropriation
Actuarial (loss) gain on defined benefit schemes after tax
Interim ordinary dividends paid

4,305
(28)
(1,000)

3,840
(23)
-

3,403
2
(728)

3,136
(1)
(900)

2,359
4
(360)

2,173
(360)

1,638
(200)

Retained profits at end of the period

3,277

3,817

2,677

2,235

2,003

1,813

1,438

Profit after income tax
Retained profits at beginning of the period		Consolidated							Previous
Previous		
NZ IFRSNZ IFRS1NZ IFRS1NZ IFRS1, 2
NZ IFRS1, 2
GAAP3
GAAP3
		
Unaudited
Audited
Audited
Audited
Audited
Audited
Audited
6 months toYear toYear toYear toYear toYear toYear to		
31/03/2009 30/09/2008 30/09/2007 30/09/2006 30/09/2005 30/09/2005 30/09/2004
		
$m
$m
$m
$m
$m
$m
$m

Total impaired assets (on-balance sheet and off-balance sheet)
620
Total assets
127,941
Total liabilities
117,689
Equity10,252

333
122,915
113,108
9,807

121
107,787
99,084
8,703

159
95,81487,5818,233

220
85,501
77,5557,946

22085,30177,545
7,756

123
74,212
66,831
7,381

The amounts included in this summary have been taken from the audited financial statements of the Banking Group with the exception of theamounts for the six months ended 31 March 2009 which have been taken from unaudited financial statements.
1.

Truck Leasing Limited has been classified as a discontinued operation for the comparative years ending 30 September 2007, 30 September 2006 and 30 September 2005.

2.

On 1 October 2005, the Banking Group adopted New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’). In accordance with NZ IFRS, comparative information
was restated using the new accounting standards from 1 October 2004. As permitted by the transitional provisions set out in NZ IFRS 1: First-time Adoption of New Zealand Equivalents toInternational Financial Reporting Standards, management elected not to restate comparative information for the adoption of NZ IAS 32 Financial Instruments: Disclosure and Presentation(‘NZ IAS 32’) and NZ IAS 39 Financial Instruments: Recognition and Measurement (‘NZ IAS 39’). Refer to Note 52 Explanation of Transition to NZ IFRS in the 30 September 2006 General
Disclosure Statement for an explanation of the Banking Group’s transition to NZ IFRS and the adjustments required to comply with NZ IFRS.							

3.

The RBNZ’s guidelines require the Banking Group to show the individual provision charge to profit as the ‘impaired asset expense’. Prior to adopting NZ IFRS on 1 October 2005, underthe Banking Group’s Bad and Doubtful Debts policy, the required individual provision was not charged to profit, but was transferred from the collective provision balance. The Banking
Group’s provision for credit impairment, which represented the expected average annual loss on principal over the economic cycle for the lending portfolio, was credited to the collective
provision. Under NZ IFRS, there is no longer a transfer between the collective and individual provisions. Further detail on the provision for credit impairment is set out in Note 14 Provision
for Credit Impairment. 								P A G E

5

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

For personal use only

Income STATEMENTS
for the six months ended 31 March 2009

Consolidated
		
		
		
Note

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

6

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Interest income

4

4,226

4,794

9,857

4,321

4,689

9,638

Interest expense

5

2,951

3,656

7,568

3,346

3,903

8,130

1,275

1,138

2,289

975

786

1,508

432

493

1,013

391

556

1,056

Net interest income
Other operating income

4

Share of profit of equity accounted associates							and jointly controlled entities
15
8
96
111
Operating income

1,715

1,727

3,413

1,366

1,342

2,564

Operating expenses
5
738
672
1,444
704
648
1,384
Profit before provision for credit impairment									and income tax		
977
1,055
1,969
662
694
1,180
Provision for credit impairment

285

93

302

265

86

278

692

962

1,667

397

608

902

6

204

270

504

109

161

258

Profit after income tax		

488

692

1,163

288

447

644

14

Profit before income tax
Income tax expense

The notes on pages 11 to 119 form part of and should be read in conjunction with these financial statements.

P A G E

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

For personal use only

statements of recognised income and e xpense
for the six months ended 31 March 2009

Consolidated
		
		
		
Note

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Available - f or - sale re valuation reserv e :- Valuation gain taken to equity

4

16

26

4

16

26

C ash flow hedging reserve :- Valuation loss taken to equity

10

(9)

(17)

(47)

(9)

(17)

(47)

- Transferred to income statement

10

(19)

(16)

(37)

(19)

(16)

(37)

Actuarial loss on defined benefit schemes

44

(38)

(12)

(33)

(38)

(12)

(33)

Income tax credit on items recognised
directly in equity		

20

15

34

20

15

34

Net expense recognised directly in equity		

(42)

(14)

(57)

(42)

(14)

(57)

Profit after income tax		

488

692

1,163

288

447

644

Total recognised income and expense for the period		

446

678

1,106

246

433

587

The notes on pages 11 to 119 form part of and should be read in conjunction with these financial statements.

P A G E

7

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

For personal use only

BALANCE SHEETS
as at 31 M arch 2009

		
		
Note

Consolidated

ParentUnaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

A ssets

Liquid assets

7

3,390

3,863

4,838

3,390

3,863

4,837

Due from other financial institutions

8

7,631

3,890

5,032

6,874

3,455

4,527

Trading securities

9

2,565

2,149

2,624

2,565

2,149

2,624

Derivative financial instruments

10

14,985

4,865

7,533

15,162

4,865

7,544

Available-for-sale assets

11

597

96

109

8,419

86

107

Net loans and advances

12, 13, 14

93,72092,57997,67991,32990,171

95,241

-

-

-

1,785

1,506

1,992

Shares in controlled entities, associates 							and jointly controlled entities
15
396
350
363
7,773
7,757

7,694

Due from subsidiary companies		Current tax assets		

60

134

57

283

338

214

Other assets

16

823

995

1,000

745

906

885

Deferred tax assets

17

200

56

121

174

43

100

Premises and equipment

18

250

238

242

60

54

53

Goodwill and other intangible assets

19

3,324

3,299

3,317

3,275

3,249

3,268

Total assets		

127,941

112,514

122,915

141,834

118,442

129,086

L iabilities									Due to other financial institutions

20

4,162

2,384

3,312

3,250

1,432

1,940

Deposits and other borrowings

21

72,76074,08077,13664,913

61,37962,80043,260Due to subsidiary companies		

-

-

-

44,78537,078Due to parent company

26

1,096

1,758

404

1,096

1,758

404

Derivative financial instruments

10

12,868

4,472

6,710

12,868

4,445

6,710

Payables and other liabilities

22

2,100

1,646

1,841

1,879

1,414

1,531

Deferred tax liabilities

23

-

-

-

-

-

-

Provisions

24

340

154

190

336

144

186

Bonds and notes

25

21,528

16,586

20,695

1,315

579

1,123

Loan capital

27

2,835

2,053

2,820

2,835

2,053

2,820

Total liabilities		

117,689

103,133

113,108

133,277

110,282

120,774

Net assets		

10,252

9,381

9,807

8,557

8,160

8,312

E q uity									Ordinary share capital

28

6,943

5,943

5,943

6,943

5,943

Reserves

29

32

77

47

32

77

47

Retained earnings

29

3,277

3,361

3,817

1,582

2,140

2,322

Total equity		

10,252

9,381

9,807

8,557

8,160

8,312

The notes on pages 11 to 119 form part of and should be read in conjunction with these financial statements.

P A G E

8

5,943

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

For personal use only

CASH FLOW STATEMENTS
for the six months ended 31 March 2009 1

Consolidated
		
		
		
Note

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

C as h f low s f rom operating acti v ities

Interest received
Dividends received		
Fees and other income received
Interest paid		

4,169

4,643

9,502

4,250

4,509

-

-

4

-

7

9,258
24

612

516

1,060

587

486

992

(3,001)(3,446)(6,959)(3,349)(3,649)(7,504)

Operating expenses paid		

(735)

(661)

(1,313)

(712)

(645)

(1,275)

Income taxes paid

(265)

(322)

(524)

(231)

(286)

(303)

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

780

730

1,770

545

422

1,192

Decrease (increase) in due from other financial institutions - term

159

(861)

(630)

(147)

(887)

(587)

Decrease (increase) in trading securities		

90

(206)

(617)

90

(206)

(617)

(Increase) decrease in derivative financial instruments		

(683)(1,266)

1,675

(672)

(1,288)

1,537

Increase in available-for-sale assets		

(485)

(28)

(36)

(8,309)

(28)

(44)

Decrease (increase) in loans and advances		

4,313(4,669)(9,433)

4,287(6,087)(10,806)

Decrease (increase) in due from subsidiary companies		

-

-

-

207

79

(407)

Increase in due to subsidiary companies		

-

-

-

1,664

2,234

3,500
154

Net changes in operating assets and liabilities:

Decrease in other assets		

72

16

28

48

10

Increase (decrease) in due to other financial institutions		

921

(786)

26

1,310

(254)

254

(Decrease) increase in deposits and other borrowings		

(3,692)

4,004

5,417

1,903

2,672

3,889

Increase in payables and other liabilities		Net cash flows provided by (used in) operating activities

37

496

276

208

537

362

251

1,971

(2,790)(1,592)

1,463(2,971)(1,684)

C as h f low s f rom in v esting acti v ities :Proceeds from sale of shares in associates
and jointly controlled entities		

-

-

-

-

-

9

Proceeds from sale of premises and equipment		

34

1

2

1

1

1

Purchase of shares in associates and jointly controlled entities

(25)

(46)

(48)

(23)

-

-

Purchase of intangible assets		

(14)

(6)

(29)

(13)

(5)

(29)

Purchase of premises and equipment		

(42)

(26)

(51)

(15)

(8)

(16)

Net cash flows used in investing activities		

(47)

(77)

(126)

(50)

(12)

(35)

1

A reconciliation of cash and cash equivalents to the Banking Group’s core liquidity portfolio is included in Note 37 Notes to the Cash Flow Statements. An analysis of the balance sheet
items that make up the Banking Group’s core liquidity portfolio is included in Note 31 Financial Risk Management

The notes on pages 11 to 119 form part of and should be read in conjunction with these financial statements.

P A G E

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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SCASH FLOW STATEMENTS
for the six months ended 31 March 2009 1

For personal use only

( continued )Consolidated
		
		
		
Note

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

C as h f low s f rom f inancing acti v ities		

Proceeds from bonds and notes		

135

3,546

9,263

135

139

615

Redemptions of bonds and notes		

(3,323)(1,242)(5,250)

(222)

(81)

(109)

Proceeds from loan capital		

-

-

835

-

-

835

Redemptions of loan capital		

-

-

(100)

-

-

(100)

(Decrease) increase in due to subsidiary companies - term		

-

-

-

(3,147)

2,363

3,507

Increase (decrease) in due to parent company		

692(1,017)(2,371)692(1,017)(2,371)

Proceeds from share issue		

1,000

-

-

1,000

-

-

Dividends paid		

(1,000)--(1,000)--Net cash flows (used in) provided by financing activities(2,496)

1,287

2,377

(2,542)

1,404

2,377
(1,684)

Net cash flows provided by (used in) operating activities		

1,971(2,790)(1,592)

1,463(2,971)

Net cash flows used in investing activities		

(47)

(77)

(126)

(50)

(12)

(35)

Net cash flows (used in) provided by financing activities		

(2,496)

1,287

2,377

(2,542)

1,404

2,377

Net (decrease) increase in cash and cash equivalents		

(572)(1,580)659(1,129)(1,579)658

Cash and cash equivalents at beginning of the period		

7,789

7,130

7,130

7,786

7,128

7,128

Cash and cash equivalents at end of the period		

7,217

5,550

7,789

6,657

5,549

7,786

3,390

3,863

4,838

3,390

3,863

4,837

R econciliation o f cas h and cas h e q ui valents to
t h e balance s h eets 1

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

3,827

1,687

2,951

3,267

1,686

2,949

Total cash and cash equivalents

7,217

5,550

7,789

6,657

5,549

7,786

1

37

A reconciliation of cash and cash equivalents to the Banking Group’s core liquidity portfolio is included in Note 37 Notes to the Cash Flow Statements. An analysis of the balance sheet
items that make up the Banking Group’s core liquidity portfolio is included in Note 31 Financial Risk Management

The notes on pages 11 to 119 form part of and should be read in conjunction with these financial statements.

P A G E

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For personal use only

NOTES TO THE FINANCIAL STATEMENTS

1.

ACCOUNTING POLICIES

A. Basis of preparationi)Statement of compliance					These financial statements have been prepared in accordance with the requirements of the Companies Act 1993, the Financial
Reporting Act 1993 and the Registered Bank Disclosure Statement (Full and Half-Year - New Zealand Incorporated Banks) Order 2008
(the ‘Order’). The parent company’s financial statements are for ANZ National Bank Limited (the ‘Bank’ or ‘Parent’) as a separate entity
and the consolidated financial statements are for the ANZ National Bank Limited Group (the ‘Banking Group’ or ‘reporting entity’),which includes subsidiaries, associate companies and jointly controlled entities.					These financial statements have also been prepared in accordance with New Zealand Generally Accepted Accounting Principles. They comply
with New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable Financial Reporting Standards,
as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (‘IFRS’). 					The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied by the Parent and all consolidated entities and to all periods presented in the consolidated financial statements.
These financial statements were authorised for issue by the Board of Directors on 22 May 2009.					

ii)Use of estimates and assumptions					The preparation of the financial statements requires the use of management judgement, estimates and assumptions that affectreported amounts and the application of policies. The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable. Actual results may differ from these estimates. 					For further discussion on the judgements and estimates made by the Banking Group, in the process of applying its accounting policies,that have the most effect on the amounts recognised in the financial statements refer to Note 2 Critical Estimates and Judgements
Used in Applying Accounting Policies. Such estimates may require review in future periods.					iii)Basis of measurement					The financial statements have been prepared on a going concern basis in accordance with the historical cost basis except that thefollowing assets and liabilities are stated at their fair value:					• derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying exposure;• assets treated as available-for-sale;		
• financial instruments held for trading;		
• assets and liabilities designated at fair value through profit and loss; and		• defined benefit plan assets and liabilities.		

iv)

Changes in accounting policies and adoption of new accounting standards					The following standards and amendments were available for early adoption but have not been applied by the Banking Group in thesefinancial statements. The Banking Group does not intend to apply any of these pronouncements until their application date which is
1 October 2009 in all instances.
NZ IFRS 8 Operating Segments
This standard requires the ‘management approach’ to identifying and disclosing information about reportable segments. This standard
is concerned with disclosure only and will have no impact on the financial results of the Bank of Banking Group.
NZ IAS 1 Presentation of Financial Statements (amended)
This standard requires the presentation of a Statement of Comprehensive Income and a Statement of Changes in Equity. These
amendments are concerned with disclosure only and will have no impact on the financial results of the Bank or Banking Group.
NZ IAS 23 Borrowing Costs (amended)
This standard requires all borrowing costs to be capitalized if they are directly attributable to the acquisition, construction or productionof a qualifying asset. This amendment will not have a material impact on the financial statements of the Bank or the Banking Group.
NZ IAS 27 Consolidated and Separate Financial Statements (amended)
This standard changes aspects of accounting for non-controlling interests and clarifies the accounting for changes in a parent’s
ownership interest in a subsidiary. These amendments are not expected to have a material impact on the financial statements of the
Bank for the Banking Group.
NZ IFRS 3 Business Combinations (amended)
This standard will change certain aspects of accounting for business combinations occurring after the application date. These
amendments apply prospectively so the initial application is expected to have no impact on the financial statement of the Bank or
the Banking Group.
NZ IFRS 2 Share-based Payment (amended). Definition of vesting conditions.
NZ IFRS 7 Financial Instruments: Disclosures (amended). Fair value measurement and liquidity risk disclosures.
NZ IAS 32 Financial Instruments: Presentation (amended). Definition and accounting for puttable instruments.
NZ IAS 39 Financial Instruments: Recognition and Measurement (amended). Options as hedging instruments and hedging inflation risk.
We have yet to assess the impact of these changes on the financial statements of the Bank or the Banking Group.					P A G E

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For personal use only

(CONTINUED)

1.

A C C O U N T I N G P O L I C I E S ( continued )v)

Presentation currency and rounding					The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.

vi)Comparatives					Certain amounts in the comparative information have been reclassified to conform with current period financial statement
presentations.					vii)Principles of consolidation					Subsidiaries					The financial statements consolidate the financial statements of the Bank and all its subsidiaries where it is determined that there isa capacity to control.					Where subsidiaries have been sold or acquired during the period, their operating results have been included to the date of disposal orfrom the date of acquisition.					Control means the power to govern, directly or indirectly, decision making in relation to the financial and operating policies of an entity
so as to obtain benefits from its activities. Control is usually present when an entity has:					• power over more than one-half of the voting rights of the other entity;		
• power to govern the financial and operating policies of the other entity;		
• 		power to appoint or remove the majority of the members of the board of directors or equivalent governing body;• power to cast the majority of votes at meetings of the board of directors or equivalent governing body of the entity.
In addition, potential voting rights that are presently exercisable or convertible are taken into account in determining whether control
exists. However, all the facts of a particular situation are considered when determining whether control exists.					The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of acquisition is measured as thefair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at acquisition date. The excess of the cost of acquisition over the fair value of the Banking
Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
Banking Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting
policies of the subsidiary have been changed where necessary to ensure consistency with the policies adopted by the Banking Group.
Associates and joint ventures					The Banking Group adopts the equity method of accounting for associates and the Group’s interest in joint venture entities. The Parent
adopts the fair value method of accounting for its interest in associates, and the cost method of accounting for its interest in joint ventures.
Associates are all entities over which the Banking Group has significant influence but not control, which generally accompany ashareholding of between 20% and 50% of the voting rights.					Joint ventures are entities over which the Banking Group has joint control. Joint control is the contractually agreed sharing of control
and exists only when the strategic financial and operating decisions relating to the activities of the joint venture require the unanimous
consent of the parties sharing control.					The Banking Group’s share of the post acquisition results of associates and jointly controlled entities is included in the consolidated
income statement and its share of post-acquisition movements in reserves recognised in reserves. Shares in associates and jointly
controlled entities are stated in the consolidated balance sheet at cost plus the Banking Group’s share of post acquisition net assets.
Unrealised gains on transactions between the Banking Group and its associates and jointly controlled entities are eliminated to theextent of the Banking Group’s interest in the entity. Unrealised losses are also eliminated unless the transaction provides evidence ofan impairment of the asset transferred. If an associate or jointly controlled entity uses accounting policies other than those used by
the Banking Group for like transactions and similar events, adjustments are made to conform the associate or jointly controlled entity’s
policy to those of the Banking Group in applying the equity method.					Interests in associates and jointly controlled entities are reviewed at each reporting date for indicators of impairment. Any impairment
is recognised in the income statement. 					All significant activities of the Banking Group, with the exception of the ING New Zealand joint venture, are operated through wholly
owned entities.					P A G E

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(CONTINUED)

1.

A C C O U N T I N G P O L I C I E S ( continued )Special purpose and off-balance sheet entities					The Group may invest in or establish special purpose entities (SPEs) to enable it to undertake specific types of transactions. The maintypes of these SPEs are securitisation vehicles and structured finance entities.					Where the Banking Group has established SPEs which are controlled by the Banking Group to facilitate transactions undertaken for
Banking Group purposes, these are consolidated in the Banking Group’s financial statements.					The Banking Group does not consolidate SPEs that it does not control. As it can sometimes be difficult to determine whether the
Banking Group has control of an SPE, it makes judgements about its exposure to the risks and rewards, as well as about its ability tomake operational decision for the SPE in question.					The table below summarises the main types of SPEs with which the Banking Group is involved, the reason for their establishment, andthe control factors associated with the Bank’s interest in them. Although there may be some indications of control, the Bank does notbear the majority of residual risks and rewards of the SPEs which are not consolidated.
Type of SPE

Reason for establishment

Control Factors

Securitisation
vehiclesSecuritisation is a financing technique whereby
assets are transferred to an SPE which funds
the purchase by issuing securities. This enables
the Bank (in the case where transferred assets
originate within the Bank) or customers toincrease diversity of funding sources.

The Bank may manage these securitisation vehicles, service
assets in the vehicle or provide liquidity or other support.
The Bank retains the risks associated with the provisionof these services. For any SPE which is not consolidated,credit and market risks associated with the underlying
assets are not retained or assumed by the Bank except
to the limited extent that the Bank provides arm’s length
services and facilities.

Structured
financeentities

These entities are set up to assist the Group’s
Corporate Finance function with the structuringof client financing. The resulting lending
arrangements are at arms length and the Bank
typically has limited ongoing involvement withthe entity.

The Bank may manage these vehicles, hold minor amountsof capital, provide financing or derivatives.

viii)		Foreign currency translation					Functional and presentation currency					Items included in the financial statements of each of the Banking Group’s entities are measured using the currency of the primaryeconomic environment in which the entity operates (the functional currency). The Banking Group’s financial statements are presented
in New Zealand dollars, which is the Bank’s functional and presentation currency.					Foreign currency transactions					Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the date of thetransaction. Monetary assets and liabilities resulting from foreign currency transactions are subsequently translated at the spot rate atreporting date.					Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different to those at which
they were initially recognised or included in a previous financial report, are recognised in the income statement in the period in which
they arise.					Translation differences on non-monetary items measured at fair value through profit or loss, are reported as part of the fair value gainor loss on these items. Translation differences on non-monetary items measured at fair value through equity, such as equities classified
as available-for-sale financial assets, are included in the available-for-sale reserve in equity.					B. Income Recognition						Revenue is recognised to the extent that it is probable that economic benefits will flow to the Banking Group and that revenue can bereliably measured.					i)Interest income					Interest income is recognised in the income statement as it accrues, using the effective interest method. 					The effective interest method calculates the amortised cost of a financial asset or financial liability and allocates the interest income
or interest expense, including any fees and directly related transaction costs that are an integral part of the effective interest rate, overthe expected life of the financial asset or liability. Income and expense on the financial asset or financial liability is recognised on an
effective yield basis in proportion to the amount outstanding over the period to maturity or repayment.					For assets subject to prepayment, expected life is determined on the basis of the historical behaviour of the particular asset portfolio,
taking into account contractual obligations and prepayment experience assessed on a regular basis. 					P A G E

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(CONTINUED)

1.

A C C O U N T I N G P O L I C I E S ( continued ) 					

ii)Fee and commission income					Fees and commissions that are integral to the effective rate of a financial asset or liability are recognised using the effective interest
method. For example, loan commitment fees, together with related direct costs, are deferred and recognised as an adjustment to theeffective interest rate on a loan once drawn. Commitment fees to originate a loan which is unlikely to be drawn down are recognised
as fee income as the service is provided.
Fees and commissions that relate to the execution of a significant act (for example, advisory services, placement fees and underwritingfees) are recognised when the significant act has been completed.
Fees charged for providing ongoing services that represent the recoupment of the costs of providing service (for example, maintaining
and administering existing facilities) are recognised as revenue over the period the service is provided.
			

iii)

Dividend income					Dividends are recognised as revenue when the right to receive payment is established.					

iv)Leasing income					Finance income on finance leases is recognised on a basis that reflects a constant periodic return on the net investment in the financelease.					

v)Gain or loss on sale of property, plant and equipment					The gain or loss on the disposal of premises and equipment is determined as the difference between the carrying amount of the assets
at the time of disposal and the proceeds of disposal, and is recognised as income in the year for which the significant risks and rewardsof ownership are transferred to the buyer.					C. Expense recognition						Expenses are recognised in the income statement on an accruals basis.					
i)		Interest expense					Interest expense on financial liabilities measured at amortised cost is recognised in the income statement as it accrues using theeffective interest method as described in note 1(B)(i).					ii)		Loan origination expenses					Certain loan origination expenses are an integral part of the effective interest rate of a financial asset measured at amortised cost.
These loan origination expenses include:					• fees and commissions payable to brokers in respect of originating lending business; and		• other expenses of originating lending business, such as external legal costs and valuation fees, provided these are direct and incremental
costs related to the issue of a financial asset.		
Such loan origination expenses are initially recognised as part of the cost of acquiring the financial asset and amortised as part of the
expected yield of the financial asset over its expected life using the effective interest method.					iii)Share-based compensation expense					The Banking Group has various equity settled share-based compensation plans. These are described in note 43 and largely comprise the
Employee Share Acquisition Plan and the ANZ Share Option Plan.					ANZ Ordinary Shares					The fair value of ANZ ordinary shares granted under the Employee Share Acquisition Plan is measured at grant date, using the one-day
volume weighted average market price of ANZ shares. The fair value is expensed immediately when shares vest immediately or on astraight-line basis over the relevant vesting period. Where shares are subject to a vesting period, the Banking Group initially recognises
a net share compensation asset reflecting the fair value of unvested shares issued to employees of the Banking Group. The fair valueof unvested shares is amortised to profit and loss on a straight-line basis over the vesting period (normally three years) as employee
services are received.					Share Options					The fair value of ANZ share options is measured at grant date, using an option pricing model. The fair value is expensed on a straightline basis over the relevant vesting period. This is recognised as an employee compensation expense with a corresponding increase in
the share options liability account.					The option pricing model takes into account the exercise price of the option, the risk free interest rate, the expected volatility of the
ANZ ordinary share price and other factors. Market vesting conditions are taken into account in estimating the fair value.
Performance Rights					A Performance Right is a right to acquire a share at nil cost to the employee subject to satisfactorily meeting time and performance
hurdles. Upon exercise, each Performance Right entitles the holder to one ordinary share in ANZ. The fair value of Performance Rights
is determined at grant date using an option pricing model, taking into account market conditions. The fair value is expensed over the
relevant vesting period with a corresponding increase in the share options reserve.					P A G E

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(CONTINUED)

1.

A C C O U N T I N G P O L I C I E S ( continued ) 					Other adjustments					Subsequent to the grant of an equity-based award, the amount recognised as an expense is adjusted for vesting conditions otherthan market conditions so that, ultimately, the amount recognised as an expense is based on the number of equity instruments thateventually vest.
Lease payments					Leases entered into by the Group as lessee are predominantly operating leases, and the operating lease payments are recognised as an
expense on a straight-line basis over the lease term.					D. Income tax						
i)Income tax expense					Income tax on earnings for the period comprises current and deferred tax. It is recognised in the income statement as tax expense,
except when it relates to items credited directly to equity, in which case it is recorded in equity, or where it arises from the initialaccounting for a business combination, in which case it is included in the determination of goodwill.					

ii)Current tax 					Current tax is the expected tax payable on taxable income for the period, based on tax rates (and tax laws) which are enacted or
substantively enacted by the reporting date and including any adjustment for tax payable in previous periods. Current tax for current
and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).					iii)Deferred tax 					Deferred tax is accounted for using the comprehensive tax balance sheet method. Deferred tax arises by providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base.					Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability
giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by thereporting date. The measurement reflects the tax consequences that would follow from the manner in which the Banking Group, at thereporting date, expects to recover or settle the carrying amount of its assets and liabilities.					Deferred tax liabilities are recognised for all taxable temporary differences, other than those in relation to taxable temporary differences
arising from goodwill. They are also recognised for taxable temporary differences arising on investments in controlled entities, branches,
associates and joint ventures, except where the Banking Group is able to control the reversal of the temporary differences and it isprobable that the temporary differences will not reverse in the foreseeable future. 					Deferred tax assets, including those related to the tax effects of income tax losses and credits available to be carried forward, arerecognised only to the extent that it is probable that future taxable profits will be available against which the deductible temporary
differences or unused tax losses and credits can be utilised.					Deferred tax related to fair value re-measurement of available-for-sale financial assets and cash flow hedges, which are charged or
credited directly to equity, is also charged or credited directly to equity and subsequently recognised in the income statement together
with the deferred gain or loss on the related asset or liability.
				

iv)

Offsetting					Current and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same taxation
authority, there is a legal right and intention to settle on a net basis and it is allowed under the tax law of the relevant jurisdiction.

E. Assets						Financial assets						
i)Financial assets and liabilities at fair value through profit or loss					Trading securities are financial instruments acquired principally for the purpose of selling in the short-term or which are a part of aportfolio which is managed for short-term profit-taking. They comprise debt and equity securities and treasury notes purchased with
the intent of being actively traded. Trading securities are initially recognised at fair value on trade date with transaction costs taken
to the income statement. Changes in the fair value (gains or losses) of these securities are recognised in the income statement in the
period in which they occur. The assets are derecognised when the rights to receive cash flows have expired, or the Banking Group has
transferred substantially all of the risks and rewards of ownership. Fair value for listed and unlisted securities is determined by the pricedisplayed by a willing buyer in a liquid market at the reporting date. Where a market price in a liquid market is not readily available, thefair value is determined by reference to the market price available for a security with similar credit, maturity and yield characteristics
or by using industry standard pricing models.									

		Derivatives that are neither financial guarantee contracts nor effective hedging instruments are carried at fair value through profit or loss.
In addition, certain financial assets and liabilities are designated and measured at fair value through profit or loss where the following
applies:					• doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuringassets and liabilities, or recognising the gains or losses thereon, on different bases;		
• 		a group of financial assets or financial liabilities or both is managed and its performance evaluated on a fair value basis; or• the financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows
or it is clear, with little or no analysis, that it would not be separately recorded.		
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A C C O U N T I N G P O L I C I E S ( continued ) 					The designation of a financial asset or liability at fair value through profit or loss is irrevocable. Changes in the fair value (gains orlosses) of these financial instruments are recognised in the income statement in the period in which they occur.				
Purchases and sales of trading securities are recognised on trade date.
ii)		Derivative financial instruments
Derivative financial instruments are contracts whose value is derived from changes in one or more underlying financial instruments orindices. They include swaps, forward rate agreements, futures, options and combinations of these instruments.
Derivative financial instruments are entered into for trading purposes (including customer-related reasons) or for hedging purposes(where the derivative instruments are used to hedge the Banking Group’s exposures to interest rate risk, currency risk, price risk, credit
risk and other exposures relating to non-trading positions).					Derivative financial instruments are recognised initially at fair value with gains or losses from subsequent measurement at fair value
being recognised in the income statement. Included in the determination of fair value of derivatives is a credit valuation adjustment
to reflect the credit worthiness of the counterparty, modelled using the counterparty’s credit spreads. The valuation adjustment is
influenced by the mark-to-market of the derivatives trades and by the movement in credit spreads. Fair values are obtained fromquoted prices in active markets (including recent transactions) and valuation techniques including discounted cash flow models andoption pricing models, as appropriate.					Where the derivative financial instrument is designated as, and effective as, a hedging instrument the timing of the recognition of any
resultant gain or loss in the income statement is dependent on the hedging designation. These hedging designations and associatedaccounting are as follows:					Fair value hedge					Where the Banking Group hedges the change in fair value of a recognised asset or liability or firm commitment, any change in the fairvalue of derivatives designated as fair value hedges are recognised in the income statement. Changes in the fair value of the hedged
item attributable to the hedged risk are reflected in adjustments to the carrying value of the hedged item, which are also recognisedin the income statement.					Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised or no longer qualifies for hedge
accounting. The resulting adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to theincome statement over a period to maturity of the hedged item. If the hedged item is sold or repaid, the unamortised adjustment isrecognised immediately in the income statement.					Cash flow hedge					The Banking Group designates derivatives as cash flow hedges where the instrument hedges the variability in cash flows of a recognised
asset or liability, or a highly probable forecast transaction. The effective portion of changes in the fair value of derivatives qualifying anddesignated as cash flow hedges are deferred to the cash flow hedging reserve, which forms part of shareholders’ equity. Any ineffective
portion is immediately recognised in the income statement. Amounts deferred in equity are recognised in the income statement in
the period during which the hedged forecast transactions take place. Where the forecast transaction that is hedged results in therecognition of a non-financial asset or non-financial liability, the gain or loss previously deferred in equity is transferred from equity
and included in the initial measurement of the cost of the asset or liability.					When the hedge expires, is sold, terminated, exercised, or no longer qualifies for hedge accounting, the cumulative amount deferredin equity remains in the cash flow hedging reserve, and is subsequently transferred to the income statement when the hedged item isrecognised in the income statement.					When a forecast transaction is no longer expected to occur, the amount deferred in equity is immediately recognised in the income
statement.					Derivatives that do not qualify for hedge accounting					All gains and losses from changes in the fair value of derivatives that are not designated in a hedging relationship but are enteredinto to manage the interest rate and foreign exchange risk are recognised in the income statement. Under certain circumstances, thecomponent of the fair value change in the derivative which relates to current period realised and accrued interest is included in net
interest income. The remainder of the fair value movement is included in other income.					Embedded derivatives					Derivatives embedded in financial instruments or other host contracts are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the host contracts, and the host contracts are not measured at fair value.
The embedded derivative is reported at fair value with changes in fair value immediately recognised in the income statement.
Set-off arrangements					Fair value gains/losses arising from trading derivatives are not offset against fair value gains/losses on the balance sheet unless a legal
right of set-off exists and there is an intention to settle net.
For contracts subject to master netting agreements that create a legal right of set-off for which only the net revaluation amount isrecognised in the income statement, net unrealised gains on derivatives are recognised as part of other assets and net unrealised losses
are recognised as part of other liabilities.					P A G E

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A C C O U N T I N G P O L I C I E S ( continued )iii)

Available-for-sale assets					Available-for-sale assets comprise those non-derivative financial assets which the Banking Group designates as available-for-sale but
which are not deemed to be held principally for trading purposes, and include equity investments and fixed term securities. They are
initially recorded at fair value plus transaction costs. Subsequent gains or losses arising from changes in fair value are included as aseparate component of equity in the ‘available-for-sale revaluation reserve’. When the asset is sold, the cumulative gain or loss relating
to the asset is transferred to the income statement. 					Where there is objective evidence of impairment, the cumulative loss related to that asset is removed from equity and recognisedin the income statement as an impairment expense for debt instruments or as non-interest income for equity instruments. If, in a
subsequent period, the amount of an impairment loss relating to an available-for-sale asset decreases and the decrease can be linked
objectively to an event occurring after the impairment event, the loss previously recognised in the income statement is reversed
through the income statement through the impairment expense line. Impairment losses recognised in the income statement for aninvestment in an equity instrument classified as available-for-sale are not reversed through the income statement.					Purchases and sales of available-for-sale financial assets are recognised on the trade date as with all regular way assets, being the dateon which the Group commits to purchase or sell the asset.					

iv)Net loans and advances					Net loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Banking Group has no intention of trading on the loans and advances. The loans and advances are initiallyrecognised at fair value plus transaction costs that are directly attributable to the issue of the loan or advance. They are subsequently
measured at amortised cost using the effective interest method, less any impairment loss, or when in an effective hedging relationship,changes in the fair value of the hedged item attributable to the hedged risk are reflected in adjustments to the carrying value of thehedged item, and also recognised in the income statement. Loans and advances are derecognised when the rights to receive cash flows
have expired or the Banking Group has transferred substantially all the risks and rewards of ownership.					Net loans and advances include direct finance provided to customers such as bank overdrafts, credit cards, term loans, finance leasereceivables and commercial bills. Overdrafts, credit cards and term loans are carried at amortised cost. Customer financing throughredeemable preference shares is included within net loans and advances. Dividends received on redeemable preference shares are taken
to the income statement as part of interest income.					Credit assessment					All loans are graded according to the level of credit risk. Loans are classified as either productive or impaired. 					Impaired assets include loans where there is doubt as to full recovery, and loans that have been restructured. An individual provision israised to cover the expected loss, where full recovery of principal is doubtful.					Restructured assets are those assets where the counterparty had difficulty complying with the original terms of the contract and theoriginal terms have been modified to grant the counterparty concessional terms below those applicable to a customer of equal credit
standing.					Assets acquired through enforcement of security are those assets which are legally owned by the Banking Group as a result of enforcing
security, other than any buildings occupied by the Banking Group.					A past due asset is any loan where the counterparty has failed to make a payment when contractually due, and which is not an
impaired asset. A 90 days past due asset is any past due asset which has not been operated by the counterparty within its key terms
for at least 90 days. 					Other assets under administration are any loans, not being impaired or 90 days past due, where the customer is in any form ofvoluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management.					Impairment of loans and advances					Loans and advances are reviewed at least at each reporting date for impairment. Credit impairment provisions are raised for exposuresthat are known to be impaired. Exposures are impaired and impairment losses are recorded if, and only if, there is objective evidenceof impairment as a result of one or more loss events, which will impact the estimated future cash flows of the individual loan or thecollective portfolio of loans that can be reliably estimated.
Impairment is assessed for assets that are individually significant (or on a portfolio basis for small value loans), and then on a collective
basis for those exposures not individually known to be impaired. 					For those exposures that are assessed collectively, these are placed in pools of similar assets with similar risk characteristics. The
required provision is estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in thecollective pool. The historical loss experience is adjusted based on current observable data such as changed economic conditions. The
provision also takes account of the impact of inherent risk of large concentrated losses within the portfolio.											P A G E

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A C C O U N T I N G P O L I C I E S ( continued ) 					The estimated individual impairment loss is measured as the difference between the asset’s carrying amount and the estimated future
cash flows discounted to their present value at the original effective interest rate. As this discount unwinds during the period between
recognition of impairment and recovery of the cash flow, it is recognised in the income statement. The process of estimating theamount and timing of cash flows involves considerable management judgement. These judgements are reviewed regularly to reduceany differences between loss estimates and actual loss experience.
Impairment of capitalised acquisition expenses is assessed through comparing the actual behaviour of the portfolio against initialexpected life assumptions.					The provision for credit impairment (individual and collective) is deducted from loans and advances in the balance sheet and the
movement in the provision for the reporting period is reflected in the income statement.					When a loan is uncollectible, either partially or in full, it is written off against the related provision for loan impairment. Subsequent
recoveries of amounts previously written off are taken to the income statement. Unsecured facilities are normally written-off when
they become 180 days past due or earlier in the event of the customer’s bankruptcy or similar legal release from the obligation.
However, a certain level of recoveries is expected after the write-off, which is reflected in the amount of the provision for credit losses.
In the case of secured facilities, remaining balances are written-off after proceeds from the realisation of collateral have been received,
if the proceeds are insufficient.					Where impairment losses recognised in previous periods have subsequently decreased or no longer exist, such impairments are reversedin the income statement. 					A provision is also raised for off balance sheet items such as commitments that are considered to be onerous.					
v)Lease receivables					Finance leases 					Contracts to lease assets and hire purchase agreements are classified as finance leases if they transfer substantially all the risks andrewards of ownership of the asset to the customer or an unrelated third party. All other lease contracts are classified as operating leases.
Finance lease receivables include amounts due from lessees in relation to finance leases and hire purchase contracts.					The gross amount of contractual payments regarding lease finance to business customers that have a fixed rate and a fixed term arerecorded as gross lease receivables and the unearned interest component is recognised as income yet to mature.					The finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments, plus thepresent value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease payments are allocatedbetween interest revenue and reduction in the lease receivable over the term of the finance lease, reflecting a constant periodic rateof return on the net investment outstanding in respect of the lease. 					Operating leases 					Operating lease payments are recognised as an expense on a straight-line basis over the lease term as lessee.					

vi)Repurchase agreements					Securities sold under repurchase agreements are retained in the financial statements where substantially all the risks and rewards ofownership remain with the Banking Group, and a counterparty liability is disclosed under the classifications of due to other financial
institutions or payables and other liabilities, depending on the term of the agreement and the counterparty.					The difference between the sale price and the repurchase price is amortised over the life of the repurchase agreement and charged tointerest expense in the income statement.					Securities purchased under agreements to resell, where the Banking Group does not acquire the risks and rewards of ownership, arerecorded as liquid assets, net loans and advances, or due from other financial institutions, depending on the term of the agreement andthe counterparty. The security is not included in the balance sheet. Interest income is accrued on the underlying loan amount.

vii)

Derecognition					The Group enters into transactions where it transfers financial assets recognised on its balance sheet yet retains either all the risks
and rewards of the transferred assets or a portion of them. If all, or substantially all, the risks and rewards are retained, the transferredassets are not derecognised from the balance sheet.					In transactions where substantially all the risks and rewards of ownership of a financial asset are neither retained nor transferred, theGroup derecognises the asset if control over the asset is lost. In transfers where control over the asset is retained, the Group continues
to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in thevalue of the transferred asset. The rights and obligations retained or created in the transfer are recognised separately as assets andliabilities as appropriate.					A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

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A C C O U N T I N G P O L I C I E S ( continued ) 					Non-financial assets						viii)Goodwill					Goodwill represents the excess of the purchase consideration over the fair value of the identifiable net assets of a controlled entity
at the date of gaining control. Goodwill is recognised as an asset and not amortised, but assessed for impairment at least annuallyor more frequently if there is an indication that the goodwill may be impaired. This involves using the discounted cash flow (DCF) or
the capitalisation of earnings methodology (CEM) to determine the expected future benefits of the cash generating units. Where theassessment results in the goodwill balance exceeding the value of expected future benefits, the difference is charged to the income
statement. Any impairment of goodwill may not be subsequently reversed.					Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.					

ix)Other intangible assets					Other intangible assets include costs incurred in acquiring and building software and computer systems (referred to as software) andan intangible asset relating to the ING New Zealand Joint Venture acquisition.					Software is amortised using the straight-line method over its expected useful life to the Banking Group. The period of amortisation is
between 3 and 5 years except for certain core infrastructure projects where the useful life has been determined to be 7 years.
At each reporting date, the software assets and other intangible assets are reviewed for impairment against impairment indicators. If
any indication of impairment exists, the recoverable amount of the assets are estimated and compared against the existing carrying
value. Where the existing carrying value exceeds the recoverable amount, the difference is charged to the income statement.
Costs incurred in planning or evaluating software proposals, or in maintaining systems after implementation, are not capitalised.

x)

Premises and equipment					Premises and equipment are carried at cost less accumulated depreciation and impairment.
Borrowing costs incurred for the construction of qualifying assets are capitalised during the period of time that is required to complete
and prepare the asset for its intended use. The calculation of borrowing costs is based upon the Banking Group’s internal cost of capital.
The gain or loss on the disposal of premises and equipment is determined as the difference between the carrying amount of the assets
at the time of disposal and the proceeds of disposal, and is included in the income statement in the year in which the significant risks
and rewards of ownership are transferred to the buyer.
Assets other than freehold land are depreciated at rates based upon their expected useful lives to the Banking Group, using thestraight-line method. The depreciation rates used for each class of asset are:					Buildings		

1%		

Building integrals		

10%		

Furniture & equipment		

10%		

Computer & office equipment		

12.5% - 33%		

Motor vehicles 		

20%		

Leasehold improvements are amortised on a straight-line basis over the shorter of their useful lives or remaining terms of the lease.
At each reporting date, the carrying amounts of premises and equipment are reviewed for indications of impairment. If any such
indication exists, the recoverable amount of the assets is estimated and compared against the existing carrying value. Where theasset’s existing carrying value exceeds its recoverable amount the difference is charged to the income statement. If it is not possible toestimate the recoverable amount of an individual asset, the Banking Group estimates the recoverable amount of the cash generating
unit to which the asset belongs. 					A previously recognised impairment loss is reversed if there has been a change in the estimates used to determine the asset’s recoverable
amount.					F. Liabilities						Financial liabilities						
i)Deposits and other borrowings					Deposits and other borrowings include certificates of deposit, interest bearing deposits, debentures, commercial paper and otherrelated interest bearing financial instruments. Deposits and other borrowings, excluding commercial paper, are initially recognised atfair value plus transaction costs and subsequently measured at amortised cost. The interest expense is recognised using the effective
interest method as explained in Accounting Policy 1 B (i). Commercial paper is designated at fair value through profit or loss, with fairvalue movements recorded directly in the income statement, which reflects the basis on which it is managed.					

ii)Bonds, notes and loan capital					Bonds, notes and loan capital are initially recognised at fair value plus transaction costs. They are subsequently measured at amortised
cost using the effective interest method, less any impairment loss, or when in an effective hedging relationship, changes in the fairvalue of the hedged item attributable to the hedged risk are reflected in adjustments to the carrying value of the hedged item, and also
recognised in the income statement. Interest expense is recognised in the income statement using the effective interest method.
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A C C O U N T I N G P O L I C I E S ( continued ) 					iii)Financial guarantee contracts					Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it
incurs because a specified debtor fails to make payments when due. Financial guarantees are issued in the ordinary course of business,consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial statements atfair value on the date the guarantee was given; typically this is the premium received.					Subsequent to initial recognition, the Banking Group’s liabilities under such guarantees are measured at the higher of their amortisedamount and the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date. Theseestimates are determined based on experience of similar transactions and history of past losses.					

iv)Derecognition					Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.					Non-financial liabilities						
vi)Employee benefits					Leave benefits					The amounts expected to be paid in respect of employees’ entitlements to annual leave are accrued at expected salary rates including
on-costs. Expected future payments for long service leave are discounted using market yields at the reporting date on national
government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. Liability for longservice leave is calculated and accrued for in respect of all applicable employees (including on-costs) using an actuarial valuation.
Superannuation schemes					The Banking Group operates a number of defined contribution schemes and also contributes, according to local law, in the various
countries in which it operates, to government and other plans that have the characteristics of defined contribution schemes. The
Banking Group’s contributions to its defined contribution cash accumulation scheme are recognised as an expense in the income
statement when incurred.					The Banking Group operates two defined benefit superannuation schemes. The liability and expense related to providing benefits toemployees under each of the defined benefit schemes are calculated by independent actuaries. A defined benefit liability is recognised
to the extent that the present value of the defined benefit obligation of each scheme, calculated using the Projected Unit Credit
Method, is greater than the fair value of each scheme’s assets. Where this calculation results in a benefit to the Banking Group, adefined benefit asset is recognised and capped at the recoverable amount. The present value of the defined benefit obligation isdetermined by discounting the estimated future outflows by reference to New Zealand 10-year government bond rates.					In each subsequent reporting period, ongoing movements in the carrying value of the defined benefit liability or asset are treated asfollows:					• the net movement relating to the current period’s service cost, interest cost, expected return on scheme assets, past service costs
and other costs (such as the effects of any curtailments and settlements), is recognised as an employee expense in the income
statement;• movements relating to actuarial gains and losses are recognised directly in retained profits; and		• contributions incurred are recognised directly against the net defined benefit position.							The assets of the defined benefit and cash accumulation superannuation schemes are held in trust and are not included in thesefinancial statements as the Banking Group does not have direct or indirect control of these schemes. The benefits under the schemes areprovided from contributions by employee members and by the Banking Group, and from income earned by the assets of the schemes.
Members’ contributions are at varying rates. Actuarial valuations are carried out at minimum of every three years in accordance withthe schemes’ Trust Deed and superannuation legislation.					vii)Provisions					The Banking Group recognises provisions when there is a present obligation, the future sacrifice of economic benefits is probable, andthe amount of the provision can be measured reliably. The amount recognised is the best estimate of the consideration required tosettle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation at reporting
date. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows. Any expected third party recoveries are recognised as an asset if it is virtually certain that recovery will bereceived and the amount of the receivable can be measured reliably.					A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

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A C C O U N T I N G P O L I C I E S ( continued ) 					G. Equity						
i)Reserves					Available-for-sale revaluation reserve					This reserve includes changes in the fair value of available-for-sale financial assets, net of tax. These changes are transferred to theincome statement in non-interest income when the asset is derecognised. When the asset is impaired, the changes are transferredto the impairment expense line in the income statement for debt instruments and in the case of equity instruments to non-interest
income.				
Cash flow hedging reserve					This reserve includes the fair value gains and losses associated with the effective portion of designated cash flow hedging
instruments.					H. Presentation						
i)Offsetting of income and expenses					Income and expenses are not offset unless required or permitted by an accounting standard. This generally arises in the following
circumstances:					• where transaction costs form an integral part of the effective interest rate of a financial instrument which is measured at amortisedcost, these are offset against the interest income generated by the financial instrument;• where gains and losses relating to fair value hedges are assessed as being effective;• where gains and losses arise from a group of similar transactions, such as foreign exchange gains and losses.						

ii)Offsetting of assets and liabilities					Assets and liabilities are offset and the net amount reported in the balance sheet only where:					• There is a current enforceable legal right to offset the asset and liability; and		• There is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.				

iii)

Statement of cash flows					For cash flow statement presentation purposes the statement of cash flows has been prepared using the direct approach modified by
the netting of the certain items as disclosed below.					Cash and cash equivalents include liquid assets, amounts due from other financial institutions, trading securities and available-for-saleassets held for the purpose of meeting short-term cash commitments that are readily convertible to cash and subject to insignificant
risk of changes in value.					Certain cash flows have been netted in order to provide more meaningful disclosure, as many of the cash flows are received anddisbursed on behalf of customers and reflect the activities of the customers rather than those of the Banking Group. These include
customer loans and advances, customer deposits, certificates of deposit, related party balances and trading securities.					

iv)Segment reporting					Business segments are distinguishable components of the Banking Group that provide products or services that are subject to risks andrewards that are different to those of other business segments. Geographical segments provide products or services within a particular
economic environment that is subject to risks and rewards that are different to those components operating in other economic
environments.					Business segments are the Banking Group’s primary reporting segments. For reporting purposes the three major business segments
are Retail Banking, Relationship Banking and Institutional. The Banking Group operates primarily in one geographic segment,
New Zealand.					

v)Goods and services tax					Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’) except where the amount of GST
incurred is not recoverable from the Inland Revenue Department (‘IRD’). In these circumstances, the GST is recognised as part of thecost of acquisition of the asset or as part of the expense.					Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the IRD
is included as ‘other assets’ or ‘other liabilities’ in the balance sheet.					Cash flows are included in the cash flow statement on a net basis. The GST components of cash flows arising from investing andfinancing activities, which are recoverable from, or payable to, the IRD are classified as operating cash flows.					P A G E

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A C C O U N T I N G P O L I C I E S ( continued ) 					I. Other						

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i)

Contingent liabilities					A contingent liability is a possible or present obligation where it is less than probable there will be an outflow of resources or it is notpossible to measure the amount of the obligation with sufficient reliability.
Liabilities are no longer contingent, and are recognised on the balance sheet, when the following requirements are met:					• the transaction is probable in that the contingency is likely to occur; and• the contingency can be reasonably estimated.		
Further disclosure is made within Note 42 Contingent Liabilities and Credit Related Commitments, where the above requirements
are not met, but there is a possible obligation that is higher than remote. Specific details of the nature of the contingent liability areprovided and, where practicable, an estimate of its financial effect. Alternatively, where no disclosure is made of its financial effectbecause it is not practicable to do so, a statement to that effect is provided.					

ii)Securitisation, funds under management and other fiduciary activities					Certain subsidiaries of the Bank act as trustees and/or managers for a number of unit trusts and superannuation investment funds. The
Bank provides private banking services to customers including portfolio management. The assets of the managed funds and privatebanking clients are not included in these financial statements, as direct or indirect control of the assets is not held by the Banking
Group. Commissions and fees earned in respect of the Banking Group’s funds under management are included in net operating
income.					Financial services provided by any member of the Banking Group to discretionary private banking activities or entities conducting
funds management, and assets purchased from discretionary private banking activities or entities conducting funds management are
on arm’s length terms and conditions, and at fair value. 					Securitised assets are derecognised when the right to receive cash flows have expired or the Banking Group has transferred substantially
all the risks and rewards of ownership.					iii)Discontinued operations					A discontinued operation is a component of the Banking Group’s business that represents a separate major line of business orgeographical area of operations that has been disposed of or is classified as held for sale, or is a subsidiary that has been disposed ofor is classified as held for sale.
When an operation is classified as a discontinued operation the comparative income statement is restated as if the operation had been
discontinued from the start of the comparative period.

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C R I T I C A L E S T I M AT E S A N D J U D G E M E N T S U S E D I N A P P LY I N G A C C O U N T I N G P O L I C I E S

These financial statements are prepared in accordance with New Zealand equivalents to International Financial Reporting Standards and otherauthoritative accounting pronouncements. Notwithstanding the existence of relevant accounting standards, there are a number of criticalaccounting treatments which include complex or subjective judgements and estimates that may affect the reported amounts of assets andliabilities in the financial statements. Estimates and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.				
An explanation of the judgements and estimates made by the Banking Group in the process of applying its accounting policies, that have themost significant effect on the amounts recognised in the financial statements are set out below. 				Critical accounting estimates and assumptions				Credit provisioning				
The accounting policy, as explained in note 1(E)(iv), relating to measuring the impairment of loans and advances, requires the Banking Group toassess impairment at least at each reporting date. The credit provisions raised (individual and collective) represent management’s best estimateof the losses incurred in the loan portfolio at balance date based on their experienced judgement.
The collective provision is estimated on the basis of historical loss experience for assets with credit characteristics similar to those in thecollective pool. The historical loss experience is adjusted based on current observable data and events and an assessment of the impact ofmodel risk. The provision also takes into account the impact of large concentrated losses within the portfolio.
The use of such judgements and reasonable estimates is considered by management to be an essential part of the process and does not impact
on reliability.
Individual provisioning is applied when the full collectability of one of the Group’s loans is identified as being doubtful. Individual and collective
provisioning is calculated using discounted expected future cash flows. The methodology and assumptions used for estimating both theamount and timing of future cash flows are revised regularly to reduce any differences between loss estimates and actual loss experience.
As at 31 March 2009 for the Banking Group, total provision for credit impairment was $876 million representing 0.93% of total net loans andadvances (31/03/2008 $522 million or 0.56%; 30/09/2008 $666 million or 0.68%). Of the total provision for 31 March 2009, $607 million
represented collective provisions and $269 million represented individual provisions.
As at 31 March 2009 for the Bank, total provision for credit impairment was $811 million representing 0.89% of total net loans and advances(31/03/2008 $479 million or 0.53%; 30/09/2008 $612 million or 0.64%). Of the total provision for 31 March 2009, $568 million represented
collective provisions and $243 million represented individual provisions.
Management regularly reviews and adjusts the estimates and methodologies as improved analysis becomes available. Changes in these assumptions
and methodologies could have a direct impact on the level of provision and impairment charge recorded in the financial statements.
Critical judgements in applying the Banking Group’s accounting policies				Derivatives and hedging				
The Banking Group buys and sells derivatives as part of its trading operations and to hedge its interest rate risk, currency risk, price risk, credit
risk and other exposures relating to non-trading positions. The derivative instruments used to hedge the Banking Group’s exposures include:• Swaps• Foreign exchange contracts• Forward rate agreements• Futures• Options, and• Combinations of the above instruments.
Hedging				A hedging instrument is a designated derivative whose fair value or cash flows are expected to offset changes in the fair value or cash flows ofa designated hedged item. A hedged item is an asset, liability, firm commitment or highly probable forecast transaction that (a) exposes the
Banking Group to the risk of changes in fair value or future cash flows and (b) is designated as being hedged. 				For a relationship to qualify for hedge accounting, the following criteria must be met:				
• Designation and Documentation: The hedging relationship must be formally designated and documented at the inception of the hedge.
• Prospective Effectiveness: This is a forward-looking test of whether a hedging relationship is expected to be highly effective in future periods.
The hedge must be expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk,
consistently with the originally documented risk management strategy for that particular hedging relationship for hedge accounting to beachievable. 			
The effectiveness of the hedge must be capable of being reliably measured, that is, the fair value or cash flows of the hedged item that are
attributable to the hedged risk and the fair value of the hedging instrument can be reliably measured. Prospective hedge effectiveness testingis required at least quarterly.			
• Retrospective Effectiveness: This is a backward-looking test of whether a hedging relationship has actually been highly effective throughout
the reporting periods for which the hedge was designated (i.e. retrospectively). The actual results of the hedge must be within a range of
80 - 125 per cent. Hedge accounting is only achieved where both prospective and retrospective effectiveness is achieved.			
• External Counterparty: For hedge accounting purposes, only instruments that involve a party external to the Banking Group can be designatedas hedging instruments. 		

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C R I T I C A L E S T I M AT E S A N D J U D G E M E N T S U S E D I N A P P LY I N G A C C O U N T I N G P O L I C I E S ( continued )Judgement is required by management in selecting and designating hedging relationships and assessing hedge effectiveness. NZ IAS 39 does not
specify a single method for assessing hedge effectiveness prospectively or retrospectively. The Banking Group adopts the hypothetical derivative
approach to determine hedge effectiveness in line with current risk management strategies. Hedge ineffectiveness can arise for a number ofreasons, and whilst a hedge may pass the effectiveness tests above it may not be perfectly effective, thus creating volatility within the income
statement through recognition of this ineffectiveness.				
Fair values of financial instruments including derivatives				A significant portion of financial instruments, including derivatives which are entered into for trading and hedging purposes, are measured atfair value. Where liquid markets exist, fair value is based on quoted market prices. Where there is no active market, fair value is determinedby the use of various valuation techniques including discounted cash flow models and option pricing models. To the extent possible models
use only observable data, however such areas as counterparty risk, volatilities and correlations require management to make judgements andestimates. Changes in assumptions used in these models and projections of future cash flows could affect the reported fair value of financial
instruments and have an impact on the income statement. The extent of usage of valuation techniques for financial instruments carried at fairvalue is disclosed in Note 35.				
Goodwill				The carrying value of goodwill is subject to an impairment test to ensure that the current carrying value does not exceed its recoverable value atthe balance sheet date. Any excess of carrying value over recoverable amount is taken to the income statement as an impairment writedown.
As at 31 March 2009, the balance of goodwill recorded as an asset on the Banking Group’s consolidated balance sheet as a result of acquisitions
was $3,265 million (31/03/2008 $3,265 million; 30/09/2008 $3,265 million) of which $3,230 million relates to the acquisition of NBNZ Groupin December 2003 (31/03/2008 $3,230 million; 30/09/2008 $3,230 million).
As at 31 March 2009, the balance of goodwill recorded as an asset on the Bank’s balance sheet as a result of acquisitions was $3,217 million,
which relates to the amalgamation of The National Bank of New Zealand Limited in June 2004 (31/03/2008 $3,217 million; 30/09/2008 $3,217
million).				
Goodwill is allocated to cash-generating units for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill
is monitored for internal management reporting purposes. The cash-generating unit to which goodwill related to the National Bank Group is
the NZ Geographic segment being ANZ National Bank Limited Group.				
Impairment testing of purchased goodwill is performed annually, or more frequently where there is an indication that the goodwill may be
impaired, by comparing the recoverable value of the Banking Group, being the smallest cash-generating unit to which the goodwill is allocated,with the current carrying amount of its net assets, including goodwill. The recoverable amount is based on the higher of fair value less costs tosell and its value in use. Where the current carrying value is greater than the recoverable amount a charge for impairment of goodwill will berecorded in the income statement.
The Banking Group obtained an independent valuation of the ANZ National Bank Limited Group as at 31 March 2009. The recoverable amount
was based on a value in use calculation using forecasts covering a 4 year period. Forecast cashflows beyond 4 years assume a historical growthrate. The discount rate used was the pre-tax rate that reflects the time value of money and risks specific to the Bank. 							The results of the independent valuation resulted in a recoverable amount in excess of current carrying value.
Changes in the assumptions upon which the valuation is based, together with changes in future cash flows could materially impact thevaluation obtained. Based on this independent valuation, the current carrying value of the Banking Group’s goodwill arising from acquisitions
is considered recoverable and no impairment write-down is required.				
Valuation of investment in ING (NZ) Holdings Ltd (ING NZ)				
The Banking Group adopts the equity method of accounting for its 49% interest in its jointly controlled entity, ING NZ. As at 31 March 2009,
the carrying value of the Banking Group’s investment in ING NZ was $242 million (31/03/2008 $201 million; 30/09/2008 $212 million). The
carrying value of the Bank’s investment in ING NZ was $231 million (31/03/2008 $220 million; 30/09/2008 $208 million).				
The carrying value of this investment is subject to an impairment test to ensure that the current carrying value does not exceed its recoverable value
at the balance sheet date. Any excess of carrying value over recoverable amount is taken to the income statement as an impairment writedown.
The Banking Group obtained an independent valuation of ING NZ as at 31 March 2009. The valuation was based on a value-in-use methodology
using a discounted cash flow approach. The results of the independent valuation resulted in a value-in-use in excess of the Banking Group’s
current carrying value.
Changes in the assumptions upon which the valuation is based, together with changes in future cash flows could materially impact thevaluation obtained. Based on this independent valuation the current carrying value of the Banking Group’s investment in ING NZ is considered
recoverable and no impairment write-down is required.

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2.

C R I T I C A L E S T I M AT E S A N D J U D G E M E N T S U S E D I N A P P LY I N G A C C O U N T I N G P O L I C I E S ( continued )ING New Zealand Funds
Trading in the ING Diversified Yield Fund and the ING Regular Income Fund (“the Funds”) was suspended on 13 March 2008 due to deteriorationin the liquidity and credit markets. These funds are managed by the joint venture partner (ING (NZ) Limited. Some of these funds were soldto ANZ National customers.
On February 25 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them the ability toexit the investment for a cash amount.
The estimated cost of this proposal to the Bank is approximately $166 million and this amount has been recognized in ‘other operating income’in the Income Statement.
The ultimate cost to the bank will depend on unit prices of the underlying funds, the discount rate applied and recoveries under insurance cover.
In addition the Commerce Commission has sought information regarding the two funds and is investigating this matter, although at this stage,
it is not possible to determine the outcome of any investigation.		
		3.

R I S K M A N A G E M E N T P O L I C I E S 				The Banking Group recognises the importance of effective risk management to its business success. Management is committed to achieving
strong control and a distinctive risk management capability that enables the Banking Group business units to meet their performance
objectives. 		
The Banking Group approaches risk through managing the various elements of the system as a whole rather than viewing them as independentand unrelated parts. The Risk function is independent of the business with clear delegations from the Board and operates within a comprehensive
framework comprising:		
• The Board, providing leadership, setting risk appetite/strategy and monitoring progress;• A strong framework for development and maintenance of Banking Group-wide risk management policies, procedures and systems, overseen by
an independent team of risk professionals;• The use of sophisticated risk tools, applications and processes to execute the global risk management strategy across the Banking Group;• Business Unit level accountability, as the “first line of defence”, and for the management of risks in alignment with the Banking Group’s strategy;and• Independent oversight to ensure Business Unit level compliance with policies, regulations and laws, and to provide regular risk evaluation andreporting.
The Banking Group manages risk through an approval, delegation and limits structure. Regular reviews of the policies, systems and risk reports,
including the effectiveness of the risk management systems, discussions covering the Banking Group’s response to emerging risk issues andtrends, and that the requisite culture and practices are in place across the Banking Group, are conducted within the Banking Group and also by
the Ultimate Parent Bank. The Board has responsibility for reviewing all aspects of risk management. 		
The Board has ultimate responsibility for overseeing the effective deployment of risk management frameworks, policies and processes within
New Zealand. The Banking Group’s Risk Committee assists the Board in this function. The role of the Committee is to assist the Board in theeffective discharge of its responsibilities for business, market, credit, operational, compliance, liquidity and reputational risk management, andto liaise and consult with the Ultimate Parent Bank Risk Committee to assist it to discharge its responsibilities. The Banking Group has anindependent Risk Management function, which via the Chief Risk Officer, coordinates risk management directly between Business Unit riskfunctions and Ultimate Parent Bank Group Risk Management functions.		
The risk management process is subject to oversight by the Risk Committee of the Ultimate Parent Bank Board. This includes the review of risk
portfolios and the establishment of prudential policies and controls.		
The Banking Group’s risk management policies are essentially the same as the Ultimate Parent Bank, but are tailored where required to suit the
local New Zealand regulatory and business environment. 		
The Audit Committee, which is a sub-committee of the Board, has responsibility for reviewing all aspects of published financial statements andinternal and external audit processes. The Committee has a quorum of two directors, both of whom must be non-executive directors. It meetsat least four times a year, and reports directly to the Board.		
Financial risk management		
Credit risk is the risk of financial loss from counterparties being unable to fulfil their contractual obligations. 		
Market risk is the risk to the Banking Group’s earnings arising from changes in interest rates, currency exchange rates, credit spreads, or fromfluctuations in bond, commodity or equity prices.		
Liquidity risk is the risk that the Banking Group has insufficient capacity to fund increases in assets, or is unable to meet its payment obligations
as they fall due, including repaying depositors or maturing wholesale debt.		
Refer to Note 31 Financial Risk Management for detailed disclosures on the Banking Group’s financial risk management policies.		

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3 . R I S K M A N A G E M E N T P O L I C I E S ( continued )Operational risk		
Operational risk is the risk arising from day to day operational activities which may result in direct or indirect loss. These losses may result
from failure to comply with policies, procedures, laws and regulations, from fraud or forgery, from a breakdown in the availability or integrityof services, systems and information, or damage to the Bank’s reputation. 		
Examples include failure to comply with policy and legislation, human error, natural disasters, fraud and other malicious acts. Where appropriate,risks are mitigated by insurance.		
Risk Management is responsible for establishing the Banking Group’s operational risk framework and associated Banking Group-level policies.
Business Units are responsible for the identification, analysis, assessment and treatment of operational risks on a day-to-day basis.
Business Units have primary responsibility for the identification and management of operational risk with executive oversight provided by therelevant Retail and Wholesale Risk Committees. The Banking Group’s Operational Risk Executive Committee (OREC) undertakes the governancefunction through the monthly monitoring of operational risk performance across the Banking Group. The Board and Risk Management conduct
effective oversight through the approval of operational risk policies and frameworks and monitoring key operational risk metrics.		
Compliance		
The Banking Group conducts its business in accordance with all relevant compliance requirements in each point of representation. In order toassist the Banking Group identify, manage, monitor and measure its compliance obligations, the Banking Group has a comprehensive regulatorycompliance framework in place, which addresses both external (regulatory) and internal compliance.		
Risk Management, in conjunction with Business Unit staff ensure the Banking Group operates within a compliance infrastructure and frameworkthat incorporates new and changing business obligations and processes.		
The compliance policies and their supporting framework seeks to minimise material risks to the Banking Group’s reputation and value that
could arise from non-compliance with laws, regulations, industry codes and internal standards and policies. Business Units have primary
responsibility for the identification and management of compliance. The Banking Group’s Risk Management division provides policy andframework, measurement, monitoring and reporting, as well as leadership in areas such as anti-money laundering procedures and matters ofprudential compliance. The Banking Group’s OREC, the Chief Risk Officer, the Board and the Risk Committee of the Ultimate Parent Bank Board
conduct Board and Executive oversight.		
Internal audit		
The Banking Group’s internal audit function conducts independent reviews that assist the Board of Directors and management to meet theirstatutory and other obligations.		
Internal Audit reports directly to the Chairman of the ANZ National Audit Committee. Under its Charter, Internal Audit conducts independent
appraisals of:		
• The continued operation and effectiveness of the internal controls in place to safeguard and monitor all material risks to the Banking Group;• Compliance with Board policies and management directives;• Compliance with the requirements of supervisory regulatory authorities;• The economic and efficient management of resources; and• The effectiveness of operations undertaken by the Banking Group.
In planning the audit activities, Internal Audit adopts a risk-based approach that directs and concentrates resources to those areas of greatest
significance, strategic concern and risk to the business. This encompasses reviews of major credit, market, technology and operating risks within
the wider Banking Group. Significant findings are reported quarterly to the Audit Committee.		
The Internal Audit Plan is approved by the Audit Committee and endorsed by the ANZ Group Audit Committee.		
All issues and recommendations reported to management are tracked and monitored internally to ensure completion and agreed actions areundertaken where appropriate.

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4.

I ncome

		
		
		
		

Consolidated

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

		

Interest income		

Financial assets at fair value through profit or loss						Trading securities 		

95

104

220

95

104

220

Financial assets not at fair value through profit or loss						Liquid assets		

86

165

313

86

165

313

Other financial institutions		

178

155

321

156

133

275

2

1

3

240

1

3

Lending on productive loans		

3,839

4,357

8,978

3,695

4,251

8,758

Lending on impaired assets (Note 13)		

2

3

6

2

3

6

Subsidiary companies		

-

-

-

25

25

47

Available-for-sale assets

Other		

24

9

16

22

7

16

					

4,131

4,690

9,637

4,226

4,585

9,418

Total interest income		

4,226

4,794

9,857

4,321

4,689

9,638

Other operating income						Net fee income1		

329

323

646

303

298

594

Dividends received		

-

-

4

-

7

24

Associate investments		

-

-

-

2

84

88

Net gain on foreign exchange trading		

111

69

166

110

69

164

Net gain on trading securities		

71

4

44

71

4

44

Net (loss) gain on trading derivatives		

(63)

72

61

(63)

72

61

Net gain (loss) on hedges not qualifying for hedge accounting		

144

(5)

72

171

(5)

72

Net ineffectiveness on qualifying cash flow hedges		

-

-

-

-

-

-

Net ineffectiveness on qualifying fair value hedges		

(17)

(1)

(70)

(17)

(1)

(70)

Net cash flow hedge gains transferred to income statement		

19

16

37
15

19

16

37

Net gain (loss) on financial liabilities designated at fairvalue through profit or loss		

(26)

(7)

15

(26)

(7)

ING New Zealand Funds2		

(166)

-

-

(166)

-

-

Other income		

30

22

38

(13)

19

27

Total other operating income		

432

493

1,013

391

556

1,056

1. Net fee income comprises:						Lending and credit facility fee income		

76

64

134

61

64

135

Fee income on trust and other fiduciary activities		

24

23

47

15

10

20

Other fee income		

316

321

632

314

309

606

Total fee income		

416

408

813

390

383

761

Direct fee expense		

87

85

167

87

85

167

Net fee income		

329

323

646

303

298

594

2 . ING New Zealand Funds
Trading in the ING Diversified Yield Fund and the ING Regular Income Fund (‘the Funds’) was suspended on 13 March 2008 due to deterioration in the liquidity and credit markets. These
funds are managed by the joint venture partner ING (NZ) Limited. Some of these funds were sold to ANZ National customers.
On 25 February 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them the ability to exit the investment for a cash amount. We
understand further details on the proposal will be released shortly.
The estimated cost of this proposal to the Bank is approximately $166 million and this amount has been recognised in ‘other operating income’ in the Income Statement.
The ultimate cost to the Bank will depend on the value of units in the underlying funds, the discount rate applied and recoveries under insurance cover. In addition the CommerceCommission has sought information regarding the two Funds and is investigating this matter, although at this stage, it is not possible to determine the outcome of any investigation.

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5 . e x penses

		
		
		
		

Consolidated

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Interest expense
Financial liabilities at fair value through profit or loss
Commercial paper

306

493

997

-

-

-

				

306

493

997

-

-

-

Deposits at amortised cost
Other financial institutions		

141

108

195

61

52

99

Deposits and other borrowings		

1,804

2,136

4,397

2,188

2,309

4,800

Subsidiary companies		

-

-

-

895

1,315

2,730

Bonds and notes		

546

707

1,532

52

19

57

Related party funding		

16

90

151

16

90

151

Loan capital		

112

86

207

112

86

207

Other		

26

36

89

22

32

86

				

2,645

3,163

6,571

3,346

3,903

8,130

Total interest expense		

2,951

3,656

7,568

3,346

3,903

8,130

Operating expenses				
Personnel costs		

374

335

724

357

320

692

Employee entitlements		

36

37

75

35

36

73

- Defined contribution schemes		

18

18

37

18

18

36

- Defined benefit schemes		

3

3

7

3

3

7

Share-based payments expense		

9

7

13

9

7

13

Building occupancy costs		

22

20

38

6

5

9

Depreciation of premises and equipment		

18

18

38

7

7

15

Leasing and rental costs		

40

39

80

7

8

17

Pension costs

Related parties (Note 45)		

41

39

82

95

90

178

Computer expenses		

57

53

117

54

51

110

Administrative expenses		

85

87

180

80

84

172

Other costs		

35

16

53

33

19

62

Total operating expenses		

738

672

1,444

704

648

1,384

		
		
		
Auditors’ remuneration to KPMG comprises:		

Audit or review of financial statements		

Consolidated

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$000s
$000s
$000s

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$000s
$000s
$000s

1,182

931

1,942

891

830

1,583

Other audit-related services		

155

216

500

118

185

298

Total auditors’ remuneration		

1,337

1,147

2,442

1,009

1,015

1,881

It is Banking Group policy that KPMG can provide assurance and other audit-related services that, while outside the scope of the statutory audit,
are consistent with the role of auditor. KPMG may not provide services that are perceived to be in conflict with the role of auditor. These include
consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the auditor may
ultimately be required to express an opinion on its own work. However, non-audit services that are not perceived to be in conflict with the roleof auditor may be provided by KPMG subject to the approval of the Ultimate Parent Bank Audit Committee.
Other audit-related services include services for the audit or review of financial information other than financial reports including prudential
supervision reviews, prospectus reviews, and other audits required for local regulatory purposes.
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6.

I N C O M E TA X E X P E N S E

		
		
		
		

Consolidated

ParentUnaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited
6 months to 6 months toYear to31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

R econciliation o f t h e prima facie income ta x
payable on pro f it w it h t h e income ta x e x pensec h arged in t h e income statement

Continuing operations		
Profit before income tax		

692

962

1,667

397

608

902
298

Prima facie income tax at 30% 		

208

317

550

119

201

Rebateable and non-assessable dividends		

(4)

(4)

(10)

-

(2)

(8)

Non-assessable income/non-deductible expenses		

-

(35)

(35)

(10)

(34)

(31)

			

204

278

505

109

165

259

Tax effect of change in domestic tax rate1		

-

(8)

(1)

-

(8)

(1)

1

Income tax under provided in prior periods		

-

-

-

-

-

-

Total income tax expense from continuing operations		

204

270

504

109

157

258

29.5%

28.1%

30.2%

27.5%

25.8%

28.6%

Effective tax rate (%)

The major components of the income tax expense comprise:		
Amounts recognised in the income statement		Current income tax charge
Current income tax charge

291

304

610

191

200

361

Deferred income tax		
Deferred tax (income) expense relating to the origination
and reversal of temporary differences		Total income tax expense recognised in income statement- continuing operations		

(87)

(34)

(106)

(82)

(39)

(103)

204

270

504

109

161

258

(12)

(4)

(12)

(12)

(4)

(12)

Net gain (loss) on revaluation of cash flow hedges		

8

(11)

(4)

8

(11)

(4)

Total income tax credit recognised directly in equity		

(4)

(15)

(16)

(4)

(15)

(16)

Balance at beginning of the period		

696

831

831

446

595

595

Imputation credits attached to dividends received		

41

22

33

35

4

18

Taxation paid		

67

101

211

62

73

84

The following amounts were (credited) charged directly to equity:		
Current income tax		
Actuarial loss on defined benefit schemes		
Deferred income tax				
Imputation Credit Account		

Imputation credits attached to dividends paid		

(252)

(369)

(370)

(252)

(464)

(370)

Additions from companies joining the Imputation Group		

-

-

-

-

105

121

Other		

-

(2)

(9)

-

(2)

(2)

Balance at end of the period		

552

583

696

291

311

446

The above amounts only include items that give rise to imputation credits that are available for use by the Banking Group and/or the Bank.
The parent is a member of an Imputation Group with other members of the Banking Group. The figures shown for the Parent above include theimputation credits available for use by the Parent held by the Imputation Group.								1In May 2007, legislation was passed to reduce the New Zealand corporate tax rate from 33% to 30%, effective for the 2009 income tax year. The tax effect shown is the impact on the value ofdeferred tax assets and liabilities as a result of the reduction in the corporate tax rate from 1 October 2008.																								P A G E

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

For personal use only

(CONTINUED)P A G E

7.

LIQUID ASSETS

		
		
		

Consolidated

ParentUnaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Cash and balances with central banks		

2,606

2,386

3,949

2,606

2,386

Securities purchased under agreement to resell		

9

-

-

9

-

3,949
-

Money at call		

672

1,390

807

672

1,390

806

Bills receivable and remittances in transit		

103

87

82

103

87

82

Total liquid assets		

3,390

3,863

4,838

3,390

3,863

4,837

Overnight balances with central banks		

2,418

2,171

3,779

2,418

2,171

3,779

The Banking Group’s core liquidity portfolio held for
managing liquidity risk (Note 31)		

9,375

6,591

8,736

9,375

6,591

8,736

Able to be withdrawn without prior notice		

167

418

437

167

417

435

Securities purchased under agreement to resell		

558

308

304

558

308

304

Securities purchased under agreement to resell with central banks

38

69

-

38

69

-

Security settlements1		

1,760

-

1,328

1,760

-

1,328

Certificates of deposit		

4,269

2,609

2,447

4,269

2,609

2,447

Term loans and advances		

839

486

516

82

52

13

Total due from other financial institutions		

7,631

3,890

5,032

6,874

3,455

4,527

Included within liquid assets is the following balance:

8 . D U E F RO M OT H E R F I N A N C I A L I N S T I T U T I O N S

There are no assets used to secure deposit obligations or assets encumbered through repurchase agreements at 31 March 2009 (31/03/2008$nil; 30/09/2008 $nil).
1. There are no related party balances with subsidiaries of the Ultimate Parent Bank at 31 March 2009 (31/03/2008 $nil; 30/09/2008 $1,328 million). There is a related party balance with asubsidiary of the Bank at 31 March 2009 of $1,760 million (31/03/2008 $nil; 30/09/2008 $1,328 million)

9. TRADING SECURITIES

Government, Local Body stock and bonds		

677

134

252

677

134

252

Certificates of deposit		

317

728

926

Promissory notes		

88

177

39

317

728

926

88

177

Other bank bonds		

1,366

1,039

1,331

39

1,366

1,039

1,331

Other			

117

71

76

117

71

76

Total trading securities		

2,565

2,149

2,624

2,565

2,149

2,624

198

97

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

104

198

						

3 0

97

104

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

For personal use only

(CONTINUED)

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

Derivative instruments are contracts whose value is derived from one or more underlying variables or indices, require little or no initial net
investment and are settled at a future date. Derivatives include contracts traded on registered exchanges and contracts agreed between
counterparties, called “Over the Counter” or “OTCs”. The use of derivatives and their sale to customers as risk management products is an
integral part of the Banking Group’s trading activities. Derivatives are also used to manage the Banking Group’s own exposure to fluctuations
in exchange and interest rates as part of its asset and liability management activities (i.e. balance sheet risk management).
Derivatives are subject to the same types of credit and market risk as other financial instruments, and the Banking Group manages these risks
in a consistent manner.
Types of derivative instruments
The principal foreign exchange rate contracts used by the Banking Group are forward foreign exchange contracts, currency swaps and currency
options. Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency on a specified future dateat an agreed rate. A currency swap generally involves the exchange, or notional exchange, of equivalent amounts of two currencies and acommitment to exchange interest periodically until the principal amounts are re-exchanged on a future date. Currency options provide thebuyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency at a specified rate on or before a future date.
As compensation for assuming the option risk, the option writer generally receives a premium at the start of the option period.
The principal interest rate contracts used by the Banking Group are forward rate agreements, interest rate futures, interest rate swaps andoptions. Forward rate agreements are contracts for the payment of the difference between a specified interest rate and a reference rate ona notional deposit at a future settlement date. There is no exchange of principal. An interest rate future is an exchange traded contract forthe delivery of a standardised amount of a fixed income security or time deposit at a future date. Interest rate swap transactions generally
involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. Interest rate
options provide the buyer with the right but not the obligation either to receive or pay interest at a specified rate on or before a future date. As
compensation for assuming the option risk, the option writer generally receives a premium at the start of the option period.
The principal commodity contracts used by the Banking Group are commodity swaps. A commodity swap generally involves the exchange of the
return on the commodity for a fixed or floating interest payment without the exchange of the underlying commodity or principal amount.
Equity related contracts are transacted by the Banking Group to offset the equity risk associated with financial instruments priced against
various share indices.
Derivatives, except for those that are specifically designated as effective hedging instruments, are classified as held for trading. The held for
trading classification includes two categories of derivative instruments: those held as trading positions and those used for the Banking Group’sbalance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include the structuring and marketingof derivative products to customers which enable them to take or mitigate risks. Market making activities consist of derivatives entered into
principally for the purpose of generating profits from short-term fluctuations in price or margins. Positions may be traded actively or held overa period of time to benefit from expected changes in market rates.
Gains or losses, including any current period interest, from the change in fair value of trading positions are recognised in the income statementas ‘other operating income’ in the period in which they occur.
Balance sheet risk management
The Banking Group designates balance sheet risk management derivatives into hedging relationships in order to minimise income statement
volatility. This volatility is created by differences in the timing of recognition of gains and losses between the derivative and the hedged item.
Hedge accounting is not applied to all balance sheet risk management positions.
Gains or losses from the change in fair value of balance sheet risk management derivatives that form part of an effective hedging relationshipare recognised in the income statement based on the hedging relationship. Any ineffectiveness is recognised in the income statement as ‘otheroperating income’ in the period in which it occurs.
Gains or losses, excluding any current period interest, from the change in fair value of balance sheet risk management positions that are notdesignated into hedging relationships are recognised in the income statement as ‘other operating income’ in the period in which they occur.
Current period interest is included in interest income and expense.
The following tables provide an overview of the Banking Group’s and the Bank’s foreign exchange rate, interest rate and commodity derivatives.
They include all trading and balance sheet risk management contracts. Notional principal amounts measure the amount of the underlying
financial commodity and represent the volume of outstanding transactions. They are not a measure of the risk associated with a derivative. The
derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market rates relative to their terms.
The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable orunfavourable, and as a consequence the aggregate fair values of derivative financial assets and liabilities, can fluctuate significantly from time
to time. The fair values of derivative instruments held and notional principal amounts are set out as follows.

P A G E

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For personal use only

(CONTINUED)P A G E

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S ( continued )Consolidated

ParentNotional			Principal
Fair values		
AmountAssetsLiabilities
$m
$m
$m

Notional		Principal
Fair values
AmountAssetsLiabilities
$m
$m
$m

Foreign exchange derivatives
Spot and forward contracts		
Swap agreements		
Options purchased		
Options sold		Collateral received / paid		

30,046
70,236
1,255
1,234
n/a

1,223
3,545
72
(328)

1,199
3,471
65
(2,824)30,04670,324
1,255
1,234
n/a

1,223
3,562
72
(328)

1,199
3,471
65
(2,824)

				

102,771

4,512

1,911

102,859

4,529

1,911

Interest rate derivatives
Forward rate agreements		
Swap agreements		
Futures contracts		
Options purchased		
Options sold		

39,121
363,063
16,021
1,941
1,941

47
9,744
96
31
-

20
9,600
11
31

39,121
372,229
16,021
1,941
1,941

47
9,904
96
31
-

20
9,600
11
31

				

422,087

9,918

9,662

431,253

10,078

9,662

Commodity derivatives
Fuel derivatives		
Electricity derivatives		

32
25

7
2

6
2

32
25

7
2

6
2

Total derivatives held for trading		

524,915

14,43911,581

534,169

14,616

11,581

-

-

-

-

-

-

		
		
		
Unaudited 31/03/2009		

Derivatives held for trading		

Derivatives held for hedging(a) Designated as cash flow hedges
Foreign exchange derivatives
Spot and forward contracts		
Interest rate derivatives
Swap agreements		

9,669

189

113

9,669

189

113

Total derivatives designated as cash flow hedges		

9,669

189

113

9,669

189

113

68

3

-

68

3

-

Swap agreements		

22,152354

1,174

22,152354

1,174

Total derivatives designated as fair value hedges		

22,220357

1,174

22,220357

1,174

Total derivatives held for hedging		

31,889546

1,287

31,889546

1,287

Total derivative financial instruments		

556,804

14,985

12,868566,058

15,162

12,868(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements		
Interest rate derivatives

3 2

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

For personal use only

(CONTINUED)

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S ( continued )Consolidated

ParentNotional			Principal
Fair values		
AmountAssetsLiabilities
$m
$m
$m

Notional		Principal
Fair values
AmountAssetsLiabilities
$m
$m
$m

Foreign exchange derivatives		
Spot and forward contracts		

42,232645

567

42,232645

567

Swap agreements		
Options purchased		
Options sold		Collateral received / paid		

59,385
1,806
1,761
n/a

1,412
70
(95)

1,648
66
(528)

59,385
1,806
1,761
n/a

1,412
70
(95)

1,648
66
(528)

				

105,184

2,032

1,753

105,184

2,032

1,753

Interest rate derivatives		
Forward rate agreements		
Swap agreements		
Futures contracts		
Options purchased		
Options sold		

96,661
342,044
17,463
1,687
1,645

1
2,421
5
11
-

3
2,419
36
11

96,661
341,464
17,463
1,687
1,645

1
2,421
5
11
-

3
2,392
36
11

			

459,500

2,438

2,469

458,920

2,438

2,442

Commodity derivatives		
Fuel derivatives		
Electricity derivatives		
Total derivatives held for trading		

9564,693

1
4,471

1
4,223

9
564,113

1
4,471

1
4,196

38

1

-

38

1

-

Swap agreements		

13,940114

41

13,940114

41

Total derivatives designated as cash flow hedges		

13,978115

41

13,978

115

41

49

3

-

49

3

-

		
		
		

Unaudited 31/03/2008
Derivatives held for trading		

Derivatives held for hedging		(a) Designated as cash flow hedges		
Foreign exchange derivatives		
Spot and forward contracts		
Interest rate derivatives		(b) Designated as fair value hedges		
Foreign exchange derivatives		
Swap agreements		
Interest rate derivatives		
Swap agreements		

33,277276

208

33,277276

208

Total derivatives designated as fair value hedges		

33,326279

208

33,326279

208

Total derivatives held for hedging		

47,304394

249

47,304394

Total derivative financial instruments		

611,997

4,865

4,472

611,4174,865

249 			4,445

P A G E

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

For personal use only

(CONTINUED)P A G E

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S ( continued )

		
		
		
Audited 30/09/2008		

Consolidated

ParentNotional			Principal
Fair values		
AmountAssetsLiabilities
$m
$m
$m

Notional		Principal
Fair values
AmountAssetsLiabilities
$m
$m
$m

Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts		

37,914

1,079

684

37,914

1,079

684

Swap agreements		
Options purchased		
Options sold		Collateral received / paid		

68,158
1,828
1,813
n/a

3,129
58
(586)

1,802
61
(270)

68,246
1,828
1,813
n/a

3,138
58
(586)

1,802
61
(270)

				

109,713

3,680

2,277

109,801

3,689

2,277

Interest rate derivatives
Forward rate agreements		
Swap agreements		
Futures contracts		
Options purchased		
Options sold		

121,966
347,394
20,328
2,158
2,164

22
3,565
15
11
-

17
3,631
6
11

121,966
346,844
20,328
2,158
2,164

22
3,565
15
11
-

17
3,631
6
11

				

494,010

3,613

3,665

493,460

3,613

3,665

Commodity derivatives
Fuel derivatives		
Electricity derivatives		

36

4

4

36

4

4

Total derivatives held for trading		

603,759

7,297

5,946

603,297

7,306

5,946

-

-

-

-

-

-

Swap agreements		

12,160161

142

12,160161

142

Total derivatives designated as cash flow hedges		

12,160161

142

12,160

161

142

58

1

-

58

1

-

Swap agreements		

31,29974622

31,89976

622

Total derivatives designated as fair value hedges		

31,35775

622

31,95777

622

Derivatives held for hedging(a) Designated as cash flow hedges
Foreign exchange derivatives
Spot and forward contracts		
Interest rate derivatives(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements		
Interest rate derivatives

Total derivatives held for hedging		

43,517236

764

44,117238

764

Total derivative financial instruments		

647,276

7,533

6,710

647,414

7,544

6,710

3 4

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

For personal use only

(CONTINUED)

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S ( continued )Hedging relationships
The Banking Group has two types of allowable hedging relationships entered into by the Banking Group: fair value hedges and cash flow hedges.
Each has specific requirements when accounting for the fair value changes in the hedging relationship. For details on the accounting treatmentof each type of hedging relationship refer to Note 1 Accounting Policy E (ii).
Fair value hedges
The risk being hedged in a fair value hedge is a change in the fair value of an asset or liability or unrecognised firm commitment that may affectthe income statement. Changes in fair value might arise through changes in interest rates or foreign exchange rates. The Banking Group’s fairvalue hedges principally consist of interest rate swaps that are used to protect against changes in the fair value of fixed-rate long-term financial
instruments due to movements in market interest rates.
The application of fair value hedge accounting results in the fair value adjustment on the hedged item attributable to the hedged risk being
recognised in the income statement at the same time the hedging instrument impacts the income statement. If a hedging relationship isterminated, the fair value adjustment to the hedged item continues to be recognised as part of the carrying amount of the item or group of items
and is amortised to the income statement as a part of the effective yield over the period to maturity. The table below shows the gain or loss onfair value hedges by hedging instrument and hedge item attributable to the hedged risk:
Consolidated
		
		
		

Unaudited
31/03/2009$m

ParentUnaudited
Audited31/03/2008 30/09/2008$m$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Gain or (loss) arising from fair value hedges:- hedged item		

424

134

733

424

134

733

- hedging instrument 		

(441)

(135)

(803)

(441)

(135)

(803)

Net ineffectiveness on qualifying fair value hedges		

(17)

(1)

(70)

(17)

(1)

(70)

Cash flow hedges
The risk being hedged in a cash flow hedge is the potential volatility in future cash flows that may affect the income statement. Volatility in the
future cash flows may result from changes in interest rates or changes in exchange rates arising from recognised financial assets and liabilities
and highly probable forecast transactions. The Banking Group’s cash flow hedges consist principally of interest rate swaps that are used to protect
against exposures to variability in future interest cash flows on non-trading assets and liabilities which bear interest at variable rates or which
are expected to be refunded or reinvested in the future. The Banking Group primarily applies cash flow hedge accounting, where necessary, to its
variable rate loan assets, variable rate liabilities and short term re-issuances of fixed rate customer and wholesale deposit liabilities. The amounts
and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on
the basis of their forecast repricing profile. This forms the basis for identifying gains and losses on the effective portions of derivatives designatedas cash flow hedges.
The effective portion of changes in the fair value of derivatives qualifying and designated as cash flow hedges is deferred to the cash flow hedging
reserve which forms part of equity. Amounts deferred in equity are recognised in the income statement in the period during which the hedged
forecast transactions take place and is fully amortised when the hedging relationship matures. The table below shows the movements in the cash
flow hedging reserve:
Consolidated
		
		
		

Unaudited
31/03/2009$m

ParentUnaudited
Audited31/03/2008 30/09/2008$m$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Balance at beginning of the period		

24

84

84

24

84

84

Transferred to income statement		

(19)

(16)

(37)

(19)

(16)

(37)

Tax effect of items transferred to income statement		

7

5

11

7

5

11

Valuation (loss) gain taken to equity		

(9)

(17)

(47)

(9)

(17)

(47)

Tax effect of net loss (gain) taken to equity		

3

6

13

3

6

13

Balance at end of the period		

6

62

24

6

62

24

The mechanics of hedge accounting results in the gain or loss in the cash flow hedging reserve above being released into the income statement
at the same time that the corresponding loss or gain attributable to the hedged item impacts the income statement. It will not necessarily bereleased to the income statement uniformly over the period of the hedging relationship as the fair value of the derivative is driven by changes
in market rates over the term of the instrument. As market rates do not always move uniformly across all time periods, a change in market
rates may drive more value in one forecast period than another, which impacts when the hedging reserve is released to the income statement.

P A G E

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

For personal use only

1 0 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S ( continued )The table below shows the breakdown of the cash flow hedging reserve attributable to each type of cash flow hedging relationship:
Consolidated

Parent						

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Variable rate loan assets		
Variable rate liabilities		
Short term re-issuances of fixed rate customer		

214
(60)

(5)
51

70
(1)

214
(60)

(5)
51

70
(1)

and wholesale deposit liabilities		

(148)

16

(45)

(148)

16

(45)

Total cash flow hedging reserve		

6

62

24

6

62

24

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur which is anticipatedto take place over the next 0 - 10 years (31/03/2008 0-10 years; 30/09/2008 0-10 years).		
All gains and losses associated with the ineffective portion of the hedging derivatives are recognised immediately as ‘other operating income’in the income statement. The ineffectiveness recognised in the income statement in respect of cash flow hedges was less than $1 million in the
Banking Group (31/03/2008 less than $1 million; 30/09/2008 less than $1 million) and less than $1 million in the Bank (31/03/2008 less than
$1 million; 30/09/2008 less than $1 million).		
There were no transactions where cash flow hedge accounting ceased in the period ended 31 March 2009 as a result of highly probable cash flowsthat were no longer expected to occur (31/03/2008 no transactions; 30/09/2008 no transactions).
1 1 . AVA I L A B L E - F O R - S A L E A S S E T S 		Consolidated
		
		
		

Unaudited
31/03/2009$m

Government, Local Body stock and bonds		
Other debt securities		
Residential mortgage-back securities1 		

496
30
-

ParentUnaudited
Audited31/03/2008 30/09/2008
$m
$m

3
38
-

3
41
-

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

496
30
7,825

3
28
-

3
41
-

Equity securities		

71

55

65

68

55

63

Total available-for-sale assets		

597

96

109

8,419

86

107

1.

The Bank has purchased securities issued by the Kingfisher NZ Trust 2008-1 as part of the securitisation detailed in Note 40. These are in exchange for the transfer of residential mortgages to the Trust.
These assets are eliminated on consolidation as they are part of an in-house residential mortgage-backed securities facility.

1 2 . N E T L O A N S A N D A D VA N C E S 		Consolidated
		
		
		

Unaudited
31/03/2009$m

Overdrafts		
Credit card outstandings		
Term loans - housing2		
Term loans - non-housing		

2,094
1,429
48,84940,696

ParentUnaudited
Audited31/03/2008 30/09/2008
$m
$m

2,238
1,412
52,70036,5032,140
1,434
53,35040,583

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

2,094
1,429
48,84938,6442,238
1,412
52,70034,4622,140
1,435
53,35038,480Finance lease receivables		

741

786

777

38

34

36

Gross loans and advances		Provision for credit impairment (Note 14)		
Unearned finance income		
Fair value hedge adjustment		Deferred fee revenue and expenses 		

93,809
(876)
(295)
1,050
(53)

93,639
(522)
(337)
(263)
(58)

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

91,054
(811)
1,050
(49)

90,846
(479)
(263)
(53)

95,441
(612)
353
(50)

Capitalised brokerage/ mortgage origination fees		

85

120

109

85

120

109

Total net loans and advances		

93,72092,57997,67991,32990,171

95,241

2.

The Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $1,806 million (31/03/2008 $nil, 30/09/2008 $nil).
The underlying collateral accepted by the RBNZ under this transaction are mortgages to the value of $2,250 million (31/03/2008 $nil, 30/09/2008 $nil).
On 27 February 2009, The Banking Group sold $4,877 million of residential mortgages to the NZ Branch, which has resulted in these assets being derecognised from both the Banking Group andBank’s balance sheet.

P A G E

3 6

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

For personal use only

1 3 . I M PA I R E D A S S E T S , PA S T D U E A S S E T S A N D OT H E R A S S E T S U N D E R A D M I N I S T R AT I O NConsolidated

			
			
			

		

Retail Other retailmortgages
exposures$m$mParentCorporate		
exposures
Total
$m
$m

Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

Individually impaired assets
Unaudited 31/03/2009
Balance at beginning of the period

83

30

214

327

83

14

191

288

Transfers from productive

200

127

186

513

200

106

177

483

Transfers to productive

(10)

(20)

(14)

(44)

(10)

(20)

(12)

(42)

Assets realised or loans repaid

(64)

(15)

(28)

(107)

(64)

(11)

(23)

(98)

Write offs

(9)

(66)

(5)

(80)

(9)

(58)

(5)

(72)

200

56

353

609

200

31

328

559

Balance at beginning of the period

7

20

88

115

7

7

79

93

Transfers from productive

8

45

68

121

8

41

57

106

Transfers to productive

-

-

(5)

(5)

-

-

(3)

(3)

Assets realised or loans repaid
Write offs

(1)
-

(44)

(26)
(1)

(27)
(45)

(1)
-

(40)

(19)
(1)

(20)
(41)

Balance at end of the period

14

21

124

159

14

8

113

135

Balance at end of the period
Unaudited 31/03/2008

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

7

20

88

115

7

7

79

93

103

122

228

453

103

97

200

400

Transfers to productive

(2)

-

(8)

(10)

(2)

-

(5)

(7)

Assets realised or loans repaid
Write offs

(18)
(7)

(14)
(98)

(86)
(8)

(118)
(113)

(18)
(7)

(3)
(87)

(75)
(8)

(96)
(102)

Balance at end of the year

83

30

214

327

83

14

191

288

P A G E

3 7

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

For personal use only

(CONTINUED)P A G E

1 3 . I M PA I R E D A S S E T S , PA S T D U E A S S E T S A N D OT H E R A S S E T S U N D E R A D M I N I S T R AT I O N ( continued )		Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Past due assets (90 days past due assets)1
Balance at beginning of the period
Transfers to past due assets		
Transfers from past due assets		

309
744
(506)

102
350
(226)

102
856
(649)

296
689
(474)

95
323
(202)

95
798
(597)

Balance at end of the period		

547

226

309

511

216

296

Restructured items
Balance at beginning of the period		
Transfers to Restructured items		

20

-

-

2

-

-

Transfers from Restructured items		

-

-

-

-

-

-

Balance at end of the period		

20

-

-

2

-

-

Other assets under administration
Balance at beginning of the period		

1

-

-

1

-

-

Transfers to other assets under administration		

10

-

1

10

-

1

Transfers from other assets under administration		

(7)

-

-

(7)

-

-

Balance at end of the period		

4

-

1

4

-

1

6

6

6

6

6

6

5

12

-

5

12

-

Balance at end of the period		

11

18

6

11

18

6

Interest foregone on impaired assets
Gross interest receivable on impaired loans		
Interest recognised		

18
(2)

7
(3)

24
(6)

18
(2)

6
(3)

24
(6)

Net interest foregone on impaired loans		

16

4

18

16

3

18

Undrawn facilities with impaired customers
Balance at beginning of the period		
Transfers to (from) undrawn facilities with
impaired customers		

Further analysis of past due assets can be found in Note 31 Financial Risk Management, including an ageing analysis of all past due assets
1 day and over where the counterparty has failed to make a payment when contractually due.
Other assets under administration and undrawn facilities with impaired customers are predominantly corporate exposures.
There are no undrawn facilities with 90 day past due customers as at 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).
The Banking Group has $20 million of restructured assets as at 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil). The Banking Group held nomaterial assets acquired through enforcement of security (31/03/2008 $nil; 30/09/2008 $nil).
1.

3 8

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

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

For personal use only

(CONTINUED)

1 4 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T

Consolidated

			
			
			

		

Retail Other retailmortgages exposures$m$m

ParentCorporate		
exposures
Total
$m
$m

Retail Other retailmortgages
exposures$m$m

Corporate
exposures
$m

Total
$m

497

Unaudited 31/03/2009
Collective provision
Balance at beginning of the period

81

164

289

534

81

146

270

Charge to income statement

12

(16)

77

73

12

(14)

73

71

Balance at end of the period

93

148

366

607

93

132

343

568

Balance at beginning of the period

28

10

94

132

28

4

83

115

Charge to income statement

35

77

100

212

35

69

90

194

Individual provision(individually impaired assets)

Recoveries of amounts previously written off

-

10

-

10

-

10

-

10

Bad debts written off
Discount unwind1

(9)
-

(66)
-

(5)
(5)

(80)
(5)

(9)
-

(58)
-

(5)
(4)

(72)
(4)

Balance at end of the period

54

31

184

269

54

25

164

243

Total provision for credit impairment

147

179

550

876

147

157

507

811

Balance at beginning of the period

58

130

234

422

58

117

217

392

Charge to income statement

4

15

27

46

4

14

25

43

Other

-

-

3

3

-

-

3

3

Balance at end of the period

62

145

264

471

62

131

245

438

Balance at beginning of the period

4

13

27

44

4

5

25

34

Charge to income statement

(2)

34

15

47

(2)

32

13

43

Recoveries of amounts previously written off

-

7

1

8

-

7

1

8

Bad debts written off
Discount unwind1

-

(44)
-

(1)
(3)

(45)
(3)

-

(40)
-

(1)
(3)

(41)
(3)

Balance at end of the period

2

10

39

51

2

4

35

41

Total provision for credit impairment

64

155

303

522

64

135

280

479

Unaudited 31/03/2008
Collective provision

Individual provision(individually impaired assets)

1.

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

P A G E

3 9

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

For personal use only

(CONTINUED)P A G E

1 4 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T ( continued )Consolidated

			
			
			

		

Retail Other retailmortgages
exposures$m$mParentCorporate		
exposures
Total
$m
$m

Retail Other retailmortgages
exposures$m$m

Corporate
exposures
$m

Total
$m

Audited 30/09/2008
Collective provision
Balance at beginning of the year
Charge to income statement

58
23

130
34

234
55

422
112

58
23

117
29

217
53

392
105

Balance at end of the year

81

164

289

534

81

146

270

497

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

4
31
(7)
-

13
80
15
(98)
-

27
79
2
(8)
(6)

44
190
17
(113)
(6)

4
31
(7)
-

5
71
15
(87)
-

25
71
1
(8)
(6)

34
173
16
(102)
(6)

Balance at end of the year

28

10

94

132

28

4

83

115

Total provision for credit impairment

109

174

383

666

109

150

353

612

Provision movement analysis
		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

New and increased provisions
Provision releases

226
(4)

62
(7)

223
(16)

208
(4)

56
(5)

203
(14)

		

222

55

207

204

51

189

Recoveries of amounts previously written off

(10)

(8)

(17)

(10)

(8)

(16)

Individual provision charge
Collective provision charge

212
73

47
46

190
112

194
71

43
43

173
105

Charge to income statement

285

93

302

265

86

278

1

4 0

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

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

For personal use only

(CONTINUED)

1 5 . S H A R E S I N C O N T RO L L E D E N T I T I E S , A S S O C I AT E S A N D J O I N T LY C O N T RO L L E D E N T I T I E S

		
		
		
		

Consolidated
Unaudited
Unaudited
31/03/2009 31/03/2008$m$m

ParentAudited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Shares in controlled entities
Shares in associates

148

142

144

7,452
90

7,461
88

7,398
88

Shares in jointly controlled entities

248

208

219

231

208

208

Total shares in controlled entities, associates andjointly controlled entities

396

350

363

7,773

7,757

7,694

Balance at beginning of the period
Acquisitions
Disposals
Transfers to subsidiary company
Fair value adjustment
Share of profit of equity accounted associates1

144
2
2

10
46
2
84

10
48
(2)
88

88
2
-

2
86
-

2
86
-

Balance at end of the period

148

142

144

90

88

88

Shares in associates comprise:

Shares in associates at 31 March 2009 includes goodwill of $59 million (31/03/2008 $54 million; 30/09/2008 $57 million) for the Banking Groupand $nil (31/03/2008 $nil; 30/09/2008 $nil) for the Parent.
Shares in jointly controlled entities comprise:						Balance at beginning of the period
219
196
196
208
Acquisitions
23
23
Disposals
Transfers to subsidiary company
Share of profit of equity accounted jointly controlled entities
6
12
23
-

208
-

208
-

Balance at end of the period

208

208

248

208

219

231

Shares in jointly controlled entities at 31 March 2009 includes goodwill of $97 million (31/03/2008 $97 million; 30/09/2008 $97 million) for the
Banking Group and $90 million (31/03/2008 $90 million; 30/09/2008 $90 million) for the Parent.
1.

The Banking Group, via its associate, Cards NZ Limited, acquired shares in Visa in March 2008, resulting in an equity accounted profit of $88 million being recognised on the sale of the sharesat fair value by Cards NZ Limited. Visa shares not sold into the initial public offering are held as an available-for-sale asset on the balance sheet.

P A G E

4 1

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

For personal use only

(CONTINUED)

1 6 . OT H E R A S S E T S

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Accrued interest and prepaid discounts
Accrued commission
Defined benefit schemes surplus
Share-based payments asset
Prepaid expenses
Security settlements
Other assets

434
25
51
58
55
200

526
18
51
53
9
338

535
20
50
57
85
253

429
19
51
51
55
140

494
15
51
47
9
290

515
16
50
46
85
173

Total other assets

823

995

1,000

745

906

885

Deferred tax assets
Balance at beginning of the period
Credited (charged) to income statement
Set-off of deferred tax liabilities pursuant to set-off provisions1

121
102
(23)

11
2
43

11
59
51

100
98
(24)

7
36

57
43

Balance at end of the period

200

56

121

174

43

100

Deferred tax assets comprise the following temporary differences:
Provision for credit impairment
Deferred fee revenue and expenses
Premises and equipment
SoftwareProvisions and accruals
Derivative financial instruments
Defined benefit schemes
Other

250
4
1
6
168
3
20
3

158
3
(1)
31
98
4
2
1

200
3
11
125
3
8
3

230
5
(4)
6
163
4
20
1

146
3
(3)
32
91
5
2
1

184
3
(3)
12
118
4
8
1

		
Set-off of deferred tax liabilities pursuant to set-off provisions1

455
(255)

296
(240)

353
(232)

425
(251)

277
(234)

327
(227)

Net deferred tax assets

200

56

121

174

43

100

The deferred tax credited (charged) to the income statement
comprises the following temporary differences:
Provision for credit impairment
Deferred fee revenue and expenses
Premises and equipment
SoftwareProvisions and accruals
Derivative financial instruments
Defined benefit schemes
Other

50
1
1
(5)
43
12
-

18
(3)
(1)
(5)
1
2
(10)

60
(2)
(21)
22
8
(8)

46
2
(1)
(6)
45
12
-

17
(1)
(4)
1
2
(8)

55
(1)
(20)
23
8
(8)

Total deferred tax credited (charged) to the income statement

102

2

59

98

7

57

1 7 . D E F E R R E D TA X A S S E T S

There was no deferred tax asset charged or credited to equity as at 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil). There were no unrecognised
deferred tax assets as at 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).																				The reduction in the corporate tax rate from 33% to 30% from the 2009 tax year has been taken into account in calculating the value of deferred
tax assets as at 31 March 2008 and 30 September 2008. 										1.

P A G E

4 2

Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same taxation authority on either the same taxable entity or different taxable entities within thesame taxable group.										A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

18. PREMISES AND EQUIPMENT

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Freehold and leasehold land and buildings
At costAccumulated depreciation

63
(11)

69
(12)

69
(12)

-

-

-

Total carrying amount

52

57

57

-

-

-

Leasehold improvements
At costAccumulated depreciation

100
(77)

97
(75)

98
(75)

2
(1)

1
-

2
(1)

Total carrying amount

23

22

23

1

1

1

264
(184)

244
(172)

255
(176)

18
(9)

17
(10)

20
(12)

80

72

79

9

7

8

252
(204)

245
(193)

246
(196)

212
(175)

203
(164)

207
(169)

Total carrying amount

48

52

50

37

39

38

Work in progress

47

35

33

13

7

6

Total premises and equipment

250

238

242

60

54

53

Furniture and equipment
At costAccumulated depreciation
Total carrying amountComputer and office equipment
At costAccumulated depreciation

Reconciliations of the carrying amounts for each class of premises and equipment are set out below:					Freehold and leasehold land and buildings
Balance at beginning of the period
Additions
Disposals
Depreciation

57
10
(15)
-

57
-

57
1
(1)

-

-

-

Balance at end of the period

52

57

57

-

-

-

Leaseholds improvements
Balance at beginning of the period
Additions
Disposals
Depreciation

23
2
(2)

24
(2)

24
3
(4)

1
-

1
-

1
-

Balance at end of the period

23

22

23

1

1

1

Furniture and equipment
Balance at beginning of the period
Additions
Disposals
Depreciation

79
8
(7)

78
1
(7)

78
16
(15)

8
1
-

7
-

7
3
(2)

Balance at end of the period

80

72

79

9

7

8

Computer and office equipment
Balance at beginning of the period
Additions
Disposals
Depreciation

50
9
(2)
(9)

50
11
(9)

50
18
(1)
(17)

38
7
(1)
(7)

39
7
(7)

39
12
(13)

Balance at end of the period

48

52

50

37

39

38

Work in progress
Balance at beginning of the period
Additions
Disposals
Depreciation

33
14
-

23
12
-

23
10
-

6
7
-

7
-

7
(1)
-

Balance at end of the period

47

35

33

13

7

6

Total premises and equipment

250

238

242

60

54

53
P A G E

4 3

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

For personal use only

(CONTINUED)P A G E

1 9 . G O O D W I L L A N D OT H E R I N TA N G I B L E A S S E T S

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

3,265

3,265

3,265

3,217

3,217

3,217

Gross carrying amount
Balance at beginning of the period
Additions from internal developments

96
4

68
6

68
28

93
4

66
5

66
27

Balance at end of the period

100

74

96

97

71

93

Balance at beginning of the period
Amortisation expense1

(47)
(6)

(39)
(4)

(39)
(8)

(45)
(5)

(39)
(3)

(39)
(6)

Balance at end of the period

(53)

(43)

(47)

(50)

(42)

(45)

Total software

47

31

49

47

29

48

Goodwill
Gross carrying amount
Balance at beginning and end of the period
SoftwareAccumulated amortisation

Other intangible assets
Total goodwill and other intangible assets

12

3

3

11

3

3

3,324

3,299

3,317

3,275

3,249

3,268

No impairment losses have been recognised against the gross carrying amount of goodwill, software and other intangible assets for the six
months ended 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).
1.

Software amortisation expense is included in ‘other costs’ in the income statement.

2 0 . D U E TO OT H E R F I N A N C I A L I N S T I T U T I O N S

Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)
Securities sold under agreements to repurchasefrom other financial institutions
Securities sold under agreements to repurchasefrom central banks2
Other financial institutions
Total due to other financial institutions

531

593

1,002

3

-

1

45

198

97

45

198

97

1,856
1,730

1,593

2,213

1,856
1,346

1,234

1,842

4,162

2,384

3,312

3,250

1,432

1,940

Included within due to other financial institutions is the following balance:
Balances owing to the Ultimate Parent Company by
ANZ National (Int’l) Limited guaranteed by the Bank
528

593

1,001

-

-

-

Balances owing to the Ultimate Parent Bank are due within twelve months. Interest is paid at variable bank rates.
2.

4 4

The Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $1,806 million (31/03/2008 $nil; 30/09/2008$nil). The underlying collateral accepted by the Reserve Bank under this transaction are mortgages to the value of $2,250 million (31/03/2008 $nil; 30/09/2008 $nil).

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

For personal use only

(CONTINUED)

2 1 . D E P O S I T S A N D OT H E R B O R ROW I N G S

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Amortised cost
Certificates of deposit
Term deposits
Demand deposits bearing interest
Deposits not bearing interest
Secured debenture stock
Securities sold under agreement to repurchase

7,054
30,02023,583
4,248
1,702
9

5,517
30,34821,209
4,305
1,763
-

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

7,054
30,02023,582
4,248
9

5,517
30,34821,209
4,305
-

5,527
31,26022,085
3,928-

Total deposits and other borrowings recognised at amortised cost

66,616

63,14264,48364,913

61,37962,800Fair value through the profit or loss
Commercial paper

6,144

10,93812,653---

Total deposits and other borrowings recognised at fair value

6,144

10,93812,653---

Total deposits and other borrowings

72,76074,08077,13664,913

61,37962,800The principal at maturity of commercial paper at fair value through the profit and loss is $6,153 million (31/03/2008 $11,014 million; 30/09/2008$12,755 million).
The Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed funds during the period ended 31 March2009 (31/03/2008 $nil; 30/09/2008 $nil). Deposits from customers are unsecured and rank equally with other unsecured liabilities of the
Banking Group. In the unlikely event that the Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in
the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.										Included within deposits and other borrowings are
the following balances:
Commercial paper issued by ANZ National (Int’l) Limited
guaranteed by the Bank at amortised cost

6,135

10,933

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

2,006

2,064

2,032

-

-

-

Registered secured debenture stock is constituted and secured by a trust deed between UDC Finance Limited and its independent trustee,
Trustees Executors Limited. The trust deed creates floating charges over all the assets, primarily loans and advances, of UDC Finance Limited.

2 2 . PAYA B L E S A N D OT H E R L I A B I L I T I E S

Creditors
Accrued interest and unearned discounts
Defined benefit schemes deficit
Share-based payments liability
Accrued charges
Security settlements
Equitable assignment of mortgages1
Other liabilities
Total payables and other liabilities

61
722
66
18
200
552
22
459

42
787
5
24
162
270
28
328

77
982
27
29
215
236
25
250

30
598
66
18
184
552
22
409

27
643
5
24
154
270
28
263

42
811
27
29
199
236
25
162

2,100

1,646

1,841

1,879

1,414

1,531

1. The ANZ FlexiMortgage Income Trust holds mortgages under an equitable assignment with the Bank. The ANZ FlexiMortgage Income Trust can at any time require the Bank to repurchase
any mortgage. The Bank may also require repurchase in certain circumstances. The mortgages are included in these financial statements.										P A G E

4 5

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

For personal use only

(CONTINUED)P A G E

2 3 . D E F E R R E D TA X L I A B I L I T I E S

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008
$m

15
8
(23)

(32)
(11)
43

(47)
(4)
51

16
8
(24)

7
(32)
(11)
36

7
(46)
(4)
43

-

-

-

-

-

-

Deferred tax liabilities comprise thefollowing temporary differences:
Lease finance
Share compensation
Defined benefit schemes
Other

101
154

76
164

90
142

97
154

71
163

85
142

			
Set-off of deferred tax liabilities pursuant to set-off provisions1

255
(255)

240
(240)

232
(232)

251
(251)

234
(234)

227
(227)

-

-

-

-

-

-

The deferred tax (credited) charged to the income statement
comprises the following temporary differences:
Lease finance
Share compensation
Defined benefit schemes
Other

11
4

(34)
(2)
4

(20)
(2)
(25)

12
4

(33)
(2)
3

(19)
(2)
(25)

Total deferred tax (credited) charged to the income statement

15

(32)

(47)

16

(32)

(46)

The deferred tax (credited) charged to equity comprises
the following temporary differences:
Cash flow hedges

8

(11)

(4)

8

(11)

(4)

Total deferred tax (credited) charged directly to equity

8

(11)

(4)

8

(11)

(4)

Provision for deferred income tax
Balance at beginning of the period(Credited) charged to income statement(Credited) charged directly to equity
Set-off of deferred tax liabilities pursuant to set-off provisions1
Balance at end of the period

Net deferred tax liabilities

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

The reduction in the corporate tax rate from 33% to 30% from the 2009 tax year has been taken into account in calculating the value of deferred
tax liabilities as at 31 March 2008 and 30 September 2008.										
1.

4 6Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same taxation authority on either the same taxable entity or different taxable entities within thesame taxable group.

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

For personal use only

(CONTINUED)

2 4 . P ROV I S I O N S

		
		
		
		

Consolidated

ParentUnaudited
Unaudited
31/03/2009 31/03/2008$m$m

Audited30/09/2008
$m

4

3

11

4

3

11

Employee entitlements
Balance at beginning of the period
New provisions
Provisions utilised

117
31
(35)

110
32
(30)

110
62
(55)

115
30
(34)

108
31
(29)

108
61
(54)

Balance at end of the period

113

112

117

111

110

115

Personnel restructuring costs
Balance at beginning of the period
New provisions
Provisions utilised

32
17
(22)

2
(1)

2
30
-

32
17
(22)

2
(1)

2
30
-

Balance at end of the period

27

1

32

27

1

32

Redundant assets restructuring costs2
Balance at beginning of the period
Transfers from subsidiary companies
Provisions utilised

1
-

2
(1)

2
(1)

1
-

2
(1)

2
(1)

Balance at end of the period

1

1

1

1

1

1

Other provisions
Balance at beginning of the period
New provisions
Provisions utilised

29
179
(13)

48
8
(19)

48
11
(30)

27
179
(13)

36
8
(15)

36
9
(18)

Balance at end of the period

195

37

29

193

29

27

Total provisions

340

154

190

336

144

186

Non-lending losses, frauds and forgeries

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

1

2

3

										1. Employee entitlements										The provision for employee entitlements provides mainly for the cost of employee entitlements to annual leave, long service leave and retirement leave. The majority of employees utilise
their annual leave in the year the entitlement accrues.										
2.

Personnel restructuring costs and redundant assets restructuring costs										Restructuring cost provisions arise from exit activities relating to material changes in the scope or manner of business undertaken by the Banking Group and includes termination benefits.
Provisions are made when the Banking Group is demonstrably committed, it is probable that the costs will be incurred, though their timing is uncertain, and the costs can be reliably
estimated. The majority of provisions recognised at 31 March 2009 are expected to be settled over the 2009 financial year, with the exception that provisions for losses arising from rental
commitments on leased premises which have become vacant as a result of restructuring will be settled over the remaining term of the leases.

3.

ING New Zealand Funds										Trading in the ING Diversified Yield Fund and the ING Regular Income Fund (‘the Funds’) was suspended on 13 March 2008 due to deterioration in the liquidity and credit markets. These
funds are managed by the joint venture partner ING (NZ) Limited. Some of these funds were sold to ANZ National customers.
On 25 February 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them the ability to exit the investment for a cash amount. We
understand further details on the proposal will be released shortly. 										The estimated cost of this proposal to the Bank is approximately $166 million and this amount has been recognised in ‘other operating income’ in the Income Statement.
The ultimate cost to the Bank will depend on the value of units in the underlying funds, the discount rate applied and recoveries under insurance cover. In addition the Commerce Commission
has sought information regarding the two Funds and may be investigating this matter, although at this stage, it is not possible to determine the outcome of any investigation.

P A G E

4 7

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

For personal use only

(CONTINUED)P A G E

2 5 . B O N D S A N D N OT E S			Consolidated					 Unaudited
Unaudited
Unaudited					31/03/2009 31/03/2008 30/09/2008
					
$m
$m
$m

Issued by ANZ National Bank Limited (Parent)
Denomination Face value		
Maturity
Interest rate %NZD
150m
fixed rate notes
2009
6.82%
NZD
50m
floating rate notes
2009
3 month BKBM + 0.30%
NZD
70m
floating rate notes2010
3 month BKBM + 0.35%
NZD
100m
fixed rate notes
2010
8.50%
NZD
75m
fixed rate notes
2010
8.50%
NZD
150m
fixed rate notes
2011
6.80%
NZD
170m
floating rate notes
2011
3 month BKBM + 0.90%
NZD
50m
fixed rate notes
2011
8.25%
NZD
175m
fixed rate notes
2014
8.50%
NZD
60m
fixed rate notes
2014
8.50%
Other bonds and notes1				Fair value hedge adjustment				
					

50
70
100
75
150
170
50
175
60
81
334
1,315

150
70
150
174
35
579

150
50
70
100
150
170
50
175
146
62
1,123

1,748
227
150
68
1,320
528
20
2
3,521
155
108
14
1,320
100
422
232

199
755
13
34
151
315
946
1,881
200
189
1,495
162
150
49
45
946
315
378
20
598
224
221
1
2,523
10
24
31
946
100
-

806
179
254
200
215
1,607
193
150
58
54
1,120
373
448
20
643
254
250
1
2,985
124
14
86
12
1,120
100
375
209

Issued by ANZ National (Int’l) Limited
Denomination Face value		EUR
100m
floating rate notes
GBP
300m
floating rate notes
HKD
80m
fixed rate notes
USD
27m
fixed rate notes2
USD
120m
floating rate notes
USD
250m
fixed rate notes
USD
750m
floating rate notes
USD
170m
floating rate notes3
USD
1,500mfloating rate notes3
NZD
200m
fixed rate notes
JPY
15,000m
floating rate notes
EUR
750m
floating rate notes
HKD
1,000mfixed rate notes
NZD
150m
floating rate notes
HKD
300m
fixed rate notes
HKD
280m
fixed rate notes
USD
750m
floating rate notes
USD
250m
floating rate notes
USD
300m
floating rate notes
NZD
20m
floating rate notes
EUR
300m
floating rate notes
JPY
17,770m
fixed rate notes
JPY
17,500m
floating rate notes
USD
1m
floating rate notes3
USD
2,000mfloating rate notes4
JPY
8,640mfixed rate notes
JPY
1,000mfixed rate notes
JPY
6,000mfloating rate notes
USD
8m
floating rate notes3
HKD
150m
floating rate notes5
HKD
190m
floating rate notes6
USD
750m
floating rate notes
NZD
100m
floating rate notes
CHF
275m
floating rate notes
SGD
200m
fixed rate notes

4 8

Maturity
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2010
2010
2010
2010
2010
2010
2010

Interest rate %3 month EURIBOR + 0.02%
3 month GBP LIBOR + 0.01%
3.93%
5.00%
3 month LIBOR - 0.06%
4.265%
3 month LIBOR + 0.07%
1 month LIBOR + 0.01%
1 month LIBOR + 0.01%
9.20%
3 month JPY LIBOR
3 month EURIBOR + 0.12%
4.40%
3 month BKBM + 0.10%
4.93%
4.44%
3 month LIBOR + 0.04%
3 month Prime - 2.9125%
1 month LIBOR + 0.04%
3 month BKBM + 0.05%
3 month EUR LIBOR + 0.15%
0.055%
3 month JPY LIBOR
1 month LIBOR + 0.01%
3 month LIBOR + 0.22%
0.114%
0.01%
3 month JPY LIBOR
1 month LIBOR + 0.01%
6 month HIBOR + 0.60%
6 month HIBOR + 0.60%
3 month LIBOR + 0.11%
3 month BKBM + 0.05%
3 month CHF LIBOR + 0.75%
3.22%

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

For personal use only

(CONTINUED)

2 5 . B O N D S A N D N OT E S ( continued )			Consolidated					 Unaudited
Unaudited
Unaudited					31/03/2009 31/03/2008 30/09/2008
					
$m
$m
$m

Issued by ANZ National (Int’l) Bank Limited
Denomination Face value		USD
100m
floating rate notes
AUD
50m
floating rate notes
USD
890m
floating rate notes8
USD
300m
fixed rate notes
GBP
435m
floating rate notes
GBP
450m
floating rate notes8
USD
1,000mfixed rate notes9
USD
2,000mfixed rate notes
USD
250m
floating rate notes

Maturity
2010
2010
2010
2011
2011
2012
2012
2013
2015

Interest rate %3 month LIBOR + 0.55%
3 month BBSW + 0.61%
3 month LIBOR + 1.03%
5.50%
3 month GBP LIBOR + 0.05%
6 month GBP LIBOR + 0.08%
3.25%
6.20%
3 month LIBOR + 0.90%

176
60
1,567
528
1,094
1,132
1,760
3,521
440

378
1,095
1,133
-

149
60
1,328
448
1,169
1,210
2,985
373

					

20,213

15,527

19,572-

480-

21,528

16,586

20,695

2,699

1,133

2,538

Issued by NBNZ Holdings Limited
Denomination Face value		
NZD
480m
floating rate notes7

Maturity
2008

Interest rate %3 month BKBM

Total bonds and notes				Included within bonds and notes is the following related party balance:
Subsidiaries of the Australia and New Zealand Banking Group Limited				Bonds and notes issued by ANZ National (Int’l) Limited are guaranteed by the Bank.
Bonds and notes are unsecured and rank equally with other unsecured liabilities of the Banking Group.
1.

Other bonds and notes includes index linked notes and other fixed rate and fixed term bonds.

2.	The interest rate payable on these notes is stepped as follows: Year 1 3.00%, Year 2 3.25%, Year 3 3.50%, Year 4 4.25% and Year 5 5.00%. The issuer may elect to redeem the notes annuallyfrom May 2004. These notes matured in May 2008.
3.	The interest rate payable on these notes is stepped as follows: Year 1 1 month LIBOR - 0.02%, Year 2 1 month LIBOR, Year 3 1 month LIBOR + 0.01%, Year 4 1 month LIBOR + 0.02% andYear 5 1 month LIBOR + 0.03%. The investor were able to elect to extend the maturity of the notes for a year on a monthly basis. These notes were originally for USD1.5billion, but between
7 August 2007 and 6 March 2009, investors elected not to extend these bonds. As a result these bonds carrying a fixed maturity as follows: 7 August 2008 USD 89 million; 5 September
2008 USD 1,232 million; 7 October 2008 USD 164 million; 5 December 2008 USD 6 million; 7 May 2009 USD 1 million; and 5 March 2010 USD 8 million.
4.	The interest rate payable on these notes is stepped as follows: Year 1 3 month LIBOR + 0.22%, Year 2 3 month LIBOR + 0.24% Year 3 3 month LIBOR + 0.26%, Year 4 3 month LIBOR +0.28% and Year 5 3 month LIBOR + 0.29%. The investor were able to elect to extend the maturity of the notes for a year on a 3 monthly basis. On 10 June 2008 and 10 September 2008
and 10 December 2008, investors elected not to extend USD 686 million, USD 525 million and USD 789 million of bonds which has resulted in these bonds carrying a fixed maturity on 9
April 2009, 10 July 2009 and 9 October 2009 respectively.
5.	The interest rate payable on these notes is stepped as follows: Year 1 3.77%, Years 2 - 5 HIBOR + 0.60%. For each 6 month period after Year 1, there is a maximum interest rate payable,
starting at 3.75% after Year 1 and stepping up 0.25% every 6 months. The issuer has the right to redeem the notes on every semi-annual coupon date from 28 April 2006. The issuer
exercised their option to call the note on 28 April 2008.
6.	The interest rate payable on these notes is stepped as follows: Year 1 3.77%, Years 2 - 5 HIBOR + 0.60%. For each 6 month period after Year 1, there is a maximum interest rate payable,
starting at 3.75% after Year 1 and stepping up 0.25% every 6 months. The issuer has the right to redeem the notes on every semi-annual coupon date from 28 April 2006. The issuer
exercised their option to call the note on 28 April 2008.
7.

These notes matured in August 2008.

8.

These notes were issued to subsidiaries of ANZ Group.

9.

These notes are guaranteed by the Bank and benefit from a supporting guarantee from the NZ Crown.

2 6 . D U E TO PA R E N T C O M PA N Y		Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

ANZ Holdings (New Zealand) Limited (Parent Company)

1,096

1,758

404

1,096

1,758

404

These funds have been borrowed in New Zealand dollars on an overnight basis and are at call. Interest is payable monthly, based on
New Zealand overnight deposit rates.

P A G E

4 9

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

For personal use only

(CONTINUED)

2 7 . L O A N C A P I TA L		

Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

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

249
321
225
53
205
950
835

239
307
215
51
196
1,050
-

248
317
222
52
202
950
835

249
321
225
53
205
950
835

239
307
215
51
196
1,050
-

248
317
222
52
202
950
835

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

2,838
(3)

2,058
(5)

2,826
(6)

2,838
(3)

2,058
(5)

2,826
(6)

Total loan capital

2,835

2,053

2,820

2,835

2,053

2,820

1,041

1,053

1,008

1,041

Included within loan capital is the following related party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)
1,053

1,008

AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and has an ultimate maturity date of 31 August 2014. The Bank may elect to repay the loan on 31
August each year commencing from 2009 through to 2013. All interest is payable half yearly in arrears, with interest payments due 28 Februaryand 31 August. Interest is based on BBSW + 0.40% p.a. up until, and including, 31 August 2009 and increases to BBSW + 0.90% p.a. thereafter.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly in arrears based on BBSW + 0.95%
p.a., with interest payments due 15 March and 15 September.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. The Bank may elect to repay the loan on 19 April
each year commencing from 2010 through to 2015. All interest is payable half yearly in arrears, with interest payments due 19 April and 19
October. Interest is based on BBSW + 0.32% p.a. to 19 April 2010 and increases to BBSW + 0.82% p.a. thereafter.
AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The Bank may elect to repay the loanon 15 September each year commencing from 2011 through to 2016. All interest is payable half yearly in arrears, with interest payments due
15 March and 15 September. Interest is based on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW + 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The Bank may elect to repay the loan
on 17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest payments due 17
March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW + 1.18% p.a. thereafter.
NZD subordinated bonds
The terms and conditions of the term subordinated fixed rate bonds:
New Zealand Exchange listed bonds
Issue date
15 September 2006

Amount $m350

Coupon rate
7.16%

Call date
15 September 2011

Maturity date
15 September 2016

2 March 2007

250

7.60%

2 March 2012

2 March 201723 July 2007

350

8.23%

23 July 201223 July 2017

As at 31 March 2009, these bonds carried an AA- rating by Standard & Poor’s.
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to pay interest to maturity at thefive year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. for the 15 September 2006; 2 March 2007 and 23 July 2007 bonds
respectively. Interest is payable half yearly in arrears based on the fixed coupon rate.

P A G E

5 0

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

For personal use only

(CONTINUED)

2 7 . L O A N C A P I TA L ( continued )The terms and conditions of the perpetual subordinated bond are as follows;
Perpetual subordinated bonds
Issue date
18 April 2008

Amount $m835

1st Call date
18 April 2013

Coupon rate
9.66%

2nd Call date
18 April 2018

The Bank may elect to redeem the bonds on 18 April 2013, 18 April 2018 or any interest payment date subsequent to 18 April 2018. Interestis payable half yearly in arrears on 18 April and 18 October each year, beginning on 18 October 2008, up to and including the Second Call Dateand then quarterly thereafter. If the bonds are not called at the First Call Date, the coupon rate will reset to the five year interest swap rate plus
2.00%. Should the bonds not be called at the Second Call Date, the Coupon Rate from the Second Call Date onwards will be set on a quarterly
basis to the three month FRA rate plus 3.00%.
As at 31 March 2009, these bonds carried an A+ rating by Standard and Poor’s.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds, ANZ National has a general right and incertain specified circumstances an obligation, to defer payment of interest on the Bonds.
All of the subordinated bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirementsof Listing Rules 10.4 and 10.5. Rule 10.4 relates to the provision of preliminary announcements of half yearly and annual results to the NZX.
Rule 10.5 relates to preparing and providing a copy of half yearly and annual reports to the NZX. The Bank has been granted a waiver from theserules on the conditions that the Bank’s quarterly General Disclosure Statement (‘GDS’) is available on the Bank’s website, at any branch and at
the NZX; that bondholders are advised by letter that copies of the GDS are available at the above locations; that all bondholders are notified on
an ongoing basis, by way of a sentence included on the notification of interest payments, that the latest GDS is available for review at the above
locations; and that a copy of the GDS is sent to the NZX on an ongoing basis.
Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all creditors of the Bank.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for the perpetual subordinated debt which
qualifies as Upper Level Tier Two Capital.										2 8 . O R D I N A RY S H A R E C A P I TA L

Consolidated
		
		
		
		

Unaudited
31/03/2009
Number ofIssued Shares

Unaudited
31/03/2008
Number ofIssued Shares

ParentAudited30/09/2008
Number ofIssued Shares

Unaudited
31/03/2009
Number ofIssued Shares

Unaudited
31/03/2008
Number ofIssued Shares

Audited30/09/2008
Number ofIssued Shares

Ordinary shares at beginning of the period
Ordinary shares issued during the period

700,755,498
1,000,000,000

700,755,498 700,755,498-

700,755,498 700,755,498 700,755,498
1,000,000,000-

Ordinary shares at end of the period

1,700,755,498

700,755,498 700,755,498

1,700,755,498 700,755,498 700,755,498

		Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Ordinary share capital at beginning of the period
Ordinary share capital issued during the period

5,943
1,000

5,943
-

5,943
-

5,943
1,000

5,943
-

5,943
-

Ordinary share capital at end of the period

6,943

5,943

5,943

6,943

5,943

5,943

The authorised share capital of the Bank comprises 1,700,755,498 ordinary shares. At beginning and end of the period, 650,712 ordinary shareswere uncalled (31/03/2008 650,712 shares; 30/09/2008 650,712 shares).
On 24 March 2009, the Bank paid a $1 billion dividend to its parent company. At the same time, the Bank issued 1 billion ordinary shares to thevalue of $1 billion.
Voting rights
At a meeting: on a show of hands or vote by voice every member who is present in person or by proxy or by representative shall have one vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote for every share of which such member isthe holder.

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(CONTINUED)P A G E

2 9 . R E S E RV E S A N D R E TA I N E D E A R N I N G S

		Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

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

23
3

(1)
16

(1)
24

23
3

(1)
16

(1)
24

Balance at end of the period

26

15

23

26

15

23

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

24
(6)
(12)

84
(11)
(11)

84
(34)
(26)

24
(6)
(12)

84
(11)
(11)

84
(26)
(34)

Balance at end of the period

6

62

24

6

62

24

Total reserves

32

77

47

32

77

47

Retained earnings
Balance at beginning of the period
Profit after income tax

3,817
488

2,677
692

2,677
1,163

2,322
288

1,701
447

1,701
644

Total available for appropriation
Actuarial loss on defined benefit schemes after tax
Interim ordinary dividends paid

4,305
(28)
(1,000)

3,369
(8)
-

3,840
(23)
-

2,610
(28)
(1,000)

2,148
(8)
-

2,345
(23)
-

Balance at end of the period

3,277

3,361

3,817

1,582

2,140

2,322

The paid dividend on ordinary shares was $1.43 per share (31/03/2008 $nil per share; 30/09/2008 $nil per share).					

5 2A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

3 0 . C A P I TA L A D E Q UA C Y

Adoption of Basel II Accord
The Bank received accreditation from the RBNZ to adopt the internal ratings based approach under the Basel II Accord on 10 December 2007 for
calculating capital adequacy ratios, effective from 31 March 2008. The objective of the Basel II Accord is to develop capital adequacy guidelinesthat are more accurately aligned with the individual risk profile of banks. Basel II consists of three pillars - Pillar I covers the capital requirements
for banks for credit, operational and market risks, Pillar II covers all other material risks not already included in Pillar I, and Pillar III relates tomarket disclosure. These market disclosure requirements are set out below.
C A P I TA L M A N A G E M E N T P O L I C I E S 													The Bank is subject to regulation by the RBNZ. The RBNZ sets minimum capital requirements that the Bank must comply with that are specified
in the Bank’s Conditions of Registration. The Bank’s Conditions of Registration require capital adequacy ratios for the Banking Group to be
calculated under the Basel II framework, in accordance with the RBNZ document entitled ‘Capital Adequacy Framework (Internal Models BasedApproach)’ (BS2B) dated March 2008. 													The RBNZ defines total regulatory capital as tier one capital plus tier two capital less deductions from total capital. Tier one capital consists ofequity less prescribed deductions such as goodwill. Tier two capital consists of subordinated loan capital less any prescribed deductions.
The Bank has an Internal Capital Adequacy Assessment Process (‘ICAAP’) which complies with the requirements set out in the RBNZ document
entitled ‘Guidelines on a Bank’s Internal Capital Adequacy Assessment Process (“ICAAP”)’ (BS12) under the Bank’s Conditions of Registration.
The Bank’s ICAAP incorporates overall capital policies and objectives, capital management policies and plans, allocation of capital to business
units and stress testing of both risk and capital positions.													The Bank’s ICAAP policy outlines the core capital management principles that must be maintained to demonstrate that its capital levels:
consider all material risks; are consistent with its overall risk appetite and profile, current operating environment and stage in business cycle;
and that forward-looking stress testing of capital requirements is performed.
The Bank’s core capital objectives are to:													• Protect the interests of depositors, creditors and the shareholder.		
• Ensure the safety and soundness of the Bank’s capital position.		
• Ensure that the capital base supports the Bank’s risk appetite, and strategic business objectives, in an efficient and effective manner.							The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes setting, monitoring and obtaining
assurance for the Bank’s ICAAP policy and framework, standardised risk definitions for all material risks, materiality thresholds, capital adequacy
targets, internal economic risk capital principles and risk appetite. 											The Board has set capital minimum, trigger and operating range targets for both tier one and total capital that ensure sufficient capital ismaintained to:													• Meet minimum prudential requirements, as defined in the Bank’s Conditions of Registration.
• Ensure consistency with the Bank’s overall risk profile and financial positions, taking into account its strategic focus and business plan.
• Support the economic risk capital requirements of the business. The Bank aims to maintain capital consistent with a long-term Standard &Poor’s AA credit rating (and equivalent ratings from other rating agencies).
The Bank’s Asset & Liability Committee and its related Capital Management sub-committee are responsible for developing, implementing andmaintaining the Bank’s ICAAP framework, including ongoing monitoring, reporting and compliance.
The Bank’s ICAAP is subject to independent and periodic review conducted by internal audit, as appropriate.								The Bank has complied with all externally imposed capital requirements which it is subject to during both the current and comparative
periods.

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3 0 . C A P I TA L A D E Q UA C Y ( continued )CAPITAL ADEQUACY RATIOS UNDER THE BASEL II INTERNAL MODELS BASED APPROACH1					

Consolidated

				
				

Unaudited
31/03/2009

Unaudited
31/03/2008

Unaudited
30/09/2008

Tier One Capital			 8.74%
RBNZ minimum Tier One Capital ratio			 4.00%
Minimum Tier One Capital ratio under Crown Wholesale Guarantee		
6.00%
Total Capital			 12.34%
RBNZ minimum Total Capital ratio			 8.00%

7.36%
4.00%
n/a
9.84%
8.00%

8.13%
4.00%
n/a
11.72%
8.00%

Capital of the Banking Group as at 31 March 2009
Tier One Capital
Ordinary share capital
Revenue and similar reserves
Current period’s profit after tax
Less deductions from Tier One Capital- Goodwill- Other intangible assets- Equity investment in ING NZ- Cash flow hedging reserve- 50% of total expected loss to the extent greater than total eligible allowances
for impairment

6,943
2,821
488
3,265
59
242
6
143

Total Tier One Capital

6,537

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

1,156

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

1,679

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

143

Total Tier Two Capital

2,692

Total Capital

9,229
Consolidated as at 31/03/2009 (Unaudited)		

					
					
					
				
Exposure at				default
				$m

Risk weighted
exposure or
implied risk
weighted
exposure$m

Total capitalrequirement$m

Total required capital of the Banking Group as at 31 March 2009 (Unaudited)
Exposures subject to internal ratings based approach			139,149
Specialised lending exposures subject to slotting approach			7,354
Exposures subject to standardised approach			260
Equity exposures			
233
Other exposures			
3,161
Total credit risk			
150,157
Operational risk				Market risk				Supervisory adjustment1				
Total capital requirement				54,338
7,722
235
989
590
63,874
5,638
3,515
1,747
74,774

4,347
618
19
79
47
5,110
451
281
140
5,982

1.

P A G E$m

5 4

The supervisory adjustment mandates an adjustment of 15% of risk-weighted retail mortgages and an adjustment, if required, in order to maintain the Basel II Minimum Capital
Requirements at no less than 90% of the Basel I Minimum Capital Requirements, in accordance with the Bank’s Conditions of Registration. No adjustment was required to maintain the
Basel II Minimum Capital Requirements at no less than 90% of the Basel I Minimum Capital Requirements at 31 March 2009.													A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

For personal use only

(CONTINUED)

3 0 . C A P I TA L A D E Q UA C Y ( continued )CAPITAL ADEQUACY RATIOS UNDER THE BASEL I APPROACH
		

Consolidated

Parent				

Unaudited
Unaudited
Unaudited
31/03/2009 31/03/2008 30/09/2008

Unaudited Unaudited
Unaudited
31/03/2009 31/03/2008 30/09/2008

Tier One Capital
Total Capital
Total risk-weighted exposures
RBNZ minimum ratios:Tier One Capital
Total Capital

8.24%
11.74%
81,093

7.59%
10.27%
76,6207.75%
11.24%
80,717

8.15%
11.58%
79,193

7.34%
9.23%
74,836

7.65%
11.09%
78,860

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

Basel I capital adequacy in respect of the Banking Group and Registered Bank has been derived in accordance with the RBNZ document entitled‘Capital Adequacy Framework (Basel I Approach)’ (BS2) dated March 2008.											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 entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008 to measure capital requirements.
Under this IRB framework, banks use their own measures for calculating the level of credit risk associated with customers and exposures, by way ofthe primary components of:
Probability of Default (‘PD’) - an estimation of the level of risk of borrower default graded by way of rating models used both at loan originationand for ongoing monitoring. For Retail Mortgage exposures the Banking Group has adopted the RBNZ prescribed exposure weighted minimum PD
of 1.25%;
Exposure at Default (‘EAD’) - the expected facility exposure at default; andLoss Given Default (‘LGD’) - an estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default andexpressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank applies the downturn LGDs according to loan-to-valuation
ratio (‘LVR’) prescribed bands as set out in BS2B. For Rural Banking exposures within the Corporate asset class the Banking Group has adopted RBNZ
prescribed downturn LGDs which are more conservative than internal estimates.
For exposures classified under Specialised Lending, the Banking Group uses slotting tables prescribed by the RBNZ rather than internal estimates.
The exceptions to IRB treatment are five minor portfolios where, due to systems constraints or other reasons, determining IRB estimates is not
currently feasible or appropriate. Risk weights for these exposures are calculated under a separate treatment as set out in the RBNZ document
entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A).
Set out below is a schedule showing the classification of Banking Group exposures according to rating approach:			Internal Ratings Based Approach
IRB Asset Class

Borrower Type

Rating Approach

SovereignCrown

IRB - Advanced

RBNZ

IRB - Advanced

Any other sovereign and its central bank

IRB - Advanced

Bank

Registered banks

IRB - Advanced

Corporate

Corporation, partnerships or proprietorships that do not fit any other asset classification

IRB - Advanced

Corporate Small to Medium Enterprises (‘SME’) with turnover of less than $50 million

IRB - Advanced

Retail Mortgages

Individuals’ borrowings against residential property

IRB - Advanced

Other Retail

Other lending to individuals (including credit cards)

IRB - Advanced

SME business borrowers

IRB - Advanced

Project Finance

IRB - Slotting

Income-Producing Real Estate

IRB - Slotting

Corporate sub-class –Specialised lending
EquityOther assets

IRB
All other assets not falling within any of the above classes

IRB

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(CONTINUED)P A G E

3 0 . C A P I TA L A D E Q UA C Y ( continued )A risk weight of 100% applies to premises and equipment and all other exposures not otherwise defined in the BS2B document, except for cash,
gold, New Zealand dollar denominated claims on the Crown and the RBNZ which receive a 0% risk weight.
Standardised Approach
Exposure Class

Exposure Type

Reason for Standardised Approach

Future treatment

Residential Mortgages

ANZ Retail residential investment loans

System constraints

Move to IRB

Corporate

Purchased receivables

Nature of productRemain Standardised

Merchant card prepayment exposures

System constraints

Move to IRB

Corporate credit cards

System constraints

Move to IRB

Mondex

Immaterial

Remain Standardised

Bank

CONTROLS SURROUNDING CREDIT RISK RATING SYSTEMS													The term Rating System covers all of the methods, processes, controls, data collection and technology that support the assessment of credit
risk, the assignment of internal credit risk ratings and the quantification of associated default and loss estimates.
All material aspects of the rating systems and risk estimate processes are governed by the Risk Management Committee of the Banking
Group. Risk grades are an integral part of reporting to senior management and executive. Management and staff of credit risk functions, inconjunction with the relevant Retail and Wholesale risk committees, regularly assess the performance of the rating systems, identify any areas
for improvement and monitor progress on previously identified development work needed.
The Banking Group’s rating systems are governed by a comprehensive framework of controls that operate at the business unit and support
centres, and through central audit and validation processes. All policies, model designs, model reviews, methodologies, validations, responsibilities,
systems and processes supporting the ratings systems are fully documented.
The Banking Group’s Retail and Wholesale ratings functions work closely with the Ultimate Parent Bank’s risk ratings functions, are independentof operational lending activities and are responsible for the ratings strategies and ongoing management of credit risk models within New
Zealand. The annual validation of models used across the Banking Group is a function undertaken by the ANZ Decision Model Validation unit,
which is also independent of credit risk operational functions and is responsible for overseeing the design, implementation and performance of
all rating models in the Banking Group.
The target approach to modelling for the Banking Group is to deploy the model most suitable for the environment. At present this involves
a combined approach to modelling, utilising models developed in New Zealand and ANZ-developed models tested and validated for use in
New Zealand as appropriate.

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(CONTINUED)

3 0 . C A P I TA L A D E Q UA C Y ( continued )CREDIT RISK EXPOSURES SUBJECT TO INTERNAL RATINGS BASED APPROACH
The following tables detail the capital requirements under the internal rating based approach exposures by asset class:		 Consolidated as at 31/03/2009 (Unaudited)					
Exposure					weighted LGD					 used for the
Exposure			Total exposure or Exposure at
capital weighted risk Risk weighted Total capital			principal amountdefault calculation
weightexposure2 requirement
			
$m
$m
%
%
$m
$m

On-balance sheet exposures
Corporate 		Sovereign 		
Bank 		Retail mortgages 		
Other retail		

37,1792,267
8,572
45,156
5,351

37,1162,234
8,082
45,156
5,351

38
5
64
21
52

60
1
13
23
53

23,52515
1,106
10,799
3,023

1,882
1
89
864
242

Total on-balance sheet exposures		

98,52597,93933

37

38,468

3,078

Off-balance sheet exposures
Corporate 		Sovereign 		
Bank 		Retail mortgages 		
Other retail

13,788
11
995
5,666
5,115

13,101
11
895
5,392
5,365

48
5
52
21
60

55
1
21
27
32

7,572
202
1,547
1,806

606
16
124
144

Total off-balance sheet exposures		

25,57524,76445

42

11,127890

Market related contracts
Corporate 		Sovereign 		
Bank		

66,858
4,733
481,760

2,944
515
12,987

57
5
65

52
1
23

1,629
6
3,108

130
249

Total market related contracts		

553,351

16,446

62

27

4,743

379

Total credit risk exposures subject to theinternal ratings based approach		

677,451

139,14938

37

54,338

4,347

2.

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

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3 0 . C A P I TA L A D E Q UA C Y ( continued )		 Consolidated as at 31/03/2009 (Unaudited)					
Exposure					 weighted LGD					 used for the
Exposure			
Probability
Exposure at
capital weighted risk Risk weighted Total capital			of default
default
calculation
weightexposure2 requirement
		
%
$m
%
%
$m
$m

Corporate
CCR rating
0 - 2 		 0.05%
3 - 4 		 0.32%
5			 1.01%
6 			 2.31%
7-8
8.15%
Default
100.00%6,308
23,845
12,208
7,248
3,008
544

60
38
39
39
42
49

26
40
71
90
142
50

1,744
10,058
9,203
6,904
4,531
286

140
805
736
552
362
23

Total corporate credit risk exposures 		

2.18%

53,16141

58

32,726

2,618

Sovereign
CCR rating
0 			
1 			
2 			
3 			
4 - 8 		Default 		

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

2,760
-

5
n/a
n/a
n/a
n/a
n/a

1
n/a
n/a
n/a
n/a
n/a

21
-

1
-

Total sovereign credit risk exposures 		

0.01%

2,760

5

1

21

1

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

0.01%
0.02%
0.07%
1.14%
5.23%
n/a

15,865
4,650
1,408
27
14
-

65
62
57
65
65
n/a

18
18
23
111
260
n/a

3,091
910
344
32
39
-

247
73
28
3
3
-

Total bank credit risk exposures 		

0.02%

21,964

64

19

4,416

354

CCR rating
0 - 3 		 0.22%
4 			 0.36%
5 			 0.94%
6 			 2.48%
7-8
13.03%
Default		 100.00%

13,464
18,467
9,805
5,831
2,226
755

21
20
22
23
24
29

9
12
26
52
110
22

1,277
2,407
2,703
3,185
2,597
177

102
193
216
255
208
14

Total residential mortgage credit risk exposures 		

2.73%

50,54821

23

12,346988

Other retail
CCR rating
0 - 2 		 0.10%
3 - 4 		 0.27%
5 			 1.09%
6 			 2.04%
7 - 8 		 11.63%
Default 		 100.00%

1,212
4,434
2,584
1,667
671
148

80
55
52
51
54
53

20
24
55
66
93
87

256
1,123
1,493
1,163
658
136

20
90
119
93
53
11

Total other retail credit risk exposures 		

10,716

56

43

4,829

386

Retail mortgages

2.81%

Credit risk exposures subject to the internal ratings based approach have been derived in accordance with the Reserve Bank of New Zealanddocument entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008 and other relevant correspondence
from the RBNZ setting out prescribed credit risk estimates.
2. Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.

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3 0 . C A P I TA L A D E Q UA C Y ( continued )SPECIALISED LENDING SUBJECT TO THE SLOTTING APPROACH
		

Consolidated as at 31/03/2009 (Unaudited)

			
			
				

Exposure		 Risk weighted Total capitalamountRisk weight
exposure2 requirement
$m
%
$m
$m

On-balance sheet exposures3
Strong			Good			Satisfactory			
Weak			Default			

1,539
2,632
1,757
383
128

70
90
115
250
-

1,143
2,511
2,142
1,015
-

92
201
171
81
-

Total on-balance sheet exposures subject to the slotting approach			

6,439

100

6,811

545

		
		
			

Exposure Exposure atamountdefault$m$m

Average risk Risk weighted Total capitalweightexposure2 requirement%$m$m

Off-balance sheet exposures
Undrawn commitments and other off balance sheet exposures		
Market related contracts		

771
3,453

713
202

94
94

711
200

57
16

Total off-balance sheet exposures subject to the slotting approach

4,224

915

94

911

73

Specialised lending subject to the slotting approach has been derived in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.
CREDIT RISK EXPOSURES SUBJECT TO THE STANDARDISED APPROACH
		

Consolidated as at 31/03/2009 (Unaudited)

				
				
				

Exposureamount$m

Average
Risk weight%On-balance sheet exposures
Corporates			
Residential mortgages				
Past due assets			

55
56
1

100
39
134

58
23
2

5
2
-

Total on-balance sheet exposures subject to the standardised approach			

112

70

83

7

		Average credit
Exposure conversion
amountfactor		$m%Creditequivalentamount$m

Off-balance sheet
Undrawn commitments and other off balance sheet		

430

34

148

Risk weighted Total capital
exposure2 requirement$m$m

Average risk Risk weighted Total capitalweightexposure2 requirement
%
$m
$m

97

152

12

Credit risk exposures subject to the standardised approach have been calculated in accordance with the Reserve Bank New Zealand document
entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A), dated November 2007.
2.

Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.													3. The supervisory categories of specialised lending above are associated with a specific risk-weight. These categories broadly correspond to the following external credit assessments using
the Standard & Poor’s rating scale: Strong BBB- or better, Good BB+ or BB, Satisfactory BB- or B+ and Weak B to C-.

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3 0 . C A P I TA L A D E Q UA C Y ( continued )EQUITY EXPOSURES		

Consolidated as at 31/03/2009 (Unaudited)
Exposure		 Risk weighted Total capitalamount Risk weight
exposure2 requirement
$m
%
$m
$m

All other equity holdings (not deducted from capital)				

233

400

989

79

Equity exposures have been calculated in accordance with the Reserve Bank of New Zealand document entitled ‘Capital Adequacy Framework(Internal Models Based Approach)’ (BS2B) dated March 2008.
OTHER EXPOSURES		

Consolidated as at 31/03/2009 (Unaudited)
Exposureamount$m

Average risk
weight%Cash and gold bullion			

187

-

-

-

New Zealand dollar denominated claims on the Crown and the RBNZ			

2,418

-

-

-

556

100

590

47

3,161

18

590

47

Other assets		
Total other IRB credit risk exposures 			Risk weighted Total capital
exposure2 requirement$m$m

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

OPERATIONAL RISK						
Total					 Implied risk operational					weighted risk capital					
exposure requirement						
$m$m

Operational risk capital requirement as at 31 March 2009 (Unaudited)
Advanced Measurement Approach for operational risk					

5,638

451

The Banking Group uses the Advanced Measurement Approach for determining its regulatory capital requirement for operational risk calculated
in accordance with the Reserve Bank of New Zealand document entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’(BS2B) dated March 2008.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. Operationalrisk incorporates legal risk which includes, but is not limited to, exposures to fines, penalties, or punitive damages resulting from regulatory
actions, as well as private settlements.
The Banking Group has implemented an organisational-wide (‘top of house’) Loss Distribution Approach (LDA) calculation to determine theinitial Operational Risk Capital. The data inputs into the LDA process include internal and external loss data and scenario analysis.		
The initial capital number is calculated at the group-wide level and then distributed and adjusted for business environment and internal controls
down to the business units (and completion points) using a Risk Drivers and Controls Approach (RDCA) Methodology. The RDCA is a risk andcontrol self assessment system which:													• assesses the level of the Banking Group’s exposure to specified drivers of risk;• assesses the scope and quality of the Banking Group’s internal control environment, key operational processes and risk mitigants; and• directly links these assessments to operational risk capital.
The Banking Group’s Operating Risk Capital is calculated using the ANZ Group methodology, but with standalone New Zealand inputs to ensure
there are no diversification benefits.
The Banking Group does not incorporate any insurance mitigation impact into its capital number. Accordingly, there are no insurance related
questions contained within the risk drivers and control assessment (scorecard) methodology.
2.

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

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3 0 . C A P I TA L A D E Q UA C Y ( continued )MARKET RISK							Implied risk							weighted							exposure							
$m

Aggregate
capital charge$mMarket risk capital requirement as at 31 March 2009 (Unaudited)
Interest rate risk						 3,406
Foreign currency risk						41Equity risk						
68

273
3
5

							 3,515

281

The market risk capital requirement has been calculated in accordance with the Reserve Bank of New Zealand document entitled ‘Capital
Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.
CREDIT RISK MITIGATIONThe Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment. Collateral
security in the form of real property or a security interest in personal property is generally taken for business credit except for major government,bank and corporate counterparties of strong financial standing. Longer term consumer finance in the form of housing loans is generally secured
against real estate while short term revolving consumer credit is generally unsecured.
Netting is defined as the set-off of two or more cash flows, assets, or liabilities. The types of netting used by the Banking Group are payments
or settlement, close-out, bilateral or multilateral. The Banking Group establishes its netting rights through various means including legallybinding set-off agreements, collateral agreements, facility agreements, security agreements and the terms and conditions of trading (including
ISDA Master Agreements when considered appropriate). Where documented rights to net have been established, a net limit may be used for
exposure assessment and monitoring.
Guarantees used for credit risk mitigation may be provided by bank, sovereign, corporate or individual counterparties. Guarantors are separately
rated, and their capacity to honour their commitments under the guarantee is also assessed. The obligor is also separately rated on a standalone basis, and then the rating of the obligor is adjusted to take into account the strength of the guarantor. The size of the adjustment reflects
the Banking Group’s assessment of the strength of the guarantor, but is capped at the guarantor’s rating so there is no recognition of “double
default”. Guaranteed exposures are subject to Banking Group policy covering market and credit risk concentrations.
As at 31 March 2009, under the IRB approach the Banking Group had $867m of Corporate exposures covered by guarantees and $8m of
Corporate exposures covered by credit derivatives. None of the credit risk exposures subject to the Standardised approach were covered byeligible financial collateral.
RETAIL MORTGAGES BY LOAN-TO-VALUATION RATIOAs required by the RBNZ, LVRs are calculated as the current loan balance divided by the Bank’s valuation of the security property at originationof the exposure. The exposure amount used to calculate LVR excludes commitments to lend. 																			
						
							

Exposureamount$m

LVR range
0% - 59%					60% - 69%						70% - 79%						80% - 89%					Over 90%					21,791
7,168
8,834
5,756
5,114

Total retail mortgage credit risk exposures subject to the internal ratings based approach			48,663

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3 0 . C A P I TA L A D E Q UA C Y ( continued )PILLAR II CAPITAL FOR OTHER MATERIAL RISKS						 Total capital						 requirement							$m

Internal capital allocation for other material risks						

145The internal capital allocation for other material risks has been derived in accordance with the Bank’s Conditions of Registration.													The Banking Group actively manages and measures all material risks affecting its operations. These risks go beyond the traditional banking risksof credit, operational and market risks. The measurement and management of any other material risk is covered in the Bank’s Economic Capitalmodel which is used within the Bank’s ICAAP. Economic capital is defined as the maximum loss in excess of that which is to be expected in thenormal course of business, assessed at a given confidence level. For the Banking Group that confidence level is set at 99.97% which is consistent
with the Bank’s risk appetite of maintaining its AA credit rating.
The internal capital allocation for the Banking Group’s other material risks as at 31 March 2009 was $145 million, comprising premises andequipment risk and capitalised origination fees risk.
Other material risks outside of the credit, operational and market risks that the Banking Group measures and manages are generally alreadydeducted from Tier One capital. As a result, the Banking Group has not included capital for these risks in the internal capital allocation for othermaterial risks.													CAPITAL ADEQUACY OF ULTIMATE PARENT BANK		Consolidated				 Unaudited
Unaudited
Unaudited				
Basel II
Basel II
Basel II						 31/03/2009 31/03/2008 30/09/2008

Tier One Capital					Total Capital					

8.2%
11.0%

6.9%
10.1%

7.7%
11.1%

For calculation of minimum capital requirements under Pillar I of the Basel II Accord, the Ultimate Parent Bank has been accredited by theAustralian Prudential Regulatory Authority (APRA) to use the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk
weighted assets and the Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent. The Basel II Accord cameinto effect from 1 January 2008.
Under prudential regulations, the Ultimate Parent Bank is required to hold a prudential capital ratio (PCR) as determined by APRA. Subject to
APRA’s discretion, the minimum PCR is 8 per cent of its total risk weighted assets. Half of this capital must be held in the form of Tier One
Capital. Prior to 1 January 2008, the minimum capital ratio, subject to APRA’s discretion, was also 8 per cent of its total risk weighted assets
calculated under the Basel I methodology and at least half of this capital was held in the form of Tier One Capital.
The Ultimate Parent Bank met the minimum capital adequacy requirements set by APRA as at 31 March 2009 and for comparative priorperiods.
The Ultimate Parent Bank is required to publicly disclose Pillar III financial information as at 31 March 2009. In the Ultimate Parent Bank’s
Consolidated Financial Report, Dividend Announcement and Appendix 4D for the Half Year to 31 March 2009, capital adequacy ratios calculated
under the Basel II methodology were disclosed. This report can be accessed at the following website address: www.anz.com.

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T

Strategy in using financial instruments
Financial instruments are fundamental to the Banking Group’s business, constituting the core element of its operations. Accordingly, the risks
associated with financial instruments are a significant component of the risks faced by the Banking Group. Financial instruments create, modify
or reduce the credit, market (including traded or fair value risks and non-traded or interest and foreign currency related risks) and liquidity risksof the Banking Group’s balance sheet. These risks and the Banking Group’s policies and objectives for managing such risks are outlined below.
The Banking Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Banking Group. 												CREDIT RISK
Credit risk is the risk of financial loss from counterparties being unable to fulfil their contractual obligations. The Banking Group assumes credit
risk in a wide range of lending and other activities in diverse markets and many jurisdictions. The credit risks arise not only from traditional
lending to customers, but also from inter-bank, treasury, international trade and capital market activities around the world.
The Banking Group has an overall lending objective of sound growth for appropriate returns. The credit risk objectives of the Banking Group are
set by the Board and are implemented and monitored within a tiered structure of delegated authority, designed to oversee multiple facets ofcredit risk, including asset writing strategies, credit policies/controls, single exposures, portfolio monitoring and risk concentrations.
The credit risk management framework exists to provide a structured and disciplined process to support those objectives. The integrity of thecredit risk function is maintained by the independence of the credit chain and is supported by comprehensive risk analysis, risk tools, monitoringprocesses and policies.
CREDIT RISK MANAGEMENT
The credit risk management framework is in place across the Banking Group with the aim of ensuring a structured and disciplined approach
is maintained in achieving the objectives set by the Board. The framework focuses on policies, people, skills, vision, values, controls, risk
concentrations and portfolio balance. It is supported by portfolio analysis and asset-writing strategies, which guide lending decisions andidentify segments of the portfolio requiring attention. The effectiveness of the framework is monitored through a series of compliance andreporting processes.
An independent Risk Management function, at Banking Group, Divisional and Business Unit levels, is staffed by risk specialists. In regard to credit
risk management, the objective is for Risk Management to provide robust credit policies, to make independent credit decisions, and to provide
strong support to front line staff in the application of sound credit practices. In addition to providing independent credit assessment on lending
decisions, Risk Management also performs key roles in portfolio management by development and validation of credit risk measurement
systems, loan asset quality reporting, and development of credit standards and policies.					The credit risk management framework is top down. Where required, the framework is defined firstly by the Banking Group’s Vision and Values
and secondly, by Credit Principles and Policies. The effectiveness of the credit risk management framework is validated through the complianceand monitoring processes.
Risk Management’s responsibilities for credit risk policy and management are executed through dedicated departments, which support the Banking
Group’s business units. All major Business Unit credit decisions require approval from both business writers and independent risk personnel.
Credit Risk is controlled through a combination of approvals, limits, reviews and monitoring procedures that are carried out on a regular basis,the frequency of which is dependent upon the level of risk. Credit risk policy and management is executed through the Chief Risk Officer who
has various dedicated areas within the Risk Management division. Wholesale Risk services the Banking Group’s corporate, investment banking
and rural lending activities through dedicated teams. Retail Risk services the Banking Group’s small business and consumer customers. The
Portfolio Reporting team within Risk Management provides an independent overview of credit risk across the Bank at a portfolio level. The
Banking Group allows sole discretion for transaction approvals at the Business Unit level in both the retail and wholesale lending sectors, withlarger transactions approved by Retail Risk and Wholesale Risk.
The credit risk review function within Internal Audit also provides a further independent check mechanism to ensure the quality of credit
decisions. This includes providing independent periodic checks on asset quality and compliance with the agreed standards and policies acrossthe Banking Group.												P A G E

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Country risk management
Some customer credit risks involve country risk, whereby actions or events at a national or international level could disrupt servicing ofcommitments. Country risk arises when payment or discharge of an obligation will, or could, involve the flow of funds from one country toanother or involve transactions in a currency other than the domestic currency of the relevant country.
Country ratings are assigned to each country where the Banking Group incurs country risk and have a direct bearing on the Banking Group’s
risk appetite for each country. The country rating is determined through a defined methodology based around external ratings agencies’
ratings and internal specialist opinion. It is also a key risk consideration in the Banking Group’s capital pricing model for cross border flows.
The recording of country limits provides the Banking Group with a means to identify and control country risk. Country limits ensure that
there is a country-by-country ceiling on exposures that involve country risk. They are recorded by time to maturity and purpose of exposure,e.g. trade, markets, project finance. Country limits are managed centrally by the Ultimate Parent Bank, through a global country risk exposure
management system managed by a specialist unit within Institutional Risk.					.
Portfolio stress testing
Stress testing is integral to strengthening the predictive approach to Risk Management and is a key component to managing risk appetite, asset
writing strategies and business strategies. It creates greater understanding of impacts on financial performance through modelling relationships
and sensitivities between geographic, industry and business unit exposures under a range of macro economic scenarios.
The Ultimate Parent Bank has a dedicated stress testing team that assists business and risk executives in the Banking Group to model andreport periodically to management and the Board Risk Committee on a range of scenarios and stress tests.
Portfolio analysis and reporting
Credit portfolios are actively monitored at each layer of the risk structure to ensure credit deterioration is quickly detected and mitigatedthrough the implementation of remediation strategies.												Businesses incurring credit risk undertake regular and comprehensive analysis of their credit portfolios. Issue identification and adherence toperformance benchmarks are reported to risk and business executives through a series of reports including monthly ‘asset quality’ reporting.
This process is undertaken by or overseen by Banking Group Risk Management ensuring an efficient and independent conduit exists to quickly
identify and communicate emerging credit issues to executives and the Board.
Collateral management
Banking Group credit principles specify to only lend what the counterparty has the capacity and ability to repay and the Banking Group
sets limits on the acceptable level of credit risk. Acceptance of credit risk is firstly based on the counterparty’s assessed capacity to meet
contractual obligations (i.e. interest and capital repayments). Obtaining collateral is only used to mitigate credit risk. Procedures are designed
to ensure collateral is managed, legally enforceable, conservatively valued and adequately insured where appropriate. Banking Group policy
sets out the types of acceptable collateral, including:• cash;• mortgages over property;• charges over business assets, e.g. premises, stock and debtors;• charges over financial instruments, e.g. debt securities and equities in support of trading facilities; and• financial guarantees.
In the event of customer default, any loan security is usually held as mortgagee in possession while action is taken to realise it. Therefore the
Banking Group does not usually hold any real estate or other assets acquired through the enforcement of security.
The Banking Group uses International Swaps and Derivatives Association (ISDA) Master Agreements to document derivatives’ activities to limit
exposure to credit losses. The credit risk is reduced by a master agreement to the extent that, if an event of default occurs, all contracts with thecounterparty are terminated and settled on a net basis. Further, it is the Banking Group’s preferred practice to include all products covered by
the ISDA in the Credit Support Annex (“CSA”), in order to achieve further credit exposure reduction. Under a CSA, collateral is passed between
the parties, depending on the aggregate mark-to-market (positive or negative) of derivative trades between the two entities, to mitigate themarket contingent counterparty risk inherent in the outstanding positions.																								

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities within the same geographic
region, or when they have similar risk characteristics that would cause their ability to meet contractual obligations to be similarly affected bychanges in economic or other conditions.												The Banking Group monitors its portfolios to identify and assess risk concentrations. Concentration limits are used to guard against large single
customer or correlated credit risks. Risk Management, Business Unit Executives and Senior Management monitor large exposure concentrations
through a monthly list of the Banking Group’s top Corporate exposures. The Credit and Market Risk Committee (six monthly) and Board Risk
Committee (annually) review a comprehensive list of single customer concentration limits and customers’ adherence to these limits.
Analyses of financial assets by industry sector are based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.
Concentrations of credit risk analysis:
The composition of financial instruments, that give rise to credit risk, by industry and geography:
Consolidated
Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments3
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2009
Industry
Agriculture, forestry, fishing
Business services
Construction
Entertainment, leisure and tourism
Finance and insurance
Government and local authority1
Manufacturing
Personal lending
Property services
Retail trade
Transport and storage
Wholesale trade
Other2		
Individual provision for credit impairment
Collective provision for credit impairment
		
Fair value hedge adjustment
Total financial assets

214
7,711
2,670
141
4
211
23
22
25
11,021
11,021

30
2,380
680
14
2
56
3,162
3,162

225
9
5
47
13,418
486
358
68
54
77
16
222
14,985
14,98518,708
1,484
901
976
1,618
1,099
3,261
50,085
9,157
1,712
1,448
1,634
1,463
93,546
(269)
(607)
(876)
1,050
93,720

143
11
7
7
12
8
25
383
70
13
11
12
12
714
714

6,885
546
332
359
595
404
1,200
10,781
3,371
630
533
601
539
26,776
26,776

26,175
2,050
1,245
1,419
25,734
5,347
4,999
61,24912,670
2,620
2,094
2,285
2,317
150,204
(269)
(607)
(876)
1,050
150,378

Geography									New Zealand
10,120
1,678
4,075
92,521714
26,776
135,884
Overseas901
1,484
10,9101,199
14,494
Total financial assets
11,021
3,162
14,98593,720714
26,776150,378
1.

Government and local authority includes exposures to government administration and defence, education and health, and community services.

2.

Other includes exposures to electricity, gas and water, communications, and personal services.									

3.

Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.									P A G E

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Consolidated
Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments3
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2008
Industry
Agriculture, forestry, fishing
Business services
Construction
Entertainment, leisure and tourism
Finance and insurance
Government and local authority1
Manufacturing
Personal lending
Property services
Retail trade
Transport and storage
Wholesale trade
Other2		
Individual provision for credit impairment
Collective provision for credit impairment
		
Fair value hedge adjustment
Total financial assets

310
4,057
2,513
286
410
44
36
97
7,753
7,753

28
1,896
142
104
14
61
2,245
2,245

19
10
1
8
4,423
50
126
46
37
16
129
4,865
4,865

15,431
931
977
1,047
1,531
1,081
2,673
54,262
9,126
1,632
1,410
1,506
1,757
93,364
(51)
(471)
(522)
(263)
92,579

147
9
9
10
15
10
26
518
87
16
13
14
17
891
891

Geography							New Zealand
6,881
1,310
1,141
90,908891
Overseas
872
935
3,724
1,671
Total financial assets
7,753
2,245
4,865
92,579891
1. Government and local authority includes exposures to government administration and defence, education and health, and community services.
2. Other includes exposures to electricity, gas and water, communications, and personal services.
3. Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.

6 6

7,080
427
448
480
702
496
1,226
11,393
4,189
749
647
691
806
29,33429,33422,987
1,377
1,435
1,573
12,6244,292
4,441
66,173
13,402
2,853
2,165
2,263
2,867
138,452
(51)
(471)
(522)
(263)
137,667

29,33429,334130,465
7,202
137,667

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Consolidated
Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments3
Total		
$m
$m
$m
$m
$m
$m
$m

Audited 30/09/2008
Industry
Agriculture, forestry, fishing
Business services
Construction
Entertainment, leisure and tourism
Finance and insurance
Government and local authority1
Manufacturing
Personal lending
Property services
Retail trade
Transport and storage
Wholesale trade
Other2		
Individual provision for credit impairment
Collective provision for credit impairment
		
Fair value hedge adjustment
Total financial assets

105
5,104
3,966
209
392
31
23
40
9,870
9,870

28
2,423
255
8
4
15
2,733
2,733

74
9
1
7
6,809
277
208
20
13
20
11
84
7,533
7,533

17,925
1,201
921
1,051
1,817
642
3,129
54,831
9,271
1,903
1,392
1,849
2,060
97,992
(132)
(534)
(666)
353
97,679

163
11
8
10
17
6
29
499
84
17
13
17
19
893
893

5,018
559
427
488
843
298
1,452
10,704
4,303
883
646
858
956
27,43527,43523,285
1,780
1,357
1,584
17,013
5,444
5,035
66,034
13,678
3,208
2,106
2,758
3,174
146,456
(132)
(534)
(666)
353
146,143

Geography												New Zealand
7,581
1,229
1,839
96,452893
27,435
135,429
Overseas
2,289
1,504
5,694
1,227
10,714
Total financial assets
9,870
2,733
7,533
97,679893
27,435
146,143
1. Government and local authority includes exposures to government administration and defence, education and health, and community services.
2. Other includes exposures to electricity, gas and water, communications, and personal services.
3. Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )ParentLiquid assets
and due fromother financial
institutions$m

Unaudited 31/03/2009
Industry
Agriculture, forestry, fishing
214
Business services
Construction
Entertainment, leisure and tourism
Finance and insurance
6,992
Government and local authority1
2,632
Manufacturing
141
Personal lending
Property services
4
Retail trade
211
Transport and storage
23
Wholesale trade22
Other225
		
10,264
Individual provision for credit impairment
Collective provision for credit impairment
		
Fair value hedge adjustment
Total financial assets
10,264

Trading				securities
Derivative		
Due fromand available
financial
Net loanssubsidiaryfor-sale assets
instruments and advances companies
$m
$m
$m
$m

30
10,202680
14
2
56
10,984
10,984225
9
5
47
13,595
486
358
68
54
77
16
222
15,162
15,162

18,383
1,356
688
947
1,443
1,006
3,079
49,633
9,154
1,554
1,071
1,571
1,205
91,090
(243)
(568)
(811)
1,050
91,329Other
Creditfinancialrelatedassets commitments3
$m
$m

1,785
1,785
1,785

130
10
5
7
10
7
22
348
65
11
8
11
9
643
643

6,876
516
312
355
554
383
1,172
10,749
3,364
591
528
598
529
26,527
26,527

Total$m

25,828
1,891
1,010
1,386
34,581
5,194
4,786
60,73012,655
2,421
1,709
2,218
2,046
156,455
(243)
(568)
(811)
1,050
156,694

Geography								New Zealand
9,897
9,500
4,252
90,1301,785
643
26,527 142,734
Overseas367
1,484
10,9101,199
13,960Total financial assets
10,264
10,984
15,162
91,3291,785
643
26,527 156,694
1. Government and local authority includes exposures to government administration and defence, education and health, and community services.
2. Other includes exposures to electricity, gas and water, communications, and personal services.
3. Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.

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For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		ParentLiquid assets
and due fromother financial
institutions$m

Unaudited 31/03/2008
Industry
Agriculture, forestry, fishing
Business services
Construction
Entertainment, leisure and tourism
Finance and insurance
Government and local authority1
Manufacturing
Personal lending
Property services
Retail trade
Transport and storage
Wholesale trade
Other2		
Individual provision for credit impairment
Collective provision for credit impairment
		
Fair value hedge adjustment
Total financial assets

310
3,691
2,444
286
410
44
36
97
7,318
7,318

Trading				securities
Derivative		
Due fromand available
financial
Net loanssubsidiaryfor-sale assets
instruments and advances companies
$m
$m
$m
$m

28
1,886
142
104
14
61
2,235
2,235

19
10
1
8
4,423
50
126
46
37
16
129
4,865
4,865

15,138
820
751
1,026
1,368
991
2,486
53,763
9,123
1,480
1,024
1,466
1,477
90,913
(41)
(438)
(479)
(263)
90,171

1,506
1,506
1,506

Other
Creditfinancialrelatedassets commitments3
$m
$m

135
7
7
9
12
9
22
478
81
13
9
13
13
808
808

7,080
393
429
471
694
474
1,218
11,340
4,187
738
630
681
775
29,11029,110Total$m

22,682
1,230
1,188
1,542
13,5804,110
4,242
65,581
13,391
2,687
1,758
2,212
2,552
136,755
(41)
(438)
(479)
(263)
136,013

Geography									New Zealand
6,708
1,300
1,049
88,5001,506
808
29,110 128,981
Overseas
610
935
3,816
1,671
7,032
Total financial assets
7,318
2,235
4,865
90,171
1,506
808
29,110 136,013
Audited 30/09/2008									Industry												Agriculture, forestry, fishing
105
74
17,604145
5,018
22,946
Business services
9
1,078
9
527
1,623
Construction
1
689
6
402
1,098
Entertainment, leisure and tourism
28
7
1,026
8
462
1,531
Finance and insurance
4,599
2,421
6,820
1,648
1,992
14
811
18,305Government and local authority1
3,965
255
277
560
5
274
5,336
Manufacturing
209
8
208
2,946
24
1,441
4,836
Personal lending
54,358449
10,69065,497
Property services
20
9,267
77
4,303
13,667Retail trade
392
13
1,723
14
843
2,985
Transport and storage
31
4
20
1,009
8
644
1,716
Wholesale trade
23
11
1,797
15
854
2,700
Other2
40
15
84
1,795
15
953
2,902
		
9,364
2,731
7,544
95,5001,992
789
27,222 145,142
Individual provision for credit impairment
(115)
(115)
Collective provision for credit impairment
(497)
(497)
		
(612)
(612)
Fair value hedge adjustment
353
353
Total financial assets
9,364
2,731
7,544
95,241
1,992
789
27,222 144,883
Geography
New ZealandOverseas
Total financial assets

7,435
1,929
9,364

1,227
1,504
2,731

1,850
5,694
7,544

94,014
1,227
95,241

1,992
1,992

789
789

27,222
27,222

134,529
10,354
144,883

1.

Government and local authority includes exposures to government administration and defence, education and health and community services.						

2.

Other includes exposures to mining, electricity, gas and water, communications, and personal services.						

3.

Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.						P A G E

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For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )MAXIMUM EXPOSURE TO CREDIT RISKFor financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount. For contingent
exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would have to pay if the contingent is called
upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
The following table presents the maximum exposure to credit risk of on and off-balance sheet financial instruments before taking account of
any collateral held or other credit enhancements and after deductions such as provision for credit impairment. The exposure is classified intosummarised Basel II asset classes.
Consolidated

				
Total				
Total
				
maximum				maximum
Retail Other retail Corporate exposure to
Retail Other retail Corporate exposure tomortgages exposures exposures1 credit risk
mortgages exposures exposures1 credit risk
$m
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2009
On and off-balance sheet positions								Liquid assets
3,390
3,390
3,390
3,390
Due from other financial institutions
7,631
7,631
6,874
6,874
Trading securities
2,565
2,565
2,565
2,565
Derivative financial instruments
14,985
14,985
15,162
15,162Available-for-sale assets
597
597
8,419
8,419
Net loans and advances
46,0595,172
42,48993,72046,0594,287
40,98391,329Due from subsidiary companies
1,785
1,785
Other financial assets
714
714
643
643
Credit related commitments
5,666
5,115
15,995
26,776
5,666
5,083
15,77826,527
Total exposure to credit risk

51,725

10,28788,366150,378

51,725

9,370

95,599156,694

Unaudited 31/03/2008
On and off-balance sheet positions										Liquid assets
3,863
3,863
3,863
3,863
Due from other financial institutions
3,890
3,890
3,455
3,455
Trading securities
2,149
2,149
2,149
2,149
Derivative financial instruments
4,865
4,865
4,865
4,865
Available-for-sale assets
96
96
86
86
Net loans and advances
48,784
5,249
38,546
92,57948,784
4,382
37,00590,171
Due from subsidiary companies
1,506
1,506
Other financial assets
891
891
808
808
Credit related commitments
5,840
5,553
17,941
29,3345,840
5,500
17,77029,110Total exposure to credit risk

54,624

10,802

72,241

137,667

54,624

9,882

71,507136,013

Audited 30/09/2008										On and off-balance sheet positions									Liquid assets
4,838
4,838
4,837
4,837
Due from other financial institutions
5,032
5,032
4,527
4,527
Trading securities
2,624
2,624
2,624
2,624
Derivative financial instruments
7,533
7,533
7,544
7,544
Available-for-sale assets
109
109
107
107
Net loans and advances
49,867
5,207
42,60597,67949,867
4,385
40,98995,241
Due from subsidiary companies
1,992
1,992
Other financial assets
893
893
789
789
Credit related commitments
5,397
5,307
16,731
27,4355,397
5,293
16,532
27,222
Total exposure to credit risk
1. Includes corporates, sovereigns and banks.

P A G E

Parent7 055,264

10,51480,365

146,143

55,264

9,678

79,941

144,883

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )CREDIT QUALITY
A core component of the Banking Group’s credit risk management capability is the risk grading framework used across all major Business
Units. A set of risk grading principles and policies are supported by a complementary risk grading methodology. Pronouncements by theInternational Basel Committee on Banking Supervision have been encapsulated in these principles and policies including governance, validationand modelling requirements.					The Banking Group’s risk grade profile changes dynamically through new counterparty lending and/or existing counterparty movements ineither risk or volume. All counterparty risk grades are subject to frequent review, including statistical and behavioural reviews in consumer andsmall business segments, and individual counterparty reviews in segments with larger single name borrowers.				
Impairment and provisioning of financial assets											The Banking Group’s policy relating to the recognition and measurement of impaired assets conforms with the RBNZ’s guidelines.											Loans are classified as either performing or impaired. Impaired assets are credit exposures where there is doubt as to whether the full contractual
amount (including interest) will be received, and/or where a material credit obligation is 90 days past due but not well secured, or is a portfolio
managed facility that can be held for up to 180 days past due, or where concessional terms have been provided due to the financial difficultiesof the customer. 									An exposure is classified as past due but not impaired where the value of collateral is sufficient to repay both the principal debt and all otherpotential interest and there is no concern as to the creditworthiness of the counterparty in question.					The past due but not impaired (over 90 days) classification applies where contractual payments are past due by 90 days or more, or where thefacility remains outside of contractual arrangements for 90 or more consecutive days, but the Banking Group believes that impairment is not
appropriate on the basis of the level of security/collateral available, or the facility is portfolio managed.					The provision for credit impairment represents management’s best estimate of the losses incurred in the loan portfolio at balance date basedon its experienced judgement.																						Distribution of gross loans and advances assets by credit quality											The credit quality of the portfolio of loans and advances is assessed by reference to the Banking Group’s risk grading principles and policies
supported by a complementary risk grading methodology. The following table presents an analysis of gross loans and advances, prior todeducting the fair value hedge adjustment and provision for credit impairment, by summarised Basel II asset class into exposures neither past
due nor impaired, past due and impaired.						Consolidated

ParentRetail Other retail Corporate		
mortgages
exposures exposures1
Total
$m
$m
$m
$m

Retail Other retailmortgages exposures$m$m

Corporate
exposures1
$m

Total
$m

Unaudited 31/03/2009
Neither past due nor impaired
Past due but not impaired (1 to 89 days)
Past due but not impaired (over 90 days)
Impaired

42,652
1,898
406
200

4,723
501
71
56

41,657959
70
353

89,032
3,358
547
609

42,652
1,898
406
200

3,926
428
59
31

40,215901
46
328

86,793
3,227
511
559

		

45,156

5,351

43,03993,54645,156

4,444

41,49091,090

Unaudited 31/03/2008											Neither past due nor impaired
47,587
5,044
37,507
90,13847,587
4,234
35,98987,810
Past due but not impaired (1 to 89 days)
1,388
302
1,151
2,841
1,388
243
1,121
2,752
Past due but not impaired (over 90 days)
122
37
67
226
122
32
62
216
Impaired
14
21
124
159
14
8
113
135
		

49,111

5,404

38,84993,364

49,111

4,517

37,28590,913

Audited 30/09/2008											Neither past due nor impaired
47,5204,912
41,886
94,31847,5204,161
40,311
91,992
Past due but not impaired (1 to 89 days)
1,776
385
877
3,038
1,776
312
836
2,924
Past due but not impaired (over 90 days)
244
54
11
309
244
48
4
296
Impaired
83
30
214
327
83
14
191
288
		

49,623

5,381

42,98897,992

49,623

4,535

41,342

95,5001. Includes corporates, sovereigns and banks.

P A G E

7 1

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

For personal use only

(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Credit quality of gross loans and advances neither past due nor impaired
The credit quality of financial assets is assessed by the Banking Group using internal ratings which aim to reflect the relative ability ofcounterparties to fulfil, on time, their credit-related obligations, and is based on their current probability of default. 				Internal rating											Strong risk rating											Corporate customers demonstrating superior stability in their operating and financial performance over the long-term, and whose debt servicing
capacity is not significantly vulnerable to foreseeable events. Retail customers with low expected loss. This rating band broadly corresponds toratings “Aaa” to “Ba1” and “AAA” to “BB+” of Moody’s Investors Service and Standard & Poor’s respectively.					Satisfactory risk rating											Corporate customers consistently demonstrating sound operational and financial stability over the medium to long term, even though some may
be susceptible to cyclical trends or variability in earnings. Retail customers with moderate expected loss. This rating band broadly corresponds
to ratings “Ba2” to “Ba3” and “BB” to “BB-” of Moody’s Investors Service and Standard & Poor’s respectively.										Substandard but not past due or impaired											Corporate customers demonstrating some operational and financial instability, with variability and uncertainty in profitability and liquidity
projected to continue over the short and possibly medium term. Retail customers with higher expected loss. This rating band broadly corresponds
to ratings “B1” to “Caa” and “B+” to “CCC” of Moody’s Investors Service and Standard & Poor’s respectively.
The rating bands presented below differ from the Note 30 Capital Adequacy credit risk exposures subject to the internal ratings based approach
disclosures as RBNZ credit risk estimates are not used for these internal ratings. Movements in the rating categories between balance dates are
due to both changes in the underlying internal ratings applied to customers and to new loans written or loans rolling off.											The following table presents an analysis of gross loans and advances neither past due nor impaired by the above internal ratings:																						Consolidated

ParentRetail Other retail Corporate		
mortgages
exposures exposures1
Total
$m
$m
$m
$m

Retail Other retailmortgages exposures$m$m

Corporate
exposures1
$m

Total
$m

Unaudited 31/03/2009
Strong risk rating
Satisfactory risk rating
Substandard but not past due or impaired

39,805
2,144
703

1,687
2,745
291

18,796
19,791
3,070

60,28824,6804,064

39,805
2,144
703

1,687
1,959
280

18,54818,7882,879

60,04022,8913,862

		

42,652

4,723

41,65789,03242,652

3,926

40,21586,793

Unaudited 31/03/2008											Strong risk rating
42,973
1,603
16,13560,71142,973
1,518
15,81760,308Satisfactory risk rating
3,834
2,940
19,516
26,2903,834
2,240
18,426
24,500Substandard but not past due or impaired
780
501
1,856
3,137
780
476
1,746
3,002
		

47,587

5,044

37,507

90,13847,587

4,234

35,98987,810

Audited 30/09/2008											Strong risk rating
43,866
1,849
19,82765,542
43,866
1,807
19,437
65,110Satisfactory risk rating
3,041
2,800
19,98725,8283,041
2,091
18,99624,128Substandard but not past due or impaired
613
263
2,072
2,948
613
263
1,878
2,754
		
1. Includes corporates, sovereigns and banks.

7 247,5204,912

41,886

94,31847,5204,161

40,311

91,992

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Credit quality of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by the Banking Group to measure and manage the retail portfolio’s credit quality. Financial assets thatare past due but not impaired include those:• assessed, approved and managed on a portfolio basis within a centralised environment (for example, credit cards and personal loans);• held on a productive basis until they are 180 days past due; and• managed on an individual basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair value of associated security
is sufficient to ensure that the Banking Group will recover the entire amount owing over the life of the facility and there is reasonable assurance
that collection efforts will result in payment of the amounts due in a timely manner.											The following table presents an ageing analysis of past due loans that are not impaired:																			Consolidated

ParentRetail Other retail Corporate		
mortgages
exposures exposures1
Total
$m
$m
$m
$m

Unaudited 31/03/2009
1 to 5 days
6 to 29 days
30 to 59 days
60 to 89 days
90 days or over		
Unaudited 31/03/2008
1 to 5 days
6 to 29 days
30 to 59 days
60 to 89 days
90 days or over		Retail Other retailmortgages exposures$m$m

Corporate
exposures1
$m

Total
$m

510
812
435
141
406

145
250
71
35
71

605
162
129
63
70

1,260
1,224
635
239
547

510
812
435
141
406

132
209
58
29
59

595
127
121
58
46

1,237
1,148
614
228
511

2,304

572

1,029

3,905

2,304

487

947

3,738

509
558
224
97
122

86
141
51
24
37

673
326
113
39
67

1,268
1,025
388
160
226

509
558
224
97
122

63
121
39
20
32

662
316
105
38
62

1,234
995
368
155
216

1,510

339

1,218

3,067

1,510

275

1,183

2,968

Audited 30/09/2008											1 to 5 days
544
137
534
1,215
544
113
520
1,177
6 to 29 days
798
155
193
1,146
798
123
176
1,097
30 to 59 days
304
63
106
473
304
51
102
457
60 to 89 days
130
30
44
204
130
25
38
193
90 days or over
244
54
11
309
244
48
4
296
		

2,020

439

888

3,347

2,020

360

840

3,220

1. Includes corporates, sovereigns and banks.

P A G E

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For personal use only

(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Credit quality of financial assets that are individually impaired											The Banking Group regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectabilityof a credit facility, the financial asset is classified and reported as individually impaired and an individual provision is allocated against it.
The following table presents an analysis of individually impaired assets, undrawn facilities with impaired customers and provision for credit
impairment by summarised Basel II asset class:											Consolidated

ParentRetail Other retail Corporate		
mortgages
exposures exposures1
Total
$m
$m
$m
$m

Unaudited 31/03/2009
Impaired financial assets
Undrawn facilities with impaired customers
Individual provision balance200
54

Net impaired financial assets
Collective provision balance

Retail Other retailmortgages exposures$m$m

Corporate
exposures1
$m

Total
$m

31
25

328
11
164

559
11
243

56
31

353
11
184

609
11
269

200
54

146

25

180

351

146

6

175

327

93

148

366

607

93

132

343

568

Unaudited 31/03/2008											Impaired financial assets
14
21
124
159
14
8
113
135
Undrawn facilities with impaired customers
18
18
18
18
Individual provision balance
2
10
39
51
2
4
35
41
Net impaired financial assets

12

11

103

126

12

4

96

112

Collective provision balance

62

145

264

471

62

131

245

438

Audited 30/09/2008											Impaired financial assets
83
30
214
327
83
14
191
288
Undrawn facilities with impaired customers
66
66
Individual provision balance
28
10
94
132
28
4
83
115
Net impaired financial assets

55

20

126

201

55

10

114

179

Collective provision balance

81

164

289

534

81

146

270

497

Security held by the Banking Group in respect of individually impaired financial assets in the analysis above has an estimated fair value of$339 million (31/03/2008 $108 million; 30/09/2008 $195 million). In addition, security held in respect of impaired off-balance sheet facilities
amounts to $11 million (31/03/2008 $18 million; 30/09/2008 $6 million).
Security held by the Bank in respect of individually impaired financial assets in the analysis above has an estimated fair value of $315 million(31/03/2008 $94 million; 30/09/2008 $173 million). In addition, security held in respect of impaired off-balance sheet facilities amounts to$11 million (31/03/2008 $18 million; 30/09/2008 $6 million).
Restructured items											The Banking Group distinguishes between facilities renegotiated on a commercial basis, on terms similar to those offered to new clients withsimilar risk, and those restructured on non commercial terms as a result of a client’s inability to meet original contractual obligations.
In the course of restructuring facilities due to financial difficulty, the Banking Group may consider modifying its terms to include concessions
such as a reduction in the principal amount, a deferral of repayments, and/or an reduction in interest rates or an extension of the maturity datematerially beyond those typically offered to new facilities with similar risk.					Restructured facilities are classified as productive and must demonstrate sound prospects of being able to adhere to the modified contractual
terms. Where doubt exists as to the capacity to sustain the modified terms, the facilities remain impaired and an appropriate level of individual
provision is held.				
The Banking Group held $20 million of restructured loans as at 31 March 2009 (31/03/2008 $nil, 30/09/2008 $nil) and the Bank held $3 million(31/03/2008 $nil, 30/09/2008 $nil).
1. Includes corporates, sovereigns and banks.

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(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Estimated value of collateral											The table below discloses the estimated value of collateral and other charges related to financial assets that are individually impaired. For the purposes ofthis disclosure, where security held is valued at more than the corresponding credit exposure, coverage is capped at the value of the credit exposure.
Consolidated
Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2009
Cash and securities
Real estate
Other
Total value of collateral
Credit exposure
Unsecured portion of credit

-

-

-

176
163
339
609
270

-

11
11
11
-

176
174
350
620
270

Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2008
Cash and securities
Real estate
12
12
Other
96
18
114
Total value of collateral
108
18
126
Credit exposure
159
18
177
Unsecured portion of credit
5151											Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Audited 30/09/2008
Cash and securities
Real estate
112
112
Other
83
6
89
Total value of collateral
195
6
201
Credit exposure
327
6
333
Unsecured portion of credit132132											P A G E

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(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )ParentLiquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2009
Cash and securities
Real estate
Other
Total value of collateral
Credit exposure
Unsecured portion of credit

-

-

-

182
133
315
559
244

-

11
11
11
-

182
144
326
570
244

Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Unaudited 31/03/2008
Cash and securities
Real estate
Other
Total value of collateral
Credit exposure
Unsecured portion of credit

-

-

-

12
82
94
135
41

-

18
18
18
-

12
100
112
153
41

											Liquid assets
Trading							and due fromsecurities
Derivative		
Other
Credit 			other financial and available
financial
Net loansfinancialrelatedinstitutions for-sale assets instruments and advances
assets commitments
Total		
$m
$m
$m
$m
$m
$m
$m

Audited 30/09/2008
Cash and securities
Real estate
Other
Total value of collateral
Credit exposure
Unsecured portion of credit

7 6

-

-

-

113
60
173
288
115

-

6
6
6
-

113
66
179
294
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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )MARKET RISK

Market risk is the risk to the Banking Group’s earnings arising from changes in interest rates, currency exchange rates, credit spreads, or fromfluctuations in bond, commodity or equity prices. Market risk arises when changes in market rates, prices and volatilities lead to a decline in
the value of assets and liabilities, including financial derivatives. Market risk is generated through both trading activities and the interest raterisk inherent in the banking book.
The Banking Group conducts trading operations in interest rates, foreign exchange, commodities and debt securities. Trading operations largely
focus on supporting customer hedging and investing activities, rather than outright proprietary trading. Consequently, the Board has set a
medium market risk appetite for the Markets business which is reflected in the low/moderate market risk limit framework.							The Banking Group has a detailed risk management and control framework to support its trading and balance sheet activities. The framework
incorporates a risk measurement approach to quantify the magnitude of market risk within trading and balance sheet portfolios. This approachand related analysis identifies the range of possible outcomes that can be expected over a given period of time, establishes the relative
likelihood of those outcomes and allocates an appropriate amount of capital to support these activities.
The market risk management and policy control framework applicable to the entities comprising the Banking Group has been set by the Board
and Risk Committee of either ANZ National Bank Limited or the Ultimate Parent Bank, as appropriate. Likewise oversight and monitoring ofmaterial Market Risk exposures of the Banking Group is undertaken by the market risk functions of ANZ National Bank Limited and also the
Ultimate Parent Bank. Throughout this document, references to the risk management of the operations within the entities comprising the
Banking Group, implicitly involves oversight by both related entities.		
Market risk management and control responsibilities
Banking Group-wide responsibility for the strategies and policies relating to the management of market risk lies with each Board Risk Committee.
Responsibility for day to day management of both market risks and compliance with market risk policy is delegated by the Risk Committee
to the Credit and Market Risk Committee (CMRC) and the ANZ National Limited Asset & Liability Committee (ALCO). The CMRC, chaired by
the ANZ Group Chief Risk Officer, is responsible for traded market risk, while the ALCO, chaired by the NZ Group Chief Executive Officer, is
responsible for non-traded market risk (or balance sheet risk). All committees receive regular reporting on the range of trading and balance
sheet market risks incurred.
Within overall strategies and policies, the control of market risk is the joint responsibility of Business Units and Risk Management, with thedelegation of market risk limits from each Board and CMRC allocated to both Risk Management and the Business Units.													The management of market risk is supported by a comprehensive limit and policy framework to control the amount of risk that the Banking
Group will accept. Market risk limits are allocated at various levels and are reported and monitored by Market Risk on a daily basis. The detailed
limit framework allocates individual limits to manage and control asset classes (e.g. interest rates, foreign exchange), risk factors (e.g. interest
rates, volatilities) and P&L limits (to monitor and manage the performance of the trading portfolios).													The Banking Group has a detailed market risk management and control framework, to support trading and non-trading activities, which
incorporates an independent risk measurement approach to quantify the magnitude of market risk within the trading and non-trading books.
This approach, along with related analysis, identifies the range of possible outcomes that can be expected over a given period of time, andestablishes the relative likelihood of those outcomes.													These risks are monitored daily against a comprehensive limit framework that includes VaR, aggregate market position and sensitivity, productand geographic thresholds. To facilitate the management, control, measurements and reporting of market risk, the Banking Group has grouped
market risk into two broad categories:																										a) Traded market riskThis is the risk of loss from changes in the value of financial instruments due to movements in price factors for both physical andderivative trading positions. They arise in trading transactions where the Banking Group acts as principal with clients or with themarket. The principal risk categories monitored are:												• Currency risk is the potential loss arising from the decline in the value of a financial instrument due to changes in foreign exchange
rates or their implied volatilities.																				• Interest rate risk is the potential loss arising from the change in the value of a financial instrument due to changes in market interest
rates or their implied volatilities.
• Credit spread risk is the potential loss arising from a change in value of an instrument due to a movement of its margin or spread
relative to a bench mark.												b) Non-traded market risk (or balance sheet risk)This comprises the management of non-traded interest rate risk, liquidity, and the risk to capital and earnings as a result of foreignexchange rate movements.												Some instruments do not fall into either category that also exposes the Banking Group to market risk. These include equity securities classified
as available-for-sale. Regular reviews are performed to substantiate valuation of the investments within this portfolio.													P A G E

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3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )The traded market risk function provides specific oversight of each of the main trading areas and is responsible for the establishment of a
Value at Risk (VaR) framework and detailed control limits. In all trading areas the Banking Group has implemented models that calculate VaR
exposures, monitor risk exposures against defined limits on a daily basis, and ‘stress test’ trading portfolios. The Banking Group has an Asset andLiability Committee (‘ALCO’), comprising executive management to provide monthly oversight of Market Risk.								The Chief Risk Officer is responsible for daily review and oversight of traded market risk reports. The Chief Risk Officer has the authority for
instructing the business to close exposures and withdraw limits where appropriate. 										Value at Risk (VaR) measure													A key measure of market risk is Value at Risk. VaR is a statistical estimate of the likely daily loss and is based on historical market movements.
The confidence level is such that there is 97.5% or 99% probability that the loss will not exceed the VaR estimate on any given day. Conversely
there is a 2.5% or 1% probability of the decrease in market value exceeding the VaR estimate on any given day. The 99% confidence levelencompasses a wider range of potential outcomes.						The Banking Group’s standard VaR approach for both traded and non-traded risk is historical simulation. The Banking Group calculates VaR using
historical changes in market rates and prices over the previous 500 business days. Traded and Non-Traded VaR is calculated using a one-day
holding period.
It should be noted that because VaR is driven by actual historical observations, it is not an estimate of the maximum loss that the Banking
Group could experience from an extreme market event. As a result of this limitation, the Banking Group utilises a number of other risk measures(e.g. stress testing) and associated detailed control limits to measure and manage market risk.													Traded and non-traded market risks are considered separately below.													Traded market risks
Trading activities are focused on customer trading, distribution and underwriting of a range of securities and derivative instruments. The
principal activities include foreign exchange, interest rate, and debt markets. These activities are managed on a global product basis.
Below are aggregate VaR exposures covering both derivative and non-derivative trading positions for the Banking Group.													Consolidated
Value at risk at 97.5% confidence
		
As at
$m

High for
period$m

Consolidated
Value at risk at 99% confidence

Low for Average for		
periodperiod
As at
$m
$m
$m

High for
period$m

Low for Average for
periodperiod$m$m

Unaudited 31/03/2009
Foreign exchangeInterest rate
Credit spread
Diversification benefit

0.5
2.4
0.4
(1.0)

1.4
2.8
0.4
n/a

0.2
1.1
0.2
n/a

0.5
1.9
0.3
(0.8)

0.8
2.8
0.6
(1.4)

1.9
4.3
0.6
n/a

0.3
1.7
0.4
n/a

0.7
2.9
0.5
(1.2)

Total VaR

2.3

3.4

1.1

1.9

2.8

4.4

1.7

2.9

Unaudited 31/03/2008													Foreign exchange
0.3
0.8
0.2
0.3
0.3
1.0
0.2
0.4
Interest rate
1.2
1.8
0.5
0.8
1.4
2.3
0.6
1.1
Credit spread
0.1
0.2
0.1
0.1
0.2
0.3
0.2
0.2
Diversification benefit
(0.4)
n/a
n/a
(0.4)
(0.4)
n/a
n/a
(0.6)
Total VaR

1.2

1.7

0.3

0.8

1.5

2.2

0.5

1.1

Audited 30/09/2008													Foreign exchange
0.2
1.3
0.1
0.3
0.2
1.6
0.2
0.5
Interest rate
1.6
1.9
0.5
0.9
2.7
2.7
0.6
1.3
Credit spread
0.2
0.3
0.1
0.1
0.4
0.4
0.2
0.2
Diversification benefit
(0.3)
n/a
n/a
(0.5)
(0.6)
n/a
n/a
(0.7)
Total VaR

1.7

2.0

0.3

0.8

2.7

2.8

0.5

1.3

VaR is calculated separately for Foreign Exchange/Commodities and for Interest Rate/Debt Markets businesses as well as for the Banking Group.
The diversification benefit reflects the historical correlation between Foreign Exchange, Commodity, Interest Rate and Debt Markets.
To supplement the VaR methodology, the Banking Group applies a wide range of stress tests, both on individual portfolios and at a Banking
Group level. The Banking Group’s stress-testing regime provides senior management with an assessment of the financial impact of identified
extreme events on market risk exposures of the Banking Group.													P A G E

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(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Non-traded market risks (balance sheet risk)
The principal objectives of balance sheet management are to manage interest income sensitivity while maintaining acceptable levels of interest
rate and liquidity risk and to manage the market value of the Banking Group’s capital. Liquidity risk is dealt with in the next section.
Interest rate risk
The objective of balance sheet interest rate risk management is to secure stable and optimal net interest income over both the short (next 12months) and long term. Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Banking
Group’s future net interest income. This risk arises from two principal sources: mismatches between the repricing dates of interest bearing
assets and liabilities; and the investment of capital and other non-interest bearing liabilities in interest bearing assets. Non-traded interest raterisk is managed to both value and earnings at risk limits. Interest rate risk is reported using three measures: VaR; scenario analysis (to a 1%
shock); and interest rate sensitivity gap.													a) VaR non-traded interest rate risk
Below are aggregate VaR figures covering non-traded interest rate risk.
				Consolidated						
					
As at
					
$m

High for
period$m

Low for Average for
periodperiod$m$m

Unaudited 31/03/2009
Value at risk at 97.5% confidence				

21.0

21.0

12.4

14.6

Unaudited 31/03/2008
Value at risk at 97.5% confidence					

11.6

11.6

10.4

11.1

Audited 30/09/2008
Value at risk at 97.5% confidence					

12.8

13.0

10.4

11.9

To supplement the VaR methodology, the Banking Group applies a wide range of stress tests, both on individual portfolios and at the Banking
Group level. The Banking Group’s stress-testing regime provides senior management with an assessment of the financial impact of identified
extreme events on market risk exposures of the Banking Group.
b) Scenario Analysis – A 1% Shock on the Next 12 Months’ Net Interest Income
A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest income over the
succeeding 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and comparative periods – expressed as a percentageof reported net interest income. The sign indicates the nature of the rate sensitivity with a positive number signifying that a rate increase ispositive for net interest income over the next 12 months. Conversely, a negative number signifies that a rate increase is negative for the next
12 months’ net interest income.
			
			
		

Impact of 1% Rate ShockAs at					Maximum exposure					Minimum exposure					Average exposure (in absolute terms)					Consolidated
Unaudited Unaudited
Audited		
31/03/2009 31/03/2008 30/09/2008

0.1%
0.7%
0.0%
0.3%

1.4%
1.8%
1.1%
1.4%

0.0%
1.8%
0.0%
0.8%

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities at any point has implications
for future net interest income. The Banking Group quantifies the potential variation in future net interest income as a result of these repricing
mismatches each month using a static gap model.											The repricing gaps themselves are constructed based on contractual repricing information. However, for those assets and liabilities where thecontractual term to repricing is not considered to be reflective of the actual interest rate sensitivity (for example, products priced at the Banking
Group’s discretion), a profile based on historically observed and/or anticipated rate sensitivity is used. This treatment excludes the effect ofbasis risk between customer pricing and wholesale market pricing. For example, when wholesale market rates are anticipating an official rateincrease the Banking Group does not reprice certain customer business until the first repricing date after the official rate rise.																						The majority of the Banking Group’s non-traded interest exposure exists in New Zealand. A separate balance sheet simulation processsupplements the static gap information. This allows the net interest income outcomes of a number of different scenarios – with different
market interest rate environments and future balance sheet structures – to be identified. This better enables the Banking Group to quantify theinterest rate risks associated with the balance sheet and to formulate strategies to manage current and future risk profiles.													P A G E

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(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about the Banking Group’s exposure to interest rate risk.													Repricing gaps are based upon contractual repricing information except where the contractual terms are not considered to be reflectiveof actual interest rate sensitivity, for example, those assets and liabilities priced at the Banking Group’s discretion. In such cases, the ratesensitivity is based upon historically observed and/or anticipated rate sensitivity.													Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding. Thesemismatches are managed within policy guidelines for mismatch positions.													The majority of the Banking Group’s loan business is conducted domestically in New Zealand. The majority of retail deposits are also raisedin New Zealand but are either fixed or floating in nature. The mix of repricing maturities in this book is influenced by the underlying financial
needs of customers.													The Banking Group’s offshore operations are wholesale in nature and are able to minimise interest rate sensitivity through closely matching thematurities of loans and deposits. Given both the size and nature of this business, the interest rate sensitivity of this balance sheet contributes
little to the aggregate risk exposure, which is primarily a reflection of the positions in New Zealand.																						A combination of off-balance sheet instruments and pricing initiatives is used in the management of interest rate risk. For example, where astrong medium to long term rate view is held, hedging and pricing strategies are used to modify the profile’s interest rate sensitivity so that
it is positioned to take advantage of the expected movement in interest rates. However, such positions are taken within the overall risk limits
specified by Banking Group policy.
The following tables represent the interest rate sensitivity of the Banking Group’s assets, liabilities and off balance sheet instruments repricing(that is, when interest rates applicable to each asset or liability can be changed) in the periods shown.																	Consolidated

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mUnaudited 31/03/2009
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

3,390
7,631
2,565
14,985597
93,720
714

3,201
3,364
511
52,130
-

2,000
384
395
6,843
-

300
5
121
10,853
-

92
1,497
10
24,106
-

168
57
-

189
1,875
14,985
71
(269)
714

Total financial assets

123,60259,206

9,622

11,27925,705225

17,565

Non-financial assets

Beyond Not bearing
5 years
interest
$m
$m

4,339

-

-

-

-

-

4,339

Total assets

127,941

59,206

9,622

11,27925,705

225

21,904

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

4,162
72,7601,096
12,868
1,743
21,5282,835

1,878
51,1351,096
226
14,877
225

8,349
92
828

1,805
6,544
-

408
2,484
85
6,416
1,782

25
235
-

46
4,248
12,868
1,340-

Total financial liabilities

116,992

69,437

9,269

8,349

11,175260

18,502

Non-financial liabilities
Equity697
10,252

-

-

-

-

-

697
10,252

Total liabilities and equity

127,941

69,437

9,269

8,349

11,175260

29,451On-balance sheet interest sensitivity gap
Hedging instruments-(10,231)
5,721

353
7,227

2,930
(9,426)

14,530(3,129)

(35)
(393)

(7,547)-

Interest sensitivity gap - net
Interest sensitivity gap - cumulative-(4,510)(4,510)

7,580
3,070

(6,496)(3,426)

11,401
7,975

(428)
7,547

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(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )				Consolidated

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mUnaudited 31/03/2008
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

3,863
3,890
2,149
4,865
96
92,579
891

3,648
3,067
893
38,881
-

570
149
6,756
-

8
30
10,579
-

147
847
11
36,699
-

252
27
-

215
106
4,865
55
(363)
891

Total financial assets

108,333

46,4897,475

10,61737,704279

5,769

Non-financial assets

Beyond Not bearing
5 years
interest
$m
$m

4,181

-

-

-

-

-

4,181

Total assets

112,51446,4897,475

10,61737,704279

9,950

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

2,384
74,080
1,758
4,472
1,361
16,5862,053

1,285
52,4901,758
188
15,453
215

239
8,405
15
893

280
7,734
394
-

382
1,146
84
739
945

21
-

177
4,305
4,472
1,074
-

Total financial liabilities

102,694

71,389

9,552

8,408

3,296

21

10,028Non-financial liabilities
Equity

439
9,381

-

-

-

-

-

439
9,381

Total liabilities and equity

112,514

71,389

9,552

8,408

3,296

21

19,848On-balance sheet interest sensitivity gap
Hedging instruments-(24,900)
27,680(2,077)
6,589

2,209
(6,501)

34,408(28,382)258
614(9,898)-Interest sensitivity gap - net
Interest sensitivity gap - cumulative

-

2,780
2,780

4,512
7,292

(4,292)
3,000

6,026
9,026

872
9,898

(9,898)-P A G E

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(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		Consolidated

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond Not bearing
5 years
interest$m$m

Audited 30/09/2008
AssetsLiquid assets 		
Due from other financial institutions 		
Trading securities 		
Derivative financial instruments 		
Available-for-sale assets 		
Net loans and advances 		
Other financial assets 		

4,838
5,032
2,624
7,533
109
97,679
893

4,667
3,080
1,043
30
44,105
-

450
10
6,682
-

13,308
-

134
1,332
14
33,877
-

239
46
-

171
1,368
7,533
65
(339)
893

Total financial assets 		

118,708

52,925

7,142

13,30835,357285

9,691

Non-financial assets 		

4,207

-

-

-

-

-

4,207

Total assets 		

122,915

52,925

7,142

13,30835,357285

13,898

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

3,312
77,136
404
6,710
1,471
20,6952,820

2,380
54,827404
94
15,732
216

114
10,671
472
819

378
6,813
374
-

381
896
60
3,942
1,785

40
1
7
175
-

19
3,928
6,710
1,310
-

Total financial liabilities 		

112,548

73,653

12,076

7,565

7,064

223

11,967

Non-financial liabilities 		
Equity 		

560
9,807

-

-

-

-

-

560
9,807

Total liabilities and equity 		

122,91573,653

12,076

7,565

7,064

223

22,334On-balance sheet interest sensitivity gap
Hedging instruments 		

-(20,728)
20,239(4,934)
5,578

5,743
(6,078)28,293(19,486)62(253)(8,436)-

Interest sensitivity gap - net 		Interest sensitivity gap - cumulative 		

-

(489)
(489)

644
155

(335)
(180)

8,807
8,627

(191)
8,436

(8,436)-8 2

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		Parent

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond Not bearing
5 years
interest$m$m

Unaudited 31/03/2009
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Other financial assets

3,390
6,874
2,565
15,162
8,419
91,329
1,785
643

3,200
2,699
511
7,826
51,261
1,045
-

2,000
384
394
6,705
-

300
5
121
10,505-1,497
10
23,067
-

168
45
-

190
1,875
15,162
68
(254)
740
643

Total financial assets

130,167

66,542

9,483

10,931

24,574213

18,424Non-financial assets

11,667

-

-

-

-

-

11,667

Total assets

141,834

66,542

9,483

10,931

24,574213

30,091

Liabilities 											Due to other financial institutions
3,250
1,349
1,805
25
25
46
Deposits and other borrowings
64,91345,903
6,576
5,902
2,284
4,248
Due to subsidiary companies
44,78530,898
1,586
261
7,295
4,745
Due to parent company
1,096
1,096
Derivative financial instruments
12,86812,868
Payables and other financial liabilities
1,548
220
92
25
6
1,205
Bonds and notes
1,315
705
375
235
Loan capital
2,835
225
828
1,782
Total financial liabilities

132,61080,396

9,082

7,968

11,786

5,011

18,367

Non-financial liabilities
Equity

667
8,557

-

-

-

-

-

667
8,557

Total liabilities and equity

141,834

80,396

9,082

7,968

11,786

5,011

27,591On-balance sheet interest sensitivity gap
Hedging instruments-(13,854)
30

401
7,312

2,963
(9,264)

12,788(2,429)(4,798)(4,351)2,500-

Interest sensitivity gap - net
Interest sensitivity gap - cumulative-(13,824)(13,824)

7,713(6,111)(6,301)(12,412)

10,359(2,053)(447)(2,500)2,500-

P A G E

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

For personal use only

(CONTINUED)P A G E

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		Parent

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond Not bearing
5 years
interest$m$m

Unaudited 31/03/2008
AssetsLiquid assets 		
Due from other financial institutions 		
Trading securities 		
Derivative financial instruments 		
Available-for-sale assets 		
Net loans and advances 		Due from subsidiary companies 		
Other financial assets 		

3,863
3,455
2,149
4,865
86
90,171
1,506
808

3,648
2,779
893
38,058
74
-

570
149
6,464
153
-

8
30
10,321-847
135,638
525
-

252
10
-

215
106
4,865
55
(320)
754
808

Total financial assets 		

106,90345,452

7,336

10,35937,011

262

6,483

Non-financial assets 		

11,551

-

-

-

-

-

11,551

Total assets 		

118,454

45,452

7,336

10,35937,011

262

18,034

Liabilities 										Due to other financial institutions 		
1,432
1,022
81
95
36
21
177
Deposits and other borrowings 		
61,37944,137
5,764
6,180
993
4,305
Due to subsidiary companies 		
37,07833,512
2,417
560
589
Due to parent company 		
1,758
1,758
Derivative financial instruments 		
4,445
4,445
Payables and other financial liabilities 		
1,146
188
15
24
919
Bonds and notes 		
579
279
150
150
Loan capital 		
2,053
215
893
945
Total financial liabilities 		

109,870

81,111

9,170

6,985

2,737

21

9,846

Non-financial liabilities 		
Equity 		

412
8,172

-

-

-

-

-

412
8,172

Total liabilities and equity 		

118,454

81,111

9,170

6,985

2,737

21

18,430On-balance sheet interest sensitivity gap 		Hedging instruments 		

-(35,659)
27,700(1,834)
6,576

3,374
(6,501)

34,274(28,389)

241
614

(396)
-

Interest sensitivity gap - net 		Interest sensitivity gap - cumulative 		-(7,959)(7,959)4,742(3,217)(3,127)(6,344)

5,885
(459)

855
396

(396)
-

8 4

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		Parent

			
		
Total
		
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond Not bearing
5 years
interest$m$m

Audited 30/09/2008
AssetsLiquid assets 		
Due from other financial institutions 		
Trading securities 		
Derivative financial instruments 		
Available-for-sale assets 		
Net loans and advances 		Due from subsidiary companies 		
Other financial assets 		

4,837
4,527
2,624
7,544
107
95,241
1,992
789

4,666
2,709
1,041
31
43,418
614
-

450
10
6,648
85
-

13,203-1,334
13
32,280
530
-

239
16
-

171
1,368
7,544
63
(324)
763
789

Total financial assets 		

117,661

52,4797,193

13,20334,157255

10,374Non-financial assets 		

11,425

-

-

-

-

-

11,425

Total assets 		

129,086

52,4797,193

13,20334,157

255

21,799Liabilities 											Due to other financial institutions 		
1,940
1,863
8
10
40
19
Deposits and other borrowings 		
62,80046,991
6,668
4,505
707
1
3,928
Due to subsidiary companies 		
43,26033,153
4,120
2,198
3,789
Due to parent company 		404
404
Derivative financial instruments 		
6,710
6,710
Payables and other financial liabilities 		
1,187
95
7
1,085
Bonds and notes 		
1,123
498
150
300
175
Loan capital 		
2,820
216
819
1,785
Total financial liabilities 		

120,244

83,22011,765

6,703

6,591

223

11,742

Non-financial liabilities 		
Equity 		

530
8,312

-

-

-

-

-

530
8,312

Total liabilities and equity 		

129,086

83,22011,765

6,703

6,591

223

20,584On-balance sheet interest sensitivity gap 		Hedging instruments 		

-(30,741)
20,789(4,572)
6,178

6,500
(6,073)27,566(20,641)

32
(253)

1,215
-

Interest sensitivity gap - net 		Interest sensitivity gap - cumulative 		-(9,952)(9,952)

1,606(8,346)427(7,919)

6,925
(994)

(221)
(1,215)1,215-

Equity securities classified as available-for-sale
The portfolio of financial assets, classified as available-for-sale for measurement and financial reporting purposes, also contains equity
investment holdings which predominantly comprise investments held for longer term strategic intentions. These equity investments are also
subject to market risk which is not captured by the VaR measures for traded and non-traded market risks. The fair value of these securities as at
31 March 2009 was $71 million (31/03/2008 $55 million; 30/09/2008 $65 million) and private equity holdings of $nil included in other assets(31/03/2008 $nil; 30/09/2008 $nil). Regular reviews are performed to substantiate valuation of the investments within the portfolio. The fairvalue of the equity securities classified as available-for-sale can fluctuate considerably. A 10 per cent reduction in the value of the available-forsale equity securities at 31 March 2009 would have reduced equity by $7.1 million (31/03/2008 $5 million; 30/09/2008 $6.5 million).		
											Foreign currency related risksThis risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes in foreign exchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk arising from individual
funding and other transactions is actively managed. The total amounts of unmatched foreign currency assets and liabilities and consequent
foreign currency exposures, arising from each class of financial asset and liability, whether recognised or unrecognised, within each currency are
not material.													P A G E

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )The net open position in each foreign currency, detailed in the table below, represents the net on-balance sheet assets and liabilities in that
foreign currency aggregated with the net expected future cash flows from off-balance sheet purchases and sales from foreign exchangetransactions in that foreign currency. The amounts are stated in New Zealand dollar equivalents translated using the spot exchange rates as atbalance sheet date.
Consolidated
Unaudited
Unaudited
31/03/2009 31/03/2008$m$m

ParentAudited30/09/2008$m

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

Net open position									Australian dollar		
27
15
9
27
15
9
Canadian dollar		
3
2
(2)
3
2
(2)
Swiss Franc		
(4)(4)
Euro		
91
99
1
9Pound sterling		
1
1
1
1
US dollar		
(4)
(26)
14
(4)
(26)
14
Other		
4
2
4
2Total net open position		

32

(3)

32

32

(3)

32

LIQUIDITY RISK
Liquidity risk is the risk that the Banking Group has insufficient capacity to fund increases in assets, or is unable to meet its payment obligations
as they fall due, including repaying depositors or maturing wholesale debt. The Banking Group maintains sufficient liquid funds to meet its
commitments based on historical and forecasted cash flow requirements. Liquidity risk is measured through cash flow modelling, with profiles
produced for both normal business and short-term crisis conditions.
The timing mismatch of cashflows and the related liquidity risk is inherent in all banking operations, and may result from internal and/or
external events, including: credit or operational risks, bank-specific events, market disruptions, or systemic shocks. The following outlines the
Banking Group’s approach to liquidity and funding risk management. Principles include:										• ensuring the liquidity management framework is compatible with local regulatory requirements;		
• daily liquidity reporting and scenario analysis to quantify the Banking Group’s positions;• monitoring wholesale and customer liability composition;		
• maintaining a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency;• holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and• establishing detailed contingency plans to cover liquidity crisis events.		
Scenario Modelling
A key component of the Banking Group’s liquidity management framework is scenario modelling. This requires assessing liquidity under at least
two specific scenarios:																										
1.

‘Normal Business conditions’: the normal behaviour of cash flows in the ordinary course of business. The Banking Group must be able to meetall commitments and obligations under a going concern scenario, within their normal funding capacity, over at least the next 30 calendar
days. In estimating the funding requirement, the models use econometric regression equations which are a function of historical volume andseasonal impacts derived from the last 2 years of historical data.				

2.

‘Short term crisis’: refers to a potential name-specific liquidity crisis in which the Banking Group may have significant difficulty rolling overor replacing liabilities. The Banking Group needs to be cashflow positive over a 5 business day period under a short term crisis scenario. The
Banking Group models expected cashflow behaviour under such a scenario based on the type of customer and their level of sophistication,and the type of asset/ liability.											In addition, the Banking Group models a number of other stress tests and liquidity scenarios over a variety of time horizons, including theimpact of credit rating downgrades, and reduced access to wholesale debt in domestic and offshore markets.													Customer and wholesale funding composition
The Banking Group employs actual cash flow based funding metrics to determine appropriate balance sheet liquidity and funding risk strategies.
These metrics are used to measure and manage the proportion of the Banking Group’s external assets which are funded by customer liabilities,
wholesale debt, equity and loan capital.
Managing these metrics assists in ensuring that an appropriate proportion of the Banking Group’s assets are funded by either ‘sticky’ customer
liabilities; or long-term wholesale debt funding (with a remaining term exceeding 1 year). This approach recognises that long-term wholesale
debt and other sticky liabilities have favourable liquidity characteristics thereby assisting in reducing any adverse impact or volatility caused byshort-term funding, and in monitoring the impact of deposit-gathering strategies.		

P A G E

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )The table below outlines total Banking Group volumes of customer deposits and wholesale funding.
		Consolidated

Parent				Funding Composition		

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Customer deposits1							New Zealand
52,12751,42652,19951,05649,76650,647
Overseas
7,435
6,199
6,757
6,803
6,096
6,626
Total customer deposits
59,562
57,62558,95657,85955,862
57,273Wholesale funding													Bonds and notes
21,528
16,586
20,695
1,315
579
1,123
Loan capital
2,835
2,053
2,820
2,835
2,053
2,820
Certificates of deposit
7,054
5,517
5,527
7,054
5,517
5,527
Commercial paper
6,144
10,93812,653Due to subsidiary companies - ANZ National (Int’l) Limited
26,96927,15533,386
Due to subsidiary companies - other
17,8169,923
9,874
Due to parent company
1,096
1,758
404
1,096
1,758
404
Secured deposits
Due to other financial institutions
4,162
2,384
3,312
3,250
1,432
1,940
Total wholesale funding

42,81939,23645,41160,335

48,41755,074

Total funding

102,381

96,861

104,367

118,194

104,279

112,347

Concentrations of funding by industry											Households
37,49135,702
36,23935,78933,94034,571Agriculture, forestry and fishing
4,186
4,037
4,517
4,186
4,037
4,517
Manufacturing
1,419
1,544
1,465
1,419
1,544
1,465
Entertainment, leisure and tourism
625
617
611
625
617
611
Finance and insurance
49,18744,89151,49866,70254,071
61,145Retail trade
768
735
752
768
735
752
Wholesale trade
690
644
626
690
644
626
Business and property services
4,082
4,696
4,686
4,082
4,696
4,686
Transport and storage
480
714
594
480
714
594
Construction
743
643
722
743
643
722
Government and local authority
1,752
1,614
1,585
1,752
1,614
1,586
Other2
958
1,024
1,072
958
1,024
1,072
Total concentrations of funding by industry

102,381

96,861

104,367

118,194

104,279

112,347

Concentrations of funding by geography3								New Zealand
65,35660,351
61,06581,452
68,711
69,356
United States
21,44015,45924,17821,04515,09023,797
Europe7,476
14,307
11,484
7,458
13,80011,466
Other countries
8,109
6,744
7,640
8,239
6,678
7,728
Total concentrations of funding by geography

102,381

96,861

104,367

118,194

104,279

112,347

Analyses of funding liabilities by industry sector are based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.
1.

Represents: term deposits, other deposits bearing interest, deposits not bearing interest and secured debenture stock.													

2.

Other includes exposures to mining, electricity, gas and water, communications, and personal services.													

3.

Funding of the Bank via ANZ National (Int’l) Limited is classified as either from the United States or Europe, as the company conducts overseas funding activities through its London
branch.													P A G E

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For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Wholesale funding
The Banking Group’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds that balances cost efficiency
while targeting diversification by markets, investors, currencies, maturities and funding structures. Short-term wholesale funding requirements,
with a contractual maturity of less than one year, are managed through the Treasury and Markets operations. Long-term wholesale funding ismanaged and executed through Treasury operations.
The Banking Group also uses maturity concentration limits under the wholesale funding and liquidity management framework. Maturity
concentration limits ensure that the Banking Group does not become reliant on issuing large volumes of new wholesale funding with a shorttime period. Funding instruments used to meet the wholesale borrowing requirement must be on a pre-established list of approved products.
Funding capacity and debt issuance planning													Under the normal business conditions scenario, borrowing capacity is an estimate of the amount of funding that can be raised in the wholesalemarkets in normal market conditions. The Banking Group adopts a conservative approach to determine its funding capacity. Funding capacity
limits are determined at the Ultimate Parent Bank level and allocated to individual sites based on their requirements.
Annually, a Funding Plan is ratified by the Banking Group’s Senior Management. The plan is supplemented by monthly updates, and is linked to
the Banking Group’s three year strategic planning cycle.		
Liquidity portfolio management
The Banking Group holds a diversified portfolio of cash and high-quality highly-liquid securities to support payment obligations and contingent
funding in the event of a market disruption.
The size of the Banking Group’s liquidity portfolio is based on the amount of liquidity required to meet: day-to-day operational requirements; apotential name crisis; or potential wholesale ‘funding stress’ requirements.
In addition, the Banking Group monitors the ratio of cover provided by the liquidity portfolio to fund both domestic and offshore wholesale debt
maturities.
Supplementing its liquidity position, the Banking Group holds additional cash and liquid asset balances. The Markets business holds secondary
sources of liquidity in the form of highly liquid instruments in its trading portfolios.
Assets held for managing liquidity risk includes short term cash held with the RBNZ or other banks, government securities and other securities thatare readily acceptable in repurchase agreements with the RBNZ and other New Zealand banks, and securities issued by offshore Supranationaland highly rated banks.
The Banking Group’s core liquidity portfolio held for managing liquidity risk comprises:																Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

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

2,418
448
4,314
477
394
1,324

2,171
185
3,299
1
935

3,779
134
3,343
180
1,300

2,418
448
4,314
477
394
1,324

2,171
185
3,299
1
935

3,779
134
3,343
180
1,300

Total liquidity portfolio		

9,375

6,591

8,736

9,375

6,591

8,736

Liquidity crisis contingency planning
The Banking Group maintains liquidity crisis contingency plans defining an approach for analysing and responding to a liquidity threatening eventat a Banking Group-wide basis. The framework includes:													• the establishment of crisis severity/stress levels;• clearly assigned crisis roles and responsibilities;• early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;• outlined action plans, and courses of action for altering asset and liability behaviour.
• procedures for crisis management reporting, and covering cash-flow shortfalls;		
• guidelines determining the priority of customer relationships in the event of liquidity problems; and		• assigned responsibilities for internal and external communications.

P A G E

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )Contractual maturity analysis of financial assets and liabilities					The tables below analyse the Banking Group’s financial assets and liabilities, within relevant maturity groupings based on the earliest date on
which the Bank or Banking Group may be required to pay. The amounts represent principal and interest cash flows and may differ comparedto the amounts reported on the balance sheet.													The management of liquidity risk is detailed on pages 86 to 88. The analysis presented below has been made on an undiscounted basis, but itshould be noted that this is not how the Bank or Banking Group manages its liquidity risk.
Contractual maturity analysis for on-balance sheet financial assets and financial liabilities:																												Consolidated
Carrying			
Value
Total
At call$m$m$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Unaudited 31/03/2009
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

3,390
7,631
2,565
14,985597
93,720
714

3,414
7,742
2,969
14,985
614
137,400
714

3,390
167
-

24
4,416
528
3
10,957
714

2,433
497
495
16,278
-

726
1,763
18
40,657-181
27
69,777-

14,98571(269)-

Total financial assets

123,602167,838

3,557

16,642

19,703

43,16469,985

14,787

Liabilities													Due to other financial institutions
4,162
4,397
1,187
752
1,917
507
34
Deposits and other borrowings
72,76074,081
28,07927,353
15,932
2,717
Derivative financial instruments
12,86812,86812,868Other financial liabilities
1,743
1,755
1,560
94
94
7
Bonds and notes
21,52823,0682,287
6,621
13,468692
Due to parent company
1,096
1,105
1,105
Loan capital
2,835
4,398
56
168
1,116
1,902
1,156
Total financial liabilities

116,992

121,672

30,371

32,00824,732

17,902

2,635

14,024

Unaudited 31/03/2008
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

3,863
3,890
2,149
4,865
96
92,579
891

3,916
4,072
2,504
4,865
120
165,702
891

3,863
418
-

53
2,476
881
11,525891

604
225
15,712
-

574
1,114
24
45,968-284
4192,860
-

4,865
55
(363)
-

Total financial assets

108,333

182,070

4,281

15,826

16,54147,68093,185

4,557

Liabilities												Due to other financial institutions
2,384
3,689
1,104
1,498
568
495
24
Deposits and other borrowings
74,08076,58926,421
31,59517,0491,524
Derivative financial instruments
4,472
4,472
4,472
Other financial liabilities
1,361
1,361
1,262
15
84
Bonds and notes
16,586
19,591
1,921
5,858
11,812
Due to parent company
1,758
1,799
1,799
Loan capital
2,053
3,343
44
132
707
2,153
307
Total financial liabilities

102,694

110,844

29,32436,32023,622

14,622

2,177

4,779

P A G E

8 9

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		Consolidated
Carrying			
Value
Total
At call$m$m$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Audited 30/09/2008
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

4,838
5,032
2,624
7,533
109
97,679
893

4,923
5,173
3,097
7,533
136
163,788
893

4,838
436
-

85
3,640
1,028
11,047893

579
103
18,580
-

518
1,688
32
47,374-278
39
87,120
-

7,533
65
(333)
-

Total financial assets

118,708

185,543

5,274

16,693

19,262

49,61287,437

7,265

Liabilities												Due to other financial institutions
3,312
3,528
1,713
734
538
497
46
Deposits and other borrowings
77,136
79,497
26,94633,06818,292
1,189
2
Derivative financial instruments
6,710
6,710
6,710
Other financial liabilities
1,471
1,471
1,404
60
7
Bonds and notes
20,69524,3172,134
7,462
14,115606
Due to parent company
404
411
411
Loan capital
2,820
4,502
60
178
959
2,153
1,152
Total financial liabilities

112,548

120,436

29,070		

37,40026,47016,8203 to 12months$m

1 to 5
years
$m

2,814

7,862

ParentCarrying			
Value
Total
At call$m$m$mLess than
3 months$m

Beyond No maturity
5 years
specified$m$m

Unaudited 31/03/2009									Assets													Liquid assets
3,390
3,414
3,390
24
Due from other financial institutions
6,874
6,879
167
4,412
2,300
Trading securities
2,565
2,969
528
497
1,763
181
Derivative financial instruments
15,162
15,162
15,162Available-for-sale assets
8,419
12,51891
783
1,557
10,01968
Net loans and advances
91,329134,626
10,46915,97738,786
69,648(254)
Due from subsidiary companies
1,785
1,785
127
5
1,653
Other financial assets
643
643
643
Total financial assets

130,167

177,996

3,684

16,167

19,56243,75979,848

14,976

Liabilities													Due to other financial institutions
3,250
3,334
1,178
216
1,891
24
25
Deposits and other borrowings
64,913
66,132
28,206
22,411
13,0292,486
Due to subsidiary companies
44,78551,261
12,2606,727
9,311
15,5907,373
Derivative financial instruments
12,86812,86812,868Other financial liabilities
1,548
1,561
1,426
94
34
7
Bonds and notes
1,315
1,497
488
37
727
245
Due to parent company
1,096
1,105
1,105
Loan capital
2,835
4,988
100
283
1,547
1,902
1,156
Total financial liabilities

132,610

142,746

42,74931,36824,645

20,408

9,552

14,024													P A G E

9 0

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

For personal use only

(CONTINUED)

3 1 .	F I N A N C I A L R I S K M A N A G E M E N T ( continued )		ParentCarrying			
Value
Total
At call$m$m$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m													Unaudited 31/03/2008													Assets											Liquid assets
3,863
3,916
3,863
53
Due from other financial institutions
3,455
3,461
417
2,474
570
Trading securities
2,149
2,504
881
225
1,114
284
Derivative financial instruments
4,865
4,865
4,865
Available-for-sale assets
86
111
2
13
41
55
Net loans and advances
90,171
162,775
10,59415,02744,64692,828(320)
Due from subsidiary companies
1,506
1,665
684
223
758
Other financial assets
808
808
808
Total financial assets

106,903

180,105

4,964

14,81016,04746,531

93,153

4,600

Liabilities												Due to other financial institutions
1,432
1,504
1,123
98
195
62
26
Deposits and other borrowings
61,37963,51326,05923,447
12,6901,317
Due to subsidiary companies
37,07840,988
9,515
10,052
11,575
9,846
Derivative financial instruments
4,445
4,445
4,445
Other financial liabilities
1,146
1,146
1,107
15
24
Bonds and notes
579
652
191
192
269
Due to parent company
1,758
1,793
1,793
Loan capital
2,053
3,343
44
132
707
2,153
307
Total financial liabilities

109,870

117,384

38,49034,93924,79912,225

2,179

4,752

Audited 30/09/2008													Assets													Liquid assets
4,837
4,922
4,837
85
Due from other financial institutions
4,527
4,538
440
3,643
455
Trading securities
2,624
3,097
1,028
103
1,688
278
Derivative financial instruments
7,544
7,544
7,544
Available-for-sale assets
107
134
32
39
63
Net loans and advances
95,241
160,885
11,047
18,17545,01586,967(319)
Due from subsidiary companies
1,992
2,179
1,138
175
866
Other financial assets
789
789
789
Total financial assets

117,661

184,088

6,415

16,592

18,90847,601

87,284

7,288

Liabilities													Due to other financial institutions
1,940
2,009
1,718
209
11
25
46
Deposits and other borrowings
62,80064,79426,55425,426
11,878934
2
Due to subsidiary companies
43,26054,696
14,587
12,64913,675
13,361424
Derivative financial instruments
6,710
6,710
6,710
Other financial liabilities
1,187
1,187
1,187
Bonds and notes
1,123
1,343
223
236
691
193
Due to parent company
404
411
411
Loan capital
2,820
4,502
60
178
959
2,153
1,152
Total financial liabilities

120,244

135,652

43,27039,75425,97815,970

2,818

7,862

P A G E

9 1

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

For personal use only

(CONTINUED)P A G E

3 2 . C O N C E N T R AT I O N S O F C R E D I T R I S KConcentrations of credit risk to individual counterparties
The number of individual counterparties other than banks or groups of closely related counterparties of which a bank is a parent (excludingOECD Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (asat the end of the quarter) in ranges of 10% of equity, on the basis of limits:									Unaudited 31/03/2009		

Unaudited 31/03/2008		

Audited 30/09/2008

Number of Counterparties		

Number of Counterparties		

Number of Counterparties

		
As at

10% to 20% of equity		Consolidated

1

Peak for		
the quarter
As at

1

Peak for		
the quarter
As at

1

1

Peak forthe quarter

1

1

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

Unaudited 31/03/2009		

Unaudited 31/03/2008		

					
Amount		$m% of Total		
CreditAmountExposure$m

As atInvestment grade credit rating1		

100.0%

1,544

1,629

Audited 30/09/2008% of Total		
CreditAmountExposure$m% of Total
CreditExposure

100.0%

100.0%

1,329

Concentrations of credit risk to bank counterparties
The number of bank counterparties or groups of closely related counterparties of which a bank is the parent (excluding OECD Governments andconnected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (as at the end of the quarter)in ranges of 10% of equity, on the basis of actual exposures:				
Unaudited 31/03/2009		

Unaudited 31/03/2008		

Audited 30/09/2008

Number of Counterparties		

Number of Counterparties		

Number of Counterparties

		
As at

10% to 20% of equity		
20% to 30% of equity		
30% to 40% of equity		Consolidated

2
2-

Peak for		
the quarter
As at

5
1
1

2
-

Peak for		
the quarter
As at

3
-

1
1
-

Peak forthe quarter

2
1-

The amount and percentage of quarter end and peak end-of-day credit exposures to bank counterparties or groups of closely related
counterparties of which a bank is a parent (excluding OECD Governments and connected persons), where the quarter end and peak end-of-day
credit exposure equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:1.

9 2

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

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

For personal use only

(CONTINUED)

3 2 . C O N C E N T R AT I O N S O F C R E D I T R I S K ( continued )		Consolidated

Unaudited 31/03/2009		

Unaudited 31/03/2008		

					
Amount		$m% of Total		
CreditAmountExposure$m

As atInvestment grade credit rating1

100.0%

6,723

2,477

Audited 30/09/2008% of Total		
CreditAmountExposure$m% of Total
CreditExposure

100.0%

100.0%

3,416

The number of individual counterparties disclosed within the various equity ranges and the total exposure as at the end of the quarter are gross
exposures. No account is taken of collateral, security, and/or netting agreements which the Banking Group may hold in respect of the various
counterparty exposures. The peak numbers are calculated for each individual counterparty, and the peak for all counterparties may not haveoccurred on the same day. The peak exposures for the quarter are measured over equity at the end of the quarter.
Concentrations of credit risk to connected persons
Credit exposures to connected persons reported in the table below have been calculated partially on a bilateral net basis, and partially on agross basis. With effect from 11 August 2008, netting has occurred in respect of certain transactions which are the subject of a bilateral netting
agreement disclosed in the Bank’s most recent Supplemental Disclosure Statement. There is a limit of 125% of the Banking Group Tier One Capitalin respect of the gross amount of aggregate credit exposure to connected persons that can be netted off in determining the net exposure.
		Consolidated

Unaudited 31/03/2009		

Unaudited 31/03/2008		

Audited 30/09/2008

Amount$m

Amount6$m

Amount$m% of Tier
One Capital% of Tier
One Capital% of Tier
One Capital

Aggregate at end of period4													Other connected persons (on gross basis, before netting)2 		
5,268
80.6%
2,843
50.0%
3,011
49.1%
Other connected persons (netted amount)2
3,309
50.6%
n/a
n/a
2,187
35.6%
Other connected persons (on partial bilateral net basis)2		
1,959
30.0%
n/a
n/a
824
13.5%
Non-bank connected persons3
0.0%
0.0%
0.0%
Peak end-of-day for the quarter4													Other connected persons (on gross basis, before netting)		
7,037
107.6%
3,112
54.8%
4,250
69.3%
Other connected persons (netted amount)		
4,175
63.9%
n/a
n/a
2,889
47.1%
Other connected persons (on partial bilateral net basis)		
2,862
43.8%
n/a
n/a
1,361
22.2%
Non-bank connected persons		
0.0%
0.0%
0.0%
Rating-contingent limit5													Other connected persons
n/a
70.0%
n/a
70.0%
n/a
70.0%
Non-bank connected persons
n/a
15.0%
n/a
15.0%
n/a
15.0%
The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusive of exposures of acapital nature. The peak end-of-day credit exposures for the quarter to connected persons are measured over Tier One Capital as at the endof the quarter. There were no individual provisions provided against credit exposures to connected persons as at 31 March 2009 (31/03/2008$nil; 30/09/2008 $nil). The Banking Group had no contingent exposures arising from risk lay-off arrangements to connected persons as at 31
March 2009 (31/03/2008 $nil; 30/09/2008 $nil).
1.

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

2.

The Banking Group has amounts due from its Parent Company and Ultimate Parent Bank and other entities within the Ultimate Parent Group arising from the ordinary course of its
business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate Parent Bank. As at 31 March 2009, the exposure
to the Bank’s Parent Company were $nil (31/03/2008 $45 million; 30/09/2008 $14 million). As at 31 March 2009, the exposure to the Bank’s Ultimate Parent Bank were $5,268 million(31/03/2008 $2,798 million; 30/09/2008 $2,997 million). 											

3.

Non-bank connected persons exposures consist of loans to directors of the Bank. Any loans are made in the ordinary course of business of the Bank, on an arm’s length basis and on normal
commercial terms and conditions.

4.

The Banking Group has complied with the limits on aggregate credit exposures (of a non-capital nature and net of individual provisions) to connected persons and non-bank connected
persons, as set out in the Conditions of Registration, at all times during the quarter. The peak exposures for the quarter are measured over Tier One Capital at the end of the quarter.

5.

Represents the maximum peak end-of-day aggregate credit exposures limit (exclusive of exposures of a capital nature and net of individual provisions) to all connected persons. This isbased on the rating applicable to the Bank’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars. Within the overall limit a sub-limit of 15% of Tier One
Capital applies to aggregate credit exposures (exclusive of exposures of a capital nature and net of individual provisions) to non-bank connected persons. On 4 May 2007, the connected
persons’ limit increased from 70% to 75% as a result of an improvement in the Bank’s credit rating. On 18 March 2008, the Bank formally engaged Fitch Ratings to provide credit rating
services. The Fitch Ratings rating of AA- has meant that from this date the connected persons’ limit has decreased from 75% to 70% as the Fitch Ratings rating of AA- is lower than thatgiven by Standard & Poor’s and Moody’s Investors Services.				

6. The connected persons’ exposure balances for 31 March 2008 have been amended for the credit equivalent adjustment for derivatives, in addition to the fair value which was alreadyincluded. The revised balances remain within limits.																																							P A G E

9 3

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

For personal use only

(CONTINUED)P A G E

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

Aggregate capital charge asa percentage of the Banking
Group’s Equity

		
		

As at
$m

Peak
$m

As at
$m

Peak
$m

As at

Peak

Unaudited 31/03/2009
Interest rate risk
Foreign currency risk
Equity risk

3,406
41
68

4,055
108
78

273
3
5

324
9
6

2.7%
0.0%
0.0%

3.2%
0.1%
0.1%

Unaudited 31/03/2008
Interest rate risk
Foreign currency risk
Equity risk

3,495
23
55

3,745
83
89

280
2
4

300
7
7

3.0%
0.0%
0.0%

3.2%
0.1%
0.1%

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

3,736
35
64

3,984
160
75

299
3
5

319
13
6

3.0%
0.0%
0.1%

3.3%
0.1%
0.1%

34. INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIESThe following table outlines the interest earning and discount bearing assets and liabilities as at the end of each period.
		Consolidated

Parent						

Unaudited
Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Unaudited Unaudited
Audited31/03/2009 31/03/2008 30/09/2008
$m
$m
$m

Interest earning and discount bearing assets

106,037

102,564

109,017

111,743

100,420

107,287

Interest and discount bearing liabilities

98,49092,666

100,581

114,243

100,024

108,502

9 4

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

For personal use only

(CONTINUED)

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s
length transaction. The determination of the fair value of financial instruments is fundamental to the financial reporting framework as all
financial instruments are recognised initially at fair value and, with the exception of those financial instruments carried at amortised cost, areremeasured at fair value in subsequent periods.
The fair value of a financial instrument on initial recognition is normally the transaction price, however, in certain circumstances the initialfair value may be based on other observable current market transactions in the same instrument, without modification or repackaging, or on avaluation technique whose variables include only data from observable markets.
Subsequent to initial recognition, the fair value of financial instruments measured at fair value is based on quoted market prices, whereavailable. In cases where quoted market prices are not available, fair value is determined using market accepted valuation techniques that
employ observable market data. In limited cases where observable market data is not available, the input is estimated based on otherobservable market data, historical trends and other factors that may be relevant.
A significant number of financial instruments are carried at fair value in the balance sheet. Additional disclosure of the fair value of thosefinancial instruments not carried at fair value has been provided below. The fair value disclosure does not cover those instruments that are notconsidered financial instruments from an accounting perspective such as income tax and intangible assets. The aggregate fair value amounts
do not represent the underlying value of the Banking Group.
In the tables below, classes of financial assets have been allocated based on their accounting treatment. The significant accounting policies inNote 1 describe how the categories of financial assets and financial liabilities are measured and how income and expenses, including fair value
gains and losses, are recognised.
Financial asset classes have been allocated into the following groups: amortised cost; financial assets at fair value through profit or loss;
derivatives in effective hedging relationships; and available-for-sale financial assets. Similarly, each class of financial liability has been allocatedinto three groups: amortised cost; financial liabilities at fair value through profit or loss; and derivatives in effective hedging relationships.
The fair values are based on relevant information available as at the respective balance sheet dates and have not been updated to reflectchanges in market conditions after the balance sheet date.													FINANCIAL ASSETS
Liquid assets and due from other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they are short-term in nature or are
receivable on demand, or where longer term in nature, fair value is based on quoted market prices.
Trading securities
Trading securities are carried at fair value. Fair value is generally based on quoted market prices, broker or dealer price quotations, or modelledvaluations using prices for securities with similar credit risk, maturity and yield characteristics.
Derivative financial instruments
The fair values of derivative financial instruments are determined using market prices and market accepted valuation models as appropriate(including discounted cash flow models) based on current market yields for similar types of instruments and the maturity of each instrument.
Available-for-sale assets
Fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available, fair value is estimated using
quoted market prices for securities with similar credit, maturity and yield characteristics, or market accepted valuation models as appropriate(including discounted cash flow models) based on current market yields for similar types of instruments and the maturity of each instrument.
Net loans and advances
The carrying value of loans and advances includes deferred fees and expenses, and is net of provision for credit impairment and income yet
to mature. The estimated fair value of loans and advances is based on the discounted amount of estimated future cash flows and accordingly
has not been adjusted for provision for credit impairment. Estimated contractual cash flows for performing loans are discounted at estimatedcurrent bank credit spreads to determine fair value. For loans with doubt as to collection, expected cash flows (inclusive of the value of security)
are discounted using a rate, which includes a premium for the uncertainty of the flows.
The difference between estimated fair values for loans and advances and their carrying value reflects changes in interest rates and the credit
worthiness of borrowers since loan origination.
Other financial assets
Included in this category are accrued interest and fees receivable. The carrying values of accrued interest and fees receivable are considered toapproximate their net fair values as they are short term in nature or are receivable on demand.
Financial assets designated at fair value through profit or loss
The Banking Group has not reclassified any financial assets previously measured at amortised cost to fair value, or previously measured at fairvalue to amortised cost, during the period ended 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).

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For personal use only

(CONTINUED)

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S ( continued )FINANCIAL LIABILITIESDue to other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they are short-term in nature or are
receivable on demand, or when longer term in nature, four value is based on quoted market prices. 													Deposits and other borrowings
The fair value of a deposit liability without a specified maturity or at call is deemed to be the amount payable on demand at the reporting date.
The fair value is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates of interest for debt
with a similar maturity are used to discount contractual cash flows.						At balance date, the carrying amount of deposits and other borrowings designated by the Banking Group at fair value through profit or loss
was $6,144 million (31/03/2008 $10,938 million; 30/09/2008 $12,653 million). This is $9 million higher (31/03/2008 $5 million higher;
30/09/2008 $17 million lower) than their amortised cost.
The accumulated amount of the change in fair value attributable to changes in credit risk on these liabilities was less than $3 million (31/03/2008
less than $1 million; 30/09/2008 less than $3 million). The change in fair value attributable to changes in credit risk has been determined as
the amount of change in fair value that is not attributable to changes in market conditions that give rise to market risks (benchmark interest
rate, and foreign exchange rates).
Bonds and notes, due to parent company and loan capital
The aggregate fair value of bonds and notes and loan capital is calculated based on quoted market prices. For those debt issues where quoted market
prices were not available, a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of the debt instrument isused. The carrying value of the due to parent company balance is considered to approximate the fair value as it is repayable on demand.		
Other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered to approximate the fair value.
Commitments and contingencies
As outlined in Note 42 Contingent Liabilities and Credit Related Commitments, the Banking Group and the Bank have various credit related
commitments. Based upon the level of fees currently charged for granting such commitments, taking into account maturity and interest rates,
together with any changes in the creditworthiness of counterparties since origination of the commitments, their estimated replacement or net
fair value is not material.
Financial liabilities designated at fair value through profit or loss
Certain items included in deposits and other borrowings have been designated as financial liabilities at fair value through profit or loss in order toeliminate an accounting mismatch which would arise if the liabilities were otherwise carried at amortised cost. This mismatch arises where a derivative,
which is required to be measured at fair value through profit or loss, has been acquired to mitigate a financial risk within the financial liability.
VALUATION METHODOLOGY													A significant number of financial instruments are carried on the balance sheet at fair value. The Banking Group has implemented controls that
ensure that the fair value is either determined, or validated, by a function independent of the party that undertakes the transaction.
The best evidence of fair value is a quoted price in an active market. Accordingly, wherever possible fair value is based on quoted market prices
for the financial instrument. The net position of non-derivative financial instruments with offsetting market risks and all derivative portfolios,
are valued at the quoted bid price for assets and the quoted ask price for liabilities. The quoted market price is not adjusted for any potential
impact that may be attributed to a large holding of the financial instrument.
Where quoted market prices are used, independent price determination or validation is utilised. The results of independent validation processes
are reported to senior management, and adjustments to the fair values are made as appropriate.
In the event that there is no quoted market price for the instrument, fair values are based on present value estimates or other market acceptedvaluation techniques which include data from observable markets wherever possible. The majority of valuation techniques employ only
observable market data however, for certain financial instruments the fair value cannot be determined in whole with reference to current
market transactions or valuation techniques whose variables only include data from observable markets. In respect of the valuation component
where market observable data is not available, the fair value is determined using valuation techniques based on data derived and extrapolated
from market data and tested against historic transactions and observed market trends.
The valuation models incorporate the impact of the bid/ask spread, counterparty credit spreads and other factors that would influence the fairvalue determined by a market participant.
For fair values determined using a valuation model, the control framework may include, as applicable, independent development or validationof: (i) valuation models; (ii) any inputs to those models; and (iii) any adjustments required outside of the valuation model, and, where possible,
independent validation of model outputs.

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For personal use only

(CONTINUED)

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S ( continued )		Consolidated

		At amortised cost		

At fair value		
though		profit or loss
Hedging

			
			
			
		 Loans and		 receivables
Carrying amount		
$m

Other
financialassets at
amortised		
cost
Sub-total$m$m

Availablefor-saleassetsHeld fortrading			
$m
$m
$m

Total
$m

Financial assets
Unaudited 31/03/2009
Liquid assets		Due from other financial institutions		
Trading securities		
Derivative financial instruments1		
Available-for-sale assets
Net loans and advances2
Other financial assets

93,720
-

3,390
3,362
714

3,390
3,362
93,720714

2,565
14,439
-

546
-

4,269
597
-

3,390
7,631
2,565
14,985597
93,720714

Total financial assets

93,7207,466

101,186

17,004546

4,866

123,602

Unaudited 31/03/2008
Liquid assets		Due from other financial institutions		
Trading securities		
Derivative financial instruments1		
Available-for-sale assets		
Net loans and advances2		
Other financial assets		

92,579
-

3,863
1,281
891

3,863
1,281
92,579
891

2,149
4,471
-

394
-

2,609
96
-

3,863
3,890
2,149
4,865
96
92,579891

Total financial assets		

92,5796,035

98,614

6,620

394

2,705

108,333

Audited 30/09/2008
Liquid assets		Due from other financial institutions		
Trading securities		
Derivative financial instruments1		
Available-for-sale assets		
Net loans and advances2		
Other financial assets		

97,679
-

4,838
2,585
893

4,838
2,585
97,679
893

2,624
7,297
-

236
-

2,447
109
-

4,838
5,032
2,624
7,533
109
97,679893

Total financial assets

97,6798,316

105,995

9,921

236

2,556

118,708

The following table summarises the carrying amounts and fair values of those financial assets not presented in the Banking Group’s balance
sheet at their fair value:
Consolidated 				Unaudited 31/03/2009

Unaudited 31/03/2008

Audited 30/09/2008

Carrying
amount$m

Fair value$m

Carrying		
amountFair value$m$m

Carrying			amountFair value$m$m

Liquid assets		Due from other financial institutions
Net loans and advances2		
Other financial assets		

3,390
3,362
93,720
714

3,390
3,362
93,572
714

3,863
1,281
92,579
891

3,863
1,281
92,377
891

4,838
2,585
97,679
893

4,838
2,585
97,429893

Total financial assets at amortised cost		

101,186

101,038

98,614

98,412

105,995

105,745

1.

Derivative financial instruments classified as ‘held for trading’ include derivatives entered into as economic hedges which are not designated as accounting hedges.													

2.

Fair value hedging is applied to financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from the amortised cost.

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For personal use only

(CONTINUED)P A G E

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S ( continued )		Consolidated
At amortised
cost

		
		
		
Carrying amount$m

At fair value through profit or loss

Hedging

Designatedon initialrecognition$mHeld fortrading$m

Sub-total		
$m
$m

Total
$m

Financial liabilities
Unaudited 31/03/2009
Due to other financial institutions			
Deposits and other borrowings			
Derivative financial instruments1		
Other financial liabilities			
Bonds and notes2			
Due to parent company		
Loan capital			

4,162
66,616
1,743
21,528
1,096
2,835

6,144
-

11,581-

6,144
11,581
-

1,287
-

4,162
72,76012,868
1,743
21,5281,096
2,835

Total financial liabilities		

97,9806,144

11,581

17,725

1,287

116,992

Unaudited 31/03/2008													Due to other financial institutions			
2,384
2,384
Deposits and other borrowings			
63,142
10,938
10,93874,080Derivative financial instruments1			
4,223
4,223
249
4,472
Other financial liabilities			
1,361
1,361
Bonds and notes2			
16,586
16,586
Due to parent company			
1,758
1,758
Loan capital			
2,053
2,053
Total financial liabilities			

87,284

10,938

4,223

15,161

249

102,694

Audited 30/09/2008													Due to other financial institutions			
3,312
3,312
Deposits and other borrowings			
64,483
12,653
12,653
77,136
Derivative financial instruments1			
5,946
5,946
764
6,710
Other financial liabilities			
1,471
1,471
Bonds and notes2			
20,695
20,695Due to parent company			404
404
Loan capital			
2,820
2,820
Total financial liabilities			

93,185

12,653

5,946

18,599764

112,548

The following table summarises the carrying amounts and fair values of those financial liabilities not presented in the Banking Group’s balance
sheet at their fair value:
Consolidated 				Unaudited 31/03/2009

Unaudited 31/03/2008

Audited 30/09/2008

Carrying
amount$m

Fair value$m

Carrying		
amountFair value$m$m

Carrying			amountFair value$m$m

Due to other financial institutions
Deposits and other borrowings		
Other financial liabilities
Bonds and notes2		
Due to parent company		
Loan capital

4,162
66,616
1,743
21,528
1,096
2,835

4,162
66,743
1,743
20,826
1,096
2,642

2,384
63,142
1,361
16,586
1,758
2,053

2,396
63,127
1,361
16,519
1,758
2,020

3,312
64,483
1,471
20,695
404
2,820

3,296
64,532
1,471
20,448404
2,687

Total financial liabilities at amortised cost		

97,98097,21287,28487,181

93,18592,8381.

Derivative financial instruments classified as ‘held for trading’ include derivatives entered into as economic hedges which are not designated as accounting hedges.													

2.

Fair value hedging is applied to financial liabilities within bonds and notes. The resulting fair value adjustment means that the carrying value differs from the amortised cost.

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For personal use only

(CONTINUED)

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S ( continued )		Parent		At amortised cost		

At fair value		
though		profit or loss
Hedging

			
			
			
		 Loans and		 receivables
Carrying amount		
$m

Other
financialassets at
amortised		
cost
Sub-total$m$m

Availablefor-saleassetsHeld fortrading			
$m
$m
$m

Total
$m

Financial assets
Unaudited 31/03/2009
Liquid assets		Due from other financial institutions		
Trading securities		
Derivative financial instruments1		
Available-for-sale assets		
Net loans and advances2		
Due from subsidiary companies
Other financial assets

91,329
-

3,390
2,605
1,785
643

3,390
2,605
91,329
1,785
643

2,565
14,616
-

546
-

4,269
8,419
-

3,390
6,874
2,565
15,162
8,419
91,3291,785
643

Total financial assets

91,3298,423

99,752

17,181546

12,688130,167

Unaudited 31/03/2008
Liquid assets		Due from other financial institutions		
Trading securities		
Derivative financial instruments1		
Available-for-sale assets		
Net loans and advances2		
Due from subsidiary companies		
Other financial assets		

90,171
-

3,863
846
1,506
808

3,863
846
90,171
1,506
808

2,149
4,471
-

394
-

2,609
86
-

3,863
3,455
2,149
4,865
86
90,171
1,506
808

Total financial assets

90,171

7,023

97,194

6,620

394

2,695

106,903

Audited 30/09/2008													Liquid assets		
4,837
4,837
4,837
Due from other financial institutions		
2,080
2,080
2,447
4,527
Trading securities		
2,624
2,624
Derivative financial instruments1		
7,306
238
7,544
Available-for-sale assets		
107
107
95,241
95,241
95,241
Net loans and advances2		
Due from subsidiary companies		
1,992
1,992
1,992
Other financial assets		
789
789
789
Total financial assets		

95,241

9,698

104,939

9,930

238

2,554

117,661

The following table summarises the carrying amounts and fair values of those financial assets not presented in the Bank’s balance sheet attheir fair value:
Parent				
Unaudited 31/03/2009

Unaudited 31/03/2008

Audited 30/09/2008

Carrying
amount$m

Fair value$m

Carrying		
amountFair value$m$m

Carrying			amountFair value$m$m

Liquid assets		Due from other financial institutions
Net loans and advances2
Due from subsidiary companies
Other financial assets

3,390
2,605
91,329
1,785
643

3,390
2,605
91,157
1,785
643

3,863
846
90,171
1,506
808

3,863
846
89,956
1,506
808

4,837
2,080
95,241
1,992
789

4,837
2,080
94,972
1,992
789

Total financial assets at amortised cost

99,752

99,58097,19496,979104,939

104,6701.
2.

Derivative financial instruments classified as ‘held for trading’ include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from the amortised cost.
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(CONTINUED)P A G E

3 5 .	FA I R VA L U E O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S ( continued )		ParentAt amortised
cost

		
		
		
Carrying amount$m

At fair value through profit or loss

Hedging

Designatedon initialrecognition$mHeld fortrading$m

Sub-total		
$m
$m

Total
$m

Financial liabilities
Unaudited 31/03/2009
Due to other financial institutions			
Deposits and other borrowings			
Due to subsidiary companies			
Derivative financial instruments1			
Other financial liabilities			
Bonds and notes2			
Due to parent company			
Loan capital			

3,250
64,91344,785
1,548
1,315
1,096
2,835

-

11,581-

11,581
-

1,287
-

3,250
64,91344,785
12,868
1,548
1,315
1,096
2,835

Total financial liabilities			

119,742-

11,581

11,581

1,287

132,610

Unaudited 31/03/2008											Due to other financial institutions			
1,432
1,432
Deposits and other borrowings			
61,37961,379Due to subsidiary companies			
37,07837,078
4,196
4,196
249
4,445
Derivative financial instruments1			
Other financial liabilities			
1,146
1,146
579
579
Bonds and notes2			
Due to parent company			
1,758
1,758
Loan capital			
2,053
2,053
Total financial liabilities			

105,425

-

4,196

4,196

249

109,870

Audited 30/09/2008											Due to other financial institutions			
1,940
1,940
Deposits and other borrowings			
62,80062,800Due to subsidiary companies			
43,26043,260
5,946
5,946
764
6,710
Derivative financial instruments1			
Other financial liabilities			
1,187
1,187
1,123
1,123
Bonds and notes2			
Due to parent company			404
404
Loan capital			
2,820
2,820
Total financial liabilities			

113,534

-

5,946

5,946

764

120,244

The following table summarises the carrying amounts and fair values of those financial liabilities not presented in the Banking Group’s balance
sheet at their fair value:
Parent				
Unaudited 31/03/2009

Unaudited 31/03/2008

Audited 30/09/2008

Carrying
amount$m

Fair value$m

Carrying		
amountFair value$m$m

Carrying			amountFair value$m$m

Due to other financial institutions		
Deposits and other borrowings		
Due to subsidiary companies		
Other financial liabilities		
Bonds and notes2		
Due to parent company		
Loan capital		

3,250
64,91344,785
1,548
1,315
1,096
2,835

3,250
65,02045,078
1,548
1,010
1,096
2,642

1,432
61,37937,078
1,146
579
1,758
2,053

1,432
61,36837,031
1,146
536
1,758
2,020

1,940
62,80043,260
1,187
1,123
404
2,820

1,940
62,84343,027
1,187
1,125
404
2,687

Total financial liabilities at amortised cost

119,742

119,644

105,425

105,291

113,534

113,213

1.

Derivative financial instruments classified as ‘held for trading’ include derivatives entered into as economic hedges which are not designated as accounting hedges.													

2.

Fair value hedging is applied to financial liabilities within bonds and notes. The resulting fair value adjustment means that the carrying value differs from the amortised cost.

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For personal use only

(CONTINUED)

3 6 . S E G M E N TA L A N A LYS I S

For segment reporting purposes, the Banking Group is organised into three major business segments - Retail Banking, Relationship Banking andInstitutional. Centralised back office and corporate functions support these segments.				
A summarised description of each business segment is shown below:
Retail Banking
Provides banking products and services to individuals and small businesses through separate ANZ and The National Bank branded distribution
channels. Personal banking customers have access to a wide range of financial services and products. Small business banking services are offered
to enterprises with annual revenues of less than $5 million. Included in this segment is Private Banking, a stand-alone business unit, which offersa fully inclusive banking and investment service to high net worth individuals. This segment also includes profit centres supporting the Retail
Banking segment (e.g. Direct Broking and the ING NZ joint venture).
Relationship Banking
This segment provides services to rural, commercial and corporate customers and UDC. A full range of banking products and services are provided
to Rural customers. Corporate and Commercial customers consist of primarily privately owned medium to large businesses with annual revenues of$2 million and greater. The Banking Group’s relationship with these businesses ranges from simple banking requirements with revenue from deposit
and transactional facilities, and cashflow lending, to more complex funding arrangements with revenue sourced from a wider range of products.
UDC is primarily involved in the financing and leasing of plant, vehicles and equipment, primarily for small and medium sized businesses, as wellas investment products.
Institutional
Institutional provides financial services to large multi-banked corporates, often global, who require sophisticated product and structuring solutions.
The Institutional business unit includes the following specialised units: 							•Markets - provides foreign exchange and commodity trading and sales-related services, origination, underwriting, structuring, risk management
and sale of credit and derivative products globally.						

•Transaction Banking - provides cash management, trade finance, international payments, clearing and custodian services.

•

Specialised Lending -  provides origination, credit analysis, structuring and execution of specific customer transactions.

Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent with the 2009
segment definitions.																		P A G E

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(CONTINUED)P A G E

3 6 . S E G M E N TA L A N A LYS I S ( continued )Consolidated
			 Relationship		Retail Banking4
Banking			$m$mInstitutional
$m

Other
$m

Total
$m

1,514
(322)
(824)

414
(520)
342

2
(1,061)
1,176

4,226
(2,951)-

Net interest income 		554
368
Other external operating income 		
80
49
Share of profit of equity accounted associates and jointly 				controlled entities 		
6
-

236
196

117
107

1,275
432

-

2

8

Operating income		
Other external expenses		
Net intersegment and related party expenses3		

640
312
164

432
54
33

226
249
(213)

1,715
697
41

Operating expenses		

476

139

87

36

738

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

164
133

278
120

345
32

190
-

977
285

Profit before income tax		
Income tax expense		

31
10

158
47

313
94

190
53

692
204

Profit after income tax		

21

111

219

137

488

Unaudited 6 months to 31/03/20091, 2External interest income		
External interest expense		
Net intersegment interest		

2,296(1,048)
(694)

417
82
57

Non-cash expenses 							Depreciation and amortisation 		
9
1
1
13
24
Balance sheet							Total external assets		
49,821
36,61834,7336,769 127,941
Share in associates and jointly controlled entities 		
242
65
89
396
Total external liabilities		
38,913
11,291
34,54732,938 117,689
1.

Results are equity standardised			

2.

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

3.

Net intersegment expenses are eliminated at the Ultimate Parent Bank level.			

4.

Other operating income includes an adjustment for $166m in relation to ING New Zealand Funds. Refer to notes 4 and 24 for further details.		

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For personal use only

(CONTINUED)

3 6 . S E G M E N TA L A N A LYS I S ( continued )Consolidated
			 Relationship		Retail Banking
Banking			$m$m

Unaudited 6 months to 31/03/20081, 2External interest income 			External interest expense 			Net intersegment interest		

2,299(1,194)
(476)

1,528
(389)
(789)

Institutional
$m

Other
$m

Total
$m

967
(642)
(279)

(1,431)
1,544

4,794
(3,656)-

Net interest income 			
629
350
46
113
1,138
Other external operating income 			
249
37
217
(10)
493
Share of profit of equity accounted associates and jointly 									controlled entities 			
12
1
83
96
Operating income			
Other external expenses			
Net intersegment and related party expenses3			

890
308
164

387
73
58

264
47
28

186
205
(211)

1,727
633
39

Operating expenses			

472

131

75

(6)

672

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

418
54

256
25

189
14

192
-

1,055
93

Profit before income tax			
Income tax expense			

364
117

231
75

175
50

192
28

962
270

Profit after income tax			

247

156

125

164

692

Non-cash expenses 									Depreciation and amortisation 			
7
1
1
13
22
Balance sheet									Total external assets			
53,78533,411
21,216
4,102
112,514
Share in associates and jointly controlled entities 			
201
61
88
350
Total external liabilities			
36,696
11,17023,21932,048103,133
1.

Results are equity standardised.

2.

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

3.

Net intersegment expenses are eliminated at the Ultimate Parent Bank level.

P A G E

1 0 3

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

For personal use only

(CONTINUED)P A G E

3 6 . S E G M E N TA L A N A LYS I S ( continued )Consolidated
			 Relationship		Retail Banking
Banking			$m$m

Audited year to 30/09/20081, 2External interest income 			External interest expense 			Net intersegment interest			

4,729(2,498)(1,000)

3,219
(819)
(1,687)

Institutional
$m

Other
$m

Total
$m

1,874
(1,247)(502)

35(3,004)
3,189

9,857
(7,568)-Net interest income 			
1,231
713
125
220
2,289
Other external operating income 			
499
82
420
12
1,013
Share of profit of equity accounted associates and jointly 									controlled entities 			
23
1
87
111
Operating income			
Other external expenses			
Net intersegment and related party expenses3			

1,753
629
335

795
156
116

546
103
58

319
474
(427)

3,413
1,362
82

Operating expenses			

964

272

161

47

1,444

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

789
178

523
108

385
16

272
-

1,969
302

Profit before income tax			
Income tax expense			

611
194

415
134

369
109

272
67

1,667
504

Profit after income tax			

417

281

260

205

1,163

Non-cash expenses 									Depreciation and amortisation 			
15
1
2
28
46
Balance sheet								Total external assets			
54,27236,15327,011
5,479
122,915
Share in associates and jointly controlled entities 			
212
64
87
363
Total external liabilities			
37,682
11,717
29,14034,569113,108
Geographic segment analysis
The Banking Group operates predominantly in New Zealand. No other geographic segments are reportable secondary segments.
1.

Results are equity standardised.

2.

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

3.

Net intersegment expenses are eliminated at the Ultimate Parent Bank level.

1 0 4

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

For personal use only

(CONTINUED)

3 7 . N OT E S TO T H E C A S H F L OW S TAT E M E N T S

Consolidated
Unaudited
Unaudited
6 months to 6 months to
31/03/2009 31/03/2008$m$m

ParentAuditedYear to30/09/2008$m

Unaudited
6 months to
31/03/2009$m

Unaudited
Audited
6 months toYear to31/03/2008 30/09/2008$m$m

Reconciliation of profit after income tax to net cash flows										provided by (used in) operating activities									Profit after income tax		
488
692
1,163
288
447
644
Non-cash items:										Depreciation and amortisation		
24
22
46
13
10
22
Provision for credit impairment		
285
93
302
265
86
278
Deferred fee revenue and expenses		
3
5
(3)
2
4
(2)
Share-based payments expense		
9
7
13
9
7
13
Amortisation of capitalised brokerage/ mortgage origination fees
27
28
57
27
28
57
Deferrals or accruals of past or future operating										cash receipts or payments:										Decrease (increase) in operating assets and liabilities		
1,191(3,520)(3,362)918(3,393)(2,876)
Decrease (increase) in interest receivable		
101
23
2
86
(7)
(28)
(Decrease) increase in interest payable		
(260)
7
202
(213)
51
219
Increase in accrued income		
(5)
(6)
(8)
(3)
(6)
(7)
(Decrease) increase in accrued expenses
(15)
(8)
45
(14)
(7)
37
Increase (decrease) in provisions		
150
(11)
25
150
(7)
35
Amortisation of premiums and discounts		
59
25
56
59
25
56
Increase in income tax assets		
(61)
(52)
(20)
(122)
(125)
(45)
Items classified as investing/financing:										Share of profit of equity accounted associates and										jointly controlled entities		
(8)
(96)
(111)
(2)
Other adjustments including associates		
(84)
(88)
(Gain) loss on disposal of premises and equipment		
(17)
1
1
1
Net cash flows provided by (used in) operating activities

1,971(2,790)(1,592)

1,463(2,971)(1,684)

Reconciliation of core liquidity portfolio to cash and cash equivalents
The Banking Group’s core liquidity portfolio held for managing liquidity risk comprises:
Consolidated
Unaudited
Unaudited
31/03/2009 31/03/2008
			
$m
$m

ParentAudited30/09/2008$m

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

Total liquidity portfolio1		
9,375
6,591
8,736
9,375
6,591
8,736
Add back:									Liquid assets		
963
1,692
1,059
963
1,692
1,058
Due from other financial institutions - less than 90 days		
2,726
663
1,948
2,726
662
1,946
Deduct:										Trading securities		
(1,846)(1,626)(2,376)(1,846)(1,626)(2,376)
Available-for-sale assets		
(394)
(394)
Due from other financial institutions - greater than 90 days			(3,607)(1,770)(1,578)(4,167)(1,770)(1,578)
Total cash and cash equivalents		
1.

7,217

5,550

7,789

6,657

5,549

7,786

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

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

For personal use only

(CONTINUED)P A G E

3 8 .		S I G N I F I C A N T C O N T RO L L E D E N T I T I E S , A S S O C I AT E S A N D I N T E R E S T S I N J O I N T LY C O N T RO L L E D E N T I T I E S A S AT
31 MARCH 2009
Controlled entities

Ownership
Interest %Airlie Investments Limited
Alos Holdings Limited
ANZ Capital NZ Limited
ANZ Investment Services (New Zealand) Limited
ANZ National (Int’l) Limited
ANZ National Staff Superannuation Limited
APAC Investments Limited
Arawata Assets Limited
Arawata Capital Limited
Arawata Finance Limited
Arawata Funding Limited
Arawata Holdings Limited
Arawata Securities Limited
Arawata Trust
Arawata Trust Company
BHI Limited
CBC Finance Limited (incorporated in United Kingdom)
Control Nominees Limited
Cortland Finance Limited
Corvine Investments Limited
Culver Finance Limited
Direct Broking Limited
Direct Nominees Limited
EFTPOS New Zealand Limited
Endeavour Finance Limited
Endeavour Securities Limited
General Finance Custodians Limited
Harcourt Corporation Limited
Harcourt Investments Limited
Karapiro Investments Limited
Kingfisher NZ Trust 2008-1
Marmion Trust
National Bank of New Zealand Custodians Limited
NBNZ Finance Limited
NBNZ Holdings Hong Kong Limited (incorporated in Hong Kong)
NBNZ Holdings Limited
Origin Mortgage Management Services Limited
Origin Mortgage Management Services (2008) Limited
Private Nominees Limited
Radiola Corporation Limited
Rural Growth Fund Limited
Sefton Finance Limited
South Pacific Merchant Finance Limited
Southpac Corporation Limited
Technical Solutions Limited
Trillium Holdings Limited
Tui Endeavour Limited
Tui Securities Limited
UDC Finance Limited

1 0 6

100
100
100
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Balance
Date

Nature of business

30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 December
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 March
30 September
30 September
30 September
30 September
31 December
30 September
30 September
31 December
30 September
31 March
31 March
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September

Investment company
Investment company
Investment company
Funds management company
Finance company
Staff superannuation scheme trustee
Finance company
Property company
Investment company
Investment company
Investment company
Investment company
Finance company
Finance entity
Investment company
Investment company
Finance company
Finance company
Investment company
Investment company
Investment company
On-line share broker
Nominee company
Eftpos service provider
Investment company
Investment company
Mortgage finance
Investment company
Investment company
Non operative
Finance entity
Finance entity
Nominee and custody services
Finance company
Non operative
Finance company
Mortgage financeMortgage financeNominee company
Distribution company
Investment company
Investment company
Investment company
Investment company
Software provider
Finance company
Investment company
Investment company
Finance company

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

For personal use only

(CONTINUED)

3 8 .		S I G N I F I C A N T C O N T RO L L E D E N T I T I E S , A S S O C I AT E S A N D I N T E R E S T S I N J O I N T LY C O N T RO L L E D E N T I T I E S A S AT
31 MARCH 2009 (CONTINUED)

All controlled entities are incorporated in New Zealand, unless stated.							For all controlled entities, with the exception of General Finance Custodians Limited, Origin Mortgage Management Services Limited and Origin
Mortgage Management Services (2008) Limited, the ownership interest percentage equates to the voting power held. In relation to thesecompanies, control exists through the Banking Group having 100% of the voting rights.										On 2 April 2009, the Bank ceased to control Marmion Trust. Control previously existed through the undertaking of the majority of risks andrewards relating to a particular transaction. This transaction was unwound on 2 April 2009.						On 9 April 2009, Technical Solutions Limited was amalgamated with Direct Broking Limited.									Movements in controlled entities
On 7 November 2007, the NZ Banking Group exited its controlling interest in Amberley Investments (50% ownership).									On 7 November 2007, the NZ Banking Group exited its controlling interest in Endeavour Caterpillar New Zealand Finance Company (50%ownership).									On 3 December 2007, Radiola NZ Limited was incorporated as a subsidiary of the NZ Banking Group, and on 23 May 2008 changed its nameto Radiola Corporation Limited.									On 8 January 2008, the NZ Banking Group exited its controlling interest in Nerine Finance No. 2 (65% ownership).									On 5 March 2008, the NZ Banking Group purchased a 100% interest in Technical Solutions Limited.									On 11 April 2008, Pioneer First Limited changed its name to Origin Mortgage Management Services (2008) Limited.									On 17 October 2008, ETRADE New Zealand Limited, ETRADE New Zealand Securities Limited and ETRADE New Zealand Securities Nominees
Limited were deregistered.											Associates

Book Value Voting
Ownership$mInterest % Interest %Balance
Date

Nature of business

Cards NZ Limited
Electronic Transaction Services Limited
EXCCL Limited
Mondex New Zealand Limited
NZ Poultry Enterprises Limited
UCG Investments Limited
Wyma Engineering (NZ) Limited

87
2
0
0
41
15
3

30 Sep31 Mar30 Sep31 Dec30 Apr
31 Mar
31 MarCard services
Eftpos settlements
Plastics manufacturing and recycling
Card services
Poultry processor
Rest home operator
Agricultural machinery supplier

Total investment in associates

148

25		
25		
45		
40		
20		
40		
31		

14
25
81
40
20
40
31

All associates are incorporated in New Zealand.
Movements in associates
On 25 February 2008, ANZ Capital NZ Limited acquired a 20% ownership interest in NZ Poultry Enterprises Limited. 		
From 28 November 2007, ANZ Capital NZ Limited purchased five further branches of UCG Investments Limited.
		
Jointly controlled entities

Book Value Voting
Ownership$mInterest % Interest %Balance
Date

Nature of businessArgenta Limited
BCS Group Limited
ING (NZ) Holdings Limited
JMI Aerospace Limited

2		21		 213		40		 4024250		 49
1		33		 3331 July
30 June31 Dec31 MarManufacture and marketing of animal remedies		
Manufacturer of baggage handling systems 			Funds management and insurance 		Airline maintenance and service provider 		Total investment in jointly controlled entities

248

All jointly controlled entities are incorporated in New Zealand.
The Banking Group has joint control of all these entities due to a combination of control factors, none of which gives either party overall control.

P A G E

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

For personal use only

(CONTINUED)

3 8 .		S I G N I F I C A N T C O N T RO L L E D E N T I T I E S , A S S O C I AT E S A N D I N T E R E S T S I N J O I N T LY C O N T RO L L E D E N T I T I E S A S AT
31 MARCH 2009 (CONTINUED)

The summarised financial information relating to the Banking Group’s investment in ING (NZ) Holdings Limited is as follows:
Consolidated
Unaudited
31/03/2009$m

Unaudited
31/03/2008$m

Audited30/09/2008$m

Share of assets and liabilities 									Investments 				678278Other assets 				
179
159
160
Total assets 				

246

241

238

Life insurance policy liabilities 				Other liabilities 				

(36)
46

12
9

(3)
11

Total liabilities 				

10

21

8

Net assets 				

236

220

230

Share of revenue, expenses and results 									Net underwriting result 				433066Other revenue 				
71425Total revenue 				Expenses 				

50
46

44
34

91
75

Profit before income tax 				Income tax expense 				

4
(2)

10
(2)

16
(6)

Profit after tax 				

6

12

22

Share of commitments 							Lease commitments 				
17
48There are no unrecognised losses in respect of any of the Banking Group’s jointly controlled entities. The Banking Group’s share of thecontingent liabilities of its joint ventures are incurred jointly with other investors. There were no contingent liabilities as at 31 March 2009(31/03/2008 $nil; 30/09/2008 $nil).

3 9 . PA R E N T C O M PA N Y A N D U LT I M AT E PA R E N T bank

The Parent Company is ANZ Holdings (New Zealand) Limited which is incorporated in New Zealand. The Ultimate Parent Bank is Australia and
New Zealand Banking Group Limited which is incorporated in Australia.																		4 0 . S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D D I S T R I B U T I O N O F
I N S U R A N C E P RO D U C T S

Securitisation
The Bank enters into transactions in the normal course of business by which it transfers financial assets directly to third parties or to special
purpose entities. These transfers may give rise to the full or partial derecognition of those financial assets.			
• Full derecognition occurs when the Bank transfers its contractual right to receive cash flows from the financial assets, or retains the right but
assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks and rewards of ownership. These risks
include credit, interest rate, currency, prepayment and other price risks.
• Partial derecognition occurs when the Bank sells or otherwise transfers financial assets in such a way that some but not substantially all of therisks and rewards of ownership are transferred but control is retained. These financial assets are recognised on the balance sheet to the extent
of the Bank’s continuing involvement.		
In May 2008 the RBNZ expanded the range of acceptable collateral that banks can pledge and borrow against as part of changes to its liquidity
management arrangement designed to help ensure adequate liquidity for New Zealand financial institutions in the event that global market disruption
was to intensify. From 31 July 2008, acceptable collateral includes residential mortgage backed securities (“RMBS”) that satisfy RBNZ criteria.
On 10 October 2008, the Banking Group established an in-house RMBS facility in order to issue securities that meet the RBNZ criteria. The
establishment of the facility resulted in the Parent ANZ National Bank LImited financial statements recognising a payable and a receivable of RMBS
securities of equal amount totalling $3,721 million to Kingfisher NZ Trust 2008-1 (‘The Trust’), a newly established consolidated entity. On 12
December 2008, a further tranche totalling $5,521 million was also ‘sold’ to the Trust, creating a further payable and receivable of RMBS securities of
equal amount. These assets and liabilities do not qualify for derecognition as the Banking Group retains a continuing involvement in the transferredassets, therefore the Consolidated Banking Group’s financial statements do not change as a result of establishing these facilities.				
							P A G E

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

For personal use only

(CONTINUED)

4 0 . S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D D I S T R I B U T I O N O F
I N S U R A N C E P RO D U C T S ( C ontinued )The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent that any loans are found to be ineligible interms of the RBNZ criteria, they are automatically removed from the facility. Additional lending to existing RMBS customers is added into the facility
on a monthly basis.
The establishment of this facility increases the Banking Group’s contingent funding ability from the RBNZ.			
On 27 February 2009, $4,877 million of residential mortgage assets were sold to the Australia and New Zealand Banking Group Limited - New Zealand
Branch. These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets. The Consolidated
Group’s financial statements have reduced as a result of transferring these assets.					Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and investment and superannuation funds. The Bank
provides private banking services to a number of clients, including investment advice and portfolio management. The Banking Group is not
responsible for any decline in performance of the underlying assets of the investors due to market forces.											As funds under management are not owned by the Banking Group, they are not included in these financial statements. The Banking Group
derives fee and commission income from the sale and management of investment funds and superannuation bonds, unit trusts and theprovision of private banking services to a number of clients.											Some funds under management are invested in products owned or securities issued by the Banking Group and are recorded as liabilities in thebalance sheet. At 31 March 2009, $2,735 million of funds under management were invested in the Banking Group’s own products or securities(31/03/2008 $1,140 million; 30/09/2008 $2,229 million).											Funds management activities conducted by the ING New Zealand joint venture are not included in the funds managed by the Banking Group,as the Banking Group does not have control of the ING New Zealand joint venture.		
The aggregate value of funds managed by the Banking Group at balance date was:									Consolidated
Unaudited
31/03/2009$m

Unaudited
31/03/2008$m

Audited30/09/2008$m

Superannuation schemes
Bonus Bonds
Discretionary funds 				

2,611
4,251

2,459
2,033

2,417
3,440

Totals funds under management 				

6,862

4,492

5,857

On 1 October 2007, the Direct Broking Call Account was registered as a portfolio investment entity (PIE).											On 25 March 2008, the UDC Superbonds Superannuation Scheme managed by UDC Finance Limited was wound up.											On 1 April 2008, the National Bank Call Fund, Private Banking Portfolio Call Fund and National Bank Private Banking Call Fund, all managed by
ANZ Investments Services (New Zealand) Limited, commenced as PIEs. The funds invest in call deposits with the Bank.											On 9 April 2008, the Term Maximiser Fund and Call Maximiser Fund managed by UDC Finance Limited commenced as PIEs. The funds invest in
secured debentures with UDC Finance Limited.											On 1 October 2008, the ANZ Call Fund and ANZ Term Fund, managed by UDC Finance Limited, commenced as PIEs. The funds invest in New
Zealand dollar call and term deposits with the Bank.											Custodial services											The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by those customers.											Marketing and distribution of insurance products											The Banking Group markets and distributes a range of insurance products which are underwritten by several insurance companies. These
activities are managed in association with the ING New Zealand joint venture.											Insurance business											The Banking Group does not conduct any insurance business directly, although the Banking Group holds a 49% share in the ING New Zealandjoint venture which does conduct insurance business.											P A G E

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

For personal use only

(CONTINUED)P A G E

4 0 . S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D D I S T R I B U T I O N O F
I N S U R A N C E P RO D U C T S ( C ontinued )Provision of financial services											Financial services provided by the Banking Group to entities which are involved in trust, custodial, funds management and other fiduciary
activities, and to affiliated insurance companies which conduct marketing or distribution of insurance products, or on whose behalf themarketing or distribution of insurance products are conducted, are provided on arm’s length terms and conditions and at fair value. Any assets
purchased from such entities have been purchased on an arm’s length basis and at fair value.											The Banking Group has not provided any funding to entities except standard lending facilities provided in the normal course of business onarm’s length terms which conduct any of the following activities: trust, custodial, funds management or other fiduciary activities established,marketed and/or sponsored by a member of the Banking Group for the period ended 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).
Risk management											The Bank and subsidiaries participating in the activities identified above have in place policies and procedures to ensure that those activities
are conducted in an appropriate manner. Should adverse conditions arise, it is considered that these policies and procedures will minimise thepossibility that these conditions will adversely impact the Bank. The policies and procedures include comprehensive and prominent disclosureof information regarding products, and formal and regular review of operations and policies by management.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing insurance products:
Investment statements, prospectuses and brochures for insurance products include disclosures that the Bank and its subsidiaries do notguarantee the insurer, nor the insurer’s subsidiaries, nor any of the products issued by the insurer or the insurer’s subsidiaries.										Where the insurance products are subject to the Securities Act 1978, investment statements, prospectuses and brochures additionally
include disclosures that:										• the policies do not represent deposits or other liabilities of the Bank or its subsidiaries; 		
• the policies are subject to investment risk, including possible loss of income and principal; and 		• the Bank and its subsidiaries do not guarantee the capital value or performance of the policies. 		
Application forms for insurance products contain acknowledgements to be signed by a purchaser which are consistent with the disclosures
for insurance products noted above.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing fund management products:
Prospectuses, investment statements and brochures for funds management products include disclosures:• that the securities do not represent deposits or other liabilities of the Bank;• that the securities are subject to investment risk including possible loss of income and principal invested; and• that the Bank does not guarantee the capital value or performance of the securities.
Application forms for funds management products contain acknowledgements to be signed by a purchaser which are consistent with thedisclosures for funds management products noted above.

41. COMMITMENTS

Consolidated
Unaudited
Unaudited
31/03/2009 31/03/2008$m$m

ParentAudited30/09/2008$m

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

Capital expenditure
Contracts for outstanding capital expenditure:
Premises and equipment
Not later than 1 year

22

20

26

-

-

-

Total capital expenditure commitments

22

20

26

-

-

-

Lease rentals											Future minimum lease payments under non-cancellable operating leases:											Premises and equipment											Not later than 1 year
86
83
86
15
18
17
Later than 1 year but not later than 5 years
156
164
167
15
25
19
Later than 5 years
31
27
27
Total lease rental commitments

273

274

280

30

43

36

Total commitments

295

294

306

30

43

36

1 1 0

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

For personal use only

(CONTINUED)

4 2 . C O N T I N G E N T L I A B I L I T I E S A N D C R E D I T R E L AT E D C O M M I T M E N T S

For contingent exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would have to pay if thecontingent is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
Consolidated

ParentFace or contract value
Unaudited
Unaudited
31/03/2009 31/03/2008$m$m

Face or contract value

Audited30/09/2008$m

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

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

732
22,6091,385
24,580659
23,150732
22,3601,385
24,361659
22,940Total credit related commitments

23,341

25,96523,80923,092

25,746

23,599Contingent liabilities							Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,913
374
1,083
65

2,107
380
567
315

2,017
401
1,090
118

1,913
374
1,083
65

2,107
380
567
310

2,017
401
1,090
115

Total contingent liabilities

3,435

3,369

3,626

3,435

3,364

3,623

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
ultimate parent company. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore
these transactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying forloans. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
The detailed and estimated maximum amount of contingent liabilities that may become payable are set out below.											Contingent tax liability											As previously disclosed, the New Zealand Inland Revenue Department (‘IRD’) is reviewing a number of structured finance transactions as part ofan audit of the 2000 to 2005 tax years. This is part of an industry-wide review by the IRD of these transactions undertaken in New Zealand.
The Bank has received Notices of Proposed Adjustment (the ‘Notices’) in respect of some of these transactions. The Notices are formal advice
that the IRD is proposing to amend tax assessments. The Notices are not tax assessments and do not establish a tax liability but are the firststep in a formal disputes process.											In November 2008 the IRD issued amended tax assessments as a follow up to the Notices in respect of six of these transactions for the 2004
income year (prior to that tax year becoming statute-barred) and a further two in respect of the 2003 income year. The IRD has previously issued
tax assessments as a follow up to the Notices in respect of two transactions for the 2000 tax year, four transactions for the 2001 tax year, fivetransactions in respect of the 2002 income year and four in respect of the 2003 income year (in each case prior to that tax year becoming statutebarred). Proceedings disputing the amended tax assessments with respect to the 2000 - 2004 income years have been commenced.										Based on the independent tax and legal advice obtained, the Bank is confident that the tax treatment it has adopted for these transactions andall similar transactions is correct. 											The tax adjustments proposed so far by the IRD cover the 2000 to 2005 tax years and imply a maximum potential liability of $313 million($486 million with interest tax effected).											The IRD is also investigating other transactions undertaken by the Banking Group, which have been subject to the same tax treatment. Should
the same position be taken by the IRD for all years on all these transactions, including those that the Notices cover, the maximum potential
liability would be approximately $365 million ($562 million with interest tax effected) as at 31 March 2009.											Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($157 million with interest tax
effected) is subject to indemnities given by Lloyds TSB Bank plc under the agreement by which the Bank acquired the NBNZ Holdings Limited
Group, and which relate to transactions undertaken by NBNZ Group before December 2003.											This leaves a net potential tax liability as at 31 March 2009 of $266 million ($405 million with interest tax effected).											All of these transactions have now either matured or been terminated.																	P A G E

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(CONTINUED)

4 2 . C O N T I N G E N T L I A B I L I T I E S A N D C R E D I T R E L AT E D C O M M I T M E N T S ( C ontinued )Commerce Commission											In November 2006, the Commerce Commission brought proceedings under the Commerce Act 1986 against Visa, MasterCard and all New
Zealand issuers of Visa and MasterCard credit cards, including ANZ National Bank Limited. The Commission alleges price fixing and substantiallylessening competition in relation to the setting of credit card interchange fees and is seeking penalties and orders under the Commerce Act.
Subsequently, several major New Zealand retailers have issued proceedings against ANZ National Bank Limited and the other above mentioned
defendants seeking unquantified damages, based on allegations similar to those contained in the Commerce Commission proceedings.
ANZ National Bank Limited is defending the proceedings. The Bank has received independent legal advice. The Bank considers it has a strongly
arguable case, but the matter is complex and difficult. At this stage any potential liabilities cannot be assessed with any certainty. A trial has
been scheduled for October 2009.											In addition, the Bank is aware that the Commerce Commission is looking closely at credit contract fees under the Credit Contracts andConsumer Finance Act 2003 (CCCFA). In its 2008-2011 Statement of Intent the Commission stated that:											“The Commission is turning more to litigation under the Credit Contracts and Consumer Finance Act to ensure credit contract fees are reasonable
and disclosed. Currently the credit industry is not fully compliant with the legislation and taking more action through the courts will encourage
better compliance and clarify any areas of the law that may be uncertain.”										In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged on credit cards and the level ofcurrency conversion charges on overseas transactions using credit cards under the CCCFA. We have also been notified that the Commission isinvestigating early repayment charges on fixed rate mortgages. At this stage the possible outcome of these investigations and any liability or
impact on fees cannot be determined with any certainty.											ING New Zealand Funds											Trading in the ING Diversified Yield Fund and the ING Regular Income Fund (‘the Funds’) was suspended on 13 March 2008 due to deteriorationin the liquidity and credit markets. These funds are managed by the joint venture partner ING (NZ) Limited. Some of these funds were soldto ANZ National customers.
On 25 February 2009, ING (NZ) Limited announced that investors in the Funds will be receiving a proposal which allows them the ability toexit the investment for a cash amount. We understand further details on the proposal will be released shortly.
The estimated cost of this proposal to the Bank is approximately $166 million and this amount has been recognised in ‘other operating income’in the Income Statement and as a provision in the Balance Sheet.
The ultimate cost to the Bank will depend on the value of units in the underlying funds, the discount rate applied and recoveries under insurance
cover. In addition the Commerce Commission has sought information regarding the two Funds and is investigating this matter, although at thisstage, it is not possible to determine the outcome of any investigation.
Other contingent liabilities											The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the Banking
Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision made where appropriate. As at 31 March
2009, there were no other contingent assets or liabilities required to be disclosed (31/03/2008 $nil; 30/09/2008 $nil).
											4 3 . E M P L OY E E S H A R E A N D O P T I O N P L A N S

The Banking Group participates in the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan operated by the ANZ Banking
Group. Any shares or options granted under these plans are shares in Australia and New Zealand Banking Group Limited.												The closing market price of one ordinary share of ANZ quoted on the ASX (Australian Stock Exchange) at 31 March 2009 was A$15.75(31/03/2008 A$22.55; 30/09/2008 A$18.75).												ANZ EMPLOYEE SHARE ACQUISITION PLAN
The ANZ Employee Share Acquisition Plan includes the A$1,000 Share Plan, the Deferred Share Plan and the Restricted Share Plan.								A$1,000 share plan
Each permanent employee who has had continuous service for one year with the Banking Group is eligible to participate in a scheme enabling
the issue of up to A$1,000 of shares of ANZ in each financial year, subject to the approval of the Ultimate Parent Bank Board. The shares vest
subject to satisfaction of a three year service period but may be forfeited in the event of resignation or termination for serious misconduct.
On expiration of that period, an employee may sell the shares, transfer them into their name, or have them retained in trust. The issue price isbased on the one-day volume weighted average price (‘VWAP’) of the shares traded on the ASX on the date of issue.
The Banking Group’s employees are required to pay NZ 1 cent per share at the time the shares are transferred to them. During the six months to
31 March 2009, 540,305 shares with an average issue price of A$14.94 were issued under the A$1,000 Share Plan (31/03/2008 267,523 shareswith an average issue price of A$27.96 were issued; 30/09/2008 267,523 shares with an average issue price of A$27.96 were issued).

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(CONTINUED)

4 3 . E M P L OY E E S H A R E A N D O P T I O N P L A N S ( continued )Deferred share plan
The Banking Group’s last issue of shares under this plan was in November 2004. Selected employees were issued deferred shares, which vest
subject to satisfaction of a minimum three year service period from the date of issue. Ordinary shares issued under this plan may be heldin trust for up to 10 years, and may be required to meet performance hurdles before being able to be traded after the restriction period has
expired. The issue price is based on the VWAP of the shares traded on the ASX in the five trading days leading up to and including the date ofissue. Unvested shares are forfeited on resignation or dismissal, or if a performance condition has not been met.
Restricted share plan
Restricted Shares are available to selected employees and are issued under the ANZ Employee Share Acquisition Plan. Selected employees havethe option to take some (or all) of their incentive payment as Restricted Shares. The shares are held in trust and may not be traded until theconclusion of the one-year restriction period, after which they may be transferred into the employee’s name. Until they are transferred into
the employee’s name, they continue to be subject to forfeiture on termination for serious misconduct.												Shares valuations
The fair value of services received in return for shares in the ANZ Employee Share Acquisition Plan are measured by referring to the fair valueof ANZ shares granted. The fair value of shares granted in the current period, measured at the date of grant of the shares, is NZ $9.8 million
based on 540,305 shares at a weighted average price of A$14.94 converted at the exchange rate of 0.8232 (31/03/2008 NZ $8.5 million basedon 267,523 shares at a weighted average price of A$27.96 converted at the exchange rate of 0.8809 were issued; 30/09/2008 NZ $8.5 million
based on 267,523 shares at a weighted average price of A$27.96 converted at the exchange rate of 0.8809 were issued).												The average issue price of shares granted and the number of shares that are expected to ultimately vest to the employees at the end of thevesting period are used to calculate the fair value of shares. No dividends are incorporated into the measurement of the fair value of shares.
ANZ SHARE OPTION PLAN
Selected employees may be granted options, which entitle them to purchase ordinary fully paid shares in ANZ at a price fixed at the time when
the options were issued. Voting and dividend rights will be attached to the unissued ordinary shares when the options have been exercised.
Each option entitles a holder to purchase one ordinary share subject to any terms and conditions imposed on issue. The exercise price of theoptions (excluding zero-priced options) is determined in accordance with the rules of the plan, and is based on the weighted average price of
the Ultimate Parent Bank’s shares traded during the five business days preceding the date of granting the options.
The main schemes of the ANZ Share Option Plan are as follows:												Current option plans
Performance rights planThis scheme is a long term incentive program available to certain Banking Group employees since November 2005 and grants the right toacquire ANZ shares at nil cost, subject to a three year vesting period and a Total Shareholder Return (TSR) performance hurdle. The proportionof rights that will become exercisable will depend upon the TSR achieved by ANZ relative to the companies in the comparator group, which
consists of selected major financial services companies in the Standard & Poor’s and ASX 100 Index. Performance equal to the median TSRof the comparator group will result in half the rights becoming exercisable. Performance above the median will result in further performancerights becoming exercisable, increasing on a straight line basis until all of the rights become exercisable where ANZ’s TSR is at or above the75th percentile in the comparator group.
The TSR hurdle will only be tested once at the end of the three-year vesting period. If the rights do not pass the hurdle on testing date, or ifthey pass the hurdle on testing date and are not exercised by the end of five years from the grant date, the rights will lapse. In the case of
resignation or termination on notice, only rights that become exercisable by the end of the notice period may be exercised. A grace period
is provided in which to exercise the rights. All other rights will lapse. In the case of retrenchment or retirement, performance rights will be
performance tested at the date of termination and where performance hurdles have been met, performance rights will be pro-rated and a grace
period provided in which to exercise the rights. In case of death or total and permanent disablement, a grace period is provided in which toexercise all performance rights.
Deferred share rights
This scheme is a short term incentive program available to certain Banking Group employees since November 2004 and grants the right toacquire ANZ shares at nil cost after a specified vesting period ranging from one to three years. Deferred share rights must be exercised by
the seventh anniversary of grant date. In the case of resignation, only rights that become exercisable by the end of the notice period may be
exercised. A grace period is provided in which to exercise the rights. All other rights will lapse. In the case of termination on notice, retrenchment,
retirement, death or total and permanent disablement, a grace period is provided in which to exercise all deferred share rights.
Legacy Option Plans
Performance options planThis scheme is a long term incentive program available to certain Banking Group employees. The options can only be exercised after a threeyear vesting period and before the seventh anniversary of the grant date. There are no other performance conditions attached to these options.
All unexercised options are generally forfeited on resignation but any options to which the Banking Group employee is entitled will need to
be exercised within a specified period of termination. On retrenchment, entitlements to options will be pro-rated over the three year vesting
period. On death or total and permanent disablement, all unvested options will become available for exercise. No further performance options
have been granted to Banking Group employees after November 2005.

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(CONTINUED)P A G E

4 3 . E M P L OY E E S H A R E A N D O P T I O N P L A N S ( continued )Zero-price options (ZPO)A ZPO is a right to acquire an ANZ share at nil cost and is granted to certain employees as part of their employment contracts. The ZPO’s haveno time based vesting criteria, so can be exercised at any time during employment and within 6 months of termination of employment. ZPO’s
must be exercised within two years of grant date or they lapse.												Other past option plans which are no longer available to the Banking Group’s employees, but continue to be amortised during their appropriate
vesting periods are hurdled options and index linked options (ILOs).												Details of the options over unissued ANZ ordinary shares and their related weighted average exercise prices as at the beginning and end of theyear and movements during the year are set out below:
Consolidated/Parent
31/03/2009
31/03/2008
30/09/2008
		Weighted		Weighted		Weighted
Number of
average
Number of
average
Number of
averageshares exercise price1
shares exercise price1
shares exercise price1
		
$A		
$A		
$A

Share options at beginning of the period
Share options granted
Share options exercised
Share options forfeited and expired

1,741,771
709,805(66,823)(150,781)

10.86
2.51
1.28
3.68

1,616,716
354,082(99,489)(52,865)

13.93
19.59
15.92

1,616,716
376,715(130,988)(120,672)

13.93
16.13
12.27

Share options at end of the period

2,233,972

8.98

1,818,444

10.99

1,741,771

10.86

Weighted average share price during the period		
14.86 		26.02 		21.37Range of exercise prices on share options at end of the period		 0.00 - 23.49 		 0.00 - 23.49 		 0.00 - 23.49
Weighted average remaining contractual life on share options												at end of the period		 39 months 		 43 months 		 36 months
Options valuations												The fair value of services received in return for share options are measured by referring to the fair value of ANZ share options granted. The fairvalue of options granted in the current period, measured at the date of grant are calculated using one of the following models:												a) Monte-Carlo simulation model utilising the assumptions underlying Black-Scholes. In terms of factoring in early exercise, the model assumes
that deferred share rights and performance rights are exercised as soon as they vest so that the option holder can benefit from the dividends.
It assumes that the performance options are exercised when the share price reaches twice the exercise price; or		b) 		an adjusted form of the Binomial Option pricing model (“BOM”). In terms of factoring in early exercise, the model assumes that the expected
life of vanilla options is 5 years, performance rights is 4 years and that deferred share rights are exercised immediately to account for lack ofmarketability.		
In addition, both models are designed such that they take into account as appropriate, any performance hurdles and non-transferability of theoptions.												The following inputs are used to measure the fair value of instruments granted during the period. All prices are quoted in Australian dollars:		
										Option type

Deferred sharerights		

Grant date
Number of Options
Option value
Exercise price (5 day VWAP)
Share price at grant
ANZ expected volatility 2
Option term
Vesting period
Expected life
Expected dividends
Risk free interest rate

PerformancerightsLTI deferredshare rights

9-Dec-2008 31-Oct-2008
18,21050,050$11.84
$9.99
$nil
$nil
$14.10$17.3634%
30%
5 years
5 years
3 years
3 years
3 years
3 years
6.00%
6.00%
3.49%
4.25%

31-Oct-2008
364,112$14.58$nil$17.3630%
5 years
3 years
3 years
6.00%
4.48%

STI deferredshare rights

STI restricted
share rights

STI deferredshare rights

31-Oct-2008 31-Oct-2008 31-Oct-2008
89,121
601
84,058$15.45$16.38$16.38
$nil
$nil
$nil
$17.36$17.36$17.3630%
30%
30%
5 years
5 years
5 years
2 years
1 year
1 year
2 years
1 year
1 year
6.00%
6.00%
6.00%
4.48%
4.28%
4.28%

1.

Calculation of weighted average exercise prices are affected by performance rights, deferred share rights and ZPO plans which have nil exercise prices.												

2.

Expected volatility is based on ANZ’s historic volatility.												1 1 4A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

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(CONTINUED)

4 3 . E M P L OY E E S H A R E A N D O P T I O N P L A N S ( continued )The following inputs are used to measure the fair value of instruments granted during the period. All prices are quoted in Australian dollars:		
Option type
			
				
		

STI deferredshare rights

STI restricted
share rights

STI deferredshare rights

Grant date				 31-Oct-2008 31-Oct-2008 31-Oct-2008
Number of Options				
28,85137,40037,402
Option value 				
$2.80
$2.94
$2.80
Exercise price (5 day VWAP)				
$17.18$17.18$17.18
Share price at grant				$17.36$17.36$17.3630%
30%
30%
ANZ expected volatility 2				
Option term				
5 years
5 years
5 years
Vesting period				1 year
2 years
1 year
Expected life				1 year
2 years
1 year
Expected dividends				
6.00%
6.00%
6.00%
Risk free interest rate				
4.48%
4.64%
4.48%
2.

Expected volatility is based on ANZ’s historic volatility.

4 4 . R E T I R E M E N T B E N E F I T O B L I G AT I O N S

The Banking Group has established a number of pension and superannuation schemes. The Banking Group may be obliged to contribute to theschemes as a consequence of legislation and provision of trust deeds. Legal enforceability is dependent on the terms of the legislation and therequirements of Scheme Trust Deeds. The major schemes are:Contribution levels
Employee

Contribution levels
Employer

Defined Benefit Scheme2orDefined Contribution Scheme

Nil

Balance of cost4

2.5% minimum of salary

7.5% of salary6

Defined Benefit SchemeorDefined Contribution Scheme

5% of salary

Balance of cost5

2.0% minimum of salary

11.2% of salary7

SchemeScheme type

ANZ National Bank Staff Superannuation Scheme1

The National Bank Staff Superannuation Fund

1

3

1.

These schemes provide for pension benefits and provide for lump sum benefits.										

2.

Closed to new members on 31 March 1990. Operates to make pension payments to retirees who were members of that section of the scheme or to dependents of the members.

3.

Closed to new members on 1 October 1991.										

4.

31/03/2009: $nil (31/03/2008 $nil; 30/09/2008 $nil).										

5.

31/03/2009: 24.8% (31/03/2008 24.8%; 30/09/2008 24.8%) of members’ salaries.										

6.

31/03/2009: 7.5% (31/03/2008 7.5%; 30/09/2008 7.5%) of members’ salaries.										

7.

31/03/2009: 11.5% (31/03/2008 11.5%; 30/09/2008 11.5%) of members’ salaries.

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(CONTINUED)P A G E4 4 . R E T I R E M E N T B E N E F I T O B L I G AT I O N S ( continued )Details of the defined benefit schemes are as follows:										Actuarial valuations for financial reporting purposes are undertaken every six months. The latest valuations were carried out as at 31 March 2009.
				

Consolidated/Parent

Unaudited
31/03/2009$m

Unaudited
Audited31/03/2008 30/09/2008$m$m

The amounts recognised in the balance sheet arising from the Banking Group’s
obligation in respect of its defined benefit schemes are determined as follows:
Defined benefit obligation at beginning of the period
Current service cost
Interest cost
Contributions by scheme participants
Actuarial (gains) losses
Benefits paid

179
1
5
1
(1)
(8)

181
2
6
(5)
(7)

181
3
12
1
3
(21)

Present value of funded defined benefit obligations

177

177

179

Fair value of scheme assets at beginning of the period
Expected return on scheme assets (net of tax)
Actuarial (losses) gains
Contributions by employer
Contributions by scheme participants
Benefits paid

152
4
(38)
1
(8)

189
5
(17)
2
(7)

189
10
(30)
3
1
(21)

Fair value of scheme assets

111

172

152

Net defined benefit (liability) asset recognised on balance sheet

(66)

(5)

(27)

The fair value of scheme assets include cash deposits and fixed interest investments of $5.5 million with the Banking Group as at 31 March2009 (31/03/2008 $2 million; 30/09/2008 $5 million).										The amounts recognised in the income statement in respect of defined benefit
schemes are as follows:										Current service cost
Interest cost
Expected return on scheme assets (net of tax)
Contribution withholding tax

1
5
(4)
1

2
6
(5)
-

3
12
(10)
2

Total pension costs recognised in the income statement - defined benefit superannuation schemes

3

3

7

The actuarial gains and losses recognised directly in equity via the statement of recognised income and expense are as follows:
Actuarial (losses) gains (pre-tax) at beginning of the period
Actuarial (losses) gains (pre-tax) incurred during the period

(25)
(38)

7
(12)

8
(33)

Balance of actuarial (losses) gains (pre-tax) at end of the period

(63)

(5)

(25)

Income tax credit (expense) recognised directly in equity

19

2

8

Balance of actuarial (losses) gains at end of the period

(44)

(3)

(17)								1 1 6A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS

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(CONTINUED)

4 4 . R E T I R E M E N T B E N E F I T O B L I G AT I O N S ( continued )The principal actuarial assumptions used were as follows:
The National Bank		
Staff Superannuation Fund		
Unaudited
Unaudited
31/03/2009 31/03/2008

Audited30/09/2008

ANZ National Bank
Staff Superannuation Scheme
Unaudited
31/03/2009

Unaudited
Audited31/03/2008 30/09/2008

Defined benefits calculation 										Discount rate (gross of tax)
6.0%
6.4%
6.0%
6.0%
6.4%
6.0%
Future price inflation
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
Future pension increases
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
Future salary increases
3.7%
3.7%
3.7%
n/a
n/a
n/a
Scheme assets calculation 								Expected return on scheme assets (net of tax)
5.5%
5.5%
5.5%
4.5%
4.5%
4.5%
The overall expected return on scheme assets is determined by reference to market expectations, at beginning of the relevant period, of asset
performance applicable to the period over which the defined benefit obligation is to be settled. The overall expected return on scheme assets
reflects an aggregation of the expected returns on the underlying asset classes.
The actual return on scheme assets (net of tax) for The National Bank Staff Superannuation Fund was -10.57% for the six months ended
31 March 2009 (31/03/2008 -6.0%; 30/09/2008 -9.0%). The actual return on scheme assets (net of tax) for the ANZ National Bank Staff
Superannuation Scheme was -7.25% for the six months ended 31 March 2009 (31/03/2008 -5.0%; 30/09/2008 -6.0%).										The investment return on scheme assets is taxed at 30% (31/03/2008 33%; 30/09/2008 33%).										The major categories of scheme assets as a percentage of the fair value of scheme plan assets are as follows:
The National Bank		
Staff Superannuation Fund		
Unaudited
Unaudited
31/03/2009 31/03/2008

Audited30/09/2008

ANZ National Bank
Staff Superannuation Scheme
Unaudited
31/03/2009

Unaudited
Audited31/03/2008 30/09/2008

Defined benefits calculation 										Cash and short term debt instruments
24.0%
16.3%
19.9%
13.0%
14.0%
17.1%
New Zealand fixed interest
13.7%
22.1%
14.5%
28.0%
22.9%
23.2%
Overseas fixed interest
20.2%
16.6%
16.1%
26.6%
23.1%
20.8%
Australasian shares
9.9%
8.8%
9.7%
9.2%
7.5%
9.3%
Overseas shares
32.2%
36.2%
39.8%
19.4%
26.7%
23.9%
Property fund units
0.0%
0.0%
0.0%
3.8%
5.8%
5.7%
		

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%The benchmark weightings of each asset class is determined by the Trustee in conjunction with the investment manager. 					Historical summary
Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what
has actually occurred in the period) and the effects of changes in actuarial assumptions on valuation date. The history of the schemes’ net
position and experience adjustments is as follows:		
		Consolidated/Parent
Unaudited
31/03/2009$m

Audited30/09/2008$m

Defined benefit obligation
Fair value of scheme assets

(177)
111

(179)
152

(181)
189

(190)
196

(187)
195

Net benefit asset (liability)

(66)

(27)

8

6

8

-

5

(1)

3

-

(28)

(21)

(7)

5

11

		
		

Experience adjustments on scheme liabilities
Experience adjustment on scheme assets

Audited
Audited
Audited30/09/2007 30/09/2006 30/09/2005
$m
$m
$m

		

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For personal use only

(CONTINUED)P A G E4 4 . R E T I R E M E N T B E N E F I T O B L I G AT I O N S ( continued )Employer contributions
To ensure the defined benefit schemes remain solvent, the schemes’ independent actuaries recommend an employer contribution rate to the
Banking Group, annually for The National Bank Staff Superannuation Fund and every three years for the ANZ National Bank Staff Superannuation
Scheme. The funding methods and current contribution rates of the individual schemes are determined in accordance with NZ IAS 19 Employee
Benefits (‘NZ IAS 19’) for annual periods beginning on or after 1 January 2007.
The National Bank Staff Superannuation Fund deficit for funding purposes was valued at $18.8m in the most recent actuarial review at 1 April
2008 determined in accordance with NZ IAS 19. The ANZ National Bank Staff Superannuation Scheme surplus was valued at $0.2 million in themost recent actuarial valuation at 31 December 2007 determined in accordance with NZ IAS 19.
The Banking Group expects to contribute $2.1 million (net of contributions withholding tax) to its defined benefit schemes in the period
to 31 March 2009 (31/03/2008 $2 million; 30/09/2008 $4 million). Employer contributions are taxed at a rate of 33% (31/03/2008 33%;
30/09/2008 33%). 										Contingent liabilities
The National Bank Staff Superannuation Fund
Under the Fund’s Trust Deed, if this scheme were wound up, the Banking Group is required to pay the Trustee of the Fund an amount sufficient
to ensure members do not suffer a reduction in benefits to which they would otherwise be entitled.										ANZ National Bank Staff Superannuation Scheme
If the Scheme is wound up then its assets must be cashed up and applied to all members’ benefits. If Scheme funds are insufficient to pay all
members’ benefits then the Banking Group must pay to the Scheme such amounts as the Scheme Actuary determines are necessary to pay
those benefits.																				4 5 . R E L AT E D PA RT Y T R A N S A C T I O N S

Consolidated		
Unaudited
Unaudited
6 months to 6 months to
31/03/2009 31/03/2008
$000s
$000s

AuditedYear to30/09/2008$000s

ParentUnaudited
6 months to
31/03/2009$000s

Unaudited
Audited
6 months toYear to31/03/2008 30/09/2008
$000s
$000s

Key management personal
Key management personal compensation 										Salaries and short-term employee benefits
5,673
5,584
11,9195,673
5,355
11,518Post-employment benefits
243
180
786
243
175
780
Other long-term benefits
39
96
127
39
76
107
Share-based payments
1,400
1,409
2,665
1,400
1,393
2,633
Total compensation of key management personnel

7,355

7,269

15,497

7,355

6,999

15,038Loans to key management personnel

3,936

6,362

7,272

Deposits from key management personnel

5,856

5,355

3,594

3,936

6,362

7,272

5,856

5,343

3,594

Key management personnel are defined as being Directors and senior management of the Banking Group, those persons having authority andresponsibility for planning, directing and controlling the activities of the entity. The information above relating to key management personnel
includes transactions with those individuals, their close family members and their controlled entities.			
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal commercial terms andconditions no more favourable than those given to other employees or customers. Loans are on terms of repayment that range between fixed,variable and interest only, all of which have been made in accordance with the Bank’s lending policies. No provision for credit impairment has
been recognised for loans made to key management personnel (31/03/2008 $nil; 30/09/2008 $nil). 			
All other transactions with key management personnel (including personally related parties) are conducted on an arm’s length basis in theordinary course of business and on commercial terms and conditions. These transactions principally consist of the provision of financial andinvestment services.							
		

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(CONTINUED)

4 5 . R E L AT E D PA RT Y T R A N S A C T I O N S ( continued )Transactions with the Parent Company, Ultimate Parent Bank and subsidiaries
Details of amounts provided by/to the Parent Company, Ultimate Parent Bank and subsidiaries of the Banking Group during the ordinary courseof business are set out in the relevant notes to these financial statements. No provision for credit impairment has been recognised during thesix months ended 31 March 2009 (31/03/2008 $nil; 30/09/2008 $nil).
On 27 February 2009, $4,877 million of residential mortgage assets were sold to the ANZ Banking Group Limited NZ Branch. These assets
qualify for derecognition as the Bank does not retain the risks and rewards associated with these mortgages. The Consolidated Group’s financial
statements have reduced as a result of transferring these assets.
Consolidated		
Unaudited
Unaudited
6 months to 6 months to
31/03/2009 31/03/2008$m$m

AuditedYear to30/09/2008$m

ParentUnaudited
6 months to
31/03/2009$m

Unaudited
6 months to
31/03/2008$m

AuditedYear to30/09/2008$m

Interest income									- Subsidiary companies		
25
25
47- Parent Company		- Ultimate Parent Bank		
44Interest expense									- Subsidiary companies		
895
1,315
2,730
- Parent Company		
16
90
151
16
90
151
- Ultimate Parent Bank		
162
109
199
39
38
83
Operating expenses									- Subsidiary companies		
54
51
96- Ultimate Parent Bank		
41
39
82
41
39
82
Transactions with associates and joint venture entities
During the period the Banking Group conducted transactions with associates and joint venture entities on normal commercial terms andconditions as shown below:
Consolidated		
Unaudited
Unaudited
6 months to 6 months to
31/03/2009 31/03/2008$m$m

AuditedYear to30/09/2008$m

ParentUnaudited
6 months to
31/03/2009$m

Unaudited
6 months to
31/03/2008$m

AuditedYear to30/09/2008$m

Amounts receivable									- associates		
27
188
28
- joint venture entities		
40
49
36
2
Amounts payable									- associates		
85
87
85
85
87
85
Interest income									- associates		
1
2
2- joint venture entities		
22
41
Commission received from ING NZ joint venture		
Costs recovered from ING NZ joint venture		

13
-

12
1

23
1

13
-

12
1

23
1

The Banking Group provides general administrative, strategic and governance services to ING (NZ) Limited under a Technical Services Agreement
The Banking Group provided registry services to the ING NZ joint venture in connection with the business of ING Managed Funds (NZ) Limited
until 31 December 2006. The Banking Group provided payroll, tax accounting and compliance services, and premises in connection with and for the
purpose of ING Insurance Services (NZ) Limited and ING Managed Funds (NZ) Limited. All provision of these services ceased from 5 March 2007.
A provision for credit impairment of $6 million is recognised for amounts outstanding from associates as at 31 March 2009 (31/03/2008$6 million; 30/09/2008 $5 million). A credit impairment loss of $nil was charged during the six months ended 31 March 2009 (31/03/2008$1 million; 30/09/2008 $nil charged).

46. SUBSEQUENT EVENTSThe financial statements were authorised for issue by the Directors on 22 May 2009. No subsequent events occurred between 31 March 2009
and the date of issue.

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DIRECTORATE AND AUDITORSP A G ED irectorate and A uditors

The address to which any document or communication may be sent to any Director is ANZ National Bank Limited, Level 14, 215-229 Lambton
Quay, Wellington, New Zealand. The document or communication should be marked for the attention of that Director.
Directors’ Interests
In order to ensure that members of the Board are reminded of their disclosure obligations under the Companies Act 1993, the following
procedures are adopted:a) At least once in each year, Directors are requested to complete, in terms of section 140(1) of the Companies Act 1993, a disclosure of any
interests which they have with the Bank itself. Directors are reminded at this time of their obligation under the Companies Act 1993 todisclose promptly any transaction or proposed transaction with the Bank in which they have an interest.
b) Directors are also requested to make a general disclosure of their interest in other entities in terms of section 140(2) of the Companies Act
1993. In addition, they are requested to initiate a review of that disclosure if there are any significant alterations which occur subsequently
during the period.
In addition to the written disclosures referred to in paragraphs (a) and (b) above, Directors disclose relevant interest which they have before
discussion of particular business items.
The Companies Act 1993 (subject to any different provision in the Bank’s Constitution) allows a Director with an interest in a transaction toparticipate in discussions and to vote on all matters relating to that particular transaction. The Bank’s Constitution does not alter that situation.
However, the Board has adopted a guideline whereby a Director with an interest in a transaction should not be present during any discussions,and should not vote, on any matter pertaining to that particular transaction.
Transactions with Directors
No Director has disclosed that he or any immediate relative or professional associate has any dealing with the Banking Group which has been
either entered into on terms other than those which would in the ordinary course of business be given to any other person of like circumstancesor means or which could otherwise be reasonably likely to influence materially the exercise of the Director’s duties as a Director of the Bank.
Changes in Directorships
Since the publication of the previous General Disclosure Statement on 5 March 2009, Graham Kennedy Hodges resigned as a director of the Board
on 30 April 2009 and Jennifer Anne Fagg was appointment as a director on 1 May 2009. Robert John Edgar also resigned effective 8 May 2009.

B oard M embers as at 2 2 M AY 2 0 0 9

Independent Non-Executive Director, Chairman
Sir Dryden Spring
DSc
Company Director
Matamata, New Zealand
Directorships
Director: Sky City Entertainment Group Limited, Port of Tauranga Limited, Fletcher Building Limited, Fletcher Building Finance Limited, Northport
Limited

Executive Director
Jennifer Anne Fagg
Ph.D, BEc (Hons)
Chief Executive
ANZ National Bank Limited
Wellington, New Zealand
Directorships
Director: None

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DIRECTORATE AND AUDITORSFor personal use only

(CONTINUED)

Non-Executive Directors
Michael Roger Pearson Smith, OBE
BSc (Hons)
Chief Executive Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia

Peter Ralph Marriott
BEc (Hons), FCA
Chief Financial Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia

Directorships
Director: Australia and New Zealand Banking Group Limited, The
Financial Markets Foundation for Children				Directorships
Director: ANZ Capital Hedging Pty Limited, ANZ (Delaware) Inc., ANZ
Holdings (New Zealand) Limited, ANZ Securities Limited, Esanda
Finance Corporation Limited, ANZEST Pty Limited, ANZ Funds Pty
Limited, ANZ Investment Holdings Pty Limited, ANZ Investments Pty
Limited, LFD Limited, RFDL Pty Limited, Ballimore Pty Limited

Independent Non-Executive Directors
Norman Michael Thomas Geary, CBE
B Com, FACA, FNZIM, FCIT
Company Director
Auckland, New Zealand

Dr Donald Thomas Brash
MA EconCompany Director
Auckland, New Zealand

Directorships
Director: Fisher & Paykel Appliances Holdings Limited,
Otago Innovation Limited

Directorships
Director: Brash Forestry Limited, Eljeans Orchard Limited, Huljich
Limited, Huljich (New Zealand) Limited, Huljich Wealth Management(New Zealand) Limited, Brash Consultancy Services Limited, Ocean
Group Holdings Limited, Ocean Partners Limited, New Zealand Milk Co.
Limited, New Zealand Farm Holding Co. Limited, New Zealand Milk
Processing Co. Limited

John Frederick JudgeB Com, FICA
Company Director
Auckland, New Zealand
Directorships
Director: Fletcher Building Limited, Fletcher Building Finance
Limited, Aquatx Holdings Limited, Aquatx Limited, Janohn Limited,
Sebca Limited, John Judge Limited, Health TV Limited, Sails Friday
Limited, Crop Solutions 2009 Limited, Hortigro Home & Garden
Limited, Hortigro Limited, Hortigro Group Limited, Elisio Limited,
Formerly Fuel Equipment Limited				Audit Committee Members as at 22 May 2009
N M T Geary (Chairman)
Independent Non-Executive Director
Sir Dryden Spring
Independent Non-Executive Director
Dr D T Brash
Independent Non-Executive Director
JF Judge
Independent Non-Executive Director
P R Marriott
Non-Executive Director
The Audit Committee, which is a sub-committee of the Board, has responsibility for reviewing and approving the published financial statements.
The Audit Committee Charter provides that the membership of the Audit Committee shall be not less than three non-executive Directors. The
quorum shall be not less than two non-executive Director members.

Auditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandP A G E

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CONDITIONS OF REGISTRATION

Conditions of Registration, applicable as at 22 May 2009.
The Bank’s Conditions of Registration were revised on 31 March 2008, 16 June 2008 and 15 October 2008 in order to implement a new set of
capital adequacy conditions for banks that have adopted the internal models based approach to capital adequacy and to correct the definitionof the Parent Bank capital ratios, respectively. The conditions that were amended were conditions 1, 1A, 1B, 1C and 4. This has resulted inchanges to the Banking Group’s capital adequacy disclosures (refer to Note 30 Capital Adequacy). Condition 11 was also changed on 27 June2008 to exclude the outsourcing functions provided to the bank by Electronic Services Limited and Interchange and Settlement Limited until
31 December 2008.
The registration of ANZ National Bank Limited (‘the Bank’) as a registered bank is subject to the following conditions:1.

That the Banking Group complies with the following requirements:(a) the total capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 8%;					(b) the tier one capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 4%; and					(c) the capital of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008 is not less than $30 million.					For the purposes of this condition of registration the scalar referred to in the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008 is 1.06. 		
For the purposes of this condition of registration, the supervisory adjustment referred to in the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is the sum of: 									(a) 15% of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008; and					(b) 12.5 times the greater of: zero; and 90% of adjusted Basel I capital, less adjusted Basel II capital; where 					(i) “adjusted Basel I capital” means 8% of total risk-weighted exposures, plus deductions from tier one capital, plus deductions fromtotal capital, all calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I
approach)” (BS2) dated March 2008;(ii) “adjusted Basel II capital” means 8% of total Basel II risk-weighted exposures plus deductions from tier one capital, plus deductions
from total capital, less any amount included in tier two capital arising from the excess of eligible allowances for impairment overEL (expected losses), all calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy framework(internal models based approach)” (BS2B) dated March 2008; and(iii) “total Basel II risk-weighted exposures” means scalar x (risk-weighted on and off balance sheet credit exposures) + 12.5 x total
capital charge for market risk exposure + 12.5 x total capital requirement for operational risk + 15% of risk-weighted exposures
secured by residential mortgages as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (internal
models based approach)” (BS2B) dated March 2008.								1A. That (a) the Bank has an internal capital adequacy assessment process (“ICAAP”); that with effect from 31 August 2008 the Bank’s ICAAP
accords with the requirements set out in the document “Guidelines on a Bank’s internal capital adequacy process (“ICAAP”)” (BS12)
dated December 2007;					(b) under its ICAAP the Bank identifies and measures its “other material risks” defined as all material risks of the Banking Group that are
not explicitly captured in the calculation of tier one and total capital ratios under the requirements set out in the document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008; and					(c) the Bank determines an internal capital allocation for each identified and measured “other material risk”. 					1B. That the Banking Group complies with all requirements set out in the Reserve Bank of New Zealand document “Capital adequacy framework(internal models based approach)” (BS2B) dated March 2008. 										1C. That the Bank complies with the following requirements:						The total capital ratio of the Bank is not less than 8%.					The tier one capital ratio of the Bank is not less than 4%.					For the purposes of this condition of registration:						•the total capital ratio is defined as capital as a percentage of risk-weighted exposures where capital and risk-weighted exposures are as
defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)” (BS2) dated March 2008; and•the tier one capital ratio is defined as tier one capital as a percentage of risk-weighted exposures where tier one capital and riskweighted exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)”(BS2) dated March 2008.												P A G E

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(CONTINUED)

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

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

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

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

AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

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

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to non-bankconnected persons shall not exceed 15 percent of the Banking Group’s tier one capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit is determined inaccordance with the Reserve Bank of New Zealand document entitled ‘Connected exposures policy’ (BS8) dated March 2008.
5. That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment, tenor, interest
rates, amortisation schedules and requirement for collateral) than corresponding exposures to non-connected persons.
6. That the board of the Bank contains at least two independent directors and that alternates for those directors, if any, are also independent.
In this context an independent director (or alternate) is a director (or alternate) who is not an employee of the Bank, and who is not a
director, trustee, or employee of any holding company (as that term is defined in section 5 of the Companies Act 1993) of the Bank, or any
other entity capable of controlling or significantly influencing the Bank.
7. That the chairperson of the Bank’s board is not an employee of the Bank.						
8.

That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing duties as a director,
to act other than in what he or she believes is the best interests of the company (i.e. the Bank).

9.

That a substantial proportion of the Bank’s business is conducted in and from New Zealand.						10. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief executive
officer, shall be made in respect of the Bank unless:						(i) The Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee, and					(ii) The Reserve Bank has advised that it has no objection to that appointment.					P A G E

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(CONTINUED)P A G E

11. That the Bank has legal and practical ability to control and execute any business, and any functions relating to any business, of the Bank
that are carried on by a person other than the Bank, sufficient to achieve, under normal business conditions and in the event of stress or
failure of the Bank or of a service provider to the Bank, the following outcomes:(a) that the Bank’s clearing and settlement obligations due on a day can be met on that day;					(b) that the Bank’s financial risk positions on a day can be identified on that day;					(c) that the Bank’s financial risk positions can be monitored and managed on the day following any failure and on subsequent days; and(d) that the Bank’s existing customers can be given access to payments facilities on the day following any failure and on subsequent days.
For the purposes of this condition of registration, the term “legal and practical ability to control and execute” is explained in the Reserve
Bank of New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated January 2006.
Until 31 December 2008, functions provided to the Bank by Electronic Transaction Services Limited and Interchange and Settlement
Limited are not covered by this condition. 						12. (a) That the business and affairs of the Bank are managed by, or under the direction and supervision of, the board of the Bank.
(b) That the employment contract of the chief executive officer of the Bank or person in an equivalent position (together “CEO”) is with
the Bank, and the terms and conditions of the CEO’s employment agreement are determined by, and any decision relating to theemployment or termination of employment of the CEO are made by, the board of the Bank.
(c) That all staff employed by the Bank shall have their remuneration determined by (or under the delegated authority of) the board or
the CEO of the Bank and be accountable (directly or indirectly) to the CEO of the Bank.
For the purposes of these conditions of registration, the term ‘Banking Group’ means ANZ National Bank Limited’s financial reporting group(as defined in section 2(1) of the Financial Reporting Act 1993).												1 2 4

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CREDIT RATING INFORM ATION

Credit Ratings applicable as at 22 May 2009
The Bank has three current credit ratings, which are applicable to its long-term senior unsecured obligations that are payable in New Zealandin New Zealand dollars. The credit ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

During the two-year period ended 31 March 2009, the Standard & Poor’s credit rating and qualification remained at AA and Outlook Stable.
During the two-year period ended 31 March 2009, the Moody’s Investors Service credit rating and qualification changed from Aa3 Outlook
Stable to Aa2 Outlook Stable on 4 May 2007.
During the two-year period ended 31 March 2009, the Fitch Ratings credit rating and qualification remained at AA- and Outlook Stable. Fitch
Ratings were formally engaged by the Bank on 18 March 2008 to provide credit rating services. Previously Fitch Ratings had rated the Bank on
an unsolicited basis as AA-.										Standard &Poor’sMoody’s
Investors
Service

Fitch Ratings

Ability to repay principal and interest is extremely strong. This is the highest
investment category.				

AAA

Aaa

AAA

Very strong ability to repay principal and interest.				

AA

Aa

AA

Strong ability to repay principal and interest although somewhat susceptible to adversechanges in economic, business or financial conditions.				

A

A

A

Adequate ability to repay principal and interest. More vulnerable to adverse changes.

BBB

Baa

BBB

BB

Ba

BB

The following grades display investment grade characteristics:

The following grades have predominantly speculative characteristics:
Significant uncertainties exist which could affect the payment of principal and interest
on a timely basis.				
Greater vulnerability and therefore greater likelihood of default.				

B

B

BB

Likelihood of default now considered high. Timely repayment of principal and interest isdependent on favourable financial conditions.				

CCC

Caa

CCC

Highest risk of default.				

CC to CCa to CCC to C

Obligations currently in default.				

D-

RD & D

Credit ratings from Standard & Poor’s and Fitch Ratings may be modified by the addition of “+” or “-” to show the relative standing withinthe ‘AA’ to ‘B’ categories. Moody’s Investors Service applies numerical modifiers 1, 2, and 3 to each of the ‘Aa’ to ‘Caa’ classifications, with 1
indicating the higher end and 3 the lower end of the rating category. 										P A G E

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DIRECTORS’ STATEMENTP A G ED irectors ’ S tatement

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 Statement (Full and Half-Year New Zealand Incorporated Registered Banks) Order 2008;(ii) The Disclosure Statement is not false or misleading.
Over the six months ended 31 March 2009, after due enquiry, each Director believes that:		(i) ANZ National Bank Limited has complied with the Conditions of Registration;(ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit
risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and other business risks, and that those systems
were being properly applied.
This General Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 22 May 2009. Onthat date, the Directors of the Bank were:

Dr D T Brash

N M T Geary, CBE

JA Fagg

J F Judge

P R Marriott

M R P Smith, OBE

Sir Dryden Spring

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INDEPENDENT re view REPORT
for the six months ended 31 march 2009

I ndependent re v ie w R eport to t h e directors o f A N Z N ational B ank L imited

We have reviewed the interim financial statements on pages 6 to 119 prepared and disclosed in accordance with Clause 23 of the Registered
Bank Disclosure Statement (Full and Half-Year – New Zealand Incorporated Registered Banks) Order 2008 (the ‘Order’) and the supplementary
information prescribed in Schedules 3 to 9. The interim financial statements, and supplementary information, provide information about thepast financial performance and cash flows of ANZ National Bank Limited (the ‘Bank’) and its subsidiary companies (the ‘Banking Group’) andtheir financial position as at 31 March 2009. This information is stated in accordance with the accounting policies set out on pages 11 to 22.
D irectors ’ responsibilities	

The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of interim financial statements in accordancewith Clause 23(2) of the Order which give a true and fair view of the financial position of the Bank and Banking Group as at 31 March 2009
and their financial performance and cash flows for the six months ended on that date. 		
They are also responsible for the preparation of supplementary information which gives a fair view, in accordance with the Order, of the mattersto which it relates; and complies with Schedules 3 to 9 of the Order.
re v ie w ers ’ responsibilities

We are responsible for reviewing the interim financial statements, including the supplementary information disclosed in accordance with
Schedules 4, 6 to 9, and Clause 17 of Schedule 3 of the Order, presented to us by the Directors and reporting our findings to you.
It is also our responsibility to express a review opinion on the supplementary information as required by Schedule 5B of the Order in order tostate whether, on the basis of the procedures described below, anything has come to our attention that would indicate that the information
disclosed in accordance with Schedule 5B is not in all material respects prepared in accordance with the Bank’s Conditions of Registration
and with the Bank’s internal models for credit risk and operational risk as accredited by the Reserve Bank of New Zealand and disclosed inaccordance with Schedule 5B and for reporting our findings to you.
B asis o f re v ie w opinion

We have performed our review in accordance with the review engagement standard RS-1 Statement of Review Engagement Standards issued by
the New Zealand Institute of Chartered Accountants. A review is limited primarily to enquiries of Banking Group personnel and analytical review
procedures applied to the financial data, and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not
express an audit opinion.		
Our firm has also provided other services to the Bank and Banking Group in relation to other audit related services. Partners and employees of ourfirm may also deal with the Bank and Banking Group on normal terms within the ordinary course of trading activities of the business of the Bank
and Banking Group. There are, however, certain restrictions on borrowings which the partners and employees of our firm can have with the Bank andBanking Group. These matters have not impaired our independence as auditors of the Bank and Banking Group. The firm has no other relationshipwith, or interest in, the Bank and Banking Group.
re v ie w O pinion

Based on our review, which is not an audit, nothing has come to our attention that would cause us to believe that: 			(a) the interim financial statements (excluding the supplementary information included in Notes 30, 32, 33, 34 and 40) do not present atrue and fair view of the financial position of the Bank and Banking Group as at 31 March 2009 and their financial performance andcash flows for the six months ended on that date;(b) the supplementary information disclosed in Notes 32, 33, 34 and 40 prescribed by Schedules 4 and 6 to 9 and Clause 17 of Schedule
3 of the Order is not fairly stated in accordance with those Schedules; and(c) the supplementary information relating to Capital Adequacy disclosed in Note 30 of the interim financial statements, as required by
Schedule 5B of the Order, derived from the Bank’s interim financial statements and sources other than the Banks’ accounting records,
is not in all material respects derived in accordance with the Bank’s Conditions of Registration, with the Reserve Bank of New Zealanddocument Capital Adequacy Framework (Internal Models Based Approach) (BS2B), and with the Bank’s internal models for credit risk andoperational risk as accredited by the Reserve Bank of New Zealand, and disclosed in accordance with Schedule 5B of the Order.
Our review was completed on 22 May 2009 and our review opinion is expressed as at that date.

Wellington

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

For personal use only

INDE XP A G E

General Disclosures

2-4

24. Provisions

47

Summary of Financial Statements

5

25. Bonds and Notes

Income Statements

6

26. Due to Parent Company

Statements of Recognised Income and Expense

7

27. Loan Capital

Balance Sheets

8

28. Ordinary Share Capital

51
52

48 - 4949
50 - 51

Cash Flow Statements

9 - 1029. Reserves and Retained Earnings

1.

11 - 2230. Capital Adequacy

53 - 62

31. Financial Risk Management

63 - 91

32. Concentrations of Credit Risk

92 - 93

Accounting Policies

2.	Critical Estimates and Judgements Used in
Applying Accounting Policies

23 - 25

3.

Risk Management Policies

25 - 26

4.

Income27

5.

Expenses

28

6.

Income Tax Expense29

7.

Liquid Assets

30

8.

Due from Other Financial Institutions

30

9.

Trading Securities

10. Derivative Financial Instruments

30
31 - 36

11. Available-For-Sale Assets

36

12. Net Loans and Advances

36

33. Market Risk

94

34.	Interest Earning and Discount Bearing Assets
and Liabilities

94

35.	Fair Value of Financial Assets andFinancial Liabilities

95 - 100

36. Segmental Analysis

101 - 104

37. Notes to the Cash Flow Statements
38.	Significant Controlled Entities, Associates andInterests in Jointly Controlled Entities
39. Parent Company and Ultimate Parent Company

13.	Impaired Assets, Past Due Assets andOther Assets Under Administration

37 - 3840.	Securitisation, Funds Management, Other
Fiduciary Activities and the Marketing andDistribution of Insurance Products

14. Provision for Credit Impairment

39 - 40

41. Commitments

105
106 - 108108

108 - 110
110

15.	Shares in Controlled Entities, Associates
and Jointly Controlled Entities41

42.	Contingent Liabilities and Credit Related
Commitments

111 - 112

16. Other Assets

42

43. Employee Share and Option Plans

112 - 115

17. Deferred Tax Assets

42

44. Retirement Benefit Obligations

115 - 118

18. Premises and Equipment

43

45. Related Party Transactions

118 - 119

19. Goodwill and Other Intangible Assets

44

46. Subsequent Events119

20. Due to Other Financial Institutions

44

Directorate and Auditors

120 - 121

21. Deposits and Other Borrowings

45

Conditions of Registration

122 - 124

22. Payables and Other Liabilities

45

Credit Rating Information

125

23. Deferred Tax Liabilities

46

Directors’ Statement

126

Independent Review Report

127

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ANZ NATIONAL BANK LIMITED GROUP GENERAL DISCLOSURE STATEMENT 							A N Z N AT I O N A L B A N K L I M I T E D G R O U P

G E NE R A L DISC LO SUR E S TATE M E N T

For the six months ended 31 March 2009
Number 53 Issued May 2009

31 March 2009 NUMBER 53

Anz National Bank Limited