Australia and New Zealand Banking Group Limited- New Zealand Branch
Registered Bank Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2014 | NUMBER 24 ISSUED DECEMBER 2014

Australia and New Zealand Banking Group Limited - New Zealand Branch

Registered Bank Disclosure Statement
For the year ended 30 September 2014

General Disclosures

Contents
1

General Matters

Summary of Financial Statements

4

The Disclosure Statement has been issued in accordancewith the Order.

Income Statement

5

Statement of Comprehensive Income

5Statement of Changes in Equity

6

Balance Sheet

7

Cash Flow Statement

8

Notes to the Financial Statements

9

Directorate and Auditors

70

Conditions of Registration72

Directors’ Statement

74

Independent Auditor’s Report

75

Copies of the most recent publicly available financial
statements of the Ultimate Parent Bank and Overseas
Banking Group will be provided immediately, free of charge,
to any person requesting a copy where request is made at
the Registered Office. The most recent publicly available
financial statements for the Ultimate Parent Bank andOverseas Banking Group can also be accessed at the internet
address anz.com.

Index

77

Credit Rating Information

General Disclosures

The address for service for the Ultimate Parent Bank is ANZCentre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.
Financial Statements of the Ultimate Parent Bank andOverseas Banking GroupAs at 3 December 2014 the Ultimate Parent Bank has threecurrent credit ratings, which are applicable to its long-term
senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.

Glossary of Terms
In this Registered Bank Disclosure Statement (DisclosureStatement) unless the context otherwise requires:(a) Bank means ANZ Bank New Zealand Limited;(b) Banking Group means the Bank and all its controlled
entities;(c) Immediate Parent Company means ANZ Funds Pty
Limited, which is the immediate parent company of ANZ
Holdings (New Zealand) Limited;(d) Ultimate Parent Bank means Australia and New Zealand
Banking Group Limited;(e) Overseas Banking Group means the worldwide
operations of Australia and New Zealand Banking Group
Limited including its controlled entities;(f) New Zealand business means all business, operations, orundertakings conducted in or from New Zealandidentified and treated as if it were conducted by acompany formed and registered in New Zealand;(g) NZ Branch means the New Zealand business of the
Ultimate Parent Bank;(h) ANZ New Zealand means the New Zealand business of
the Overseas Banking Group;(i) Registered Office is Level 8, 1 Victoria Street, Wellington,
New Zealand, which is also ANZ New Zealand’s addressfor service;(j) RBNZ means the Reserve Bank of New Zealand;(k) APRA means the Australian Prudential Regulation
Authority;(l) the Order means the Registered Bank DisclosureStatements (Overseas Incorporated Registered Banks)
Order 2014; and(m) Any term or expression which is defined in, or in themanner prescribed by, the Order shall have the meaning
given in or prescribed by the Order.

The Ultimate Parent Bank’s credit ratings, which have notchanged in the last two years, are:
Current Credit
RatingAA-

Qualification
Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Rating Agency
Standard & Poor’sAustralia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures
The following table describes the credit rating grades
available:
Standard &Poor'sMoody's
Investors
Service

Fitch Ratings

The following grades display investment grade characteristics:
Ability to repay principal and
AAA
Aaa
AAA
interest is extremely strong. Thisis the highest investment
category.
Very strong ability to repayAA
AaAA
principal and interest.
Strong ability to repay principal
AAA
and interest althoughsomewhat susceptible toadverse changes in economic,
business or financial conditions.
Adequate ability to repay
BBB
Baa
BBB
principal and interest. Morevulnerable to adverse changes.
The following grades have predominantly speculative
characteristics:
Significant uncertainties exist
BB
Ba
BB
which could affect the paymentof principal and interest on atimely basis.
Greater vulnerability andB
B
B
therefore greater likelihood of
default.
Likelihood of default now
CCC
Caa
CCC
considered high. Timely
repayment of principal andinterest is dependent on
favourable financial conditions.
CC to CCa to CCC to C
Highest risk of default.
D
RD & D
Obligations currently in default.
Credit ratings from Standard & Poor's and Fitch Ratings may be modified by
the addition of "+" or "-" to show the relative standing within the “AA” to “B”
categories. Moody's Investors Service applies numerical modifiers 1, 2, and 3 toeach of the “Aa” to “Caa” classifications, with 1 indicating the higher end and 3
the lower end of the rating category.

Ranking of local creditors in liquidation
Certain claims on the Australian assets of the Ultimate Parent
Bank are given a statutory priority under Australian law.
Unsecured creditors of the NZ Branch could be expected torank behind such claims.
Specifically, pursuant to section 13A(3) of the Banking Act of
the Commonwealth of Australia (“Banking Act”), if an
Authorised Deposit-Taking Institution (“ADI”) (which includes
the Ultimate Parent Bank) becomes unable to meet its
obligations or suspends payment, the assets of the ADI inAustralia are to be available to meet the ADI's liabilities in thefollowing order:(a) first, the ADI's liabilities (if any) to APRA because of therights APRA has against the ADI because of section 16AIof the Banking Act;(b) second, the ADI's debts (if any) to APRA under section
16AO of the Banking Act;(c) third, the ADI's liabilities (if any) in Australia in relation
to protected accounts that account-holders keep with
the ADI. Broadly, this includes, among other things,
certain deposit accounts with the Ultimate Parent Bank
that are situated in Australia;(d) fourth, the ADI’s debts (if any) to the Reserve Bank ofAustralia;(e) fifth, the ADI’s liabilities (if any) under an industry
support contract that is certified by APRA; and(f)sixth, the ADI's other liabilities in the order of theirpriority (apart from section 13A(3)).

Unsecured creditors of the NZ Branch could be expected torank as a creditor pursuant to paragraph (f), together withother unsecured creditors of the Ultimate Parent Bank that
do not otherwise have a priority claim under paragraphs (a)to (e) above.
Under section 13A(1) of the Banking Act, in certain
circumstances APRA may take control of an ADI’s business or
appoint an administrator to take control of the ADI’sbusiness. Section 16(1) and (2) of the Banking Act provide
that, despite anything contained in any law relating to thewinding-up of companies, but subject to section 13A(3) of
the Banking Act, the debts of an ADI to APRA in respect of
APRA's costs (including costs in the nature of remunerationand expenses) of being in control of the ADI's business, or of
having an administrator in control of the ADI's business, are adebt due to APRA and have priority in a winding-up of the
ADI over all other unsecured debts.
Section 86 of the Reserve Bank Act 1959 of theCommonwealth of Australia provides that notwithstanding
anything contained in any law relating to the winding-up ofcompanies, but subject to section 13A(3) of the Banking Act,debts due to the Reserve Bank of Australia by any ADI shall, ina winding-up, have priority over all other debts.
Section 13A(3) of the Banking Act affects all of the unsecured
liabilities of the NZ Branch, which as at 30 September 2014,
amounted to $nil (30/09/2013 $nil).

Requirement to hold excess assets over deposit
liabilities
Section 13A(4) of the Banking Act states that it is an offence
for an ADI not to hold assets (excluding goodwill and any
assets or other amount excluded by the prudential standards
for the purposes of that subsection) in Australia of a valuethat is equal to or greater than the total amount of its deposit
liabilities in Australia, unless APRA has authorised the ADI tohold assets of a lesser value. During the year ended 30
September 2014, the Ultimate Parent Bank has at all times
held assets (excluding goodwill and any assets or otheramounts prescribed by APRA) in Australia of not less than thevalue of the Ultimate Parent Bank's total deposit liabilities inAustralia.
Section 13E of the Banking Act states that APRA may give the
Ultimate Parent Bank a direction that requires it to increase
its level of capital in the circumstances specified in that
section.
The requirements of the Banking Act have the potential toimpact the management of the liquidity of ANZ New
Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

General Disclosures
Guarantors
No material obligations of the NZ Branch are guaranteed as
at 3 December 2014.
ANZNZ Covered Bond Trust
Certain debt securities (Covered Bonds) issued by the Bank’s
wholly owned subsidiary, ANZ New Zealand (Int’l) Limited,
are guaranteed by ANZNZ Covered Bond Trust Limited (theCovered Bond Guarantor), solely in its capacity as trustee of
ANZNZ Covered Bond Trust. The Covered Bond Guarantor
has guaranteed the payment of interest and principal of
Covered Bonds with a carrying value as at 30 September
2014 of $3,928 million, pursuant to a guarantee which issecured over a pool of assets. The Covered Bond Guarantor’s
address for service is Level 35, Vero Centre, 48 Shortland
Street, Auckland, New Zealand. The Covered Bond Guarantor
is not a member of the Banking Group and has no credit
ratings applicable to its long term senior unsecured
obligations payable in New Zealand dollars. The Covered
Bonds have been assigned a long term rating of Aaa and AAA
by Moody’s Investors Service and Fitch Ratings respectively.
Details of the pool of assets that secure this guarantee areprovided in Note 34.

3

Australia and New Zealand Banking Group Limited - New Zealand Branch

4

Summary of Financial Statements
ANZ New ZealandYear toYear toYear toYear toYear to30/09/2014

30/09/2013 1

30/09/2012

30/09/2011

30/09/2010

Interest income

6,799

6,461

6,568

6,757

6,447

Interest expense

4,034

3,820

3,859

4,157

3,952

Net interest income

2,765

2,641

2,709

2,600

2,495

Non-interest income

1,063

795

905

809

745

Operating income

3,828

3,436

3,614

3,409

3,240

Operating expenses

1,490

1,513

1,743

1,688

1,565

$ millions

(9)

66

202

190

456

2,347

1,857

1,669

1,531

1,219

Income tax expense

636

488

404

446

352

Profit after income tax

1,711

1,369

1,265

1,085

867

Dividends paid

(2,335)

(720)

(485)

(421)

(492)

969

-

-

-

-

Credit impairment charge / (release)
Profit before income tax

Share capital issued

As at

As at

As at

As at

As at

30/09/2014

30/09/2013 1

30/09/2012

30/09/2011

30/09/2010

668

936

1,405

1,792

2,047

Total assets

138,528

129,853

130,983

131,511

127,029

Total liabilities

128,447

120,111

121,827

123,046

119,208

-

-

-

-

1

10,081

9,742

9,156

8,465

7,821

$ millions

Total impaired assets

Non-controlling interests
Equity & head office account

The amounts included in this summary have been taken from the audited financial statements of ANZ New Zealand.

1Comparative amounts have changed. Refer to notes 1 and 36 for details.

Australia and New Zealand Banking Group Limited - New Zealand Branch

5

Income Statement
ANZ New Zealand

NZ Branch

Year toYear toYear toYear toNote

30/09/2014

30/09/2013 1

30/09/2014

30/09/2013

Interest income

4

6,799

6,461

543

509

Interest expense

5

4,034

3,820

422

398

$ millions

2,765

2,641

121

111

Net trading gains

4

210

163

-

-

Net funds management and insurance income

4

325

234

-

-

Other operating income / (loss)

4

525

391

(3)

(12)

3

7

-

-

3,828

3,436

118

99

1,490

1,513

26

26

2,338

1,923

92

73

(9)

66

7

3

2,347

1,857

85

70

636

488

24

20

1,711

1,369

61

50

Year toYear toYear toYear to30/09/2014

30/09/2013 1

30/09/2014

30/09/2013

1,711

1,369

61

50

Net interest income

Share of associates' profit
Operating income
Operating expenses

5

Profit before credit impairment and income tax
Credit impairment charge / (release)

13

Profit before income tax
Income tax expense
Profit after income tax

6

Statement of Comprehensive Income
ANZ New Zealand$ millions

Profit after income tax

NZ Branch

Items that will not be reclassified to profit or loss
Actuarial gain on defined benefit schemes

35

71

-

-

Income tax expense relating to items not reclassified

(10)

(20)

-

-

Total items that will not be reclassified to profit or loss

25

51

-

-

Unrealised losses recognised directly in equity

(2)

(138)

-

-

Realised gains transferred to the income statement

(41)

(21)

-

-

Income tax credit relating to items that may be reclassified

12

45

-

-

Items that may be reclassified subsequently to profit or loss

Total items that may be reclassified subsequently to profit or loss
Total comprehensive income for the year

1

(31)

(114)

-

-

1,705

1,306

61

50

Comparative amounts have changed. Refer to notes 1 and 36 for details.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

6

Statement of Changes in Equity$ millions

Share capitaland initial head
Note office account

ANZ New ZealandAvailablefor-sale
Cash flow
hedging
revaluation
reserve
reserve

Retainedearnings

Total equity

As at 1 October 20121

6,424

(3)

141

2,594

9,156

Profit after income tax

-

-

-

1,369

1,369

Unrealised gains / (losses) recognised directly in equity

-

1

(139)

-

(138)

Realised gains transferred to the income statement

-

-

(21)

-

(21)

Actuarial gain on defined benefit schemes1

-

-

-

71

71

Income tax credit / (expense) on items recognised directly in equity1

-

-

45

(20)

25

-

1

(115)

1,420

1,306

-

-

-

(720)

(720)

6,424

(2)

26

3,294

9,742
1,711

Total comprehensive income for the year
Ordinary dividend paid25

As at 30 September 2013 1
Profit after income tax

-

-

-

1,711

Unrealised gains / (losses) recognised directly in equity

-

3

(5)

-

(2)

Realised gains transferred to the income statement

-

-

(41)

-

(41)

Actuarial gain on defined benefit schemes

-

-

-

35

35

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

-

(1)

13

(10)

2

Total comprehensive income for the year

-

2

(33)

1,736

1,705

Preference shares issued

25

969

-

-

-

969

Ordinary dividend paid

25

-

-

-

(2,335)(2,335)

7,393

-

(7)

2,695

10,081

Initial head
office account

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

Retainedearnings

Total equity

As at 1 October 2012

11

-

-

216

227

Profit after income tax

-

-

-

50

50

11

-

-

266

277

-

-

-

61

61

11

-

-

327

338

As at 30 September 2014

NZ Branch$ millions

As at 30 September 2013
Profit after income tax
As at 30 September 2014

1

Comparative amounts have changed. Refer to notes 1 and 36 for details.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

7

Balance Sheet
ANZ New Zealand$ millions

NZ BranchNote

30/09/2014

30/09/2013 1

1/10/2012 1

30/09/2014

30/09/2013

8

2,248

2,347

2,818

426

141

38

855

515

228

304

314

304

1/10/2012

AssetsCash
Settlement balances receivable

783

1,002

1,256

-

-

-

11,750

10,32012,338

-

-

-

190

172

142

-

-

-

10

11,421

9,508

12,709

62

12

52

-

1

24

-

-

-

Available-for-sale assets

11

772

942

157

-

-

-

Net loans and advances

12

105,485

100,113

96,331

9,176

9,256

9,396

Other assets

16

632

570

548

2

1

-

470

399

408

-

-

-

Collateral paid
Trading securities

9

Investments backing insurance contract liabilities
Derivative financial instruments
Current tax assets

Insurance contract assets
Investments in subsidiaries and associates

15

88

98

99

-

-

-

Deferred tax assets

6

-

42

100

6

6

8

380

376

323

-

-

-

17

3,454

3,448

3,502

-

-

-

Total assets

138,528

129,853

130,983

9,976

9,730

9,798

Interest earning and discount bearing assets

121,539

115,297

113,565

9,615

9,410

9,450

1,992

1,114

1,223

-

-

-

800

438

257

-

-

-

Premises and equipment
Goodwill and other intangible assets

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

18

94,52788,01385,139

8,747

8,372

9,273

Derivative financial instruments

10

10,961

11,20814,085

802

1,021

222

68

-

-

24

18

19

Current tax liabilities
Deferred tax liabilities

6

59

-

-

-

-

-

Payables and other liabilities

19

1,352

1,260

1,428

65

42

57

Provisions

20

204

229

339

-

-

-

Bonds and notes

21

17,042

16,40718,188---Subordinated debt

22

1,442

1,442

1,168

-

-

-

Total liabilities (excluding head office account)

128,447

120,111

121,827

9,638

9,453

9,571

Net assets (excluding head office account)

10,081

9,742

9,156

338

277

227

7,393

6,424

6,424

11

11

11

(7)

24

138

-

-

-

Retained earnings

2,695

3,294

2,594

327

266

216

Total equity & head office account10,081

9,742

9,156

338

277

227

Interest and discount bearing liabilities

108,614

101,470

100,543

8,747

8,372

9,273

EquityShare capital and initial head office account25

Reserves

For and on behalf of the Board of Directors:

David Gonski
ChairmanAustralia and New Zealand Banking Group Limited
3 December 2014

1

Michael Smith
Executive Director
Australia and New Zealand Banking Group Limited
3 December 2014

Comparative amounts have changed. Refer to notes 1 and 36 for details.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

8

Cash Flow Statement
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013 1

30/09/2014

30/09/2013

6,724

6,432

535

516

4

4

-

-

Net funds management & insurance income

261

236

-

-

Fees and other income received

682

612

-

-

Interest paid

(3,945)(3,859)

(423)

(413)

Operating expenses paid

$ millions

Note

Cash flows from operating activities
Interest received
Dividends received(1,431)(1,551)(5)(26)

Income taxes paid

(464)

(381)

(18)

(19)

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

1,831

1,493

89

58

Change in settlements receivable

167

(134)

-

-

Change in collateral paid

219

254

-

-

Change in trading securities(1,025)

1,558

-

-

Change in derivative financial instruments

(676)

1,306

(218)

847

Change in available-for-sale assets

188

(766)

-

-

Change in insurance investment assets

(18)

(30)

-

-

(5,396)(3,941)

3,477

3,243

-

-

(3,393)(3,144)-

Net changes in operating assets and liabilities:

Change in loans and advances
Loans and advances purchased from the Bank
Change in settlements payable

34

(28)

-

Change in collateral received

362

181

-

-

Change in deposits and other borrowings

5,851

2,610

330

(901)

Net changes in operating assets and liabilities

(294)

1,010

196

45

1,537

2,503

285

103

Proceeds from sale of shares in associates and jointly controlled entities

9

1

-

-

Proceeds from sale of premises and equipment

9

-

-

-

Net cash flows provided by operating activities

31

Cash flows from investing activities

Proceeds from sale of subsidiary

-

68

-

-

Purchase of intangible assets

(43)

(27)

-

-

Purchase of premises and equipment

(77)

(115)

-

-

Net cash flows used in investing activities

(102)

(73)

-

-

4,431

2,167

-

-

-

312

-

-

969

-

-

-

Redemptions of bonds and notes(4,589)(4,611)--Dividends paid

(2,335)

(720)

-

-

Net cash flows used in financing activities(1,524)(2,852)

-

-

(89)

(422)

285

103

2,345

2,767

141

38

2,256

2,345

426

141

Cash flows from financing activities
Proceeds from issue of bonds and notes
Proceeds from issue of loan capital
Proceeds from issue of preference shares

Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year131Comparative amounts have changed. Refer to notes 1 and 36 for details.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

9

Notes to the Financial Statements
1.

Significant Accounting Policies(a)Basis of preparation(i)Statement of compliance

These financial statements have been prepared inaccordance with the requirements of the Companies Act
1993, the Financial Reporting Act 1993 and the Order. The
NZ Branch’s financial statements are for Australia and New
Zealand Banking Group Limited - New Zealand Branch as aseparate entity and ANZ New Zealand’s financial
statements are for the NZ Branch’s consolidated group,
which includes subsidiaries and associates.
These financial statements have been prepared inaccordance with New Zealand Generally Accepted
Accounting Practice. They comply with New Zealandequivalents to International Financial Reporting Standards(NZ IFRS) and other applicable Financial ReportingStandards, 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.
(ii)

Use of estimates and assumptions

Preparation of the financial statements requires the use ofmanagement judgement, estimates and assumptions that
affect reported amounts and the application of policies.
Actual results may differ from these estimates.
Discussion of the critical accounting estimates, which
include complex or subjective decisions or assessments,
are covered in note 2. Such estimates will require review infuture periods.
(iii)

Basis of measurement

The financial statements have been prepared inaccordance with the historical cost basis except that thefollowing assets and liabilities are stated at their fair value:•
derivative financial instruments, including in thecase of fair value hedging, the fair value adjustment
on the underlying hedged exposure;•available-for sale financial assets;•financial instruments held for trading;•financial instruments designated at fair value
through profit and loss.
(iv)

Changes in accounting policies and application of
new accounting standards

All new and amending NZ IFRSs applicable for the firsttime to ANZ New Zealand in the year ended 30 September
2014 have been applied to these financial statements
effective from their required date of application. The initial
application of these standards and interpretations have
not resulted in any material change to ANZ New Zealand’sreported result or financial position, and have largely
resulted in changes to disclosures.
The accounting policies are consistent with those of theprevious financial year except as noted below.
•
Defined benefit liabilities: The amendments to NZ IAS
19 Employee Benefits have been applied
retrospectively, in accordance with transitional•(v)

provisions, with the net impact of initial application
recognised in retained earnings as at 1 October
2012. The balances of payables and other liabilities
and the associated deferred tax asset have been
restated for subsequent periods.
Cash and cash equivalents: Loans and advances withfinancial institution counterparties with original
maturities of less than 90 days and remittances intransit have been removed from the definition of
cash equivalents. These balances are now included
in net loans and advances and settlement balances
receivable respectively. The associated cash
inflows/outflows form part of cash flows fromoperating activities. ANZ New Zealand considers
that this change better reflects the characteristics of
those financial instruments.
Rounding

The amounts in the financial statements have beenrounded to the nearest million dollars, except whereotherwise stated.
(vi)Comparatives

In addition to restatements resulting from the initial
application of the amendment to NZ IAS 19, certain
amounts in the comparative information have been
reclassified to ensure consistency with the current year’s
presentation. Further information on material changes tocomparative information is included in note 36.
(vii)

Principles of consolidation

Subsidiaries
The consolidated financial statements of ANZ New
Zealand comprise the financial statements of the NZ
Branch and all the New Zealand businesses of all thesubsidiaries of the Ultimate Parent Bank.
An entity, including a structured entity, is considered a
subsidiary of ANZ New Zealand when it is determined that
control over the entity exists. Control is deemed to exist
when ANZ New Zealand is exposed, or has rights, tovariable returns from its involvement with the entity andhas the ability to affect those returns through its powerover the entity. Power is assessed by examining existingrights that give ANZ New Zealand the current ability todirect the relevant activities of the entity. At times, thedetermination of control can be judgemental. Further
detail on the judgement involved in assessing control has
been provided in note 2.
The effect of all transactions between entities in ANZ New
Zealand is eliminated. Where subsidiaries have been soldduring the year, their operating results have been
included to the date of disposal. When control ceases, theassets and liabilities of the subsidiary and othercomponents of equity are derecognised. Any resulting
gain or loss is recognised in profit or loss.
In the NZ Branch’s financial statements, investments in
subsidiaries are carried at cost less accumulated
impairment losses.

Australia and New Zealand Banking Group Limited - New Zealand Branch

10

Notes to the Financial Statements
Associates

and directly related transaction costs that are an integral
part of the effective interest rate, over the expected life of
the financial asset or liability so as to achieve a constantyield on the financial asset or liability.

ANZ New Zealand applies the equity method of
accounting for associates.
ANZ New Zealand’s share of results of associates is
included in the consolidated income statement. Shares inassociates are carried in the consolidated balance sheet atcost plus ANZ New Zealand’s share of post acquisition net
assets less accumulated impairment. Interests inassociates are reviewed for any indication of impairment
at least at each reporting date. Where an indication of theimpairment exists, the recoverable amount of theassociate is determined as the higher of the associate’s fairvalue less costs to sell and its value in use. A discounted
cash flow methodology and other methodologies, such as
the capitalisation of earnings method, are used todetermine the reasonableness of the valuation.

For assets subject to prepayment, expected life isdetermined on the basis of the historical behaviour of theparticular asset portfolio, taking into account contractual
obligations and prepayment experience assessed on aregular basis.
(ii)

Fees and commissions received that are integral to theeffective interest rate of a financial asset are recognised
using the effective interest method. For example, loan
commitment fees, together with related direct costs, aredeferred and recognised as an adjustment to the effective
interest rate on a loan once drawn. Commitment fees tooriginate a loan which is unlikely to be drawn down arerecognised as fee income as the service is provided.

In the NZ Branch’s financial statements investments in
subsidiaries and associates are carried at cost lessaccumulated impairment losses.
(viii)

Fees and commissions that relate to the execution of asignificant act (for example, advisory or arrangement
services, placement fees and underwriting fees) arerecognised when the significant act has been completed.

Foreign currency translation

Functional and presentation currency
Items included in the financial statements of each of ANZ
New Zealand’s entities are measured using the currency ofthe primary economic environment in which the entity
operates (the functional currency). ANZ New Zealand’s
financial statements are presented in New Zealand dollars,
which is ANZ New Zealand’s functional and presentation
currency.

Fees charged for providing ongoing services (for example,
maintaining and administering existing facilities) arerecognised as income over the period the service isprovided.
(iii)

Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing at
the dates of the transactions. Monetary assets andliabilities resulting from foreign currency transactions aresubsequently translated at the spot rate at reporting date.

Translation differences on non-monetary items measured
at fair value through profit or loss are reported as part of
the fair value gain or loss on these items.
Translation differences on non-monetary items measured
at fair value through equity, such as equities classified asavailable-for-sale financial assets, are included in theavailable-for-sale revaluation reserve in equity.
(b)

Income recognition
Income is recognised to the extent that it is probable that
economic benefits will flow to ANZ New Zealand and thatrevenue can be reliably measured.
(i)Interest income

Interest income is recognised as it accrues, using theeffective interest method.
The effective interest method calculates the amortised
cost of a financial asset or financial liability and allocatesthe interest income or interest expense, including any fees

Dividend income

Dividends are recognised as revenue when the right toreceive payment is established.

Foreign currency transactions

Exchange differences arising on the settlement ofmonetary 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.

Fee and commission income(iv)

Gain or loss on sale of assets

The gain or loss on the disposal of assets is determined as
the difference between the carrying amount of the assets
at the time of disposal and the proceeds of disposal net ofincremental disposal costs. This is recognised as an item ofother income in the period in which the significant risks
and rewards of 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 atamortised cost is recognised in the income statement as it
accrues using the effective interest method.
(ii)

Loan origination expenses

Certain loan origination expenses are an integral part ofthe effective interest rate of a financial asset measured atamortised cost. These loan origination expenses include:•
fees and commissions payable to brokers andcertain customer incentive payments in respect oforiginating lending business; and•other expenses of originating lending business, suchas external legal costs and valuation fees, provided
these are direct and incremental costs related to theissue of a financial asset.
Such loan origination expenses are initially recognised aspart of the cost of acquiring the financial asset andamortised as part of the effective yield of the financial

Australia and New Zealand Banking Group Limited - New Zealand Branch

11

Notes to the Financial Statements
asset over its expected life using the effective interest
method.

Zealand, at the reporting date, recovers or settles the
carrying amount of its assets and liabilities.

(iii)

(iv)

Lease payments

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.

Leases entered into by ANZ New Zealand 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 year comprises current anddeferred tax and is based on the applicable tax law. 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 initial accounting 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 year, based on tax rates (and tax laws) which areenacted or substantively enacted by the reporting dateand including any adjustment for tax payable in previous
periods. Current tax for current and prior periods isrecognised as a liability (or asset) to the extent that it isunpaid (or refundable).
(iii)

Deferred tax

Deferred tax is accounted for using the comprehensive tax
balance sheet method. It is generated by temporary
differences between the carrying amounts of assets andliabilities for financial reporting purposes and their tax
base.
Deferred tax assets, including those related to the tax
effects of income tax losses and credits available to be
carried forward, are recognised only to the extent that it isprobable that future taxable profits will be available
against which the deductible temporary differences orunused tax losses and credit can be utilised.
Deferred tax liabilities are recognised for all taxable
temporary differences, other than those relating totaxable temporary differences arising from goodwill. They
are also recognised for taxable temporary differences
arising on investments in subsidiaries, branches,
associates and joint ventures, except where ANZ New
Zealand is able to control the reversal of the temporary
differences and it is probable that temporary differences
will not reverse in the foreseeable future. Deferred tax
assets associated with these interests are recognised only
to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and there
will be sufficient taxable profits against which to utilise thebenefits of the temporary difference.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when theasset and liability giving rise to them are realised or
settled, based on tax rates and tax laws that have beenenacted or substantively enacted by the reporting date.
The measurement reflects the tax consequences thatwould follow from the manner in which ANZ New

Offsetting(e)AssetsFinancial assets(i)Financial assets and liabilities at fair value throughprofit or loss

Trading securities are financial instruments acquired
principally for the purpose of selling in the short-term or
which are a part of a portfolio which is managed for shortterm profit-taking. Trading securities are initiallyrecognised and subsequently measured in the balance
sheet at their fair value.
Derivatives that are not effective accounting hedging
instruments are carried at fair value through profit or loss.
In addition, certain financial assets and liabilities aredesignated and measured at fair value through profit orloss where the following applies:•
the asset represents investments backing insurance
policy liabilities;•
doing so eliminates or significantly reduces ameasurement or recognition inconsistency thatwould otherwise arise from measuring assets andliabilities, or recognising the gains or losses thereon,on different bases;•a group of financial assets or financial liabilities orboth is managed and its performance evaluated ona 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, withlittle or no analysis, that it would not be separately
recorded.
Changes in the fair value (gains or losses) 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 one or more underlying price index orother variables. They include swaps, forward rateagreements, futures, options and combinations of these
instruments.
Derivative financial instruments are entered into for
trading purposes (including customer-related reasons) orfor hedging purposes (where the derivative instruments
are used to hedge ANZ New Zealand’s exposures tointerest rate risk, currency risk, price risk, credit risk andother exposures relating to non-trading positions).
Derivative financial instruments are recognised initially atfair value with gains or losses from subsequent
measurement at fair value being recognised in the income

Australia and New Zealand Banking Group Limited - New Zealand Branch

12

Notes to the Financial Statements
statement. Valuation adjustments are integral indetermining the fair value of derivatives. This includes acredit valuation adjustment (CVA) to reflect the credit
worthiness of the counterparty and funding valuation
adjustment (FVA) to account for the funding cost inherent
in the portfolio.
Where the derivative is designated and is effective as ahedging instrument, the timing of the recognition of any
resultant gain or loss in the income statement isdependent on the hedging designation. These hedging
designations and associated accounting are as follows:
Fair value hedge
Where ANZ New Zealand hedges the fair value of arecognised asset or liability or firm commitment, changes
in the fair value of the derivative designated as a fair value
hedge are recognised in the income statement. Changes
in the fair value of the hedged item attributable to thehedged risk are reflected in adjustments to the carrying
value of the hedged item, which are also recognised in theincome statement.
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercised or nolonger qualifies for hedge accounting. The resulting
adjustment to the carrying amount of the hedged item
arising from the hedged risk is amortised to the income
statement over the period to maturity of the hedged item.
If the hedged item is sold or repaid, the unamortised fairvalue adjustment is recognised immediately in the income
statement.
Cash flow hedge
ANZ New Zealand designates derivatives as cash flow
hedges where the instrument hedges the variability incash flows of a recognised asset or liability, a foreignexchange component of a firm commitment, or a highly
probable forecast transaction. The effective portion ofchanges in the fair value of derivatives qualifying anddesignated as cash flow hedges is deferred to the hedging
reserve, which forms part of shareholders’ equity. Any
ineffective portion is recognised immediately in theincome statement. Amounts deferred in equity arerecognised in the income statement in the period during
which the hedged forecast transactions take place.
When the hedge expires, is sold, terminated, exercised, or
no longer qualifies for hedge accounting, the cumulative
amount deferred in equity remains in the hedging reserve,
and is subsequently transferred to the income statement
when the hedged item is recognised in the income
statement.
When a forecast hedged transaction is no longer expected
to occur, the amount deferred in equity is recognised
immediately in the income statement.
Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value ofderivatives that are not designated in a hedging
relationship but are entered into to manage the interest
rate and foreign exchange risk of ANZ New Zealand arerecognised in the income statement. Under certain
circumstances, the component of the fair value change inthe derivative which relates to current period realised andaccrued interest is included in net interest income. The
remainder of the fair value movement is included in otherincome.
(iii)

Available-for-sale assets

Available-for-sale assets comprise non-derivative financial
assets which ANZ New Zealand designates as availablefor-sale but which are not deemed to be held principallyfor trading purposes, and include equity investments andquoted debt securities.
They are initially recognised at fair value plus transaction
costs. Subsequent gains or losses arising from changes infair value are included as a separate component of equity
in the available-for-sale revaluation reserve. When theasset is sold, the cumulative gain or loss relating to theasset is transferred to the income statement.
Where there is objective evidence of impairment on anavailable-for-sale asset, the cumulative loss related to that
asset is removed from equity and recognised in theincome 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 debt
instrument decreases and the decrease can be linked
objectively to an event occurring after the impairment
event, the loss is reversed through the income statement
through the impairment expense line.
Purchases and sales of available-for-sale financial assets
are recognised on trade date, being the date on which
ANZ New Zealand commits to purchase or sell the asset.
(iv)

Net loans and advances

Loans and advances are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when ANZ New Zealandprovides money to a debtor with no intention of trading
the loans and advances. The loans and advances are
initially recognised at fair value plus transaction costs thatare directly attributable to the issue of the loan oradvance. They are subsequently measured at amortised
cost using the effective interest method, unless specificallydesignated on initial recognition at fair value throughprofit or loss.
All loans are graded according to the level of credit risk.
Net loans and advances include direct finance provided tocustomers such as bank overdrafts, credit cards, termloans, finance lease receivables and commercial bills.
Impairment of loans and advances
Loans and advances are reviewed at least at eachreporting date for impairment. Credit impairment
provisions are raised for exposures that are known to be
impaired. Exposures are impaired and impairment losses
are recorded if, and only if, there is objective evidence ofimpairment as a result of one or more loss events, that
occurred after the initial recognition of the loan and prior
to the reporting date, and that loss event, or events, has
had an impact on the estimated future cash flows of theindividual loan or the collective portfolio of loans that canbe reliably estimated.

Australia and New Zealand Banking Group Limited - New Zealand Branch

13

Notes to the Financial Statements
and a counterparty liability is disclosed under deposits
and other borrowings. The difference between the saleprice and the repurchase price is accrued over the life of
the repurchase agreement and charged to interest
expense in the income statement.

Impairment is assessed for assets that are individuallysignificant (or on a portfolio basis for small value loans)and then on a collective basis for those exposures notindividually known to be impaired.
Exposures that are assessed collectively are placed inpools of similar assets with similar risk characteristics. The
required provision is estimated on the basis of historicalloss experience for assets with credit risk characteristics
similar to those in the collective pool. The historical loss
experience is adjusted based on current observable datasuch as changed economic conditions. The provision also
takes account of the impact of inherent risk of large
concentrated losses within the portfolio and anassessment of the economic cycle.

Securities purchased under agreements to resell, where
ANZ New Zealand does not acquire the risks and rewardsof ownership, are recorded as cash or net loans andadvances depending on the term of the agreement. The
security is not included in the balance sheet. Interest
income is accrued on the underlying loan amount.
Securities borrowed are not recognised in the balance
sheet, unless these are sold to third parties, at which point
the obligation to repurchase is recorded as a financial
liability at fair value with fair value movements included in
the income statement.

The estimated impairment losses are measured as thedifference between the asset’s carrying amount and theestimated future cash flows discounted to their present
value. As this discount unwinds during the period
between recognition of impairment and recovery of the
cash flow, it is recognised in interest income. The processof estimating the amount and timing of cash flows
involves considerable management judgement. These
judgements are reviewed regularly to reduce any
differences between loss estimates and actual loss
experience.

(vii) Derecognition
ANZ New Zealand enters into transactions where it
transfers financial assets recognised on its balance sheet
yet retains either all the risks and rewards of thetransferred assets or a portion of them. If all, or
substantially all, the risks and rewards are retained, thetransferred assets are not derecognised from the balance
sheet.
In transactions where substantially all the risks andrewards of ownership of a financial asset are neither
retained nor transferred, ANZ New Zealand derecognises
the asset if control over the asset is lost. In transfers wherecontrol over the asset is retained, ANZ New Zealandcontinues to recognise the asset to the extent of its
continuing involvement, determined by the extent towhich it is exposed to changes in the value of thetransferred asset. The rights and obligations retained or
created in the transfer are recognised separately as assets
and liabilities as appropriate.

Impairment of capitalised acquisition expenses is assessed
through comparing the actual behaviour of the portfolio
against initial expected life assumptions.
The provision for impairment loss (individual andcollective) is deducted from loans and advances in thebalance sheet and the movement 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. Unsecured facilities are normally written-off
when they become 180 days past due or earlier in theevent of the customer's bankruptcy or similar legal releasefrom the obligation. However, a certain level of recoveries
is expected after the write-off, which is reflected in theamount 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 there is a shortfall.

Non-financial assets(viii) Goodwill
Goodwill represents the excess of the purchaseconsideration 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
is assessed for impairment at least annually or more
frequently if there is an indication that the goodwill may
be impaired. Where the assessment results in the goodwill
balance exceeding the value of expected future benefits,
the difference is charged to the income statement. Any
impairment of goodwill is not subsequently reversed.

Where impairment losses recognised in previous periods
have subsequently decreased or no longer exist, such
impairment losses are reversed in the income statement.
A provision is also raised for off-balance sheet items suchas commitments that are considered likely to result in an
expected loss.
(v)

Lease receivables

Contracts to lease assets and hire purchase agreements
are classified as finance leases if they transfer substantially
all the risks and rewards of ownership of the asset to thecustomer or an unrelated third party. All other lease
contracts are classified as operating leases.
(vi)

Repurchase agreements

Securities sold under repurchase agreements are retainedin the financial statements where substantially all the risks
and rewards of ownership remain with ANZ New Zealand,(f)Liabilities
Financial liabilities(i)

Deposits and other borrowings

Deposits and other borrowings include certificates ofdeposit, interest bearing deposits, UDC secured
investments, commercial paper and other related interest
and non-interest bearing financial instruments. Deposits
and other borrowings, excluding commercial paper, areinitially recognised at fair value plus transaction costs andsubsequently measured at amortised cost. The interest
expense is recognised using the effective interest method.
Commercial paper is designated at fair value throughAustralia and New Zealand Banking Group Limited - New Zealand Branch

14

Notes to the Financial Statements
profit or loss, with fair value movements recorded directlyin the income statement, which reflects the basis on which
it is managed.
(ii)•

Bonds, notes and subordinated debt•

Bonds, notes and subordinated debt are accounted for in
the same way as deposits and other borrowings, except
for those bonds and notes which are designated at fairvalue through profit or loss on initial recognition, with fairvalue movements recorded in the income statement.
(iii)

(ii)

Financial guarantee contracts(iii)

Certain cash flows have been netted in order to provide
more meaningful disclosure, as many of the cash flows arereceived and disbursed on behalf of customers and reflect
the activities of the customers rather than those of ANZ
New Zealand. These include customer loans and advances,
customer deposits, certificates of deposit, related party
balances and trading securities.

Derecognition(iv)

SharesIssued shares are recognised at the amount paid per share
net of directly attributable issue costs.
(ii)

Receivables and payables are stated with the amount of
GST included. The net amount of GST recoverable from, orpayable to, the IRD is included as other assets or otherliabilities in the balance sheet.

Reserves

Available-for-sale revaluation reserve

Cash flows are included in the cash flow statement on a
net basis. The GST components of cash flows arising frominvesting and financing activities, which are recoverable
from, or payable to, the IRD are classified as operating
cash flows.

This reserve includes changes in the fair value of availablefor-sale financial assets, net of tax. These changes aretransferred to the income statement (in non-interest
income) when the asset is derecognised. Where the asset
is impaired, the changes are transferred to the impairment
expense line in the income statement for debt
instruments and in the case of equity instruments to noninterest income.

(v)

This reserve includes the fair value gains and losses
associated with the effective portion of designated cash
flow hedging instruments.
Presentation(i)

Offsetting of income and expenses

Income and expenses are not offset unless required or
permitted by an accounting standard. This generally arisesin the following circumstances:•where transaction costs form an integral part of theeffective interest rate of a financial instrument
which is measured at amortised cost, these are

Segment reporting

Operating segments are distinguishable components of
ANZ New Zealand that provide products or services thatare subject to risks and rewards that are different to thoseof other operating segments. ANZ New Zealand operates
predominately in the banking industry within New
Zealand. ANZ New Zealand has very limited exposure torisk associated with operating in different economic
environments or political conditions. On this basis nogeographical segment information is provided.

Cash flow hedging reserve(h)Goods and services tax

Income, expenses and assets are recognised net of theamount of goods and services tax (GST) except where theamount of GST incurred is not recoverable from the Inland
Revenue Department (IRD). In these circumstances, theGST is recognised as part of the cost of acquisition of theasset or as part of the expense.

Equity(i)Statement of cash flows

For cash flow statement presentation purposes, cash andcash equivalents includes cash and nostro balances
included in settlement balances receivable and settlementbalances payable.

Financial liabilities are derecognised when the obligation
specified in the contract is discharged, cancelled or
expires.
(g)

Offsetting of financial assets and liabilities

Assets and liabilities are offset and the net amountreported in the balance sheet only where there is:•a current enforceable legal right to offset the asset
and liability; and•an intention to settle on a net basis, or to realise theasset and settle the liability simultaneously.

Financial guarantee contracts are contracts that require
the issuer to make specified payments to reimburse theholder for a loss it incurs because a specified debtor fails
to make payments when due. Financial guarantees areissued in the ordinary course of business, consisting ofletters of credit, guarantees and acceptances. Financial
guarantees are initially recognised in the financial
statements at fair value on the date the guarantee wasgiven; typically this is the premium received. Subsequent
to initial recognition, ANZ New Zealand's liabilities undersuch guarantees are measured at the higher of theiramortised amount and the best estimate of theexpenditure required to settle any financial obligation
arising at the balance sheet date. These estimates are
determined based on experience of similar transactions
and history of past losses.
(iv)

offset against the interest income generated by thefinancial instrument;
where gains and losses relating to fair value hedges
are assessed as being effective; orwhere gains and losses arise from a group of similartransactions, such as foreign exchange gains andlosses.

(i)

Other
(i)

Contingent liabilities

Contingent liabilities acquired in a business combination
are individually measured at fair value at the acquisition
date. At subsequent reporting dates the value of such

Australia and New Zealand Banking Group Limited - New Zealand Branch

Notes to the Financial Statements
contingent liabilities is reassessed based on the estimateof expenditure required to settle the contingent liability.
Other contingent liabilities are not recognised in thebalance sheet but disclosed in Note 33 unless it isconsidered remote that ANZ New Zealand will be liable tosettle the possible obligation.
(ii)

Accounting Standards not early adopted

The following standards and amendments were available
for early adoption but have not been applied by ANZ New
Zealand in these financial statements. ANZ New Zealandcurrently does not intend to apply any of thesepronouncements until their effective date.
Standards and amendments effective for periods
commencing after 1 January 2018
NZ IFRS 9 Financial Instruments
This standard is being released in phases and once
finalised will replace NZ IAS 39 Financial Instruments:
Recognition and Measurement in its entirety. The phases
currently issued are:•Phase 1: Specifies a simpler methodology forclassifying and measuring financial assets, with two
primary measurement categories: amortised costand fair value.
•
Phase 2: Simplifies hedge accounting requirements
which more closely align with risk management
activities undertaken when hedging financial andnon-financial risks. Includes new impairment
requirements that introduce an expected credit loss
impairment model. Introduces a fair value throughother comprehensive income classification for
financial assets when the business model is to collectcontractual cash flows and to sell financial assets.
ANZ New Zealand is assessing the impact on the financial
statements.

15

Australia and New Zealand Banking Group Limited - New Zealand Branch

16

Notes to the Financial Statements
2.

Critical Estimates and Judgement Used in
Applying Accounting Policies

There are a number of critical accounting treatments which
include complex or subjective judgements and estimatesthat may affect the reported amounts of assets and liabilities
in the financial statements. Estimates and judgements arecontinually evaluated and are based on historical experienceand other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
An explanation of the judgements and estimates made by
ANZ New Zealand, in the process of applying its accounting
policies, that have the most significant effect on the amounts
recognised in the financial statements are set out below.
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring the impairmentof loans and advances requires ANZ New Zealand to assess
impairment at least at each reporting date. The credit
provisions raised (collective and individual) represent
management's best estimate of the losses incurred in theloan portfolio at balance date based on their experienced
judgement.
The collective provision is estimated on the basis of historicalloss experience for assets with credit characteristics similar to
those in the collective pool. The historical loss experience isadjusted based on current observable data and events andan assessment of the impact of model risk. The provision also
takes into account the impact of large concentrated losses
within the portfolio and the economic cycle.
The use of such judgements and reasonable estimates is
considered by management to be an essential part of theprocess and does not impact on the reliability of theprovision.
Individual and collective provisioning involves the use ofassumptions for estimating the amounts and timing of
expected future cash flows. The process of estimating theamount and timing of cash flows involves considerable
management judgement. These judgements are revised
regularly to reduce any differences between loss estimatesand actual loss experience.
Refer to Note 13 for details of credit impairment provisions.
Critical judgements in applying ANZ New Zealand’s
accounting policies
Financial instruments at fair value
ANZ New Zealand’s financial instruments measured at fairvalue are stated in note 1(a)(iii). In estimating fair value ANZ
New Zealand uses, wherever possible, quoted market prices
in an active market for the financial instrument.
In the event that there is no active market for the instrument,
fair value is based on present value estimates or other market
accepted valuation techniques. The valuation models
incorporate the impact of bid/ask spread, counterparty credit
spreads and other factors that would influence the fair value
determined by a market participant. The selection of
appropriate valuation techniques, methodology and inputs

requires judgement. These are reviewed and updated as
market practice evolves.
Derivatives and hedging
ANZ New Zealand 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 exposuresrelating to non-trading positions.
A hedging instrument is a designated derivative whose fairvalue or cash flows are expected to offset changes in the fairvalue or cash flows of a designated hedged item. A hedged
item is an asset, liability, firm commitment or highly probable
forecast transaction that: (a) exposes ANZ New Zealand to
the risk of changes in fair value or future cash flows; and (b) isdesignated as being hedged.
Judgement is required in selecting and designating hedging
relationships and assessing hedge effectiveness. NZ IAS 39
Financial Instruments: Recognition and Measurement does not
specify a single method for assessing hedge effectivenessprospectively or retrospectively. ANZ New Zealand adopts
the hypothetical derivative approach to determine hedge
effectiveness in line with current risk management strategies.
Hedge ineffectiveness can arise for a number of reasons andwhilst a hedge may pass the effectiveness tests above it may
not be perfectly effective, leaving some volatility in theincome statement.
The majority of outstanding derivative positions aretransacted over-the-counter and therefore need to be valued
using valuation techniques. Included in the determination of
the fair value of derivatives is a credit valuation adjustment(CVA) to reflect the creditworthiness of the counterparty. This
is influenced by the mark-to-market of the derivative trades
and by the movement in the market cost of credit. Further
adjustments are made to account for the funding costs
inherent in the derivative. Judgment is required to determine
the appropriate cost of funding and the future expectedcashflows used in this funding valuation adjustment (FVA).
Structured entities
A structured entity is an entity in which voting or similar
rights are not the dominant factor in deciding who controls
the entity, such as when voting rights relate to administrative
tasks only and the relevant activities are directed by means ofcontractual arrangements. Structured entities are generally
created to achieve a narrow and well defined objective withrestrictions around their ongoing activities and are often
thinly capitalised with a reliance on debt financing for
support.
ANZ New Zealand assesses, at inception and periodically,
whether a structured entity should be consolidated based on
the accounting policy outlined in note 1. Such assessments
are predominantly securitisation activities and involvementwith managed funds. When assessing whether ANZ New
Zealand controls (and therefore consolidates) a structured
entity, judgement is required about whether ANZ New
Zealand has power over the relevant activities as well as
exposure to variable returns of the structured entity. All
involvement, rights and exposure to returns are consideredwhen assessing if control exists.
ANZ New Zealand is deemed to have power over a managed
fund when it performs the function of Manager of that

Australia and New Zealand Banking Group Limited - New Zealand Branch

17

Notes to the Financial Statements
managed fund. Whether ANZ New Zealand controls the
managed fund depends on whether it holds that power as
principal, or as an agent for other investors. ANZ New
Zealand is considered the principal, and thus controls an
managed fund, when it cannot be easily removed from theposition of Manager by other investors and has variable
returns through significant aggregate economic interest inthat managed fund. In all other cases ANZ New Zealand isconsidered to be acting in an agency capacity and does notcontrol the managed fund.
Structured entities are consolidated when control exists. In
other cases ANZ New Zealand may simply have an interest inor may sponsor a structured entity but not consolidate it.
ANZ New Zealand considers itself the sponsor of an
unconsolidated structured entity where it is the primary
party involved in the design and establishment of thatstructured entity and:•
where ANZ New Zealand is the major user of thatstructured entity; or•
ANZ New Zealand’s name appears in the name of thatstructured entity or on its products; or•
ANZ New Zealand provides implicit or explicit
guarantees of that entity’s performance.
Goodwill
Refer to Note 17 for details of goodwill held by ANZ New
Zealand.
The carrying value of goodwill is subject to an impairment
test to ensure that the current carrying value does notexceed 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 write down.
Goodwill has been allocated for impairment purposes to the
cash generating units at which the goodwill is monitored forinternal reporting purposes. Impairment testing of purchased
goodwill is performed by comparing the recoverable value ofeach cash generating unit with the current carrying amountof its net assets, including goodwill. Judgement is required in
identifying the cash-generating units to which goodwill andother assets are allocated for the purpose of impairment
testing.
The recoverable amount is based on value-in-use
calculations. These calculations use cash flow projections
based on a number of financial budgets within each segment
approved by management covering a three year period. Cashflow projections are based on a range of readily available
economic assumptions including GDP and CPI. Cash flows
beyond the three year period are extrapolated using a 3%
growth rate.
These cash flow projections are discounted using a capital
asset pricing model. As at 28 February 2014 when the last
valuation was prepared, a discount rate of 11.09% wasapplied to each cash generating unit. The main variables in
the calculation of the discount rate used are the risk free rate,
the beta rate and the market risk premium. The risk free rateis based on the 10 year Government Bond Rate. The beta rate
and the market risk premium are consistent with observableand comparative market rates applied in the regionalbanking sector. Market observable information is not readily
available at the segment level therefore management
performed stress tests for key sensitivities in each segment.

Management believes any reasonable possible change in the
key assumptions on which the recoverable amount is based
would not cause ANZ New Zealand’s carrying amount toexceed its recoverable amount.

Australia and New Zealand Banking Group Limited - New Zealand Branch

18

Notes to the Financial Statements
3.

Risk Management Policies

ANZ New Zealand recognises the importance of effective risk
management to its business success. Management iscommitted to achieving strong control and a distinctive risk
management capability that enables ANZ New Zealandbusiness units to meet their performance objectives.
ANZ New Zealand approaches risk through managing thevarious elements of the system as a whole rather thanviewing them as independent and unrelated parts. The risk
management division (Risk Management) is independent of
the business, with clear delegations from the Board of the
Ultimate Parent Bank and operates within a comprehensive
framework comprising:•
The Boards of the entities making up ANZ New Zealand(the Boards) providing leadership, setting risk
appetite/strategy and monitoring progress;•
A strong framework for development and maintenanceof ANZ New Zealand-wide risk management policies,
procedures and systems, overseen by an independent
team of risk professionals;•
The use of sophisticated risk tools, applications andprocesses to execute the global risk management
strategy as it is deemed to apply to each entity across
ANZ New Zealand;•Business unit level accountability, as the “first line ofdefence”, for the management of risks in alignment
with ANZ New Zealand’s strategy; and•Independent oversight to ensure business unit levelcompliance with policies, regulations and laws, and toprovide regular risk evaluation and reporting.
ANZ New Zealand manages risk through an approval,delegation and limits structure. Regular reviews of thepolicies, systems and risk reports, including the effectivenessof the risk management systems, discussions covering ANZ
New Zealand’s response to emerging risk issues and trends,
and that the requisite culture and practices are in placeacross ANZ New Zealand, are conducted within ANZ New
Zealand and also by the Ultimate Parent Bank. The Boards
have responsibility for reviewing all aspects of risk
management.
The Boards have ultimate responsibility for overseeing theeffective deployment of risk management frameworks,
policies and processes within New Zealand. The Bank’s Risk
Committee assists the Boards in this function. The role of the
Risk Committee is to assist the Boards in the effective
discharge of its responsibilities for business, market, credit,
operational, compliance, liquidity, product and reputationalrisk management, and to liaise and consult with the Ultimate
Parent Bank Risk Committee as required. Risk Management,
via the Chief Risk Officer, coordinates risk management
activities directly between Business Unit risk functions andUltimate Parent Bank Group Risk Management functions.
ANZ New Zealand’s risk management policies are essentiallythe same as the Ultimate Parent Bank, but are tailored whererequired to suit the local New Zealand regulatory andbusiness environment.
The Bank’s Audit Committee, which is a sub-committee of theBoard of the Bank, has responsibility for reviewing for
ensuring the integrity of ANZ New Zealand's financial
controls, reporting systems and internal audit standards. It

meets at least four times a year and reports directly to theBoard of the Bank. All members of the Bank’s Audit
Committee are non-executive directors.
Financial risk management
Refer to Note 27 for detailed disclosures on ANZ New
Zealand's financial risk management policies.
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, froma breakdown in the availability or integrity of services,
systems and information, or damage to ANZ New Zealand’s
reputation.
Examples include failure to comply with policy andlegislation, human error, natural disasters, fraud and othermalicious acts. Where appropriate, risks are mitigated byinsurance.
Risk Management is responsible for establishing ANZ New
Zealand’s operational risk framework and associated ANZ
New Zealand-wide policies. Business units are responsible forthe identification, analysis, assessment and treatment ofoperational risks on a day-to-day basis.
Business units have primary responsibility for theidentification and management of operational risk withexecutive oversight provided by the relevant Retail andWholesale Risk Forums. The Bank’s Operational Risk
Executive Committee (OREC) undertakes the governancefunction through the bi-monthly monitoring of operationalrisk performance across ANZ New Zealand. The Boards andRisk Management conduct effective oversight through theapproval of operational risk policies and frameworks andmonitoring key operational risk metrics.
Compliance
ANZ New Zealand conducts its business in accordance withall relevant compliance requirements. In order to assist ANZ
New Zealand identify, manage, monitor and measure its
compliance obligations, ANZ New Zealand has acomprehensive regulatory compliance framework in place,which addresses both external (regulatory) and internal
compliance.
Risk Management, in conjunction with business unit staff
ensure ANZ New Zealand operates within a complianceinfrastructure and framework that incorporates new andchanging business obligations and processes.
The compliance policies and their supporting framework
seek to minimise material risks to ANZ New Zealand’s
reputation and value that could arise from non-compliancewith laws, regulations, industry codes and internal standards
and policies. Business units have primary responsibility forthe identification and management of compliance. Risk
Management provides policy and framework, measurement,
monitoring and reporting, as well as leadership in areas suchas anti-money laundering procedures and matters ofprudential compliance. The Board and the Risk Committee ofthe Ultimate Parent Bank Board conduct Board and Executive
oversight.

Australia and New Zealand Banking Group Limited - New Zealand Branch

Notes to the Financial Statements
Global Internal Audit
Global Internal Audit is a function independent ofmanagement whose role is to provide the Board andmanagement with an effective and independent appraisal of
the internal controls established by management. Operating
under a Board approved Charter, the reporting line for theoutcomes of work conducted by Global Internal Audit isdirect to the Chair of the Bank’s Audit Committee, with adirect communication line to the Chief Executive Officer ofthe Bank and the external auditor.
The Global Internal Audit Plan is developed utilising a risk
based approach and is refreshed on a quarterly basis. The
Bank’s Audit Committee approves the plan, the associatedbudget and any changes.
All audit activities are conducted in accordance with local
and international auditing standards, and the results of theactivities are reported to the Audit Committees of the
Ultimate Parent Bank and the Bank as appropriate, Risk
Committee and management. These results influence theperformance assessment of business heads.
Furthermore, Global Internal Audit monitors the remediationof audit issues and highlights the current status of any
outstanding audits.

19Australia and New Zealand Banking Group Limited - New Zealand Branch

20

Notes to the Financial Statements
4.

IncomeANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

474

418

-

-

Cash

72

72

-

-

Available-for-sale assets

33

16

-

-

Net loans and advances

6,204

5,930

543

509

16

25

-

-

6,325

6,043

543

509

6,799

6,461

543

509

$ millions

Interest income
Financial assets at fair value through profit or loss
Trading securities
Financial assets not at fair value through profit or loss

Other
Total interest income
Net trading gains
Net gain on foreign exchange trading

157

154

-

-

Net gain / (loss) on trading securities

57

(197)

-

-

Net gain / (loss) on trading derivatives

(4)

206

-

-

Net trading gains

210

163

-

-

Net funds management income

139

124

-

-

Net insurance income

186

110

-

-

Total funds management and insurance income

325

234

-

-

Net funds management and insurance income

Other operating income
Lending and credit facility fee income

55

57

-

-

Other fee income

543

541

-

-

Total fee income

598

598

-

-

Direct fee expense

(216)

(200)

-

-

Net fee income

382

398

-

-

Net ineffectiveness on qualifying fair value hedges

14

(1)

7

8

Net loss on derivatives not qualifying for hedge accounting

(40)

(75)

(10)

(20)

Net cash flow hedge gain transferred to income statement

41

21

-

-

Insurance settlement proceeds

91

-

-

-

-

16

-

-

Other income

37

32

-

-

Total other operating income

525

391

(3)

(12)

Gain on sale of subsidiary and associates

Australia and New Zealand Banking Group Limited - New Zealand Branch

21

Notes to the Financial Statements
5.

Expenses
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

229

170

-

-

Interest expense
Financial liabilities at fair value through profit or loss
Commercial paper
Financial liabilities not at fair value through profit or loss
2,906

2,726

422

398

Bonds and notes

799

824

-

-

Subordinated debt

73

79

-

-

Other

27

21

-

-

3,805

3,650

422

398

4,034

3,820

422

398

Personnel costs

716

702

-

-

Employee entitlements

69

71

-

-

Superannuation costs

38

43

-

-

Share-based payments expense

22

22

-

-

Building occupancy costs

41

41

-

-

Depreciation of premises and equipment

55

46

-

-

Leasing and rental costs

78

84

-

-

Technology expenses

137

114

-

-

Deposits and other borrowings

Total interest expense
Operating expenses

Amortisation of software and other intangible assets

30

52

-

-

Administrative expenses

170

188

-

-

Charges from Ultimate Parent Bank

81

84

-

-

Other costs

53

66

26

26

1,490

1,513

26

26

2,308

2,481

79

88

Review of regulatory returns

96

186

-

-

Prospectus assurance or review

249

120

-

-

Other assurance services3

151

100

-

-

Total other services

496

406

-

-

2,804

2,887

79

88

Total operating expenses$ thousands

Fees paid to auditor (KPMG New Zealand)1
Audit or review of financial statements2
Other services:

Total fees paid to auditor relating to the NZ Branch and ANZ New ZealandFees paid on behalf of related entities and not recharged4
Total fees paid to auditor
1
2
3
4

147

181

-

-

2,951

3,068

79

88

Comparative figures have been adjusted to include and show separately fees paid on behalf of other entities and which have not been recharged.
Includes fees for both the audit of the annual financial statements and reviews of interim financial statements.
Includes fees for controls reports, comfort letters and other agreed upon procedures engagements.
Amounts include fees for audits of annual financial statements and audits of summary financial statements for inclusion in prospectuses for ANZ PIE funds, and comfort
letters and other agreed upon procedures engagements for The Bonus Bonds Trust and ANZ Staff Foundation.

It is ANZ New Zealand’s policy that, subject to the approval of the Ultimate Parent Bank’s Audit Committee, 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. Services that are perceived to be inconflict with the role of auditor include consulting advice and subcontracting of operational activities normally undertaken bymanagement, and engagements where the auditor may ultimately be required to express an opinion on its own work.

Australia and New Zealand Banking Group Limited - New Zealand Branch

22

Notes to the Financial Statements
6.

Income Tax
ANZ New Zealand$ millions

Reconciliation of the prima facie income tax payable on profit
Profit before income tax

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

2,347

1,857

85

70

Prima facie income tax at 28%

657

520

24

20

Imputed and non-assessable dividends

(3)

(5)

-

-

Change in tax provisions

(10)

(10)

-

-

Non assessable income and non deductible expenditure

(9)

(18)

-

-

1

1

-

-

636

488

24

20

27.1%

26.3%

28.0%

28.0%

Current tax

532

405

24

18

Deferred tax

104

83

-

2

Total income tax expense recognised in the income statement

636

488

24

20

2,341

1,852

-

-

Income tax under provided in prior years
Total income tax expense
Effective tax rate (%)
Amounts recognised in the income statement

Imputation credits available

A number of companies within ANZ New Zealand are members of an imputation group. The imputation credit balance for ANZ New
Zealand includes the imputation credit balance in relation to both the imputation group and other companies within ANZ New
Zealand that are not in the imputation group. The imputation credit balance available includes imputation credits that will arise
from the payment of the amount of provision for income tax as at the reporting date.
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Deferred tax assets / (liabilities) comprise the following temporary differences:
193

238

6

6

Premises and equipment, software and intangibles

2

8

-

-

Provisions and accruals

61

76

-

-

Insurance policy assets

(127)

(108)

-

-

Financial instruments

3

(10)

-

-

Carried forward losses

9

15

-

-

(191)

(179)

-

-

(9)

2

-

-

(59)

42

6

6

Provision for credit impairment

Lease finance
Other deferred tax assets and liabilities (including tax provisions)1

Net deferred tax assets / (liabilities)
1

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

23

Notes to the Financial Statements
7.

Segment Analysis

ANZ New Zealand is organised into four major business segments for segment reporting purposes - Retail, Commercial, Wealth andInstitutional. Centralised back office and corporate functions support these segments. These segments are consistent with internalreporting provided to the chief operating decision maker, being the Bank’s Chief Executive Officer.
Segmental reporting has been updated to reflect minor changes to ANZ New Zealand’s structure. Comparative data has beenadjusted to be consistent with the current year’s segment definitions.
RetailRetail provides products and services to personal customers via the branch network, mortgage specialists, the contact centre and avariety of self service channels (internet banking, phone banking, ATMs, website and mobile phone banking). Core products include
current and savings accounts, unsecured lending (credit cards, personal loans and overdrafts) and home loans secured by mortgages
over property. Retail distributes insurance and investment products on behalf of the Wealth segment.
Commercial
Commercial provides services to Business Banking, Commercial & Agri, and UDC customers. Business Banking services are offered tosmall enterprises (typically with annual revenues of less than $5 million). Commercial & Agri customers consist of primarily privately
owned medium to large enterprises. ANZ New Zealand's relationship with these businesses ranges from simple banking
requirements with revenue from deposit and transactional facilities, and cash flow lending, to more complex funding arrangementswith revenue sourced from a wider range of products. UDC is principally involved in the financing and leasing of plant, vehicles andequipment, mainly for small and medium sized businesses, as well as investment products.
WealthWealth comprises the Private Wealth, Funds Management and Insurance businesses, which provide private banking, investment,
superannuation and insurance products and services.
Institutional
Institutional provides financial services through a number of specialised units to large multi-banked corporations, often global,
which require sophisticated product and risk management solutions. Those financial services include loan structuring, foreignexchange, wholesale money market services and transaction banking.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

24

Notes to the Financial Statements
Business segment analysis1
ANZ New Zealand$ millions

Wealth2

RetailCommercial

External interest income

2,209

3,512

92

968

18

6,799

External interest expense(1,096)

(661)

(199)

(475)

(1,603)(4,034)

Net intersegment interest(138)(1,478)

166

(165)

1,615

-

Net interest income

975

1,373

59

328

30

2,765

Other external operating income

297

89

318

298

58

1,060

-

1

-

-

2

3

Operating income

1,272

1,463

377

626

90

3,828

Operating expenses

632

488

137

182

51

1,490

Profit before credit impairment and income tax

640

975

240

444

39

2,338

Credit impairment charge / (release)

31

(40)

(1)

1

-

(9)

Profit before income tax

609

1,015

241

443

39

2,347

Income tax expense

171

284

59

123

(1)

636

Profit after income tax

438

731

182

320

40

1,711

Depreciation and amortisation

17

2

5

-

61

85

Goodwill

547

1,434

180

1,072

-

3,233

Other intangible assets

30

2

126

-

63

221

Investment in associates

-

3

-

-

85

88

Total external assets

38,193

61,182

2,526

34,744

1,883

138,528

Total external liabilities

34,94523,0895,316

28,90136,196

128,447

External interest income

2,157

3,238

88

969

9

6,461

External interest expense(1,056)

(607)

(200)

(420)

(1,537)(3,820)Net intersegment interest(175)(1,316)

149

(191)

1,533

-

Net interest income

926

1,315

37

358

5

2,641

Other external operating income

297

125

195

251

(80)

788

-

2

-

-

5

7

Operating income

1,223

1,442

232

609

(70)

3,436

Operating expenses

639

489

139

196

50

1,513

Profit before credit impairment and income tax

584

953

93

413

(120)

1,923

Credit impairment charge / (release)

57

(11)

(1)

20

1

66

Profit before income tax

527

964

94

393

(121)

1,857

Income tax expense

148

266

14

106

(46)

488

Profit after income tax

379

698

80

287

(75)

1,369

Institutional

Other

Total

30/09/2014

Share of associates' profit

Other information

30/09/2013

Share of associates' profit

Other information
Depreciation and amortisation

24

5

5

-

64

98

Goodwill

547

1,434

180

1,072

-

3,233

Other intangible assets

27

2

130

-

56

215

Investment in associates

-

3

-

-

95

98

Total external assets

37,47556,9352,261

31,535

1,647

129,853

Total external liabilities

32,395

20,3994,848

26,82735,642

120,1111
2

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Wealth other external operating income for the year ended 30 September 2014 includes the $91 million insurance settlement relating to the Bank’s former
involvement in the ING Diversified Yield Fund and the ING Regular Income Fund.

Australia and New Zealand Banking Group Limited - New Zealand Branch

25

Notes to the Financial Statements
8.

Cash
ANZ New Zealand$ millions

Coins, notes and cash at bankers
Balances with central banks
Securities purchased under agreements to resell
Total cash

9.

30/09/2014

NZ Branch

30/09/2013

30/09/2014

30/09/2013

630

328

426

141

1,309

1,709

-

-

309

310

-

-

2,248

2,347

426

141

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Trading Securities
ANZ New Zealand$ millions

NZ Branch

6,607

5,404

-

-

Certificates of deposit

378

551

-

-

Promissory notes

91

36

-

-

Other bank bonds

4,630

4,300

-

-

44

29

-

-

11,750

10,320--Government, local body stock and bonds

Other
Total trading securities

Australia and New Zealand Banking Group Limited - New Zealand Branch

26

Notes to the Financial Statements
10. Derivative Financial Instruments
The use of derivatives and their sale to customers as risk management products is an integral part of ANZ New Zealand’s trading
activities. Derivatives are also used to manage ANZ New Zealand’s own exposure to fluctuations in exchange and interest rates aspart of its own asset and liability management activities.
Derivatives are subject to the same types of credit and market risk as other financial instruments and ANZ New Zealand manages
these risks in a consistent manner.
Derivatives, except for those that are specifically designated as effective hedging instruments, are classified as held for trading.
ANZ New Zealand
Notional
principal
amountAssetsSpot and forward contracts

63,800Swap agreements
Options purchased
Options sold$ millions

NZ Branch

Liabilities

Notional
principal
amountAssetsLiabilities

1,454

1,234

420

-

9

155,303

5,420

5,718

8,747

52

768

2,528

47

1

-

-

-

2,381

1

36

-

-

-

224,012

6,922

6,989

9,167

52

777

Fair values

Fair values

30/09/2014

Derivatives held for trading
Foreign exchange derivatives

Interest rate derivatives
8,899

2

1

614

-

-

Swap agreements

680,503

4,132

3,750

3,532

4

6

Futures contracts

17,930

2

4

-

-

-

Options purchased

1,607

2

-

-

-

-

840

1

3

-

-

-

709,779

4,139

3,758

4,146

4

6

346

22

21

-

-

-

934,137

11,083

10,76813,31356

783

Forward rate agreements

Options soldCommodity derivatives
Total derivatives held for trading
Derivatives in hedging relationships
Fair value hedges
Foreign exchange swap agreements
Interest rate swap agreements

17

-

-

-

-

-

25,494

242

85

4,567

6

19

25,511

242

85

4,567

6

19

Cash flow hedges
Interest rate swap agreements

18,866

96

108

-

-

-

Total derivatives in hedging relationships

44,377

338

193

4,567

6

19

Total derivative financial instruments

978,514

11,421

10,961

17,88062802Australia and New Zealand Banking Group Limited - New Zealand Branch

27

Notes to the Financial Statements
ANZ New Zealand
Notional
principal
amountAssetsSpot and forward contracts

53,870Swap agreements
Options purchased
Options sold30/09/2013$ millions

NZ Branch

Liabilities

Notional
principal
amountAssetsLiabilities

566

985

283

2

2

139,110

3,187

5,090

8,233

-

991

2,982

52

-

-

-

-

2,973

1

70

-

-

-

198,935

3,806

6,145

8,516

2

993

Fair values

Fair values

Derivatives held for trading
Foreign exchange derivatives

Interest rate derivatives
Forward rate agreements

15,442

-

2

435

-

-

Swap agreements

518,586

5,386

4,843

1,124

6

5

Futures contracts

24,857

2

6

-

-

-

Options purchased

1,098

4

-

-

-

-

Options sold

1,010

-

5

-

-

-

560,993

5,392

4,856

1,559

6

5

366

32

32

-

-

-

760,294

9,230

11,033

10,0758998

Commodity derivatives
Total derivatives held for trading
Derivatives in hedging relationships
Fair value hedges
Foreign exchange swap agreements
Interest rate swap agreements

55

2

-

-

-

-

24,718

186

76

4,443

4

23

24,773

188

76

4,443

4

23

Cash flow hedges
Interest rate swap agreements

15,240

90

99

-

-

-

Total derivatives in hedging relationships

40,013

278

175

4,443

4

23

Total derivative financial instruments

800,307

9,508

11,20814,51812

1,021

Derivatives held for trading
The held for trading classification includes two categories of derivative instruments: those held as trading positions and those used
for ANZ New Zealand’s balance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include the structuring andmarketing of derivative products to customers which enable them to take or mitigate risks. Market making activities consist ofderivatives entered into principally for the purpose of generating profits from short-term fluctuations in price or margins. Positions
may be traded actively or held over a period of time to benefit from expected changes in market rates.
Balance sheet risk management
ANZ New Zealand designates certain 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 thederivative and the hedged item. Hedge accounting is not applied to all balance sheet risk management positions as some balance
sheet risk management derivatives are classified as held for trading.
Derivatives in hedging relationships
Fair value hedges
ANZ New Zealand’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fairvalue of fixed-rate long-term financial instruments due to movements in market interest rates.
Gain / (loss) on fair value hedges attributable to the hedged risk
ANZ New Zealand$ millions

30/09/2014

NZ Branch

30/09/2013

30/09/2014

30/09/2013

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

(51)

80

-

(20)

- hedging instrument

65

(81)

7

28

Net ineffectiveness on qualifying fair value hedges

14

(1)

7

8

Australia and New Zealand Banking Group Limited - New Zealand Branch

28

Notes to the Financial Statements
Cash flow hedges
ANZ New Zealand’s cash flow hedges comprise interest rate swaps that are used to protect against exposures to variability in futureinterest 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 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 designated as cash flow hedges.
Analysis of the cash flow hedging reserve
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Variable rate loan assets

(29)

(18)

-

-

Variable rate liabilities

-

15

-

-

Short term re-issuances of fixed rate customer and wholesale deposit liabilities

22

29

-

-

Total cash flow hedging reserve

(7)

26

-

-

Deferred gain / (loss) attributable to hedges of:

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur, which isanticipated to take place over the next ten years (30/09/2013 ten years).

11. Available-for-sale Assets
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Government, local body stock and bonds

522

742

-

-

Other debt securities

248

198

-

-

2

2

-

-

772

942

-

-

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Overdrafts

1,744

1,841

-

-

Credit card outstandings

1,580

1,458

-

-

Term loans - housing

61,91858,814

9,192

9,273

Term loans - non-housing

Equity securities
Total available-for-sale assets

12. Net Loans and Advances
ANZ New Zealand$ millions

Note

NZ Branch

39,622

37,673--

Lease receivables

277

351

-

-

Hire purchase

837

721

-

-

Other

125

125

-

-

106,103

100,983

9,192

9,273

(688)

(849)

(22)

(23)

Less: Unearned income

(212)

(214)

(1)

-

Add: Capitalised brokerage/mortgage origination fees

215

162

7

6

Add: Customer liability for acceptances

67

31

-

-

105,485

100,113

9,176

9,256

Total gross loans and advances
Less: Provision for credit impairment

Total net loans and advances

13Australia and New Zealand Banking Group Limited - New Zealand Branch

29

Notes to the Financial Statements
13. Provision for Credit Impairment
Credit impairment charge / (release)
ANZ New Zealand

NZ BranchNon-retail
exposures

Retailmortgages

Other retail
exposures

Non-retail
exposures

299

18

-

-

18

(187)

(10)

-

-

(10)

-

-

-

-

83

8

-

-

8

(92)

(1)

-

-

(1)

7

-

-

7

375

18

-

-

18

(222)

(13)

-

-

(13)

-

-

-

-

130

5

-

-

5

(64)

(2)

-

-

(2)

66

3

-

-

3

Non-retail
exposures

Total

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

117

324

556

14

-

-

14

1

(69)

(92)

(1)

-

-

(1)

91

118

255

464

13

-

-

13

83

22

188

293

9

-

-

9

Retailmortgages

Other retail
exposures

New and increased provisions

68

120

111

Write-backs

(54)

(21)

(112)

Recoveries of amounts written off previously

(2)

(20)

(7)

(29)

Individual credit impairment charge / (release)

12

79

(8)

Collective credit impairment charge / (release)

(24)

1

(69)

Credit impairment charge / (release)

(12)

80

(77)

(9)

New and increased provisions

105

113

157

Write-backs

(88)

(30)

(104)

Recoveries of amounts written off previously

(2)

(16)

(5)

(23)

Individual credit impairment charge

15

67

48

Collective credit impairment release

(5)

(8)

(51)

Credit impairment charge / (release)

10

59

(3)

Retailmortgages

Other retail
exposures

Balance at beginning of the year

115

Charge / (release) to income statement(24)

Balance at end of the year

$ millions

Total

Total

30/09/2014

30/09/2013

Movement in provision for credit impairment
ANZ New Zealand$ millions

NZ Branch

30/09/2014

Collective provision

Individual provision
Balance at beginning of the year
New and increased provisions net of writebacks
Bad debts written off

14

99

(1)

112

8

-

-

8

(10)

(106)

(67)

(183)

(7)

-

-

(7)

Discount unwind reversal / (discount unwind)1

(6)

-

8

2

(1)

-

-

(1)

Balance at end of the year

81

15

128

224

9

-

-

9

Total provision for credit impairment

172

133

383

688

22

-

-

22

Balance at beginning of the year

120

125

375

620

16

-

-

16

Release to income statement

(5)

(8)

(51)

(64)

(2)

-

-

(2)

Balance at end of the year

115

117

324

556

14

-

-

14

Balance at beginning of the year
New and increased provisions net of writebacks
Bad debts written off

130

26

305

461

11

-

-

11

17

83

53

153

5

-

-

5

(55)

(87)

(150)

(292)

(6)

-

-

(6)

Discount unwind1

(9)

-

(20)

(29)

(1)

-

-

(1)

30/09/2013

Collective provision

Individual provision

Balance at end of the year

83

22

188

293

9

-

-

9

Total provision for credit impairment

198

139

512

849

23

-

-

23

1

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cash flows discounted to its
present value using the original effective interest rate for the asset. This discount unwinds as interest income over the period the asset is held.

Australia and New Zealand Banking Group Limited - New Zealand Branch

30

Notes to the Financial Statements
14. Impaired Assets
ANZ New Zealand$ millions
30/09/2014

Retailmortgages

NZ Branch

Other retail
exposures

Non-retail
exposures

Total

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

35

Balance at beginning of the year

214

49

673

936

35

-

-

Transfers from productive

218

138

299

655

40

-

-

40

Transfers to productive

(51)

(4)

(153)

(208)

(10)

-

-

(10)

Assets realised or loans repaid

(148)

(42)

(342)

(532)

(24)

-

-

(24)

Write offs

(10)

(106)

(67)

(183)

(7)

-

-

(7)

Total impaired assets
Undrawn facilities with impaired
customers

223

35

410

668

34

-

-

34

1

-

38

39

-

-

-

-

30/09/2013

Balance at beginning of the year

352

44

1,009

1,405

39

-

-

39

Transfers from productive

315

134

408

857

47

-

-

47

Transfers to productive

(93)

(5)

(194)

(292)

(2)

-

-

(2)

Assets realised or loans repaid

(305)

(37)

(400)

(742)

(43)

-

-

(43)

Write offs

(55)

(87)

(150)

(292)

(6)

-

-

(6)

Total impaired assets
Undrawn facilities with impaired
customers

214

49

673

936

35

-

-

35

-

1

24

25

-

-

-

-

15. Investments in Subsidiaries and Associates
The following table lists the principal subsidiaries of ANZ New Zealand. Principal subsidiaries are those that have transactions or balances withparties outside ANZ New Zealand. All subsidiaries are 100% owned and incorporated in New Zealand unless stated otherwise.
Principal subsidiaries

Nature of business

Members of the Banking GroupANZ Bank New Zealand Limited

Registered bank

ANZ Capital NZ Limited

Investment

ANZ Investment Services (New Zealand) Limited

Funds management

ANZ New Zealand (Int'l) Limited

Finance

ANZ New Zealand Investments Limited

Funds management

ANZ New Zealand Securities Limited

On-line share broker

ANZNZ Covered Bond Trust1

Securitisation entity

Arawata Assets Limited

Property

Arawata Finance Limited

Investment

AUT Investments Limited

Investment

Karapiro Investments Limited

Investment

Kingfisher NZ Trust 2008-11

Securitisation entity

OnePath Insurance Services (NZ) Limited

Insurance

OnePath Life (NZ) Limited

Insurance

UDC Finance Limited

Asset finance

Other operating members of ANZ New Zealand (together with the NZ Branch, the "Relevant Members")
ANZ Capel Court Limited (New Zealand Branch)2

Securitisation services

ANZ Holdings (New Zealand) Limited

Holding company

ANZ Securities (NZ) Limited

Nominee1

2

ANZ New Zealand does not own ANZNZ Covered Bond Trust and Kingfisher NZ Trust 2008-1. Control exists as ANZ New Zealand retains substantially all the risks andrewards of the operations. Details of ANZ New Zealand’s interest in consolidated structured entities is included in note 34.
Incorporated in Australia and registered in New Zealand as an Overseas ASIC Company.

Australia and New Zealand Banking Group Limited - New Zealand Branch

31

Notes to the Financial Statements
16. Other Assets
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Accrued interest and prepaid discounts

428

374

2

1

Accrued commission

19

18

-

-

Share-based payments asset

60

62

-

-

Prepaid expenses

15

15

-

-

Other assets

110

101

-

-

Total other assets

632

570

2

1

17. Goodwill and Other Intangible Assets
ANZ New Zealand

NZ Branch$ millions

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Goodwill

3,233

3,233

-

-

Software

96

84

-

-

Other intangibles

125

131

-

-

3,454

3,448

-

-

30/09/2013

30/09/2014

30/09/2013

Total goodwill and other intangible assets

18. Deposits and Other Borrowings
ANZ New Zealand$ millions

Note

30/09/2014

NZ Branch

Certificates of deposit

1,376

2,364

-

-

Term deposits

34,75833,862--Other deposits bearing interest and other borrowings

34,027

29,687--

Deposits not bearing interest

6,001

5,526

-

-

Deposits from banks

226

180

-

-

Commercial paper

6,057

4,765

-

-

UDC secured investments

28

1,569

1,492

-

-

Borrowings from Ultimate Parent Bank and Immediate Parent Company

23

10,513

10,137

8,747

8,372

94,52788,013

8,747

8,372

Total deposits and other borrowings

Deposits from customers are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand. In the unlikely eventthat 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

32

Notes to the Financial Statements
19. Payables and Other Liabilities
ANZ New Zealand$ millions

30/09/2014

NZ Branch

30/09/2013

30/09/2014

30/09/2013

Creditors

58

61

-

-

Accrued interest and unearned discounts

534

514

39

40

Defined benefit schemes deficit

20

60

-

-

Share-based payments liability

39

39

-

-

Accrued charges

229

254

23

2

Security settlements and short sales

226

143

-

-

Life insurance contract liabilities - reinsurance

104

100

-

-

Liability for acceptances

67

31

-

-

Other liabilities

75

58

3

-

1,352

1,260

65

42

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Employee annual and long service leave

114

120

-

-

Other1

90

109

-

-

Total provisions

204

229

-

-

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Total payables and other liabilities

20. Provisions
ANZ New Zealand$ millions

1

NZ Branch

Includes provisions for surplus leased space, make-good of leased premises, seismic obligations, and restructuring costs.

21. Bonds and Notes
ANZ New Zealand$ millions

Note

NZ Branch

3,250

2,635

-

-

1

U.S. medium term notes

4,934

4,464

-

-

Euro medium term notes1

4,774

4,349

-

-

3,928

3,925

-

-

Trust securities2

-

905

-

-

Index linked notes

35

84

-

-

Total bonds and notes issued

16,921

16,362--

Fair value hedge adjustment

129

77

-

-

Less bonds and notes held by the Bank

(8)

(32)

-

-

17,042

16,407--

Domestic bonds

Covered bonds1

Total bonds and notes

28, 34

Bonds and notes, other than covered bonds, are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand.
1
2

These bonds and notes are issued by ANZ New Zealand (Int’l) Limited and are guaranteed by the Bank.
Trust Securities were issued by Samson Funding Limited on 26 November 2003. The notes were ‘stapled’ to preference shares issued by the Ultimate Parent Bank andwere redeemed on 16 December 2013.

Australia and New Zealand Banking Group Limited - New Zealand Branch

33

Notes to the Financial Statements
22. Subordinated Debt
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

NZD 835,000,000 perpetual subordinated bond

835

835

-

-

AUD 265,740,000 perpetual subordinated floating rate loan

298

299

-

-

AUD 10,000,000 perpetual subordinated floating rate loan

11

11

-

-

AUD 265,017,668 subordinated floating rate loan

298

298

-

-

1,442

1,443

-

-

-

(1)

-

-

1,442

1,442

-

-

Total subordinated debt issued
Less subordinated debt instruments held by the Bank
Total subordinated debt

Subordinated debt 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.
Subordinated debt instruments are classified as debt reflecting an assessment of the key terms and conditions of the instruments,
and an assessment of the ability, and likelihood of interest payments being deferred. Certain of these instruments haveinterrelationships that have been considered in this assessment.
NZD 835,000,000 bondThis bond was issued by the Bank on 18 April 2008. The Bank did not elect to redeem the bond on 18 April 2013 (the First Call Date).
The Bank may elect to redeem the bond on 18 April 2018 (the Second Call Date) or any interest payment date subsequent to 18 April
2018. Interest is payable half yearly in arrears on 18 April and 18 October each year, up to and including the Second Call Date andthen quarterly thereafter. Should the bond not be called at the Second Call Date, the Coupon Rate from the Second Call Dateonwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 30 September 2014, this bond carried a BBB+ rating by Standard and Poor's and an A3 rating by Moody’s.
The coupon interest on the bond was 9.66% until 18 April 2013 when it reset to 5.28% for the five year period to 18 April 2018.
This bond is listed on the New Zealand Exchange (NZX). The Market Surveillance Panel of the NZX granted the Bank a waiver fromthe requirements of Listing Rules 10.4 (relating to the provision of preliminary announcements of half yearly and annual results to
the NZX) and 10.5 (relating to preparing and providing a copy of half yearly and annual reports to the NZX).
AUD 265,740,000 loan
This loan was drawn down by the Bank on 27 September 1996 and has no fixed maturity. Interest is payable half yearly in arrears at
BBSW + 0.95% p.a., with interest payments due on 15 March and 15 September each year.
AUD 10,000,000 loan
This loan was drawn down by the Bank on 27 March 2013 and has no fixed maturity. Interest is payable half yearly in arrears on 15
March and 15 September each year. The bank may repay the loan on any interest payment date after both the NZD 835,000,000
bond and AUD 265,740,000 loan have been repaid in full.
Coupon interest is BBSW + 2.4% p.a., increasing to BBSW + 4.4% p.a. from 15 September 2018.
AUD 265,017,668 loan
This loan was drawn down by ANZ Holdings (New Zealand) Limited on 25 September 2013. The loan matures on 1 March 2024, but
ANZ Holdings (New Zealand) Limited may elect to repay the loan on any interest payment date from 1 March 2019. Interest is
payable half yearly in arrears at BBSW + 2.60% p.a., with interest payments due on 1 March and 1 September each year.

Australia and New Zealand Banking Group Limited - New Zealand Branch

34

Notes to the Financial Statements
23. Related Party Transactions
Key management personnel
Key management personnel are defined as the Directors and senior management of ANZ New Zealand - those persons having theauthority and responsibility for planning, directing and controlling the activities of the entity. The information below includes
transactions with those individuals, their close family members and their subsidiaries.
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal commercial
terms and conditions 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.
All 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 offinancial and investment services.
ANZ New Zealand$ thousands

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

Key management personnel compensation
12,402

13,210--Post-employment benefits

387

258

-

-

Other long-term benefits

130

76

-

-

-

123

-

-

Share-based payments expense

5,400

5,693

-

-

Total compensation of key management personnel

18,31919,360--Loans to key management personnel

7,661

5,741

-

-

Deposits from key management personnel

5,035

8,001

-

-

Salaries and short-term employee benefits

Termination benefits

Loans to and deposits held by key management personnel

Transactions with other related parties
The NZ Branch and ANZ New Zealand undertake transactions with the Immediate Parent Company, the Ultimate Parent Bank, othermembers of the Overseas Banking Group and associates.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment services,
technology and process support, and compensation for share based payments made to ANZ New Zealand employees. Transactions
with related parties outside of ANZ New Zealand are conducted on an arm’s length basis and on normal commercial terms.
In addition the Bank undertakes similar transactions with subsidiaries, which are eliminated in the consolidated ANZ New Zealandfinancial statements. Included within the Bank’s transactions with subsidiaries is the provision of administrative functions to somesubsidiaries for which no payments have been made.
Transactions with related parties$ millions

Ultimate Parent Bank and subsidiaries not part of ANZ New ZealandInterest income

ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

3

2

11

-

Interest expense

484

544

422

398

Other operating income

116

16

3

-

Operating expenses
Immediate Parent Company
Interest expense

81

84

-

-

66

63

-

-

Preference shares issued

969

-

-

-

Operating expenses

-

-

26

25

Mortgages purchased from the Bank

-

-

3,393

3,144

Interest expense

3

2

-

-

Share of associates' profit

3

7

-

-

The Bank

Associates

Australia and New Zealand Banking Group Limited - New Zealand Branch

35

Notes to the Financial Statements
Balances with related parties
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Cash

487

236

426

141

Settlement balances receivable

12

22

-

-

Collateral paid

125

-

-

-

3,764

1,903

51

-

63

66

2

1

Settlement balances receivable

-

-

304

314

Derivative financial instruments

-

-

11

12

Ultimate Parent Bank and subsidiaries not part of ANZ New ZealandDerivative financial instruments
Other assets
The Bank

Associates
Investments in associates
Total due from related parties

88

98

-

-

4,539

2,325

794

468

Ultimate Parent Bank and subsidiaries not part of ANZ New Zealand
Settlement balances payable

120

37

-

-

Deposits and other borrowings

8,928

8,372

8,747

8,372

Derivative financial instruments

4,576

3,133

768

991

Payables and other liabilities

49

66

39

40

Bonds and notes

-

2,180

-

-

Subordinated debt

607

608

-

-

1,766

1,766

-

-

6

5

-

-

Derivative financial instruments

-

-

34

30

Payables and other liabilities

-

-

22

-

85

85

-

-

16,137

16,252

9,610

9,433

Immediate Parent Company
Deposits and other borrowings
Payables and other liabilities
The Bank

Associates
Deposits and other borrowings
Total due to related parties

Balances due from / to related parties are unsecured other than that ANZ New Zealand and the Bank have provided guarantees andcommitments to related parties as follows:
ANZ New Zealand$ millions

Financial guarantees provided to the Ultimate Parent BankNZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

180

181

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

36

Notes to the Financial Statements
24. Current and Non-current Assets and Liabilities
Assets and liabilities are classified as current if:•
it is expected they will be realised, consumed or settled in the normal operating cycle or within twelve months after the end of
the reporting date; or•they are held primarily for trading; or•they are assets that are cash or a cash equivalent; or•they are liabilities where there is no unconditional right to defer settlement for at least twelve months.
Non-current assets include premises and equipment and intangible assets as well as financial assets of a long-term nature. Noncurrent liabilities include financial and non-financial liabilities which are expected to be settled after twelve months from balancedate.
For the purposes of this disclosure, the fair value of both trading and hedging derivatives has been classified as current. For more
information on the contractual timing of expected outflows and inflows in relation to hedging derivatives refer to Note 27.

ANZ New Zealand
30/09/2014$ millions

Current

NZ Branch
30/09/2014

30/09/2013

Non-current

Current

Current

Non-current

30/09/2013

Non-current

Current

Non-current

Assets
2,248

-

2,347

-

426

-

141

-

Settlement balances receivable

855

-

515

-

304

-

314

-

Collateral paid

783

-

1,002

-

-

-

-

-

11,750-

10,320

-

-

-

-

-

190

-

169

3

-

-

-

-

11,421

-

9,508

-

62

-

12

-

-

-

1

-

-

-

-

-

Available-for-sale assets

437

335

567

375

-

-

-

-

Net loans and advances

26,93278,55329,67170,442

471

8,705

425

8,831

572

60

508

62

2

-

1

-

Insurance contract assets
Investments in subsidiaries andassociates
Deferred tax assets

-

470

-

399

-

-

-

-

-

88

-

98

-

-

-

-

-

-

-

42

-

6

-

6

Premises and equipment

-

380

-

376

-

-

-

-

Goodwill and other Intangible assets

-

3,454

-

3,448

-

-

-

-

55,18883,34054,60875,245

1,265

8,711

893

8,837

1,992

-

1,114

-

-

-

-

-

800

-

438

-

-

-

-

-

Deposits and other borrowings

84,390

10,13779,360

8,653

2,428

6,319

2,273

6,099

Derivative financial instruments

10,961-

11,208

-

802

-

1,021

-

Cash

Trading securities
Investment backing insurance contract
liabilities
Derivative financial instruments
Current tax assets

Other assets

Total assets
Liabilities
Settlement balances payable
Collateral Received

Current tax liabilities

68

-

-

-

24

-

18

-

Deferred tax liabilities

-

59

-

-

-

-

-

-

1,293

59

1,161

99

65

-

42

-

117

87

137

92

-

-

-

-

3,944

13,0984,251

12,156----

Payables and other liabilities
Provisions
Bond and Notes
Subordinated debt
Total liabilities

-

1,442

-

1,442

-

-

-

-

103,565

24,882

97,66922,442

3,319

6,319

3,354

6,099

Australia and New Zealand Banking Group Limited - New Zealand Branch

37

Notes to the Financial Statements
25. Share Capital and Initial Head Office Account

ANZ New Zealand

Number of issued shares$ millions

30/09/2014

30/09/2013

30/09/2014

30/09/2013

381,655,112

381,655,112

1,453

1,453

At beginning of the year

4,005,295,229

4,005,295,229

4,960

4,960

Issued during the year

898,397,703

-

969

-

Redeemable preference shares at end of the year

4,903,692,932

4,005,295,229

5,929

4,960

Paid in share capital

5,285,348,044-

4,386,950,341
-

7,382
11

6,413

NZ Branch initial head office accountTotal ANZ New Zealand share capital & initial head office account5,285,348,044

4,386,950,341

7,393

6,424

Ordinary shares
At beginning and end of the year
Redeemable preference shares

11

Ordinary shares
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. On a show ofhands every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll
every member shall have one vote for each share held.
During the year ended 30 September 2014 ANZ Holdings (New Zealand) Limited (ANZH) paid ordinary dividends of $2,335 million(30/09/2013 $720 million) to the Immediate Parent Company (equivalent to $6.17 (30/09/2013 $1.89) per share).
Redeemable preference shares
All redeemable preference shares (RPS) were issued by ANZH to members of the Overseas Banking Group. RPS carry no voting rights
and are redeemable by ANZH providing notice in writing to holders of the RPS. Dividends are payable at the discretion of thedirectors of ANZH and are non-cumulative.
There are six classes of RPS, relating to issues in 1988, 2005, 2007, 2008, 2009 and 2014. ANZH did not pay any dividends on RPS
during the years ended 30 September 2014 and 30 September 2013.
In the event of liquidation, holders of RPS are entitled to available subscribed capital per share, pari passu with all holders of existing
RPS but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of profits or assets.
Head office account
The NZ Branch capital comprises the initial head office account only. The head office account is the funds provided by the Ultimate
Parent Bank on the creation of the NZ Branch. It is non-interest bearing and there is no fixed date of repayment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

38

Notes to the Financial Statements
26. Capital Adequacy
Capital management policies
ANZ New Zealand’s core capital objectives are to:•Protect the interests of depositors, creditors and shareholders;•
Ensure the safety and soundness of ANZ New Zealand’s capital position; and•Ensure that the capital base supports ANZ New Zealand’s risk appetite, and strategic business objectives, in an efficient andeffective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting, monitoring andobtaining assurance for ANZ New Zealand’s Internal Capital Adequacy Assessment Process (“ICAAP”) policy and framework;
standardised risk definitions for all material risks; materiality thresholds; capital adequacy targets; internal economic risk capital
principles; and risk appetite.
ANZ New Zealand has minimum and trigger levels for common equity tier 1, tier 1 and total capital that ensure sufficient capital ismaintained to:•
Meet minimum prudential requirements imposed by regulators;•
Ensure consistency with ANZ New Zealand’s overall risk profile and financial positions, taking into account its strategic focus
and business plan; and•Support the economic risk capital requirements of the business.
ANZ New Zealand’s Asset & Liability Committee and its related Capital Management Forum are responsible for developing,
implementing and maintaining ANZ New Zealand's ICAAP framework, including ongoing monitoring, reporting and compliance.
ANZ New Zealand’s ICAAP is subject to independent and periodic review conducted by Internal Audit.
ANZ New Zealand has complied with all externally imposed capital requirements to which it is subject during the current andcomparative periods.
Basel III capital ratios

Ultimate Parent Bank
(Extended Licensed Entity)

Overseas Banking Group
30/09/2014

30/09/2013

30/09/2014

30/09/2013

Unaudited

Common equity tier 1 capital

8.8%

8.5%

9.1%

8.5%

Tier 1 capital

10.7%

10.4%

11.3%

10.6%

Total capital

12.7%

12.2%

13.4%

12.5%

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has accredited theOverseas Banking Group to use the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted
assets and the Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
Under prudential regulations, the Overseas Banking Group is required to maintain a Prudential Capital Ratio (PCR) as determined by
APRA. The Overseas Banking Group exceeded the PCR set by APRA as at 30 September 2014 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2014. The Overseas
Banking Group’s Pillar 3 disclosure document for the quarter ended 30 September 2014, in accordance with APS 330: Public
Disclosure of Prudential Information, discloses capital adequacy ratios and other prudential information. This document can beaccessed at the website anz.com.
Market risk
ANZ New Zealand’s aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B. The
peak end-of-day market risk exposures are for the half-year ended 30 September 2014.
Implied risk weighted exposure$ millions

Notional capital charge

Peak

Period end

Peak

Period end

Peakoccurred on

5,572

5,745

446

460

26/09/2014

55

164

4

13

16/07/2014

2

2

-

-

1/07/2014

Unaudited 30/09/2014

Interest rate risk
Foreign currency risk
Equity risk

5,629

450

Australia and New Zealand Banking Group Limited - New Zealand Branch

39

Notes to the Financial Statements
Residential mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by ANZ New
Zealand's valuation of the security property at origination of the exposure. Off balance sheet exposures include undrawn andpartially drawn residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing
lending which have been accepted by the customer.
30/09/2014
UnauditedOn-balancesheet

Off-balance
sheet

Total

Does not exceed 60%

22,191

3,559

25,750Exceeds 60% and not 70%

10,905984

11,889Exceeds 70% and not 80%

17,433

1,442

18,875

Does not exceed 80%

50,5295,985

56,514

Exceeds 80% and not 90%

6,073

212

6,285

Exceeds 90%

3,205

222

3,427

Total

59,807

6,419

66,226Note

30/09/2014

12

61,918$ millions

LVR range

Reconciliation of mortgage related amounts
Unaudited$ millions

Term loans - housing
Add: fair value hedging adjustment

33

Add: short-term housing loans classified as overdrafts

490(2,634)

Less: housing loans made to corporate customers
Gross retail mortgage loans / On-balance sheet retail mortgage exposures27

59,807

Add: off-balance sheet retail mortgage exposures

6,419

Total retail mortgage exposures as per LVR analysis

66,226

Australia and New Zealand Banking Group Limited - New Zealand Branch

40

Notes to the Financial Statements
27. Financial Risk Management

quality reporting, and development of credit standards andpolicies.

Strategy in using financial instruments

The credit risk management framework is top down. The
framework is defined by ANZ New Zealand's credit principles
and policies. The effectiveness of the credit risk management
framework is validated through the compliance andmonitoring processes.

Financial instruments are fundamental to ANZ New Zealand’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 ANZ New
Zealand. Financial instruments create, modify or reduce thecredit, market and liquidity risks of ANZ New Zealand’sbalance sheet. ANZ New Zealand’s overall risk management
programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on
the financial performance of ANZ New Zealand.
The risk management and policy control framework
applicable to the entities comprising ANZ New Zealand has
been set by the Board and Risk Committee of the Bank or the
Ultimate Parent Bank, as appropriate. Likewise oversight andmonitoring of material risk exposures of ANZ New Zealand isundertaken by the Risk Management functions of the Bankand also the Ultimate Parent Bank. Throughout thisdocument, references to the Risk Management of theoperations within the entities comprising ANZ New Zealand,
implicitly involves oversight by both related entities.

Credit risk
Credit risk is the risk of financial loss from counterparties
being unable to fulfil their contractual obligations. ANZ New
Zealand assumes credit risk in a wide range of lending andother activities in diverse markets and many jurisdictions.
Credit risks arise not only from traditional lending tocustomers, but also from inter-bank, treasury, international
trade and capital market activities around the world.
ANZ New Zealand has an overall lending objective of soundgrowth for appropriate returns. The credit risk objectives of
ANZ New Zealand are set by each Board and are
implemented and monitored within a tiered structure ofdelegated authority, designed to oversee multiple facets ofcredit risk, including business writing strategies, credit
policies/controls, single exposures, portfolio monitoring andrisk concentrations.
Credit risk management
A credit risk management framework is in place across ANZ
New Zealand with the aim of ensuring a structured anddisciplined approach is maintained in achieving theobjectives set by each Board. The framework focuses onpolicies, people, skills, controls, risk concentrations andportfolio balance. It is supported by portfolio analysis andbusiness-writing strategies, which guide lending decisions
and identify segments of the portfolio requiring attention.
The effectiveness of the framework is monitored through aseries of compliance and reporting processes.
An independent Risk Management function is staffed by risk
specialists. In regard to credit risk management, the objective
is for Risk Management to provide robust credit policies, tomake 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

Risk Management's responsibilities for credit risk policy andmanagement are executed through dedicated departments,
which support the 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 carriedout on a regular basis, the frequency of which is dependent
upon the level of risk. For the key operating entities within
ANZ New Zealand, credit risk policy and management is
executed through the Chief Risk Officer, who is responsible
for various dedicated areas within the Risk Management
division. A formal outsourcing agreement provides for credit
risk functions to be provided to a number of ANZ New
Zealand entities by staff of the Bank.
The credit risk review function within Global Internal Audit
also provides a further independent check mechanism toensure the quality of credit decisions. This includes providing
independent periodic checks on asset quality andcompliance with the agreed standards and policies across
ANZ New Zealand.
Country risk management
Some customer credit risks involve country risk, whereby
actions or events at a national or international level could
disrupt servicing of commitments. Country risk arises when
payment or discharge of an obligation will, or could, involvethe flow of funds from one country to another or involve
transactions in a currency other than the domestic currencyof the relevant country.
Country ratings are assigned to each country where ANZ
New Zealand incurs country risk and have a direct bearing on
ANZ New Zealand's risk appetite for each country. The
country rating is determined through a defined
methodology based around external ratings agencies’ ratingsand internal specialist opinion. It is also a key risk
consideration in ANZ New Zealand's capital pricing model forcross border flows.
The recording of country limits provides ANZ New Zealandwith 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 bytime to maturity and purpose of exposure, e.g., trade,markets and project finance. Country limits are managed
centrally by the Ultimate Parent Bank, through a global
country risk exposure management system managed by aspecialist unit within Institutional Risk.

Australia and New Zealand Banking Group Limited - New Zealand Branch

41

Notes to the Financial Statements
Portfolio stress testing
Stress testing is integral to strengthening the predictive
approach to Risk Management and is a key component tomanaging risk appetite and business writing strategies. It
creates greater understanding of impacts on financial
performance through modelling relationships andsensitivities between geographic, industry and business unit
exposures under a range of macro economic scenarios.
The Ultimate Parent Bank has a dedicated stress testing teamthat assists business and risk executives in ANZ New Zealand
to model and report periodically to management and theBoard Risk Committee on a range of scenarios and stresstests.
Portfolio analysis and reporting
Credit portfolios are actively monitored at each layer of therisk structure to ensure credit deterioration is quickly
detected and mitigated through the implementation ofremediation strategies.
Businesses incurring credit risk undertake regular andcomprehensive analysis of their credit portfolios. Issue
identification and adherence to performance benchmarks
are reported to Risk Management and business executives
through a series of reports including monthly ‘asset quality’
reporting. This process is undertaken by or overseen by Risk
Management ensuring an efficient and independent conduit
exists to identify and communicate emerging credit issues to
ANZ New Zealand executives and each Board.
Collateral management
ANZ New Zealand credit principles specify lending only what
the counterparty has the capacity and ability to repay and
ANZ New Zealand 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 aredesigned to ensure collateral is managed, legally
enforceable, conservatively valued and adequately insured
where appropriate. ANZ New Zealand policy sets out thetypes of acceptable collateral, including:
•
Cash;
•
Mortgages over property;•
Charges over business assets, e.g., premises, stock anddebtors;•
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 ANZ New Zealand does not usually hold
any real estate or other assets acquired through theenforcement of security.
ANZ New Zealand uses 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 the counterparty are terminated and settled on a net
basis. Further, it is ANZ New Zealand's preferred practice toinclude 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-tomarket (positive or negative) of derivative trades between
the two entities, to mitigate the market contingent
counterparty risk inherent in the outstanding positions.
Concentrations of credit risk
Concentrations of credit risk arise when a number ofcustomers 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.
ANZ New Zealand monitors its portfolios to identify andassess risk concentrations. Concentration limits are used toguard 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 ANZ New Zealand's top corporate
exposures. The ANZ Credit and Market Risk Committee and
Board Risk Committee regularly review a comprehensive listof 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. Notes on the following tables:
1 Government and local authority includes exposures togovernment administration and defence, education andhealth and community services.
2 Other includes exposures to electricity, gas and water,
communications and personal services.
3 Net loans and advances exclude individual andcollective provisions for credit impairment held inrespect of credit related commitments.
4 Credit related commitments comprise undrawn
facilities, customer contingent liabilities and letters ofoffer.

Australia and New Zealand Banking Group Limited - New Zealand Branch

42

Notes to the Financial Statements
ANZ New ZealandCash,settlements
receivable andcollateral paid

Tradingsecurities andavailable-forsale assets

Derivative
financial
instruments

Net loans andadvances 3Agriculture

-

-

9

17,36276

1,364

Forestry, fishing and mining

-

-

8

1,122

5

914

2,049

Business and property services

-

-

16

9,507

42

2,499

12,064

Construction

-

-

-

1,217

5

935

2,157

30/09/2014$ millions

Other
financial Credit related
assets commitments 4

Total

Industry
18,811

-

-

25

1,028

5

238

1,296

Finance and insurance

2,373

5,526

10,078

972

306

1,214

20,469Government and local authority1

11,363Entertainment, leisure and tourism

1,309

6,857

630

1,256

6

1,305

Manufacturing

-

25

177

3,031

13

2,067

5,313

Personal lending

-

-

-

63,940241

15,106

79,287Retail trade

-

-

20

2,031

9

968

3,028

Transport and storage

-

12

31

1,484

7

730

2,264

Wholesale trade

-

-

15

1,384

6

1,290

2,695

Other2

-

102

412

1,836

8

1,736

4,094

3,682
-

12,522-

11,421-

106,170
(583)

729
-

30,366(105)

164,890
(688)

-

-

-

(212)

-

-

(212)

-

-

-

215

-

-

215

3,682

12,522

11,421

105,590729

30,261

164,205

2,992

8,339

2,630

103,165719

30,081

147,926

690

4,183

8,791

2,425

10

180

16,2793,682

12,522

11,421

105,590729

30,261

164,205

Agriculture

-

29

22

17,47070

1,229

18,820Forestry, fishing and mining

-

-

11

940

4

894

1,849

Business and property services

-

1

24

8,904

36

2,363

11,328Construction

-

-

-

1,035

4

709

1,748

Entertainment, leisure and tourism

-

-

27

1,033

4

326

1,390

Finance and insurance

1,902

5,284

8,576

678

294

1,267

18,001Government and local authority1

10,163

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

30/09/2013

Industry

1,764

5,872

248

1,252

5

1,022

Manufacturing

-

-

69

2,971

12

1,996

5,048

Personal lending

-

-

-

60,674

206

11,86572,745Retail trade

-

-

40

1,822

7

991

2,860

Transport and storage

-

3

54

1,473

6

610

2,146

Wholesale trade

-

-

13

1,315

5

1,369

2,702

Other2

-

73

424

1,447

6

2,627

4,577

3,666
-

11,262-

9,508-

101,014
(712)

659
-

27,268(137)

153,377
(849)

-

-

-

(214)

-

-

(214)

-

-

-

162

-

-

162

3,666

11,262

9,508

100,250659

27,131

152,476

3,038

7,843

2,491

97,878650

26,950138,850

628

3,419

7,017

2,372

9

181

13,626

3,666

11,262

9,508

100,250659

27,131

152,476

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

43

Notes to the Financial Statements
NZ BranchCash,settlements
receivable andcollateral paid

Tradingsecurities andavailable-forsale assets

Derivative
financial
instruments

Net loans andadvances 3Agriculture

-

-

-

1

-

-

1

Business and property services

-

-

-

3

-

-

3

Construction

-

-

-

3

-

-

3

Entertainment, leisure and tourism

-

-

-

2

-

-

2

730

-

62

-

2

-

794

Government and local authority1

-

-

-

1

-

-

1

Manufacturing

-

-

-

1

-

-

1

Personal lending

-

-

-

9,177

-

33

9,210

Retail trade

-

-

-

2

-

-

2

Transport and storage

-

-

-

1

-

-

1

30/09/2014$ millions

Other
financial Credit related
assets commitments 4

Total

Industry

Finance and insurance

2

-

-

-

1

-

-

1

730
-

-

62
-

9,192
(22)

2
-

33
-

10,019
(22)

-

-

-

(1)

-

-

(1)

-

-

-

7

-

-

7

730

-

62

9,176

2

33

10,003

730

-

11

8,919

2

33

9,695

-

-

51

257

-

-

308

730

-

62

9,176

2

33

10,003

Agriculture

-

-

-

1

-

-

1

Business and property services

-

-

-

5

-

-

5

Construction

-

-

-

2

-

-

2

Other

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

30/09/2013

Industry

Entertainment, leisure and tourism

-

-

-

2

-

-

2

455

-

12

7

1

-

475

Government and local authority1

-

-

-

2

-

-

2

Manufacturing

-

-

-

1

-

-

1

Personal lending

-

-

-

9,248

-

54

9,302

Retail trade

-

-

-

2

-

-

2

Transport and storage

-

-

-

1

-

-

1

Other2

-

-

-

2

-

-

2

455
-

-

12
-

9,273
(23)

1
-

54
-

9,795
(23)

-

-

-

6

-

-

6

455

-

12

9,256

1

54

9,778

New Zealand

314

-

12

9,010

1

54

9,391

Overseas

141

-

-

246

-

-

387

Total financial assets

455

-

12

9,256

1

54

9,778

Finance and insurance

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

44

Notes to the Financial Statements
Maximum exposure to credit risk
The following table presents the maximum exposure to credit risk for on and off balance sheet financial instruments before taking
account of the financial effect of any collateral held or other credit enhancements, unless such collateral meets the offsetting criteria
in NZ IAS 32 Financial Instruments: Presentation.
The table also provides a quantification of the value of the financial charges ANZ New Zealand holds over a borrower’s specific asset(or assets) where ANZ New Zealand is able to enforce the collateral in satisfying a debt in the event of the borrower failing to meet its
contractual obligations. For the purposes of this disclosure, where the collateral held is valued at more than the corresponding credit
exposure, the financial effect is capped at the value of the credit exposure. In respect of derivative financial instruments, the assessedcollateral is the amount of cash collateral received and does not include the effect of any netting arrangements under ISDAs.
The most common types of collateral include:•
Security over real estate including residential, commercial, industrial and rural property;•
Cash deposits; and•Other security over business assets including specific plant and equipment, inventory and accounts receivables.
ANZ New Zealand also manages its credit risk by accepting other types of collateral such as guarantees and security interests over
the assets of a customer’s business. The assignable value of such credit mitigants is less certain and their financial effect has not been
quantified for disclosure purposes. Credit exposures shown as not fully secured may benefit from such credit mitigants.

$ millions

ANZ New Zealand
Maximum
Unsecured
exposure to Financial effect portion of creditof collateralcredit risk
exposure

NZ Branch
Maximum
Unsecured
exposure to Financial effect portion of creditof collateralcredit risk
exposure

30/09/2014

On and off-balance sheet positions
2,044

309

1,735

426

-

426

Settlement balances receivable

855

746

109

304

-

304

Collateral paid

783

-

783

-

-

-

Trading securities

11,750-11,750---Derivative financial instruments

11,421800

10,621

62-

62

Available-for-sale assets

772

-

772

-

-

-

Net loans and advances

105,590

95,066

10,524

9,176

9,119

57

729

380

349

2

-

2

Credit related commitments

30,261

15,373

14,88833

33-

Total exposure to credit risk

164,205

112,674

51,531

10,003

9,152

851

2,149

310

1,839

141

-

141

515

254

261

314

-

314

Collateral paid

1,002

-

1,002

-

-

-

Trading securities

10,320-

10,320---Derivative financial instruments

9,508

438

9,070

12

-

12

Cash

Other financial assets

30/09/2013

On and off-balance sheet positions
Cash
Settlement balances receivable

Available-for-sale assets

942

-

942

-

-

-

Net loans and advances

100,250

90,612

9,638

9,256

9,227

29

659

329

330

1

-

1

Other financial assets
Credit related commitments

27,131

12,82414,307

54

54-

Total exposure to credit risk

152,476

104,767

47,709

9,778

9,281

497

Credit quality
A core component of ANZ New Zealand’s credit risk
management capability is the risk grading framework used
across all major business units. A set of risk grading principles
and policies is supported by a complementary risk grading
methodology. Pronouncements by the International BaselCommittee on Banking Supervision have been encapsulated
in these principles and policies, including governance,
validation and modelling requirements.

ANZ New Zealand’s risk grade profile changes dynamicallythrough new counterparty lending and existing counterparty
movements in either risk or volume. All counterparty risk
grades are subject to frequent review, including statisticaland behavioural reviews in consumer and small businesssegments, and individual counterparty reviews in segmentswith larger single name borrowers.

Australia and New Zealand Banking Group Limited - New Zealand Branch

45

Notes to the Financial Statements
Impairment and provisioning of financial assets

The past due but not impaired (over 90 days) classification
applies where contractual payments are past due by 90 daysor more, or where the facility remains outside of contractual
arrangements for 90 or more consecutive days, but ANZ New
Zealand believes that impairment is not appropriate on thebasis of the level of security/collateral available, or the facility
is portfolio managed.

ANZ New Zealand's policy relating to the recognition andmeasurement of impaired assets conforms to the RBNZ'sguidelines.
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; a material credit obligation is 90 days past
due but not well secured; they are portfolio managed andcan be held for up to 180 days past due; or concessionalterms have been provided due to the financial difficulties of
the customer.

The provision for credit impairment represents
management’s best estimate of the losses incurred in theloan portfolio at balance date based on its experienced
judgement.
Distribution of gross loans and advances assets by credit
quality

An exposure is classified as past due but not impaired (lessthan 90 days) where the value of collateral is sufficient to
repay both the principal debt and all other potential interestor there is no concern as to the creditworthiness of thecounterparty in question.

The credit quality of the portfolio of loans and advances isassessed by reference to ANZ New Zealand’s risk grading
principles and policies supported by a complementary risk
grading methodology.

Distribution by asset class of gross loans and advances by credit quality
ANZ New Zealand

NZ Branch

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

Strong risk rating

49,092

1,428

21,83672,356

7,600

-

-

7,600

Satisfactory risk rating
Substandard but not past due or
impaired
Total neither past due nor impaired

8,777

2,721

17,04028,538

1,247

-

-

1,247

709

313

1,254

2,276

129

-

-

129

58,578

4,462

40,130103,170

8,976

-

-

8,976

1 to 5 days

361

121

580

1,062

19

-

-

19

6 to 29 days

275

91

190

556

77

-

-

77

1 to 29 days

636

212

770

1,618

96

-

-

96

30 to 59 days

176

31

116

323

43

-

-

43

60 to 89 days

84

16

52

152

21

-

-

21

90 days and over

110

30

32

172

22

-

-

22

1,006

289

970

2,265

182

-

-

182

$ millions
30/09/2014

Past due but not impaired:

Total past due but not impaired

223

35

410

668

34

-

-

34

59,807

4,786

41,510106,103

9,192

-

-

9,192

Strong risk rating

45,713

1,342

21,01068,065

7,611

-

-

7,611

Satisfactory risk rating
Substandard but not past due or
impaired
Total neither past due nor impaired

8,866

2,519

15,591

26,976

1,316

-

-

1,316

873

326

1,792

2,991

152

-

-

152

55,452

4,187

38,39398,032

9,079

-

-

9,079

1 to 5 days

356

138

477

971

29

-

-

29

6 to 29 days

246

94

148

488

69

-

-

69

1 to 29 days

602

232

625

1,459

98

-

-

98

30 to 59 days

141

38

57

236

30

-

-

30

60 to 89 days

64

19

13

96

15

-

-

15

90 days and over

108

40

76

224

16

-

-

16

Total past due but not impaired

915

329

771

2,015

159

-

-

159

Total impaired assets

214

49

673

936

35

-

-

35

56,581

4,565

39,837

100,983

9,273

-

-

9,273

Total impaired assets
Gross loans and advances
30/09/2013

Past due but not impaired:

Gross loans and advances

Australia and New Zealand Banking Group Limited - New Zealand Branch

46

Notes to the Financial Statements
Credit quality of gross loans and advances neither past due
nor impaired
The credit quality of financial assets is assessed by ANZ New
Zealand using internal ratings which aim to reflect therelative ability of counterparties to fulfil, on time, their creditrelated obligations, and is based on their current probabilityof default.
Internal ratings
Strong risk rating - Corporate customers demonstratingsuperior 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 bandbroadly corresponds to ratings “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 overthe medium to long term, even though some may besusceptible to cyclical trends or variability in earnings. Retailcustomers with moderate expected loss. This rating bandbroadly corresponds to ratings “Ba2” to “B1” and “BB” to “B+”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 andliquidity projected to continue over the short and possibly
medium term. Retail customers with higher expected loss.
This rating band broadly corresponds to ratings “B2” to “Caa”
and “B” to “CCC” of Moody's Investors Service and Standard &Poor's respectively.
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.
Credit quality of financial assets that are past due but not
impairedAgeing analysis of past due loans is used by ANZ New
Zealand to measure and manage credit quality. Financial
assets that are 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 pastdue; 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 valueof associated security is sufficient to ensure that ANZ New
Zealand 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.

Market risk
Market risk is the risk to ANZ New Zealand’s earnings arisingfrom changes in interest rates, currency exchange rates,
credit spreads, or from fluctuations in bond, commodity or
equity prices. Market risk is generated through both trading
activities and the interest rate risk inherent in the banking
book.
ANZ New Zealand conducts trading operations in interest
rates, foreign exchange, commodities and debt securities.
ANZ New Zealand has a detailed risk management andcontrol framework to support its trading and balance sheet
management activities. The framework incorporates a risk
measurement approach to quantify the magnitude of market
risk within trading and balance sheet portfolios. Thisapproach, and related analysis, identifies the range ofpossible outcomes that can be expected over a given periodof time, establishes the relative likelihood of those outcomes
and allocates an appropriate amount of capital to support
these activities.
Market risk management and control responsibilities
The Board Risk Committee has delegated responsibility forthe oversight of market risk to the Asset & Liability
Committee (ALCO), chaired by the Chief Financial Officer ofthe Bank. ALCO are required to ensure that market risk
exposure across Traded and Non-Traded portfolios remains
within the risk appetite specified by the Board Risk
Committee. ALCO receive regular reporting on a range of
trading and balance sheet market risk exposures.
The Risk Management division of ANZ New Zealand, throughthe Chief Risk Officer, is responsible for the day-to-day
oversight of market risk. This includes the implementation of
a comprehensive limit and policy framework to control theamount of risk that the Banking Group will accept. Market
risk limits are allocated at various levels and are reported andmonitored 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 profit and loss limits (tomonitor and manage the performance of the trading
portfolios).
Additional oversight and monitoring of material risk
exposures of ANZ New Zealand is undertaken by the Risk
Management functions of the Ultimate Parent Bank.
Within overall strategies and policies, the control of market
risk is the joint responsibility of business units and Risk
Management, with the delegation of market risk limits fromthe Board Risk Committee to both Risk Management and thebusiness units.
These risks are monitored daily against a comprehensive limit
framework that includes Value at Risk, aggregate market
position and sensitivity, product and geographic thresholds.
To facilitate the management, control, measurements andreporting of market risk, ANZ New Zealand has grouped
market risk into two broad categories:

Australia and New Zealand Banking Group Limited - New Zealand Branch

47

Notes to the Financial Statementsa.

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 and derivative trading positions. They arise in
trading transactions where ANZ New Zealand acts as
principal with clients or with the market. The principal risk
categories monitored are:••

Currency risk is the potential loss arising from thedecline in the value of a financial instrument due tochanges in foreign exchange rates or their implied
volatilities.
Interest rate risk is the potential loss arising from thechange in the value of a financial instrument due tochanges in market interest rates or their implied
volatilities.

•

Credit spread risk is the potential loss arising from achange 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 raterisk, liquidity, and the risk to capital and earnings as a resultof movements in market rates.
Some instruments do not fall into either category but also
expose ANZ New Zealand to market risk. These include
equity securities classified as available-for-sale. Regularreviews are performed to substantiate the valuation of thesetypes of instruments.

In all trading areas ANZ New Zealand has implemented
models that calculate Value at Risk (“VaR”) exposures,monitor risk exposures against defined limits on a daily basis,and “stress test” trading portfolios.
VaR measure
A key measure of market risk is VaR. VaR is a statisticalestimate of the likely daily loss and is based on historicalmarket movements.
The confidence level is such that there is a 99% probability
that the loss will not exceed the VaR estimate on any givenday. Conversely there is 1% probability of the decrease inmarket value exceeding the VaR estimate on any given day.
ANZ New Zealand’s standard VaR approach for both tradedand non-traded risk is historical simulation. ANZ New
Zealand calculates VaR using historical changes in market
rates and prices over the previous 500 business days. Tradedand 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 ANZ New Zealand could experience from an
extreme market event. As a result of this limitation, ANZ New
Zealand utilises a number of other risk measures (e.g. stresstesting) and associated detailed control limits to measureand manage market risk.

Traded market risks$ millions

ANZ New Zealand
Value at risk at 99% confidence
Low forHigh for
Period end
year
year

Average foryear

30/09/2014

Foreign exchange risk

0.3

1.1

-

0.4

Interest rate risk

1.5

3.1

0.9

1.8

Credit spread risk

0.3

0.6

0.1

0.3

Diversification benefit

(0.6)

n/a

n/a

(0.7)

Total VaR

1.5

3.3

0.9

1.8

Foreign exchange risk

0.3

1.4

-

0.3

Interest rate risk

2.1

3.7

1.1

2.3

Credit spread risk

0.4

1.0

0.2

0.4

Diversification benefit

(0.8)

n/a

n/a

(0.7)

Total VaR

2.0

4.1

1.2

2.3

30/09/2013

Traded market risk VaR is calculated separately for foreign exchange and for interest rate/debt markets businesses as well as for ANZ
New Zealand. The diversification benefit reflects the historical correlation between foreign exchange, interest rate and debt markets.
To supplement the VaR methodology, ANZ New Zealand applies a wide range of stress tests, both on individual portfolios and at
ANZ New Zealand level. ANZ New Zealand's stress-testing regime provides senior management with an assessment of the financial
impact of identified extreme events on market risk exposures of ANZ New Zealand.
Non-traded market risk (or balance sheet risk)
The principal objectives of balance sheet management are to manage net interest income sensitivity while maintaining acceptablelevels of interest rate and liquidity risk and to manage the market value of ANZ New Zealand’s capital. Liquidity risk is dealt with in
the next section.

Australia and New Zealand Banking Group Limited - New Zealand Branch

48

Notes to the Financial Statements
Interest rate risk
The objective of balance sheet interest rate risk management is to mitigate the negative impact of movements in wholesale interest
rates on the earnings of ANZ New Zealand's banking book. Non-traded interest rate risk relates to the potential adverse impact toearnings from changes in market interest rates. 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.
As part of normal business activity ANZ New Zealand has additional risks from fixed rate mortgage prepayments and basis risk:•
Prepayment risk is the potential risk to earnings or market value from when a customer prepays all or part of a fixed rate
mortgage and where any customer fee charged is not sufficient to offset the loss in value to ANZ New Zealand of this financial
asset due to movements in interest rates and other pricing factors. As far as possible the true economic cost is passed throughto customers in line with their terms and conditions and relevant legislation.
•
Basis risk is the potential risk to earnings or market value from differences between customer pricing and wholesale market
pricing. This is managed through active review of product margins.
Non-traded interest rate risk 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. This treatment excludes the effect of prepayment and basis
risk.
a.

Non-traded interest rate risk VaR$ millions

Period end

ANZ New Zealand
Low forHigh foryear
year

Average foryear

30/09/2014

Value at risk at 99% confidence

10.7

10.7

8.0

8.9

9.1

14.2

7.7

11.1

30/09/2013

Value at risk at 99% confidenceb.

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 overthe 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 apercentage of reported net interest income. The sign indicates the nature of the rate sensitivity with a positive number signifyingthat a rate increase is positive for net interest income over the next 12 months. Conversely, a negative number signifies that a rateincrease is negative for the next 12 months’ net interest income.
ANZ New Zealand
30/09/2014

30/09/2013

Period end

1.1%

1.0%

Maximum exposure

1.8%

2.1%

Minimum exposure

0.7%

0.5%

Average exposure (in absolute terms)

1.3%

1.3%

Impact of 1% rate shock

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.
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about ANZ New Zealand's exposure to interest rate risk.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding.
These mismatches are managed within policy guidelines for mismatch positions.
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet instruments
by showing the periods in which these instruments may reprice (that is, when interest rates applicable to each asset or liability canbe changed).
The repricing gaps are based upon contractual repricing.

Australia and New Zealand Banking Group Limited - New Zealand Branch

49

Notes to the Financial Statements
ANZ New Zealand$ millions

Total

Up to
3 months

Over 3 to
6 months

Over 6 to
12 months

Over 1 to
2 yearsOver
2 years

Not bearing
interest

2,248

2,044

-

-

-

-

204

30/09/2014

AssetsCash
Settlement balances receivable

855

53

-

-

-

-

802

Collateral paid

783

783

-

-

-

-

-

Trading securities

11,750

1,388

304

1,631

418

8,009

-

Derivative financial instruments

11,421

-

-

-

-

-

11,421

Available-for-sale assets

772

262

10

250

-

248

2

Net loans and advances(464)

105,485

58,147

7,135

12,263

18,525

9,879

Other financial assets

729

137

35

18

-

-

539

Total financial assets

134,043

62,814

7,484

14,162

18,943

18,136

12,504

1,992

512

-

-

-

-

1,480

800

800

-

-

-

-

-

Deposits and other borrowings

94,527

66,29010,852

7,566

2,371

1,447

6,001

Derivative financial instruments

10,961

-

-

-

-

-

10,961

Bonds and notes

17,042

5,149

267

1,971

2,811

6,844

-

Subordinated debt

Liabilities
Settlement balances payable
Collateral received

1,442

-

607

-

-

835

-

Other financial liabilities

884

130

-

10

6

146

592

Total financial liabilities

127,648

72,881

11,726

9,547

5,188

9,272

19,034

Hedging instruments-

12,610

2,333

1,746

(13,269)(3,420)-Interest sensitivity gap

6,395

2,543

(1,909)

6,361

486

5,444

(6,530)

2,347

2,159

-

-

-

-

188

515

35

-

-

-

-

480

Collateral paid

1,002

1,002

-

-

-

-

-

Trading securities

10,320

1,235

455

606

3,105

4,919

-

Derivative financial instruments

9,508

30/09/2013

AssetsCash
Settlement balances receivable

9,508

-

-

-

-

-

Available-for-sale assets

942

337

234

23

250

96

2

Net loans and advances

100,11364,014

5,945

12,41012,221

6,079

(556)

Other financial assets

659

103

30

36

3

-

487

Total financial assets

125,406

68,885

6,664

13,075

15,579

11,094

10,109

1,114

547

-

-

-

-

567

438

438

-

-

-

-

-

Deposits and other borrowings

88,01362,282

9,419

8,232

1,437

1,117

5,526

Derivative financial instruments

11,208

-

-

-

-

-

11,208

Bonds and notes

16,407

5,780

47

266

2,933

7,381

-

Subordinated debt

1,442

-

607

-

-

835

-

764

23

-

-

-

126

615

Total financial liabilities

119,386

69,07010,073

8,498

4,370

9,459

17,916

Hedging instruments-(1,881)

14,330(4,714)(10,828)

3,093-

Interest sensitivity gap

6,020(2,066)

10,921

(137)

381

4,728

(7,807)

Liabilities
Settlement balances payable
Collateral received

Payables and other liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

50

Notes to the Financial Statements
NZ Branch
Total

Up to
3 months

Over 3 to
6 months

Over 6 to
12 months

Over 1 to
2 yearsOver
2 years

Cash

426

426

-

-

-

-

-

Settlement balances receivable

304

-

-

-

-

-

304

Derivative financial instruments

62

-

-

-

-

-

62
(13)

$ millions

Not bearing
interest

30/09/2014

Assets

9,176

3,747

934

1,660

2,116

732

Other financial assets

2

-

-

-

-

-

2

Total financial assets

9,970

4,173

934

1,660

2,116

732

355

Deposits and other borrowings

8,747

8,747

-

-

-

-

-

Derivative financial instruments

802

-

-

-

-

-

802

Net loans and advances

Liabilities

42

-

-

-

-

-

42

9,591

8,747

-

-

-

-

844

Hedging instruments

-

5,079

(266)

(2,121)(1,961)(731)-

Interest sensitivity gap

379

505

668

(461)

155

1

(489)

Cash

141

141

-

-

-

-

-

Settlement balances receivable

314

-

-

-

-

-

314

Payables and other liabilities
Total financial liabilities

30/09/2013

AssetsDerivative financial instruments
Net loans and advances

12

-

-

-

-

-

12

9,256

5,229

830

1,584

1,305

321

(13)

Other financial assets

1

-

-

-

-

-

1

Total financial assets

9,724

5,370

830

1,584

1,305

321

314

Deposits and other borrowings

8,372

8,372

-

-

-

-

-

Derivative financial instruments

1,021

-

-

-

-

-

1,021

Payables and other liabilities

40

-

-

-

-

-

40

Total financial liabilities

9,433

8,372

-

-

-

-

1,061

Hedging instruments

-

3,811

(573)

(1,656)(1,261)(321)-

Interest sensitivity gap

291

809

257

(72)

44

-

(747)

Liabilities

Equity price risk
The portfolio of financial assets classified as available-for-sale contains equity investment holdings 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 nontraded market risks. The fair value of these securities as at 30 September 2014 was $2 million (30/09/2013 $2 million). A 10 per centreduction in the value of the available-for-sale equity securities would not be material.

Australia and New Zealand Banking Group Limited - New Zealand Branch

51

Notes to the Financial Statements
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 foreignexchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk arising fromindividual funding and other transactions is actively managed. The total amounts of unmatched foreign currency assets andliabilities, and consequent foreign currency exposures arising from each class of financial asset and liability, whether recognised or
unrecognised, within each currency are not material.
The net open position in each foreign currency 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 exchange transactionsin that foreign currency. The amounts are stated in New Zealand dollar equivalents translated using the spot exchange rates as atbalance sheet date.
ANZ New Zealand$ millions

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Australian dollar

1

32

(2)

-

Euro

37

1

-

-

Japanese yen

9

(1)

-

-

US dollar

(14)

(1)

-

-

Swiss franc

(37)

-

-

-

Other

1

1

-

-

Total net open position

(3)

32

(2)

-

Net open position

Australia and New Zealand Banking Group Limited - New Zealand Branch

52

Notes to the Financial Statements
Liquidity risk
Liquidity risk is the risk that ANZ New Zealand is unable tomeet its payment obligations as they fall due. The timing
mismatch of cash flows and the related liquidity risk isinherent in all banking operations and is closely monitored
by ANZ New Zealand.
ANZ New Zealand’s liquidity and funding risks are governedby a detailed policy framework which is approved by the Risk
Committees of the Bank’s and Ultimate Parent Bank’s Boards.
The core objective of ANZ New Zealand’s framework is to
manage liquidity to meet obligations as they fall due,
without incurring unacceptable losses.
Central to ANZ New Zealand’s liquidity risk management
approach is the establishment of a liquidity risk appetite
framework to which ANZ New Zealand must conform at all
times. The risk appetite for liquidity has been set as low, andthis objective is achieved by ANZ New Zealand managing
liquidity risks within the boundaries of the following
requirements and principles:•
Maintaining the ability to meet all payment obligationsin the immediate term.
•
Ensuring the ability to meet “survival horizons” under arange of ANZ New Zealand specific and general market
liquidity stress scenarios.
•
Maintaining strength in ANZ New Zealand’s balance
sheet structure to ensure long term resilience in ANZ
New Zealand’s liquidity and funding risk profile.
•
Limiting the potential earnings at risk associated with
unexpected increases in funding costs or theliquidation of assets under stress.
•
Ensuring the liquidity management framework is
compatible with regulatory requirements.
•
Daily liquidity reporting and scenario analysis,
quantifying ANZ New Zealand’s positions.
•Targeting a diversified funding base, avoiding undue
concentrations by investor type, maturity, market
source and currency.
•
Holding a portfolio of high quality liquid assets toprotect against adverse funding conditions and tosupport day-to-day operations.
•
Establishing detailed contingency plans to coverdifferent liquidity crisis events.
Management of liquidity and funding risks are overseen by
ALCO.
Supervision and Regulation
The RBNZ requires the Bank to have a comprehensive Board
approved liquidity strategy defining: policy, systems andprocedures for measuring, assessing, reporting andmanaging domestic and foreign currency liquidity. This also
includes a formal contingency plan for dealing with aliquidity crisis. The Banking Group is required to meet one
week and one month liquidity mismatch ratios and a one
year core funding ratio each day.
Scenario Modelling
A key component of ANZ New Zealand’s liquidity
management framework is scenario modelling. Liquidity isassessed under different scenarios, including going-concern,
name-crisis and various survival horizons.
Going-concern: reflects the normal behaviour of cash flows in
the ordinary course of business. ANZ New Zealand must beable to meet all commitments and obligations under a going
concern scenario, within ANZ New Zealand’s normal funding
capacity (‘available to fund’ limit), over at least the following
30 calendar days. In estimating the funding requirement,
ANZ New Zealand models expected cash flows by reference
to historical behaviour and contractual maturity data.
Name-crisis: refers to a potential name-specific liquidity crisis
scenario which models the behaviour of cash flows where
there is a problem (real or perceived) which may include, but
is not limited to, operational issues, doubts about thesolvency of ANZ New Zealand, or adverse rating changes.
Under this scenario ANZ New Zealand may have significant
difficulty rolling over or replacing funding. Under theliquidity policy ANZ New Zealand must be cash flow positive
over an eight calendar day period.
Survival horizons: The global financial crisis has highlighted
the importance of differentiating between stressed andnormal market conditions in a name-specific crisis and thedifferent behaviour that offshore and domestic wholesalefunding markets can exhibit during market stress events.
ANZ New Zealand has linked its liquidity risk appetite todefined liquidity “survival horizons” (i.e. the time period
under which ANZ New Zealand must maintain a positive cash
flow position). The following stressed scenarios are modelled:•
Extreme Short Term Crisis Scenario: A name-specificstress during a period of market stress.
•
Short Term Crisis Scenario: A name-specific stressduring a period of normal markets conditions.
•Global Funding Market Disruption: Stressed global
wholesale funding markets leading to a closure ofdomestic and offshore markets.
•
Offshore Funding Market Disruption: Stressed global
wholesale funding markets leading to a closure ofoffshore markets only.
As of 30 September 2014 ANZ New Zealand was incompliance with all of the above scenarios.
Wholesale funding
ANZ New Zealand’s wholesale funding strategy is designed
to deliver a sustainable portfolio of wholesale funds thatbalances cost efficiency while targeting diversification bymarkets, investors, currencies, maturities and funding
structures. Short-term wholesale funding requirements, witha contractual maturity of less than one year, are managed
through the Treasury and Markets operations. Long-term
wholesale funding is managed and executed throughTreasury operations.
ANZ New Zealand also uses maturity concentration limits
under the wholesale funding and liquidity management
framework. Maturity concentration limits ensure that ANZ
New Zealand does not become reliant on issuing large
volumes of new wholesale funding within a short time
period. Funding instruments used to meet the wholesaleborrowing requirement must be on a pre-established list of
approved products.

Australia and New Zealand Banking Group Limited - New Zealand Branch

53

Notes to the Financial Statements
Funding capacity and debt issuance planning
ANZ New Zealand 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 approved by the
Bank’s Board. The plan is supplemented by monthly updates and is linked to ANZ New Zealand’s three year strategic planning cycle.
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealand employs funding
metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longerdated wholesale debt (with remaining term exceeding one year) and equity. This approach recognises that long-term wholesale
debt and other sticky liabilities have favourable liquidity characteristics.
Analysis of funding liabilities by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC)
codes.
Funding composition$ millions

ANZ New Zealand

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

New Zealand

67,75962,309--Overseas

8,596

8,258

-

-

Total customer deposits

76,35570,567--

Bonds and notes

17,042

16,407--

Subordinated debt

1,442

1,442

-

-

Certificates of deposit

1,376

2,364

-

-

Commercial paper

6,057

4,765

-

-

Other borrowings

10,73910,317

8,747

8,372

Total wholesale funding

36,65635,295

8,747

8,372

Total funding

113,011

105,862

8,747

8,372

Customer deposits1

Wholesale funding

Concentrations of funding by industry
2,996

2,312

-

-

Forestry, fishing and mining

544

613

-

-

Business and property services

5,576

5,148

-

-

Construction

1,044

882

-

-

922

737

-

-

Finance and insurance

46,13345,211

8,747

8,372

Government and local authority

2,434

2,166

-

-

AgricultureEntertainment, leisure and tourism

Manufacturing

1,458

1,416

-

-

Households

47,60043,286--

Retail trade

994

954

-

-

Transport and storage

772

636

-

-

1,029

1,086

-

-

Wholesale trade
2

1,509

1,415

-

-

113,011

105,862

8,747

8,372

New Zealand

72,964

68,248--Australia

12,041

12,478

8,657

8,287

United States

11,518

9,822

-

-

Europe10,464

9,508

-

-

Other countries

6,024

5,806

90

85

Total funding

113,011

105,862

8,747

8,372

Other

Total funding
Concentrations of funding by geography3

12
3

Represents term deposits, other deposits bearing interest, deposits not bearing interest and UDC secured investments.
Other includes exposures to electricity, gas and water, communications and personal services.
ANZ New Zealand classifies funding via ANZ New Zealand (Int’l) as either from the United States or Europe based on the respective programmes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

54

Notes to the Financial Statements
Liquidity portfolio management
ANZ New Zealand holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity risk management.
The size of ANZ New Zealand’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity
scenario metrics.
Total liquidity portfolio$ millions

Balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government, local body stock and bonds

ANZ New Zealand

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

1,309

1,709

-

-

-

41

-

-

159

159

-

-

6,318

5,522

-

-

380

387

-

-

Other bonds

5,135

5,069

-

-

Total liquidity portfolio

13,301

12,887--

Government treasury bills

Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand Government securities, securities
issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned Enterprises, Local
Authorities and highly rated NZ domestic corporates. These assets would be accepted as collateral by the RBNZ in repurchasetransactions. At 30 September 2014 ANZ New Zealand would be eligible to enter into repurchase transactions with a value of$11,536 million. The Banking Group also held unencumbered internal residential mortgage backed securities (“RMBS”) which would
entitle ANZ New Zealand to enter into repurchase transactions with a value of $5,709 million at 30 September 2014 (the RBNZ has
imposed a cap limiting the amount of RMBS deemed as eligible in the liquidity portfolio to 4% of total assets).
Liquidity crisis contingency planning
ANZ New Zealand maintains liquidity crisis contingency plans defining an approach for analysing and responding to a liquiditythreatening event on a 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

55

Notes to the Financial Statements
Contractual maturity analysis of financial assets and liabilities
The following tables present ANZ New Zealand's financial assets and liabilities within relevant contractual maturity groupings, basedon the earliest date on which the NZ Branch or ANZ New Zealand may be required to realise an asset or settle a liability. The amounts
disclosed in the tables represent undiscounted future principal and interest cash flows, except for derivatives held for trading where
the full mark-to-market amount has been included in the less than three months category. As a result, the amounts in the tables
below may differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using the earliest
date at which ANZ New Zealand or the NZ Branch can be called upon to pay. The liquidity risk of credit related commitments andcontingent liabilities may be less than the contract amount, and does not necessarily represent future cash requirements as many ofthese facilities are expected to be only partially used or to expire unused.
ANZ New Zealand does not manage its liquidity risk on this basis.
ANZ New Zealand
30/09/2014$ millions

Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specifiedFinancial assets
2,250

1,513

737

-

-

-

-

Settlement balances receivable

855

514

341

-

-

-

-

Collateral paid

783

-

783

-

-

-

-

Trading securities

13,325

-

818

2,491

8,172

1,844

-

Derivative financial assets (trading)Cash10,727-

10,727----Available-for-sale assets

826

-

163

279

382

-

2

Net loans and advances

151,304350

15,922

16,62249,452

68,958-Other financial assets

301

-

259

42

-

-

-

Total financial assets

180,371

2,377

29,75019,43458,00670,802

2

1,992

999

993

-

-

-

-

800

-

800

-

-

-

-

Deposits and other borrowings

96,80240,271

21,07624,473

10,982--Derivative financial liabilities (trading)

9,355

-

9,355

-

-

-

-

Bonds and notes

17,935

-

1,014

3,184

13,116621-

Subordinated debt

2,202

-

18

54

304

384

1,442

Other financial liabilities

448

-

215

17

61

155

-

Total financial liabilities

129,534

41,27033,471

27,72824,463

1,160

1,442

Financial liabilities
Settlement balances payable
Collateral received

Derivative financial instruments used for balance sheet management- gross inflows

24,463

-

3,205

4,418

15,956884-- gross outflows
Net financial assets / (liabilities) after balance
sheet management(25,365)-(3,261)(4,591)(16,613)(900)-

49,935(38,893)(3,777)(8,467)32,886

69,626(1,440)Contractual maturity of off-balance sheet commitments and contingent liabilities
Total

Less than
1 yearBeyond1 year

483

102

381

Credit related commitments

27,93027,930-Contingent liabilities

2,436

2,436

-

Total

30,84930,468381

Non-credit related commitments

Australia and New Zealand Banking Group Limited - New Zealand Branch

56

Notes to the Financial Statements
ANZ New Zealand
30/09/2013
Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specified

2,347

1,896

451

-

-

-

-

518

351

167

-

-

-

-

Collateral paid

1,002

-

1,002

-

-

-

-

Trading securities

11,528

-

412

1,617

8,429

1,070

-

Derivative financial assets (trading)

8,536

-

8,536

-

-

-

-

$ millions

Financial assets
Cash
Settlement balances receivable

Available-for-sale assets

983

-

296

271

324

90

2

Net loans and advances

138,765

350

15,743

18,38541,94062,347-

Other financial assets

290

-

221

66

3

-

-

Total financial assets

163,969

2,597

26,82820,33950,696

63,507

2

1,114

879

235

-

-

-

-

438

-

438

-

-

-

-

90,006

34,79322,712

23,159

9,332

10

-

Derivative financial liabilities (trading)

9,526

-

9,526

-

-

-

-

Bonds and notes

17,359

-

2,531

1,979

11,3591,490-

Subordinated debt

1,885

-

15

48

317

63

1,442

Financial liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

Other financial liabilities

352

-

172

4

31

145

-

Total financial liabilities

120,680

35,67235,62925,19021,039

1,708

1,442

Derivative financial instruments used for balance sheet management- gross inflows

23,054

-

2,356

4,459

14,975

1,264-- gross outflows
Net financial assets / (liabilities) after balance
sheet management(23,409)-(2,379)(4,458)(15,323)(1,249)-42,934(33,075)(8,824)(4,850)29,30961,814(1,440)Contractual maturity of off-balance sheet commitments and contingent liabilities
Less than
1 yearBeyond1 year

429

97

332

25,06725,067-

Total

Non-credit related commitments
Credit related commitments
Contingent liabilities

2,201

2,201

-

Total

27,69727,365332

Australia and New Zealand Banking Group Limited - New Zealand Branch

57

Notes to the Financial Statements
NZ Branch
30/09/2014
Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specified

Cash

429

-

429

-

-

-

-

Settlement balances receivable

304

-

304

-

-

-

-

Net loans and advances

15,597

-

298

723

3,738

10,838-

Total financial assets

16,330

-

1,031

723

3,738

10,838-$ millions

Financial assets

Financial liabilities
9,414

-

953

1,737

6,724

-

-

Other financial liabilities

42

-

42

-

-

-

-

Total financial liabilities

9,456

-

995

1,737

6,724

-

-

9,922

-

1,448

1,793

6,681

-

-

(10,801)-(1,570)(2,009)(7,222)

-

-

5,995

-

(86)

(1,230)(3,527)

10,838-Deposits and other borrowings

Derivative financial instruments used for balance sheet management- gross inflows- gross outflows
Net financial assets / (liabilities) after balance
sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
Total

Less than
1 yearBeyond1 yearCredit related commitments

33

33

-

Total

33

33

-

NZ Branch
30/09/2013
Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specified

Cash

141

-

141

-

-

-

-

Settlement balances receivable

314

-

314

-

-

-

-

15,282

-

220

701

3,670

10,691-Other financial assets

1

-

1

-

-

-

-

Total financial assets

15,738

-

676

701

3,670

10,691-$ millions

Financial assets

Net loans and advances

Financial liabilities
Deposits and other borrowings

9,004

-

999

1,531

6,474

-

-

Other financial liabilities

40

-

40

-

-

-

-

Total financial liabilities

9,044

-

1,039

1,531

6,474

-

-

Derivative financial instruments used for balance sheet management- gross inflows- gross outflows
Net financial assets / (liabilities) after balance
sheet management

9,062

-

1,174

1,520

6,368

-

-

(10,091)-(1,282)(1,691)(7,118)

-

-

5,665

-

(471)

(1,001)(3,554)

10,691-

Contractual maturity of off-balance sheet commitments and contingent liabilities
Total

Less than
1 yearBeyond1 yearCredit related commitments

54

54

-

Total

54

54

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

58

Notes to the Financial Statements
28. Financial Assets Pledged as Collateral and Offsetting Financial Instruments
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Cash collateral given on derivative financial instruments

783

1,002

-

-

Trading securities encumbered through repurchase agreements

47

108

-

-

21, 34

7,283

5,857

-

-

18

2,354

2,162

-

-

10,467

9,129

-

-

Residential mortgages pledged as security for covered bonds
Assets pledged as collateral for UDC secured investments
Total financial assets pledged as collateral

UDC secured investments are constituted and secured by a trust deed between UDC Finance Limited and its independent trustee,
Trustees Executors Limited. UDC Finance Limited has granted a charge over all its assets and undertaking, primarily net loans andadvances, in favour of the Trustee.
Offsetting financial assets and financial liabilities
The following information relates to financial assets and liabilities which have been set off in the balance sheet and those which havenot been set off but for which ANZ New Zealand has enforceable master netting agreements in place with counterparties.
ANZ New ZealandAmounts set off
Net amounts
in the balance presented in the
Gross amounts
balance sheet
sheet$ millions

Related amounts not offset 1
Financial
instruments

Cash collateral

Net amounts

-

(206)

78

30/09/2014

Financial assets
Collateral paid
2

284

-

284

47

-

47

(47)

-

-

8,448

-

8,448

(7,572)

(716)

160

Collateral received

753

-

753

-

(716)

37

Securities sold under agreements to repurchase 3

47

-

47

(47)

-

-

7,848

-

7,848

(7,572)(206)

70

Collateral paid

145

-

145

-

(94)

51

Trading securities 2

108

-

108

(107)

-

1

6,056

-

6,056

(5,891)(123)

42

Collateral received

136

-

136

-

(123)

13

Securities sold under agreements to repurchase 3

107

-

107

(107)

-

-

6,144

-

6,144

(5,891)(94)

159

Trading securities

Derivative financial instruments
Financial liabilities

Derivative financial instruments
30/09/2013

Financial assets

Derivative financial instruments
Financial liabilities

Derivative financial instruments

There are no financial assets or financial liabilities subject to enforceable master netting agreements in the NZ Branch.
1

ANZ New Zealand enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard
master netting agreements. ANZ New Zealand holds and provides cash and securities collateral in respective of derivative transactions covered by these agreements.
The right to set off balances under these master netting agreements or to set off cash and securities collateral only arises in the event of non payment or default and, as aresult, these arrangements do not qualify for offsetting under NZ IAS 32 Financial Instruments: Presentation.
2
This is the amount of trading securities encumbered through repurchase agreements, see financial assets pledged as collateral table in this note.
3
Included in deposits from banks, see note 18.

29. Concentrations of Credit Risk to Individual Counterparties
ANZ New Zealand measures its concentration of credit risk in respect to bank counterparties on the basis of approved exposures andin respect to non-bank counterparties on the basis of limits.
For the three month period ended 30 September 2014 there were no individual counterparties (excluding connected parties,
governments and banks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or peak end-of-day
credit exposure equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of the period).
This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch59

Notes to the Financial Statements
30. Classification of Financial Instruments and Fair Value Measurements
ANZ New ZealandAt amortisedcost

At fair value through profit or loss
Designated on
initialrecognition Held for trading$ millions

Hedging

Available-forsale assets

Total
carrying
amountFair value

30/09/2014
2,248

-

-

-

-

2,248

2,248

Settlement balances receivable

855

-

-

-

-

855

855

Collateral paid

783

-

-

-

-

783

783

Trading securities--

11,750--11,75011,750Derivative financial instruments1--

11,083338-

11,421

11,421

Available-for-sale assets

-

-

-

-

772

772

772

Net loans and advances2

105,485

-

-

-

-

105,485

105,600

Other financial assets

539

190

-

-

-

729

729

Total financial assets

109,910190

22,833338

772

134,043

134,158

1,992

-

-

-

-

1,992

1,992

Cash

Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments1

800

-

-

-

-

800

800

88,470

6,057

-

-

-

94,527

94,550--10,768193-

10,961

10,961

Bonds and notes2

17,042----

17,042

17,225Subordinated debt

1,442

-

-

-

-

1,442

1,443

Other financial liabilities

658

-

226

-

-

884

884

Total financial liabilities

110,404

6,057

10,994

193-

127,648

127,855

2,347

-

-

-

-

2,347

2,347

30/09/2013
CashSettlement balances receivable

515

-

-

-

-

515

515

1,002

-

-

-

-

1,002

1,002

Trading securities--

10,320--

10,320

10,320Derivative financial instruments1

-

-

9,230

278

-

9,508

9,508

Available-for-sale assets

-

-

-

-

942

942

942

2

100,209

Collateral paid

Net loans and advances

100,113

-

-

-

-

100,113

Other financial assets

487

172

-

-

-

659

659

Total financial assets

104,464

172

19,550278

942

125,406

125,502

1,114

-

-

-

-

1,114

1,114

438

-

-

-

-

438

438

83,248

4,765

-

-

-

88,01388,198Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments1--

11,033

175-

11,208

11,208

Bonds and notes2

16,407----

16,407

16,627

Subordinated debt

1,442

-

-

-

-

1,442

1,342

Other financial liabilities

622

-

142

-

-

764

764

Total financial liabilities

103,271

4,765

11,175

175-

119,386

119,691

Australia and New Zealand Banking Group Limited - New Zealand Branch

60

Notes to the Financial Statements
NZ Branch
At amortisedcost

At fair value through profit or loss
Designated on
initialrecognition Held for trading$ millions

Hedging

Available-forsale assets

Total
carrying
value

Fair Value

30/09/2014

Cash

426

-

-

-

-

426

426

Settlement balances receivable

304

-

-

-

-

304

304

Derivative financial instruments1

-

-

56

6

-

62

62

9,176

-

-

-

-

9,176

9,185

Other financial assets

2

-

-

-

-

2

2

Total financial assets

9,908

-

56

6

-

9,970

9,979

Deposits and other borrowings

8,747

-

-

-

-

8,747

8,862

Derivative financial instruments1

-

-

783

19

-

802

802

Other financial liabilities

42

-

-

-

-

42

42

Total financial liabilities

8,789

-

783

19

-

9,591

9,706

Cash

141

-

-

-

-

141

141

Settlement balances receivable

314

-

-

-

-

314

314

Derivative financial instruments1

-

-

8

4

-

12

12

9,256

-

-

-

-

9,256

9,273

Other financial assets

1

-

-

-

-

1

1

Total financial assets

9,712

-

8

4

-

9,724

9,741

Deposits and other borrowings

8,372

-

-

-

-

8,372

8,500

Derivative financial instruments1

-

-

998

23

-

1,021

1,021

Other financial liabilities

40

-

-

-

-

40

40

Total financial liabilities

8,412

-

998

23

-

9,433

9,561

Net loans and advances2

30/09/2013

Net loans and advances212

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 certain financial assets within loans and advances and certain financial liabilities within bonds and notes. The resulting fair value
adjustment means that the carrying value differs from the amortised cost.

Australia and New Zealand Banking Group Limited - New Zealand Branch

61

Notes to the Financial Statements
Measurement of fair value
Valuation methodologies
ANZ New Zealand has an established control framework that ensures fair value is either determined or validated by a function
independent of the party that undertakes the transaction. The control framework ensures that all models are calibrated periodicallyto test that outputs reflect prices from observable current market transactions in the same instrument or other available observable
market data.
Where quoted market prices are used, prices are independently verified from other sources. For fair values determined using avaluation model, the control framework may include, as applicable, independent development or validation of valuation models,
any inputs to those models, any adjustments required outside of the valuation model and, where possible, independent validationof model outputs. In this way, continued appropriateness of the valuations is ensured.
In instances where ANZ New Zealand holds offsetting risk positions, ANZ New Zealand uses the portfolio exemption in NZ IFRS 13
Fair Value Measurement to measure the fair value of such groups of financial assets and financial liabilities on the basis of the pricethat would be received to sell a net long position (that is, an asset) for a particular risk exposure or to transfer a net short position(that is, a liability) for a particular risk exposure.
The Group categorises its fair value measurements on the basis of inputs used in measuring fair value using the fair value hierarchy
below:•

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

•

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

•

Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are
not based on observable market data (unobservable inputs).

Valuation techniques and inputs used
In the event that there is no quoted market price for the instrument, fair value is based on valuation techniques. The valuation
models incorporate the impact of bid/ask spreads, counterparty credit spreads, funding costs and other factors that would influence
the fair value determined by market participants.
The majority of valuation techniques employ only observable market data. However, for certain financial instruments the valuation
technique may employ some data (valuation inputs or components) which is not readily observable in the current market. In thesecases valuation inputs (or components of the overall value) are derived and extrapolated from other relevant market data and tested
against historic transactions and observed market trends. To the extent that valuation is based on models or inputs that are notobservable in the market, the determination of fair value can be more subjective, dependent on the significance of the unobservable
input to the overall valuation.
The following valuation techniques have been applied to determine the fair values of financial instruments where there is no quoted
price (level1) for the instrument:•

For instruments classified as trading securities and securities short sold, derivative financial assets and liabilities, available-forsale assets, and investments backing insurance contract liabilities, fair value measurements are derived by using modelledvaluations techniques (including discounted cash flow models) that incorporate market prices / yields for securities with similar
credit risk, maturity and yield characteristics; and/or current market yields for similar instruments.

•

For net loans and advances, deposits and other borrowings and debt issuances, discounted cash flow techniques are used
where contractual future cash flows of the instrument are discounted using discount rates incorporating wholesale market
rates or market borrowing rates of debt with similar maturities or a yield curve appropriate for the remaining term to maturity.

•

ANZ New Zealand holds units in an unlisted fund, included in available-for sale assets which does not trade in an active market.
The fair value of these units is based on the estimated cashflows from the realisation of the underlying assets.

There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during theyear.

Australia and New Zealand Banking Group Limited - New Zealand Branch

62

Notes to the Financial Statements
Valuation hierarchy for financial assets and financial liabilities measured at fair value
ANZ New Zealand$ millions

Level 1NZ Branch

Level 2

Level 3

Total

Level 1

Level 2

Level 3

11,65991-

11,7502

11,419-11,421

Available-for-sale assets

712

58

2

Other financial assets

129

61

-

12,502

11,629

2

Total

-

-

-

-

-

62

-

62

772

-

-

-

-

190

-

-

-

-

24,133

-

62

-

62

30/09/2014

Financial assets
Trading securities
Derivative financial instruments

Total
Financial liabilities
Deposits and other borrowings

-

6,057

-

6,057

-

-

-

-

Derivative financial instruments

4

10,957-

10,961

-

802

-

802

Other financial liabilities

226

-

-

226

-

-

-

-

Total

230

17,014-

17,244

-

802

-

802

10,208112-

10,320

-

-

-

-

2

9,506

-

9,508

-

12

-

12

30/09/2013

Financial assets
Trading securities
Derivative financial instruments
Available-for-sale assets

940

-

2

942

-

-

-

-

Other financial assets

140

32

-

172

-

-

-

-

11,2909,650

220,942

-

12

-

12

Total
Financial liabilities
Deposits and other borrowings

-

4,765

-

4,765

-

-

-

-

Derivative financial instruments

6

11,202-

11,208

-

1,021

-

1,021

Other financial liabilities

142

-

-

142

-

-

-

-

Total

148

15,967-

16,115

-

1,021

-

1,021

Valuation hierarchy for financial assets and financial liabilities not measured at fair value1
ANZ New Zealand$ millions

NZ Branch

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total-

101,696

3,904

105,600

-

9,185

-

9,185

Deposits and other borrowings-

88,493-88,493

-

8,862

-

8,862

Bonds and notes-

17,225-

17,225----Subordinated debt

828

615

-

1,443

-

-

-

-

Total

828

106,333-

107,161

-

8,862

-

8,862

30/09/2014
Financial assets

Net loans and advances
Financial liabilities

1

Fair values, where the carrying amount is not considered a close approximation of fair value.

Australia and New Zealand Banking Group Limited - New Zealand Branch

63

Notes to the Financial Statements
31. Notes to the Cash Flow Statement
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2014

30/09/2013

30/09/2014

30/09/2013

1,711

1,369

61

50

Depreciation and amortisation

85

98

-

-

Provision for credit impairment

(9)

66

7

3

$ millions

Reconciliation of profit after income tax to net cash flows provided by operating
activities
Profit after income tax
Non-cash items:

Deferred fee revenue and expenses

(4)

4

-

-

Amortisation of capitalised brokerage / mortgage origination fees

75

51

9

8

Amortisation of premiums and discounts

152

186

(16)

-

Fair value gains and losses

(225)

(108)

3

12

16

6

-

-

Change in net operating assets less liabilities

(294)

1,010

196

45

Change in interest receivable

(53)

(12)

(1)

(1)

Change in interest payable

20

(102)

(1)

(15)

Change in accrued expenses

(25)

(5)

21

-

Change in provisions

(25)

(110)

-

-

Change in insurance policy assets-

Loss on disposal and impairment of premises and equipment and intangibles
Deferrals or accruals of past or future operating cash receipts or payments:

(67)

2

-

Change in other receivables and payables

7

(27)

-

-

Change in net income tax assets / liabilities

172

106

6

1

1

-

-

-

Dividends from associates in excess of share of profits
Items classified as investing / financing:
Gain on disposal of subsidiaries (excluding disposal costs)
Net cash flows provided by operating activities

-

(31)

-

-

1,537

2,503

285

103

30/09/2014

30/09/2013

30/09/2014

30/09/2013

2,248

2,347

426

141
-

ANZ New Zealand$ millions

NZ Branch

Reconciliation of cash and cash equivalents to the balance sheet
CashAmounts included in settlement balances receivable / (payable):
Nostro accounts

38

22

-

Overdrawn nostro accounts

(30)

(24)

-

-

Total cash and cash equivalents

2,256

2,345

426

141

30/09/2014

30/09/2013

30/09/2014

30/09/2013

15

24

-

-

Not later than 1 year

87

73

-

-

Later than 1 year but not later than 5 years

203

167

-

-

Later than 5 years

178

165

-

-

Total operating lease commitments

468

405

-

-

Total commitments

483

429

-

-

32. Commitments
ANZ New Zealand$ millions

NZ Branch

Contracts for outstanding capital expenditure
Not later than 1 year
Future minimum lease payments under non-cancellable operating leases

Australia and New Zealand Banking Group Limited - New Zealand Branch

64

Notes to the Financial Statements
33. Credit Related Commitments, Guarantees and Contingent Liabilities$ millions

ANZ New Zealand

NZ Branch

Face or contract value

Face or contract value

30/09/2014

30/09/2014

30/09/2013

30/09/2013

Credit related commitments
764

817

-

-

Commitments to provide financial services

27,16624,25033

54

Total credit related commitments

27,93025,06733

54

Financial guarantees

925

997

-

-

Standby letters of credit

79

32

-

-

Transaction related contingent items

1,321

1,059

-

-

Trade related contingent liabilities

111

113

-

-

2,436

2,201

-

-

Commitments with certain drawdown due within one year

Guarantees and contingent liabilities

Total guarantees and contingent liabilities

ANZ New Zealand guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio management and collateralrequirements for customers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do notnecessarily reflect future cash requirements.
Other contingent liabilities
On 11 March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action againstbanks in New Zealand for certain fees charged to New Zealand customers over the past six years. Proceedings were filed against the
Bank on 25 June 2013. The potential outcome of this litigation cannot be determined with any certainty at this stage.
ANZ New Zealand has other contingent liabilities in respect of actual and possible claims and court proceedings.
On 3 December 2014, the Commerce Commission and the Financial Markets Authority (FMA) announced settlements with the Bank
relating to the Commission's and the FMA's investigations into the promotion, sale and offer of interest rate swaps to rural customers
from 2005 to 2009; the settlement includes a payment fund of $18.5 million and a contribution to the Commission’s and the FMA's
costs.
An assessment of ANZ New Zealand’s likely loss in respect of these matters has been made on a case-by-case basis and provision
made where deemed necessary.

Australia and New Zealand Banking Group Limited - New Zealand Branch

65

Notes to the Financial Statements
34.

Structured Entities, Transferred Financial Assets, Fiduciary Activities and Insurance

Structured entities
ANZ New Zealand’s involvement with structured entities is mainly through securitisations and its funds management activities,
which are outlined further below. ANZ New Zealand has involvement with structured entities that may be established either by ANZ
New Zealand or by a third party.
Consolidated structured entities
Kingfisher NZ Trust 2008-1 (the Kingfisher Trust)
ANZ New Zealand has established the Kingfisher Trust as an in-house residential mortgage backed securities facility that can issue
securities meeting the RBNZ criteria to use as collateral in repurchase transactions with the RBNZ.
These assets do not qualify for derecognition as the Bank retains substantially all of the risks and rewards of the transferred assets.
As at 30 September 2014 and 30 September 2013 ANZ New Zealand had not entered into any repurchase agreements with the RBNZ
for residential mortgage backed securities and therefore no collateral had been accepted by the RBNZ under this facility.
ANZNZ Covered Bond Trust (the Covered Bond Trust)
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by
the Bank which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of the Covered Bond Trust of
issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The
assets of the Covered Bond Trust are not available to creditors of the Bank, although the Bank (or its liquidator or statutory manager)
may have a claim against the residual assets of the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond
Trust have been satisfied.
ANZ New Zealand continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as
security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.
Unconsolidated securitisations
ANZ New Zealand also has an interest in unconsolidated securitisation entities through the provision of funding facilities or holding
bonds or notes issued by such entities. ANZ New Zealand’s exposure to these entities is not material.
Transferred financial assets
Assets transferred to the Kingfisher Trust and the Covered Bond Trust
The Bank has purchased securities issued by both the Kingfisher Trust and the Covered Bond Trust in exchange for the transfer of therights to the cash flows associated with the identified residential mortgages. As at 30 September 2014, $15,270 million of assets were
held in the Kingfisher Trust and the Covered Bond Trust (30/09/2013 $11,687 million).
Repurchase transactions
Securities sold subject to repurchase agreements are not derecognised when substantially all the risks and rewards of ownership
remain with the Bank.
The following table sets out the carrying values assets transferred by the NZ Branch and ANZ New Zealand to other entities and theassociated liabilities to deliver the cashflows on those instruments.
ANZ New Zealand$ millions

NZ BranchNote

30/09/2014

30/09/2013

30/09/2014

30/09/2013

Carrying amount of assets transferred

28

47

108

-

-

Carrying amount of associated liabilities

28

47

107

-

-

Repurchase agreements

Australia and New Zealand Banking Group Limited - New Zealand Branch

66

Notes to the Financial Statements
Funds management and other fiduciary activities
Funds management
Certain entities that form part of ANZ New Zealand act as trustee and/or manager for a number of unit trusts and investment andsuperannuation funds. ANZ New Zealand provides private banking services to a number of clients, including investment advice andportfolio management. ANZ New Zealand is not responsible for any decline in performance of the underlying assets of the investors
due to market forces.
As funds under management are not controlled by ANZ New Zealand, they are not included in these financial statements. ANZ New
Zealand derives fee and commission income from the sale and management of investment funds and superannuation schemes, unit
trusts and the provision of private banking services to customers. ANZ New Zealand derives commission income from the sale ofthird party funds management products.
Some funds under management are invested in products owned or securities issued by ANZ New Zealand and are recorded asliabilities in the balance sheet. At 30 September 2014, $2,928 million of funds under management were invested in ANZ New
Zealand's own products or securities (30/09/2013 $3,054 million).
Custodial services
ANZ New Zealand provides custodial services to customers in respect of assets that are beneficially owned by those customers.
Funds managed and held in custody by ANZ New Zealand$ millions

ANZ New Zealand
30/09/2014

30/09/2013

Kiwisaver and other managed funds

7,205

5,506

The Bonus Bonds Trust

3,196

3,259

715

833

ANZ PIE Fund1
2

Other investment portfolios

8,807

7,354

Total funds under management

19,923

16,952

Funds held in custody or as nominee on behalf of customers

7,427

6,365

110

95

Funds management fee income from structured entities
1

2

ANZ New Zealand established, and is considered to be the sponsor of, the ANZ PIE Fund. The ANZ PIE Fund invests only in deposits with the Bank. ANZ New Zealanddoes not receive a management fee from, and does not have an interest in, the ANZ PIE Fund.
These funds are not structured entities as they are investment portfolios managed on behalf of customers.

Insurance business
ANZ New Zealand conducts insurance business through its subsidiaries OnePath Life (NZ) Limited and OnePath Insurance Services(NZ) Limited (together OnePath Insurance). OnePath Insurance provides a range of risk transfer insurance products, including life,
lump sum trauma/disablement, income protection and medical cover. In addition, other entities within ANZ New Zealand market
and distribute a range of insurance products which are underwritten by OnePath Insurance, or by third party insurance companies.
The aggregate amount of insurance business in this group comprises assets totalling $850 million (30/09/2013 $779 million), which
is 0.6% (30/09/2013 0.6%) of the total consolidated assets of ANZ New Zealand.
OnePath Life (NZ) Limited and OnePath Insurance Services (NZ) Limited propose to amalgamate and continue as OnePath Life (NZ)
Limited. The proposed amalgamation is subject to necessary consents and approvals, including from the RBNZ.
Risk management
The Bank and entities that form part of ANZ New Zealand participating in the activities identified above have in place policies andprocedures to ensure that those activities are conducted in an appropriate manner. Should adverse conditions arise, it is consideredthat these policies and procedures will minimise the possibility that these conditions will adversely impact the Bank or ANZ New
Zealand. The policies and procedures include comprehensive and prominent disclosure of information regarding products, andformal and regular review of operations and policies by management.

Australia and New Zealand Banking Group Limited - New Zealand Branch

67

Notes to the Financial Statements
35. Additional Disclosures

NZ Branch Funding$ millions

Total liabilities of the NZ Branch less amounts due to related parties

30/09/2014

28

Overseas Banking Group Profitability and Size
AUD millions

30/09/2014

Profit for the year ended 30/09/20141

7,271

Net profit after tax for the year to 30/09/2014 as a percentage of average total assets

0.97%

Total assets
Percentage change in total assets in the year to 30/09/2014
1772,092
9.83%

Net profit after tax for the year includes $12 million of profit attributable to non-controlling interests.

Overseas Banking Group asset quality
AUD millions

30/09/2014

Gross impaired assets

2,889

Gross impaired assets as a percentage of total assets

0.4%

Individual provision

1,176

Individual provision as a percentage of gross impaired assets

40.7%

Collective provision

2,757

Australia and New Zealand Banking Group Limited - New Zealand Branch

68

Notes to the Financial Statements
36. Changes to Comparatives
Certain amounts in the comparative information have been reclassified to conform with current period financial statement
presentations.
The classification of the balance sheet was changed during the period to more consistently reflect the nature of the financial assets
and liabilities. Prior to this reclassification, the balance sheet was classified according to both nature and counterparty. The key
changes include:
Assets•••••Securities purchased under agreements to resell in less than three months previously reported in liquid assets and due fromother financial institutions are now classified as cash.
Money at call, bills receivable and remittances in transit previously reported in liquid assets are now classified as either cash,
settlement balances receivable or net loans and advances depending on the nature of the asset.
Loans to other banks previously reported in due from other financial institutions are now classified as net loans and advances.
Collateral paid previously reported in due from other financial institutions is now classified separately.
Issued security settlements previously reported in other assets are now classified as settlement balances receivable.

Liabilities•••

Loans from other banks previously reported in due to other financial institutions are now classified as deposits and otherborrowings.
Collateral received previously reported in due to other financial institutions is now classified separately.
Issued security settlements previously reported in other liabilities are now classified as settlement balances payable.

Minor changes in the overall total assets and total liabilities have also occurred due to an amendment to NZ IAS19 Employee Benefits.
The tables below show the impact of these changes on the balance sheet, together with the impact of the change in the definition of
cash and cash equivalents explained in note 1. Associated amounts in the income statement, statement of comprehensive income
and cash flow statement have been restated accordingly, and the impact of the changes to these statements is not material.
ANZ New Zealand

30/09/2013
Previously
reported

Liquid assets
Due from other financial institutions

1/10/2012

ChangeCurrently
reported

Previously
reported

ChangeCurrently
reported

2,496(2,496)-

2,831(2,831)-

1,711(1,711)-

1,760(1,760)

-

Cash

-

2,347

2,347

-

2,818

2,818

Settlement balances receivable

-

515

515

-

228

228
1,256

$ millions

AssetsCollateral paid

-

1,002

1,002

-

1,256

Available-for-sale assets

782

160

942

57

100

157

Net loans and advances

99,765348

100,113

96,094237

96,331Other assets

735

(165)

570

596

(48)

548

Deferred tax assets

36

6

42

92

8

100

All other assets

24,322-

24,32229,545-29,545

Total assets

129,8476

129,853

130,9758

130,983

9,871(9,871)-

11,012(11,012)-

Settlement balances payable

-

1,114

1,114

-

1,223

1,223

Collateral received

-

438

438

-

257

257

Deposits and other borrowings

77,696

10,31788,01373,652

11,487

85,139Due to immediate parent company

1,766(1,766)-

1,766(1,766)-

Payables and other liabilities

1,473

(213)

1,260

1,588

(160)

1,428

Liabilities
Due to other financial institutions

All other liabilities

29,286-29,28633,780-33,780Total liabilities

120,092

19

120,111

121,79829

121,827

Equity

9,755

(13)

9,742

9,177

(21)

9,156

Cash and cash equivalents in cash flow statement

3,002

(657)

2,345

3,293

(526)

2,767

Australia and New Zealand Banking Group Limited - New Zealand Branch

69

Notes to the Financial Statements
NZ Branch$ millions

30/09/2013

1/10/2012

Previously
reported

Currently
reported

Previously
reported

ChangeChange141-

Currently
reported

(141)

-

38

(38)

-

141

141

-

38

38

AssetsDue from other financial institutions
Cash
Settlement balances receivable

-

314

314

-

304

304

314

(314)

-

304

(304)

-

All other assets

9,275

-

9,275

9,456

-

9,456

Total assets

9,730

-

9,730

9,798

-

9,798

8,372

(8,372)-

9,273(9,273)9,273

Due from the Bank

Liabilities
Due to other financial institutions
Deposits and other borrowings

-

8,372

8,372

-

9,273

All other liabilities

1,081

-

1,081

298

-

298

Total liabilities

9,453

-

9,453

9,571

-

9,571

Equity

277

-

277

227

-

227

Cash and cash equivalents in cash flow statement

141

-

141

38

-

38

Australia and New Zealand Banking Group Limited - New Zealand Branch

70

Directorate and Auditors
Any document or communication may be sent to any
Director or the Chief Executive Officer – NZ Branch at theRegistered Office. The document or communication should
be marked for the attention of that Director or the Chief
Executive Officer.
Directors’ Interests
The Board of the Ultimate Parent Bank has adopted
procedures to ensure that conflicts and potential conflicts ofinterest between a Director’s duties to the Ultimate Parent
Bank and their own interests are avoided or dealt with.
Pursuant to these procedures:a.

b.

each Director should disclose to all Directors any
material personal interest they have in any matter which
relates to the affairs of the Ultimate Parent Bank and anyother interest which the Director believes is appropriate
to disclose in order to avoid an actual conflict of interestor the perception of a conflict of interest. This disclosure
should be made as soon as practicable after the Director
becomes aware of their interest or the need to make adisclosure; anda Director who has an interest of the type referred to ina. above in a matter that is to be considered at a
Directors' meeting, must not vote on the matter nor bepresent while the matter is considered at the meeting,unless a majority of Directors who do not have such aninterest in the matter agree that the interest should notdisqualify such Director from being present while thematter is being considered and from voting on thematter. The minutes of the meeting should record thedecision taken by the Directors who do not have aninterest in the matter.

In addition, Standing Notices about Interests are maintainedfor each Director. If the Director's interests change, theDirector shall disclose the change as soon as practicable andan updated Standing Notice shall be tabled at the next Board
meeting and recorded in the minutes of that meeting.
Transactions with Directors and the Chief Executive Officer,
NZ Branch
There are no transactions entered into by any Director, theChief Executive Officer – NZ Branch, or any immediate
relative or close business associate of any Director or the
Chief Executive Officer – NZ Branch, with any part of ANZ
New Zealand which has been either entered into on terms
other than those which would in the ordinary course ofbusiness be given to any other person of like circumstancesor means or which could otherwise be reasonably likely to
influence materially the exercise of the Directors' or Chief
Executive Officer – NZ Branch duties in respect of the NZ
Branch and ANZ New Zealand.

Board Members as at 3 December 2014
The names, qualifications, occupation, country of residence
and material external directorships of each director of the
Ultimate Parent Bank as at the date this Disclosure Statement
was signed were:

ChairmanDavid Michael Gonski, AC
BCom, LLB, FAICD(LIFE), FCPA
Company Director
Sydney, Australia
Mr Gonski is an ex-officio member of all Board Committees,
including Chair of the Governance Committee.
Chairman: Coca-Cola Amatil Limited, The University of New
South Wales Foundation Limited, and Sydney Theatre
Company Ltd
Director/Member: Singapore Telecommunications Limited,
Australian Philanthropic Services Limited, ASIC External
Advisory Panel and Lowy Institute for International Policy
Chancellor: University of New South Wales

Chief Executive Officer – Australia and New Zealand
Banking Group Limited
Michael Roger Pearson Smith, OBE
BSc (Hons) (City Lond), Hon LLD (Monash)
Chief Executive Officer and Executive Director
Melbourne, Australia
External Directorships
Executive Chairman: Chongqing Mayor's International
Economic Advisory Council
Director: the Financial Markets Foundation for Children,
Financial Literacy Australia Limited, the International
Monetary Conference and the Institute of International
Finance
Member: Australian Bankers’ Association Incorporated, Asia
Business Council, Australian Government Financial Literacy
Advisory Board, Shanghai International Financial Advisory
Council, and the Business Council of Australia
Fellow: The Hong Kong Management Association

Non-Executive Directors
Ilana Rachel Atlas
BJuris (Hons), LLB (Hons), LLM
Company Director
Sydney, Australia
External Directorships
Chairman: The Bell Shakespeare Company Limited
Director: Oakridge Wines Pty Limited, Coca-Cola Amatil
Limited, Human Rights Law Centre Ltd, Treasury Corporationof New South Wales, Jawun, Westfield Corporation Limited

Australia and New Zealand Banking Group Limited - New Zealand Branch

71

Directorate and Auditors
Paula Jane Dwyer

Ian John Macfarlane, AC

BCom, FCA, SF Fin, FAICD
Company Director
Melbourne, Australia

BEc (Hons), MEc, Hon DSc (Syd), Hon DSc (UNSW), Hon DCom
(Melb), Hon DLitt (Macq), Hon LLD (Monash)
Company Director
Sydney, Australia

Ms Dwyer is Chair of the Audit Committee and a member ofthe Risk Committee and Human Resources Committee.
External Directorships
Chairman: Healthscope Limited, Tabcorp Holdings Limited
Director: Lion Pty Ltd
Member: Kirin International Advisory Board, and ASIC
External Advisory Panel
Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is Chair of the Technology Committee and a memberof the Risk Committee and Human Resources Committee.
External Directorships
Chairman: Civil Aviation Authority of Singapore, The Islamic
Bank of Asia Limited, and General Atlantic Singapore Fund
Pte Ltd
Director: Rolls-Royce Holdings plc, General Atlantic
Singapore Fund FII Pte Ltd, Singapore Exchange Limited,
Caldecott Inc., and Cluny Lodge Pte Ltd
Member: Governing Board of Lee Kuan Yew School of Public
PolicySpecial Advisor: General Atlantic
Consultant: Capital International Inc Advisory Board
President: INSEAD South East Asia Council
Graeme Richard Liebelt
BEc (Hons), FAICD, FTSE, FAIM
Company Director
Melbourne, Australia
Mr Liebelt is Chair of the Human Resources Committee, and amember of the Risk Committee, Governance Committee andTechnology Committee
External Directorships
Chairman: Amcor Limited and The Global Foundation
Deputy Chairman: Melbourne Business School
Director: The Australian Foundation Investment Company
Limited, and Carey Baptist Grammar School

Mr Macfarlane is Chair of the Risk Committee and a memberof the Governance Committee and Audit Committee.
External Directorships
Director: Woolworths Limited and the Lowy Institute forInternational Policy
Member: Council of International Advisors to the China
Banking Regulatory Commission, International Advisory
Board of Goldman Sachs, and International Advisory Board of
CHAMP Private Equity
John Thomas Macfarlane
BCom, MCom (Hons)
Company Director
Melbourne, Australia
Mr Macfarlane is a member of the Audit Committee, Risk
Committee and Technology Committee.
External Directorships
Chairman: AGInvest Holdings Limited (MyFarm Limited)
Director: Craigs Investment Partners Limited, Colmac GroupPty Ltd and St. Vincent’s Institute of Medical Research

Chief Executive Officer, Australia and New Zealand
Banking Group – New Zealand Branch
Anthony John Bradshaw
BCA, CA
Chief Executive Officer– NZ Branch
Wellington, New ZealandAuditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

72

Conditions of Registration
Conditions of Registration, applicable as at 30 September
2014. These Conditions of Registration have applied from 30
March 2014.
The registration of Australia and New Zealand Banking Group
Limited (the registered bank) in New Zealand is subject to thefollowing conditions:1.

That the banking group does not conduct any nonfinancial activities that in aggregate are material relative to
its total activities.

b)

If the entity conducts insurance business and its
business does not predominantly consist of insurance
business and the entity is not a subsidiary of anotherentity in the banking group whose businesspredominantly consists of insurance business, theamount of the insurance business to sum is the total
liabilities relating to the entity’s insurance businessplus the equity retained by the entity to meet thesolvency or financial soundness needs of its insurance
business.

In determining the total amount of the banking group’s
insurance businessa)b)

all amounts must relate to on balance sheet items
only, and must comply with generally accepted
accounting practice; andif products or assets of which an insurance
business is comprised also contain a noninsurance component, the whole of suchproducts or assets must be considered part of theinsurance business.

the Reserve Bank has advised that it has no objection
to that appointment.

6.

That Australia and New Zealand Banking Group Limited
complies with the following minimum capital adequacy
requirements, as administered by the Australian Prudential
Regulation Authority:

For the purposes of this condition of registration, thebanking group’s insurance business is the sum of thefollowing amounts for entities in the banking group:
If the business of an entity predominately consists of
insurance business and the entity is not a subsidiary of
another entity in the banking group whose businesspredominantly consists of insurance business, theamount of the insurance business to sum is the total
consolidated assets of the group headed by the entity;andb)That Australia and New Zealand Banking Group Limited
complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.

That the banking group’s insurance business is not greaterthan 1% of its total consolidated assets.

a)the Reserve Bank has been supplied with a copy of thecurriculum vitae of the proposed appointee; and5.

In this condition of registration, the meaning of “material”
is based on generally accepted accounting practice.
2.

a)

7.

a)

Common Equity Tier 1 capital of the Australia and New
Zealand Banking Group Limited is not less than 4.5
percent of risk weighted exposures;b)

Tier 1 capital of the Australia and New Zealand
Banking Group Limited is not less than 6 percent ofrisk weighted exposures;c)

Total capital of Australia and New Zealand Banking
Group Limited is not less than 8 percent of risk
weighted exposures.

That the business of the registered bank in New Zealand isrestricted to:a)acquiring for fair value, and holding, mortgages
originated by ANZ Bank New Zealand Limited; andb)

any other business for which the prior written
approval of the Reserve Bank of New Zealand has
been obtained; andc)activities that are necessarily incidental to the businessspecified in paragraphs (a) and (b).

8.

That the value of the mortgages held by the registeredbank in New Zealand must not exceed $15 billion inaggregate.

9.

That the registered bank in New Zealand does not incur
any liabilities except:a)to the government of New Zealand in respect oftaxation and other charges;b)

to other branches or the head office of the registered
bank;

c)

to trade creditors and staff;d)to ANZ Bank New Zealand Bank Limited in respect ofactivities, other than borrowing, that are necessarily
incidental to the business specified in paragraphs (a)and (b) of condition 7; ande)any other liabilities for which the prior written
approval of the Reserve Bank has been obtained.

For the purposes of this condition of registration,“insurance business” means the undertaking orassumption of liability as an insurer under a contractof insurance:“insurer” and “contract of insurance” have the same
meaning as provided in sections 6 and 7 of the
Insurance (Prudential Supervision) Act 2010.
3.

That the business of the registered bank in New Zealanddoes not constitute a predominant proportion of the totalbusiness of the registered bank.

4.

That no appointment to the position of the New Zealandchief executive officer of the registered bank shall be madeunless:In these conditions of registration:“banking group”a)means the New Zealand business of the registeredbank and its subsidiaries as required to be reported ingroup financial statements for the group’s New
Zealand business under section 461B(2) of the
Financial Markets Conduct Act 2013 (unless paragraph(b) applies); orAustralia and New Zealand Banking Group Limited - New Zealand Branch

Conditions of Registrationb)

if the Financial Reporting Act 1993 applies to theregistered bank, means the means the New Zealandbusiness of the registered bank and its subsidiaries as
required to be reported in group financial statements
for the group's New Zealand business under section
9(2) of the Financial Reporting Act 1993:“business of the registered bank in New Zealand” a)means the New Zealand business of the registeredbank as defined in the requirement for financial
statements for New Zealand business in section
461B(2) of the Financial Markets Conduct Act 2013
(unless paragraph (b) applies); orb)

if the Financial Reporting Act 1993 applies to theregistered bank, means the New Zealand business of
the registered bank as required to be reported in thefinancial statements under section 8(2) of the Financial
Reporting Act 1993:“generally accepted accounting practice”a)has the same meaning as in section 8 of the Financial
Reporting Act 2013 (unless paragraph (b) applies); orb)means generally accepted accounting practice within
the meaning of section 3 of the Financial ReportingAct 1993 if the registered bank is required to prepare
financial statements in accordance with that practice.

73

Australia and New Zealand Banking Group Limited - New Zealand Branch

74

Directors’ and New Zealand Chief Executive Officer’s Statement
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director of the Ultimate Parent Bank and theChief Executive Officer – NZ Branch believes that:(i)

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (Overseas
Incorporated Registered Banks) Order 2014; and(ii)

The Disclosure Statement is not false or misleading.

Over the year ended 30 September 2014, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive Officer– NZ Branch believes that:(i)

The Ultimate Parent Bank has complied with all Conditions of Registration that applied during that period;(ii)

The NZ Branch and the Bank had systems in place to monitor and control adequately the material risks of Relevant Members of
ANZ New Zealand including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk andother business risks, and that those systems were being properly applied.

This Disclosure Statement is dated 3 December 2014, and has been signed by the Chairman of the Ultimate Parent Bank, onbehalf of all Directors, and by the Chief Executive Officer – NZ Branch.

David Gonski, AC
Chairman,on behalf of the Directors:
Ilana Atlas
Paula Dwyer
Lee Hsien Yang
Graeme Liebelt
Ian Macfarlane, ACJohn Macfarlane
Michael Smith, OBE

Anthony Bradshaw
Chief Executive Officer – NZ BranchAustralia and New Zealand Banking Group Limited - New Zealand Branch

75

Independent Auditor’s Report
To the Directors of Australia and New Zealand Banking Group Limited
Report on the NZ Branch and ANZ New Zealand Disclosure Statement
We have audited the accompanying financial statements and supplementary information of Australia and New Zealand Banking
Group Limited – New Zealand Branch (the NZ Branch) and its related entities (ANZ New Zealand) on pages 5 to 69 of the DisclosureStatement. The financial statements comprise the balance sheets as at 30 September 2014, the statements of income,comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies
and other explanatory information of the NZ Branch and ANZ New Zealand. The supplementary information comprises theinformation that is required to be disclosed under the Registered Bank Disclosure Statements (Overseas Incorporated Registered
Banks) Order 2014 (the Order).
Directors' Responsibility for the Disclosure Statement
The Directors are responsible for the preparation of the NZ Branch and ANZ New Zealand Disclosure Statement, including financial
statements prepared in accordance with Clause 25 of the Order, generally accepted accounting practice in New Zealand andInternational Financial Reporting Standards that give a true and fair view of the matters to which they relate. The Directors are also
responsible for such internal controls as they determine are necessary to enable the preparation of the NZ Branch and ANZ New
Zealand financial statements that are free from material misstatement whether due to fraud or error.
The Directors are responsible for the preparation and fair presentation of supplementary information, in accordance with Schedules
2, 4, 7, 10, 11 and 13 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Disclosure Statement, including the financial statements prepared in accordancewith Clause 25 of the Order and the supplementary information disclosed in accordance with Schedules 4, 7, 10, 11 and 13 of theOrder. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the NZ Branch
and ANZ New Zealand financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the NZ Branch and ANZ
New Zealand financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal controls relevant to the NZ Branch and ANZ New Zealand’s preparation of the financial statements thatgives a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the NZ Branch and ANZ New Zealand’sinternal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates, as well as evaluating the presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
KPMG has also provided other audit related services to the NZ Branch and ANZ New Zealand. In addition, certain partners andemployees of our firm may also deal with the NZ Branch and ANZ New Zealand on normal terms within the ordinary course of
trading activities of the NZ Branch and ANZ New Zealand. These matters have not impaired our independence as auditors of the NZ
Branch and ANZ New Zealand. We have no other relationship with, or interest in, the NZ Branch and ANZ New Zealand.
Opinion on the Disclosure Statement
In our opinion the Disclosure Statement of the NZ Branch and ANZ New Zealand on pages 5 to 69 (excluding the supplemental
information):a.

complies with generally accepted accounting practice in New Zealand;b.

complies with International Financial Reporting Standards; andc.

gives a true and fair view of the financial position as at 30 September 2014 and of their financial performance and cash flows forthe year ended on that date.

Australia and New Zealand Banking Group Limited - New Zealand Branch76

Opinion on Supplementary Information
In our opinion, the supplementary information that is required to be disclosed in accordance with Schedules 4, 7, 10, 11 and 13 of
the Order, and is included within notes 13, 14, 26, 27, 29, 34 and 35 of the Disclosure Statement:a.

has been prepared, in all material respects, in accordance with the guidelines issued pursuant to section 78(3) of the Reserve
Bank of New Zealand Act 1989 and any Conditions of Registration;b.

is in accordance with the books and records of the NZ Branch and ANZ New Zealand; andc.

fairly states the matters to which it relates in accordance with those Schedules.

Report on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
We have reviewed the Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy, as disclosed
in note 26 of the Disclosure Statement for the year ended 30 September 2014.
Directors’ Responsibility for the Supplementary Information Relating to Credit and Market Risk Exposures and Capital Adequacy
The Directors are responsible for the preparation of supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy that is required to be disclosed under Schedule 9 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy based on our review. We conducted our review in accordance with the review engagement standard RS-1
Statement of Review Engagement Standards issued by the External Reporting Board. Those standards require that we comply withethical requirements and plan and perform the review to obtain limited assurance about whether the supplementary information
relating to Credit and Market Risk Exposures and Capital Adequacy is, in all material respects:a.

prepared in accordance with Capital Adequacy Framework (Standardised Approach) (BS2A); andb.

disclosed in accordance with Schedule 9 of the Order.

A review is limited primarily to enquiries of NZ Branch and ANZ New Zealand personnel and analytical review procedures applied to
the financial data, and thus provides less assurance than an audit. We have not performed an audit in respect of the Credit andMarket Risk Exposures and Capital Adequacy disclosures, and accordingly, we do not express an audit opinion on these disclosures.
Opinion on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
Based on our review, nothing has come to our attention that causes us to believe that the supplementary information relating toCredit and Market Risk Exposures and Capital Adequacy prescribed by Schedule 9 of the Order, and disclosed in note 26 of theDisclosure Statement, is not, in all material respects:a.

prepared in accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A); andb.

disclosed in accordance with Schedule 9 of the Order.

Report on Other Legal and Regulatory Requirements
In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, and clauses 2(1)(d) and2(1)(e) of Schedule 1 of the Order, we report that:a.

we have obtained all the information and explanations we have required; andb.

in our opinion, proper accounting records have been kept by the NZ Branch and ANZ New Zealand, as far as appears from our
examination of those records.

Wellington
3 December 2014

Australia and New Zealand Banking Group Limited - New Zealand Branch

77

Index
Contents and Glossary of Terms
General Disclosures
Summary of Financial Statements
Income Statement
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement
1. Significant Accounting Policies
2. Critical Estimates and Judgement Used in Applying Accounting Policies
3. Risk Management Policies
4. Income5. Expenses
6. Income Tax
7. Segmental Analysis
8. Cash
9. Trading Securities
10. Derivative Financial Instruments
11. Available-for-sale Assets
12. Net Loans and Advances
13. Provision for Credit Impairment
14. Impaired Assets
15. Subsidiaries and Associates
16. Other Assets
17. Goodwill and Other Intangible Assets
18. Deposits and Other Borrowings
19. Payables and Other Liabilities
20. Provisions
21. Bonds and Notes
22. Subordinated Debt
23. Related Party Transactions
24. Current and Non-current Assets and Liabilities
25. Share Capital
26. Capital Adequacy
27. Financial Risk Management
28. Financial Assets Pledged as Collateral and Offsetting Financial Instruments
29. Concentrations of Credit Risk to Individual Counterparties
30. Classification of Financial Instruments and Fair Value Measurements
31. Notes to the Cash Flow Statements
32. Commitments
33. Credit Related Commitments and Contingent Liabilities
34. Structured Entities, Transferred Financial Assets, Fiduciary Activities and Insurance
35. Additional Disclosures
36. Changes to Comparatives
Directorate and Auditors
Conditions of Registration
Directors’ and New Zealand Chief Executive Officer’s Statement
Independent Auditor’s Report
Index

1
1
4
5
5
6
7
8
9
16
18
20
21
22
23
25
25
26
28
28
29
30
30
31
31
31
32
32
32
33
34
36
37
38
40
58
58
59
63
63
64
65
67
68
70
72
74
75
77