ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2016
NUMBER 82 | ISSUED AUGUST 2016

ANZ Bank New Zealand Limited

REGISTERED BANK DISCLOSURE STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2016

CONTENTS
General Disclosures

2

Income Statement

3Statement of Comprehensive Income

3

Balance Sheet

4

Condensed Cash Flow Statement

5

Statement of Changes in Equity

6

Notes to the Financial Statements

7

Directors' Statement

16

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 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 Ground Floor, ANZ Centre, 23-29
Albert Street, Auckland, New Zealand, which is also the
Banking Group’s address for 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 (New Zealand Incorporated Registered
Banks) Order 2014; and(m) Any term or expression which is defined in, or in themanner prescribed by, the Order shall have themeaning given in or prescribed by the Order.

ANZ Bank New Zealand Limited

2

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

Credit Rating Information
The Bank has three credit ratings, which are applicable to its
long-term senior unsecured obligations. On 7 July 2016,
Standard & Poor’s changed the outlook on the Bank from
Stable to Negative.
The Bank’s credit ratings are:Rating Agency
Standard & Poor’s

Current Credit
Rating
Qualification
AAOutlook Negative

Moody’s Investors Service

Aa3

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Guarantors
No obligations of the Bank are guaranteed as at 12 August
2016.

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 June 2016 of
NZ$4,739 million, pursuant to a guarantee which is secured
over a pool of assets. The Covered Bond Guarantor’s addressfor service is Level 9, 34 Shortland Street, Auckland, New
Zealand. The Covered Bond Guarantor is not a member ofthe Banking Group and has no credit ratings applicable to its
long term senior unsecured obligations payable in New
Zealand dollars. The Covered Bonds have been assigned along term rating of Aaa and AAA by Moody’s InvestorsService and Fitch Ratings respectively. Details of the pool ofassets that secure this guarantee are provided in Note 7.

Other Matters
APRA has reviewed the level of exposures that can beprovided to the respective New Zealand banking subsidiaries
and branches (New Zealand operations) of the four
Australian parent banks, including the Ultimate Parent Bank.
APRA has confirmed that by 1 January 2021 no more than
5% of the Ultimate Parent Bank’s Level 1 Tier 1 capital cancomprise non-equity exposures to its New Zealandoperations during ordinary times. Exposures in excess of thislimit must be reduced in equal percentages over the five
year transition period and may not increase above theexposures as at 30 June 2015. This limit does not include
holdings of capital instruments or eligible secured
contingent funding support provided to the Bank during
times of financial stress.
The Ultimate Parent Bank established a New Zealand branchwhich was registered on 5 January 2009. The Bank sells, fromtime-to-time, residential loans and mortgages into the NZ
Branch to provide funding for the Bank’s business. As at 30
June 2016, the NZ Branch held approximately NZ$6.6 billionof residential loans. To satisfy APRA’s requirements describedabove, the Bank intends to repay this funding at
approximately NZ$1.6 billion per annum over the five year
transition period ending 31 December 2020.
APRA has also clarified that contingent funding support by
the Ultimate Parent Bank to the Bank during times offinancial stress must be provided on terms that are
acceptable to APRA and, in aggregate with all otherexposures to its New Zealand operations, must not exceed
50% of the Ultimate Parent Bank’s Level 1 Tier 1 capital. At
present, only covered bonds meet APRA’s criteria forcontingent funding. On this basis, we believe that the
Ultimate Parent Bank will continue to be able to provide
financial support to the Bank.

Directorate
Nigel Williams became a Director on 14 December 2015 andceased as alternate director for Michael Smith on 21
December 2015.
Michael Smith retired as a Director on 21 December 2015.

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

ANZ Bank New Zealand Limited

3

INCOME STATEMENT
Unaudited

Unaudited

9 months to

9 months toYear to30/06/2016

30/06/2015

30/09/2015

Note

Audited

NZ$m

NZ$m

NZ$m

Interest income

4,837

5,197

6,926

Interest expense

2,590

3,059

4,051

Net interest income

2,247

2,138

2,875

Net trading gains

44

218

262

Net funds management and insurance income

325

280

385

318

367

523

2

4

5

2,936

3,007

4,050

1,197

1,134

1,512

1,739

1,873

2,538

105

56

74

Profit before income tax

1,634

1,817

2,464

Income tax expense

449

502

681

Profit after income tax

1,185

1,315

1,783

Audited

Other operating income2

Share of associates' profit
Operating income
Operating expenses

2

Profit before credit impairment and income tax
Credit impairment charge

5

STATEMENT OF COMPREHENSIVE INCOME
Unaudited

Unaudited

9 months to

9 months toYear to30/06/2016
NZ$m

30/06/2015
NZ$m

30/09/2015
NZ$m

1,185

1,315

1,783

Actuarial loss on defined benefit schemes

(6)

(26)

(32)

Income tax credit relating to items that will not be reclassified

2

7

9

Total items that will not be reclassified to profit or loss

(4)

(19)

(23)

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

Items that may be reclassified subsequently to profit or loss
Unrealised gains recognised directly in equity

78

2

12

Realised losses / (gains) transferred to income statement

4

(16)

(16)

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

(23)

4

1

Total items that may be reclassified subsequently to profit or loss

59

(10)

(3)

1,240

1,286

1,757

Total comprehensive income for the period

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

ANZ Bank New Zealand Limited

4

BALANCE SHEET
Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Cash

1,836

3,643

2,380

Settlement balances receivable

550

346

309

Collateral paid

2,326

2,219

1,929

Trading securities

12,746

12,257

12,139

120

141

151
17,658

Note

AssetsInvestments backing insurance contract liabilities
Derivative financial instruments

21,505

16,507

Current tax assets

135

78

-

Available-for-sale assets

2,831

782

1,428

Net loans and advances

113,107105,262

106,357

Other assets

4

723

717

740

Life insurance contract assets

552

633

541

Investments in associates

4

90

4

Premises and equipment

398

374

388

Goodwill and other intangible assets

3,418

3,471

3,492

Total assets

160,332

146,428

147,527

Interest earning and discount bearing assets

133,307

124,684

124,785

1,764

1,620

1,844

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

8

Derivative financial instruments

761

1,278

1,687

99,941

91,89090,67817,23022,674

15,957

Current tax liabilities

-

-

87

Deferred tax liabilities

155

98

124

Payables and other liabilities

1,571

1,689

1,487

Provisions

190

195

191

17,10819,313

19,403

Debt issuances

9

Subordinated debt

10

3,282

2,343

2,343

Total liabilities

147,446

134,383

135,074

Net assets

12,886

12,045

12,453

8,888

8,213

8,888

49

(17)

(10)

3,949

3,849

3,575

EquityShare capital
Reserves
Retained earnings
Total equity

12,886

12,045

12,453

Interest and discount bearing liabilities

114,532

109,679

108,629

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

ANZ Bank New Zealand Limited

5

CONDENSED CASH FLOW STATEMENT
Unaudited

Unaudited

9 months to

9 months to

AuditedYear to30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Cash flows from operating activities
Interest received

4,839

5,129

6,857

Interest paid

(2,573)(2,967)(3,985)

Other cash inflows provided by operating activities

733

688

1,054

Other cash outflows used in operating activities(1,712)(1,679)(1,974)

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

1,287

1,171

1,952

Net changes in operating assets and liabilities(1,606)(420)(1,498)Net cash flows provided by / (used in) operating activities

(319)

751

454

Cash inflows provided by investing activities

38

-

-

Cash outflows used in investing activities

(69)

(77)

(132)

Net cash flows used in investing activities

(31)

(77)

(132)

Cash flows from investing activities

Cash flows from financing activities
Cash inflows provided by financing activities

4,845

4,296

6,384

Cash outflows used in financing activities(5,087)(3,089)(6,065)

Net cash flows provided by / (used in) financing activities

(242)

1,207

319

Net increase / (decrease) in cash and cash equivalents

(592)

1,881

641

Cash and cash equivalents at beginning of the period

2,471

1,830

1,830

Cash and cash equivalents at end of the period

1,879

3,711

2,471

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

ANZ Bank New Zealand Limited

6

STATEMENT OF CHANGES IN EQUITY

As at 1 October 2014 (Audited)

Share capital

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

8,213

-

(7)

3,575

11,781
1,315

Retainedearnings

Total
equityProfit after income tax

-

-

-

1,315

Unrealised gains recognised directly in equity

-

1

1

-

2

Realised gains transferred to the income statement

-

-

(16)

-

(16)

Actuarial loss on defined benefit schemes

-

-

-

(26)

(26)

Income tax credit on items recognised directly in equity

-

-

4

7

11

Total comprehensive income for the period

-

1

(11)

1,296

1,286

Ordinary dividend paid

-

-

-

(1,015)(1,015)Preference dividend paid

-

-

-

(7)

(7)

As at 30 June 2015 (Unaudited)

8,213

1

(18)

3,849

12,045As at 1 October 2014 (Audited)

8,213

-

(7)

3,575

11,781

Profit after income tax

-

-

-

1,783

1,783

Unrealised gains recognised directly in equity

-

-

12

-

12

Realised gains transferred to the income statement

-

-

(16)

-

(16)

Actuarial loss on defined benefit schemes

-

-

-

(32)

(32)

Income tax credit on items recognised directly in equity

-

-

1

9

10

Total comprehensive income for the period

-

-

(3)

1,760

1,757

Ordinary shares issued

675

-

-

-

675

Ordinary dividend paid

-

-

-

(1,745)(1,745)Preference dividend paid

-

-

-

(15)

(15)

As at 30 September 2015 (Audited)

8,888

-

(10)

3,575

12,453

Profit after income tax

-

-

-

1,185

1,185

Unrealised gains recognised directly in equity

-

-

78

-

78

Realised losses transferred to the income statement

-

-

4

-

4

Actuarial loss on defined benefit schemes

-

-

-

(6)

(6)

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

-

-

(23)

2

(21)

Total comprehensive income for the period

-

-

59

1,181

1,240

Ordinary dividend paid

-

-

-

(800)

(800)

Preference dividend paid

-

-

-

(7)

(7)

8,888

-

49

3,949

12,886As at 30 June 2016 (Unaudited)

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

ANZ Bank New Zealand Limited

7

NOTES TO THE FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIES(i)

Reporting entity and statement of compliance
These interim financial statements are for the Banking Groupfor the nine months ended 30 June 2016. They have been
prepared in accordance with New Zealand Generally
Accepted Accounting Practice as appropriate for profit
oriented entities, the requirements of NZ IAS 34 Interim
Financial Reporting, IAS 34 Interim Financial Reporting and theOrder, and should be read in conjunction with the Banking
Group’s financial statements for the year ended 30
September 2015.

(ii)

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

2.

derivative financial instruments, including in the caseof fair value hedging, the fair value of any applicable
underlying exposure;financial instruments held for trading;financial assets treated as available-for-sale; andfinancial instruments designated at fair value throughprofit and loss.

(iii) Changes in accounting policies
With the exception of software changes in note 2, theaccounting policies adopted by the Banking Group are
consistent with those adopted and disclosed in the previous
full year Disclosure Statement.
(iv) Presentation currency and rounding
The amounts contained in the financial statements arepresented in millions of New Zealand dollars, unlessotherwise stated.
(v)

Comparatives
Certain amounts in the comparative information have been
reclassified to ensure consistency with the current period’s
presentation.

(vi) Principles of consolidation
The financial statements consolidate the financial statementsof the Bank and its subsidiaries.

OTHER OPERATING INCOME AND EXPENSES

Other operating income
Unaudited

Unaudited

9 months to

9 months to

AuditedYear to30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Net fee income

316

304

404

Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value

(28)

25

64

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

1

(2)

1

Other income

29

40

54

Total other operating income

318

367

523

Operating expenses
During the nine months ended 30 June 2016, the Banking Group changed the application of its accounting policy for the capitalisation of
expenditure on internally generated software assets effective from 1 October 2015. The change aligns the accounting policy for software
assets with the rapidly changing technology landscape and the Banking Group’s evolving digital strategy by increasing the threshold forcapitalisation of software development costs and directly expensing more project related costs. The change does not affect the Banking
Group’s total investment in technology but does affect the timing of recognition of costs in the profit and loss account. The impact of thechange on the results for the nine months ended 30 June 2016 was:•Higher amortisation of NZ$65 million relating to the accelerated amortisation of software assets where the original cost was below
the revised threshold at 1 October 2015. This brings forward amortisation which otherwise would have been recognised in future
periods.
•
Higher operating expenses of NZ$31 million relating to software development costs which otherwise would have been capitalised
and amortised in future periods.
The change in capitalised software treatment has no impact on regulatory capital ratios.

ANZ Bank New Zealand Limited

8

NOTES TO THE FINANCIAL STATEMENTS
3.

SEGMENT ANALYSISThe Banking Group is organised into three major businesssegments for segment reporting purposes - Retail,Commercial and Institutional. Centralised back office andcorporate functions support these segments. Thesesegments are consistent with internal reporting provided tothe chief operating decision maker, being the Bank’s Chief
Executive Officer.
During the nine months ended 30 June 2016, Wealth was
integrated with Retail, having been disclosed separately
previously. During the year ended 30 September 2015,
Business Banking was integrated with Retail, having been
included in Commercial previously. Segment reporting has
been updated to reflect these changes and other minorchanges to the Banking Group’s structure. Comparative data
has been adjusted to be consistent with the current period’s
segment definitions.
RetailRetail provides products and services to Retail, Private
Banking, and Business Banking customers via the branch
network, mortgage specialists, relationship managers, thecontact centre and a variety of self service channels (internet
banking, phone banking, ATMs, website and mobile phonebanking). Retail and Private Banking customers have personalbanking requirements and Business Banking customers
consist primarily of small enterprises with annual revenues ofless than NZ$5 million. Core products and services include
current and savings accounts, unsecured lending (credit
cards, personal loans and overdrafts), home loans secured by
mortgages over property, investment products,
superannuation and insurance services.

Commercial
Commercial provides services to Commercial & Agri(CommAgri) and UDC customers. CommAgri customers
consist of primarily privately owned medium to large
enterprises. Commercial's relationship with these businesses
ranges from simple banking requirements with revenue from
deposit and transactional facilities, and cash flow lending, tomore complex funding arrangements with revenue sourced
from a wider range of products. UDC is principally involved in
the financing and leasing of plant, vehicles and equipment,
mainly for small and medium sized businesses, as well as
investment products.
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, foreign exchange, wholesale money market
services and transaction banking.
Other
Other includes treasury and back office support functions,none of which constitutes a separately reportable segment.

Business segment analysis1
RetailCommercial

Institutional

Other2

Total

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

External revenues

1,872

1,423

375

(734)

2,936

Intersegment revenues

(126)

(743)

13

856

-

Total revenues

1,746

680

388

122

2,936

Profit after income tax

682

324

162

17

1,185

1,639

1,560

675

(867)

3,007

22

(869)

(174)

1,021

-

Total revenues

1,661

691

501

154

3,007

Profit after income tax

617

360

253

85

1,315

Unaudited 9 months to 30/06/2016

Unaudited 9 months to 30/06/2015

External revenues
Intersegment revenues

Audited year to 30/09/2015

External revenues

2,229

2,070

864

(1,113)

4,050

(1)

(1,149)

(200)

1,350

-

Total revenues

2,228

921

664

237

4,050

Profit after income tax

835

478

331

139

1,783

Intersegment revenues

1
2

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
This segment has negative external revenues as this segment incurs funding costs on behalf of the Banking Group and is reimbursed internally.

ANZ Bank New Zealand Limited

9

NOTES TO THE FINANCIAL STATEMENTS
4.

NET LOANS AND ADVANCES
Note

Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

1,091

1,159

1,162

1,674

1,676

1,688

65,641

58,632

59,90443,87243,02742,880

Lease receivables

227

243

236

Hire purchase

1,037

911

946

-

125

-

113,542

105,773

106,816

(618)

(638)

(611)

Less: Unearned income

(212)

(214)

(214)

Add: Capitalised brokerage/mortgage origination fees

356

290

314

Add: Customer liability for acceptances

39

51

52

113,107105,262

106,357

Overdrafts1
Credit card outstandings
Term loans - housing

1

Term loans - non-housing

Other
Total gross loans and advances
Less: Provision for credit impairment

5

Total net loans and advances
1

Comparative amounts have been changed to reclassify revolving credit facilities secured by residential property provided to corporate customers from Overdrafts to Termloans – housing (30/06/2015 NZ$498 million, 30/09/2015 NZ$476 million).

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$6,630 million as at 30 June 2016 (30/06/2015
NZ$7,719 million, 30/09/2015 NZ$8,011 million). These assets qualify for derecognition as the Bank does not retain a continuing
involvement in the transferred assets.

5.

PROVISION FOR CREDIT IMPAIRMENT
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

Collective provision

77

131

261

469

Individual provision

41

6

102

149

Total provision for credit impairment

118

137

363

618

Collective credit impairment charge

-

4

8

12

Individual credit impairment charge / (release)

(9)

53

49

93

Credit impairment charge / (release)

(9)

57

57

105

85

123

259

467

Unaudited 30/06/2016

Unaudited 30/06/2015

Collective provision
Individual provision

60

8

103

171

Total provision for credit impairment

145

131

362

638

Collective credit impairment charge

7

5

4

16

Individual credit impairment charge / (release)

(6)

47

(1)

40

Credit impairment charge

1

52

3

56

Collective provision

77

127

253

457

Individual provision

54

9

91

154

Total provision for credit impairment

131

136

344

611

Audited 30/09/2015

Collective credit impairment charge / (release)

(1)

9

(2)

6

Individual credit impairment charge / (release)

(9)

68

9

68

Credit impairment charge / (release)

(10)

77

7

74

ANZ Bank New Zealand Limited

10

NOTES TO THE FINANCIAL STATEMENTS
6.

IMPAIRED ASSETS AND PAST DUE ASSETS
Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

NZ$m

NZ$m

NZ$m

NZ$m

Total impaired assets

66

30

264

360

Loans that are at least 90 days past due but not impaired

98

31

49

178

Total impaired assets

112

31

269

412

Loans that are at least 90 days past due but not impaired

117

36

59

212

Total impaired assets

97

32

253

382

Loans that are at least 90 days past due but not impaired

103

32

62

197

Unaudited 30/06/2016

Unaudited 30/06/2015

Audited 30/09/2015

7.

ASSETS PLEDGED AS COLLATERAL FOR LIABILITIES
Carrying Amount

Cash collateral given on derivative financial instruments
Securities sold under agreements to repurchase
Residential mortgages pledged as security for covered bonds

Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

2,326

2,219

1,929

861

826

47

11,317

7,020

7,547

Assets pledged as collateral for UDC secured investments

2,619

2,458

2,441

Total financial assets pledged as collateral

17,123

12,523

11,964ANZNZ Covered Bond Trust (the Covered Bond Trust)
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank
which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of the Covered Bond Trust of issuances of coveredbonds by the Bank, or its wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond
Trust are not available to creditors of the Bank, although the Bank (or its liquidator or statutory manager) may have a claim against theresidual assets of the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond Trust have been satisfied.
The Banking Group continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as
security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.

8.

DEPOSITS AND OTHER BORROWINGS

Note

Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Term deposits

38,121

34,401

34,982On demand and short term deposits

43,67439,32641,436

Deposits not bearing interest

7,548

6,366

6,716

1,677

1,654

1,736

Total customer deposits

91,02081,74784,870

Certificates of deposit

1,502

2,257

745

Commercial paper

6,541

6,877

4,964

Deposits from banks

861

1,002

47

Deposits from other members of ANZ New Zealand

17

7

52

99,941

91,89090,678

UDC secured investments

Total deposits and other borrowings

7

ANZ Bank New Zealand Limited

11

NOTES TO THE FINANCIAL STATEMENTS
9.

DEBT ISSUANCES
Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Domestic bonds

3,575

3,650

3,525

U.S. medium term notes1

5,646

6,748

6,831

Euro medium term notes1

2,898

3,835

3,598

Covered bonds1

4,739

4,983

5,335

Index linked notes

36

36

35

16,894

19,252

19,324

Fair value hedge adjustment

233

119

175

Less debt issuances held by the Bank

(19)

(58)

(96)

17,10819,313

19,403

Total debt issuances

Total debt issuances
1

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

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

10. SUBORDINATED DEBT
Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

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

495

494

494

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

1,003

1,003

1,003

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

938

-

-

NZD 835m perpetual subordinated bond2,3

835

835

835

AUD 10m perpetual subordinated floating rate loan

11

11

11

3,282

2,343

2,343

ANZ Capital Notes1

Perpetual subordinated debt

Total subordinated debt

These instruments qualify as additional tier 1 capital.
These instruments are listed on the New Zealand Debt Market (NZDX). The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirements of Listing
Rules 10.3 (relating to the provision of preliminary announcements of half yearly and annual results to the NZX) and 10.4 (relating to preparing and providing a copy of half
yearly and annual reports to the NZX).
3
These instruments qualify as tier 2 capital under RBNZ’s Basel III transitional rules, subject to the RBNZ’s Basel III transition adjustment.
1
2

NZD 938 million ANZ New Zealand Internal Capital
Notes (ANZ NZ ICN2)
On 15 June 2016, the Bank issued 9.38 million convertible
notes to the NZ Branch at NZ$100 each, raising NZ$938
million.
The ANZ NZ ICN2 Notes (the notes) are fully paid convertible
subordinated perpetual notes.
The notes are classified as debt given there arecircumstances beyond the Bank’s control where the principal
is converted into a variable number of shares of the Bank.
Interest
Interest on the notes is non-cumulative and payable semiannually in arrears in June and December in each year. Theinterest rate is based on a floating rate equal to theaggregate of the New Zealand 6 month bank bill rate plus a
629 basis point margin.
Interest payments are subject to the Bank’s absolute
discretion and certain payment conditions being satisfied(including RBNZ requirements). If interest is not paid on thenotes the Bank may not, except in limited circumstances, pay
dividends or undertake a share buy-back or other capital
reduction on its ordinary shares until interest is next paid.

Conversion features
The Bank may be required to convert some or all of the notes
if a common equity capital trigger event, or a RBNZ nonviability trigger event occurs. The ANZ NZ ICN2 will convert
into ordinary shares of the Bank.
A common equity capital trigger event occurs if the Banking
Group’s common equity tier 1 capital is equal to or less than
5.125%.
A RBNZ non-viability trigger event occurs if the RBNZ directs
the Bank to convert or write off the notes or a statutory
manager is appointed to the Bank and decides the Bank
must convert or write off the notes.
Redemption
On 15 June 2026 and each 5th anniversary thereafter the
Bank has the right, subject to satisfying certain conditions, toredeem (subject to receiving RBNZ’s prior approval), all orsome of the ANZ NZ ICN2 at its discretion.
Rights of holders in event of liquidation
The notes rank equally with the Bank’s other ANZ Capitalnotes and preference shares, and lower than perpetual
subordinated debt. Holders of the notes do not have any
right to vote in general meetings of the Bank.

ANZ Bank New Zealand Limited

12

NOTES TO THE FINANCIAL STATEMENTS
11.

RELATED PARTY BALANCES
Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Total due from related parties

5,200

4,369

4,195

Total due to related parties

7,229

5,879

5,487

12. CAPITAL ADEQUACY
Basel III capital ratios

Banking Group

RBNZ minimum
ratios30/06/2016

30/06/2015

30/09/2015

Common equity tier 1 capital

4.5%

10.4%

10.0%

10.5%

Tier 1 capital

6.0%

13.7%

12.3%

12.7%

Total capital

8.0%

14.2%

13.1%

13.6%

Buffer ratio

2.5%

5.9%

5.1%

5.6%

Unaudited

Capital of the Banking Group

Unaudited
30/06/2016
NZ$m

Common equity tier 1 capital before deductions

12,587Less deductions from common equity tier 1 capital(3,675)

Common equity tier 1 capital

8,912

Additional tier 1 capital

2,781

Total tier 1 capital
Tier 2 capital

11,693

Total capital

12,161

468

Capital requirements of the Banking Group
Exposure atdefault

Risk weighted
exposure or
implied risk
weighted
exposure1

Total capitalrequirement

NZ$m

NZ$m

NZ$m

Corporate exposures

49,80931,024

2,482

Sovereign exposures

12,403322

26

Bank exposures

11,8173,886

311

Retail mortgage exposures

72,011

17,037

1,363

Unaudited 30/06/2016

Other retail exposures

10,743

8,578

686

Exposures subject to internal ratings based approach

156,783

60,847

4,868

Specialised lending exposures subject to slotting approach

10,786

9,856

788

Exposures subject to standardised approach

2,447

346

28

Equity exposures

6

24

2

Other exposures

2,892

1,701

136

Total credit risk

172,91472,774

5,822

Operational risk

n/a

5,923

474

Market risk

n/a

6,876

550

172,91485,573

6,846

Total
1

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

ANZ Bank New Zealand Limited

13

NOTES TO THE FINANCIAL STATEMENTS
Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's
Conditions of Registration.
Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group
include pension risk, insurance risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk, value in-force risk, business retention
risk and software risk.
The Banking Group's internal capital allocation for these other material risks is NZ$438 million (30/06/2015 NZ$450 million; 30/09/2015
NZ$479 million).
Residential mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group'svaluation of the security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn
residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing lending which have been
accepted by the customer.
30/06/2016
On-balancesheet

Off-balance
sheet

Total

NZ$m

NZ$m

NZ$m

Does not exceed 60%

24,944

4,603

29,547

Exceeds 60% and not 70%

13,563

1,531

15,094

Exceeds 70% and not 80%

18,277

1,792

20,069Does not exceed 80%

56,784

7,926

64,710Exceeds 80% and not 90%

4,241

231

4,472

Exceeds 90%

1,984

231

2,215

Total

63,0098,388

71,397

Unaudited

LVR range

Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of
the Banking Group’s liquidity portfolio is based on the amount required to meet its liquidity policy and includes both items classified as
cash and those classified as operating assets in the Condensed Cash Flow Statement.
Unaudited
30/06/2016
NZ$m

Cash and balances with central banks

1,330

Certificates of deposit

1,126

Government, local body stock and bonds

5,486

Government treasury bills

938

Reserve Bank bills

277

Other bonds

6,610

Total liquidity portfolio

15,767The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into
repurchase transactions with a value of NZ$6,990 million at 30 June 2016.

ANZ Bank New Zealand Limited

14

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

Unaudited

30/06/2016
Carrying
amountFair value

Audited30/06/2015
Carrying
amountFair value

30/09/2015
Carrying
amountFair value

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

113,107

113,437

105,262

105,755

106,357

106,854

Deposits and other borrowings2

99,941

100,059

91,89092,041

90,67890,832

Debt issuances1

17,10817,233

19,313

19,45819,403

19,516

Subordinated debt

3,282

3,220

2,343

2,335

2,343

2,288

AssetsNet loans and advances1
Liabilities

1

2

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

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

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

•

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

•

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

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

Unaudited

30/06/2016
Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m

Audited30/06/2015
Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

30/09/2015
Total Level 1 Level 2 Level 3
NZ$m NZ$m NZ$m NZ$m

Total
NZ$m

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

12,592154

3 21,495- 12,746 12,168
7 21,505

89

6 16,497

259- 12,139

4 16,507- 12,257 11,880

12 17,640

6 17,658

1,636

1,193

2

2,831

324

456

2

782

900

526

2

1,428

5

115

-

120

2

139

-

141

2

149

-

151

14,236 22,957

9 37,202 12,500 17,181

6 29,687 12,794 18,574

8 31,376

Financial liabilities
Deposits and other borrowings-

Derivative financial instruments

41 22,630

6,541

Payables and other liabilities

386

Total financial liabilities held at fair value427 29,171

-

-

6,541

3 22,674-

386

3 29,601-

6,877

4 15,951
526-

530 22,828

-

6,877

-

4,964

2 15,957

19 17,209

-

309

526

2 23,360-

328 22,173

-

4,964

2 17,230-309

2 22,503

ANZ Bank New Zealand Limited

15

NOTES TO THE FINANCIAL STATEMENTS
14. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit risk to bank counterparties on the basis of actual exposures, and to non-bankcounterparties on the basis of limits.
For the three months ended 30 June 2016 there was one bank counterparty, with a long term credit rating of BBB+ or its equivalent,
where the Banking Group’s peak end-of-day credit exposure was 10% to 15% of the Banking Group’s equity as at the end of the period.

15. INSURANCE BUSINESSThe Banking Group conducts insurance business through its subsidiary OnePath Life (NZ) Limited (OnePath Life).
The Banking Group’s aggregate amount of insurance business comprises the total assets of OnePath Life of NZ$921 million (30/06/2015:
NZ$862 million; 30/09/2015 NZ$884 million), which is 0.6% (30/06/2015: 0.6%; 30/09/2015 0.6%) of the total consolidated assets of the
Banking Group.

16. CREDIT RELATED COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES
Face or contract value
Unaudited

Unaudited

Audited30/06/2016

30/06/2015

30/09/2015

NZ$m

NZ$m

NZ$m

Credit related commitments
Commitments with certain drawdown due within one year

1,242

1,217

1,130

Commitments to provide financial services

32,19230,22331,291

Total credit related commitments

33,434

31,44032,421

Financial guarantees

825

971

920

Standby letters of credit

104

60

82

Transaction related contingent items

1,436

1,350

1,385

Guarantees and contingent liabilities

Trade related contingent liabilities
Total guarantees and contingent liabilities

98

90

67

2,463

2,471

2,454

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio management and collateral requirements
for customers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect
future cash requirements.
Other contingent liabilities
On 11 March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action against banks 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.
The Banking Group has other contingent liabilities in respect of actual and possible claims and court proceedings.
An assessment of the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision madewhere deemed necessary.

17. SUBSEQUENT EVENTSOn 12 August 2016 the Bank’s Board resolved to pay a preference dividend of NZ$6 million on 1 September 2016 and to pay an ordinary
dividend of NZ$550 million no later than 30 September 2016.

ANZ Bank New Zealand Limited

16

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

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

The Disclosure Statement is not false or misleading.

Over the nine months ended 30 June 2016, after due enquiry, each Director believes that:(i)

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

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

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

This Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 12 August 2016.

Antony Carter

Shayne ElliottDavid Hisco

John Judge

Mark Verbiest

Nigel Williams

Joan Withers