For personal use only

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

GENER A L SHORT FOR M
DISCLOSURE STATEME NT

For the nine months ended 30 June 2009
Number 54 Issued August 2009

For personal use onlyFor personal use only

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

GENERAL SHORT FORMDISCLOSURE STATEMENTFOR THE NINE MONTHSENDED 30 JUNE 2009

CONTENTS
General Disclosures

2-4

Income Statement

5

Statement of Recognised Income and Expense

6

Balance Sheet

7

Cash Flow Statement

8-9

Notes to the Financial Statements

10 - 36

Conditions of Registration

37 - 39

Credit Rating Information40

Directors’ Statement

41

Independent Review Report42

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

For personal use only

GENERAL DISCLOSURESThis Short Form Disclosure Statement has been issued inaccordance with the Registered Bank Disclosure Statement(Off-Quarter - New Zealand Incorporated Registered Banks)
Order 2008 (“the Order”).

•

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

In this Disclosure Statement unless the context otherwise
requires:•the Ultimate Parent Bank should not enter into cross default
clauses whereby a default by the Bank on an obligation(whether financial or otherwise) is deemed to trigger a defaultof the Ultimate Parent Bank in its obligations;•

the Board of the Ultimate Parent Bank in determining limitson acceptable levels of exposure to the Bank should haveregard to:a. “Banking Group” means ANZ National Bank Limited and all its
subsidiaries; andb. any term or expression which is defined in, or in the mannerprescribed by, the Registered Bank Disclosure Statement (OffQuarter - New Zealand Incorporated Registered Banks) Order2008 shall have the meaning given in or prescribed by that
Order.

2the level of exposure that would be approved to third
parties of broadly equivalent credit status. In this regard,
prior consultation (and in cases approval) is required before
entering exceptionally large exposures; and•the impact on the Ultimate Parent Bank’s capital andliquidity position and its ability to continue operating in
the event of a failure by the Bank.

G eneral M atters

The full name of the registered bank is ANZ National Bank
Limited (“the Bank”) and its address for service is Level 14, ANZ
Tower, 215-229 Lambton Quay, Wellington, New Zealand.
The Bank was incorporated under the Companies Act 1955 byvirtue of the ANZ Banking Group (New Zealand) Act 1979 on
23 October 1979, and was reregistered under the Companies
Act 1993 on 13 June 1997.
The immediate parent company of the Bank is ANZ Holdings(New Zealand) Limited (incorporated in New Zealand). The
immediate parent company is owned by ANZ Funds Pty Limitedand Australia and New Zealand Banking Group Limited (bothincorporated in Australia).
The Ultimate Parent Bank is Australia and New Zealand Banking
Group Limited (“ANZ”), which is incorporated in Australia, andits address for service is Level 14, 100 Queen Street, Melbourne,
Australia.

•

the level of exposure to the Bank not exceeding:•

50% on an individual exposure basis; and•150% in aggregate (being exposures to all similar regulated
entities related to the Ultimate Parent Bank)of the Ultimate Parent Bank’s capital base.
Additionally, the Ultimate Parent Bank may not provide material
financial support in breach of the Australian Banking Act (1959).
This requires APRA to exercise its powers and functions forthe protection of a bank’s depositors and in the event of abank becoming unable to meet its obligations or suspending
payment, the assets of the bank in Australia shall be available
to meet that bank’s deposit liabilities in Australia in priority toall other liabilities of the bank.

The Bank is wholly owned by its immediate parent company
and ultimately the Ultimate Parent Bank. The immediate parent
company has the power under the Bank’s Constitution toappoint any person as a Director of the Bank either to fill acasual vacancy or as an additional Director or to remove any
person from the office of Director, from time to time by giving
written notice to the Bank. No appointment of a new Director
may occur unless the Reserve Bank of New Zealand (“RBNZ”)
confirms that it does not object to the appointment.

The Ultimate Parent Bank has not provided material
financial support to the Bank contrary to any of the above
requirements.

A New Zealand Branch (“NZ Branch”) of the Australia and New
Zealand Banking Group Limited was established on 5 January
2009. The full name of the NZ Branch is Australia and New
Zealand Banking Group Limited New Zealand Branch and its
address for service is Level 14, ANZ Tower, 215-229 Lambton
Quay, Wellington, New Zealand.

b. New Zealand Wholesale Funding Guarantee Facility (“Crown
Wholesale Guarantee”).

M aterial F inancial S upport

In accordance with the requirements issued by the Australian
Prudential Regulation Authority (“APRA”) pursuant to thePrudential Standards, Australia and New Zealand Banking Group
Limited, as the Ultimate Parent Bank, may not provide material
financial support to the Bank contrary to the following:•

P A G E•the Ultimate Parent Bank should not undertake any third party
dealings with the prime purpose of supporting the business of
the Bank;

G uarantors

The Bank has guarantees under the:a. New Zealand Deposit Guarantee Scheme (“Crown Retail
Guarantee”); andThis section provides a brief description of the Crown Retail
Guarantee and Crown Wholesale Guarantee and also sets out
from where further information may be obtained. As at thedate of this General Short Form Disclosure Statement the only
material obligations of the Bank that are guaranteed are thedebt securities (as defined in the Retail Deed) guaranteed under
the Crown Retail Guarantee and debt securities for which the
Crown has issued a Guarantee Eligibility Certificate under the
Crown Wholesale Guarantee (copies of which are available on
the Treasury website www.treasury.govt.nz).
Crown Retail Guarantee
The Crown Retail Guarantee is provided under a Crown Deedof Guarantee (Registered Bank) entered into by the Bankand the Crown on 14 November 2008 and supplemented on
9 December 2008 (“Retail Deed”).

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

GENERAL DISCLOSURESFor personal use only

(CONTINUED)

The Crown Retail Guarantee does not extend to subordinateddebt securities issued by the Bank or debt securities that areissued by the Bank to Related Parties (as defined in the RetailDeed) of the Bank or to Financial Institutions.
As defined in the Retail Deed, “Financial Institutions” meansa financial institution, as defined in section 2 of the Reserve
Bank of New Zealand Act 1989, which carries on the business ofborrowing and lending money, such as a life insurance company,a building society or a registered bank, and, without limiting thegenerality of the foregoing, includes:a. a “collective investment scheme” as that term is defined in
section 157B of the Reserve Bank of New Zealand Act 1989
(including any “superannuation fund” or “superannuation
scheme”);b. an “insurer” as that term is defined in section 2 of the Insurance
Companies (Rating and Inspections) Act 1994 or any otherperson carrying on the business of providing insurance cover(of whatever nature);c. a person carrying on business as a sharebroker, an investment
adviser or a fund manager (to the extent that person is acting
in that capacity); or
d. a person who is a subsidiary of, or who is controlled by afinancial institution within a), b), or c) above.
The Crown Retail Guarantee applies for a period commencing on
12 October 2008 and expiring on 12 October 2010 (“Guarantee
Period”).
Under the Crown Retail Guarantee the Crown absolutely andirrevocably guarantees:a. all obligations of the Bank to pay money to a creditor underDebt Securities (“Indebtedness”) that become due andpayable during the Guarantee Period; andb. if a Default Event, as defined in the Retail Deed, occurs during
the Guarantee Period, all Indebtedness that exists on the dateof that Default Event (whether or not that Indebtedness isdue and payable during the Guarantee Period); andc. all interest accruing on the amounts referred to in b) after theoccurrence of the Default Event.
The Crown undertakes that if the Bank does not pay an amountreferred to in a), b) or c) above, the Crown will pay that amountto the creditor when it is due and payable (except to the extent
that that Indebtedness or interest is not paid solely as a resultof an administrative error or technical error and is subsequently
paid within 7 days of its due date).
The Crown’s obligation to pay any amount under the Crown
Retail Guarantee is subject to the Crown receiving a notice ofclaim from the creditor in respect of the relevant Indebtedness
and to the Crown satisfying itself as to the amount of therelevant Indebtedness and such other matters as the Crown
reasonably considers appropriate in order to ascertain theextent of its liability under the Crown Retail Guarantee inrespect of that Indebtedness. Notice may be served on the
Crown in respect of the Crown Retail Guarantee by service on
The Treasury at 1 The Terrace, Wellington.
The maximum liability of the Crown to each creditor under the
Crown Retail Guarantee is one million New Zealand dollars($1,000,000). For this purpose amounts owed to creditors by
the Bank under any debt security will be aggregated with otheramounts owed to the same creditor by the Bank which aresupported by the Crown Retail Guarantee.

Crown Wholesale Guarantee
The Crown Wholesale Guarantee is provided under the Crown
Wholesale Funding Guarantee in respect of the Bank enteredinto by the Crown on 23 December 2008 and supplemented on
19 February 2009 (“Wholesale Deed”).
Newly issued senior unsecured (except for covered bonds, which
are also eligible) negotiable or transferable debt securities issued
by the Bank, or issued by a subsidiary of the Bank and guaranteedby the Bank, may be eligible to benefit from the Crown Wholesale
Guarantee. For the Crown Wholesale Guarantee to apply, theBank will need to apply to the Crown for a Guarantee Eligibility
Certificate (as defined in the Wholesale Deed) in respect of
the issue of debt securities. The decision to issue a Guarantee
Eligibility Certificate in respect of any issue of debt securities isat the sole and absolute discretion of the Crown.
If a Guarantee Eligibility Certificate is issued in respect of any
debt securities, the Crown (subject to any special conditions
specified in a Guarantee Eligibility Certificate and provided
the debt securities are not varied, amended, waived, released,
novated, supplemented, extended or restated in any respect
without the prior written consent of the Crown) irrevocably:
a. guarantees the payment by the Bank of any liability of the
Bank to pay principal and interest (excluding any penalty
interest or other amount only payable following a default) in
respect of the debt securities for which the Crown has issued
a Guarantee Eligibility Certificate; andb. undertakes that if the Bank does not pay any such liability on
the date on which it becomes due and payable, the Crown
shall, within five Business Days of a demand being made inaccordance with the Wholesale Deed and following the expiryof any applicable grace period, pay such liability.
The Crown Wholesale Guarantee does not extend to debt
securities held by a Related Party (as defined in the Wholesale
Deed) of the Bank.
In the event of a claim made on the Crown, the Crown will
only pay the interest and principal due to the holders of thedebt security on the originally scheduled dates for payment ofinterest and principal.
The Crown’s obligations in respect of any debt security
terminate on the date falling 30 days after the earlier of:a. the scheduled maturity date for the debt security under which
the guaranteed liability arises; andb. the date falling five years after the date of issue of the debt
security under which the guaranteed liability arises, unless valid
demand has been made on the Crown prior to that time.
Any demand on the Crown in respect of debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate
may only be made in the prescribed form by delivery by handto the Minister of Finance, Parliament Buildings, Wellington,
New Zealand or to one of the other addresses specified in the
Wholesale Deed.
No Guarantee Eligibility Certificate shall be issued by the Crown
in respect of any proposed debt security unless the aggregate
amount of the proposed debt security and all of the Bank’s
outstanding liabilities to pay principal and interest in respect ofthe debt securities for which the Crown has issued a Guarantee
Eligibility Certificate will not exceed the maximum amountas the Crown may from time to time determine and notify inwriting to the Bank (which, at the date of this General ShortForm Disclosure Statement, is set at $6,500 million).

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

GENERAL DISCLOSURESFor personal use only

(CONTINUED)P A G E

4

Further information

S U P P L E M E N TA L D I S C L O S U R E S TAT E M E N T

Further information about the Crown Retail Guarantee and the
Crown Wholesale Guarantee, including a copy of the Retail Deedand Wholesale Deed and any Guarantee Eligibility Certificate
issued by the Crown in respect of the Bank, is available on The
Treasury website at www.treasury.govt.nz.

The most recent Supplemental Disclosure Statement for thenine months ended 30 June 2009 is available at no charge:

Further information about the Crown, including a copy of its
most recent audited financial statements can be obtained at
www.treasury.govt.nz.
The Crown’s credit ratings are available on the New Zealand
Debt Management Office website www.nzdmo.govt.nz. The
Crown’s long-term foreign-currency and domestic debt credit
ratings have not changed in the two years immediately before
the date of this General Short Form Disclosure Statemnet. The
Crown’s credit ratings are:Standard &Poor’sMoody’s
Investors
Service
Fitch Ratings

Current
Credit Rating

Qualification

AA+

Outlook Stable

Aaa

Outlook Stable

AA+

Outlook Negative

Current
Credit Rating

Qualification

AAA

Outlook Stable

Aaa

Outlook Stable

AAA

Outlook Negative

Domestic Currency
Rating Agency
Standard &Poor’sMoody’s
Investors
Service
Fitch Ratingsb. immediately if request is made at the Bank’s head office,located at Level 14, ANZ Tower, 215-229 Lambton Quay,
Wellington, New Zealand; andc. within five working days of a request, if a request is made atany branch of the ANZ or National Bank of New Zealand.
The Bank’s most recent Supplemental Disclosure Statement
contains a copy of the bilateral netting agreement (refer Note18) and a copy of the Crown Retail Guarantee and Crown
Wholesale Guarantee.
D irectorate

Foreign Currency
Rating Agency

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

Credit ratings are assigned to sovereigns and businesses by
the international credit rating agencies. Credit ratings provide
investors with an indication of the credit-worthiness of an entity
in which they are considering investing. There are three majorinternationally recognised credit rating agencies: Standard &Poor’s, Moody’s Investors Service and Fitch Ratings. AAA is thehighest rating level while a rating in the AA range is also seen as
a very high level of credit-worthiness.

Since the authorisation date of the previous General DisclosureStatement on 22 May 2009, Shayne Cary Elliott was appointed
as a non-executive Director of the Bank on 11 August 2009.

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

For personal use only

income statement
for the nine months ended 30 june 2009

Consolidated
Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

Interest income

5,819

7,310

9,857

Interest expense

3,962

5,599

7,568

Net interest income

1,857

1,711

2,289

Net trading gains

191

216

271

Other operating income

362

533

742

Share of profit of equity accounted associates
and jointly controlled entities

10

102

111

Note

AuditedYear to30/09/2008$m

Operating income

2,420

2,562

3,413

Operating expenses

1,094

1,035

1,444

Profit before provision for credit impairment
and income tax

1,326

1,527

1,969

528

167

302

798

1,360

1,667

237

400

504

561

960

1,163

Provision for credit impairment

10

Profit before income tax
Income tax expense

3

Profit after income tax
				The notes on pages 10 to 36 form part of and should be read in conjunction with these financial statements.

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

For personal use only

STATEMENT OF RECOGNISED INCOME AND E XPENSE
for the nine months ended 30 June 2009

Consolidated

Note

Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008
$m

3

36

26

Available - for - sale re valuation reserv e :Valuation gain taken to equity
C as h flow h edging R E S E RV E :Valuation loss taken to equity

(6)

(26)

(47)

Transferred to income statement

(13)

(26)

(37)

Actuarial loss on defined benefit schemes

(38)

(12)

(33)

Income tax credit on items recognised
directly in equity

19

20

34

Net expense recognised directly in equity

(35)

(8)

(57)

Profit after income tax

561

960

1,163

Total recognised income and expense for the period

526

952

1,106

The notes on pages 10 to 36 form part of and should be read in conjunction with these financial statements.

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

For personal use only

BALANCE SHEET
as at 30 June 2009

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008
$m

2,076
5,460
2,950
12,185
767
93,169

3,225
4,465
2,306
4,337
106
95,296

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

398
108
925
272
258
3,328

356
140
1,048
61
242
3,314

363
57
1,000
121
242
3,317

121,896

114,896

122,915

5,064
70,846971
11,6681,791
370
17,9862,867

2,619
75,266
1,655
4,253
1,599
157
16,713
2,979

3,312
77,136
404
6,710
1,841
190
20,695
2,820

Total liabilities

111,563

105,241

113,108

Net assets

10,333

9,655

9,807

6,943
39
3,351

5,943
83
3,629

5,943
47
3,817

10,333

9,655

9,807

Note
A ssets

Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances

4
5
6
7
8

Shares in associates
and jointly controlled entities
Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets
Total assets
L iabilities

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

11
12

13
14

E q uity

Ordinary share capital
Reserves
Retained earnings

15
16
16

Total equity

The notes on pages 10 to 36 form part of and should be read in conjunction with these financial statements.

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

For personal use only

cash flow statement
for the nine months ended 30 june 2009

Consolidated
Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008
$m

5,862

7,057

9,502

1

-

4

691

785

1,060

Interest paid

(3,974)(5,194)(6,959)Operating expenses paidNote
C A S H F L OW S F RO M O P E R AT I N G A C T I V I T I E SInterest received
Dividends received
Fees and other income received(1,032)(947)(1,313)

Income taxes paid

(420)

(458)

(524)

Cash flows from operating profits before changes inoperating assets and liabilities

1,128

1,243

1,770

(1,835)(1,448)

(630)

(293)

(328)

(617)

(2,358)

(63)

1,675

Increase in available-for-sale assets

(651)

(18)

(36)

Decrease (increase) in loans and advances

4,455(7,282)(9,433)

(76)

(33)

28

1,923

(550)

26

456

1,911

3,373

(5,216)

2,589

2,044

Net changes in operating assets and liabilities:
Increase in due from other financial institutions - term
Increase in trading securities(Increase) decrease in derivative financial instruments(Increase) decrease in other assets
Increase (decrease) in due to other financial institutions
Increase in deposits(Decrease) increase in other borrowings
Increase in payables and other liabilities

148

76

208

(2,319)(3,777)(1,592)

Proceeds from sale of premises and equipment

36

1

2

Purchase of shares in associates and jointly controlled
entities

(25)

(46)

(48)

Purchase of intangible assets

(20)

(23)

(29)

Purchase of premises and equipment

(61)

(39)

(51)

Net cash flows used in investing activities

(70)

(107)

(126)

Net cash flows used in operating activities

22

C A S H F L OW S F RO M I N V E S T I N G A C T I V I T I E S

The notes on pages 10 to 36 form part of and should be read in conjunction with these financial statements.

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

For personal use only

cash flow statement
for the nine months ended 30 june 2009 ( C O N T I N U E D )Consolidated

Note

Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008$m

C A S H F L OW S F RO M F I N A N C I N G A C T I V I T I E S

Proceeds from bonds and notes

2,113

4,815

9,263

Redemptions of bonds and notes(4,618)(2,928)(5,250)

Proceeds from loan capital

-

835

835

Redemptions of loan capital

-

-

(100)
(2,371)567(1,120)

Proceeds from Share issue

Increase (decrease) in due to parent company

1,000

-

-

Dividends paid

(1,000)--Net cash flows (used in) provided by financing activities(1,938)

1,602

2,377

Net cash flows used in operating activities
Net cash flows used in investing activities(2,319)(70)(3,777)(107)(1,592)(126)

Net cash flows (used in) provided by financing activities(1,938)

1,602

2,377

Net (decrease) increase in cash and cash equivalents(4,327)(2,282)659

Cash and cash equivalents at beginning of the period

7,789

7,130

7,130

Cash and cash equivalents at end of the period1

3,462

4,848

7,789

1. A reconciliation of cash and cash equivalents to the Banking Group’s core liquidity portfolio is included in Note 22 Notes to the Cash Flow Statements.

The notes on pages 10 to 36 form part of and should be read in conjunction with these financial statements.

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

notes to the financial statements

For personal use only

1.

P A G E

1 0

ACCOUNTING POLICIES(i) Basis of preparation
These financial statements have been prepared in accordance with NZ IAS 34 Interim Financial Reporting and the Registered Bank
Disclosure Statement (Off-Quarter - New Zealand Incorporated Registered Banks) Order 2008. These financial statements should
be read in conjunction with the consolidated financial statements for the year ended 30 September 2008.
(ii) Basis of measurement
The financial statements have been prepared on a going concern basis in accordance with historical cost concepts except thatthe following assets and liabilities are stated at their fair value:
•
•
•
•
•

derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying
exposure,financial instruments held for trading,assets recognised as available-for-sale,financial instruments designated at fair value through profit or loss, anddefined benefit scheme asset or liability.

(iii) Changes in accounting policies
There have been no changes in accounting policies since the authorisation date of the previous Disclosure Statement on
22 May 2009.
(iv) Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
(v) Consolidation
These financial statements consolidate the financial statements of ANZ National Bank Limited (the “Bank”) and its subsidiaries(the “Banking Group”).
(vi) Comparatives
To ensure consistency with the current period, comparative figures have been reclassified where appropriate.

2.

RISK MANAGEMENT POLICIESThere has been no material change in the Banking Group’s policies for managing risk, or material exposures to any new types of risk since
the authorisation date of the previous Disclosure Statement on 22 May 2009.

3.

I ncome Ta x E x pense

Consolidated
Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008$m

Income tax expense

237

400

504

Effective tax rate (%)

29.7%

29.4%

30.2%

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

For personal use only4.

L i q uid A ssets

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Cash and balances with central banks
Securities purchased under agreement to resell
Money at callBills receivable and remittances in transit

1,617
402
57

1,804
125
1,178
118

3,949
807
82

Total liquid assets

2,076

3,225

4,838

Included within liquid assets is the following balance:
Overnight balances with central banks

1,445

1,622

3,779

Able to be withdrawn without prior notice

79

1,115

437

Securities purchased under agreement to resell

340

220

304

Securities purchased under agreement to resell with central banks

41

-

-

5.

D ue from ot h er F inancial I nstitutions

Security settlements

-

-

1,328

Certificates of deposit

4,041

2,596

2,447

Reserve Bank bills

744

-

-

Term loans and advances

215

534

516

5,460

4,465

5,032

-

-

1,328

Government, Local Body stock and bonds

665

124

252

Certificates of deposit

458

655

926

Promissory notes

69

160

39

Other bank bonds

1,631

1,280

1,331

127

87

76

2,950

2,306

2,624

79

321

97

Total due from other financial institutions
Included within due from other financial institutions is the following
related party balance:
Subsidiary of the Ultimate Parent Bank

6.

T rading S ecurities

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

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For personal use only

7.

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AVA I L A B L E - F O R - S A L E A S S E T S

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Government, Local Body stock and bonds

634

3

3

Other debt securities

59

28

41

Equity securities

74

75

65

Total available-for-sale assets

767

106

109

2,140

8 . N et L oans and A d vances

Overdrafts

2,016

2,087

Credit card outstandings

1,410

1,414

1,434

Term loans - housing

49,09553,19753,350Term loans - non-housing

40,34838,724

40,583Finance lease receivables

699

781

777

Gross loans and advances

93,56896,203

98,284

Provision for credit impairment (Note 10)(1,034)

(563)

(666)

Unearned finance income

(279)

(343)

(346)
353

Fair value hedge adjustment

886

(60)

Deferred fee revenue and expenses

(52)

(56)

(55)

Capitalised brokerage/ mortgage origination fees

80

115

109

93,16995,296

97,679Total net loans and advances

The Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book valueof $1,806 million (30/06/2008 $nil; 30/09/2008 $nil). The underlying collateral accepted by the Reserve Bank under this transaction aremortgages to the value of $2,250 million (30/06/2008 $nil; 30/09/2008 $nil).
On 27 February 2009, $4,877 million of residential mortgage assets were sold to the Australia and New Zealand Banking Group Limited– New Zealand Branch. These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferredassets. The Consolidated Group’s financial statements have reduced as a result of transferring these assets.

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

For personal use only

9 . I M PA I R E D A S S E T S , PA S T D U E A S S E T S A N D OT H E R A S S E T S U N D E R A D M I N I S T R AT I O NConsolidated
Individually impaired assets

Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid

83
371
(18)
(137)

30
188
(20)
(26)

214
470
(18)
(98)

327
1,029
(56)
(261)

Write offs

(16)

(108)

(45)

(169)

283

64

523

870

Unaudited 30/06/2009

Individually Impaired Assets balance at end of
the period
Restructured items
Total impaired assets

1

-

-

1

284

64

523

871

Unaudited 30/06/2008
Balance at beginning of the period

7

20

88

115

Transfers from productive

61

98

100

259

Transfers to productive

(1)

-

(9)

(10)

Assets realised or loans repaid

(7)

(4)

(59)

(70)

Write offs

(1)

(77)

(3)

(81)

Individually Impaired Assets balance at end of
the period

59

37

117

213

Restructured items

-

-

-

-

Total impaired assets

59

37

117

213

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

7

20

88

115

103

122

228

453

Transfers to productive

(2)

-

(8)

(10)

Assets realised or loans repaid

(18)

(14)

(86)

(118)

Write offs

(7)

(98)

(8)

(113)

Individually Impaired Assets balance at end of
the period

83

30

214

327

Restructured items

-

-

-

-

Total impaired assets

83

30

214

327

Restructured assets include impaired loans where concessionary terms and conditions have been formally granted because of thecustomer’s financial difficulties and a loss is not expected to incur.

P A G E

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

For personal use only

(CONTINUED)

9 . I M PA I R E D A S S E T S , PA S T D U E A S S E T S A N D OT H E R A S S E T S U N D E R A D M I N I S T R AT I O N ( continued )Individually impaired assets

Unaudited 30/06/2009

Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

Balance at end of period
Past due assets (90 days past due assets)1

363

73

84

520

Other assets under administration

-

-

36

36

Undrawn facilities with impaired customers

-

-

32

32

Interest not recognised on impaired assets

18

5

17

40

254

Unaudited 30/06/2008
Balance at end of period
Past due assets (90 days past due assets)1

169

46

39

Other assets under administration

-

-

1

1

Undrawn facilities with impaired customers

-

-

8

8

Interest not recognised on impaired assets

-

2

4

6

309

Audited 30/09/2008
Balance at end of period
Past due assets (90 days past due assets)1

244

54

11

Other assets under administration

-

-

1

1

Undrawn facilities with impaired customers

-

-

6

6

Interest not recognised on impaired assets

6

2

10

18

There are no undrawn facilities with 90 day past due customers or customers within the other assets under administration category as
at 30 June 2009 (30/06/2008 $nil; 30/09/2008 $nil).

1. 90 day past due assets are not classified as impaired assets as they are either 90 days or more past due and well secured, or are portfolio managed facilities that can be held for up
to 180 days past due.

P A G E

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

For personal use only

(CONTINUED)

1 0 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T

Consolidated
Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

Balance at beginning of the period

81

164

289

534

Charge to income statement

19

(14)

92

97

Balance at end of the period

100

150

381

631

Unaudited 30/06/2009
Collective provision

Individual provision (individually impaired assets)
Balance at beginning of the period

28

10

94

132

Charge to income statement

99

116

216

431

Recoveries of amounts previously written off

1

13

-

14

(16)

(108)

(45)

(169)

-

-

(5)

(5)

Balance at end of the period

112

31

260

403

Total provision for credit impairment

212

181

641

1,034

Bad debts written off
Discount unwind1

Unaudited 30/06/2008
Collective provision
Balance at beginning of the period

58

130

234

422

Charge to income statement

5

16

40

61

Other

-

-

3

3

Balance at end of the period

63

146

277

486

Balance at beginning of the period

4

13

27

44

Charge to income statement

12

76

18

106

Individual provision (individually impaired assets)

Recoveries of amounts previously written off

-

12

1

13

Bad debts written off

(1)

(77)

(3)

(81)

Discount unwind1

-

-

(5)

(5)

Balance at end of the period

15

24

38

77

Total provision for credit impairment

78

170

315

563

Balance at beginning of the year

58

130

234

422

Charge to income statement

23

34

55

112

Balance at end of the year

81

164

289

534

Balance at beginning of the year

4

13

27

44

Charge to income statement

40

93

57

190

Recoveries of amounts previously written off

-

15

2

17

Bad debts written off

(7)

(98)

(8)

(113)

Audited 30/09/2008
Collective provision

Individual provision (individually impaired assets)

Discount unwind1

-

-

(6)

(6)

Balance at end of the year

37

23

72

132

Total provision for credit impairment

118

187

361

666

1.

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

P A G E

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

For personal use only

1 0 . P ROV I S I O N F O R C R E D I T I M PA I R M E N T ( C O N T inued )P A G E

1 6

Consolidated
Provision movement analysis

Retailmortgages$mOther retail
exposures$m

Corporate
exposures
$m

Total
$m

103

131

221

455

(3)

(2)

(5)

(10)

Unaudited 30/06/2009
New and increased provisions
Provision releases

100

129

216

445

Recoveries of amounts previously written off

(1)

(13)

-

(14)

Individual provision charge

99

116

216

431

Collective provision charge

19

(14)

92

97

Charge to income statement

118

102

308

528

New and increased provisions

12

88

27

127

Provision releases

-

-

(8)

(8)

Unaudited 30/06/2008

12

88

19

119

Recoveries of amounts previously written off

-

(12)

(1)

(13)

Individual provision charge

12

76

18

106

Collective provision charge

5

16

40

61

Charge to income statement

17

92

58

167

New and increased provisions

40

108

75

223

Provision releases

-

-

(16)

(16)

Audited 30/09/2008

40

108

59

207

Recoveries of amounts previously written off

-

(15)

(2)

(17)

Individual provision charge

40

93

57

190

Collective provision charge

23

34

55

112

Charge to income statement

63

127

112

302

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

For personal use only

1 1 .	due to ot h er financial institutions

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008
$m

2,462

672

1,002

79

321

97

1,806

-

-

Australia and New Zealand Banking Group Limited(Ultimate Parent Company)
Securities sold under agreements to repurchase from other financial
institutions
Securities sold under agreements to repurchase from central banks1
Other financial institutions

717

1,626

2,213

Total due to other financial institutions

5,064

2,619

3,312

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

2,220

672

1,001

Balances owing to the Ultimate Parent Company are due within twelve months. Interest is paid at variable bank rates.
1. The Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $1,806 million (30/06/2008 $nil;
30/09/2008 $nil). The underlying collateral accepted by the Reserve Bank under this transaction are mortgages to the value of $2,250 million (30/06/2008 $nil; 30/09/2008 $nil).
These assets do not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets therefore the Consolidated Group’s financial statements do notchange as a result of establishing these facilities. The net effect on the Consolidated Group is to reflect additional cash or liquid assets and a liability being Securities sold underagreements to repurchase from central banks (refer Note 24 for further details).

1 2 . D eposits and ot h er borrow ings

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Certificates of deposit

5,072

4,458

5,527

Term deposits

32,15331,62831,260Demand deposits bearing interest

21,936

21,06922,085

Deposits not bearing interest

4,424

3,943

3,928

Amortised cost

Secured debenture stock

1,621

1,821

1,683

Total deposits and other borrowings recognised at amortised cost

65,206

62,91964,483

5,640

12,347

12,653

Total deposits and other borrowings recognised at fair value

5,640

12,347

12,653

Total deposits and other borrowings

70,84675,266

77,136

Fair value through the profit or loss
Commercial paper

The Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed funds during the period ended
30 June 2009 (30/06/2008 $nil; 30/09/2008 $nil). Deposits from customers are unsecured and rank equally with other unsecured
liabilities of the Banking Group. In the unlikely event that the Bank was put into liquidation or ceased to trade, secured creditors andthose creditors set out in the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.

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

For personal use only

1 2 . D eposits and ot h er borrow ings ( continued )P A G E

1 8

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Included within deposits and other borrowings are thefollowing balances:
Commercial paper issued by ANZ National (Int'l) Limited guaranteed by the
Bank at amortised cost

5,637

12,345

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

1,921

2,107

2,032

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

1 3 . B onds and notes

Consolidated

Total bonds and notes
Included within bonds and notes are the following related party balances:
Subsidiaries of the Australia and New Zealand Banking Group Limited
Bonds and notes issued by ANZ National (Int’l) Limited guaranteed by
the Bank

Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

17,986

16,713

20,695

2,508

1,174

2,538

16,782

15,256

19,572

Bonds and notes are unsecured and rank equally with other unsecured liabilities of the Banking Group.

1 4 . L oan C apital

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

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

258
330
231
54
210
950
835

261
334
234
55
213
1,050
835

248
317
222
52
202
950
835

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

2,868
(1)

2,982
(3)

2,826
(6)

Total loan capital

2,867

2,979

2,820

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

1,083

1,097

1,041

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

For personal use only

1 4 . L oan C apital ( C ontinued )AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and has an ultimate maturity date of 31 August 2014. On 31 July 2009 the Bank elected
to repay the loan on 31 August 2009. All interest is payable half yearly in arrears, with interest payments due 28 February and 31 August.
Interest is based on BBSW + 0.40% p.a. up until, and including, 31 August 2009.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly in arrears based on BBSW +0.95% p.a., with interest payments due 15 March and 15 September.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. The Bank may elect to repay the loan on
19 April each year commencing from 2010 through to 2015. All interest is payable half yearly in arrears, with interest payments due
19 April and 19 October. Interest is based on BBSW + 0.32% p.a. to 19 April 2010 and increases to BBSW + 0.82% p.a. thereafter.
AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The Bank may elect to repay
the loan on 15 September each year commencing from 2011 through to 2016. All interest is payable half yearly in arrears, with interest
payments due 15 March and 15 September. Interest is based on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW +0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The Bank may elect to repay
the loan on 17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest
payments due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW +1.18% p.a. thereafter.
NZD subordinated bonds
The terms and conditions of the term subordinated fixed rate bonds are as follows:
Term Subordinated fixed rate bonds
Issue date
15 September 2006
2 March 2007
23 July 2007

Amount $m

Coupon rate

Call date

Maturity date

350
250
350

7.16%
7.60%
8.23%

15 September 2011
2 March 201223 July 201215 September 2016
2 March 201723 July 2017

As at 30 June 2009, these bonds carried an AA- rating by Standard & Poor’s.
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to pay interest to maturity at
the five year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. for the 15 September 2006; 2 March 2007 and 23 July 2007
bonds respectively. Interest is payable half yearly in arrears based on the fixed coupon rate.
The terms and conditions of the perpetual subordinated bond are as follows:
Perpetual Subordinated Bond
Issue date
18 April 2008

Amount $m

Coupon rate

1st Call date

2nd Call date

835

9.66%

18 April 201318 April 2018

The Bank may elect to redeem the bonds on 18 April 2013, 18 April 2018 or any interest payment date subsequent to 18 April 2018.
Interest is payable half yearly in arrears on 18 April and 18 October each year, beginning on 18 October 2008, up to and including
the Second Call Date and then quarterly thereafter. If the bonds are not called at the First Call Date, the coupon rate will reset to thefive year interest swap rate plus 2.00%. Should the bonds not be called at the Second Call Date, the Coupon Rate from the Second
Call Date onwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 30 June 2009, these bonds carried an A+ rating by Standard and Poor’s.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds, ANZ National has a general rightand in certain specified circumstances an obligation, to defer payment of interest on the Bonds.
All of the NZD subordinated bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the Bank a waiver from therequirements of Listing Rules 10.4 and 10.5. Rule 10.4 relates to the provision of preliminary announcements of half yearly and annual
results to the NZX. Rule 10.5 relates to preparing and providing a copy of half yearly and annual reports to the NZX. The Bank has been
granted a waiver from these rules on the conditions that the Bank’s quarterly General Disclosure Statement (“GDS”) is available on the
Bank’s website, at any branch and at the NZX; that bondholders are advised by letter that copies of the GDS are available at the above
locations; that all bondholders are notified on an ongoing basis, by way of a sentence included on the notification of interest payments,that the latest GDS is available for review at the above locations; and that a copy of the GDS is sent to the NZX on an ongoing basis.
Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all creditors of
the Bank.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for the perpetual subordinated debt
which qualifies as Upper Level Tier Two Capital.
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A N Z N AT I O N A L B A N K L I M I T E D A N D S U B S I D I A RY C O M PA N I E SNOTES TO THE FINANCIAL STATEMENTS(CONTINUED)

For personal use only

1 5 . O rdinary s h are capital

P A G E

2 0

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Ordinary share capital at beginning of the period

5,943

5,943

5,943

Ordinary share capital issued during the period

1,000

-

-

Ordinary share capital at end of the period

6,943

5,943

5,943

Voting rights
At a meeting: on a show of hands or vote by voice every member who is present in person or by proxy or by representative shall have one
vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote for every share of which such member
is the holder.

1 6 . R eserv es and retained earnings

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Available-for-sale revaluation reserve
Balance at beginning of the period

23

(1)

(1)

Valuation gain (loss) recognised after tax

4

36

24

Balance at end of the period

27

35

23

Balance at beginning of the period

24

84

84

Valuation (loss) gain recognised after tax

(4)

(19)

(34)

Transferred to income statement

(8)

(17)

(26)

Balance at end of the period

12

48

24

Total reserves

39

83

47

3,817

2,677

2,677

561

960

1,163

4,378

3,637

3,840

(27)

(8)

(23)

Interim ordinary dividends paid

(1,000)--

Balance at end of the period

3,351

3,629

3,817

Cash flow hedging reserve

Retained earnings
Balance at beginning of the period
Profit after income tax
Total available for appropriation
Actuarial (loss) gain on defined benefit schemes after tax

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

For personal use only

1 7 .	capital ade q uacy
C apital A de q uacy R atios U nder T h e B asel I i I nternal M odels B ased A pproac h 1

Consolidated
Unaudited
30/06/2009

Consolidated
Unaudited
30/06/2008

Consolidated
Unaudited
30/09/2008

Tier One Capital

9.13%

7.71%

8.13%

RBNZ minimum Tier One Capital ratio

4.00%

4.00%

4.00%

Minimum Tier One Capital ratio under Crown Wholesale Guarantee

6.00%

n/a

n/a

Total Capital

12.93%

11.39%

11.72%

RBNZ minimum Total Capital ratio

8.00%

8.00%

8.00%

Capital of the Banking Group as at 30 June 2009 (Unaudited)$mTier One Capital
Ordinary share capital

6,943

Revenue and similar reserves

2,829

Current period’s profit after tax

561

Less deductions from Tier One Capital-- Goodwill-- Other intangible assets-- Defined benefit schemes surplus (net of tax)

3,265
63
-

-- Equity investment in ING NZ

244-- Cash flow hedging reserve-- 50% of total expected loss to the extent greater than
total eligible allowances for impairment

12

Total Tier One Capital

94
6,655

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

1,165

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

1,702
2,867

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

94

Total Tier Two Capital

2,773

Total Capital

9,428

P A G E

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

For personal use only

(CONTINUED)

1 7 .	capital ade q uacy ( C ontinued )Total required capital of the Banking Group as at
30 June 2009 (Unaudited)

Exposureat default$mRisk weighted
exposure or implied
risk weighted
exposure$m

Exposures subject to internal ratings based approach

133,362

52,401

4,192

7,233

7,471

598

Exposures subject to standardised approach

263

238

19

Equity exposures

232

912

73

Specialised lending exposures subject to slotting approach

Total capitalrequirement$m

Other exposures

2,296

720

58

Total credit risk

143,386

61,742

4,940

Operational risk

n/a

5,638

451

Market risk

n/a

3,745

299

Supervisory adjustment1

n/a

1,794

144

143,386

72,9195,834

Total capital requirement
C A P I TA L A D E Q UA C Y R AT I O S U N D E R T H E B A S E L I A P P RO A C HConsolidated
Unaudited
30/06/2009

Unaudited
30/06/2008

Registered Bank
Audited30/09/2008

Unaudited
30/06/2009

Unaudited
30/06/2008

Audited30/09/2008

Tier One Capital

8.44%

7.76%

7.75%

8.35%

7.52%

7.65%

Total Capital

12.02%

11.56%

11.24%

11.88%

10.58%

11.09%

Total risk-weighted
exposures

79,98178,45780,717

78,10676,38578,860Tier One Capital

4.00%

4.00%

4.00%

4.00%

4.00%

4.00%

Total Capital

8.00%

8.00%

8.00%

8.00%

8.00%

8.00%

RBNZ minimum ratios:Basel I capital adequacy in respect of the Banking Group and Registered Bank has been derived in accordance with the RBNZ document
entitled ‘Capital Adequacy Framework (Basel I Approach)’ (BS2) dated March 2008.													I M P L E M E N TAT I O N O F T H E A D VA N C E D I N T E R N A L R AT I N G S B A S E D A P P RO A C H TO C R E D I T R I S K M E A S U R E M E N T

The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based (“IRB”) banks
in the RBNZ document entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008 to measurecapital requirements.													Under this IRB Framework, banks use their own measures for calculating the level of credit risk associated with customers and exposures,by way of the primary components of:													Probability of Default (“PD”) – an estimate of the level of risk of borrower default graded by way of rating models used both at loanorgination and for ongoing monitoring. For Retail Mortgage exposures the Banking Group is required to adopt the RBNZ prescribed
exposure weighted minimum PD of 1.25%.												Exposure at Default (“EAD”) – the expected facility exposure at default, and													Loss Given Default (“LGD”) – an estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor
default and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn
LGDs according to LVR band as set out in BS2B. For Rural Banking exposures the Banking Group is required to adopt RBNZ prescribed
downturn LGDs which are more conservative than internal estimates.													For exposures classified under Specialised Lending, the Banking Group uses slotting tables supplied by the RBNZ rather than internal estimates.
The exceptions to IRB treatment are five minor portfolios where, due to systems constraints or other reasons, determining these IRB risk
estimates is not currently feasible or appropriate. Risk weights for these exposures are calculated under a separate treatment as set out
in the RBNZ document entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A).													Refer to the Banking Group’s 31 March 2009 General Disclosure Statement for a more detailed description of the Banking Group’s
implementation of the IRB approach.
1

P A G E

2 2

The supervisory adjustment includes an adjustment of 15% of risk-weighted retail mortgages and an adjustment, if required, in order to maintain the Basel II Minimum Capital
Requirements at no less than 90% of the Basel I Minimum Capital Requirements, in accordance with the Bank’s Conditions of Registration. No adjustment was required to maintainthe Basel II Minimum Capital Requirements at no less than 90% of the Basel I Minimum Capital Requirements at 30 June 2009.

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

For personal use only

1 7 .	capital ade q uacy ( C ontinued )C R E D I T R I S K E X P O S U R E S S U B J E C T TO T H E I N T E R N A L R AT I N G S B A S E D A P P RO A C H

The following tables analyse the capital requirements under the internal rating based approach exposures by asset class:
Consolidated as at 30/06/2009 (Unaudited)
Total
exposureor principal
amount$m

Exposureweighted
LGD used for
Exposure at
the capitaldefault
calculation$m%

Exposureweighted Risk weighted Total capitalrisk weight
exposure2 requirement$m$m%

On-balance sheet exposures
Corporate

36,33536,33137

59

22,841

1,827

Sovereign

3,059

3,022

5

1

21

2

Bank

6,325

6,014

63

13

800

64

Retail mortgages

45,43745,43621

23

11,175894

Other retail

5,267

5,267

52

52

2,911

233

Total on-balance sheet exposures

96,423

96,070313737,7483,020

Corporate

14,623

11,921

48

57

7,095

568

Sovereign

13

13

5

1

-

-

Off-balance sheet exposures

Bank

831

744

48

19

149

12

Retail mortgages

5,643

5,347

20

26

1,502

120

Other retail

5,103

5,288

61

32

1,777

142

Total off-balance sheet exposures

26,21323,31345

43

10,523842

Corporate

63,295

2,627

57

56

1,546

124

Sovereign

5,988

387

5

1

5

-

Bank

507,723

10,965

65

22

2,579

206

Total market related contracts

577,006

13,979

62

28

4,130

330

Total credit risk exposures subject tothe internal ratings based approach

699,642

133,3623737

52,401

4,192

Market related contracts

2.

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

P A G E

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

For personal use only

1 7 .	capital ade q uacy ( C ontinued )Consolidated as at 30/06/2009 (Unaudited)

Probabilityof default%
Corporate
CCR rating
0-2
3-4
5
6
7-8
Default

Exposureweighted
LGD used for
ExposureExposure at
the capital weighted risk Risk weighted Total capitaldefault calculation
weightexposure2 requirement
$m
$m
$m
%
%

0.05%
0.32%
1.01%
2.35%
7.58%
100.00%5,599
22,567
11,349
7,223
3,509
632

60
38
38
38
42
48

25
39
69
88
134
80

1,470
9,397
8,343
6,746
4,993
533

118
752
667
540
399
43

Total corporate credit risk exposures

2.47%

50,87941

58

31,482

2,519

Sovereign
CCR rating
0
1
2
3
4-8
Default

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

3,422
-

5
-

1
-

26
-

2
-

Total sovereign credit risk exposures

0.01%

3,422

5

1

26

2

0.01%
0.02%
0.08%
1.02%
5.49%
100.00%13,920
2,953
759
40
2
49

65
61
49
65
65
65

18
21
26
107
199
-

2,628
645
207
45
3
-

210
52
16
4
-

0.29%

17,723

64

19

3,528

282

0.22%
0.38%
0.99%
2.33%
10.04%
100.00%13,74018,990
9,661
4,343
3,241
808

21
20
22
23
24
29

9
13
27
49
97
58

1,349
2,526
2,722
2,236
3,345
499

108
202
218
179
267
40

2.82%

50,78321

24

12,677

1,014

0.10%
0.27%
1.13%
2.05%
12.10%
100.00%

1,223
4,442
2,512
1,600
615
163

80
55
52
51
54
55

20
24
55
66
93
67

265
1,138
1,455
1,112
603
115

21
91
117
89
48
9

2.95%

10,555

57

42

4,688

375

Bank
CCR rating
0
1
2-4
5-6
7-8
Default
Total bank credit risk exposures
Retail mortgages
CCR rating
0-3
4
5
6
7-8
Default
Total residential mortgage credit risk exposures
Other retail
CCR rating
0-2
3-4
5
6
7-8
Default
Total other retail credit risk exposures

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

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

For personal use only

1 7 .	capital ade q uacy ( C ontinued )S P E C I A L I S E D L E N D I N G S U B J E C T TO T H E S L OT T I N G A P P RO A C HConsolidated as at 30/06/2009 (Unaudited)Risk
weighted Total capital
exposure2 requirement$m$m

Exposureamount$m

Riskweight%Strong

1,632

70

1,211

97

Good

2,305

90

2,199

176

Satisfactory

2,128

115

2,595

208

279

250

739

59

On-balance sheet exposures3

Weak
Default
Total on-balance sheet exposures subject to the slotting approach

156

-

-

-

6,500

98

6,744

540

Exposure Exposure
Averageamount at default risk weight
$m
$m
%

Risk
weighted Total capital
exposure2 requirement$m$m

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

675

604

93

593

47

Market related contracts

2,332

129

98

134

11

Total off-balance sheet exposures subject to the slotting approach

3,007

733

94

727

58

Specialised lending subject to the slotting approach have been derived in accordance with the Reserve Bank of New Zealand document
entitled 'Capital Adequacy Framework (Internal Models Based Approach)' (BS2B) dated March 2008.
C R E D I T R I S K E X P O S U R E S S U B J E C T TO T H E S TA N D A R D I S E D A P P RO A C HConsolidated as at 30/06/2009 (Unaudited)
Exposureamount$m

Risk weight%

Risk weighted
exposure2$m

Total capitalrequirement$m

Corporates

54

100

57

4

Residential mortgages

55

38

22

2

1

132

1

-

110

69

80

6

On-balance sheet exposures

Default
Total on-balance sheet exposures subject to the standardised approach

Average
Exposurecreditamount conversion$mfactor %Credit Average
Risk
equivalentrisk weighted Total capitalamount weight exposure2 requirement
$m
%
$m
$m

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

434

35

153

97

158

13

Credit risk exposures subject to the standardised approach have been calculated in accordance with the Reserve Bank of New Zealanddocument entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A) dated November 2007.													2, Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.
3. The supervisory categories of Specialised Lending above are associated with a specific risk-weight. These categories broadly correspond to the following external credit assessments
using the Standard & Poor’s rating scale: Strong BBB- or better, Good BB+ or BB, Satisfactory BB- or B+ and Weak B to C-.

P A G E

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

For personal use only

1 7 .	capital ade q uacy ( C ontinued )E q uity E X P O S U R E SConsolidated as at 30/06/2009 (Unaudited)

2 6

Risk weight%

Risk weighted
exposure2$m

Total capitalrequirement
$m

232

371

912

73

All other equity holdings (not deducted from capital)

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

OT H E R E X P O S U R E SConsolidated as at 30/06/2009 (Unaudited)
Exposureamount$m

Risk weight%

Risk weighted
exposure2$m

Total capitalrequirement
$m

172

-

-

-

Cash and gold bullion
New Zealand dollar denominated claims on
the Crown and the RBNZ

1,445

-

-

-

679

100

720

58

2,296

30

720

58

Other assets
Total other IRB credit risk exposures

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

O perational risk

Implied risk Total operational
weightedrisk capital
exposurerequirement$m$m
Operational risk capital requirement as at 30 June 2009 (Unaudited)
Advanced Measurement Approach for operational risk

5,638

451

The operational risk capital requirement has been calculated in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.

2.

P A G E

Exposureamount$m

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

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

For personal use only

1 7 .	capital ade q uacy ( C ontinued )M arket R isk	Implied risk
weighted
exposure$m

Aggregate
capital charge
$m

3,646

292

18

1

Market risk capital requirement as at 30 June 2009 (Unaudited)
Interest rate risk
Foreign currency risk
Equity risk

81

6

3,745

299

The market risk capital requirement has been calculated in accordance with the Reserve Bank of New Zealand document entitled‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B) dated March 2008.													C R E D I T R I S K M I T I G AT I O N 													The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment.
Collateral security in the form of real property or a security interest in personal property is generally taken for business credit except
for major government, bank and corporate counterparties of strong financial standing. Longer term consumer finance in the form of
housing loans is generally secured against real estate while short term revolving consumer credit is generally unsecured.
As at 30 June 2009, under the IRB approach, the Banking Group had $1,031m of Corporate exposures covered by guarantees and $8m
of Corporate exposures covered by credit derivatives.
R E TA I L M O RT G A G E S B Y L O A N - TO - VA L UAT I O N R AT I O

As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Bank’s valuationof the security property at origination of the exposure. The exposure amount used to calculate LVR excludes commitments to lend.

LVR Range

Exposureamount$m

0% - 59%

21,952

60% - 69%7,388

70% - 79%

9,023

80% - 89%

5,600

Over 90%

4,967
48,930P I L L A R I I C A P I TA L F O R OT H E R M AT E R I A L R I S K S

Total capital requirement

Internal capital allocation for other material risks

Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Unaudited
30/09/2008
$m

146

154

145

The internal capital allocation for other material risks has been derived in accordance with the Bank’s Conditions of Registration.
The internal capital allocation for the Banking Group’s other material risks comprised premises and equipment risk and capitalised
origination fees risk.												Other material risks outside of the credit, operational and market risks that the Banking Group measures and manages are generally
already deducted from Tier One capital. As a result, the Banking Group has not included capital for these risks in the internal capital
allocation for other material risks.													P A G E

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

For personal use only

1 8 . C oncentrations of credit risk

Concentrations of credit risk to individual counterparties
The number of individual counterparties other than banks or groups of closely related counterparties of which a bank is a parent(excluding OECD Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds
10% of equity (as at the end of the quarter) in ranges of 10% of equity, on the basis of limits:		
Consolidated
Unaudited 30/06/2009
Number of Counterparties

10% to 20% of equity

Unaudited 30/06/2008
Number of Counterparties

Audited 30/09/2008
Number of Counterparties

As at

Peak forthe quarter

As at

Peak forthe quarter

As at

Peak forthe quarter

1

1

1

1

1

1

The number of individual counterparties disclosed within the various equity ranges is based on counterparty limits rather than actual
exposures outstanding. No account is taken of security and/or guarantees which the Banking Group may hold in respect of the various
counterparty limits.
The amount and percentage of quarter end credit exposures to individual counterparties other than banks or groups of closely related
counterparties of which a bank is a parent (excluding OECD Governments and connected persons), where the quarter end credit
exposure equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:
Unaudited 30/06/2009

Unaudited 30/06/2008

Audited 30/09/2008

Amount$m% of Total
CreditExposureAmount$m% of Total
CreditExposureAmount$m% of Total
CreditExposure

1,306

100.0%

1,926

100.0%

1,329

100.0%

As at
Investment grade credit rating1

Concentrations of credit risk to bank counterparties
The number of bank counterparties or groups of closely related counterparties of which a bank is the parent (excluding OECD
Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (asat the end of the quarter) in ranges of 10% of equity, on the basis of actual exposures:Consolidated
Unaudited 30/06/2009
Number of Counterparties
As at

Unaudited 30/06/2008
Number of Counterparties

Audited 30/09/2008
Number of Counterparties

Peak forthe quarter

As at

Peak for thequarter

As at

Peak for thequarter

10% to 20% of equity

-

1

2

3

1

2

20% to 30% of equity

2

2

-

-

1

1

30% to 40% of equity
The amount and percentage of quarter end credit exposures to bank counterparties or groups of closely related counterparties of whicha bank is a parent (excluding OECD Governments and connected persons), where the quarter end credit exposures equals or exceeds
10% of equity (as at the end of the quarter), by credit rating:
Unaudited 30/06/2009
Amount$m% of Total
CreditExposure

Unaudited 30/06/2008
Amount$m% of Total
CreditExposure

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

As at
Investment grade credit rating 1
4,872
100.0%
2,926
100.0%
3,416
100.0%The number of individual counterparties disclosed within the various equity ranges and the total exposure as at the end of the quarterare gross exposures. No account is taken of collateral, security and/or netting agreements which the Banking Group may hold inrespect of the various counterparty exposures. The peak number is calculated for each individual counterparty and the peak for all
counterparties may not have occurred on the same day.
1. All of the individual and bank counterparties included in the above tables have an investment grade credit rating. An investment grade credit rating means a credit rating of BBB
or Baa3 or above, or its equivalent. In the case of a group of closely related counterparties, the credit rating applicable is that of the entity heading the group of closely related
counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars, or to an entity’s long term seniorunsecured foreign currency obligations.

P A G E

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

For personal use only

1 8 . C oncentrations of credit risk ( C ontinued )Concentrations of credit risk to connected persons
Credit exposures to connected persons reported in the table below have been calculated partially on a bilateral net basis, and partiallyon a gross basis. With effect from 11 August 2008, netting has occurred in respect of certain transactions which are the subject of abilateral netting agreement disclosed in the Bank’s most recent Supplemental Disclosure Statement for the period ended 30 June 2009.
There is a limit of 125% of the Banking Group Tier One Capital in respect of the gross amount of aggregate credit exposure to connected
persons that can be netted off in determining the net exposure.
Consolidated
Unaudited 30/06/2009
Amount% of Tier$m One Capital

Aggregate at end of period4
Other connected persons(on gross basis, before netting)2
Other connected persons (amount netted off)2
Other connected persons(on partial bilateral net basis)2
Non-bank connected persons3Peak end-of-day for the quarter4
Other connected persons(on gross basis, before netting)
Other connected persons (amount netted off)
Other connected persons(on partial bilateral net basis)Non-bank connected persons
Rating-contingent limit5
Other connected persons
Non-bank connected persons

Unaudited 30/06/2008

Audited 30/09/2008

Amount$m% of Tier
One Capital

Amount$m% of Tier
One Capital

4,174

62.7%

2,947

49.6%

3,011

49.1%

3,023
1,151

45.4%
17.3%

n/a
n/a

n/a
n/a

2,187
824

35.6%
13.5%

-

0.0%

-

0.0%

-

0.0%

5,514

82.9%

3,455

58.1%

4,250

69.3%

3,154
2,360

47.4%
35.5%

n/a
n/a

n/a
n/a

2,889
1,361

47.1%
22.2%

-

0.0%

-

0.0%

-

0.0%

n/a
n/a

70.0%
15.0%

n/a
n/a

70.0%
15.0%

n/a
n/a

70.0%
15.0%

The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusive of exposuresof a capital nature. The peak end-of-day credit exposures for the quarter to connected persons are measured over Tier One Capital asat the end of the quarter. There were no individual provisions provided against credit exposures to connected persons as at 30 June2009 (30/06/2008 $nil; 30/09/2008 $nil). The Banking Group had no contingent exposures arising from risk lay-off arrangements toconnected persons as at 30 June 2009 (30/06/2008 $nil; 30/09/2008 $nil).
2. The Banking Group has amounts due from its Parent Company and Ultimate Parent Bank and other entities within the Ultimate Parent Group arising from the ordinary course of its
business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate Parent Bank. As at 30 June 2009, the gross
exposures to the Bank’s Parent Company were $nil (30/06/2008 $nil; 30/09/2008 $14 million). As at 30 June 2009, the gross exposures to the Bank’s Ultimate Parent Bank were
$4,174 million (30/06/2008 $2,947 million; 30/09/2008 $2,997 million).
3. Non-bank connected persons exposures consist of loans to directors of the Bank. Any loans are made in the ordinary course of business of the Bank, on an arm’s length basis and on
normal commercial terms and conditions.
4. The Banking Group has complied with the limits on aggregate credit exposure (of a non-capital nature and net of individual provisions) to connected persons and non-bankconnected persons, as set out in the Conditions of Registration, at all times during the quarter.
5. Represents the maximum peak end-of-day aggregate credit exposures limit (of a non-capital nature and net of individual provisions) to all connected persons. This is based on theratings applicable to the Bank’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars (refer page 40 for the credit rating). Within the overall limit
a sub-limit of 15% of Tier One Capital applies to aggregate credit exposures (exclusive of exposures of a capital nature and net of individual provisions) to non-bank connected
persons. On 4 May 2007, the connected persons’ limit increased from 70% to 75% as a result of an improvement in the Bank’s credit rating. On 18 March 2008, the Bank formallyengaged Fitch Ratings to provide credit rating services. The Fitch Ratings rating of AA- has meant that from this date the connected persons’ limit has decreased from 75% to 70%
as the Fitch Ratings rating of AA- is lower than that given by Standard & Poor’s and Moody’s Investors Service.

P A G E

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

For personal use only

(CONTINUED)P A G E

3 0

1 9 . M arket risk

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

Implied risk weighted exposure

Aggregate capital charge

Aggregate capital charge
as a percentage of the
Banking Group’s Equity

As at
$m

Peak
$m

As at
$m

Peak
$m

As at

Peak

Unaudited 30/06/2009
Interest rate risk

3,646

3,663

292

293

2.8%

2.8%

Foreign currency risk

18

140

1

11

0.0%

0.1%

Equity risk

81

91

6

7

0.1%

0.1%

3,633

4,078

291

326

3.0%

3.4%

Foreign currency risk

16

151

1

12

0.0%

0.1%

Equity risk

74

76

6

6

0.1%

0.1%

Unaudited 30/06/2008
Interest rate risk

Audited 30/09/2008
3,736

3,984

299

319

3.0%

3.3%

Foreign currency risk

Interest rate risk

35

160

3

13

0.0%

0.1%

Equity risk

64

75

5

6

0.1%

0.1%

2 0 .	I N T E R E S T E A R N I N G A N D D I S C O U N T B E A R I N G A S S E T S A N D L I A B I L I T I E SConsolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Interest earning and discount bearing assets

104,285

105,467

109,017

Interest and discount bearing liabilities

93,40995,330100,581

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

For personal use only

2 1 . S E G M E N TA L A N A LYS I S

For segment reporting purposes, the Banking Group is organised into three major business segments - Retail, Commercial and Institutional.
Centralised back office and corporate functions support these segments.
A summarised description of each business segment is shown below:
RetailProvides banking products and services to individuals and small businesses through separate ANZ and The National Bank of New
Zealand branded distribution channels. Personal banking customers have access to a wide range of financial services and products. Small
business banking services are offered to enterprises with annual revenues of less than $5 million. Included in this segment is Private
Banking, a stand-alone business unit, which offers a fully inclusive banking and investment service to high net worth individuals. This
segment also includes profit centres supporting the Retail Banking segment (e.g. ING NZ joint venture).
Commercial
This segment provides services to Rural, Corporate and Commercial and UDC customers. A full range of banking products and services
are provided to Rural customers. Corporate and Commercial customers consist of primarily privately owned medium to large businesses
with annual revenues of $2 million and greater. The Banking Group’s relationship with these businesses ranges from simple banking
requirements with revenue from deposit and transactional facilities, and cashflow lending, to more complex funding arrangements withrevenue sourced from a wider range of products. UDC is primarily involved in the financing and leasing of plant, vehicles and equipment,
primarily for small and medium sized businesses, as well as investment products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group’s client base. The Institutional business unit ismade up of the following specialised units:•

Markets - provides foreign exchange and commodity trading and sales-related services, origination, underwriting, structuring, risk
management and sale of credit and derivative products globally.

•

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

•

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

Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent with the 2009
segment definitions.
BUSINESS SEGMENT ANALYSIS - CONTINUING OPERATIONS1,2
Consolidated
RetailBanking3$mCommercial
Banking$m

Net operating income3

992

612

Profit before income tax3

42

201

Institutional
$m

Other
$m

Total
$m

610

206

2,420

410

145

798

Unaudited 9 months to 30/06/2009

Unaudited 9 months to 30/06/2008
Net operating income

1,328

591

402

241

2,562

Profit before income tax

507

344

270

239

1,360

Audited year to 30/09/2008
Net operating income

1,760

795

539

319

3,413

Profit before income tax

612

418

364

273

1,667

1.

Results are equity standardised

2. Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3. Includes $211 million charge in relation to ING New Zealand Funds. Refer to Note 26 for further details.

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

For personal use only

2 2 . notes to t h e cas h flow statements

Consolidated
Unaudited
9 months to
30/06/2009$m

Unaudited
9 months to
30/06/2008$m

AuditedYear to30/09/2008$m

Profit after income tax

561

960

1,163

Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Deferred fee revenue and expenses
Share-based payments expense
Amortisation of capitalised brokerage/ mortgage origination fees

35
528
4
14
38

33
167
(3)
11
42

46
302
(3)
13
57

(3,447)
139
(279)
(2)
43
180
77
(183)

(5,020)
14
100
(5)
51
(8)
40
(58)

(3,362)
2
202
(8)
45
25
56
(20)

(10)

(102)

(111)

Reconciliation of profit after income tax to net cash flows used inoperating activities

Deferrals or accruals of past or future operating
cash receipts or payments:
Increase in operating assets and liabilities
Decrease in interest receivable(Decrease) increase in interest payable
Increase in accrued income
Increase in accrued expenses
Increase (decrease) in provisions
Amortisation of premiums and discounts
Increase in income tax assets
Items classified as investing/financing:
Share of profit of equity accounted associates and jointly
controlled entities(Gain) Loss on disposal of premises and equipment
Net cash flows used in operating activities

(17)

1

1

(2,319)(3,777)(1,592)

Reconciliation of core liquidity portfolio to cash and cash equivalents
The Banking Group’s core liquidity portfolio held for managing liquidity risk comprises:			Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008
$m

1,445
275
4,459
1,225
622
1,625
9,651

1,622
67
3,222
15
1,313
6,239

3,779
134
3,343
180
1,300
8,736

631
324

1,604
1,290

1,059
1,948

Non-cash items included within liquidity portfolio:
Trading securities
Available-for-sale assets
Due from other financial institutions - greater than 90 days

(2,525)(622)(3,997)(1,955)(2,330)(2,376)(1,578)

Total cash and cash equivalents

3,462

4,848

7,789

2,076
1,386
3,462

3,225
1,623
4,848

4,838
2,951
7,789

Cash and balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government, Local Body stock and bonds
Available-for-sale assets
Other bank bonds
Total liquidity portfolio1
Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:
Liquid assets not with central banks
Due from other financial institutions - less than 90 days

Reconciliation of cash and cash equivalents to the balance sheets
Liquid assets
Due from other financial institutions - less than 90 days
Total cash and cash equivalents
1.

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3 2

Assets held for managing liquidity risk includes short term cash held with the RBNZ or other banks, government securities and other securities that are readily acceptable inrepurchase agreements with the RBNZ and other New Zealand banks and securities issued by offshore Supranational and highly rated banks.

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

For personal use only

(CONTINUED)

2 3 . PA R E N T C O M PA N Y A N D U LT I M AT E PA R E N T C O M PA N Y

The Parent Company is ANZ Holdings (New Zealand) Limited which is incorporated in New Zealand. The Ultimate Parent Bank isAustralia and New Zealand Banking Group Limited which is incorporated in Australia.										2 4 .	S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D
D I S T R I B U T I O N O F I N S U R A N C E P RO D U C T S

Securitisation
The Bank enters into transactions in the normal course of business by which it transfers financial assets directly to third parties orto special purpose entities. These transfers may give rise to the full or partial derecognition of those financial assets.
•

Full derecognition occurs when the Bank transfers its contractual right to receive cash flows from the financial assets, or retains
the right but assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks and rewards ofownership. These risks include credit, interest rate, currency, prepayment and other price risks.

•Partial derecognition occurs when the Bank sells or otherwise transfers financial assets in such a way that some but not substantiallyall of the risks and rewards of ownership are transferred but control is retained. These financial assets are recognised on the balance
sheet to the extent of the Bank’s continuing involvement.

In May 2008 the RBNZ expanded the range of acceptable collateral that banks can pledge and borrow against as part of changes
to its liquidity management arrangement designed to help ensure adequate liquidity for New Zealand financial institutions in theevent that global market disruption was to intensify. From 31 July 2008, acceptable collateral includes residential mortgage backed
securities (“RMBS”) that satisfy RBNZ criteria.
On 10 October 2008, the Banking Group established an in-house RMBS facility that could issue securities meeting the RBNZ criteria.
The establishment of the facility resulted in the Parent financial statements recognising a payable and receivable of equal amount
totalling $3,721 million to Kingfisher NZ Trust 2008-1 (“the Trust”), a newly established consolidated entity. On 12 December 2008,
a further tranche totalling $5,521 million was also sold to the Trust, creating a second payable and receivable of equal amount.
These assets do not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets, therefore theConsolidated Group’s financial statements do not change as a result of establishing these facilities.
The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent that any loans are foundto be ineligible in terms of the RBNZ criteria, they are automatically removed from the facility. Additional lending to existing RMBS
customers is added into the facility on a monthly basis.
The establishment of this facility increases the Banking Group’s contingent funding ability from the RBNZ.
Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and investment and superannuation funds.
The Bank provides private banking services to a number of clients, including investment advice and portfolio management. The
Banking Group is not responsible for any decline in performance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by the Banking Group, they are not included in these financial statements. The
Banking Group derives fee and commission income from the sale and management of investment funds and superannuation bonds,
unit trusts and the provision of private banking services to a number of clients. The Banking Group derives commission income fromthe sale of third party funds management products.
Custodial services
The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by those customers.
Marketing and distribution of insurance products
The Banking Group markets and distributes a range of insurance products which are underwritten by several insurance companies.
These activities are managed in association with the ING New Zealand joint venture.
Insurance business
The Banking Group does not conduct any insurance business directly, although the Banking Group holds a 49% share in the ING NZ
joint venture which does conduct insurance business.
Provision of financial services
Financial services provided by the Banking Group to entities which are involved in trust, custodial, funds management and otherfiduciary activities, and to affiliated insurance companies which conduct marketing or distribution of insurance products, or on
whose behalf the marketing or distribution of insurance products are conducted, are provided on arm’s length terms and conditions
and at fair value. Any assets purchased from such entities have been purchased on an arm’s length basis and at fair value.
The Banking Group has not provided any funding to entities except standard lending facilities provided in the normal course ofbusiness on arm’s length terms which conduct any of the following activities: trust, custodial, funds management or other fiduciary
activities established, marketed and/or sponsored by a member of the Banking Group (30/06/2008 $nil; 30/09/2008 $nil).

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

For personal use only

(CONTINUED)P A G E3 4

2 4 .	S E C U R I T I S AT I O N , F U N D S M A N A G E M E N T, OT H E R F I D U C I A RY A C T I V I T I E S A N D T H E M A R K E T I N G A N D
D I S T R I B U T I O N O F I N S U R A N C E P RO D U C T S ( continued )Risk Management
The Bank and subsidiaries of the Banking Group participating in the activities identified above have in place policies and procedures toensure that those activities are conducted in an appropriate manner. Should adverse conditions arise, it is considered that these policies
and procedures will minimise the possibility that these conditions will adversely impact the Bank. The policies and procedures include
comprehensive and prominent disclosure of information regarding products, and formal and regular review of operations and policies
by management and auditors.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing insurance products:
Investment statements, prospectuses and brochures for insurance products include disclosures that the Bank and its subsidiaries do
not guarantee the insurer, nor the insurer’s subsidiaries, nor any of the products issued by the insurer or the insurer’s subsidiaries.
Where the insurance products are subject to the Securities Act 1978, investment statements, prospectuses and brochures additionally
include disclosures that:• the policies do not represent deposits or other liabilities of the Bank or its subsidiaries;• the policies are subject to investment risk, including possible loss of income and principal; and• the Bank and its subsidiaries do not guarantee the capital value or performance of the policies.
Application forms for insurance products contain acknowledgements to be signed by a purchaser which are consistent with thedisclosures for insurance products noted above.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing fund management
products:
Prospectuses, investment statements and brochures for funds management products include disclosures:• that the securities do not represent deposits or other liabilities of the Bank;• that the securities are subject to investment risk including possible loss of income and principal invested; and• that the Bank does not guarantee the capital value or performance of the securities.
Application forms for funds management products contain acknowledgements to be signed by a purchaser which are consistent withthe disclosures for funds management products noted above.

25. COMMITMENTS

Consolidated
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$m

Premises and equipment
Not later than 1 year

32

26

26

Total capital expenditure commitments

32

26

26

Premises and equipment
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years

84
149
30

81
157
27

86
167
27

Total lease rental commitments

263

265

280

Total commitments

295

291

306

Capital expenditure
Contracts for outstanding capital expenditure:

Lease rentals
Future minimum lease payments under non-cancellable operating leases:

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

For personal use only

(CONTINUED)

2 6 . C O N T I N G E N T L I A B I L I T I E S , C R E D I T R E L AT E D C O M M I T M E N T S A N D M A R K E T R E L AT E D C O N T R A C T S

For contingent exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would have to pay if
the contingent is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
Consolidated
Face or contract value
Unaudited
30/06/2009$m

Unaudited
30/06/2008$m

Audited30/09/2008$mCommitments with certain drawdown due within one year
Commitments to provide financial services

792
23,181803
24,124659
23,150Total credit related commitments

23,97324,92723,809Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,799
440
1,033
77

1,996
487
777
348

2,017
401
1,090
118

Total contingent liabilities

3,349

3,608

3,626

Exchange rate contracts
Interest rate contracts
Equity contracts

101,243
478,05144

103,285
551,961-

109,771
537,469
36

Total foreign exchange, interest rate and equity contracts

579,338

655,246647,276

Credit related commitments

Contingent liabilities

Foreign exchange, interest rate and equity contracts

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.
The detailed and estimated maximum amount of contingent liabilities that may become payable are set out below.
Contingent tax liability
As previously disclosed, the New Zealand Inland Revenue Department (“IRD”) is reviewing a number of structured finance transactions
as part of an audit of the 2000 to 2005 tax years. This is part of an industry-wide review by the IRD of these transactions undertaken
in New Zealand. Consequently a number of cases are before the courts. The first of these decisions was issued on 16 July 2009 against
another bank in favour of the IRD.
The IRD has issued amended tax assessments in respect of seven of these transactions which cover the 2000 to 2004 income years.
Proceedings disputing the amended tax assessments with respect to the 2000-2004 income years have been commenced.
The Bank considers that its position in relation to the application of the tax laws is correct and as noted above is disputing the IRD’s
position. The Bank considers the taxation and accounting positions it has adopted for these transactions, and all similar transactions, inthese accounts appropriate.
The tax adjustments proposed so far by the IRD cover the 2000 to 2005 tax years and imply a maximum potential liability of $313 million($492 million with interest tax effected).
The IRD is also investigating other transactions undertaken by the Banking Group, which have been subject to the same tax treatment.
Should the same position be taken by the IRD for all years on all these transactions, including those that the Notices cover, the maximum
potential liability would be approximately $365 million ($568 million with interest tax effected) as at 30 June 2009.
The possible application of penalties has yet to be considered by the IRD, but may be imposed following an adverse judgement.
Having regard to the circumstances and the advice received, the Bank considers the application of penalties to be both inappropriate
and unlikely.

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

For personal use only

2 7 . C O N T I N G E N T L I A B I L I T I E S , C R E D I T R E L AT E D C O M M I T M E N T S A N D M A R K E T R E L AT E D C O N T R A C T S ( continued )Contingent Tax Liability (Continued)
Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($159 million with interest tax
effected) is subject to indemnities given by Lloyds TSB Bank plc under the agreement by which the Bank acquired the NBNZ Holdings
Limited Group, and which relate to transactions undertaken by NBNZ Group before December 2003.
This leaves a net potential tax liability as at 30 June 2009 of $266 million ($409 million with interest tax effected).
All of these transactions have now either matured or been terminated.
Commerce Commission
In November 2006, the Commerce Commission brought proceedings under the Commerce Act 1986 against Visa, MasterCard and all
New Zealand issuers of Visa and MasterCard credit cards, including ANZ National Bank Limited. The Commerce Commission alleges pricefixing and substantially lessening competition in relation to the setting of credit card interchange fees and is seeking penalties and orders
under the Commerce Act.
Subsequently, several major New Zealand retailers have issued proceedings against ANZ National Bank Limited and the other above mentioned
defendants seeking unquantified damages, based on allegations similar to those contained in the Commerce Commission proceedings.
ANZ National Bank Limited is defending the proceedings. The Bank has received independent legal advice. The matter is complex anddifficult. At this stage any potential liability cannot be assessed with any certainty. A trial has been scheduled for October 2009.
In addition, the Bank is aware that the Commerce Commission is looking closely at credit contract fees under the Credit Contracts andConsumer Finance Act 2003 (“CCCFA”). In its 2008-2011 Statement of Intent the Commission stated that:“The Commission is turning more to litigation under the Credit Contracts and Consumer Finance Act to ensure credit contract fees arereasonable and disclosed. Currently the credit industry is not fully compliant with the legislation and taking more action through thecourts will encourage better compliance and clarify any areas of the law that may be uncertain.”In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged on credit cards andthe level of currency conversion charges on overseas transactions using credit cards under the CCCFA. We have also been notified that
the Commission will be investigating early repayment charges on fixed rate mortgages. At this stage the possible outcome of theseinvestigations and any liability or impact on fees cannot be determined with any certainty.
ING New Zealand Funds
Trading in the ING Diversified Yield Fund and the ING Regular Income Fund (“the Funds”) was suspended on 13 March 2008 due todeterioration in the liquidity and credit markets. These funds are managed by the joint venture partner (ING (NZ) Limited). Some ofthese funds were sold to ANZ National Bank customers.
On 5 June 2009, ING NZ AUT Investments Limited, a subsidiary of ING (NZ) Limited, made an offer to investors in the Funds. The offerclosed on 13 July 2009. Investors holding approximately 99% of the funds accepted the offer and will receive a payment of 60 cents perunit in the ING Diversified Yield Fund or 62 cents per unit in the ING Regular Income Fund, as applicable, either (i) in cash no later than
28 August 2009, or (ii) by way of deposit in an on-call account with ANZ National, paying 8.30% per annum fixed for up to five years.
The Bank considers it has adequately provided for these obligations at this time. Allowance for the estimated cost of this offer isrecognised as a reduction in “other operating income” in the income statement for the nine months ended 30 June 2009 with acorresponding provision in the balance sheet.
Although acceptance of this offer includes a waiver of claims, ANZ National Bank customers were offered an additional opportunity toaccess the ANZ National Bank customer complaints team (and, where still unsatisfied, the New Zealand Banking Ombudsman) even
where the investors have accepted the offer.
The ultimate cost to ANZ National Bank will depend on the final value of units in the Funds, any recoveries under insurance, the numberof complaints and the results of any litigation and regulatory proceedings that may be brought in connection with the Funds or theirsale. The Commerce Commission has sought information regarding the Funds and the sale of units in the Funds and is investigating thismatter. At this stage it is not possible to predict the outcome of any investigation.
Other contingent liabilities
The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the
Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision made where appropriate. As
at 30 June 2009, there were no other contingent assets or liabilities required to be disclosed (30/06/2008 nil; 30/09/2008 nil).

2 8 . subse q uent e v ents

On 28 July 2009, a further $4,986 million of residential mortgage assets were sold to the Australia and New Zealand Banking Group
Limited – New Zealand Branch.
On 31 July 2009, the Bank elected to repay an Australian dollar denominated loan of AUD 207,450,000 on 31 August 2009.

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

Conditions of registration

For personal use only

Conditions of Registration, applicable as at 27 August 2009. These Conditions of Registration have applied from 15 October 2008.
The Bank’s Conditions of Registration were revised on 31 March 2008 and 16 June 2008 in order to implement a new set of capital
adequacy conditions for banks that have adopted the internal-models based approach to capital adequacy and to correct thedefinition of the Parent Bank capital ratios, respectively. The conditions that were amended were conditions 1, 1A, 1B, 1C and 4. This
has resulted in changes to the Banking Group’s capital adequacy disclosures (refer to Note 17 Capital Adequacy).
The registration of ANZ National Bank Limited (‘the Bank’) as a registered bank is subject to the following conditions:
1. That the Banking Group complies with the following requirements:(a) the total capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 8%;(b) the tier one capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 4%; and(c) the capital of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008 is not less than $30 million.
For the purposes of this condition of registration the scalar referred to in the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is 1.06.
For the purposes of this condition of registration, the supervisory adjustment referred to in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is the sum of:(a) 15% of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(b) 12.5 times the greater of: zero; and 90% of adjusted Basel I capital, less adjusted Basel II capital; where(i) “adjusted Basel I capital” means 8% of total risk-weighted exposures, plus deductions from tier one capital, plus deductions
from total capital, all calculated in accordance with the Reserve Bank of New Zealand document “Capital adequacy
framework (Basel I approach)” (BS2) dated March 2008;(ii) ”adjusted Basel II capital” means 8% of total Basel II risk-weighted exposures plus deductions from tier one capital, plus
deductions from total capital, less any amount included in tier two capital arising from the excess of eligible allowances
for impairment over EL (expected losses), all calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(iii) “total Basel II risk-weighted exposures” means scalar x (risk-weighted on and off balance sheet credit exposures) + 12.5 x
total capital charge for market risk exposure + 12.5 x total capital requirement for operational risk + 15% of risk-weighted
exposures secured by residential mortgages as defined in the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008.
1A. That(a) the Bank has an internal capital adequacy assessment process (“ICAAP”); that with effect from 31 August 2008 the Bank’s
ICAAP accords with the requirements set out in the document “Guidelines on a Bank’s internal capital adequacy process(“ICAAP”)” (BS12) dated December 2007;(b) under its ICAAP the Bank identifies and measures its “other material risks” defined as all material risks of the Banking Group
that are not explicitly captured in the calculation of tier one and total capital ratios under the requirements set out in the
document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(c) the Bank determines an internal capital allocation for each identified and measured “other material risk”.
1B.That the Banking Group complies with all requirements set out in the Reserve Bank of New Zealand document “Capital adequacy
framework (internal models based approach)” (BS2B) dated March 2008:
1C.That the Bank complies with the following requirements:
The total capital ratio of the Bank is not less than 8 %.
The tier one capital ratio of the Bank is not less than 4%

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

Conditions of registration(CONTINUED)

For personal use only

For the purposes of this condition of registration:•

the total capital ratio is defined as capital as a percentage of risk-weighted exposures where capital and risk-weighted
exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)”(BS2) dated March 2008; and•the tier one capital ratio is defined as tier one capital as a percentage of risk-weighted exposures where tier one capitaland risk-weighted exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework(Basel I approach)” (BS2) dated March 2008.

2. That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total activities,
where the term material is based on generally accepted accounting practice, as defined in the Financial Reporting Act 1993.
3. That the Banking Group’s insurance business is not greater than 1% of its total consolidated assets. For the purposes of thiscondition:(i) Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings andInspections) Act 1994 (including those to which the Act is disapplied by sections 4(1)(a) and (b) and 9 of that Act), or any
business of the nature referred to in section 3(1) of the Life Insurance Act 1908;(ii) In measuring the size of the Banking Group’s insurance business:(a) Where insurance business is conducted by any entity whose business predominantly consists of insurance business, thesize of that insurance business shall be:•

The total consolidated assets of the group headed by that entity;•

Or if the entity is a subsidiary of another entity whose business predominantly consists of insurance business, thetotal consolidated assets of the group headed by the latter entity;(b) Otherwise, the size of each insurance business conducted by any entity within the Banking Group shall equal the total
liabilities relating to that insurance business, plus the equity retained by the entity to meet the solvency or financial
soundness needs of the insurance business;(c) the amounts measured in relation to parts a) and b) shall be summed and compared to the total consolidated assets of
the Banking Group. All amounts in parts a) and b) shall relate to on balance sheet items only, and shall be determinedin accordance with generally accepted accounting practice, as defined in the Financial Reporting Act 1993;(d) where products or assets of which an insurance business is comprised also contain a non-insurance component, thewhole of such products or assets shall be considered part of the insurance business.
4. That aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the Banking Group to all
connected persons do not exceed the rating-contingent limit outlined in the following matrix:

1.

Credit Rating1

Connected exposure limit (% of the
Banking Group’s Tier 1 capital)

AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

This table uses the rating scales of Standard & Poor’s, Fitch Ratings and Moody’s Investors Services. (Fitch Ratings’ scale is Identical to Standard & Poor’s.)

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to nonbank connected persons shall not exceed 15 percent of the Banking Group’s Tier One capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit is determinedin accordance with the Reserve Bank of New Zealand document entitled ‘Connected Exposure Policy’ (BS8) dated March 2008.
5. That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment, tenor,
interest rates, amortisation schedules and requirement for collateral) than corresponding exposures to non-connected persons.
6. That the board of the Bank contains at least two independent directors and that alternates for those directors, if any, arealso independent. In this context an independent director (or alternate) is a director (or alternate) who is not an employee of
the Bank, and who is not a director, trustee, or employee of any holding company (as that term is defined in section 5 of theCompanies Act 1993) of the Bank, or any other entity capable of controlling or significantly influencing the Bank.
7. That the chairperson of the Bank’s board is not an employee of the Bank.

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Conditions of registration

For personal use only

(CONTINUED)

8. That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing duties as adirector, to act other than in what he or she believes is the best interests of the company (i.e. the Bank).
9. That a substantial proportion of the Bank’s business is conducted in and from New Zealand.
10. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief
executive officer, shall be made in respect of the Bank unless:(i) The Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee, and(ii) The Reserve Bank has advised that it has no objection to that appointment.
11. That the Bank has legal and practical ability to control and execute any business, and any functions relating to any business, of the
Bank that are carried on by a person other than the Bank, sufficient to achieve, under normal business conditions and in the eventof stress or failure of the Bank or of a service provider to the Bank, the following outcomes:(a) that the Bank’s clearing and settlement obligations due on a day can be met on that day;(b) that the Bank’s financial risk positions on a day can be identified on that day;(c) that the Bank’s financial risk positions can be monitored and managed on the day following any failure and on subsequent days;and(d) that the Bank’s existing customers can be given access to payments facilities on the day following any failure and on subsequentdays.
For the purposes of the this condition of registration, the term “legal and practical ability to control and execute” is explained in the
Reserve Bank of New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated January 2006.
Until 31 December 2008, functions provided to the Bank by Electronic Transaction Services Limited and Interchange and Settlement
Limited are not covered by this condition.
12. (a) That the business and affairs of the Bank are managed by, or under the direction and supervision of, the board of the Bank.
(b) That the employment contract of the chief executive officer of the Bank or person in an equivalent position (together “CEO”) iswith the Bank, and the terms and conditions of the CEO’s employment agreement are determined by, and any decision relating
to the employment or termination of employment of the CEO are made by, the board of the Bank.
(c) That all staff employed by the Bank shall have their remuneration determined by (or under the delegated authority of) the board
or the CEO of the Bank and be accountable (directly or indirectly) to the CEO of the Bank.
For the purposes of these conditions of registration, the term ‘Banking Group’ means ANZ National Bank Limited’s financial reportinggroup (as defined in section 2(1) of the Financial Reporting Act 1993).

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Credit rating informationP A G E

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Credit Ratings applicable as at 27 August 2009
The Bank has three current credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in
New Zealand in New Zealand dollars. The credit ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

During the two-year period ended 30 June 2009, the Standard & Poor’s credit rating and qualification remained at AA and Outlook
Stable.
During the two-year period ended 30 June 2009, the Moody’s Investors Service credit rating and qualification remained at Aa2 andOutlook Stable.
During the two-year period ended 30 June 2009, the Fitch Ratings credit rating and qualification remained at AA- and Outlook Stable.
Fitch Ratings were formally engaged by the Bank on 18 March 2008 to provide credit rating services. Previously Fitch Ratings had
rated the Bank on an unsolicited basis as AA-.
Description

Standard &Poor’sMoody’s
Investors
Service

Fitch Ratings

Ability to repay principal and interest is extremely strong. This is the highest
investment category.

AAA

Aaa

AAA

Very strong ability to repay principal and interest.

AA

Aa

AA

Strong ability to repay principal and interest although somewhat susceptible toadverse changes in economic, business or financial conditions.

A

A

A

Adequate ability to repay principal and interest. More vulnerable to adversechanges.

BBB

Baa

BBB

Significant uncertainties exist which could affect the payment of principal andinterest on a timely basis.

BB

Ba

BB

Greater vulnerability and therefore greater likelihood of default.

B

B

BB

Likelihood of default now considered high. Timely repayment of principal andinterest is dependent on favourable financial conditions.

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & DThe following grades display investment grade characteristics:

The following grades have predominantly speculative characteristics:

Highest risk of default.
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 withinthe ‘AA’ to ‘B’ catergories. Moody’s Investors Service applies numerical modifiers 1, 2, and 3 to each of the ‘Aa’ to ‘Caa’ classifications,with 1 indicating the higher end and 3 the lower end of the rating category.

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

Directors’ statement

D irectors ’ S tatement

For personal use only

As at the date on which this General Short Form Disclosure Statement is signed, after due enquiry, each Director believes that:(i) The Short Form Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statement(Off-Quarter - New Zealand Incorporated Registered Banks) Order 2008;(ii) The Short Form Disclosure Statement is not false or misleading.
Over the nine months ended 30 June 2009, after due enquiry, each Director believes that:(i) ANZ National Bank Limited has complied with the Conditions of Registration;(ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including
credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other businessrisks, and that those systems were being properly applied.
This General Short Form Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on,
27 August 2009. On that date, the Directors of the Bank were:

Dr D T Brash

S C Elliot

J A Fagg

N M T Geary, CBEJ F Judge

P R Marriott

M R P Smith, OBE

Sir Dryden Spring

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For personal use only

Independent Re vie w Report FOR THE
nine MONTHS ENDED 30 june 2009

I ndependent R e v ie w R eport to t h e D irectors of A N Z N ational B ank L imited

We have reviewed the interim financial statements on page 5 to 36 prepared and disclosed in accordance with Clause 19 of theRegistered Bank Disclosure Statement (Off-Quarter – New Zealand Incorporated Registered Banks) Order 2008 (the ‘Order’) and the
supplementary information prescribed in Schedules 2 to 8. The interim financial statements, and supplementary information, provide
information about the past financial performance and cash flows of ANZ National Bank Limited and its subsidiary companies (the“Banking Group”) and their financial position as at 30 June 2009. This information is stated in accordance with the accounting policies
set out on page 10.
D irectors ’ responsibilities

The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of interim financial statements inaccordance with clause 19 of the Order which gives a true and fair view of the financial position of the Banking Group as at 30 June2009 and their financial performance and cash flows for the nine months ended on that date.
They are also responsible for the preparation of supplementary information which gives a fair view, in accordance with the Order, of thematters to which it relates; and complies with Schedules 2 to 8 of the Order.
R e v ie w ers ’ responsibilities

We are responsible for reviewing the interim financial statements, including the supplementary information disclosed in accordancewith Schedules 3, 5 to 8, and Clause 13 of Schedule 2 of the Order presented to us by the Directors and reporting our findings to you.
It is also our responsibility to express a review opinion on the supplementary information as required by Schedule 4B of the Order inorder to state whether, on the basis of the procedures described below, anything has come to our attention that would indicate that the
information disclosed in accordance with Schedule 4B is not in all material respects prepared in accordance with the Bank’s Conditionsof Registration and with the Bank’s internal models for credit risk and operational risk as accredited by the Reserve Bank of New Zealandand disclosed in accordance with Schedule 4B and for reporting our findings to you.
B asis of re v ie w opinion

We have performed our review in accordance with the review engagement standard RS-1 Statement of Review Engagement Standards
issued by the New Zealand Institute of Chartered Accountants. A review is limited primarily to enquiries of Banking Group personnel
and analytical review procedures applied to the financial data, and thus provides less assurance than an audit. We have not performed
an audit and, accordingly, we do not express an audit opinion.
Our firm has also provided other services to the Banking Group in relation to other audit related services. Partners and employees ofour firm may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the
Banking Group. There are, however, certain restrictions on borrowings which the partners and employees of our firm can have with the
Banking Group. These matters have not impaired our independence as auditors of the Banking Group. The firm has no other relationshipwith, or interest in, the Banking Group.
R e v ie w O pinion

Based on our review, which is not an audit, nothing has come to our attention that would cause us to believe that:(a) the interim financial statements (excluding the supplementary information disclosed in Notes 17, 18, 19, 20 and 24) do not present
a true and fair view of the financial position of the Banking Group as at 30 June 2009 and its financial performance and cash flows
for the nine months ended on that date;(b) the supplementary information disclosed in Notes 18, 19, 20 and 24 prescribed by Schedules 3, 5 to 8 and Clause 13 of Schedule 2of the Order is not fairly stated in accordance with those Schedules; and(c) the supplementary information relating to Capital Adequacy disclosed in Note 17 of the interim financial statements, as requiredby Schedule 4B of the Order, derived from the Banking Group’s interim financial statements and sources other than the Banking
Group’s accounting records, is not in all material respects derived in accordance with the Bank’s Conditions of Registration, with
the Reserve Bank of New Zealand document Capital Adequacy Framework (Internal Models Based Approach) (BS2B), and with the
Banking Group’s internal models for credit risk and operational risk as accredited by the Reserve Bank of New Zealand, and disclosed
in accordance with Schedule 4B of the Order.
Our review was completed on 27 August 2009 and our review opinion is expressed as at that date.

Wellington

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Anz National Bank Limited