Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Half Year
31 March 2013

Consolidated Financial Report
Dividend Announcement
and Appendix 4D

The Consolidated Financial Report and Dividend Announcement contains the information required by Appendix 4D of the Australian Securities
Exchange Listing Rules. It should be read in conjunction with ANZ’s 2012 Annual Report, and is lodged with the Australian Securities Exchange
under listing rule 4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Name of Company:

APPENDIX 4D

Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Report for the half year ended 31 March 2013

Operating Results1

A$ million

Operating income

1%

to

8,930

Net statutory profit attributable to shareholders

1%

to

2,940

10%

to

3,182

2

Cash profit

Dividends3

Proposed interim dividend

Cents
per
share

Franked4amountper share

73

100%

Record date for determining entitlements to the proposed interim dividend

15 May 2013

Payment date for the proposed interim dividend

1 July 2013

Dividend Reinvestment Plan and Bonus Option Plan
Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate inrespect of the 2013 interim dividend. For the 2013 interim dividend, ANZ will provide shares under the DRP and BOP through the issue of new shares.
The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to thearithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX
during the seven trading days commencing on 17 May 2013, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will
rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their
participation in the DRP or BOP for the 2013 interim dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Standard Time)on 15 May 2013. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address inGreat Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling and New Zealand dollars
respectively at an exchange rate calculated on 17 May 2013.
1
2

3
4

Compared to previous corresponding period (six months ended 31 March 2012)
Reported profit is adjusted to exclude certain non-core items to arrive at cash profit, and has been provided to assist readers to understand the results for the ongoing activities of theGroup. The net after tax adjustment was an increase of $242 million made up of several items. Refer pages 76 to 83 of the ANZ Condensed Consolidated Financial Report and Dividend
Announcement for the half year 31 March 2013 for further details
There is no foreign conduit income attributed to the dividends
The proposed interim dividend will be fully franked for Australian tax purposes (30% tax rate) and carry New Zealand imputation credits of 9 New Zealand cents per ordinary share

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT AND DIVIDEND ANNOUNCEMENT
Half year ended 31 March 2013

CONTENTS

PAGE

Section 1 – Media release1

Section 2 – Snapshot

5

Section 3 – CEO Overview

9

Section 4 – CFO Overview

11

Section 5 – Segment review

35

Section 6 – Geographic review

67

Section 7 – Profit reconciliation

75

Section 8 – Condensed consolidated financial statements

85

Section 9 – Supplementary information

115

Definitions

134

Alphabetical Index

137

This Consolidated Financial Report and Dividend Announcement has been prepared for Australia and New Zealand Banking Group Limited (the“Company”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “us”, “we” or “our”.
All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based,
has been reviewed by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors. The signing ofthese Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 29 April 2013.
When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as
they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions
to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDThis page has been left blank intentionally

ABN 11 005 357 522

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

For Release: 30 April 2013Media Release
ANZ 2013 Half Year Result– revenue growth and productivity drive higher returns and increased dividend –ANZ today announced a statutory profit after tax of $2.9 billion up 7% compared to the previous half (HOH). Cashprofit1 of $3.2 billion increased 8% HOH and 10% against the prior comparable period (PCP).
The interim dividend of 73 cents per share fully franked is 11% higher than interim 2012.
Performance Highlights2•

Profit before provisions (PBP) increased 7% (+10% PCP) reflecting growth in International and Institutional
Banking, particularly in Asia, a strong performance from the Australia Division, emerging benefits from the
New Zealand simplification program, a solid contribution from Global Wealth and further Group-wide
improvement in productivity.

•

Return on equity (RoE) increased by 80 bps to 15.5% (steady PCP) driven by earnings growth and initial
benefits from our focus on capital efficiency. Earnings per share increased 7% to 117.0 cents.

•

Dividend uplift came from stronger earnings with a move to progressively rebalance to a more even
distribution of dividend half on half.

•

Revenue, excluding the gain on the sale of Visa shares in 2H12, increased 3% (+4% PCP). Earnings
diversification continues with 20% of revenue derived from outside of Australia and New Zealand. Global
Markets revenue increased 23% to $1.1 billion (+11% PCP) with customer sales up 7%.

•

ANZ invested over $400 million in growth and transformation initiatives across the bank during the half.
Productivity improvements saw expenses, excluding one-offs in 2H12, decline slightly. The cost to income
ratio (CTI) decreased to 44.4%.

•

The Group net interest margin excluding Global Markets was steady at 267 bps.3 The benefits of reduced
reliance on wholesale funding and asset repricing were offset by deposit competition and the impact of lower
earnings on capital and rate insensitive deposits in a declining interest rate environment.

•

Customer deposits grew 5% (+12% PCP) with net loans and advances up 3% (+7% PCP).4•

The provision charge was $599 million, down 13%. Gross impaired assets declined 10%. The collective
provision coverage ratio is 1.01% on a Basel 3 basis (1.06% Basel 2).

•

ANZ remains strongly capitalised under the new Basel 3 capital rules and is at the upper end of global peers
comparisons. Capital generation of $2.2 billion increased the Common Equity Tier 1 (CET1) ratio on an
Australian Prudential Regulation Authority (APRA) Basel 3 basis to 8.2%, equivalent to an internationallyharmonised Basel 3 basis CET1 of 10.3%.

ANZ Chief Executive Officer Mike Smith said: “This result is a good performance and demonstrates ANZ isdelivering consistent, well diversified revenue growth supported by strong productivity and capital management
outcomes.
“Since 2008 we have worked hard to connect ANZ shareholders and customers to the significant opportunities
being created by Asia’s fast-growing economies while building on our traditional strengths in Australia, New
Zealand and the Pacific.
“This half saw us strengthen our franchises in Asia Pacific, Australia and New Zealand, hold Group margins
steady, produce a lower cost-to-income ratio and achieve a higher return on equity while further strengthening ourcapital position. Shareholders are benefiting from these outcomes.
“A highlight of our performance was our ability to invest over $400 million in growth initiatives during the period
while also producing strong productivity outcomes across the business with expenses down 8% and the cost to
income ratio down to 44.4%.
“This outcome is a step change for ANZ. It reflects a continuing commitment to growth while also delivering
sustainable productivity outcomes that provides us with ever greater earnings leverage over time.

1

Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, the result for the ongoing business activities of the Group.
All comparisons are on a cash basis and are 1H13 compared to 2H12 unless otherwise noted.
Group NIM exit margin (ex Markets) 267 bps for quarter ended March 2013, up from 266 bps Group NIM exit margin (ex Markets) at September 2012.
4
FX adjusted.
231

MEDIA RELEASE“The Asia Pacific Europe and America network contributed 20% of Group revenue with particularly strong
performances from Global Markets, Trade, Transaction Banking and Asia Commercial. In Australia, we madefurther market share gains in priority Retail and Commercial segments, margins were well managed and we saw
improving trends in customer satisfaction. In New Zealand we have maintained our market leading position while
completing the first phase of the simplification program which has driven productivity benefits during the half.
Wealth is being repositioned with a focus on increased cross-sell, product innovation and productivity.
“Provisions were slightly better than expectations and while the credit outlook remains stable we believe ongoingstress in certain parts of the economy warrants a cautious outlook.
“These strong operational results and the pipeline of initiatives that we are now delivering to improve capitalefficiency saw ANZ’s return on equity rise 80 basis points during the half to 15.5%.
“We understand that our shareholders value sustainability and predictability in dividend streams. ANZ is focusedon maintaining a full year dividend payout in the range of 65% to 70% of cash earnings and aligning our dividendwith earnings growth. In the current environment, while we are well placed in our capital position we are committed
to driving further capital efficiencies. This will allow us to move the payout ratio steadily towards the higher end of
our target range with a more balanced split between the first and second halves.
“This result is further evidence that ANZ is consistently delivering on its promises to its shareholders and to its
customers. ANZ is well positioned going into the second half with good momentum on growth opportunities, on
costs and on capital management and I am confident about the year as a whole,” Mr Smith said.
PERFORMANCE BY DIVISION5
AUSTRALIAThe Australian franchise (Retail and Corporate & Commercial Banking) delivered a strong result, strengthening ourdomestic position. Profit was up 7% HOH (+11% PCP) and PBP up 6% (+15% PCP). Revenue grew 2% with costs
well controlled, decreasing 3%, or flat excluding capitalised software impairments (-2% PCP).
The Retail business delivered above system growth in mortgages and deposits, continuing the trend of the past
three years, and this growth has been largely self funded. Traditional Banking market share has increased 140 bps
to 14.3% and market share in the Affluent Segment increased 180 bps to 15.2% during the past two years, thestrongest growth of the major banks.
A strong customer focus has driven a steady increase in Corporate and Commercial Banking customer numbers(up 9% in the past 12 months) and customer satisfaction, including improved ratings for "easy to do business with"and "servicing customers' business needs across Australia, New Zealand and Asia". The business is harnessing
ANZ’s regional platform with trade finance revenues attributable to Corporate and Commercial Banking clients up
9% (+15% PCP) and overall cross sell up 2% (+11% PCP).
To ensure continued growth and delivery of further productivity benefits, we are investing in our Banking onAustralia program. We are taking an integrated approach to digital opportunities including constructing a new
digital platform. We have delivered ANZ goMoney iPhone and Android apps, which are ranked as the most popularof their type in the market, with over one million registered users. In Corporate and Commercial Banking welaunched the award winning ANZ FastPay app, Australia’s first mobile banking app for on-the-go card acceptance.
We are improving our sales capability delivering over 150,000 hours of training in the past 12 months. In Retail our
improved training and systems saw our proprietary channels contribute the majority of mortgage sales in the half
and 55% of total mortgage FUM growth in March. Growth was achieved while maintaining strong mortgage broker
volumes and adhering to strict underwriting standards.
Margins improved slightly, up 3 bps, despite deposit pricing and mix pressures. Credit quality remains sound withthe provision charge in line with volume growth after allowing for write backs in the second half 2012.
INTERNATIONAL AND INSTITUTIONAL BANKING (IIB)
IIB continues to strengthen returns while growing and diversifying its earnings by geography, product andcustomer, reducing its historical reliance on Institutional lending and interest rate trading in Australia. In the half
46% of revenue and 59% of deposits came from outside Australia and New Zealand. Profit grew 26% HOH (+3%
PCP) with PBP up 17% (+1% PCP). Profit, excluding the impact of the capitalised software impairment in 2H12,
increased 10% HOH with PBP up 6%.
In line with our strategy, flow and value added products such as Trade, Foreign Exchange, Debt Capital Markets
and Cash Management are experiencing higher growth, with Transaction Banking profit up 26% and Global
Markets profit up 30%. Lending volumes, primarily trade related and in priority segments like Resources (+12%)
and Financial Institutions (+7%) are growing strongly. Within Global Markets, while income from Trading andBalance Sheet grew strongly, more than half of the revenue came from customer sales.

5

All comparisons are on a cash basis and are 1H13 compared to 2H12 unless otherwise noted.

2

MEDIA RELEASE

Commercial Asia grew revenue strongly (+32%) and ROE improved further, in part due to an improving productmix through strong cross sell of Transaction Banking and Global Markets products which comprise almost 90% ofincome.
The quality of the ANZ Retail Asia Pacific franchise continues to build. The business managed margin headwinds
well, and delivered a strong cost outcome with expenses down 7% (-8% PCP). Building liquidity is a key focus;
Customer deposits grew 5%.
The IIB balance sheet continues to grow and strengthen, with deposits up 6% and lending driven predominantly bytrade finance in APEA (+ 21%).
Good underlying volume growth, disciplined cost management and ongoing productivity improvements helped
offset margin headwinds. Institutional margins improved in the second quarter but were down 14 bp for the half
(excluding Markets), 6 bps of which related to the impact of lower interest rates on earnings on capital and rateinsensitive deposits in a low interest rate environment.
A strong overall cost reduction outcome included a 14% decline in operations costs in the half (13% PCP),
providing capacity for investment in our strategic growth areas. These include new platforms for CashManagement and Markets and in the Asia core banking engine. We also invested further in our regional presence,
opening a representative office in Myanmar and our 7th branch in China (Hangzhou).
The quality of our Institutional lending book continues to improve with lending to investment grade clients now 79%
of the loan book up from 60% five years ago. Net impaired assets have declined 9% during the half.
NEW ZEALAND (all figures in NZD)
The business moved onto one brand and one technology platform in October 2012. Market share grew in both
deposits and mortgages, and customer satisfaction levels have been stable and consideration levels6 increased.
Simplification is driving greater business efficiency and the cost to income ratio declined further. Profit grew 22%(+ 19% PCP) with PBP up 11% (+ 7% PCP).
Lending grew modestly, up 1%, and was fully self-funded by customer deposits which grew 4%. We are driving
greater quality in our income base and improving cross sell with a circa 30% increase in the proportion of new
Retail customers with three products or more over the past year.
Retail lending volumes held up well despite the low growth environment, however a combination of competitive
macro conditions and a short term tactical sales campaign led to some margin pressure in the first quarter but
margins stabilised in the second quarter. The Commercial segment delivered above system growth in Small
Business Banking.
Credit quality has continued to strengthen and the provision charge declined 60% (64% PCP) largely driven by areduced individual provisions in the Commercial & Agri business. Delinquency rates have declined and gross
impaired assets were down both HOH and PCP.
GLOBAL WEALTH
Our key focus is to deepen relationships with existing customers, and Wealth solutions held by ANZ customers
grew 9% PCP. ANZ Smart Choice Super launched in late 2012 is seeing new account openings at the rate of morethan 800 per week. Specifically designed for the digital channel, this innovative solution allows customers to view
and manage their superannuation online, via mobile or tablet.
Profit increased 20% (+15% PCP) with income up 3% primarily through an increase in Funds under Management
and in-force insurance premiums. Improved investment markets benefitted Funds under Management. Productivity
initiatives and a non-recurring software impairment from the prior period, drove a 7% decrease in operating costs
resulting in a 690 bps reduction in the Division’s cost to income ratio (-280 bps PCP).
The number of ANZ financial planners grew 9% in Australia and New Zealand across the half. In addition, ANZ
Financial Planning’s productivity in Australia increased with a 21% increase in risk sales per adviser and a 6%
increase in investment inflows per adviser (PCP).
BALANCE SHEET, CAPITAL, LIQUIDITY AND FUNDING
ANZ is strongly capitalised; $2.2 billion of capital generation during the half increased our CET1 ratio on an APRA
Basel 3 basis to 8.2%, equivalent to an internationally harmonised Basel 3 basis of 10.3% at the end of March,
despite an increase in risk weighted assets and the removal of the discount on the Dividend Reinvestment Plan.
Consistent with previous periods, deposit growth exceeded loan growth, with deposits comprising 61% of theGroup's total funding base.
ANZ has completed $12.4 billion of term wholesale funding, leaving the Group well placed to meet the annual
funding task of $20-25 billion. Issuance has again been well diversified across senior, subordinated and covered
formats and in a range of currencies.
6

Source Ipsos Branch Tracker – consumers saying the brand is their first choice or is seriously considered.

3

MEDIA RELEASE

Liquidity portfolio assets, up $7 billion to $122 billion over the half, continue to provide a strong buffer against
market volatility and exceed the Group’s total offshore wholesale debt portfolio.
ANZ has further reduced the remaining notional exposure on the Group Credit Intermediation Trades by
US$3.3 billion to US$4.7 billion reducing risk weighted assets by circa $1 billion.
DIVIDEND
In the past ANZ has targeted a Dividend payout ratio (DPOR) equivalent to 67% of cash earnings. The Board
believes that a full year DPOR of between 65% and 70% is sustainable in the medium term, with a bias towards
the upper end of the range in the near term.
The interim dividend of 73 cents per share reflects strong earnings in the first half, together with a move toprogressively rebalance to a more even distribution of dividend half on half.
CREDIT QUALITY
Credit quality performed better than expectations. The first half provision charge of $599 million is down 13% HOH
and while slightly higher than the same period in 2012, it contains lower levels of writebacks. Releases ofCollective Provision management overlays were also lower.
The Collective Provision ratio of 1.01% on an APRA Basel 3 basis (1.06% on a Basel 2 basis) provides
conservative coverage given the ongoing improvement in credit quality, particularly in Institutional where lending toinvestment grade clients now comprises 79% of the book compared to 60% five years ago.
Gross impaired assets reduced by 10%, and have now reduced at an average of $375 million each half since
2H10. New impaired assets reduced in all Divisions, with total new impaired assets down 15%.
For media enquiries contact:
Paul Edwards
Group GM, Corporate Communications
Tel: +61-3-8654 9999 or +61-434-070101
Email: Paul.Edwards@anz.com

Stephen Ries
Senior Manager, Media Relations
Tel: +61-3-8654 3659 or +61-409-655551
Email: Stephen.Ries@anz.com

For investor and analyst enquiries contact:
Jill Craig
Group GM, Investor Relations
Tel: +61-3-8654 7749 or +61-412-047448
Email: Jill.Craig@anz.com

Ben Heath
Senior Manager, Investor Relations
Tel: +61-3-8654 7793 or +61-435-655033
Email: Ben.Heath@anz.com

4SNAPSHOTCONTENTS
Section 2 – Snapshot
Statutory Results
Cash Results
Key Balance Sheet Metrics

5

SNAPSHOT
Statutory Results
Half Year

Movement

Net interest income

Mar 13$M
6,200

Sep 12$M
6,126

Mar 12$M
5,984

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
4%

Other operating income

2,730

2,768

2,833

-1%

-4%

Operating income

8,930

8,894

8,817

0%

1%

Operating expenses(4,034)(4,386)(4,133)-8%-2%

Profit before credit impairment and income tax

4,896

4,508

4,684

9%

5%
9%

Provision for credit impairment

(588)

(660)

(538)

-11%

Profit before income tax

4,308

3,848

4,146

12%

4%

Income tax expense(1,363)(1,104)(1,223)

23%

11%

(5)

(2)

(4)

large

25%

2,940

2,742

2,919

7%

1%

Non-controlling interests
Profit attributable to shareholders of the Company
Earnings per ordinary share (cents)

Half Year

Movement

Mar 13

Sep 12

Mar 12

Basic

Reference
Page
97

110.8

Mar 13v. Sep 12
6%

Mar 13v. Mar 12
-2%

108.6

102.6

Diluted

97

105.4

99.1

106.2

6%

-1%

Half Year
Ordinary share dividends (cents)
Interim - 100% franked

Reference
Page
96

Final - 100% franked

96

n/a

79

n/a

Ordinary share dividend payout ratio1

96

68.2%

78.5%

60.8%

96

3

4

7

Preference share dividend ($M)
Dividend paid2
Profitability ratios
Return on average ordinary shareholders' equity3

13.7%

15.6%

0.90%

0.85%

0.95%

Net interest margin

2.24%

2.28%

2.35%

Net interest margin (excluding Global Markets)

2.65%

2.67%

2.75%

45.2%

49.3%

46.9%

1.23%

1.37%

1.35%

584

887

690
(152)

Credit impairment provisioning/(release)
Individual provision charge ($M)

3.

Mar 12
66

14.4%

Operating expenses to average assets2

Sep 12n/a

Return on average assets

Efficiency ratios
Operating expenses to operating income1.

Mar 1373

99

Collective provision charge/(release) ($M)

99

4

(227)

Total provision charge ($M)

99

588

660

538

Individual provision charge as a % of average net advances

0.27%

0.42%

0.34%

Total provision charge as a % of average net advances

0.27%

0.31%

0.27%

Dividend payout ratio is calculated using 31 March 2012 interim, 30 September 2012 final and the proposed 31 March 2013 interim dividends
Represents dividends paid on Euro Trust Securities (preference shares) issued on 13 December 2004
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares

6

SNAPSHOT
1

Cash Profit Results

Half Year

Movement

Net interest income

Mar 13$M
6,236

Sep 12$M
6,126

Mar 12$M
5,984

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
4%

Other operating income

2,850

3,002

2,736

-5%

4%

Operating income

9,086

9,128

8,720

0%

4%

Operating expenses(4,034)(4,386)(4,133)-8%-2%

Profit before credit impairment and income tax

5,052

4,742

4,587

7%

10%

Provision for credit impairment

(599)

(688)

(570)

-13%

5%

Profit before income tax

4,453

4,054

4,017

10%

11%

Income tax expense(1,266)(1,118)(1,117)

13%

13%

(5)

(2)

(4)

large

25%

3,182

2,934

2,896

8%

10%

Non-controlling interests
Cash profit1
Earnings per ordinary share (cents)

Basic
DilutedHalf Year

Movement

Reference
Page

Mar 13

Sep 12

Mar 12
109.3

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
7%

25
25

117.0

109.2

113.2

105.2

104.8

8%

8%

Half Year
Reference
Page
26

Ordinary share dividends (cents)
Ordinary share dividend payout ratio2
Profitability ratios
Return on average ordinary shareholders' equity3
Return on average assets

Mar 1363.0%

Sep 12
73.4%

Mar 12
61.2%

15.5%

14.7%

15.5%

0.97%

0.91%

0.95%
2.35%

Net interest margin

14

2.25%

2.28%

Net interest margin (excluding Global Markets)

14

2.67%

2.67%

2.75%

66,84760,362

58,116

44.4%

48.0%

47.4%

1.23%

1.37%

1.34%

Profit per average FTE ($)
Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Credit impairment provisioning/(release)
Individual provision charge ($M)

19

595

915

722

Collective provision charge/(release) ($M)

20

4

(227)

(152)

Total provision charge ($M)

19

599

688

570

Individual provision charge as a % of average net advances

0.28%

0.43%

0.36%

Total provision charge as a % of average net advances

0.28%

0.32%

0.28%

Cash profit by division/geography

Half Year

Movement

Australia

Mar 13$M
1,415

Sep 12$M
1,327

Mar 12$M
1,271

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
11%

International and Institutional Banking

1,199

952

1,159

26%

3%

New Zealand

397

319

323

24%

23%

Global Wealth

203

169

177

20%

15%

Group Centre

(32)

167

(34)

large

-6%

Cash profit by division

3,182

2,934

2,896

8%

10%

Australia

9%

2,164

1,893

1,977

14%

Asia Pacific, Europe & America

460

516

447

-11%

3%

New Zealand

558

525

472

6%

18%

3,182

2,934

2,896

8%

10%

Cash profit by geography
1.

2.
3.

Reported profit has been adjusted to exclude non-core items to arrive at cash profit, and has been provided to assist readers to understand the result for the ongoing business activities of
the Group. Refer to page 12 for the reconciliation between statutory and cash profit
Dividend payout ratio is calculated using 31 March 2012 interim, 30 September 2012 final and the proposed 31 March 2013 interim dividends
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares

7

SNAPSHOTKey Balance Sheet Metrics
As at
Reference
Page

Mar 13

Movement

Sep 12

Mar 12

7.8%

Mar 13v. Sep 12

Mar 13v. Mar 12

Capital adequacy ratio (%)
Common Equity Tier 1- APRA Basel 3

30

8.2%

8.0%

- Internationally Harmonised Basel 3

30

10.3%

10.0%

9.8%

Credit risk weighted assets ($B)1

118

275.0

254.9

250.2

8%

10%

1

118

322.6

300.1

284.8

7%

13%

Total risk weighted assets ($B)
Balance Sheet: Key Items
Net loans & advances ($B)

442.0

427.8

412.6

3%

7%

Total assets ($B)

672.6

642.1

612.2

5%

10%

Customer deposits ($B)

344.1

327.9

308.3

5%

12%

Total equity ($B)

42.5

41.2

39.4

3%

8%

Impaired assets
Gross impaired assets ($M)

22

4,685

5,196

5,343

-10%

-12%

Net impaired assets ($M)

23

3,142

3,423

3,629

-8%

-13%

Net impaired assets as a % of net advances

0.71%

0.80%

0.88%

-11%

-19%

Net impaired assets as a % of shareholders' equity

7.4%

8.3%

9.2%

-11%

-20%

1,543

1,773

1,714

-13%

-10%

32.9%

34.1%

32.1%

-3%

3%

2,769

2,765

2,994

0%

-8%

Collective provision as a % of credit risk weighted assets1

1.01%

1.08%

1.20%

-7%

-16%

Net Assets
Net tangible assets per ordinary share ($)

12.56

12.22

11.74

3%

7%

Net tangible assets attributable to ordinary shareholders ($B)

34.5

33.2

31.5

4%

10%

47,41948,23949,509

-2%

-4%

14.2

13.3

12.4

7%

15%

- high2$29.46$25.12$23.6817%24%- low2$23.42$20.26$18.60

16%

26%- closing$28.53$24.75$23.26

15%

23%

78.3

67.3

62.3

16%

26%

Individual provision ($M)

99

Individual provision as a % of gross impaired assets
Collective provision ($M)

99

Other information
Full time equivalent staff (FTE)
Assets per FTE ($M)
Share priceMarket capitalisation of ordinary shares ($B)
1.

2.

March 2013 risk weighted assets under Basel 3 methodology. September 2012 and March 2012 risk weighted assets under Basel 2 methodology. The change from Basel 2 to Basel 3 on
1 January 2013 increased risk weighted assets by $15.2 billion at that date. Under a Basel 2 methodology the March 2013 collective provision coverage ratio (as a percentage of credit risk
weighted assets) would be 1.06%
During the half year reporting period

As at ($B)

Net loans & advances by division/geography

Movement

Australia

Mar 13262.1

Sep 12
253.9

Mar 12
247.6

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
6%

International and Institutional Banking

102.5

98.3

93.2

4%

10%

New Zealand

71.6

70.3

67.4

2%

6%

Global Wealth

5.8

5.3

5.2

8%

11%

Group Centre

-

-

(0.8)

n/a

-100%

Net loans & advances by division

442.0

427.8

412.6

3%

7%

Australia

312.3

305.8

298.0

2%

5%

Asia Pacific, Europe & America

51.6

45.3

40.7

14%

27%

New Zealand

78.1

76.7

73.9

2%

6%

Net loans & advances by geography

442.0

427.8

412.6

3%

7%

8

CEO OVERVIEWCEO Overview1
Strategy and Performance
ANZ is executing a focused strategy to build the best connected, most respected bank across the Asia Pacific region.
We are pursuing significant organic growth opportunities in the Asia Pacific region, focused primarily on corporate and financial institutions, and with ourstrong domestic businesses in Australia and New Zealand, our distinctive footprint and super regional connectivity, we are uniquely positioned to meetthe needs of customers, who are increasingly linked to regional capital, trade and wealth flows.
Management continues to respond to the changing and challenging conditions in different markets. While ANZ’s is primarily a growth strategy, in the lightof subdued market conditions and an evolving regulatory environment, management recognises that it must focus on both growth and productivity todeliver suitable returns to shareholders. This has led to an emphasis on capital management and increased use of common infrastructure for greater
responsiveness, scale and control. Risks continue to be well managed, with the quality of our lending book increasing.
This half, our differentiated strategy delivered strong growth in cash earnings, up 8% half on half (HOH) and 10% against the prior corresponding period(PCP), with Return on Equity rising 80 bps to 15.5%. Earnings per share grew 7% to 117 cents, with a dividend for the half of 73 cents per share up 11%
on the same period in 2012. Dividend uplift came from stronger earnings together with a move to progressively rebalance to a more even distribution halfon half. APEA network revenues represented 20% of Group revenues, with Greater China and the ASEAN markets each accounting for 12% of overall
revenues.
Group Strategic Aspiration
Our aspiration is to have 25-30% of profit driven by network revenue, that is revenue sourced from outside of Australia and New Zealand, by 2017. We
continue to make good progress towards this aspiration with our International and Institutional Banking division now delivering 46% of revenue and 59%
of deposits from outside Australia and New Zealand. Ongoing productivity improvements and capital management initiatives remain central to ourstrategy, and this half our cost-to-income (CTI) ratio fell to 44.4%.This reflects a continuing commitment to growth while also delivering sustainableproductivity outcomes that provide us with ever greater earnings leverage over time.
Strategic progress in 1H13
Many of the key trends we observed in 2012 continued into the first half of the 2013 financial year, with subdued credit growth, low volatility, low interest
rates and deposit margin pressure across all our markets – albeit less pronounced in Asia. Within this environment, ANZ has made progress on strategic
priorities in each business, contributing to the strong profit result.
•

In Australia, growth in our Retail and Commercial segments contributed 6% and 8% increase in earnings respectively for the half. ANZ has grownboth mortgages and household deposits faster than system over the past three years and this has been largely self funded. Over the last two years
traditional banking market share increased 140 basis points (bps) and market share in the affluent segment increased 180 bps, the strongest growthof the Australian major banks. In Commercial, customer acquisition combined with improved rates of Trade and Mortgages cross-sell contributed toearnings growth of 9%.

•

In International and Institutional Banking, profits were up by 26%. ANZ has built real scale and capability in Asia, and our growth trajectory is now
more established and coming off an increasingly higher base. Connectivity is a key differentiator for ANZ, driving cross-border activity around the
network.
The Division continues to diversify its earnings base by product, geography and customer. In line with our strategy, flow and value added products
such as Trade, Foreign Exchange, Debt Capital Markets and Cash Management are experiencing higher growth with Transaction Banking profit up
26% and Global Markets profit up 30%. Lending volumes, primarily trade related and in priority segments like Resources (+12%) and Financial
Institutions (+7%) are growing strongly. Within Global Markets, income from customer sales and related trading was up 21% for the year,
accounting for 70% of the total increase in revenues, while income from the Group’s Balance Sheet was up 32% largely due to tightening of credit
spreads. Good underlying growth, disciplined cost management and ongoing productivity improvements helped offset margin headwinds.
Pleasingly, this year ANZ was recognised as a Top Four Asian Corporate Bank in the annual Greenwich survey, with overall market penetration
increasing from 28% to 41% and core relationships increasing from 12% to 23%, in addition to the strong results in the Australian and New ZealandPeter Lee surveys.

•

In New Zealand, the first phase of the simplification strategy was successfully completed towards the end of calendar year 2012 with the businessmoving onto one technology platform and one brand in October 2012. We are focussed on improving our ability to leverage the business’ scale toimprove productivity while maintaining market share. Profits were up 22% (in NZD) for the half with CTI reducing by 680 bps to 44.7%. The Division
is driving greater quality in its income base and improving cross sell with a circa 30% increase in the proportion of new Retail customers with three
products or more over the last year. The balance sheet continues to strengthen with lending volumes up 2%, including above market growth inMortgages, fully self-funded by customer deposits which grew 5%.

•

In our Global Wealth business, deepening relationships with bank customers is a key focus and there was a 9% net increase in Wealth solutions
held by ANZ customers during the period. The Division’s profit increased 20% with income up 3% primarily through an increase in Funds underManagement (up 6%) and in-force insurance premiums (up 4%). Productivity initiatives drove a 7% decrease in operating costs resulting in a
690 bps decrease in the Division’s CTI ratio (-280 bps PCP).

•In Operations, our hubs continue to provide operational leverage, with costs down while absorbing increased volumes.

•

ANZ is strongly capitalised; $2.2 billion of capital generation during the half increased our CET1 ratio on an APRA Basel 3 basis to 8.2%, equivalent
to an internationally harmonised Basel 3 basis of 10.3% at the end of March, despite an increase in risk weighted assets and the removal of the
discount on the Dividend Reinvestment Plan.

1

The CEO Overview is reported on a cash basis

9CEO OVERVIEW•

Risk – gross impaired assets reduced both half on half and relative to the prior corresponding period. Credit quality is in line with expectations andthe collective provision ratio of 1.01% following the introduction of APRA Basel 3 standards (1.06% on a Basel 2 basis) provides appropriate
coverage given the ongoing portfolio credit quality improvement in the Group’s lending book, in particular in Institutional where investment grade
lending now comprises 79% of the book compared to 60% in 2H08.

Medium to Long Term Strategic Goals
ANZ’s objective is to deliver above-peer earnings growth with strong capital and expense disciplines, targeting a 200 bps improvement in the Group CTI
ratio from FY12 to FY14 and increasing our ROE from current levels. In the past, ANZ has targeted a Dividend Payout Ratio (DPOR) equivalent to 67%
of cash earnings. The Board believes that a full year DPOR of between 65% and 70% is sustainable in the medium term, with a bias towards the upper
end of the range in the near term.
The interim dividend of 73 cents per share reflects strong earnings in the first half together with a move to progressively rebalance to a more even
distribution of dividend half on half. To meet our objectives, we will:•

Focus our Asian expansion primarily on corporate and financial institutions, supporting our Australian and New Zealand customers, targeting
profitable markets and segments in which we have expertise and which are connected through trade and capital flows to the region, while building
our niche Retail business for liquidity and efficiency.

•

Further strengthen our position in our core markets of Australia and New Zealand.

•

Use common infrastructure and platforms for greater responsiveness, scale and control.

•

Maintain strong liquidity and actively manage capital to enhance ROE.

•

Build on our Super Regional capabilities – using our management bench-strength and continuing to deepen our international pool of talent.

•

Apply strict acquisition criteria when reviewing inorganic opportunities.

Dividends 1H13
In the past ANZ has targeted a Dividend payout ratio (DPOR) equivalent to 67% of cash earnings. The Board believes that a full year DPOR of between
65 and 70% is sustainable in the medium term, with a bias towards the upper end of the range in the near term. The interim dividend of 73 cents per
share reflects strong earnings in the first half, together with a move to progressively rebalance to a more even distribution of dividend half on half.
Summary
ANZ’s financial goal is to deliver top quartile shareholder return (TSR) performance and above-peer EPS growth through the cycle, by building a position
as the best connected, most respected bank in the Asia Pacific region.

10

CFO OVERVIEWCONTENTS
Section 4 – CFO Overview
Cash profit
Divisional performance
Review of Group results
Income and expenses
Credit risk
Income tax expense
Impact of exchange rate movements/revenue hedges
Earnings per share
Dividends
Economic profit
Balance sheet, liquidity and capital
Deferred acquisition costs and deferred income
Software capitalisation

11

CFO OVERVIEW
Non-IFRS information
The Group provides two additional measures of performance in the Results Announcement which are prepared on a basis other than in accordance withaccounting standards - cash profit and economic profit. The guidance provided in Australian Securities and Investments Commission Regulatory Guide
230 has been followed when presenting this information.

Cash profit
From 1 October 2012, the Group changed from reporting profit on an underlying profit basis to reporting profit on a cash basis. Comparative information
has been restated on a consistent basis.
Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, the result for the ongoing business activities of the Group. The
adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the Group Condensed
Consolidated Financial Statements review. Cash profit is not subject to review by the external auditor, however, the external auditor has informed the
Audit Committee that the adjustments have been determined on a consistent basis across each period presented.
The CFO Overview section is reported on a cash basis.
Half Year
Mar 13$M
2,940

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit1
Cash profit

Sep 12$M
2,742

Movement
Mar 12$M
2,919

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
1%

242

192

(23)

26%

large

3,182

2,934

2,896

8%

10%

Half Year
Mar 13$M

Movement

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

Adjustments between statutory profit
and cash profit (gains)/losses1
Treasury shares adjustment

53

26

70

large

-24%

Revaluation of policy liabilities

19

(35)

(6)

large

large

Economic hedging

192

207

22

-7%

large

Revenue and net investment hedges

16

10

(63)

60%

large

Structured credit intermediation trades

(38)

(16)

(46)

large

-17%

242

192

(23)

26%

large

Total adjustments between
statutory profit and cash profit1
1.

Refer to pages 76 to 83 for analysis of the reconciliation of statutory profit to cash profit

Half Year

Movement

Net interest income

Mar 13$M
6,236

Sep 12$M
6,126

Mar 12$M
5,984

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
4%

Other operating income

2,850

3,002

2,736

-5%

4%

Operating income

9,086

9,128

8,720

0%

4%

Operating expenses(4,034)(4,386)(4,133)-8%-2%

Profit before credit impairment and income tax

5,052

4,742

4,587

7%

10%

Provision for credit impairment

(599)

(688)

(570)

-13%

5%

Profit before income tax

4,453

4,054

4,017

10%

11%

Income tax expense(1,266)(1,118)(1,117)

13%

13%

(5)

(2)

(4)

large

25%

3,182

2,934

2,896

8%

10%

Non-controlling interests
Cash profit

12

CFO OVERVIEWDivisional performance
Half Year

Movement

Cash profit by division
Australia

Mar 13$M
1,415

Sep 12$M
1,327

Mar 12$M
1,271

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
11%

International and Institutional Banking

1,199

952

1,159

26%

3%

New Zealand

397

319

323

24%

23%

Global Wealth

203

169

177

20%

15%

Group Centre

(32)

167

(34)

large

-6%

3,182

2,934

2,896

8%

10%

Cash profit by division

Cash profit by division – March 2013 Half Year v September 2012 Half Year

78

34

247
3,182
(199)

88
$m

2,934

2H12
Cash profit

Australia

International andInstitutional Banking

New ZealandGlobal WealthGroup Centre

1H13
Cash profit

March 2013 half year v September 2012 half year
Australia•

Profit increased 7% driven by a 4% increase in net interest income, with solid growth in average net loans and advances and an improvement inmargins, and a 3% reduction in expenses, reflecting a $58 million capitalised software impairment in the September 2012 half, partially offset by
a 3% increase in provisions.

International and Institutional Banking•

Profit increased 26% mainly due to stronger performances by Global Markets and Transaction Banking, a 21% fall in provision charges and a
10% reduction in expenses largely due to a $162 million capitalised software impairment in the September 2012 half.

New Zealand•Profit increased 24%, reflecting a 60% reduction in provision charges, and a 13% reduction in operating expenses that was largely related tohigher NZ Simplification costs in the September 2012 half. 2% average lending growth reflected an increase in Mortgages market share,
however this was offset by margin compression.

Global Wealth•Profit was up 20% primarily due to improved Funds Management results, with a 6% increase in Funds Under Management and a 7% reduction
in operating expenses in part due to a $29 million capitalised software impairment in the September 2012 half.

Group Centre•

The September 2012 half was significantly impacted by a $291 million gain on sale of Visa shares, partially offset by a software impairment of$24 million.

March 2013 half year v March 2012 half year
Australia•

Profit increased 11% driven by a 10% increase in net interest income with strong growth in both average net loans and advances and margins,
and a 2% reduction in expenses due to a reduction in average FTE.

International and Institutional Banking•

Profit increased 3% with strong Global Markets revenues and lower credit provision charges across the Global Institutional businesses, partially
offset by lower margins in Global Loans and Transaction Banking.

New Zealand•Profit increased 23% driven primarily by an improvement in credit quality and lower costs related to NZ Simplification.

Global Wealth•Profit increased 15% mainly due to improved Funds Management and Insurance results and a 2% reduction in operating expenses.

Group Centre•

The loss of $32 million was $2 million less than the March 2012 half due to higher net interest income and lower provision charges offset by alower tax benefit due to tax provisions released in the March 2012 half.

Refer to Section 4 – Segment Review on pages 35 to 65 for further details

13

CFO OVERVIEW
Review of Group results
Income and expenses
Net interest income
Half YearGroup
Cash net interest income
Average interest earning assets
Net interest margin (%) - cash

Group (excluding Global Markets)
Cash net interest income
Average interest earning assets
Net interest margin (%) - cash

Movement

Mar 13$M
6,236

Sep 12$M
6,126

Mar 12$M
5,984

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
4%555,141

538,161

508,762

3%

9%

2.25

2.28

2.35

-1%

-4%

4%

5,865

5,765

5,650

2%

441,233

431,049

410,917

2%

7%

2.67

2.67

2.75

0%

-3%

Half Year
Cash net interest margin by division(excluding Global Wealth)
Australia

Movement

Mar 13$M
2.53

Sep 12$M
2.50

Mar 12$M
2.45

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
3%

International and Institutional Banking (excluding Global Markets)

2.77

2.91

3.30

-5%

-16%

New Zealand

2.49

2.59

2.67

-4%

-7%

Group net interest margin (excluding Global Markets) – March 2013 Half Year v September 2012 Half Year
2
267

1

267

Other

1H13
Cash
Net interest margin

4
bps
(5)
(2)
2H12
Cash
Net interest margin

Funding and asset
mix

Funding costs

Deposits

AssetsMarch 2013 half year v September 2012 half year (excluding Global Markets)
Net interest margin (flat)•

Funding and asset mix (+2 bps): reflecting increased proportion of customer deposits and lower reliance on wholesale funding.

•Funding costs (-5 bps): lower returns on capital and rate-insensitive deposits as a result of the lower interest rate environment, while wholesalefunding costs were broadly flat.

•

Deposits (-2 bps): due to continued competition for deposits across all businesses.

•

Assets (+4 bps): benefits of re-pricing mortgages in Australia, partially offset by competition driven margin compression in New Zealandmortgages and Trade finance loans in the APEA region.

Average interest earning assets (+$10.2 billion or 2%)•

Australia (+ $5.8 billion or 2%): Mortgages up $3.3 billion driven by increase in variable rate lending and Commercial up $2.4 billion, driven by
growth in Fixed Loans and tailored commercial facilities.

•

IIB (+$1.9 billion or 2%): Transaction Banking up $2.1 billion with an increase in Trade finance loans in the APEA region, offset by decline in
Global Loans by $1.0 billion with reduced inter-bank lending.

•

New Zealand (+$2.8 billion or 4%): Uplift in retail lending, particularly mortgages.

Average deposits and other borrowings (+$5.4 billion or 2%)•

Australia (+ $7.3 billion or 5%): reflecting increased customer deposits in Retail from higher volumes on Progress Saver and Mortgage offset
product, along with growth in deposits in Commercial.

•

IIB (+$1.2 billion or 2%): increase in deposits, with growth concentrated in APEA region.

•

New Zealand (+$2.8 billion or 7%): uplift in customer deposits in Business Banking and Private Banking.

•Group Centre (-$6.1 billion or 11%): reduced short term wholesale funding borrowing via Commercial Paper and Certificate of Deposit.

14

CFO OVERVIEW
Income and expenses, cont’d
Net interest income, cont’dMarch 2013 half year v March 2012 half year (excluding Global Markets)
Net interest margin (-8 bps)•

Funding and asset mix (flat): improved funding mix from increased proportion of customer deposits offset by some adverse asset mix fromhigher proportionate growth in lower margin Trade loans business and slower growth in higher margin Cards business.

•

Funding costs (-9 bps): lower returns on capital and rate-insensitive deposits as a result of the lower interest rate environment.

•

Deposits (-12 bps): due to intense competition for deposits across all businesses.

•

Assets (+12 bps): benefits of re-pricing mortgages in Australia, partially offset by competition driven margin compression in Trade finance loans
in the APEA region.

Average interest earning assets (+$30.3 billion or 7%)•

Australia (+ $15.9 billion or 7%): largely self funded growth in lending with Mortgages up $11.0 billion and Commercial up $4.9 billion, primarilyin Esanda, Business Banking and Small Business Banking.

•

IIB (+$9.1 billion or 10%): $2.0 billion growth in Global Loans and a $5.7 billion increase in Trade finance lending in Transaction Banking.

•

New Zealand (+$4.7 billion or 7%): Uplift in retail lending, particularly in mortgages.

Average deposits and other borrowings (+$18.3 billion or 6%)•

Australia (+ $14.7 billion or 11%): reflecting increased customer deposits in Retail from higher volumes on Progress, Online and BusinessPremium Saver products and term deposits, along with growth in deposits in Commercial.

•

IIB (+$3.8 billion or 5%): mainly due to increased customer deposits within the APEA region.

•

New Zealand (+$5.9 billion or 15%): increase in retail deposits focussing on savings and call product.

•

Group Centre (-$6.5 billion or 11%): reduced short term wholesale funding borrowing via Commercial Paper.

15

CFO OVERVIEW
Income and expenses, cont’d
Other operating income
Half Year

Movement

Mar 13$M
1,145

Sep 12$M
1,137

Mar 12$M
1,156

Mar 13v. Sep 12
1%

Mar 13v. Mar 12-1%

Foreign exchange earnings1

134

156

132

-14%

2%

Net income from wealth management

594

542

557

10%

7%

Share of associates' profit1

209

230

166

-9%

26%

Other1,2

27

394

55

-93%

-51%

Global Markets other operating income

741

543

670

36%

11%

2,850

3,002

2,736

-5%

4%

371

361

334

3%

11%

741

543

670

36%

11%

1,112

904

1,004

23%

11%

Fee income1

Cash other operating income
1.
2.

Excluding Global Markets
Other income includes a $291 million gain on sale of Visa shares in the September 2012 half

Global Markets income
Net interest income
Other operating income
Cash Global Markets income

Half Year

Movement

Other operating income by division
Australia

Mar 13$M
587

Sep 12$M
607

Mar 12$M
586

Mar 13v. Sep 12-3%

Mar 13v. Mar 12
0%

International and Institutional Banking

1,496

1,360

1,400

10%

7%

New Zealand

162

161

154

1%

5%

Global Wealth

680

657

661

4%

3%

Group Centre1

(75)

217

(65)

large

15%

2,850

3,002

2,736

-5%

4%

Cash other operating income
1.

Other income includes a $291 million gain on sale of Visa shares in the September 2012 half

Other operating income – March 2013 Half Year v September 2012 Half Year

3,002

52

8

(21)

(22)

$m

198

2,850

Global Markets
other operating
income

1H13
Cash otheroperatingincome

(291)
(76)

2H12
Cash otheroperatingincomeFee income

Foreignexchangeearnings

Net income
from wealthmanagement

Share ofassociates'
profitGain on sale ofVisa shares

Other

March 2013 half year v September 2012 half year
Fee income•

Transaction Banking increased $20 million driven by higher trade finance loan volumes and repricing of existing facilities.

Foreign Exchange•

IIB (excluding Global Markets) reduced $15 million driven by decreased international payment volumes in Transaction Banking.

•Cards & Payments decreased $8 million driven by lower volumes as a result of seasonality.

Net Income from Wealth Management•

Global Wealth increased $31 million primarily due to an increase in Funds Management income off the back of higher Funds Under
Management, as well as an increase in Insurance income, resulting from improved lapse experience and higher inforce premiums.

•

Retail Asia Pacific increased $5 million due to improved insurance and investment performance in Taiwan, Indonesia and Singapore.

16

CFO OVERVIEW
Income and expenses, cont’d
Other operating income, cont’d
Share of associates profit•

P.T. Bank Pan Indonesia (Panin Bank) decreased $19 million mainly driven by seasonal factors impacting underlying business earnings as wellas an $8 million adjustment from aligning accounting policies in the September 2012 half.

•

AMMB Holdings Berhad (AMMB) decreased $11 million mainly driven by seasonal factors impacting non-annuity earnings.

•

Bank of Tianjin (BoT) increased $9 million due to increase in underlying earnings driven by strong lending growth.

•Shanghai Rural Commercial Bank (SRCB) decreased $1 million mainly attributable to an impairment of an investment offset by lower credit
provisions and growth in interest income.

Other income•

Group Centre decreased $307 million mainly due to the $291 million gain on sale of Visa shares in the September 2012 half.

•

Global Loans decreased $30 million due mainly to a gain on restructuring a transaction in the September 2012 half and loan sell downs in the
March 2013 half.

•

Asia Partnerships decreased $9 million due to the $10 million dilution gain relating to the BoT investment in the September 2012 half.

•

Mortgages decreased $6 million mainly due to the gain on sale of the Origin business in the September 2012 half.

Global Markets Income
Total Global Markets income is affected by mix impacts between the income categories within other operating income and net interest income. Total
Global Markets income increased $208 million or 23%. Key drivers were:•

Fixed income up $104 million (28%).

•

FX Income up $51 million (14%).

•

Capital Markets up $35 million (40%).

Refer to page 49 for further information.
March 2013 half year v March 2012 half year
Fee income•

Global Relationship Banking decreased $16 million due a reduction in Mergers & Acquisitions activity.

•

Global Loans decreased $12 million as a result of reduced deal activity.

•

Transaction Banking increased $15 million driven by trade finance loan volume growth and pricing initiatives.

Foreign Exchange•Group Centre increased $13 million mainly due to higher hedge gains.

•

IIB (excluding Global Markets) reduced $8 million with small declines across a number of countries.

Net Income from Wealth Management•

Global Wealth increased $23 million primarily due to an increase in Insurance income driven by improved claims experience partially offset byhigher lapse experience.

•

Retail Asia Pacific increased $5 million as a result of improved insurance and investment performance in Taiwan, Indonesia and Singapore.

Share of associates profit•

SRCB increased $17 million mainly attributable to growth in interest income driven by loan repricing and reduced low margin lending as well as
lower credit provision charges.

•

BoT increased $8 million due to an increase in underlying earnings mainly attributable to lending growth.

•

Panin Bank increased $7 million mainly due to adjustments from aligning accounting policies in the March 2012 half.

•

AMMB increased by $1 million due to underlying earnings growth.

Other income•

Group Centre decreased $28 million mainly due to lower earnings from discontinued business (private equity and infrastructure).

•

Global Loans decreased $15 million from loan sell downs in the March 2013 half.

•

Asia Partnerships increased $21 million due to the $31 million write-down of the investment in Saigon Securities Inc (SSI) offset by the$10 million gain on sale of Sacombank both occurring in the March 2012 half.

Global Markets Income
Total Global Markets income is affected by mix impacts between the income categories within other operating income and net interest income. Total
Global Markets income increased $108 million or 11%. Key drivers were:•

FX income increased $10 million (3%).

•

Fixed income up $75 million (19%).

•

Capital Markets up $6 million (5%).

Refer to page 49 for further information.

17

CFO OVERVIEW
Income and expenses, cont’dExpenses
Half Year

Movement

Personnel expenses

Mar 13$M
2,344

Sep 12$M
2,338

Mar 12$M
2,427

Premises expenses

356

363

353

-2%

1%

Computer expenses1

618

825

558

-25%

11%

Restructuring expenses2

57

136

138

-58%

-59%

Other expenses

659

724

657

-9%

0%

Total cash operating expenses

4,034

4,386

4,133

-8%

-2%

Total full time equivalent staff (FTE)

47,41948,23949,509

-2%

-4%

1.
2.

Mar 13v. Sep 12
0%

Mar 13v. Mar 12-3%

Computer expenses include a $8 million software impairment in the March 2013 half (Sep 12 half: $273 million; Mar 12 half: $1 million)
Restructuring expenses include $14 million related to the NZ Simplification in the March 2013 half (Sep 12 half: $84 million; Mar 12 half: $64 million)

Half Year

Movement

Australia

Mar 13$M
1,465

Sep 12$M
1,508

Mar 12$M
1,494

Mar 13v. Sep 12-3%

Mar 13v. Mar 12-2%

International and Institutional Banking

1,446

1,614

1,455

-10%

-1%

New Zealand

470

541

520

-13%

-10%

Global Wealth

460

496

471

-7%

-2%

Group Centre

193

227

193

-15%

0%

4,034

4,386

4,133

-8%

-2%

Total cash operating expenses

Operating expenses – March 2013 Half Year v September 2012 Half Year
58
4,386

6
(7)

$m
(265)

(9)
4,034

(70)
(65)

2H12
Cash operating
expenses

Personnel
expenses

Premises
expensesComputerexpenses

Softwareimpairment

Restructuring
expenses

NZ
Simplification

Other expenses

1H13
Cash operating
expenses

March 2013 half year v September 2012 half year•

Personnel expenses increased $6 million as a result of annual salary increases being offset by reductions in staff numbers, increased utilisationof our hub resources and lower temporary staff costs.

•

Premises expenses decreased $7 million (-2%) due to lower utilities and maintenance costs.

•

Computer expenses decreased $207 million (-25%) due to the $273 million impairment of software assets in the September 2012 half, partially
offset by increased depreciation and amortisation and higher computer contractor costs.

•

Restructuring expenses reduced $79 million (-58%) mainly due to higher NZ Simplification expense in the September 2012 half.

•

Other expenses decreased $65 million (-9%) due to lower discretionary expenses resulting from an ongoing focus on productivity and expense
management.

March 2013 half year v March 2012 half year•

Personnel expenses decreased $83 million (-3%) as a result of lower temporary staff costs and reduced staff numbers across all divisions,partially offset by the cost of annual salary increases.

•

Premises expenses increased $3 million (1%) due to rent increases and higher depreciation and amortisation costs.

•

Computer expenses increased $60 million (11%) due to higher computer contractor costs and increased depreciation and amortisation fromincreased investment in technology.

•

Restructuring expenses decreased $81 million (-59%) mainly due to higher NZ Simplification expense in the March 2012 half.

•

Other expenses increased $2 million (0%), with ongoing focus on productivity and expense management limiting expense growth.

18

CFO OVERVIEW
Credit risk
Overall asset quality has improved during the half, with gross impaired assets reducing by $511 million (10%) to $4,685 million at 31 March 2013. Total
provisions for impairment losses of $4,312 million as at 31 March 2013 were down $226 million (5%) on 30 September 2012 largely reflecting a reduction
in new individual provisions during the period as asset quality improved.
The total credit impairment charge decreased $89 million (13%) half on half, however increased by $29 million (5%) compared to the March 2012 half.
Half Year

Movement

Provision for credit impairment charge
Australia

Mar 13$M386

Sep 12$M
375

Mar 12$M
267

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
45%

International and Institutional Banking1

184

234

217

-21%

-15%

New Zealand

28

70

78

-60%

-64%

Global Wealth

1

2

2

-50%

-50%

Group Centre

-

7

6

-100%

-100%

599

688

570

-13%

5%

Provision for credit impairment charge
1.

Includes impairment of $3 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million)

Half Year

Movement

Mar 13$M
370

Sep 12$M
402

Mar 12$M
289

Mar 13v. Sep 12-8%

Mar 13v. Mar 12
28%

International and Institutional Banking1

167

419

321

-60%

-48%

New Zealand

58

89

104

-35%

-44%

Global Wealth

-

2

3

-100%

-100%

Group Centre

-

3

5

-100%

-100%

595

915

722

-35%

-18%

Individual provision charge
Australia

Total individual provision charge
1.

Includes impairment of $3 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million)

Half Year

Movement

Mar 13$M
550

Sep 12$M
545

Mar 12$M504

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
9%International and Institutional Banking

245

564

383

-57%

-36%

New Zealand

150

182

190

-18%

-21%

Global Wealth

-

3

6

-100%

-100%

New and increased provisions
Australia

Group Centre

-

3

8

-100%

-100%

New and increased provisions for loans and advances

945

1,297

1,091

-27%

-13%

Recoveries and writebacks
Australia

(180)

(143)

(215)

26%

-16%

International and Institutional Banking

(78)

(145)

(62)

-46%

26%

New Zealand

(92)

(93)

(86)

-1%

7%

Global Wealth

-

(1)

(3)

-100%

-100%

Group Centre

-

-

(3)

n/a

-100%

Recoveries and writebacks

(350)

(382)

(369)

-8%

-5%

Total individual provision charge

595

915

722

-35%

-18%

March 2013 half year v September 2012 half year
The total individual provision charge decreased $320 million (35%) over the September 2012 half mainly due to large legacy loan provisions being raisedin IIB during the September 2012 half. Both Australia and New Zealand divisions first half provisions are lower compared to the second half of 2012.
March 2013 half year v March 2012 half year
The total individual provision charge decreased $127 million (18%) over the March 2012 half primarily due to decreased provisions in IIB, associated withlarge individual provisions on a few legacy Global Institutional loans in March 2012, and lower provisions following an improvement in credit quality in
New Zealand. This was partially offset by a provision increase in Australia division, largely driven by higher provisions in the Commercial portfolio.

19

CFO OVERVIEW
Collective provision charge/(release)
Half Year

Movement

Mar 13$M
69

Sep 12$M74

Mar 12$M
74

Risk profile1

(20)

(22)

Portfolio mix

(20)

(11)

Economic cycle and concentration risk adjustment1(25)
4Collective provision charge by source
Lending growth

Collective provision charge/(release)1.

Mar 13v. Sep 12-7%

Mar 13v. Mar 12
-7%

(174)

-9%

-89%

(1)

82%

large

(268)

(51)

-91%

-51%

(227)

(152)

large

large

Risk profile release in March 2012 includes $60 million transferred to Economic cycle and concentration risk adjustment

Collective provision charge/(release) by division
Australia

16

(27)

(22)

large

large

International and Institutional Banking

17

(185)

(104)

large

large

New Zealand

(30)

(19)

(26)

58%

15%

Global Wealth

1

-

(1)

n/a

large

Group Centre

-

4

1

-100%

-100%

Collective provision charge/(release)

4

(227)

(152)

large

large

March 2013 half year v September 2012 half year
The collective provision movement of $231 million from the September 2012 half was primarily driven by a $43 million movement in Australia division due
to releases from the economic cycle balance and a $202 million movement in IIB due to crystallising individual provisions on a few legacy exposures thattriggered a release from the concentration risk provisions in the September 2012 half.
The $4 million collective provision charge reflects a $16 million charge in Australia division primarily driven by underlying growth and seasonality in both
Retail and Commercial segments, a $17 million charge in IIB which was primarily due to growth and changes in portfolio mix. The release in New Zealandof $30 million mainly reflects economic overlay releases given lower than expected earthquake losses, and to offset individual losses on customers
affected by the NZ drought and the PSA virus.
March 2013 half year v March 2012 half year
The collective provision movement of $156 million from March 2012 half was driven by a $38 million movement in Australia division primarily driven byreleases from the economic cycle balance and a $121 million movement in IIB due to crystallisation of individual provisions and the associated collective
provision release.

20

CFO OVERVIEW
Credit risk, cont’dCredit risk on impaired derivatives loss/(gain)
Credit valuation adjustments (CVA) on impaired derivatives are transferred to the individual provision charge in cash profit (refer also page 78) so that all
incurred losses are reflected as credit impairment charges.
The amounts involved are as follows:
Half Year
Mar 13$M
11

Credit risk on impaired derivatives loss/(gain)

Sep 12$M
28

Movement
Mar 12$M
32

Mar 13v. Sep 12-61%

Mar 13v. Mar 12-66%

Expected loss
Management believe that disclosure of modelled expected loss data for individual provisions will assist in assessing the longer term expected loss rates
on the lending portfolio as it removes the volatility in reported earnings created by the use of the IFRS incurred credit loss provisioning. The expected loss
methodology is used internally for return on equity analysis and economic profit reporting.
The expected one year loss on the lending portfolio as at the balance date was $1,700 million, an increase of $45 million over the September 2012 half
year.
% of Group
exposure atdefault

Expected loss as a percentage of exposure at default
Australia

As at

44%

Mar 130.30%

Sep 12
0.31%

Mar 120.31%

International and Institutional Banking

42%

0.18%

0.19%

0.21%

New Zealand

12%

0.24%

0.23%

0.25%

Global Wealth

1%

0.12%

0.15%

0.14%

Other

1%

0.00%

0.00%

0.02%

Total

100%

0.24%

0.24%

0.26%

1,700

1,655

1,679

Annual expected loss ($million)

As at

% of
Group
gross lending
assets59%

Mar 130.36%

Sep 12
0.36%

Mar 12
0.37%

International and Institutional Banking

23%

0.52%

0.53%

0.57%

New Zealand

16%

0.28%

0.26%

0.29%

Global Wealth

1%

0.13%

0.17%

0.17%

Other

1%

0.65%

0.74%

0.00%

Total

100%

0.38%

0.38%

0.40%

Expected loss as a percentage of gross lending assets
Australia

21

CFO OVERVIEW
Credit risk, cont’d
Provision for credit impairment balance
Half Year

Movement

Collective provision1

Mar 13$M
2,769

Sep 12$M
2,765

Mar 12$M
2,994

Mar 13v. Sep 12
0%

Mar 13v. Mar 12-8%

Individual provision

1,543

1,773

1,714

-13%

-10%

Total provision for credit impairment

4,312

4,538

4,708

-5%

-8%

1.

The collective provision includes amounts for off-balance sheet credit exposures: $531 million at 31 March 2013 (Sep 2012: $529 million; Mar 2012: $545 million). The impact on theincome statement for the half year ended 31 March 2013 was a $2 million charge (Sep 2012 half: $14 million release; Mar 2012 half: $22 million release)

Gross impaired assets
As at ($M)

Movement
Mar 13v. Sep 12-9%

Mar 13v. Mar 12-15%

Mar 13
3,978

Sep 12
4,364

Mar 12
4,664

Restructured items

524

525

340

0%

54%

Non-performing commitments and contingencies

183

307

339

-40%

-46%

4,685

5,196

5,343

-10%

-12%

Impaired loans

Gross impaired assets

Half Year

Movement

Gross impaired assets by division
Australia

Mar 13$M
1,746

Sep 12$M
1,794

Mar 12$M
1,748

Mar 13v. Sep 12-3%

Mar 13v. Mar 12
0%

International and Institutional Banking

1,893

2,222

2,247

-15%

-16%

New Zealand

1,013

1,144

1,311

-11%

-23%

Global Wealth
Cash gross impaired assets

33

36

37

-8%

-11%

4,685

5,196

5,343

-10%

-12%

March 2013 half year v September 2012 half year
Gross impaired assets decreased by 10% over the September 2012 half year, driven by the reduced flow of new impaired assets across all divisions
combined with asset realisations and write-offs in IIB and New Zealand.
March 2013 half year v March 2012 half year
Gross impaired assets decreased by 12% over the March 2012 half year, driven by the reduced flow of new impaired assets across all divisions
combined with asset realisations and write-offs in IIB and New Zealand.

22

CFO OVERVIEW
Credit risk, cont’d
Net impaired assets
As at ($M)

Gross impaired assets

Movement

Mar 13
4,685

Sep 12
5,196

Mar 12
5,343

Mar 13v. Sep 12-10%

Mar 13v. Mar 12-12%(1,518)(1,729)(1,701)

-12%

-11%

(25)

(44)

(13)

-43%

92%

3,142

3,423

3,629

-8%

-13%

Individual provisions
Impaired loans
Non-performing commitments and contingencies
Net impaired assets

March 2013 half year v September 2012 half year
Net impaired assets decreased by 8% over the September 2012 half year consequent to the reduced flow of new impaired assets, most notably in IIB
and New Zealand, and a higher level of writeoffs relative to new individual provisions. The Group has an individual provision coverage ratio on impaired
assets of 32.9% at 31 March 2013.
March 2013 half year v March 2012 half year
Net impaired assets decreased by 13% over the March 2012 half year driven by the reduced flow of new impaired assets combined with a reduction in
individual provision balance of $171 million. Individual provisions in IIB and New Zealand have reduced with Australia partially offsetting the reduction.
The Group has an individual provision coverage ratio on impaired assets of 32.9% at 31 March 2013, up from 32.1% as at 31 March 2012.
New Impaired Assets
Half Year
Mar 13$M
1,551

Impaired loans

Movement

Sep 12$M
1,657

Mar 12$M
1,913

Mar 13v. Sep 12-6%

Mar 13v. Mar 12-19%

Restructured items

13

54

249

-76%

-95%

Non-performing commitments and contingencies

7

136

194

-95%

-96%

1,571

1,847

2,356

-15%

-33%

Total new impaired assets

Half Year

Movement

New impaired assets by division
Australia

Mar 13$M782

Sep 12$M
862

Mar 12$M
835

Mar 13v. Sep 12-9%

Mar 13v. Mar 12-6%

International and Institutional Banking

453

641

1,065

-29%

-57%

New Zealand

335

340

447

-1%

-25%

Global Wealth

1

4

9

-75%

-89%

1,571

1,847

2,356

-15%

-33%

Total new impaired assets

March 2013 half year v September 2012 half year
New impaired assets decreased by 15% over the September 2012 half, with new impaired loans decreasing across all divisions but most notably in IIB
and New Zealand. Restructured items and non performing commitments and contingencies were also lower, mainly driven by improvements in IIB.
March 2013 half year v March 2012 half year
New impaired assets decreased by 33% over the March 2012 half, with the higher March 2012 number driven by the impairment of a few substantial
legacy loans in IIB. New impaired loans in the March 2013 half decreased across all divisions but most notably in IIB and New Zealand. Restructured
items and non performing commitments and contingencies were also lower, mainly driven by improvements in IIB.

23

CFO OVERVIEW
Income tax expense
Half Year

Movement

Income tax expense on cash profit

Mar 13$M
1,266

Sep 12$M
1,118

Mar 12$M
1,117

Effective tax rate (cash profit)

28.4%

27.6%

27.8%

Mar 13v. Sep 12
13%

Mar 13v. Mar 12
13%

March 2013 half year v September 2012 half year
The effective tax rate was up 0.8% primarily due to a reduction in tax provisions in the September 2012 half and as a result of higher relative profit growthin Australia.
March 2013 half year v March 2012 half year
The effective tax rate was up 0.6% primarily due to a reduction in tax provisions in the March 2012 half.
Impact of exchange rate movements/revenue hedges
The Group uses derivative instruments to economically hedge against the adverse impact on future offshore revenue streams from exchange rate
movements.
Movements in average exchange rates, net of associated revenue hedges, resulted in a decrease of $9 million in the Group’s cash profit after tax for the
March 2013 half. This included the impact on earnings (cash basis) from associated revenue and expense hedges, which decreased $19 million (beforetax) over the September 2012 half (March 2012 half year: decrease of $4 million). Hedge revenue is booked in the Group Centre.
Half Year Mar 2013v. Half Year Sep 2012

Net interest income
Other operating income

Half Year Mar 2013v. Half Year Mar 2012

FX
unadjusted %growth2%

FX adjusted% growth2%

FX
Impact$M
11

FX
unadjusted %growth4%

FX adjusted% growth
4%

FX
Impact
$M
28

-5%

-4%

(21)

4%

4%

1
29

Operating income

0%

0%

(10)

4%

4%

Operating expenses

-8%

-8%

(4)

-2%

-3%

(8)

Profit before credit impairment and income tax

7%

7%

(14)

10%

10%

21

Provision for credit impairment

-13%

-13%

1

5%

5%

1

Profit before income tax

10%

10%

(13)

11%

10%

22

Income tax expense

13%

14%

4

13%

13%

(6)

Non-controlling interests

large

large

-

25%

25%

-

8%

9%

(9)

10%

9%

16

Cash profit

The Group’s cash profit adjusted for exchange rate movements is as follows:
Half Year

Movement

Net interest income

Mar 13$M
6,236

Sep 12$M
6,137

Mar 12$M
6,012

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
4%

Other operating income

2,850

2,981

2,737

-4%

4%

Operating income

9,086

9,118

8,749

0%

4%

Operating expenses(4,034)(4,390)(4,141)-8%-3%

Profit before credit impairment and income tax

5,052

4,728

4,608

7%

10%

Provision for credit impairment

(599)

(687)

(569)

-13%

5%

Profit before income tax

4,453

4,041

4,039

10%

10%

Income tax expense(1,266)(1,114)(1,123)

14%

13%

(5)

(2)

(4)

large

25%

3,182

2,925

2,912

9%

9%

Non-controlling interests
Cash profit (exchange rate adjusted)24

CFO OVERVIEW
Earnings related hedges
The Group has taken out economic hedges against New Zealand dollar and US dollar (and USD linked) revenue and expense streams. New Zealanddollar exposure relates to the New Zealand geography (refer page 73) and the debt component of New Zealand dollar intra-group funding of thisbusiness, which amounted to NZD1.766 billion at 31 March 2013. Most of our US dollar earnings are in APEA (refer page 71). Details of these hedges
are set out below.
Half Year
Mar 13$M
1,315

Sep 12$M
997

Mar 12$M
794

Amount taken to income (pre tax) 2

(3)

-

5

Amount taken to income (pre tax cash basis) 3

(2)

-

3

Net open USD position (notional principal)1

728

725

1,060

Amount taken to income (pre tax) 2

13

19

103

Amount taken to income (pre tax cash basis) 3

23

40

22

NZD Economic hedges
Net open NZD position (notional principal)1

USD Economic hedges

1.
2.
3.

Value in AUD at original contract rate
Unrealised valuation movement plus realised revenue from closed out hedges
Realised revenue from closed out hedges

As at 31 March 2013, the following hedges are in place to partially hedge future earnings against adverse movements in exchange rates:•

NZD1.6 billion at a forward rate of approximately NZD1.25/AUD.

•

USD0.7 billion at a forward rate of approximately USD0.99/AUD.

•

An unrealised loss of $11 million (pre-tax) on the outstanding NZD and USD economic hedges was booked to the income statement during the halfand has been treated as an adjustment to statutory profit as these are hedges of future periods’ NZD and USD revenues.

Earnings per share (cents)
Half Year

Movement

Mar 13

Sep 12

Mar 12

Mar 13v. Sep 12

Mar 13v. Mar 12

Basic

117.0

109.2

109.3

7%

7%

Diluted

113.2

105.2

104.8

8%

8%

Basic

2,716.6

2,682.2

2,644.1

1%

3%

Diluted2,904.4

2,910.9

2,904.00%0%Cash profit ($M)

3,182

2,934

2,896

8%

10%

(3)

(4)

(7)

-25%

-57%

Cash profit less preference share dividends ($M)

3,179

2,930

2,889

8%

10%

Diluted cash profit less preference share dividends ($M)

3,289

3,063

3,042

7%

8%

Cash earnings per share (cents)1

Weighted average number of ordinary shares (M)2

Preference share dividends ($M)11.
2.

The earnings per share calculation excludes the Euro Trust Securities (preference shares)
Includes Treasury shares held in OnePath Australia

25

CFO OVERVIEWDividends
Half Year

Movement

Mar 13$M73

Sep 12$M
n/a

Mar 12$M
66

Mar 13v. Sep 12
n/a

Mar 13v. Mar 12
11%

n/a

79

n/a

n/a

n/a

Ordinary share dividends used in payout ratio ($M)2

2,003

2,150

1,769

-7%

13%

Cash profit ($M)

3,182

2,934

2,896

8%

10%

(3)

(4)

(7)

-25%

-57%

63.0%

73.4%

61.2%

Dividend per ordinary share (cents)
Interim (fully franked)1
Final (fully franked)

Less: Preference share dividends paid
Ordinary share dividend payout ratio (cash basis)21.
2.

Interim dividend for 2013 is proposed
Dividend payout ratio is calculated using proposed 2013 interim dividend of $2,003 million, which is based on the forecast number of ordinary shares on issue at the dividend record date.
Dividend payout ratios for the September 2012 half year and March 2012 half year are calculated using actual dividend paid of $2,150 million and $1,769 million respectively. Dividend
payout ratio is calculated by adjusting profit attributable to shareholders of the company by the amount of preference share dividends paid

The Directors propose that an interim dividend of 73 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2013. The proposed 2013
interim dividend will be fully franked for Australian tax purposes.
New Zealand imputation credits of NZ 9 cents per ordinary share will also be attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2013 interim dividend and ANZ will
provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used in determining the number of shares to beprovided under the DRP and BOP will be calculated in accordance with the DRP and BOP Terms and Conditions. Refer to Note 5 of the Notes toCondensed Consolidated Financial Statements for further details regarding the calculation of the “Acquisition Price” and the operation of the DRP and
BOP.
Economic profit
Half Year
Mar 13$M
2,940

Profit attributable to shareholders of the company
Adjustments between statutory profit and cash profit

Sep 12$M
2,742

Movement
Mar 12$M
2,919

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
1%
large

242

192

(23)

26%

Cash profit

3,182

2,934

2,896

8%

10%

Economic credit cost adjustment

(171)

(106)

(224)

61%

-24%

Imputation credits

644

609

522

6%

23%
14%

Economic return

3,655

3,437

3,194

6%

Cost of capital(2,243)(2,197)(2,064)2%

9%Economic profit

1,412

1,240

1,130

14%

25%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is considered in determining the variable component of
remuneration packages. Economic Profit is used for internal management purposes and is not subject to audit.
Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the actual credit loss charge withinternal expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised,measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, this is calculated using ordinary
shareholders’ equity (excluding non-controlling interests), multiplied by the cost of capital rate (currently 11%) plus the dividend on preference shares. At
a business unit level, capital is allocated based on economic capital, whereby higher risk businesses attract higher levels of capital. This method isdesigned to help drive appropriate risk management and ensure business returns align with the relevant risk. Key risks covered include credit risk,
operating risk, market risk and other risks.
Economic profit has improved half on half due to increased cash profit and higher imputation credits from high relative profit growth in Australia, partially
offset by higher capital requirements and a higher credit cost adjustment.

26

CFO OVERVIEW
Balance sheet, liquidity and capital
Condensed balance sheet
As at ($B)

Movement

Mar 13

Sep 12

Mar 12

Mar 13v. Sep 12

Mar 13v. Mar 12

Liquid assets

53.1

36.6

35.8

45%

48%

Due from other financial institutions

20.8

17.1

16.3

22%

28%

Trading and available-for-sale assets

62.9

61.2

56.0

3%

12%

Derivative financial instruments

41.7

48.9

39.6

-15%

5%

Net loans and advances

442.0

427.8

412.6

3%

7%

Regulatory deposits

1.7

1.5

1.4

14%

17%

Investments backing policy liabilities

31.2

29.9

30.2

4%

3%

Other

19.2

19.1

20.3

1%

-6%

Total assets

672.6

642.1

612.2

5%

10%

AssetsLiabilities
Due to other financial institutions

43.3

30.5

29.7

42%

46%

Customer deposits

344.1

327.9

308.3

5%

12%

Other deposits and other borrowings

76.4

69.2

74.8

10%

2%

Deposits and other borrowings

420.5

397.1

383.1

6%

10%

Derivative financial instruments

45.1

52.6

41.4

-14%

9%

Bonds and notes

60.2

63.1

61.1

-5%

-1%

Policy liabilities and external unit holder liabilities

34.8

33.5

33.5

4%

4%

Other

26.2

24.1

24.0

9%

9%

Total liabilities

630.1

600.9

572.8

5%

10%

Total equity

42.5

41.2

39.4

3%

8%

Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesaledebt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent inall banking operations and is closely monitored by the Group. The Group maintains a portfolio of liquid assets to manage potential stresses in funding
sources. The minimum level of liquidity portfolio assets to hold is based on a range of ANZ specific and general market liquidity stress scenarios such that
potential cash flow obligations can be met over the short to medium term.
The Group’s approach to liquidity risk management incorporates the following key components:•

Scenario modelling of funding sources
The Global financial crisis highlighted the importance of differentiating between stressed and normal market conditions in a name-specific crisis andthe different behaviour that offshore and domestic wholesale funding markets can exhibit during market stress events. ANZ’s short term liquidity
scenario modelling stresses cash flow projections against multiple ‘survival horizons’ over which the Group is required to remain cash flow positive. In
addition, longer term scenarios are in place that measure the structural liquidity position of the balance sheet. Scenarios modelled are either
prudential requirements or Board mandated scenarios. Under these scenarios, customer and wholesale balance sheet asset/liability flows arestressed.

•

Liquidity portfolio
The Group holds a diversified portfolio of cash and high credit quality securities that may be sold or pledged to provide same-day liquidity. This
portfolio helps protect the Group’s liquidity position by providing cash in a severely stressed environment. All assets held in the prime portfolio are
securities eligible for repurchase under agreements with the applicable central bank (i.e. ‘repo eligible’).
The liquidity portfolio is well diversified by counterparty, currency and tenor. Under the liquidity policy framework, securities purchased for ANZ’sliquidity portfolio must be of a similar or better credit quality to ANZ’s external long-term or short-term credit ratings and continue to be repo eligible.
Supplementing the prime liquid asset portfolio, the Group holds additional liquidity:•

central bank deposits with the US Federal Reserve, Bank of England, Bank of Japan and European Central Bank of $26.1 billion;•

Australian Commonwealth and State Government securities of $7.4 billion and gold and precious metals of $3.3 billion, and•cash and other securities to satisfy local country regulatory liquidity requirements which are not included in the liquid assets below.

27

CFO OVERVIEW
Liquidity risk, cont’d
As at
Mar 13
AUD $BSep 12
AUD $BMar 12
AUD $B

Australia

25.3

24.0

21.2

New Zealand

10.5

11.0

10.5

United States

1.3

1.4

1.4

United Kingdom

4.4

3.3

3.1

Singapore

3.2

4.5

5.0

Hong Kong

0.3

0.6

0.3

Prime liquidity portfolio (Market Values)1

Japan

1.4

1.3

1.2

Total excluding internal Residential Mortgage Backed Securities

46.4

46.1

42.7

Internal Residential Mortgage Backed Securities (Australia)

35.3

34.9

24.6

Internal Residential Mortgage Backed Securities (New Zealand)

3.3

3.0

4.0

Total prime portfolio

85.0

84.0

71.3

Other eligible securities including gold and cash on deposit with central banks2

36.8

30.6

28.1

Total liquidity portfolio

121.8

114.6

99.4

1.
2.

Market value is post the repo discount applied by the applicable central bankLiquid asset holdings in Australia and New York are netted down against overnight interbank borrowings

Regulatory Change
The Basel 3 Liquidity changes include the introduction of two new liquidity ratios to measure liquidity risk (the Liquidity Coverage Ratio (LCR) and the Net
Stable Funding Ratio (NSFR)). A component of the liquidity required under the proposed standards will likely be met via the previously announced
Committed Liquidity Facility from the Reserve Bank of Australian (RBA), however the size and availability of the facility has not yet been agreed with
APRA and the RBA. While ANZ has an existing stress scenario framework and structural liquidity risk metrics and limits in place, the requirements
proposed are in general more challenging. These changes may impact the future composition and size of ANZ’s liquidity portfolio, the size andcomposition of the Bank’s funding base and consequently could affect future profitability. The Basel Committee on Banking Supervision released revised
LCR details in January 2013 which included the re-calibration of certain balance sheet 'run-off factors'. APRA is expected to release further details on its
requirements shortly.
Wholesale Funding
ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
As at March 2013, the composition of the Group’s funding profile was:•Term wholesale funding with a remaining maturity of more than one year of $61.4 billion, representing 11% of total funding ($68.4 billion, 12% of
total funding at Sep 2012).

•

Term wholesale funding with a remaining maturity of one year or less of $32.0 billion, representing 5% of total funding ($25.4 billion, 5% of total
funding at Sep 2012).

•

Short-term wholesale funding (including central bank deposits) of $90.7 billion, representing 15% of total funding ($78.9 billion, 14% of total fundingat Sep 2012).

•

Shareholders’ equity and hybrids of $47.6 billion, representing 8% of total funding ($46.3 billion, 8% of total funding at Sep 2012).

$8.6 billion of term wholesale debt (with a remaining term greater than one year as at 31 March, 2013) was issued during the first half of FY13, and in
addition $0.4 billion was issued by ANZ Wealth. $3.4 billion of term wholesale funding has been issued since 31 March 2013.
•

Access to all major global wholesale funding markets remained available to ANZ during half year 2013.

•

All wholesale funding needs were comfortably met.

•

The weighted average tenor of new term debt was 4.0 years (4.6 years in 2012).

•

The weighted average cost of new term debt issuance decreased in the first half of 2013 as a result of improved market conditions. However
average portfolio costs remain substantially above pre-crisis levels and have only recently stabilised at these elevated levels.

28

CFO OVERVIEW
Liquidity risk, cont’d
The following tables show the Group’s funding composition:
As at ($M)

Movement

Mar 13

Sep 12

Mar 12

Mar 13v. Sep 12

Mar 13v. Mar 12

Customer deposits and other liabilities1
Australia

145,550

140,810

132,7843%

10%International and Institutional Banking

151,847

142,651

132,744

6%

14%

New Zealand

41,42339,62237,782

5%

10%

Global Wealth

10,042

9,449

9,659

6%

4%

Group Centre(4,727)(4,656)(4,666)2%

1%

Customer deposits

344,135

327,876

308,303

5%

12%

Other2

12,373

9,841

9,624

26%

29%

Total customer deposits and other liabilities (funding)

356,508

337,717

317,9276%

12%Wholesale funding3,4
Bonds and notes5

59,422

62,693

61,107-5%-3%

Loan capital

11,666

11,914

12,605-2%-7%

Certificates of deposit

61,56456,83859,6038%

3%Commercial paper issued

14,486

12,16415,08419%-4%Due to other financial institutions6

38,67830,53829,68827%

30%

Other wholesale borrowings7

4,242

4,585

2,665

-7%

59%

Total wholesale funding

190,058

178,732

180,752

6%

5%

Shareholders' equity (excl preference shares)

41,64840,34938,572

3%

8%

Total funding

588,214556,798537,251

6%

9%

Short term wholesale funding (excluding Central Banks)

72,351

63,43364,735

14%

12%

Central Bank deposits

18,36015,475

14,872

19%

23%

Total short term wholesale funding

90,711

78,90879,60715%

14%- Less than 1 year residual maturity

31,97725,391

22,782

26%

40%- Greater than 1 year residual maturity

61,39268,44971,677-10%-14%

Hybrid capital including preference shares

5,978

5,984

6,686

0%

-11%

190,058

178,732

180,752

6%

5%

Short term wholesale funding (excluding Central Banks)

12%

11%

12%

Central Bank deposits

3%

3%

3%

Total short term wholesale funding

15%

14%

15%

Wholesale funding maturity3,4Long term wholesale funding3

Total wholesale funding and preference share capital
excluding shareholders' equity

Total funding maturity

Long term wholesale funding- Less than 1 year residual maturity

5%

5%

4%

- Greater than 1 year residual maturity

11%

12%

13%

61%

61%

59%

Total customer liabilities (funding)Shareholders' equity and hybrid debt

8%

8%

9%

Total funding and shareholders' equity

100%

100%

100%

1.
2.
3.

4.
5.
6.
7.

Includes term deposits, other deposits and an adjustment to the Group Centre to eliminate OnePath Australia investments in ANZ deposit products
Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in OnePath Australia
Long term wholesale funding amounts are stated at original hedged exchange rates. Movements due to currency fluctuations in actual amounts borrowed are classified as short termwholesale funding
Liability for acceptances have been removed as they do not provide net funding
Excludes term debt issued externally by ANZ Wealth
Liquid asset holdings in Australia and New York are netted down against overnight interbank borrowings
Includes net derivative balances, special purpose vehicles, other borrowings and Euro Trust Securities (preference shares)

29

CFO OVERVIEWCapital Management
Basel 3 Capital Ratios
As at
APRA Basel 3

Internationally Harmonised

Mar 13
8.2%

1

Sep 12
8.0%

1

Mar 12
7.8%

Mar 13
10.3%

Sep 12110.0%

Mar 121
9.8%

Tier 1

9.8%

9.7%

9.7%

12.1%

11.8%

11.8%

Total capital

11.7%

11.7%

11.8%

14.0%

13.9%

14.0%

Risk weighted assets ($B)

322.6

315.4

303.7

307.6

299.5

289.6

Common Equity Tier 1

1.

Tier 1 and Total Capital ratios include the application of a 10% ‘hair cut’ to the face value of the additional Tier 1 and Tier 2 securities on issue at those dates
Further details of the components of capital and the capital adequacy calculation are set out on pages 116 to 120

Calculation of Capital Adequacy
For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, ANZ has been accredited by Australian
Prudential Regulation Authority (APRA) to use the Advanced Internal Ratings Based (AIRB) methodology for credit risk weighted assets and Advanced
Measurement Approach (AMA) for the operational risk weighted asset equivalent.
Effective 1 January 2013, APRA has adopted the majority of Basel 3 capital reforms in Australia. The Basel 3 reforms include; increased capital
deductions from Common Equity Tier 1 (“CET1”) capital, an increase in capitalisation rates (including prescribed minimum capital buffers, fully effective
1 January 2016), tighter requirements around new Tier 1 and Tier 2 securities and transitional arrangements for existing Tier 1 and Tier 2 securities that
do not conform to the new regulations. Other changes include capital requirements for counterparty credit risk and an increase in the asset value
correlation with respect to exposures to large and unregulated financial institutions.

APRA Basel 3 Common Equity Tier 1 – March 2013 Half Year v September 2012 Half Year

101
16
(31)
8.02

(18)

1

8.18

Other

1H13
APRA Basel 3(53)

Movement
inbps

up 16 bps

2H12
APRA Basel 3

Cash
NPAT

RWA
Non-RWA
Capital initiatives
Business Usage Business Usage

30

Dividends(net DRP)

CFO OVERVIEWAPRA Basel 3 to Internationally Harmonised Basel 3 Common Equity Tier 1 – March 2013 Half Year

1

37

10.30

IRRBB RWA
(APRA Pillar 1
approach)

1H13InternationallyHarmonised
Basel 3

45

Movement
in
bps

81
8.18

1H13
APRA Basel 3

1.

26

23

Up to 5%10% allowance forinvestments inallowance fordeferred
insurance and banking
tax assets
associates

Other
capital items

Mortgage
20% LGD floor
and others

ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel III: A global regulatory framework for more resilient banks and banking systems” (June2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006)

The above provides a reconciliation of CET1 under APRA’s Basel 3 prudential capital standards to Internationally Harmonised Basel 3 standards. APRA
views the Basel 3 reforms as a minimum requirement and hence has not incorporated some of the concessions proposed in the Basel 3 rules and has
also set higher requirements in other areas. As a result, Australian banks’ Basel 3 reported capital ratios will not be directly comparable with international
peers (Internationally Harmonised Basel 3).
In addition, APRA has implemented an accelerated implementation timetable for the Basel 3 capital reforms, particularly in relation to minimum capitalratios and deductions which became effective 1 January 2013. Introduction of the prescribed minimum capital buffers will be fully effective
1 January 2016 and the Leverage Ratio from 1 January 2015.
APRA is still yet to finalise capital standards on the Basel 3 reforms dealing with the improvements in capital disclosures, including the leverage ratio,
contingent capital and measures to address systematic and inter-connected risks.
Level 3 Conglomerates (“Level 3”)
APRA has announced that it will proceed with implementing Level 3 Conglomerates framework on 1 January 2014, with draft Level 3 capital adequacy
standards expected to be released in the second quarter of 2013. The standards will regulate a bancassurance group such as ANZ as a single economic
entity with minimum capital requirements and additional reporting on risk exposure levels. Based upon APRA’s March 2010 Discussion Paper, and draft
prudential standards covering group governance and risk exposures released in December 2012, ANZ is not expecting any material impact on its
operations.

31CFO OVERVIEW
Deferred acquisition costs and deferred income
The Group recognises as assets deferred acquisition costs relating to the acquisition of interest earning assets or the issuance of funding. The Groupalso recognises deferred income that is integral to the yield of an originated financial instrument, net of any direct incremental costs. This income isdeferred and recognised as net interest income over the expected life of the financial instrument under AASB 139: ‘Financial Instruments: Recognition
and Measurement’. Deferred acquisition costs that do not relate to interest earning assets, for example those relating to the acquisition of life investment
contracts, are excluded from this analysis.
The balances of deferred acquisition costs and deferred income were:
Deferred Acquisition Costs1

Deferred Income

Mar 13

Sep 12

Mar 12

Mar 13

Sep 12

$M

$M

$M

$M

$M

$M

745

704

647

70

101

114

International and Institutional Banking

17

12

6

251

276

278

New Zealand

106

80

43

38

35

30

Global Wealth

1

1

1

3

3

3

Group Centre

44

53

64

-

-

-

Total

913

850

761

362

415

425

Australia

1.

Mar 12

Deferred acquisition costs largely include the amounts of brokerage capitalised and amortised in the Australia and New Zealand divisions. Deferred acquisition costs also include
capitalised debt raising expenses

Deferred acquisition costs and associated amortisation during the period were:
Half Year Mar 2013
Amortisation Charge

Half Year Sep 2012

Capitalised Costs1

Amortisation Charge

Capitalised Costs1

$M

$M

$M

$M

191

232

184

241

International and Institutional Banking

5

10

3

9

New Zealand

19

45

13

50

Global Wealth

-

-

-

-

Group Centre

11

2

10

(1)

Total

226

289

210

299

Australia

1.

Costs capitalised exclude brokerage trailer commissions paid

32

CFO OVERVIEW
Software capitalisation
At 31 March 2013, the Group’s intangibles included $1,857 million in relation to costs incurred in acquiring and developing software.
Half Year
Mar 13$M
1,762

Balance at start of period

Movement

Sep 12$M
1,743

Mar 12$M
1,572

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
12%-12%

Software capitalised during the period

284

462

324

-39%

Amortisation during the period

(181)

(170)

(150)

6%

21%

Software impaired/written-off

(8)

(273)

(1)

-97%

large

Foreign exchange differences

-

-

(2)

n/a

-100%

1,857

1,762

1,743

5%

7%

Total capitalised software

Capitalised cost analysis by Division

Half Year

Movement

Mar 13$M76

Sep 12$M
116

Mar 12$M
64

Mar 13v. Sep 12-34%

Mar 13v. Mar 12
19%

International and Institutional Banking

115

195

150

-41%

-23%

New Zealand

12

18

13

-33%

-8%

Global Wealth

15

26

20

-42%

-25%

Group Centre

66

107

77

-38%

-14%

Total

284

462

324

-39%

-12%

Australia

Net book value by Division

Half Year

Movement

Mar 13$M359

Sep 12$M
338

Mar 12$M
323

Mar 13v. Sep 12
6%International and Institutional Banking

914

873

906

5%

1%

New Zealand

84

81

72

4%

17%

Australia

Mar 13v. Mar 12
11%

Global Wealth

75

75

94

0%

-20%

Group Centre

425

395

348

8%

22%

1,857

1,762

1,743

5%

7%

Total

33

CFO OVERVIEWThis page has been left blank intentionally

34

SEGMENT REVIEWCONTENTS
Section 5 – Segment Review
Segment performance
Australia
International and Institutional Banking
New ZealandGlobal WealthGroup Centre

35

SEGMENT REVIEW
Segment Performance
The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand and Global Wealth being theoperating divisions.
Effective 1 October 2012, Corporate Banking Australia transferred to the Australia division from IIB and comparatives have been restated accordingly.
There have been no other major structure changes, however there have been a number of minor restatements as a result of changes to customer
segmentation, changes to net interbusiness unit expense methodologies and the realignment of support functions. Prior period comparatives are adjusted
for such changes.
The Segment Review section is reported on a cash basis.

March 2013 Half Year

AUD M
Net interest income
Other external operating income

Australia
3,282International &Institutional
Banking
1,775

New Zealand889

Global Wealth
58

Group Centre
232

Group
6,236

587

1,496

162

680

(75)

2,850

Operating income

3,869

3,271

1,051

738

157

9,086

Operating expenses(1,465)(1,446)

(470)

(460)

(193)

(4,034)

Profit before credit impair't and income tax

2,404

1,825

581

278

(36)

5,052

Provision for credit impairment

(386)

(184)

(28)

(1)

-

(599)

Profit before income tax

2,018

1,641

553

277

(36)

4,453

Income tax expense andnon-controlling interests

(603)

(442)

(156)

(74)

4

(1,271)

Cash profit

1,415

1,199

397

203

(32)

3,182

Australia
3,171International &Institutional
Banking
1,811

New Zealand890

Global Wealth60

Group Centre
194

Group
6,126

September 2012 Half Year

AUD M
Net interest income
Other external operating income

607

1,360

161

657

217

3,002

Operating income

3,778

3,171

1,051

717

411

9,128

Operating expenses(1,508)(1,614)

(541)

(496)

(227)

(4,386)

Profit before credit impair't and income tax

2,270

1,557

510

221

184

4,742

Provision for credit impairment

(375)

(234)

(70)

(2)

(7)

(688)

Profit before income tax

1,895

1,323

440

219

177

4,054

Income tax expense andnon-controlling interests

(568)

(371)

(121)

(50)

(10)

(1,120)Cash profit

1,327

952

319

169

167

2,934

Australia
4%International &Institutional
Banking-2%

New Zealand0%

Global Wealth-3%Group Centre
20%

Group
2%

Other external operating income

-3%

10%

1%

4%

large

-5%

Operating income

2%

3%

0%

3%

-62%

0%

Operating expenses

-3%

-10%

-13%

-7%

-15%

-8%

Profit before credit impair't and income tax

6%

17%

14%

26%

large

7%

Provision for credit impairment

3%

-21%

-60%

-50%

-100%

-13%

Profit before income tax

6%

24%

26%

26%

large

10%

Income tax expense andnon-controlling interests

6%

19%

29%

48%

large

13%

Cash profit

7%

26%

24%

20%

large

8%

March 2013 Half Year vs September 2012 Half Year%Net interest income

36

SEGMENT REVIEWMarch 2013 Half Year

AUD M
Net interest income
Other external operating income

Australia
3,282International &Institutional
Banking
1,775

New Zealand889

Global Wealth
58

Group Centre
232

Group
6,236

587

1,496

162

680

(75)

2,850

Operating income

3,869

3,271

1,051

738

157

9,086

Operating expenses(1,465)(1,446)

(470)

(460)

(193)

(4,034)

Profit before credit impair't and income tax

2,404

1,825

581

278

(36)

5,052

Provision for credit impairment

(386)

(184)

(28)

(1)

-

(599)

Profit before income tax

2,018

1,641

553

277

(36)

4,453

Income tax expense andnon-controlling interests

(603)

(442)

(156)

(74)

4

(1,271)

Cash profit

1,415

1,199

397

203

(32)

3,182

Australia
2,992International &Institutional
Banking
1,856

New Zealand890

Global Wealth62Group Centre
184

Group
5,984

586

1,400

154

661

(65)

2,736

March 2012 Half Year

AUD M
Net interest income
Other external operating income
Operating income

3,578

3,256

1,044

723

119

8,720

Operating expenses(1,494)(1,455)

(520)

(471)

(193)

(4,133)

Profit before credit impair't and income tax

2,084

1,801

524

252

(74)

4,587

Provision for credit impairment

(267)

(217)

(78)

(2)

(6)

(570)

Profit before income tax

1,817

1,584

446

250

(80)

4,017

Income tax expense andnon-controlling interests

(546)

(425)

(123)

(73)

46

(1,121)

Cash profit

1,271

1,159

323

177

(34)

2,896

Australia
10%International &Institutional
Banking-4%

New Zealand0%

Global Wealth-6%Group Centre
26%

Group
4%

0%

7%

5%

3%

15%

4%

March 2013 Half Year vs March 2012 Half Year%Net interest income
Other external operating income
Operating income

8%

0%

1%

2%

32%

4%

Operating expenses

-2%

-1%

-10%

-2%

0%

-2%

Profit before credit impair't and income tax

15%

1%

11%

10%

-51%

10%

Provision for credit impairment

45%

-15%

-64%

-50%

-100%

5%

Profit before income tax

11%

4%

24%

11%

-55%

11%

Income tax expense andnon-controlling interests

10%

4%

27%

1%

-91%

13%

Cash profit

11%

3%

23%

15%

-6%

10%

37

SEGMENT REVIEW
Australia
Philip Chronican
Australia division comprises Retail and Corporate and Commercial Banking businesses. Retail includes Mortgages, Deposits, Cards and Payments alongwith the Retail Distribution Network. Corporate and Commercial Banking includes our core banking offerings to Corporate Banking, Business Banking,Regional Business Banking and Small Business Banking customers and Esanda.

Cash profit – March 2013 Half Year v September 2012 Half Year
50
111

(7)

1,415

(11)

(20)
$m

(35)

1,327

2H12
Cash profit

Net interest
incomeOther operating
incomeOperatingexpenses software
impairment

Provision for
Operatingexpenses - other credit impairment

Australia division has continued to strengthen its domestic franchisethrough selective growth in market share and enhanced cross sell,
while at the same time launching the “Banking on Australia”
transformation program.

•

Divisional margin improved 3bps as a result of active
management of pricing, discounting, commissions and anincrease in proprietary mortgage sales, outweighing deposit
pricing pressures.

•

Other external operating income decreased by 3% due mainly tothe inclusion of non-recurring Origin mortgage portfolio saleproceeds in the September half.

•

Operating expenses were down 3% due to an ongoing focus on
productivity and expense management, and the impact of nonrecurring software asset impairments in the September half.

•

Provision for credit impairment increased 3% in the half. This ispartly due to the impact of surplus flood provision releases in the
September half not recurring. Credit quality remains sound and islargely in line with the September half.

Banking on Australia responds to changing customer banking
preferences and further strengthens our Australian franchise.
We are investing in digital and mobile channels to meet the needs ofour customers, lower cost to serve, provide common platforms andcreate further revenue opportunities. We currently have 1 million
registered goMoney users and more than 23k downloads of our award
winning ANZ FastPay app1. We are transforming our distribution
network to reduce branch footprint costs, build out our contact centre
capability and improve frontline banker productivity, with revenue per
FTE increasing 13% over the prior comparative period. Simpler
Banking productivity initiatives are underway and delivering tangible
benefits, with the ratio of operating expenses to operating income
reducing from 41.8% in the March 2012 half to 37.9% this half.

March 2013 half year v March 2012 half year

ANZ FastPay won the “Innovation in Payments” award at the Financial InsightInnovation Awards 2013. This is the same award ANZ goMoney won in 2011

Cash profit increased 11%, with a 10% increase in net interest income
and a 2% reduction in expenses, offset by a 45% increase in credit
provisions.

Retail update
As a result of our targeted focus on higher value customer segments,
increased share of wallet and consistent above system growth in bothHousehold Lending and Household Deposits, ANZ has continued to
grow Traditional Banking market share and had the strongest growth ofthe majors for this measure in the twelve months to March 20132.
2

Key factors affecting the result were:

Source: Roy Morgan Research: Aust Population aged 14+, rolling 12 months, Trade
Banking Consumer Market (Deposits, Cards & Loans), Peers: CBA (excl Bankwest),
NAB, Westpac (excl Bank of Melbourne & St George)•

Net interest income increased 10% as a result of strong growth inaverage net loans and advances of 7% combined with an 8 basis
point improvement in net interest margin.

•

Growth in average net loans and advances of 7% was driven by
above system growth in Mortgages of 6% and strong growth in
Corporate and Commercial Banking of 8%. Average deposit
growth was 11%, with the majority coming from savings products.

•

Net interest margin improved 8 basis points over the priorcomparative period as a result of disciplined margin
management, partly offset by deposit pricing pressures.

•

Operating expenses were down 2% as result of a reduction in
average FTE and benefits from operational efficiencies,
procurement saves and lower discretionary spending.

•

Provision for credit impairment increased 45% reflecting higher
individual provisions largely due to prior comparative period writebacks in Corporate Banking, combined with an increase incollective provisions after the release of surplus flood provisions
in the March 2012 half.

Corporate and Commercial Banking update
Corporate and Commercial Banking continues to focus on growing thebusiness through targeted customer acquisition (customer numbers
grew by a net 77k or 9% since March 2012), increased cross-sell (up
11% since March 2012) and leveraging ANZ’s super-regional footprint.
March 2013 half year v September 2012 half year
Cash profit increased 7% in the half, with a 4% increase in net interest
income and a 3% reduction in expenses.
Key factors affecting the result were:•
Net interest income increased 4% with growth in average net
loans and advances of 2% and a 3 basis point improvement in net
interest margin.
•

1H13
Cash profit

Banking, Small Business Banking and Esanda. Asset growth waslargely self-funded with average deposit growth of 5%, with the
majority of the deposit growth coming from savings products.

Banking on Australia Transformation Program1

Income tax
expense & noncontrollinginterests

The 2% growth in average net loans and advances was driven by
above system growth in Mortgages and strong growth in Business

38

SEGMENT REVIEW
Australia
Philip Chronican

Australia Total
Half YearNet interest income
Other external operating income

Movement

Mar 13$M
3,282

Sep 12$M
3,171

Mar 12$M
2,992

Mar 13v. Sep 12
4%

Mar 13v. Mar 12
10%

587

607

586

-3%

0%

Operating income

3,869

3,778

3,578

2%

8%

Operating expenses(1,465)(1,508)(1,494)-3%-2%

Profit before credit impairment and income tax

2,404

2,270

2,084

6%

15%

Provision for credit impairment

(386)

(375)

(267)

3%

45%

Profit before tax

2,018

1,895

1,817

6%

11%

Income tax expense and non-controlling interests

(603)

(568)

(546)

6%

10%

Cash profit

1,415

1,327

1,271

7%

11%

826

782

662

6%

25%

589

543

617

8%

-5%

-

2

(8)

-100%

-100%

1,415

1,327

1,271

7%

11%

Balance Sheet
Net loans & advances

262,065

253,933

247,571

3%

6%

Other external assets

2,909

2,872

2,943

1%

-1%

External assets

264,974

256,805

250,514

3%

6%

Customer deposits

145,550

140,810

132,784

3%

10%

Other external liabilities

16,577

17,47915,556-5%

7%

External liabilities

162,127

158,289

148,340

2%

9%
12%

Consisting of:RetailCorporate and Commercial Banking
Other
Cash profit

1

Risk weighted assets

105,551

98,55993,905

7%

Average net loans and advances

257,920

252,133

242,020

2%

7%

Average deposits and other borrowings

144,293137,000

129,555

5%

11%

RatiosReturn on average assets

1.09%

1.04%

1.04%

Net interest average margin

2.53%

2.50%

2.45%

Operating expenses to operating income

37.9%

39.9%

41.8%

Operating expenses to average assets

1.13%

1.18%

1.22%

Individual provision charge/(release)

370

402

289

-8%

28%

0.29%

0.32%

0.24%

16

(27)

(22)

large

large

Collective provision charge/(release) as a % of average net advances

0.01%(0.02%)(0.02%)Net impaired assets

1,016

1,078

1,057

-6%

-4%

Net impaired assets as a % of net advances

0.39%

0.42%

0.43%

Total full time equivalent staff (FTE)

14,51814,60615,169-1%-4%

Individual provision charge/(release) as a % of average net advances
Collective provision charge/(release)1.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

39

SEGMENT REVIEW
Australia
Philip Chronican
Individual provision charge/(release)

Half Year
Mar 13$M
186

RetailMovement

Sep 12$M
208

Mar 12$M
208

Mar 13v. Sep 12-11%

Mar 13v. Mar 12-11%

Mortgages

22

21

22

5%

0%

Cards & Payments

155

179

179

-13%

-13%

Deposits

9

8

7

13%

29%

184

194

81

-5%

large

Corporate Banking

13

18

(31)

-28%

large

Esanda

53

50

32

6%

66%

Regional Business Banking

43

54

26

-20%

65%

Business Banking

33

29

22

14%

50%

Small Business Banking

42

43

32

-2%

31%

370

402

289

-8%

28%

Corporate and Commercial Banking

Individual provision charge/(release)Collective provision charge/(release)

Half Year

Movement

Mar 13$M
19

Sep 12$M(24)

Mar 12$M(9)

Mar 13v. Sep 12
large

Mar 13v. Mar 12
large

Mortgages

5

(12)

(2)

large

large

Cards & Payments

15

(12)

(9)

large

large

Other

(1)

-

2

n/a

large

(3)

(3)

(13)

0%

-77%

RetailCorporate and Commercial Banking
Corporate Banking

(6)

-

(11)

n/a

-45%

Esanda

(2)

10

9

large

large

Regional Business Banking

(8)

4

2

large

large

Business Banking

4

9

2

-56%

100%

Small Business Banking

9

5

9

80%

0%

-

(31)

(24)

-100%

-100%

Collective provision charge/(release)

Other

16

(27)

(22)

large

large

Total provision charge/(release)

386

375

267

3%

45%

40

SEGMENT REVIEW
Australia
Philip Chronican
Net loans & advances

As at ($M)
Mar 13
198,883

Sep 12
192,740

Mar 12
189,429

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
5%Mortgages

187,920

182,115

178,527

3%

5%

Cards & Payments

10,894

10,554

10,828

3%

1%

69

71

74

-3%

-7%

63,182

61,193

58,1253%

9%

RetailOther
Corporate and Commercial Banking
Corporate Banking

9,296

9,208

8,786

1%

6%

Esanda16,352

15,847

14,9573%

9%

Regional Business Banking

11,373

11,372

10,8540%

5%Business Banking

16,403

15,542

14,665

6%

12%

Small Business Banking

9,758

9,224

8,893

6%

10%

-

-

(30)

n/a

-100%

Other
Operations and Support
Net loans & advances

-

-

17

n/a

-100%

262,065

253,933

247,571

3%

6%

Customer deposits

As at ($M)

Movement
Mar 13v. Sep 12
4%

Mar 13v. Mar 12
11%

12,221

7%

15%

322

-16%

0%

79,359

4%

10%

8

-10%

13%

43,182

40,845

1%

7%

66

96

129

-31%

-49%

Regional Business Banking

5,058

5,029

4,902

1%

3%

Business Banking

12,331

12,791

11,851-4%

4%

Small Business Banking

26,09425,26623,963

3%

9%

15

17

29

-12%

-48%

145,550

140,810

132,7843%

10%

RetailMortgages
Cards & Payments
Deposits
Other
Corporate and Commercial Banking1
EsandaOperations and Support
Customer deposits
1.

Movement

Mar 13
101,986

Sep 12
97,611

Mar 12
91,91014,093

13,187322

382

87,562

84,0329

1043,549Corporate Banking deposits of $5.8 billion are included in the IIB division deposits (Sep 12 half: $6.2 billion; Mar 12 half: $5.8 billion)

41

SEGMENT REVIEW
Australia
Philip Chronican
RetailHalf YearNet interest income
Other external operating income

Movement

Mar 13$M
1,916

Sep 12$M
1,850

Mar 12$M
1,679

Mar 13v. Sep 12
4%

Mar 13v. Mar 12
14%

452

471

451

-4%

0%
11%

Operating income

2,368

2,321

2,130

2%

Operating expenses(982)(1,022)

(983)

-4%

0%

Profit before credit impairment and income tax

1,386

1,299

1,147

7%

21%

Provision for credit impairment

(205)

(184)

(199)

11%

3%

Profit before tax

1,181

1,115

948

6%

25%

Income tax expense and non-controlling interests

(355)

(333)

(286)

7%

24%

Cash profit

826

782

662

6%

25%

50,81547,237

46,9488%

8%

Risk weighted assets

Half Year
Individual provision charge/(release)
Mortgages
Cards & Payments
Deposits
Individual provision charge/(release)Collective provision charge/(release)
Mortgages
Cards & Payments
Other

Movement

Mar 13$M
22

Sep 12$M
21

Mar 12$M
22

Mar 13v. Sep 12
5%

Mar 13v. Mar 12
0%

155

179

179

-13%

-13%

9

8

7

13%

29%

186

208

208

-11%

-11%

5

(12)

(2)

large

large

15

(12)

(9)

large

large

(1)

-

2

n/a

large

Collective provision charge/(release)

19

(24)

(9)

large

large

Total provision charge/(release)

205

184

199

11%

3%

As at ($M)

Movement
Mar 13v. Sep 12
3%

Mar 13v. Mar 12
5%

Net loans & advances
Mortgages

Mar 13
187,920

Sep 12
182,115

Mar 12
178,527

Cards & Payments

10,894

10,554

10,828

3%

1%

69

71

74

-3%

-7%

Net loans & advances

198,883

192,740

189,429

3%

5%

Customer deposits
Mortgages

14,093

13,187

12,221

7%

15%

322

382

322

-16%

0%

87,562

84,03279,359

4%

10%

Other

Cards & Payments
Deposits
Other
Customer deposits

42

9

10

8

-10%

13%

101,986

97,611

91,910

4%

11%

SEGMENT REVIEW
Australia
Philip Chronican
Corporate and Commercial Banking
Half Year

Movement

Mar 13$M
1,363

Sep 12$M
1,319

Mar 12$M
1,309

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
4%

136

140

136

-3%

0%

Operating income

1,499

1,459

1,445

3%

4%

Operating expenses

(481)

(491)

(497)

-2%

-3%

Profit before credit impairment and income tax

1,018

968

948

5%

7%

Provision for credit impairment

(181)

(191)

(68)

-5%

large

Profit before tax

837

777

880

8%

-5%

Income tax expense and non-controlling interests

(248)

(234)

(263)

6%

-6%

Cash profit

589

543

617

8%

-5%

53,62050,60846,501

6%

15%

Net interest income
Other external operating income

Risk weighted assets

Half Year

Movement

Mar 13$M
13

Sep 12$M
18

Mar 12$M(31)

Mar 13v. Sep 12-28%

Mar 13v. Mar 12
large

Esanda53

50

Regional Business Banking

43

54

32

6%

66%

26

-20%

Business Banking

33

65%

29

22

14%

Small Business Banking

50%

42

43

32

-2%

31%

Individual provision charge/(release)

184

194

81

-5%

large

Collective provision charge/(release)
Corporate Banking

Individual provision charge/(release)
Corporate Banking

(6)

-

(11)

n/a

-45%

Esanda

(2)

10

9

large

large

Regional Business Banking

(8)

4

2

large

large

Business Banking

4

9

2

-56%

100%

Small Business Banking

9

5

9

80%

0%

Other

-

(31)

(24)

-100%

-100%

(3)

(3)

(13)

0%

-77%

181

191

68

-5%

large

Collective provision charge/(release)
Total provision charge/(release)

As at ($M)
Mar 13
9,296

Sep 12
9,208

Mar 12
8,786

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
6%

Esanda16,352

15,847

14,9573%

9%

Regional Business Banking

11,373

11,372

10,8540%

5%Business Banking

16,403

15,542

14,665

6%

12%

Small Business Banking

9,758

9,224

8,893

6%

10%

-

-

(30)

n/a

-100%

63,182

61,193

58,1253%

9%Net loans & advances
Corporate Banking

Other
Net loans & advances

Customer deposits1
Esanda

66

96

129

-31%

-49%

Regional Business Banking

5,058

5,029

4,902

1%

3%

Business Banking

12,331

12,791

11,851-4%

4%

Small Business Banking

26,09425,26623,9633%

9%43,54943,182

40,845

1%

7%

Customer deposits
1.

Movement

Corporate Banking deposits of $5.8 billion are included in the IIB division deposits (Sep 12 half: $6.2 billion; Mar 12 half: $5.8 billion)

43

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
The International and Institutional Banking (IIB) division comprises Global Institutional (including Transaction Banking, Global Loans and Global Markets),
Retail Asia Pacific and Asia Partnerships, together with Relationship & Infrastructure.

Cash profit – March 2013 Half Year v September 2012 Half Year
50
6

162

1,199
(71)

136
$m

952
(36)

2H12
Cash profit

Net interest
incomeOther operating
incomeOperatingexpenses software
impairment

Provision for
Operatingexpenses - other credit impairment•

The results reflect geographically diverse revenue growth, with APEA
now contributing 34% of Global Institutional income.
Margin pressure in Australia continued albeit at a lesser rate. Global
Markets’ strong results were driven by improved trading conditions andincreased customer volumes. With the build out of scale and capability
in Asia, IIB has benefitted from strong volume growth in Asia comparedto the more constrained business environments in Australia and New
Zealand. Disciplined cost management helped fund IIB’s investment ingrowth areas in APEA. Improved net impaired assets position was
driven by continued actions to de-risk the Global Institutional portfolio.

Cash profit increased 3%, driven by the strong Global Markets
performance, stronger Asian Partnerships results and lower credit
provision charges in the Global Institutional businesses, partially offset
by margin compression.
Key factors affecting the result were:Cash profit increased 26%, mainly due to the strong performance of
Global Markets and Transaction Banking, partially offset by margincompression, coupled with lower credit provisions and the impact of thecapitalised software impairment in the September 2012 half year.

•

Net interest income decreased 4%. Solid growth in APEA
accounted for most of the overall increases in average customer
deposits (up 10%) and average net loans and advances (up 9%).
However, net interest margin (excluding Global Markets) declined
53 basis points reflecting lower returns on retained capital, margincompression from competition and the impact of the change inthe funding and asset mix.

•

Other external operating income increased 7%, driven by thestrong Global Markets performance. Asia Partnerships’
contribution was higher mainly due to the impact of an impairment
charge in the March 2012 half year relating to our investment in
Saigon Securities Incorporation (SSI).

•

Operating expenses were 1% lower, with cost savings fromproductivity gains and greater utilisation of the hub resources
largely offset by continued re-investment in the business.

•

Provision charges for credit impairment were 15% lower, largely
due to individual provision charges in the March 2012 half year ona few legacy Global Institutional loans in Australia. This waspartially offset by collective provision releases in the March 2012
half year from associated concentration risk provisions.

Key factors affecting the result were:•

Provision charges for credit impairment decreased 21%, due tohigher individual provision charges in the September 2012 halfyear on a few legacy Global Institutional loans in Australia. Thiswas partially offset by collective provision releases in the
September 2012 half year from associated concentration risk
provisions. Excluding the above legacy exposures, credit quality
remained sound.
March 2013 half year v March 2012 half year

March 2013 half year v September 2012 half year•

1H13
Cash profit

half year. Excluding the impact of the capitalised software
impairment, expenses were flat. Cost savings from productivity
initiatives and increased utilisation of the hub resources allowed
targeted investment to continue.

IIB’s scale and capability in Asia is providing a platform to build further
momentum on the Super Regional Strategy, through capturing an
increasing share of trade and capital flows and value-added services
from volume growth. IIB delivered strong income growth in Foreign
Exchange, Capital Markets, Trade and Resources. ANZ was voted a
top four corporate bank in Asia in the 2013 Greenwich Associates
Survey.

•Income tax
expense & noncontrollinginterests

Net interest income declined 2% with net interest margin(excluding Global Markets) 14 basis points lower. Margins were
driven lower by pricing pressure in customer deposits, lower
returns on capital and rate insensitive deposits in low interest rateenvironments and competition in loans. The above offset thebenefits from the volume growth. Overall average customer
deposits were 5% higher and average net loans and advances
increased 3%, with growth concentrated in the APEA region.
Other external operating income was 10% higher, driven by 36%
growth in Global Markets with favourable trading conditions andhigher customer volume. Asia Partnerships’ contribution was
lower due to lower earnings and the gain arising from dilution of
our Bank of Tianjin stake in the September 2012 half year.
Operating expenses were 10% lower, mainly due to the$162 million write-down of software assets in the September 2012

44

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
International and Institutional Banking Total
Half Year

Movement

Net interest income

Mar 13$M
1,775

Sep 12$M
1,811

Mar 12$M
1,856

Mar 13v. Sep 12-2%

Mar 13v. Mar 12-4%

Other external operating income

1,496

1,360

1,400

10%

7%

Operating income

3,271

3,171

3,256

3%

0%

Operating expenses(1,446)(1,614)(1,455)-10%-1%

Profit before credit impairment and income tax

1,825

1,557

1,801

17%

1%

Provision for credit impairment

(184)

(234)

(217)

-21%

-15%

Profit before income tax

1,641

1,323

1,584

24%

4%

Income tax expense and non-controlling interests

(442)

(371)

(425)

19%

4%

Cash profit

1,199

952

1,159

26%

3%

Consisting of:
Global Institutional

1,037

842

1,062

23%

-2%

Asia Partnerships

186

217

127

-14%

46%

Retail Asia Pacific

34

40

24

-15%

42%

Relationship & Infrastructure

(58)

(147)

(54)

-61%

7%

1,199

952

1,159

26%

3%

Balance Sheet
Net loans & advances

102,570

98,27893,237

4%

10%

Other external assets

182,291

168,608

152,624

8%

19%

External assets

284,861

266,886

245,861

7%

16%

Customer deposits

14%

Cash profit

151,847

142,651

132,744

6%

Other deposits and borrowings

9,193

9,040

8,862

2%

4%

Deposits and other borrowings

161,040

151,691

141,606

6%

14%

Other external liabilities

82,58076,65465,4358%

26%

External liabilities

243,620

228,345

207,041

7%

18%

Risk weighted assets1

166,407

152,741

144,609

9%

15%

Average net loans and advances

99,81696,921

91,3393%

9%Average deposits and other borrowings

154,309146,769

139,881

5%

10%

RatiosReturn on average assets

0.88%

0.72%

0.94%

Net interest average margin

1.65%

1.75%

1.95%

Net interest average margin (excluding Global Markets)

2.77%

2.91%

3.30%

Operating expenses to operating income

44.2%

50.9%

44.7%

Operating expenses to average assets

1.06%

1.21%

1.18%
-60%

-48%

large

large

-9%

-14%

-4%

-6%

Individual provision charge/(release)
Individual provision charge/(release) as a % of average net advances
Collective provision charge/(release)Collective provision charge/(release) as a % of average net advances

167

419

321

0.34%

0.86%

0.70%

17

(185)

(104)

0.03%

(0.38%)(0.23%)Net impaired assets

1,401

1,541

1,637

Net impaired assets as a % of net advances

1.37%

1.57%

1.76%

Total full time equivalent staff (FTE)

13,526

14,07014,4481.

March 2013 risk weighted assets under Basel 3 methodology. September 2012 and March 2012 risk weighted assets under Basel 2 methodology

45

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Individual provision charge/(release)

Half Year

Movement

Retail Asia Pacific

Mar 13$M
23

Sep 12$M(15)

Mar 12$M
2

Mar 13v. Sep 12
large

Mar 13v. Mar 12
large

Global Institutional

144

430

305

-67%

-53%

Transaction Banking

15

60

(7)

-75%

large

Global Loans

122

343

244

-64%

-50%

Global Markets

7

27

68

-74%

-90%

-

4

14

-100%

-100%

167

419

321

-60%

-48%

Relationship & Infrastructure
Individual provision charge/(release)Collective provision charge/(release)

Half Year

Movement

Retail Asia Pacific

Mar 13$M(5)

Sep 12$M
2

Mar 12$M(11)

Mar 13v. Sep 12
large

Mar 13v. Mar 12-55%

Global Institutional

21

(180)

(76)

large

large

Transaction Banking

10

3

(2)

large

large

Global Loans

8

(132)

(67)

large

large

Global Markets

3

(51)

(7)

large

large

Relationship & Infrastructure

1

(7)

(17)

large

large

Collective provision charge/(release)

17

(185)

(104)

large

large

Total provision charge/(release)

184

234

217

-21%

-15%

Net loans & advances

As at ($M)

Movement

Retail Asia Pacific

Mar 13
5,693

Sep 12
4,939

Mar 12
4,121

Global Institutional

Mar 13v. Sep 12
15%

Mar 13v. Mar 12
38%

95,521

92,23888,1884%

8%Transaction Banking

22,202

19,001

16,36017%

36%

Global Loans

67,612

67,66565,7450%

3%

Global Markets

5,707

5,572

6,083

2%

-6%

1,356

1,101

928

23%

46%

102,570

98,27893,2374%

10%

Relationship & Infrastructure
Net loans & advances

Customer deposits

As at ($M)

Movement

Retail Asia Pacific

Mar 13$M
10,932

Sep 12$M
10,423

Mar 12$M
9,546

Global Institutional

139,506

130,695

62,47065,124Global Loans

722

Global Markets

Transaction Banking

Relationship & Infrastructure
Customer deposits

46

Mar 13v. Sep 12
5%

Mar 13v. Mar 12
15%

121,6807%

15%

61,537

-4%

2%

847

625

-15%

16%

76,31464,72459,518

18%

28%

1,409

1,533

1,518

-8%

-7%

151,847

142,651

132,7446%14%

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Global Institutional
Half Year

Movement

Net interest income

Mar 13$M
1,554

Sep 12$M
1,591

Mar 12$M
1,643

Mar 13v. Sep 12-2%

Mar 13v. Mar 12-5%

Other external operating income

1,121

938

1,060

20%

6%

Operating income

2,675

2,529

2,703

6%

-1%

Operating expenses(1,064)(1,111)(1,015)-4%

5%Profit before credit impairment and income tax

1,611

1,418

1,688

14%

-5%

Provision for credit impairment

(165)

(250)

(229)

-34%

-28%

Profit before income tax

1,446

1,168

1,459

24%

-1%

Income tax expense and non-controlling interests

(409)

(326)

(397)

25%

3%

Cash profit

1,037

842

1,062

23%

-2%

-19%

Consisting of:Transaction Banking

275

219

338

26%

Global Loans

359

313

394

15%

-9%

Global Markets

403

310

330

30%

22%

1,037

842

1,062

23%

-2%

Cash profit
Balance Sheet
Net loans & advances

95,521

92,23888,188

4%

8%

Other external assets

175,620

162,247

146,5158%

20%

External assets

271,141

254,485

234,703

7%

16%

Customer deposits

139,506

130,695

121,680

7%

15%

Other deposits and borrowings

9,190

8,994

8,823

2%

4%

Deposits and other borrowings

148,696

139,689

130,503

6%

14%

Other external liabilities

81,79675,94764,8088%26%

External liabilities

230,492

215,636

195,311

7%

18%

Risk weighted assets

155,382

141,586

133,956

10%

16%

Average net loans and advances

93,22591,41086,634

2%

8%

Average deposits and other borrowings

142,013

135,404

129,519

5%

10%

RatiosReturn on average assets

0.80%

0.67%

0.90%

Net interest average margin

1.50%

1.59%

1.79%

Net interest average margin (excluding Global Markets)

2.54%

2.66%

3.05%

Operating expenses to operating income

39.8%

43.9%

37.6%

Operating expenses to average assets

0.82%

0.88%

0.86%

Individual provision charge/(release)

144

430

305

-67%

-53%

0.31%

0.94%

0.71%
large

large

-11%

-15%

Individual provision charge/(release) as a % of average net advances
Collective provision charge/(release)Collective provision charge/(release) as a % of average net advances

21

(180)

(76)

0.05%

(0.39%)(0.18%)Net impaired assets

1,353

1,519

1,593

Net impaired assets as a % of net advances

1.42%

1.65%

1.81%

47

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Global Institutional by Product
Half Year

Movement

Mar 13$M393

Sep 12$M
418

Mar 12$M
443

Other external operating income

346

329

329

5%

5%

Operating income

739

747

772

-1%

-4%

Operating expenses

(329)

(380)

(311)

-13%

6%

Profit before credit impairment and income tax

410

367

461

12%

-11%

Provision for credit impairment

(25)

(63)

9

-60%

large

Profit before income tax

385

304

470

27%

-18%

Income tax expense and non-controlling interests

(110)

(85)

(132)

29%

-17%

Cash profit

275

219

338

26%

-19%

34,25530,162

28,38914%

21%

Individual provision charge/(release)

15

60

(7)

-75%

large

Collective provision charge/(release)

10

3

(2)

large

large

Net loans & advances

22,202

19,001

16,360

17%

36%

Customer deposits

62,47065,12461,537-4%

2%

Global Loans
Net interest income

790

812

866

-3%

-9%

Other external operating income

34

66

61

-48%

-44%

Transaction Banking
Net interest income

Risk weighted assets

Mar 13v. Sep 12-6%

Mar 13v. Mar 12-11%

Operating income

824

878

927

-6%

-11%

Operating expenses

(192)

(234)

(221)

-18%

-13%

Profit before credit impairment and income tax

632

644

706

-2%

-10%

Provision for credit impairment

(130)

(211)

(177)

-38%

-27%

Profit before income tax

502

433

529

16%

-5%

Income tax expense and non-controlling interests

(143)

(120)

(135)

19%

6%

Cash profit

359

313

394

15%

-9%

75,19175,36875,5890%-1%

Risk weighted assets
Individual provision charge/(release)

122

343

244

-64%

-50%

Collective provision charge/(release)

8

(132)

(67)

large

large

Net loans & advances

67,612

67,66565,7450%

3%

Global Markets
Net interest income

371

361

334

3%

11%

Other external operating income

741

543

670

36%

11%

Operating income

1,112

904

1,004

23%

11%

Operating expenses

(543)

(497)

(483)

9%

12%

Profit before credit impairment and income tax

569

407

521

40%

9%

Provision for credit impairment

(10)

24

(61)

large

-84%

Profit before income tax

559

431

460

30%

22%

Income tax expense and non-controlling interests

(156)

(121)

(130)

29%

20%

Cash profit

403

310

330

30%

22%

45,93636,05629,97927%

53%

Risk weighted assets
Individual provision charge/(release)

7

27

68

-74%

-90%

Collective provision charge/(release)

3

(51)

(7)

large

large

76,31464,72459,51818%

28%

Customer deposits

48

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Analysis of Global Markets operating income
Half Year
Composition of Global Markets
operating income by product class
Fixed income

Movement

Mar 13$M
470

Sep 12$M
366

Mar 12$M
395

Mar 13v. Sep 12
28%

Mar 13v. Mar 12
19%

Foreign exchange

409

358

399

14%

3%

Capital markets

122

87

116

40%

5%

Other

111

93

94

19%

18%

1,112

904

1,004

23%

11%

Global Markets operating income

Half Year

Movement

Composition of Global Markets
operating income by geography
Australia

Mar 13$M525

Sep 12$M
427

Mar 12$M
476

Mar 13v. Sep 12
23%

Mar 13v. Mar 12
10%

Asia Pacific, Europe & America

447

373

401

20%

11%

New Zealand

140

104

127

35%

10%

1,112

904

1,004

23%

11%

Global Markets operating income

Half Year
Composition of Global Markets
operating income by activity
Sales

1

Trading2
Balance sheet

3

Global Markets operating income

Movement

Mar 13$M
575

Sep 12$M
538

Mar 12$M
624

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
-8%

283

174

229

63%

24%

254

192

151

32%

68%

1,112

904

1,004

23%

11%

Half Year
Composition of Global Markets' Sales income
by geography1
Australia

Movement

Mar 13$M
263

Sep 12$M
239

Mar 12$M
300

Asia Pacific, Europe & America

263

240

245

10%

7%

New Zealand

49

59

79

-17%

-38%

Global Markets' Sales income

575

538

624

7%

-8%

Half Year
Composition of Global Markets' Trading andBalance Sheet income by geography2,3Australia

Sep 12$M
188

Mar 12$M
176

Asia Pacific, Europe & America

185

133

New Zealand

90

45

Global Markets'
Trading and Balance Sheet income

537

366

2.
3.

Mar 13v. Mar 12-12%

Movement

Mar 13$M
262

1.

Mar 13v. Sep 12
10%

Mar 13v. Sep 12
39%

Mar 13v. Mar 12
49%

156

39%

19%

48

100%

88%

380

47%

41%

Sales represents direct client flow business on core products such as fixed income, FX, commodities and capital markets
Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow
Balance sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio

Global Markets Analysis•

Sales revenue up 7% driven by strong Capital Markets activity.

Global Markets continued to focus on the priority customers, products,
and geographies. With APEA now representing 40% of Global Markets
revenue, growth in that market is focused on flow businesses such as
Foreign Exchange, as well as Commodities and Capital Markets.
Domestically the Australian and New Zealand businesses havebenefitted from strong growth in Fixed Income.

•

Fixed Income revenue up 28%, benefitted from favourable market
conditions with tightening credit spreads as sentiment about the
global economy improved, contributing strongly to overall revenue
growth in Australia (up 23%) and New Zealand (up 35%).
March 2013 half year v March 2012 half year

In a more difficult market with lower volatility reducing sales volumes
and margins, Markets produced a credible result growing revenue by
11%. Growth was spread evenly across all geographies:

March 2013 half year v September 2012 half year
Markets continued to benefit from its strategy to grow a morediversified business in terms of both products and regional footprint.
Key growth areas continued to drive revenue growth:•

FX income up 14% largely in APEA, a solid result in low volatility
market.

49•

FX income increased 3% with volume growth at lower margins.

•

Fixed income increased 19% benefitting from narrowing of credit
spreads on the liquidity portfolio.

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Market risk
Traded market risk
Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivatives trading positions for the Bank’s
principal trading centres. All figures are in AUD.
99% confidence level (1 day holding period)
As at
Mar 13Low forperiodMar 13$M

Avg forperiodMar 13$M

As at
Sep 12$M

High for
periodMar 13$M$M

High foryear
Sep 12$M

Low foryear
Sep 12$M

Avg foryear
Sep 12$M

Value at Risk at 99% confidence
Foreign exchange

6.3

12.6

3.3

5.4

3.5

10.0

3.5

5.9

Interest rate

8.3

11.6

2.8

5.2

4.5

8.1

2.8

5.4

Credit

3.8

5.6

2.8

3.8

4.0

7.5

2.6

4.7

Commodities

2.3

4.2

1.5

2.6

1.8

4.8

1.5

3.3

Equity

1.3

2.9

1.0

1.8

1.2

4.0

0.7

1.6

(12.9)

n/an/a(10.5)

(6.9)

n/a

n/a

(11.6)

9.1

13.6

5.5

8.3

8.1

13.6

5.7

9.3

Diversification benefit
Total VaR

Non-traded interest rate risk
Non-traded interest rate risk is managed by Global Markets and relates to the potential adverse impact of changes in market interest rates on future netinterest income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis to a 1% rate shock.
99% confidence level (1 day holding period)
As at
Mar 13Low forperiodMar 13$M

Avg forperiodMar 13$M

As at
Sep 12$M

High for
periodMar 13$M$M

High foryear
Sep 12$M

Low foryear
Sep 12$M

Avg foryear
Sep 12$M

Australia

42.0

42.0

25.5

New Zealand

12.3

17.9

11.6

34.8

25.9

28.5

13.7

20.4

14.4

11.2

14.6

10.3

Asia Pacific, Europe & America

4.2

5.9

12.3

4.2

4.8

5.5

6.0

4.5

(12.3)

5.2

n/a

n/a

(18.0)(14.9)

n/an/a(15.3)

46.2

46.2

27.3

36.0

27.7

29.4

15.7

22.6

Value at Risk at 99% confidence

Diversification benefit
Total VaR

Impact of 1% rate shock on the next 12 months’ net interest income1
As at
As at period end

Mar 13
1.06%

Sep 12
1.55%

Maximum exposure

1.77%

2.45%

Minimum exposure

1.06%

1.26%

Average exposure (in absolute terms)

1.43%

1.95%

1.

The impact is expressed as a percentage of net interest income. A positive result indicates that a rate increase is positive for net interest income. Conversely, a negative indicates a rateincrease is negative for net interest income.

50

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Global Institutional by Geography
Half Year
Mar 13$M
933

Australia
Net interest income
Other external operating income

Movement

Sep 12$M
958

Mar 12$M
1,007

Mar 13v. Sep 12-3%

Mar 13v. Mar 12
-7%

569

525

591

8%

-4%

Operating income

1,502

1,483

1,598

1%

-6%

Operating expenses

(545)

(629)

(576)

-13%

-5%

Profit before credit impairment and income tax

957

854

1,022

12%

-6%

Provision for credit impairment

(80)

(180)

(176)

-56%

-55%

Profit before income tax

877

674

846

30%

4%

Income tax expense and non-controlling interests

(263)

(200)

(255)

32%

3%

Cash profit

614

474

591

30%

4%

79,19874,99872,232

6%

10%

Risk weighted assets
Individual provision charge/(release)

78

391

264

-80%

-70%

Collective provision charge/(release)

3

(211)

(88)

large

large

Net loans & advances

47,43049,173

48,596-4%-2%

Customer deposits

52,11555,96955,799-7%-7%

Asia Pacific, Europe & America
Net interest income

479

475

476

1%

1%

Other external operating income

428

341

373

26%

15%

Operating income

907

816

849

11%

7%

Operating expenses

(440)

(406)

(363)

8%

21%

Profit before credit impairment and income tax

467

410

486

14%

-4%

Provision for credit impairment

(80)

(64)

(55)

25%

45%

Profit before income tax

387

346

431

12%

-10%

Income tax expense and non-controlling interests

(97)

(87)

(93)

11%

4%

Cash profit

290

259

338

12%

-14%

65,58456,48351,52616%

27%

Individual provision charge/(release)

63

39

44

62%

43%

Collective provision charge/(release)

16

25

11

-36%

45%

Net loans & advances

42,631

37,63234,015

13%

25%

Customer deposits

77,101

65,31856,573

18%

36%

New Zealand
Net interest income

142

158

160

-10%

-11%

Other external operating income

124

72

96

72%

29%

Operating income

266

230

256

16%

4%

Operating expenses

(79)

(76)

(76)

4%

4%

Profit before credit impairment and income tax

187

154

180

21%

4%

(5)

(6)

2

-17%

large

Profit before income tax

182

148

182

23%

0%

Income tax expense and non-controlling interests

(49)

(39)

(49)

26%

0%

Cash profit

133

109

133

22%

0%

10,60010,105

10,1985%

4%

Risk weighted assets

Provision for credit impairment

Risk weighted assets
Individual provision charge/(release)

3

-

(3)

n/a

large

Collective provision charge/(release)

2

6

1

-67%

100%

Net loans & advances

5,460

5,433

5,577

0%

-2%

Customer deposits

10,290

9,408

9,308

9%

11%

51

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
Retail Asia Pacific
Half Year

Movement

Mar 13$M207

Sep 12$M
194

Mar 12$M
198

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
5%

Other external operating income

159

169

157

-6%

1%

Operating income

366

363

355

1%

3%

Operating expenses

(306)

(328)

(332)

-7%

-8%

Profit before credit impairment and income tax

60

35

23

71%

large

Provision for credit impairment

(18)

13

9

large

large

Profit before income tax

42

48

32

-13%

31%

Income tax expense and non-controlling interests

(8)

(8)

(8)

0%

0%

Cash profit

34

40

24

-15%

42%

6,870

6,714

5,942

2%

16%

Net interest income

Risk weighted assets

Half Year
Mar 13$M
23

Individual provision charge/(release)Collective provision charge/(release)

Movement

Sep 12$M(15)

Mar 12$M
2

Mar 13v. Sep 12
large

Mar 13v. Mar 12
large

(5)

2

(11)

large

-55%

Net loans & advances

5,693

4,939

4,121

15%

38%

Customer deposits

10,932

10,423

9,546

5%

15%

Asia Partnerships
Half Year

Movement

Mar 13$M(19)

Sep 12$M(18)

Mar 12$M(21)

Mar 13v. Sep 12
6%

Mar 13v. Mar 12-10%

Other external operating income

206

237

149

-13%

38%

Operating income

187

219

128

-15%

46%

Net interest income

Operating expenses
Profit before credit impairment and income tax
Provision for credit impairment
Profit before income tax
Income tax expense and non-controlling interests
Cash profit

52

(3)

(3)

(5)

0%

-40%

184

216

123

-15%

50%

-

-

-

n/a

n/a

184

216

123

-15%

50%

2

1

4

100%

-50%

186

217

127

-14%

46%

SEGMENT REVIEWInternational and Institutional Banking
Alex Thursby
This page has been left blank intentionally

53

SEGMENT REVIEWNew ZealandDavid Hisco
The New Zealand division comprises Retail and Commercial business units. Retail includes Mortgages, Cards and Unsecured Lending to personalcustomers. Commercial includes Commercial & Agri (‘CommAgri’) and Small Business Banking.
New Zealand’s results and commentary are reported in NZD. AUD results are shown on page 59.

Cash profit – March 2013 Half Year v September 2012 Half Year

54
14

90

NZD m

497
(40)

409

2H12
Cash profit

(27)

(3)

Net interest
incomeOther operating
incomeOperatingOperating
Provision for
Income tax
expenses expenses - other credit impairment expense & nonNZ Simplification
controllinginterests

The New Zealand division has completed the initial phase of its brandintegration and simplification programme, including the move to one
core banking system, providing a platform to better leverage ourbusiness scale to unlock productivity benefits and drive earnings
growth. Despite the subdued economic environment, we are growing
market share in target segments and have maintained customer
satisfaction at high levels.

•

Operating expenses decreased 15%. This included a
NZ$90 million reduction in restructuring costs as work on
integrating the core banking system winds down. Excluding thisfactor, operating costs decreased 3%, reflecting productivity gains
from simplifying the business.

•

Provisioning has continued to trend downward, declining NZ$54
million in the half. The individual provision charge decreased
NZ$41 million, with the biggest improvement in the Commercial
book. The release from collective provisions was NZ$13 million
higher than for the preceding half.

Retail update
The transition to a single brand and one core banking system has
positioned the business to optimise coverage and capability from its
distribution network, and leverage cost productivities. Lending volumes
have held up well in the low credit growth environment, but margins
have reduced due to lending competition intensifying.

March 2013 half year v March 2012 half year
Cash profit increased 19% driven by strong lending growth, lower costs
and an improvement in credit quality, partially offset by net interest
margin contraction.

Commercial update
Commercial has focused on growing Small Business Banking andimproving the quality of the CommAgri lending book. Above-system
growth in Small Business Banking, coupled with simplification
productivity initiatives and a significant improvement in CommAgri
credit quality, have offset the impact of margin compression.

Key factors affecting the result were:•

Net interest margin contracted 18 basis points due to stronger
competition, unfavourable lending mix and higher funding costs.
Higher funding costs were partly driven by lower returns from
capital and rate insensitive deposits in a low interest rateenvironment.

•

Average net loans and advances growth at 4% was strong in a low
credit growth environment, driven primarily by above-system
growth in mortgages.

•
Net interest income decreased 2%, with the negative impact ofmargin contraction more than offsetting the positive contribution
from lending growth.

Other operating income increased 2%, comprising volume-driven
increases in insurance, management fees and commissions thatreflect improved cross-sell.

•

Net interest margin contracted 10 basis points due to stronger
competition, unfavourable lending mix and higher funding costs.
Higher funding costs were partly driven by lower returns from
capital and rate insensitive deposits in a low interest rateenvironment.

Simplifying the business has driven operational and technology
cost savings. Adjusting for the lower costs due to the wind down of
the integration project (NZ$70 million), operating costs decreased
2% when compared with the March 2012 half.

•

The provisioning charge reduced 64% compared with the March2012 half. This reflected a 16 basis point improvement in the IP
loss rate. Strong credit processes have ensured the continuation of
the downward trend in delinquencies, and maintained highrecovery and rehabilitation rates.

March 2013 half year v September 2012 half year
Cash profit increased 22% in the half with the impact of margincompression offset by significant cost reductions and a 60% reductionin the provisioning charge.
Key factors affecting the result were:
•

•

1H13
Cash profit•

Average net loans and advances increased 2%, driven primarily by
above-system growth in mortgages. This growth was funded bycustomer deposits which increased 4% in the half.

•

Other operating income decreased 1%, with the preceding half
benefiting from one-off insurance recoveries. Fee growth remains
constrained in a competitive retail environment.

54

SEGMENT REVIEWNew ZealandDavid Hisco
New Zealand Total
Table reflects NZD for New Zealand
AUD results shown on page 59
Half Year
Mar 13
NZD M
1,114

Net interest income
Other external operating income

Movement

Sep 12
NZD M
1,141

Mar 12
NZD M
1,153

Mar 13v. Sep 12-2%

Mar 13v. Mar 12
-3%

203

206

199

-1%

2%

Operating income

1,317

1,347

1,352

-2%

-3%

Operating expenses

(589)

(693)

(673)

-15%

-12%

Profit before credit impairment and income tax

728

654

679

11%

7%

Provision for credit impairment

(36)

(90)

(101)

-60%

-64%

Profit before income tax

692

564

578

23%

20%

Income tax expense and non-controlling interests

(195)

(155)

(160)

26%

22%

Cash profit

497

409

418

22%

19%

Consisting of:Retail

177

185

179

-4%

-1%

Commercial

332

299

297

11%

12%

Operations & Support

(12)

(75)

(58)

-84%

-79%

497

409

418

22%

19%

Balance Sheet
Net loans & advances

89,25888,041

85,516

1%

4%

Other external assets

1,856

2,061

2,021

-10%

-8%

External assets

91,114

90,10287,537

1%

4%

Customer deposits

51,65049,64447,970

4%

8%

Other deposits and borrowings

4,337

5,445

4,458

-20%

-3%

Deposits and other borrowings

55,98755,08952,428

2%

7%

Other external liabilities

16,62917,503

16,856-5%-1%

External liabilities

72,616

72,592

69,2840%

5%Risk weighted assets

50,78749,762

46,803

2%

9%

Average net loans and advances

88,53086,83985,314

2%

4%

Average deposits and other borrowings

56,42954,09350,747

4%

11%

RatiosReturn on average assets

1.10%

0.92%

0.96%

Net interest average margin

2.49%

2.59%

2.67%

Operating expenses to operating income

44.7%

51.5%

49.8%

Operating expenses to average assets

1.31%

1.56%

1.54%

Individual provision charge/(release)

73

114

135

-36%

-46%

0.16%

0.26%

0.32%

(37)

(24)

(34)

54%

9%

(0.09%)(0.06%)(0.08%)

881

979

1,158

-10%

-24%

Net impaired assets as a % of net advances

0.99%

1.11%

1.35%

Total full time equivalent staff (FTE)

7,721

8,182

8,056

-6%

-4%

Cash profit

1

Individual provision charge/(release) as a % of average net advances
Collective provision charge/(release)Collective provision charge/(release) as a % of average net advances
Net impaired assets

1.

March 2013 risk weighted assets under Basel 3 methodology. September 2012 and March 2012 risk weighted assets under Basel 2 methodology

55

SEGMENT REVIEWNew ZealandDavid Hisco
Individual provision charge/(release)

Half Year

Movement

Mar 13
NZD M
39

Sep 12
NZD M
36

Mar 12
NZD M
39Commercial

34

78

96

-56%

-65%

CommAgri

28

70

87

-60%

-68%

Small Business Banking

6

8

9

-25%

-33%

73

114

135

-36%

-46%

RetailIndividual provision charge/(release)Collective provision charge/(release)

Half Year

Mar 13v. Sep 12
8%

Mar 13v. Mar 120%

Movement

Mar 13
NZD M(9)Sep 12NZD M(4)Mar 12NZD M(8)Commercial

(28)

(20)

(26)

40%

8%

CommAgri

(19)

(15)

(27)

27%

-30%

RetailSmall Business Banking

Mar 13v. Sep 12
large

Mar 13v. Mar 12
13%

(9)

(5)

1

80%

large

Collective provision charge/(release)

(37)

(24)

(34)

54%

9%

Total provision charge/(release)

36

90

101

-60%

-64%

Net loans & advances

As at (NZD M)

Movement

RetailMar 1335,806

Sep 1235,506

Mar 12
34,754

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
3%

Commercial

53,45252,53550,762

2%

5%

CommAgri34,23934,36933,7780%

1%

Small Business Banking

19,213

18,166

16,9846%

13%

89,25888,041

85,5161%

4%

Net loans & advances

Customer deposits

As at (NZD M)

Movement

RetailMar 1331,392

Sep 1230,538Mar 12
28,883

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
9%

Commercial

20,258

19,106

19,087

6%

6%

CommAgri

9,644

9,208

9,549

5%

1%

Small Business Banking

10,614

9,898

9,538

7%

11%

51,65049,64447,970

4%

8%

Customer deposits
1.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

56

SEGMENT REVIEWNew ZealandDavid Hisco
RetailHalf YearNet interest income
Other external operating income

Movement

Mar 13
NZD M
451

Sep 12
NZD M
466

Mar 12
NZD M
471

Mar 13v. Sep 12-3%

Mar 13v. Mar 12
-4%

145

147

142

-1%

2%

Operating income

596

613

613

-3%

-3%

Operating expenses

(320)

(325)

(334)

-2%

-4%

Profit before credit impairment and income tax

276

288

279

-4%

-1%

Provision for credit impairment

(30)

(32)

(31)

-6%

-3%

Profit before income tax

246

256

248

-4%

-1%

Income tax expense and non-controlling interests

(69)

(71)

(69)

-3%

0%

Cash profit

177

185

179

-4%

-1%

19,50418,756

16,805

4%

16%

Risk weighted assets

Half Year
Mar 13
NZD M
39

Individual provision charge/(release)Collective provision charge/(release)

Sep 12NZD M
36

Movement
Mar 12
NZD M
39

Mar 13v. Sep 12
8%

Mar 13v. Mar 12
0%

(9)

(4)

(8)

large

13%

Net loans & advances

35,80635,50634,754

1%

3%

Customer deposits

31,39230,53828,8833%

9%57

SEGMENT REVIEWNew ZealandDavid Hisco
Commercial
Half YearNet interest income
Other external operating income

Movement

Mar 13
NZD M
655

Sep 12
NZD M
661

Mar 12
NZD M
676

Mar 13v. Sep 12-1%

Mar 13v. Mar 12
-3%

58

62

59

-6%

-2%

Operating income

713

723

735

-1%

-3%

Operating expenses

(245)

(253)

(252)

-3%

-3%

Profit before credit impairment and income tax

468

470

483

0%

-3%

Provision for credit impairment

(6)

(58)

(70)

-90%

-91%

Profit before income tax

462

412

413

12%

12%

Income tax expense and non-controlling interests

(130)

(113)

(116)

15%

12%

Cash profit

332

299

297

11%

12%

30,86630,60329,596

1%

4%

Risk weighted assets

Half Year
Mar 13
NZD M
28

Individual provision charge/(release)
CommAgri
Small Business Banking

Sep 12NZD M
70

Movement
Mar 12
NZD M
87

Mar 13v. Sep 12-60%

Mar 13v. Mar 12
-68%

6

8

9

-25%

-33%

Individual provision charge/(release)

34

78

96

-56%

-65%

Collective provision charge/(release)
CommAgri

(19)

(15)

(27)

27%

-30%

(9)

(5)

1

80%

large

(28)

(20)

(26)

40%

8%

6

58

70

-90%

-91%

Small Business Banking
Collective provision charge/(release)
Total provision charge/(release)

As at (NZD M)

Movement

Mar 13
34,239Sep 12
34,369Mar 12
33,778Mar 13v. Sep 12
0%

Mar 13v. Mar 12
1%

19,213

18,166

16,984

6%

13%

Net loans & advances

53,45252,53550,762

2%

5%

Customer deposits
CommAgri

9,644

9,208

9,549

5%

1%

Net loans & advances
CommAgri
Small Business Banking

Small Business Banking
Customer deposits

58

10,614

9,898

9,538

7%

11%

20,258

19,106

19,087

6%

6%

SEGMENT REVIEWNew ZealandDavid Hisco
New Zealand Total
Table reflects AUD for New Zealand
NZD results shown on page 55
Half Year
Mar 13$M
889

Net interest income
Other external operating income

Movement

Sep 12$M
890

Mar 12$M
890

Mar 13v. Sep 12
0%

Mar 13v. Mar 12
0%
5%

162

161

154

1%

Operating income

1,051

1,051

1,044

0%

1%

Operating expenses

(470)

(541)

(520)

-13%

-10%

Profit before credit impairment and income tax

581

510

524

14%

11%

Provision for credit impairment

(28)

(70)

(78)

-60%

-64%

Profit before income tax

553

440

446

26%

24%

Income tax expense and non-controlling interests

(156)

(121)

(123)

29%

27%

Cash profit

397

319

323

24%

23%

Consisting of:Retail

142

145

138

-2%

3%

Commercial

265

233

229

14%

16%

Operations & Support

(10)

(59)

(44)

-83%

-77%

397

319

323

24%

23%

Balance Sheet
Net loans & advances

71,58470,26867,354

2%

6%

Other external assets

1,489

1,645

1,592

-9%

-6%

External assets

73,073

71,913

68,9462%

6%

Customer deposits

41,42339,62237,782

5%

10%

Other deposits and borrowings

3,478

4,346

3,511

-20%

-1%

Deposits and other borrowings

44,901

43,96841,293

2%

9%

Other external liabilities

13,336

13,97013,276-5%0%

External liabilities

58,23757,93854,5691%

7%

Risk weighted assets

40,731

39,71736,863

3%

10%

Average net loans and advances

70,63567,78965,836

4%

7%

Average deposits and other borrowings

45,02342,216

39,160

7%

15%

RatiosReturn on average assets

1.10%

0.92%

0.96%

Net interest average margin

2.49%

2.59%

2.67%

Operating expenses to operating income

44.7%

51.5%

49.8%

Operating expenses to average assets

1.31%

1.56%

1.54%

Individual provision charge/(release)

58

89

104

-35%

-44%

0.16%

0.26%

0.32%

(30)

(19)

(26)

58%

15%

(0.09%)(0.06%)(0.08%)

706

782

912

-10%

-23%

Net impaired assets as a % of net advances

0.99%

1.11%

1.35%

Total full time equivalent staff (FTE)

7,721

8,182

8,056

-6%

-4%

Cash profit

1

Individual provision charge/(release) as a % of average net advances
Collective provision charge/(release)Collective provision charge/(release) as a % of average net advances
Net impaired assets

1.

March 2013 risk weighted assets under Basel 3 methodology. September 2012 and March 2012 risk weighted assets under Basel 2 methodology

59

SEGMENT REVIEW
Global Wealth
Joyce Phillips
The Global Wealth division comprises Private Wealth, Funds Management and Insurance business units which provides investment, superannuation,
insurance products and services (including Private Banking) for customers across Australia, New Zealand and Asia.

Cash profit – March 2013 Half Year v September 2012 Half Year

7

29

1
203

31
$m

(24)

169
(2)

2H12
Cash profit

Net interest
income(8)

Other operating
incomeNet funds
management
and insuranceincomeOperatingexpenses software
impairment

Provision for
Operatingcreditexpenses - other
impairment

Income tax

expense & noncontrollinginterests

1H13
Cash profit

along with software impairment charges in the September 2012 half
resulted in a 7% reduction in operating costs, and a 690 bps fall in cost
to income ratio.

Global Wealth update
In line with our strategy, ANZ Global Wealth continued to deepen
relationships with existing ANZ banking customers, seeing growth insales through ANZ channels across Australia, New Zealand & Asia.
This is being supported by the embedding of wealth solutions into retailsales processes and the training of branch and call centre staff.

Key factors affecting the result were:•Funds management operating income improved by 3%. This was
mainly driven by the growth in FUM of 6% to $54.8 billion
following strong gains from the investment market, partially offset
by the impact of margin compression and losses from the annuity
portfolio. Despite signs of market recovery, investors’ appetite forhigher margin growth products remains subdued.

In late 2012, we launched ANZ Smart Choice Super in Australia, a low
cost and innovative solution that automatically adjusts to a customer’s
stage in life and allows them to check their superannuation balance ona mobile or tablet.
ANZ Global Wealth continued to show strong performance in life
insurance with solid inforce growth across all products. Funds Under
Management growth was driven by the turn-around in global
investment markets across all geographies and there was improved
productivity from ANZ and aligned adviser channels in Australia.
ANZ Global Wealth continues to simplify the business and leverage our
global capability, and this has seen an improvement in productivity.
Funds Management update
Whilst the Funds Management business has strengthened core retailsuperannuation and investment offerings, business conditions remainchallenging. ANZ Smart Choice Super product has been launched andis growing rapidly. The large volume of regulatory change impacting
the superannuation industry in Australia is being taken as anopportunity to transform the business and ensure simplicity andscalability of our operating model going forward.

•

Insurance operating income increased by 1% mainly due toimproved lapse experience and an increase in inforce premiums
by 4% to $1.9 billion.

•

Private Wealth operating income remains flat. Volumes continued
to improve across all geographies with customer deposits and net
loans and advances growing by 6% and 8% respectively, offset
by margin compression. Cash profit improved 26% in the period.

•

Operating expenses were down 7% due to benefits fromoperational efficiencies and the inclusion of non-recurring
software asset impairments in the September half.
March 2013 half year v March 2012 half year

Cash Profit increased by 15% due to improved Funds Management,
Insurance and Private Wealth results. The cost to income ratio fell by
280 bps to 62.3% as a result of operational efficiency initiatives.
Key factors affecting the result were:

The New Zealand business continues to make good progress andcontinues to enjoy a dominant market position in Kiwisaver.

•Business momentum remains strong despite a difficult economic
environment and market for insurance. Our presence is strong acrossall areas of Direct, Group and Retail Insurance with inforce premiums
growing well while the business continues to focus on retention andclaims management activities to improve profitability.

Funds management operating income improved by 1% as aresult of 8% growth in FUM to $54.8 billion, partially offset by
margin compression and adverse annuity experience. Demand
for low-risk deposit products remained strong despite signs ofimprovement in market conditions.

•

Higher insurance operating income by 5% driven by improved
claims experience, partially offset by higher lapse experience.
Inforce premiums also improved by 10% to $1.9 billion.

Private Wealth update•

Improved profitability in all geographies, with a focus on leveraging
ANZ’s regional presence. ANZ Global Wealth signed a Memorandumof Understanding with Switzerland’s Vontobel Group, a Swiss Private
Bank, to enhance product offerings.

Private Wealth operating income remains flat. Volumes continued
to improve with customer deposits and net loans and advances
growing by 4% and 11% respectively, offset by margincompression. Cash profit grew 33%.

•

Decline in operating expenses by 2%, reflecting operational
efficiencies from simplifying the business, reduction in average
FTE and lower discretionary spend.

Insurance update

March 2013 half year v September 2012 half year
Cash Profit was higher by 20% mainly due to improved Funds
Management results. Productivity and business simplification activities,

60

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Global Wealth Total
Half Year

Movement

Mar 13$M
58

Sep 12$M
60

Mar 12$M
62

Mar 13v. Sep 12-3%

Mar 13v. Mar 12-6%

Other operating income

80

88

84

-9%

-5%

Net funds management and insurance income

600

569

577

5%

4%

Operating income

738

717

723

3%

2%

Operating expenses

(460)

(496)

(471)

-7%

-2%

Profit before credit impairment and income tax

278

221

252

26%

10%

(1)

(2)

(2)

-50%

-50%

Profit before income tax

277

219

250

26%

11%

Income tax expense and non-controlling interests

(74)

(50)

(73)

48%

1%

Cash profit

203

169

177

20%

15%

Net interest income

Provision for credit impairment

Consisting of:Business Segment
Funds Management1

54

30

38

80%

42%

Insurance

108

107

96

1%

13%

Private Wealth

24

19

18

26%

33%

Corporate and Other2

17

13

25

31%

-32%

Total Global Wealth

203

169

177

20%

15%

Australia

173

141

159

23%

9%

New Zealand

30

28

23

7%

30%

-

-

(5)

n/a

-100%

Total Global Wealth

203

169

177

20%

15%

Income from invested capital3

28

30

27

-7%

4%

Balance Sheet
Funds under management

54,80551,66750,981

6%

8%

Average funds under management

53,21850,72349,9875%

6%

In-force premiums

1,893

1,822

1,722

4%

10%

Customer deposits

10,042

9,449

9,659

6%

4%

Net loans & advances

5,776

5,361

5,226

8%

11%

62.3%

69.2%

65.1%

Australia

0.59%

0.76%

0.68%

New Zealand

0.49%

0.57%

0.66%

Australia

10.8%

11.5%

12.5%

New Zealand

41.6%

40.0%

43.1%

Australia

13.3%

14.5%

13.3%

New Zealand

16.8%

19.3%

15.5%

4,198

4,059

4,458

3%

-6%

1,911

2,109

2,164

-9%

-12%

Geography

Asia Pacific, Europe & America

RatiosOperating expenses to operating income
4

Funds management expenses to average FUM

Insurance expenses to in-force premiums

Retail insurance lapse rates

Total full time equivalent staff (FTE)
Aligned adviser numbers
1.
2.
3.

4.
5.

5

Funds management includes Pensions & Investments business and E*Trade
Corporate and other includes income from invested capital, profits from advice and distribution business and unallocated corporate tax credits
Income from invested capital represents after tax revenue generated from investing insurance and investment business’ capital balances (required for regulatory purposes) net of groupfunding charges and borrowing costs which is included as part of Corporate and Other results. The invested capital as at 31 March 2013 was $1.95 billion (Sep 12: $2.1 billion), which
comprises fixed interest securities of 29% and cash on term deposit of 71% (Sep 12: 26% fixed interest securities and 74% cash on term deposits)
Funds management expense and FUM only relates to Pensions & Investments business
Includes corporate authorised representatives of dealer groups wholly or partially controlled by OnePath Group and ANZ Group financial planners

61

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Major business segments
Half Year
Mar 13$M
18

Funds Management6
Net interest income

Movement

Sep 12$M
18

Mar 12$M
18

Mar 13v. Sep 12
0%

Mar 13v. Mar 12
0%

Other operating income

33

31

25

6%

32%

Funds management income

388

386

390

1%

-1%

Funds management volume related expenses

(183)

(186)

(179)

-2%

2%

Operating income

256

249

254

3%

1%

Operating expenses

(183)

(214)

(198)

-14%

-8%

73

35

56

large

30%

-

-

-

n/a

n/a

Profit before income tax

73

35

56

large

30%

Income tax expense and non-controlling interests

(19)

(5)

(18)

large

6%

Cash profit

54

30

38

80%

42%

Profit before credit impairment and income tax
Provision for credit impairment

Half Year
Mar 13$M
13

Insurance
Net interest income

Movement

Sep 12$M
14

Mar 12$M
15

Mar 13v. Sep 12-7%

Mar 13v. Mar 12-13%

Other operating income

25

34

33

-26%

-24%

Insurance income

366

359

328

2%

12%

Insurance volume related expenses

(133)

(139)

(119)

-4%

12%

Operating income

271

268

257

1%

5%

Operating expenses

(124)

(123)

(126)

1%

-2%

Profit before credit impairment and income tax

147

145

131

1%

12%

Provision for credit impairment

-

-

-

n/a

n/a

Profit before income tax

147

145

131

1%

12%

Income tax expense and non-controlling interests

(39)

(38)

(35)

3%

11%

Cash profit

108

107

96

1%

13%

Half Year

Movement

Mar 13$M
50

Sep 12$M
50

Mar 12$M
54

Mar 13v. Sep 12
0%

Other operating income

23

23

25

0%

-8%

Net funds management income

23

23

17

0%

35%

Operating income

96

96

96

0%

0%

Operating expenses

(61)

(68)

(66)

-10%

-8%

Profit before credit impairment and income tax

35

28

30

25%

17%

Provision for credit impairment

(1)

(1)

(3)

0%

-67%

Profit before income tax

34

27

27

26%

26%

Income tax expense and non-controlling interests

(10)

(8)

(9)

25%

11%

Cash profit

24

19

18

26%

33%

Private Wealth
Net interest income

6.

Funds management includes Pensions & Investments business and E*Trade62

Mar 13v. Mar 12-7%

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Group & Individual

173

178

178

-3%

-3%

Experience profit/(loss)7

(12)

(27)

(33)

-56%

-64%

Net insurance income
Life Insurance Planned profit margin

Assumption changes8

Mar 13v. Sep 12

Mar 13v. Mar 12

-

1

-

-100%

n/a

General Insurance operating profit margin

28

23

22

22%

27%

Australia

189

175

167

8%

13%

44

35

39

26%

13%

-

3

3

-100%

-100%

-

7

-

-100%

n/a

New Zealand

44

45

42

-2%

5%

Total

233

220

209

6%

11%

Life Insurance Planned profit margin
Individual
Experience profit/(loss)

7

Assumption changes87.

8.

Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan on Group and Individual business (Australia) and Individual business (New
Zealand)Assumption changes are gains or losses arising from a change in valuation methods and best estimate assumptions

Half Year

Movement

Mar 13$M
183

Sep 12$M
214

Mar 12$M
198

Mar 13v. Sep 12-14%

Mar 13v. Mar 12-8%

Insurance

124

123

126

1%

-2%

Private Wealth

61

68

66

-10%

-8%

Corporate and Other

92

91

81

1%

14%

Total

460

496

471

-7%

-2%

Operating expenses by business segment
Funds management99.

Funds management includes Pensions & Investments business and E*Trade

Half Year
Operating expenses by geography
Australia
New Zealand

Movement

Mar 13$M
378

Sep 12$M
413

Mar 12$M
387

Mar 13v. Sep 12-8%

Mar 13v. Mar 12
-2%

54

56

56

-4%

-4%

Asia Pacific, Europe & America

28

27

28

4%

0%

Total

460

496

471

-7%

-2%

As at ($M)

Movement

Funds under management
Funds under management - average

Mar 1353,218

Sep 1250,723

Mar 12
49,987

Mar 13v. Sep 12
5%

Mar 13v. Mar 12
6%

Funds under management - end of period

54,80551,66750,981

6%

8%Composed of:Australian equities

18,20815,234

15,33720%

19%

Global equities

10,301

10,441

10,428-1%-1%

Cash and fixed interest

22,77522,676

21,9690%

4%Property and infrastructure

3,521

3,316

3,247

6%

8%

Total

54,80551,66750,981

6%

8%

As at ($M)

Movement

Funds under management by region
Australia

Mar 1345,385

Sep 12
42,842

Mar 12
42,573

Mar 13v. Sep 12
6%

Mar 13v. Mar 12
7%

New Zealand

9,420

8,825

8,408

7%

12%

Total

54,80551,66750,981

6%

8%

63

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Mar 13$M

Inflows

Outflows

Other

Funds Management cashflows by product
OneAnswer

17,232

1,128(1,352)

1,151

Other Personal Investment

5,546

214

(490)

291

5,531

Employer Super

13,789

778

(784)

854

12,941

Oasis

5,626

379

(477)

452

5,272

ANZ Trustees

3,192

161

(52)

290

2,793

Kiwisaver

2,922

319

(121)

204

2,520

Private Bank - New Zealand

3,253

280

(214)

74

3,113

Other New Zealand

3,245

218

(429)

264

3,192

Total

54,805

3,477(3,919)3,580

51,66710.

10

Sep 12$M
16,305

Other includes investment income net of taxes, fees and charges and distributions

As at ($M)

Movement

Insurance annual in-force premiumsGroup

Mar 13439

Sep 12
431

Mar 12408

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
8%

Individual

1,006

967

906

4%

11%

448

424

408

6%

10%

Total

1,893

1,822

1,722

4%

10%

Insurance annual in-force premiums by region
Australia

1,756

1,694

1,598

4%

10%

General Insurance

New Zealand
Total

Insurance in-force book movement
Group
Individual
General Insurance

137

128

124

7%

10%

1,893

1,822

1,722

4%

10%

Mar 13LapsesSep 12$M

Newbusiness
$M

$M

$M

439

29

(21)

431

1,006

135

(96)

967

448

81

(57)

424

Total

1,893

245

(174)

1,822

Insurance in-force book movement by region
Australia

1,756

233

(171)

1,694

137

12

(3)

128

1,893

245

(174)

1,822

New Zealand
Total

Embedded value and value of new business (insurance and investments only)
Embedded value as at September 201211

15.

16.

$M
370

$M
4,091

8

116

162

16

178

(35)

3

(32)

3,956

397

4,353

Economic assumptions change

(19)

8

(11)

Net transfer16

(150)

-

(150)

3,787

405

4,192

14

Embedded value as at March 2013

14.

$M
3,721
108

15

13.

Total

Expected return13
Experience deviations and assumption changes

12.

New Zealand

Value of new business12

Sub-total embedded value before economic assumption changes
and net transfer

11.

Australia

Embedded value represents an estimate of the value of existing business plus the market value of net assets at a point in time. In calculating embedded value, the present value of future
profits, franking credits and the release of capital in respect of the funds management and insurance business in-force at the valuation date is added to the adjusted net asset values.
Cashflows are projected using best estimate assumptions are discounted between 8.50% and 10%. The Lenders Mortgage Insurance business is not included
Value of new business represents the present value of future profits less the cost of capital arising from the new business written over the period
Expected return represents expected increase in value over the period
Experience deviations and assumption changes arise from deviations from and changes to best estimate assumptions underlying the prior period embedded value. The adverse
movement for Australian business is primarily due to lower margins on Funds Management business resulting from expected MySuper changes partially offset by lower expenses, together
with lower capital charges under the new capital standards. New Zealand business has experienced positive claims experience in the past six months
Risk discount rates have increased by 0-50bps over the six-month period leading to a negative impact. The discount rate impact in New Zealand business was offset by the increase in theexchange rate for New Zealand dollars
Net transfer represents net capital movements over the period including capital injections, transfer of cash dividends and value of franking credits. In the past 6 months, cash dividends of$120 million and franking credits of $30 million were transferred from the business to the ANZ Group

64

SEGMENT REVIEWGroup Centre
Group Centre comprises Global Services & Operations, Group Technology, Group Human Resources, Group Risk, Group Strategy, Group Corporate
Affairs, Group Corporate Communications, Group Treasury, Global Internal Audit, Group Finance, Group Marketing, Innovation and Digital andShareholder Functions. Group Centre segment results are after internal recharges to operating segments.
Half Year

Movement

Mar 13$M
232

Sep 12$M
194

Other external operating income1

(75)

217

Operating income

157

411

Operating expenses

(193)

(227)

(193)

-15%

0%

Profit/(Loss) before credit impairment and income tax

(36)

184

(74)

large

-51%

Net interest income1

Mar 12$M
184

Mar 13v. Sep 12
19%

Mar 13v. Mar 12
26%

(65)

large

15%

119

-63%

32%

Provision for credit impairment

-

(7)

(6)

-100%

-100%

Profit/(Loss) before income tax

(36)

177

(80)

large

-55%

Income tax expense and non-controlling interests
Cash profit/(loss)

Total full time equivalent staff (FTE)
1.

4

(10)

46

large

-91%

(32)

167

(34)

large

-6%

7,456

7,322

7,378

2%

1%

Includes offsetting variances between net interest and other income as a result of elimination entries associated with the consolidation of OnePath Australia.

Cash profit – March 2013 Half Year v September 2012 Half Year

38
167

$m

10

24
(291)
2H12
Cash profit

Net interest
income

7

14
(32)

(1)

Gain on sale of Other operating
Visa sharesincomeOperatingexpenses software
impairment

March 2013 half year v September 2012 half year

Operating
Provision for
expenses - othercreditimpairment

Income tax
expense & noncontrollinginterests

1H13
Cash profit

March 2013 half year v March 2012 half year

Key factors affecting the result were:

Key factors affecting the result were:•

Operating income decreased $254 million due to a $224 million
gain on sale of Visa shares in the September half partially offset
by higher net interest income due to an increase in centrally held
capital.

•Operating income improved $38 million largely due to higher net
interest income following an increase in centrally held capital andincreased profit from foreign currency hedges.

••

Operating expenses reduced $34 million largely due to$24 million software impairment expense in the September half,along with higher depreciation and amortisation and restructuring
expenses in the March 2013 half.

Operating expenses were flat mainly due to a GST credit in the
March 2013 half, offset by higher depreciation and amortisationand higher restructuring expenses in the March 2013 half.

•

Provision for credit impairment reduced $6 million due to higher
provisions made for discontinued businesses in the March 2012
half.

•

Provision for credit impairment reduced $7 million due toprovisions made for discontinued businesses in the September
half.

65

SEGMENT REVIEWGroup Centre
This page has been left blank intentionally66

GEOGRAPHIC REVIEWCONTENTS
Section 6 – Geographic Review
Geographic performance
Australia geography
Asia Pacific, Europe & America geography
New Zealand geography

67

GEOGRAPHIC REVIEW
Geographic Performance
Half Year

Movement

Mar 13$M
1,958

Sep 12$M
1,733

Mar 12$M
1,995

Mar 13v. Sep 12
13%

Asia Pacific, Europe & America

460

502

449

-8%

2%

New Zealand

522

507

475

3%

10%

2,940

2,742

2,919

7%

1%

Statutory Profit1
Australia

Half Year

Mar 13v. Mar 12-2%

Movement

Mar 13$M
2,164

Sep 12$M
1,893

Mar 12$M
1,977

Mar 13v. Sep 12
14%

Asia Pacific, Europe & America

460

516

447

-11%

3%

New Zealand

558

525

472

6%

18%

3,182

2,934

2,896

8%

10%

Cash Profit1
Australia

As at ($M)

Mar 13v. Mar 12
9%

Movement

Net loans & advances
Australia

Mar 13
312,247

Sep 12305,817

Mar 12
298,013

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
5%

Asia Pacific, Europe & America

51,62045,31040,723

14%

27%

New Zealand

78,113

76,69673,892

2%

6%

Net loans & advances

441,980

427,823

412,628

3%

7%

As at ($M)

Movement

Customer deposits
Australia

Mar 13
195,850

Sep 12
194,695

Mar 12
186,975

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
5%

Asia Pacific, Europe & America

92,73680,46470,77915%

31%

New Zealand

55,54952,71750,5495%

10%

Customer deposits

344,135

327,876

308,303

5%

12%

1.

Refer to page 84 for a detailed reconciliation of divisional to geographic region results

68

GEOGRAPHIC REVIEW
Australia geography
Half Year

Movement

Net interest income

Mar 13$M
4,514

Sep 12$M
4,395

Mar 12$M
4,274

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
6%

Other external operating income

1,677

1,856

1,691

-10%

-1%

Operating income

6,191

6,251

5,965

-1%

4%

Operating expenses(2,602)(2,936)(2,685)-11%-3%

Profit before credit impairment and income tax

3,589

3,315

3,280

8%

9%

Provision for credit impairment

(466)

(562)

(446)

-17%

4%

Profit before tax

3,123

2,753

2,834

13%

10%
12%

Income tax expense and non-controlling interests

(959)

(860)

(857)

12%

Cash profit

2,164

1,893

1,977

14%

9%

Adjustments between statutory profit and cash profit

(206)

(160)

18

29%

large

Statutory profit

1,958

1,733

1,995

13%

-2%

Balance Sheet
Net loans & advances

312,247

305,817

298,013

2%

5%

Other external assets

126,486

123,592

113,1762%

12%

External assets

438,733

429,409411,189

2%

7%

Customer deposits

195,850

194,695

186,975

1%

5%

Other deposits and borrowings

63,23955,782

61,90313%

2%

Deposits and other borrowings

259,089

250,477

248,878

3%

4%

Other external liabilities

148,116

148,506

138,8410%7%External liabilities

407,205

398,983

387,719

2%

5%

Risk weighted assets

192,118

179,957

173,421

7%

11%

Average net loans and advances

309,310305,500

292,553

1%

6%

Average deposits and other borrowings

255,299

253,904

249,597

1%

2%

Ratios
Net interest average margin

2.52%

2.48%

2.51%

Net interest average margin (excluding Global Markets)

2.79%

2.76%

2.82%

Operating expenses to operating income - cash

42.0%

47.0%

45.0%

Operating expenses to average assets - cash

1.20%

1.36%

1.29%

Individual provision charge/(release) - cash

-44%

-21%

large

large

-9%

-13%

-2%

-9%

1

447

797

569

Individual provision charge/(release) as a % of
average net advances - cash

0.29%

0.52%

0.39%

Collective provision charge/(release) - cash

19

(235)

(123)

0.01%

(0.15%)(0.08%)

Collective provision charge/(release) as a % of
average net advances - cash
Net impaired assets

2,097

2,314

2,408

Net impaired assets as a % of net advances

0.67%

0.76%

0.81%

Total full time equivalent staff (FTE)

21,35021,682

23,583

1.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

69

GEOGRAPHIC REVIEWAsia Pacific, Europe & America geography
Table reflects AUD for the APEA region
Half Year
Mar 13$M
682

Net interest income
Other external operating income

Movement

Sep 12$M
679

Mar 12$M
659

Mar 13v. Sep 12
0%

Mar 13v. Mar 12
3%

809

770

715

5%

13%

Operating income

1,491

1,449

1,374

3%

9%

Operating expenses

(822)

(772)

(787)

6%

4%

Profit before credit impairment and income tax

669

677

587

-1%

14%

Provision for credit impairment

(99)

(51)

(48)

94%

large

Profit before income tax

570

626

539

-9%

6%

Income tax expense and non-controlling interests

(110)

(110)

(92)

0%

20%

Cash profit

460

516

447

-11%

3%

-

(14)

2

-100%

-100%

Statutory profit

460

502

449

-8%

2%

Geographic segments:
Asia

301

304

251

-1%

20%

Europe & America

68

120

98

-43%

-31%

Adjustments between statutory profit and cash profit

Pacific

91

92

98

-1%

-7%

Cash profit

460

516

447

-11%

3%

Balance Sheet
Net loans & advances

51,62045,31040,723

14%

27%

Other external assets

80,89765,571

62,61723%

29%

External assets

132,517

110,881

103,340

20%

28%

Customer deposits

92,73680,46470,77915%

31%

Other deposits and borrowings

8,319

7,398

7,630

12%

9%

Deposits and other borrowings

101,055

87,86278,40915%

29%

Other external liabilities

38,97530,45327,78828%

40%

External liabilities

140,030

118,315

106,197

18%

32%

Risk weighted assets

78,416

69,261

63,241

13%

24%

Average net loans and advances

47,32643,387

38,837

9%

22%

Average deposits and other borrowings

89,15081,94372,421

9%23%

Ratios
Net interest average margin

1.20%

1.27%

1.39%

Net interest average margin (excluding Global Markets)

2.15%

2.26%

2.07%

Operating expenses to operating income - cash

55.1%

53.3%

57.3%

Operating expenses to average assets - cash

1.27%

1.30%

1.46%

Individual provision charge/(release) - cash

large

64%

-48%

large

6%

12%

0%

3%

1

87

28

53

Individual provision charge/(release) as a % of
average net advances - cash

0.37%

0.12%

0.27%

Collective provision charge/(release) - cash

12

23

(5)

0.06%

0.10%

(0.03%)

Collective provision charge/(release) as a % of
average net advances - cash
Net impaired assets

337

319

301

Net impaired assets as a % of net advances

0.65%

0.70%

0.74%

Total full time equivalent staff (FTE)

17,413

17,50016,8741.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

70GEOGRAPHIC REVIEWAsia Pacific, Europe & America geography
Table reflects USD for the APEA region
Half Year
Mar 13
USD M
709

Net interest income
Other external operating income

Sep 12
USD M
695

Movement
Mar 12
USD M
680

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
4%

840

788

738

7%

14%

Operating income

1,549

1,483

1,418

4%

9%

Operating expenses

(854)

(790)

(812)

8%

5%

Profit before credit impairment and income tax

695

693

606

0%

15%

Provision for credit impairment

(103)

(52)

(50)

98%

large

Profit before income tax

592

641

556

-8%

6%

Income tax expense and non-controlling interests

(114)

(113)

(95)

1%

20%

Cash profit

478

528

461

-9%

4%

-

(13)

2

-100%

-100%

Statutory profit

478

515

463

-7%

3%

Geographic segments:
Asia

313

311

259

1%

21%

Europe & America

71

123

101

-42%

-30%

Adjustments between statutory profit and cash profit

Pacific

94

94

101

0%

-7%

Cash profit

478

528

461

-9%

4%

Balance Sheet
Net loans & advances

53,80947,40342,356

14%

27%

Other external assets

84,32768,601

65,12823%

29%

External assets

138,136

116,004

107,484

19%

29%

Customer deposits

96,66984,182

73,61615%

31%

Other deposits and borrowings

8,671

7,739

7,937

12%

9%

Deposits and other borrowings

105,340

91,921

81,553

15%

29%

Other external liabilities

40,62731,86028,90228%

41%

External liabilities

145,967

123,781

110,455

18%

32%

Risk weighted assets

80,174

72,461

65,776

11%

22%

Average net loans and advances

49,15844,43340,077

11%

23%

Average deposits and other borrowings

92,601

83,92374,73510%

24%

Ratios
Net interest average margin

1.20%

1.27%

1.39%

Net interest average margin (excluding Global Markets)

2.15%

2.26%

2.07%

Operating expenses to operating income - cash

55.1%

53.3%

57.3%

Operating expenses to average assets - cash

1.27%

1.30%

1.46%

Individual provision charge/(release) - cash

large

64%

-48%

large

5%

12%

0%

3%

1

90

27

55

Individual provision charge/(release) as a % of
average net advances - cash

0.37%

0.12%

0.27%

Collective provision charge/(release) - cash

13

25

(5)

0.06%

0.10%

(0.03%)

Collective provision charge/(release) as a % of
average net advances - cash
Net impaired assets

350

333

313

Net impaired assets as a % of net advances

0.65%

0.70%

0.74%

Total full time equivalent staff (FTE)

17,413

17,50016,8741.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

71

GEOGRAPHIC REVIEWNew Zealand geography
Table reflects AUD results for the New Zealand geography
Half Year
Mar 13$M
1,040

Net interest income
Other external operating income

Movement

Sep 12$M
1,052

Mar 12$M
1,051

Mar 13v. Sep 12-1%

Mar 13v. Mar 12
-1%
10%

364

376

330

-3%

Operating income

1,404

1,428

1,381

-2%

2%

Operating expenses

(610)

(678)

(661)

-10%

-8%

Profit before credit impairment and income tax

794

750

720

6%

10%

Provision for credit impairment

(34)

(75)

(76)

-55%

-55%

Profit before income tax

760

675

644

13%

18%

Income tax expense and non-controlling interests

(202)

(150)

(172)

35%

17%

Cash profit

558

525

472

6%

18%

Adjustments between statutory profit and cash profit

(36)

(18)

3

100%

large

Statutory profit

522

507

475

3%

10%

Balance Sheet
Net loans & advances

78,113

76,69673,892

2%

6%

Other external assets

23,26625,14523,786-7%-2%

External assets

101,379

101,841

97,6780%

4%

Customer deposits

55,54952,71750,5495%

10%

Other deposits and borrowings

4,781

6,067

5,305

-21%

-10%

Deposits and other borrowings

60,33058,78455,854

3%

8%

Other external liabilities

22,53424,80822,989-9%-2%

External liabilities

82,864

83,592

78,843-1%

5%

Risk weighted assets

52,04850,901

48,174

2%

8%

Average net loans and advances

77,25874,072

72,145

4%

7%

Average deposits and other borrowings

60,351

57,17353,897

6%

12%

Ratios
Net interest average margin

2.27%

2.39%

2.47%

Net interest average margin (excluding Global Markets)

2.51%

2.60%

2.67%

Operating expenses to operating income - cash

43.5%

47.5%

47.9%

Operating expenses to average assets - cash

1.18%

1.33%

1.34%

Individual provision charge/(release) - cash

61

90

102

-32%

-40%

Individual provision charge/(release) as a % of
average net advances - cash

0.16%

0.24%

0.28%

Collective provision charge/(release) - cash

(27)

(15)

(26)

80%

4%

(0.07%)(0.04%)(0.07%)
-10%

-23%

-4%

-4%

1

Collective provision charge/(release) as a % of
average net advances - cash
Net impaired assets

708

790

920

Net impaired assets as a % of net advances

0.91%

1.03%

1.25%

Total full time equivalent staff (FTE)

8,656

9,057

9,052

1.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

72

GEOGRAPHIC REVIEWNew Zealand geography
Table reflects NZD results for the New Zealand geography
Half Year
Mar 13
NZD M
1,303

Net interest income
Other external operating income

Movement

Sep 12
NZD M
1,347

Mar 12
NZD M
1,362

Mar 13v. Sep 12-3%

Mar 13v. Mar 12
-4%

457

482

428

-5%

7%

Operating income

1,760

1,829

1,790

-4%

-2%

Operating expenses

(765)

(868)

(857)

-12%

-11%

Profit before credit impairment and income tax

995

961

933

4%

7%

Provision for credit impairment

(43)

(96)

(98)

-55%

-56%

Profit before income tax

952

865

835

10%

14%

Income tax expense and non-controlling interests

(253)

(192)

(223)

32%

13%

Cash profit

699

673

612

4%

14%

Adjustments between statutory profit and cash profit

(44)

(23)

3

91%

large

Statutory profit

655

650

615

1%

7%

Balance Sheet
Net loans & advances

97,39896,094

93,818

1%

4%

Other external assets

29,011

31,50530,199-8%-4%

External assets

126,409

127,599

124,017-1%

2%

Customer deposits

69,264

66,05164,179

5%

8%

Other deposits and borrowings

5,960

7,601

6,735

-22%

-12%

Deposits and other borrowings

75,22473,652

70,914

2%

6%

Other external liabilities

28,09931,08329,189-10%-4%External liabilities

103,323

104,735

100,103-1%

3%

Risk weighted assets1

64,89863,775

61,165

2%

6%

Average net loans and advances

96,831

94,88693,490

2%

4%

Average deposits and other borrowings

75,64073,251

69,8433%

8%

Ratios
Net interest average margin

2.27%

2.39%

2.47%

Net interest average margin (excluding Global Markets)

2.51%

2.60%

2.67%

Operating expenses to operating income - cash

43.5%

47.5%

47.9%

Operating expenses to average assets - cash

1.18%

1.33%

1.34%

Individual provision charge/(release) - cash

-32%

-41%

89%

3%

-11%

-24%

-4%

-4%

77

114

131

Individual provision charge/(release) as a % of
average net advances - cash

0.16%

0.24%

0.28%

Collective provision charge/(release) - cash

(34)

(18)

(33)

(0.07%)(0.04%)(0.07%)

Collective provision charge/(release) as a % of
average net advances - cash
Net impaired assets

884

990

1,169

Net impaired assets as a % of net advances

0.91%

1.03%

1.25%

Total full time equivalent staff (FTE)

8,656

9,057

9,052

1.

March 2013 risk weighted assets under Basel 3 methodology, September 2012 and March 2012 risk weighted assets under Basel 2 methodology

73

GEOGRAPHIC REVIEWThis page has been left blank intentionally74

PROFIT RECONCILIATIONCONTENTS
Section 7 – Profit Reconciliation
Adjustments between statutory profit and cash profit
Explanation of adjustments between statutory profit and cash profit
Reconciliation of statutory profit to cash profit
Divisional to Geographic region reconciliation matrix

75

PROFIT RECONCILIATION
Non-IFRS information
The Group provides two additional measures of performance in the Results Announcement which are prepared on a basis other than in accordance withaccounting standards - cash profit and economic profit. The guidance provided in Australian Securities and Investments Commission Regulatory Guide
230 has been followed when presenting this information.

Adjustments between statutory profit and cash profit
From 1 October 2012, the Group changed from reporting profit on an underlying profit basis to reporting profit on a cash profit basis. Comparative
information has been restated on a consistent basis.
Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, the result for the ongoing business activities of the Group. These
adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the Group Condensed
Consolidated Financial Statements review. Cash profit is not subject to review by the external auditor, however the external auditor has informed the
Audit Committee that the adjustments have been determined on a consistent basis across each period presented.
Half Year

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit
Cash profit

Movement

Mar 13$M
2,940

Sep 12$M
2,742

Mar 12$M
2,919

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
1%

242

192

(23)

26%

large

3,182

2,934

2,896

8%

10%

Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

53

26

70

large

-24%

Adjustments between statutory profit
and cash profit (gains)/losses
Treasury shares adjustment
Revaluation of policy liabilities

19

(35)

(6)

large

large

Economic hedging

192

207

22

-7%

large

Revenue and net investment hedges

16

10

(63)

60%

large

Structured credit intermediation trades

(38)

(16)

(46)

large

-17%

242

192

(23)

26%

large

Total adjustments between
statutory profit and cash profit

Explanation of adjustments between statutory profit and cash profit•

Treasury shares adjustment
ANZ shares held by the Group in the consolidated managed funds and life business are deemed to be Treasury shares for accounting purposes.
Realised and unrealised gains and losses from these shares and dividends received on these shares are reversed as these are not permitted to berecognised in income for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact
on the Group’s profits because the Treasury shares support policy liabilities which are revalued in deriving income. Accordingly, an adjustment tostatutory profit of $53 million gain after tax ($57 million gain pre tax) has been recognised.

•

Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation,with the impact of changes in the market discount rate each period being reflected in the income statement. ANZ includes the impact on theremeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to cash profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.

•

Economic hedging and Revenue and net investment hedges
The Group enters into economic hedges to manage its interest rate and foreign exchange risk. The application of AASB 139: Financial Instruments –Recognition and Measurement results in fair value gains and losses being recognised within the income statement. ANZ includes the mark-tomarket adjustments as an adjustment to cash profit as the profit or loss resulting from the transactions will reverse over time to match with the profit
or loss from the economically hedged item as part of cash profit. This includes gains and losses arising from:–approved classes of derivatives not designated in accounting hedge relationships but which are considered to be economic hedges, including
hedges of NZD and USD revenue;–

the use of the fair value option (principally arising from the valuation of the ‘own name’ credit spread on debt issues designated at fair value); and–ineffectiveness from designated accounting cash flow, fair value and net investment hedges.

In the table below, funding and lending related swaps are primarily foreign exchange rate swaps which are being used to convert the proceeds offoreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt. As these swaps do not qualify for hedge accounting,movements in the fair values are recorded in the Income Statement. The main drivers of these fair values are currency basis spreads and theAustralian dollar and New Zealand dollar fluctuation against other major funding currencies. This category also includes economic hedges of selectstructured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers of these fair value adjustments are
Australian and New Zealand yield curves.
Over the first half of 2013, funding swaps have been significantly impacted by the contraction in currency basis spreads, principally from AUD/USD
spreads.

76

PROFIT RECONCILIATION
Losses arising from the use of the fair value option on own name debt hedged by derivatives have been driven by a contraction of the Group’s credit
spreads in the first half of 2013.
During the half the AUD exchange rate was relatively flat against the NZD and USD, the revenue and net investment hedge loss was principally
attributed to the recycling of unrealised gains at 30 September 2012 to cash profit in the first half 2013.
Half Year
Mar 13$M

Sep 12$M

Mar 12$M

Funding and lending related swaps

203

299

(105)

Use of the fair value option on own debt hedged by derivatives

74

(8)

127

Revenue and net investment hedges

23

15

(90)

Ineffective portion of cash flow and fair value hedges

(6)

5

11

(Profit)/loss before tax

294

311

(57)

(Profit)/loss after tax

208

217

(41)

Impact on income statement (gains)/losses
Timing differences where IFRS results in asymmetry between thehedge and hedged items

Cumulative pre-tax timing differences
relating to economic hedging (gains)/losses

As at ($M)
Mar 13

Sep 12

Mar 12

Funding and lending related swaps

959

756

457

Use of the fair value option on own debt hedged by derivatives

10

(64)

(56)

Revenue and net investment hedges

(22)

(45)

(60)

Ineffective portion of cash flow and fair value hedges

(23)

(17)

(22)

924

630

319

Timing differences where IFRS results in asymmetry between thehedge and hedged items (before tax)

77

PROFIT RECONCILIATION•

Structured credit intermediation trades
ANZ entered into a series of structured credit intermediation trades from 2004 to 2007. The underlying structures involve credit default swaps (CDS)
over synthetic collateralised debt obligations (CDOs), portfolios of external collateralised loan obligations (CLOs) or specific bonds/floating rate notes(FRNs). ANZ sold protection using credit default swaps over these structures and then to mitigate risk, purchased protection via credit default swaps
over the same structures from eight US financial guarantors.
Being derivatives, both the sold protection and purchased protection are marked-to-market. Prior to the commencement of the global credit crisis,
movements in valuations of these positions were not significant and largely offset each other in income. Following the onset of the credit crisis, thepurchased protection has provided only a partial offset against movements in valuation of the sold protection because:–

one of the counterparties to the purchased protection defaulted and many of the remaining were downgraded; and–a credit valuation adjustment is applied to the remaining counterparties to the purchased protection reflective of changes to their credit
worthiness.

ANZ is actively monitoring this portfolio with a view to reducing the exposure via termination and restructuring of both the bought and sold protection
if and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. During the half ANZ terminatedall bought CDSs with one financial guarantor along with the corresponding sold CDSs for a net profit of $7 million (including termination costs andrelease of CVA). The notional amount on the outstanding sold trades at March 2013 was US$4.7 billion (Sep 2012: US$8.0 billion; Mar 2012:
US$8.1 billion).
The credit risk expense on structured credit derivatives remains volatile reflecting the impact of market movements in credit spreads and AUD/USD
rates.
The (gain)/loss on structured credit intermediation trades is included as an adjustment to cash profit as it relates to a legacy non-core business andthe remaining gains and losses predominantly relate to mark-to-market movements which are expected to reverse to zero in future periods.
Half Year
Mar 13$M(48)

Credit risk on intermediation trades
Profit before income tax

Sep 12$M(21)

Movement
Mar 12$M(52)

Mar 13v. Sep 12
large

Mar 13v. Mar 12-8%

Income tax expense

10

5

6

100%

67%

Profit after income tax

(38)

(16)

(46)

large

-17%

As at ($M)

Movement

Mar 13257

Sep 12359

Mar 12447

Mar 13v. Sep 12-28%

Mar 13v. Mar 12-43%

CVA for outstanding transactions

54

116

139

-53%

-61%

Realised close out and hedge costs

336

322

320

4%

5%

Cumulative life to date charges

390

438

459

-11%

-15%

Financial impacts of credit intermediation trades
Mark-to-market exposure to financial guarantors
Cumulative costs relating tofinancial guarantors1

1.

•

The cumulative costs in managing the positions include realised losses relating to restructuring of trades in order to reduce risks and realised losses on termination of sold protection trades.
It also includes foreign exchange hedging losses

Credit risk on impaired derivatives (nil profit after tax impact)
Reclassification of a charge to income for credit valuation adjustments on defaulted and impaired derivative exposures to provision for credit
impairment of $11 million (Sep 2012 half $28 million; Mar 2012 half: $32 million). The reclassification has been made to reflect the manner in which
the defaulted and impaired derivatives are managed.

•

Policyholders tax gross up (nil profit after tax impact)
For statutory reporting purposes policyholder income tax and other related taxes paid on behalf of policyholders are included in both net income fromwealth management and the Group’s income tax expense. The gross up of $187 million (Sep 2012 half: $63 million; Mar 2012 half: $88 million) has
been excluded from the cash results as it does not reflect the underlying performance of the business which is assessed on a net of policyholder tax
basis.

78

PROFIT RECONCILIATIONThis page has been left blank intentionally79

PROFIT RECONCILIATION
Reconciliation of statutory profit to cash profit
March 2013 Half Year
Statutory

Adjustments to statutory profit

profitTreasurysharesadjustment

Policyholders
tax gross up

Revaluationof policy
liabilities

Net interest income

$M
6,200

$M
-

$M
-

$M
-

Fee income

1,231

-

-

-

Foreign exchange earnings

467

-

-

-

Profit on trading instruments

315

-

-

-

Net income from wealth management

696

57

(187)

28

Other

21

-

-

-

Other operating income

2,730

57

(187)

28

Operating income

8,930

57

(187)

28

Personnel expenses(2,344)---

Premises expenses

(356)

-

-

-

Computer expenses

(618)

-

-

-

Restructuring expenses

(57)

-

-

-

Other expenses

(659)

-

-

-

Operating expenses(4,034)---

Profit before credit impairment and tax

4,896

57

(187)

28

Provision for credit impairment

(588)

-

-

-

Profit before income tax

4,308

57

(187)

28

Income tax expense(1,363)

(4)

187

(9)

(5)

-

-

-

2,940

53

-

19

Non-controlling interests
ProfitSeptember 2012 Half Year

Statutory

Adjustments to statutory profit

profitTreasurysharesadjustment

Policyholders
tax gross up

Revaluationof policy
liabilities

Net interest income

$M
6,126

$M
-

$M
-

$M
-

Fee income

1,194

-

-

-

Foreign exchange earnings

511

-

-

-

Profit on trading instruments

79

-

-

-

Net income from wealth mgmt

626

28

(63)

(49)

Other

358

-

-

-

Other operating income

2,768

28

(63)

(49)

Operating income

8,894

28

(63)

(49)

Personnel expenses(2,338)---Premises expenses

(363)

-

-

-

Computer expenses

(825)

-

-

-

Restructuring expenses

(136)

-

-

-

Other expenses

(724)

-

-

-

Operating expenses(4,386)---

Profit before credit impairment and tax

4,508

28

(63)

(49)

Provision for credit impairment

(660)

-

-

-

Profit before income tax

3,848

28

(63)

(49)

Income tax expense(1,104)

(2)

63

14

(2)

-

-

-

2,742

26

-

(35)

Non-controlling interests
Profit80

PROFIT RECONCILIATIONMarch 2013 Half Year
Adjustments to statutory profit

CashprofitEconomic
hedging

Revenue andnet investment
hedges

Structured
creditintermediation trades

Credit risk
on impaired
derivatives

Total
adjustments tostatutory profit

$M
36

$M
-

$M
-

$M
-

$M
36

$M
6,236

-

-

-

-

-

1,231

(12)

23

-

-

11

478

7

-

(48)

11

(30)

285

-

-

-

-

(102)

594

241

-

-

-

241

262

236

23

(48)

11

120

2,850

272

23

(48)

11

156

9,086

-

-

-

-

-

(2,344)

-

-

-

-

-

(356)

-

-

-

-

-

(618)

-

-

-

-

-

(57)

-

-

-

-

-

(659)

-

-

-

-

-

(4,034)

272

23

(48)

11

156

5,052

-

-

-

(11)

(11)

(599)

272

23

(48)

-

145

4,453

(80)

(7)

10

-

97

(1,266)

-

-

-

-

-

(5)

192

16

(38)

-

242

3,182

September 2012 Half Year
Adjustments to statutory profit

CashprofitEconomic
hedging

Revenue andnet investment
hedges

Structured
creditintermediation trades

Credit risk
on impaired
derivatives

Total
adjustments tostatutory profit

$M
-

$M
-

$M
-

$M
-

$M
-

$M
6,126

-

-

-

-

-

1,194

4

15

-

-

19

530

14

-

(21)

28

21

100

-

-

-

-

(84)

542

278

-

-

-

278

636

296

15

(21)

28

234

3,002

296

15

(21)

28

234

9,128

-

-

-

-

-

(2,338)

-

-

-

-

-

(363)

-

-

-

-

-

(825)

-

-

-

-

-

(136)

-

-

-

-

-

(724)

-

-

-

-

-

(4,386)

296

15

(21)

28

234

4,742

-

-

-

(28)

(28)

(688)

296

15

(21)

-

206

4,054

(89)

(5)

5

-

(14)

(1,118)

-

-

-

-

-

(2)

207

10

(16)

-

192

2,934

81

PROFIT RECONCILIATIONMarch 2012 Half Year
Statutory

Adjustments to statutory profit

profitTreasurysharesadjustment

Policyholders
tax gross up

Revaluationof policy
liabilities

Net interest income

$M
5,984

$M
-

$M
-

$M
-

Fee income

1,218

-

-

-

Foreign exchange earnings

570

-

-

-

Profit on trading instruments

274

-

-

-

Net income from wealth mgmt

577

76

(88)

(8)

Other

194

-

-

-

Other operating income

2,833

76

(88)

(8)

Operating income

8,817

76

(88)

(8)

Personnel expenses(2,427)---

Premises expenses

(353)

-

-

-

Computer expenses

(558)

-

-

-

Restructuring expenses

(138)

-

-

-

Other expenses

(657)

-

-

-

Operating expenses(4,133)---

Profit before credit impairment and tax

4,684

76

(88)

(8)

Provision for credit impairment

(538)

-

-

-

Profit before income tax

4,146

76

(88)

(8)

Income tax expense(1,223)

(6)

88

2

(4)

-

-

-

2,919

70

-

(6)

Non-controlling interests
Profit82

PROFIT RECONCILIATIONMarch 2012 Half Year
Adjustments to statutory profit

CashprofitEconomic
hedging

Revenue andnet investment
hedges

Structured
creditintermediation trades

Credit risk
on impaired
derivatives

Total
adjustments tostatutory profit

$M
-

$M
-

$M
-

$M
-

$M
-

$M
5,984

-

-

-

-

-

1,218

(4)

(90)

-

-

(94)

476

(5)

-

(52)

32

(25)

249

-

-

-

-

(20)

557

42

-

-

-

42

236

33

(90)

(52)

32

(97)

2,736

33

(90)

(52)

32

(97)

8,720

-

-

-

-

-

(2,427)

-

-

-

-

-

(353)

-

-

-

-

-

(558)

-

-

-

-

-

(138)

-

-

-

-

-

(657)

-

-

-

-

-

(4,133)

33

(90)

(52)

32

(97)

4,587

-

-

-

(32)

(32)

(570)

33

(90)

(52)

-

(129)

4,017

(11)

27

6

-

106

(1,117)

-

-

-

-

-

(4)

22

(63)

(46)

-

(23)

2,896

83

PROFIT RECONCILIATION
Divisional to Geographic region reconciliation matrix
Geographies

Australia
1,413

Asia Pacific,
Europe &America2

New Zealand
-

Total
1,415

International and Institutional Banking

590

477

132

1,199

New Zealand

n/a

n/a

397

397

Global Wealth

173

-

30

203

Group Centre

(12)

(19)

(1)

(32)

Cash profit

2,164

460

558

3,182

Divisions

Divisions

Divisions

March 2013 Half Year
AUD M
Australia

Adjustments between statutory profit and cash profit

(206)

-

(36)

(242)

Statutory profit

1,958

460

522

2,940

September 2012 Half Year
AUD M
Australia

1,326

2

(1)

1,327

International and Institutional Banking

322

520

110

952

New Zealand

n/a

n/a

319

319

Global Wealth

141

-

28

169

Group Centre

104

(6)

69

167

Cash profit

1,893

516

525

2,934

Adjustments between statutory profit and cash profit

(160)

(14)

(18)

(192)

Statutory profit

1,733

502

507

2,742

March 2012 Half Year
AUD M
Australia

1,267

2

2

1,271

International and Institutional Banking

567

459

133

1,159

New Zealand

n/a

n/a

323

323

Global Wealth

159

(5)

23

177

Group Centre

(16)

(9)

(9)

(34)

Cash profit

1,977

447

472

2,896

Adjustments between statutory profit and cash profit
Statutory profit

84

18

2

3

23

1,995

449

475

2,919

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTSCONTENTS

PAGE

Directors’ Report86

Condensed Consolidated Income Statement87

Condensed Consolidated Statement of Comprehensive Income

88

Condensed Consolidated Balance Sheet89

Condensed Consolidated Cash Flow Statement90

Condensed Consolidated Statement of Changes in Equity

91

Notes to Condensed Consolidated Financial Statements

92

Directors’ Declaration and Responsibility Statement

112

Auditors’ Review Report and Independence Declaration

113

85

DIRECTORS’ REPORTThe Directors present their report on the Condensed Consolidated Financial Statements for the half year ended 31 March 2013.
Directors
The names of the Directors of the Company who held office during and since the end of the half year are:
Mr JP MorschelChairman

Mr MRP Smith, OBE – Chief Executive Officer

Director and Chief Executive Officer

Dr GJ Clark

Director

Ms PJ Dwyer

Director

Mr PAF Hay

Director

Mr Lee Hsien Yang

Director

Mr IJ Macfarlane, AC

Director

Mr DE Meiklejohn, AM

Director

Ms AM Watkins

Director

Result
The consolidated profit attributable to shareholders of the Company was $2,940 million. Further details are contained in the CFO’s Overview on pages 12
to 33 which forms part of this report, and in the Condensed Consolidated Financial Statements.

Review of operations
A review of the operations of the Group during the half year and the results of those operations are contained in the CFO’s Overview on pages 12 to 33
which forms part of this report.

Lead auditor’s independence declaration
The lead auditor’s independence declaration given under section 307C of the Corporations Act 2001 (as amended) is set out on page 113 which forms
part of this report.

Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by ASIC Class Order 98/100.

Significant event since balance date
There have been no significant events from 31 March 2013 to the date of this report.
Signed in accordance with a resolution of the Directors.

John MorschelChairmanMichael R P Smith
Director

29 April 201386

CONDENSED CONSOLIDATED INCOME STATEMENT
Australia and New Zealand Banking Group Limited
Half Year

Note

Movement

Interest income

Mar 13$M
14,326

Sep 12$M
15,098Mar 12$M
15,440Mar 13v. Sep 12-5%

Mar 13v. Mar 12-7%

Interest expense(8,126)(8,972)(9,456)-9%-14%

Net interest income

2

6,200

6,126

5,984

1%

4%

Other operating income

2

1,823

1,913

2,090

-5%

-13%

Net funds management and insurance income

2

696

626

577

11%

21%

Share of associates' profit

18

211

229

166

-8%

28%

8,930

8,894

8,817

0%

1%

3

(4,034)(4,386)(4,133)-8%-2%Operating income
Operating expenses
Profit before credit impairment and income tax
Provision for credit impairment

4,896

4,508

4,684

9%

5%

8

(588)

(660)

(538)

-11%

9%

4,308

3,848

4,146

12%

4%

4

(1,363)(1,104)(1,223)

23%

11%

2,945

2,744

2,923

8%

1%

5

2

4

large

25%

2,940

2,742

2,919

7%

1%

-2%

Profit before income tax
Income tax expense
Profit for the period
Comprising:
Profit attributable to non-controlling interests
Profit attributable
to shareholders of the Company

Earnings per ordinary share (cents)
Basic

6

108.6

102.6

110.8

6%

Diluted

6

105.4

99.1

106.2

6%

-1%

5

73

79

66

-8%

11%

Dividend per ordinary share (cents)

The notes appearing on pages 92 to 111 form an integral part of the Condensed Consolidated Financial Statements

87CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Australia and New Zealand Banking Group Limited
Half Year

Movement

Mar 13$M
2,945

Sep 12$M
2,744

Mar 12$M
2,923

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
1%

(27)

(52)

(2)

-48%

large

-

10

-

-100%

n/a

6

(6)

(410)

large

large

Valuation gain/(loss) taken to equity

35

117

142

-70%

-75%

Cumulative (gain)/loss transferred to the income
statement

(2)

(271)

25

-99%

large

Profit for the period
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit plans
Income tax on items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit plans
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve
Exchange differences taken to equity
Available-for-sale assets

Cash flow hedges
Valuation gain/(loss) taken to equity

(115)

96

(53)

large

large

Transferred to income statement for the period

5

10

7

-50%

-29%

Share of associates' other comprehensive income1

20

(29)

(2)

large

large

Income tax on items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve

-

4

(5)

-100%

-100%

Available-for-sale assets revaluation reserve

(9)

32

(49)

large

-82%

Cash flow hedge reserve

31

(31)

14

large

large

Other comprehensive income net of tax
Total comprehensive income for the period

(56)

(120)

(333)

-53%

-83%

2,889

2,624

2,590

10%

12%

Comprising total comprehensive income attributable to:non-controlling interests
shareholders of the Company
1.

5

2

1

large

large

2,884

2,622

2,589

10%

11%

Share of associate’s other comprehensive income is comprised of Available-for-sale assets reserve of $20 million (Sep 12 half: loss of $30 million; Mar 12 half: $2 million); Foreign currencytranslation reserve loss of $1 million (Sep 12 half: $1 million; Mar 12 half: Nil) and Cash flow hedge reserve of $1 million (Sep 12 half: Nil; Mar 12 half: loss of $4 million)

The notes appearing on pages 92 to 111 form an integral part of the Condensed Consolidated Financial Statements

88CONDENSED CONSOLIDATED BALANCE SHEET
Australia and New Zealand Banking Group Limited

As at ($M)

Movement

Mar 1353,077

Sep 12
36,578Mar 1235,771

Mar 13v. Sep 12
45%

Mar 13v. Mar 1248%

Due from other financial institutions

20,781

17,103

16,28722%

28%

Trading securities

39,56940,60232,859-3%

20%

Derivative financial instruments

41,70048,92939,597

-15%

5%
1%

AssetsLiquid assets

Note

Available-for-sale assets

23,282

20,562

23,12513%

441,980

427,823

412,6283%

7%

Regulatory deposits

1,679

1,478

1,436

14%

17%

Investment in associates

3,719

3,520

3,424

6%

9%

55

33

116

67%

-53%

Net loans and advances

7

Current tax assets
Deferred tax assets

654

785

484

-17%

35%

Goodwill and other intangible assets

7,142

7,082

7,070

1%

1%

Investments backing policy liabilities

31,19929,89530,204

4%

3%

Other assets

5,709

5,623

7,116

2%

-20%

Premises and equipment

2,079

2,114

2,095

-2%

-1%

672,625

642,127

612,2125%

10%43,34530,53829,68842%46%

420,474

397,123

383,1416%

10%45,07052,63941,371

-14%

9%

735

781

648

-6%

13%

Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings

10

Derivative financial instruments
Current tax liabilities
Deferred tax liabilities
Policy liabilities

12

18

26

-33%

-54%

31,08729,53729,0035%

7%

External unit holder liabilities (life insurance funds)

3,730

3,949

4,528

-6%

-18%

Payables and other liabilities

12,58910,109

9,418

25%

34%

Provisions

1,172

1,201

1,234

-2%

-5%

Bonds and notes1

60,22663,098

61,107-5%-1%

11,666

11,914

12,605-2%-7%

Total liabilities

630,106

600,907572,769

5%

10%

Net assets

42,51941,22039,4433%

8%

Ordinary share capital

23,58923,07022,1952%

6%

Preference share capital

871

871

871

0%

0%

Loan capital

11

Shareholders' equity

Reserves

13(2,528)(2,498)(2,430)1%

4%

Retained earnings

13

20,534

19,72818,7584%

9%

Share capital and reserves attributable toshareholders of the Company

13

42,466

41,17139,3943%8%

Non-controlling interests

13

53

49

49

8%

8%

Total shareholders' equity

13

42,51941,22039,4433%

8%

1.

On 20 December 2012, ANZ repurchased $2.4 billion of Commonwealth guaranteed transferable Certificates of Deposit

The notes appearing on pages 92 to 111 form an integral part of the Condensed Consolidated Financial Statements

89

CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Australia and New Zealand Banking Group Limited
Half Year
Mar 13
Inflows(Outflows)$M

Sep 12
Inflows(Outflows)$M

Mar 12
Inflows(Outflows)$M

14,302(8,250)22
2,351(2,350)(1,322)
119(1,291)

15,130(8,925)61
687(2,392)(1,220)5,161(1,174)

15,291(9,902)19
2,011(2,381)(1,842)(427)(1,661)

2,733
59(2,388)
(207)

3,088
76
(2,257)
(239)

2,867
2
(2,171)
(200)

3,778

7,996

1,606

(720)
(121)
2,392
(14,590)634(2,729)(7,307)(14,353)(199)(1,527)
2,718(18,395)(1,728)1,928(3,003)
2,137(4,946)
5,729

24,83512,751
1,403

15,250(544)
1,095

18,412
4,728(886)

26,150(8,820)5,634

29,928

(824)

7,240

(10,229)
7,541(3,597)
5,873(26,844)
25,327

(1)
25

1
5

(2)
13

(149)
(550)
(3,363)

(189)
(273)
1,820

(130)
20
(429)
(2,045)

6,980(10,683)

8,988(7,720)15,364(7,942)750(965)(1,657)
21
(44)

714
(1,440)(1,028)31-

2,010(1,153)(1,191)
29(55)

Net cash provided by/(used in) financing activities
Net cash provided by/(used in) operating activities
Net cash provided by/(used in) investing activities
Net cash provided by/(used in) financing activities(5,598)29,928(3,363)(5,598)

(455)
(824)
1,820
(455)

7,062
7,240
(2,045)
7,062

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of exchange rate changes on cash and cash equivalents

20,96741,450(1,640)541
40,601308

12,25730,021(1,677)60,77741,45040,601

Note
Cash flows from operating activities
Interest received
Interest paid
Dividends received
Other operating income received
Personnel expenses paid
Other operating expenses paid
Net cash (paid)/received on derivatives
Income taxes (paid)/refunds received
Net cash flows from funds management and insurance businessPremiums, other income and life investment deposits received
Investment income and policy deposits received
Claims and policy liability payments
Commission expense paid
Cash flows from operating activities before changes inoperating assets and liabilities
Changes in operating assets and liabilities arising fromcash flow movements(Increase)/decrease in operating assets
Liquid assets
Due from other financial institutions
Trading securities
Loans and advances
Net cash flows from investments backing policy liabilities
Purchase of insurance assets
Proceeds from sale/maturity of insurance assets
Increase/(decrease) in operating liabilities
Deposits and other borrowings
Due to other financial institutions
Payables and other liabilities
Change in operating assets and liabilities arising fromcash flow movements
Net cash provided by/(used in) operating activities
Cash flows from investing activities
Available-for-sale assets
Purchases
Proceeds from sale or maturity
Controlled entities and associates
Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other assets
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Dividends paid
Share capital issues
On market share purchases

15(a)Cash and cash equivalents at end of period15(b)The notes appearing on pages 92 to 111 form an integral part of the Condensed Consolidated Financial Statements

90

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Australia and New Zealand Banking Group Limited
Shareholders'equityattributable to
Retained Equity holders ofearnings
the Bank$M$M

Ordinary
share
capital$M

Preference
shares$M

Reserves1

21,343871(2,095)

17,787

Profit or loss

-

-

-

2,919

Other comprehensive income for the period

-

-

(328)

Total comprehensive income for the period--

Dividends paid-

Dividend income on treasury shares
held within the Group's
life insurance statutory funds

As at 1 October 2011

Noncontrollinginterests$M

Total
Shareholders'equity$M37,90648

37,954

2,919

4

2,923

(2)

(330)

(3)

(333)

(328)

2,917

2,589

1

2,590

-

-

(1,962)(1,962)-(1,962)

-

-

-

14

14

-

14

757

-

-

-

757

-

757

-

-

(1)

-

(1)

-

(1)

$M

Transactions with equity holders intheir capacity as equity holders:

Dividend reinvestment plan
Transactions with non-controlling interests
Other equity movements:
Share based payments and exercises
Group share option scheme
Treasury shares OnePath Australia
adjustment
Group employee share acquisition
schemeTransfer of options/rights lapsed

-

-

(4)

-

(4)

-

(4)

29

-

-

-

29

-

29

21

-

-

-

21

-

21

45

-

-

-

45

-

45

-

-

(2)

2

-

-

-

22,195871(2,430)18,75839,39449

39,443

Profit or loss

-

-

-

2,742

2,742

2

2,744

Other comprehensive income for the period

-

-

(78)

(42)

(120)

-

(120)

Total comprehensive income for the period

-

-

(78)

2,700

2,622

2

2,624

Dividends paid

-

-

-

(1,740)(1,740)(2)(1,742)

Dividend income on treasury shares
held within the Group's
life insurance statutory funds

-

-

-

10

10

-

10

704

-

-

-

704

-

704

-

-

-

-

-

-

-

As at 31 March 2012

Transactions with equity holders intheir capacity as equity holders:

Dividend reinvestment plan
Transactions with non-controlling interests
Other equity movements:
Share based payments and exercises
Group share option scheme
Treasury shares OnePath Australia
adjustment
Group employee share acquisition
schemeTransfer of options/rights lapsed
As at 30 September 2012

-

-

10

-

10

-

10

31

-

-

-

31

-

31

57

-

-

-

57

-

57

83

-

-

-

83

-

83

-

-

-

-

-

-

-

23,070871(2,498)19,72841,171

49

41,220

Profit or loss

-

-

-

2,940

2,940

5

2,945

Other comprehensive income for the period

-

-

(29)

(27)

(56)

-

(56)

Total comprehensive income for the period

-

-

(29)

2,913

2,884

5

2,889

Dividends paid

-

-

-

(2,118)(2,118)-(2,118)Dividend income on treasury shares
held within the Group's
life insurance statutory funds

-

-

-

10

10

-

10

451

-

-

-

451

-

451

-

-

-

-

-

(1)

(1)

Transactions with equity holders intheir capacity as equity holders:

Dividend reinvestment plan
Transactions with non-controlling interests
Other equity movements:
Share based payments and exercises
Group share option scheme
Treasury shares OnePath Australia
adjustment
Group employee share acquisition
schemeTransfer of options/rights lapsed
As at 31 March 2013
1.

-

-

-

-

-

-

-

21

-

-

-

21

-

21

27

-

-

-

27

-

27

20

-

-

-

20

-

20

-

-

(1)

1

-

-

-

23,589871(2,528)20,534

42,46653

42,519Further information on other comprehensive income is disclosed in Note 13

The notes appearing on pages 92 to 111 form an integral part of the Condensed Consolidated Financial Statements

91

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
These Condensed Consolidated Financial Statements:
have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (“AASs”);
should be read in conjunction with the ANZ Annual Report for the year ended 30 September 2012 and any public announcements made by the
Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2013 in accordance with the continuous disclosure
obligations under the Corporations Act 2001 and the ASX Listing Rules;
are Condensed Financial statements as defined in AASB 134 Interim Financial Reporting (“AASB 134”). This report does not include all notes of
the type normally included in the annual financial report;
are presented in Australian dollars unless otherwise stated; andwere approved by the Board of Directors on 29 April 2013.
i)Statement of compliance
These Condensed Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001 and AASB 134 which
ensures compliance with IAS 34 Interim Financial Reporting.

ii)

Accounting policies
These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods ofcomputation consistent with those applied in the 2012 Annual Financial Statements. All new AASs and Australian Accounting Standards Board
Interpretations applicable to annual reporting periods beginning on or after 1 October 2012 have been applied to the Group effective from theirrequired date of application. The initial application of these Standards and Interpretations has not had a material impact on the financial positionor the financial results of the Group.

iii) Basis of measurement
The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are statedat their fair value:
derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying exposure;financial assets treated as available-for-sale;financial instruments held for trading; andassets and liabilities designated at fair value through profit and loss.
In accordance with AASB 1038 Life Insurance Contracts, life insurance liabilities are measured using the Margin on Services model.
In accordance with AASB 119 Employee Benefits, defined benefit obligations are measured using the Projected Unit Credit method.
iv) Use of estimates, assumptions and judgments
The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates andassumptions that affect reported amounts and the application of accounting policies. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable. Actual results may differ from these estimates and theestimates may require review in future periods.
v)

Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by ASIC Class Order 98/100.

vi) Comparatives
Certain amounts in the comparative information have been reclassified to conform with current period financial statement presentations.

92

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. IncomeHalf Year

Movement

Interest income

Mar 13$M
14,326

Sep 12$M
15,098Mar 12$M
15,440Mar 13v. Sep 12-5%

Mar 13v. Mar 12-7%

Interest expense(8,126)(8,972)(9,456)-9%-14%

Net interest income

6,200

6,126

5,984

1%

4%

i) Fee and commission income
Lending fees1

371

356

341

4%

9%

Non-lending fees and commissions

1,043

1,012

1,048

3%

0%

Total fee and commission income

1,414

1,368

1,389

3%

2%

Fee and commission expense

(183)

(174)

(171)

5%

7%

Net fee and commission income2

1,231

1,194

1,218

3%

1%

418

408

417

2%

0%

2,303

818

1,912

large

20%
-12%

ii) Net funds management and insurance income
Funds management income
Investment income
Insurance premium income

519

647

590

-20%

Commission income/(expense)

(207)

(238)

(200)

-13%

4%

Claims

(345)

(289)

(309)

19%

12%

Changes in policy liabilities3(1,935)(692)(1,757)

large

10%

Elimination of treasury share (gain)/loss

(57)

(28)

(76)

large

-25%

Total net funds management and insurance income

696

626

577

11%

21%

iii) Share of associates' profit

211

229

166

-8%

28%

Net foreign exchange earnings

467

511

570

-9%

-18%

Net gains from trading securities and derivatives

267

58

222

large

20%

Credit risk on intermediation trades

48

21

52

large

-8%

(241)

(294)

(33)

-18%

large

iv) Other income

Movement on financial instruments measured at fairvalue through profit & loss4
Brokerage income

25

32

23

-22%

9%

Gain on sale of investment in Sacombank

-

-

10

n/a

-100%

Write-down of investment in SSI

-

-

(31)

n/a

-100%

Private equity and infrastructure earnings

-

6

22

-100%

-100%

Gain on sale of Visa shares

-

291

-

-100%

n/a

Dilution gain on investment in Bank of Tianjin

-

10

-

-100%

n/a

26

84

37

-69%

-31%

Other
Total other income
Total other operating income
Total income

5

Profit before income tax as a % of total income
1.
2.
3.

4.

5.

592

719

872

-18%

-32%

2,730

2,768

2,833

-1%

-4%

-5%

-7%

17,056

17,866

18,27325.26%

21.54%

22.69%

Lending fees exclude fees treated as part of the effective yield calculation in interest income
Includes interchange fees paid
Includes policyholder tax gross up, which represents contribution tax (recovered at 15% on the super contributions made by members) debited to the policyholder account once a year in
July when the statement is issued to the members at the end of the 30 June financial year
Includes fair value movements (excluding realised and accrued interest) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments and notdesignated as accounting hedges, ineffective portions of cashflow hedges, and fair value movements in financial assets and liabilities designated fair value
Total income includes external dividend income of $3 million (Sep 2012 half: $3 million; Mar 2012 half: $1 million)

93

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Operating expenses
Half Year
Mar 13$M

Sep 12$M

Movement
Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12-20%

Personnel
Employee entitlements and taxes

115

145

143

-21%

1,547

1,512

1,554

2%

0%

2

5

5

-60%

-60%

Superannuation costs - defined contribution plans

143

143

152

0%

-6%

Equity-settled share-based payments

101

88

101

15%

0%

Temporary staff

64

106

112

-40%

-43%

Salaries and wages
Superannuation costs - defined benefit plans

Other

372

339

360

10%

3%

2,344

2,338

2,427

0%

-3%

Depreciation and amortisation

47

46

44

2%

7%

Rent

208

207

205

0%

1%

Utilities and other outgoings

81

86

82

-6%

-1%

Other

20

24

22

-17%

-9%

356

363

353

-2%

1%

Computer contractors

109

68

82

60%

33%

Data communications

55

54

52

2%

6%

Depreciation and amortisation

238

222

202

7%

18%

Rentals and repairs

71

62

69

15%

3%

Software purchased

120

131

122

-8%

-2%

Software impairment

8

273

1

-97%

large

Other

17

15

30

13%

-43%

618

825

558

-25%

11%

Advertising and public relations

112

124

105

-10%

7%

Audit and other fees

10

10

8

0%

25%

Depreciation of furniture and equipment

49

49

50

0%

-2%

Freight and cartage

32

32

33

0%

-3%

Loss on sale and write-off of equipment

7

3

5

large

40%

Non-lending losses

28

27

25

4%

12%

Postage and stationery

61

70

67

-13%

-9%

Professional fees

118

144

109

-18%

8%

Telephone

34

36

33

-6%

3%

Travel

85

88

82

-3%

4%

Amortisation and impairment of intangible assets

50

55

55

-9%

-9%

Other

73

86

85

-15%

-14%

659

724

657

-9%

0%

New Zealand simplification programme

14

84

64

-83%

-78%

Other

43

52

74

-17%

-42%

Total personnel expenses

Premises

Total premises expenses

Computer

Total computer expenses

Other

Total other expenses

Restructuring

Total restructuring expenses
Operating expenses

94

57

136

138

-58%

-59%

4,034

4,386

4,133

-8%

-2%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Income tax expense
Reconciliation of the prima facie income tax expense on pre-tax profit with
the income tax expense charged in the Income Statement

Half Year

Movement

Profit before income tax

Mar 13$M
4,308

Sep 12$M
3,848

Mar 12$M
4,146

Mar 13v. Sep 12
12%

Mar 13v. Mar 12
4%

Prima facie income tax expense at 30%

1,292

1,154

1,244

12%

4%

Overseas tax rate differential

(16)

(17)

(31)

-6%

-48%

Rebateable and non-assessable dividends

(3)

(2)

(2)

50%

50%

Profit from associates

(63)

(68)

(50)

-7%

26%

Tax effect of permanent differences:Gain on sale of investment in Sacombank

-

-

(3)

n/a

-100%

Write-down of investment in SSI

-

-

9

n/a

-100%

Offshore Banking Unit

(4)

(3)

(9)

33%

-56%

131

44

62

large

large

Tax provisions no longer required

(4)

(47)

(23)

-91%

-83%

Interest on Convertible Preference Shares

29

33

35

-12%

-17%
large

OnePath Australia - Policyholder income and contributions tax

Other

2

5

(6)

-60%

1,364

1,099

1,226

24%

11%

(1)

5

(3)

large

-67%

Total income tax expense charged
in the income statement

1,363

1,104

1,223

23%

11%

Australia

1,070

860

964

24%

11%

Overseas

293

244

259

20%

13%

23%

11%

Income tax under/(over) provided in previous years

Effective Tax Rate - Group

95

1,363

1,104

1,223

31.6%

28.7%

29.5%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Dividends
Half Year

Movement

Mar 1373

Sep 12n/a

Mar 12
66

Mar 13v. Sep 12
n/a

Mar 13v. Mar 12
11%

Final (fully franked)

n/a

79

n/a

n/a

n/a

Ordinary share dividend1
Interim dividend

$M
-

$M
1,769

$M
-

%
n/a

%
n/a

2,150

-

2,002

n/a

7%

(35)

(33)

(47)

6%

-26%

2,115

1,736

1,955

22%

8%

68.2%

78.5%

60.8%

Dividend per ordinary share (cents)
Interim (fully franked)

Final dividend
Bonus option plan adjustment
Total2
Ordinary share dividend payout ratio (%)
1.

2.
3.

3

Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders (Mar 13: Nil; Sep 12: $2 million;
Mar 12: Nil)
Dividends payable are not accrued and are recorded when paid
Dividend payout ratio is calculated using proposed 2013 interim dividend of $2,003 million (not shown in the above table). The proposed 2013 interim dividend of $2,003 million is basedon the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September 2012 half year and March 2012 half year were calculated using
actual dividend paid of $2,150 million and $1,769 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the company by the amount ofpreference shares dividend paid

Ordinary Shares
The Directors propose that an interim dividend of 73 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2013. The proposed 2013
interim dividend will be fully franked for Australian tax purposes.
New Zealand imputation credits of NZ 9 cents per ordinary share will also be attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2013 interim dividend. For the 2013
interim dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used indetermining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume
weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the seven trading days
commencing on 17 May 2013, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects withexisting fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for
the 2013 interim dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Standard Time) on 15 May 2013 (the record date
for the proposed interim dividend). Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with aregistered address in Great Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling and New
Zealand dollars respectively at an exchange rate calculated on 17 May 2013.
Preference Shares
Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

3

4

7

-25%

-57%

€4.37

€7.38

€10.80-41%-60%Preference share dividend
Euro Trust Securities

Dividend per preference share
Euro Trust Securities

96

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings per share
Half Year

Number of fully paid ordinary shares on issue (M)1

Basic
Profit attributable to shareholders of the Company ($M)
Less Preference share dividends ($M)

Movement

Mar 13
2,743.7

Sep 12
2,717.4

Mar 12
2,679.5

Mar 13v. Sep 12
1%

Mar 13v. Mar 12
2%

2,940

2,742

2,919

7%

1%

(3)

(4)

(7)

-25%

-57%

2,937

2,738

2,912

7%

1%

2,704.1

2,667.5

2,627.4

1%

3%

Basic earnings per share (cents)

108.6

102.6

110.8

6%

-2%

DilutedProfit less preference share dividends ($M)

2,937

2,738

2,912

7%

1%

Interest on US Stapled Trust Securities ($M)3

14

16

14

-13%

0%

-

9

22

-100%

-100%

96

108

117

-11%

-18%

3,047

2,871

3,065

6%

-1%

Profit less preference share dividends ($M)
Weighted average number of ordinary shares (M)2

Interest on UK Stapled Securities ($M)4
Interest on Convertible Preference Shares ($M)5
Profit attributable to shareholders of the Company
excluding interest on US Stapled Trust Securities, UK Stapled
Securities and Convertible Preference Shares ($M)
Weighted average number of shares on issue (M)2

2,704.1

2,667.5

2,627.4

1%

3%

Weighted average number of convertible options (M)

5.3

4.4

4.6

20%

15%

Weighted average number of convertible US Stapled Trust Securities (M)3

26.5

30.5

32.6

-13%

-19%

-

14.0

31.3

-100%

-100%

Weighted average number of convertible UK Stapled Securities (M)4
Weighted average number of Convertible Preference Shares (M)5Adjusted weighted average number of shares - diluted (M)6
Diluted earnings per share (cents)
1.
2.

3.

4.

5.

6.

156.0

179.8

191.4

-13%

-18%

2,891.9

2,896.2

2,887.3

0%

0%

105.4

99.1

106.2

6%

-1%

Number of fully paid ordinary shares on issue includes Treasury shares of 28.7 million at 31 March 2013 (Sep 2012: 28.8 million; Mar 2012: 31.6 million)
Weighted average number of ordinary shares excludes Treasury shares held in OnePath (12.1 million) and in ANZEST Pty Ltd (16.6 million) for the group employee share acquisition
schemeThe US Stapled Trust securities (issued on 27 November 2003) convert to ordinary shares in 2053 at the market price of ANZ ordinary shares less 5% unless redeemed or bought backprior to that date. The US Stapled Trust security issue can be de-stapled and the investor left with coupon paying preference shares at ANZ’s discretion under certain circumstances.
AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS
UK Hybrid (issued on 15 June 2007) is a GBP denominated stapled security that was due to convert to ordinary shares on the fifth anniversary at the market price of ANZ ordinary sharesless 5% (subject to certain conversion conditions). Immediately prior to conversion on 15 June 2012 the securities were redeemed by ANZ for cash at face value. AASB 133 requires that
potential ordinary shares for which conversion to ordinary share capital is mandatory must be considered in the calculation of diluted EPS up to the date of conversion
There are three “Tranches” of convertible preference shares. The first are convertible preference shares issued on 30 September 2008 and convert to ordinary shares on 16 June 2014 at
the market price of ANZ ordinary shares less 2.5% (subject to certain conversion conditions). The second are convertible preference shares issued on 17 December 2009 and convert toordinary shares on 15 December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The third are convertible preference shares issued
on 28 September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary shares less 1% (subject to certain conversion conditions). AASB 133
requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS
The earnings per share calculation excludes the Euro Trust Securities (Preference Shares)

97

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Net loans and advances
As at ($M)

Movement

Mar 13

Sep 12

Mar 12

Mar 13v. Sep 12

Mar 13v. Mar 12

Overdrafts

5,779

6,031

5,732

-4%

1%

Credit card outstandings

8,761

8,632

9,084

1%

-4%

Australia

Commercial bills outstanding

16,38818,223

18,476-10%-11%

Term loans - housing

187,708

181,971

178,486

3%

5%

Term loans - non-housing

85,19982,92278,5283%

8%

Lease receivables

1,560

1,603

1,868

-3%

-16%

Hire purchase

9,753

9,880

9,498

-1%

3%

702

480

580

46%

21%

315,850

309,742302,252

2%

4%

1,077

892

786

21%

37%

994

996

964

0%

3%

1,539

1,246

812

24%

90%

Other

Asia Pacific, Europe & America
Overdrafts
Credit card outstandings
Commercial bills outstanding
Term loans - housing

4,494

3,981

3,374

13%

33%

Term loans - non-housing

42,786

37,66834,761

14%

23%

Lease receivables

132

143

126

-8%

5%

Other

331

161

168

large

97%

51,35345,08740,991

14%

25%

New Zealand
Overdrafts

987

1,091

1,185

-10%

-17%

Credit card outstandings

1,135

1,113

1,110

2%

2%

Term loans - housing

46,08044,754

42,681

3%

8%

Term loans - non-housing

30,062

29,90929,1791%

3%

Lease receivables

119

139

168

-14%

-29%

Hire purchase

535

505

462

6%

16%

Other

108

220

218

-51%

-50%
5%

79,026

77,73175,0032%

446,229432,560

418,246

3%

7%

Less: Provision for credit impairment (refer note 8)(4,312)(4,538)(4,708)-5%-8%

Less: Unearned income1(2,075)(2,235)(2,283)

-7%

-9%

869

797

697

9%

25%

Total gross loans and advances

Add: Capitalised brokerage/mortgage origination fees2
Add: Customers' liabilities for acceptances

Total net loans and advances
1.
2.

1,269

1,239

676

2%

88%

(4,249)(4,737)(5,618)

-10%

-24%

441,980

427,823

412,628

3%

7%Includes fees deferred and amortised using the effective interest method of $362 million (Sep 2012: $415 million; Mar 2012: $425 million)
Capitalised brokerage/mortgage origination fees are amortised over the term of the loan

98

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Provision for credit impairment
Half Year

Movement

Mar 13$M
2,765

Sep 12$M
2,994

Mar 12$M
3,176

Charge/(credit) to income statement

4

(227)

Disposal-(4)

Adjustment for exchange rate fluctuations-

Collective provision
Balance at start of period

Total collective provision1

Mar 13v. Sep 12-8%

Mar 13v. Mar 12
-13%

(152)

large

large

-

-100%

n/a

2

(30)

-100%

-100%

2,769

2,765

2,994

0%

-8%

Individual provision
Balance at start of period

1,773

1,714

1,697

3%

4%

New and increased provisions

932

1,270

1,023

-27%

-9%

Write-backs

(240)

(286)

(251)

-16%

-4%

(3)

(5)

(29)

-40%

-90%
-14%

Adjustment for exchange rate fluctuations
Discount unwind

(55)

(79)

(64)

-30%

Bad debts written-off

(864)

(841)

(662)

3%

31%

Total individual provision

1,543

1,773

1,714

-13%

-10%

Total provision for credit impairment

4,312

4,538

4,708

-5%

-8%

1.

The collective provision includes amounts for off-balance sheet credit exposures: $531 million at 31 March 2013 (Sep 2012: $529 million; Mar 2012: $545 million). The impact on theincome statement for the half year ended 31 March 2013 was a $2 million charge (Sep 2012 half: $14 million release; Mar 2012 half: $22 million release)

Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

Australia

646

958

772

-33%

-16%

Asia Pacific, Europe & America

132

126

61

5%

large

New Zealand

154

186

190

-17%

-19%

932

1,270

1,023

-27%

-9%

Write-backs

(240)

(286)

(251)

-16%

-4%

692

984

772

-30%

-10%

Recoveries of amounts previously written-off

(111)

(97)

(117)

14%

-5%

Individual provision charge for loans and advances

Provision movement analysis
New and increased provisions

581

887

655

-34%

-11%

Impairment on available-for-sale assets1

3

-

35

n/a

-91%

Collective provision charge/(credit) to income statement

4

(227)

(152)

large

large

588

660

538

-11%

9%

Charge to income statement
1.

Includes impairment of $3 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million)

Half Year

Movement

Individual provision balance
Australia

Mar 13$M955

Sep 12$M
1,128

Mar 12$M
985

Asia Pacific, Europe & America

275

277

New Zealand

313

368

1,543

1,773

Total individual provision99

Mar 13v. Sep 12-15%

Mar 13v. Mar 12
-3%

326

-1%

-16%

403

-15%

-22%

1,714

-13%

-10%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Credit quality
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances, there
may be differences between the carrying amounts reported on the balance sheet and the amounts reported in the table below. Principally, thesedifferences arise in respect of financial assets that are subject to risks other than credit risk, such as equity investments which are primarily subject tomarket risk, or bank notes and coins. For contingent exposures, the maximum exposure to credit risk is the maximum amount the Group would haveto pay if the instrument is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
The following table presents the maximum exposure to credit risk of on-balance sheet and off-balance sheet financial instruments before taking
account of any collateral held or other credit enhancements.

Reported
53,0771

Excluded
3,705

Maximum
exposure tocredit risk
49,372

Due from other financial institutions

20,781-

20,781

Trading securities

39,569-39,569Derivative financial instruments2

41,700-41,700Available-for-sale assets

23,282

65

23,217Net loans and advances

441,980-

441,980

As at March 2013
$M
Liquid assets

Other financial assets3

5,052

-

5,052

625,4413,770

621,671

Undrawn facilities

152,467-

152,467

Contingent facilities

34,008-34,008

186,475-

186,475

811,9163,770

808,146

Liquid assets

36,5783,056

33,522

Due from other financial institutions

17,103-

17,103

Trading securities

40,602-40,602Derivative financial instruments2

48,929-48,929Available-for-sale assets

20,562

71

20,491

Net loans and advances

427,823-

427,823

Total

As at September 2012
$M

Other financial assets3

5,049

-

5,049

596,646

3,127

593,519

Undrawn facilities

141,355-

141,355

Contingent facilities

32,383-32,383

173,738-

173,738

770,384

3,127

767,257

Liquid assets

35,771

2,834

32,937

Due from other financial institutions

16,287-

16,287

Trading securities

32,859-32,859Derivative financial instruments2

39,597-39,597Available-for-sale assets

23,125497

22,628Net loans and advances

412,628-

412,628

Total

As at March 2012
$M

Other financial assets3

6,525

-

6,525

566,792

3,331

563,461

Undrawn facilities

137,505-

137,505

Contingent facilities

32,738-32,738170,243-

170,243

737,035

3,331

733,704

Total
1.
2.
3.

Includes bank notes and coins and cash at bank within liquid assets and equity instruments within available-for-sale financial assets
Derivative financial instruments are net of credit valuation adjustments
Mainly comprises trade dated assets and accrued interest. During the period deferred insurance premiums were reclassified to non financial assets and comparative information has been
restated accordingly

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Credit quality, cont’dDistribution of financial assets by credit quality

As at March 2013
$M
Liquid assets

Neither past due
nor impaired
49,372

Past due but not
impaired-

Restructured-

Net
Impaired-Total
49,372

Due from other financial institutions

20,781---

20,781

Trading securities

39,569---39,56941,700Derivative financial instruments

1

41,592-25

83

Available-for-sale assets

23,217---

23,217Net loans and advances

427,184

11,837499

2,460

441,980

Other financial assets2

5,052

-

-

-

5,052

186,400--75

186,475

793,167

11,837524

2,618

808,146

As at September 2012
$M
Liquid assets

33,522---

33,522

Due from other financial institutions

17,103---

17,103

Trading securities

40,602---40,602
48,929Credit related commitments3

Derivative financial instruments

1

48,785-28

116

Available-for-sale assets

20,491---

20,491

Net loans and advances

413,556

11,135497

2,635

427,823

Other financial assets2

5,049

-

-

-

5,049

173,591--

147

173,738

752,699

11,135525

2,898

767,257

As at March 2012
$M
Liquid assets

32,937---32,937

Due from other financial institutions

16,287---

16,287

Trading securities

32,859---32,85939,597

Credit related commitments3

Derivative financial instruments

1

39,426-20

151

Available-for-sale assets

22,628---22,628Net loans and advances

396,861

12,484

320

2,963

412,628

Other financial assets2
Credit related commitments3

1.
2.

3.

6,525

-

-

-

6,525

170,068--

175

170,243

717,591

12,484340

3,289

733,704

Derivative assets, considered impaired, are net of credit valuation adjustments
Mainly comprises trade dated assets and accrued interest. During the period deferred insurance premiums were reclassified to non financial assets and comparative information has been
restated accordinglyComprises undrawn facilities and customer contingent liabilities

101

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Credit quality, cont’dCredit quality of financial assets neither past due nor impaired
The credit quality of financial assets is managed by the Group using internal ratings based on their current probability of default. The Group’s
masterscales are mapped to external rating agency scales, to enable wider comparisons.

As at March 2013
$M
Liquid assets

Strong credit
profile1 Satisfactory risk2
49,162196

Sub-standard but
not past due or
impaired3
14

Total
49,372

Due from other financial institutions

19,798932

51

20,781

Trading securities

39,326

243-

39,569Derivative financial instruments

40,638746

208

41,592Available-for-sale assets

21,691

1,520

6

23,217Net loans and advances

313,425

96,31917,440427,184

Other financial assets4

4,666

327

59

5,052

155,168

29,044

2,188

186,400

643,874

129,327

19,966793,167

As at September 2012
$M
Liquid assets

32,790664

68

33,522

Due from other financial institutions

16,296792

15

17,103

Trading securities

40,50399-

40,602Derivative financial instruments

46,578

1,962

245

48,785

Available-for-sale assets

19,0651,420

620,491

Net loans and advances

300,227

96,05817,271

413,556

Credit related commitments5

Other financial assets4

4,655

334

60

5,049

142,037

29,535

2,019

173,591

602,151

130,864

19,684752,699

As at March 2012
$M
Liquid assets

32,703201

33

32,937

Due from other financial institutions

15,171

1,103

13

16,287

Trading securities

31,8591,000-

32,859Derivative financial instruments

37,751

1,264

411

39,426

Available-for-sale assets

20,8571,765

622,628Net loans and advances

287,131

91,56618,164

396,861

Credit related commitments5

Other financial assets4
Credit related commitments5

1.

2.

3.

4.

5.

5,588

851

86

6,525

139,174

28,3552,539

170,068

570,234

126,105

21,252

717,591

Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable toforeseeable events. This rating broadly corresponds to ratings “Aaa” to “Baa3” and “AAA” to “BBB-” of Moody’s and Standard & Poor’s respectively
Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends orvariability in earnings. This rating broadly corresponds to ratings “Ba2” to “Ba3” and “BB” to “BB-” of Moody’s and Standard & Poor’s respectively
Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly
medium term. This rating broadly corresponds to ratings “B1” to “Caa” and “B+” to “CCC” of Moody’s and Standard & Poor’s respectively
Mainly comprises trade dated assets and accrued interest. During the period deferred insurance premiums were reclassified to non financial assets and comparative information has been
restated accordinglyComprises undrawn commitments and customer contingent liabilities

102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Credit quality, cont’dAgeing analysis of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not
impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards
and personal loans), that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual
basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of associated security is
sufficient to cover amounts outstanding.

As at March 2013
$M
Liquid assets

1-5 days 6-29 days 30-59 days 60-89 days > 90 days
-

Total
-

Due from other financial institutions

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

Derivative financial instruments

-

-

-

-

-

-

Available-for-sale assets

-

-

-

-

-

-

Net loans and advances

2,088

5,294

1,870

889

1,696

11,837

Other financial assets1

-

-

-

-

-

-

Credit related commitments2

-

-

-

-

-

-

2,088

5,294

1,870

889

1,696

11,837As at September 2012
$M
Liquid assets

-

-

-

-

-

-

Due from other financial institutions

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

Derivative financial instruments

-

-

-

-

-

-

Available-for-sale assets

-

-

-

-

-

-

Net loans and advances

2,285

4,926

1,478

733

1,713

11,135

-

-

-

-

-

-

Other financial assets1
Credit related commitments

2

-

-

-

-

-

-

2,285

4,926

1,478

733

1,713

11,135As at March 2012
$M
Liquid assets

-

-

-

-

-

-

Due from other financial institutions

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

Derivative financial instruments

-

-

-

-

-

-

Available-for-sale assets

-

-

-

-

-

-

Net loans and advances

2,847

4,837

1,966

958

1,876

12,484

Other financial assets1

-

-

-

-

-

-

Credit related commitments2

-

-

-

-

-

-

2,847

4,837

1,966

958

1,876

12,4841.
2.

Mainly comprises trade dated assets and accrued interest
Comprises undrawn facilities and customer contingent liabilities

103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Credit quality, cont’dFinancial assets that are individually impaired
ANZ regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectability of a credit facility, thefinancial instrument (or ‘the facility’) is classified and reported as individually impaired and an individual provision is allocated against it.
As described in the summary of significant accounting policies in the 2012 Annual Financial Statements, provisions are created for financial
instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated aspart of overall change in fair value and directly reduce the reported carrying amounts.
Impaired instruments

Individual provision balances

As at ($M)

As at ($M)

Mar 13$M-

Sep 12$M-

Mar 12$M-

Mar 13$M-

Sep 12$M-

Mar 12$M-

Due from other financial institutions

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

83

116

151

-

-

-

Liquid assets

Derivative financial instruments1
Available-for-sale assets

-

-

-

-

-

-

Net loans and advances

3,978

4,364

4,664

1,518

1,729

1,701

Other financial assets2
Credit related commitments3
Total
1.
2.
3.

-

-

-

-

-

-

100

191

188

25

44

13

4,161

4,671

5,003

1,543

1,773

1,714

Derivative financial instruments are net of credit valuation adjustments
Mainly comprises trade dated assets and accrued interest
Comprises undrawn facilities and customer contingent liabilities

As at ($M)

Movement

Impaired and Restructured Items
by size of exposure
Less than $10 million

Mar 13
2,246

Sep 12
2,311

Mar 12
2,468

Mar 13v. Sep 12-3%

Mar 13v. Mar 12-9%$10 million to $100 million

1,659

1,731

1,903

-4%

-13%

Greater than $100 million

780

1,154

972

-32%

-20%

Gross impaired assets1

4,685

5,196

5,343

-10%

-12%

Less: Individually assessed provisions for impairment(1,543)(1,773)(1,714)

-13%

-10%

Net impaired assets

3,142

3,423

3,629

-8%

-13%

1.

Includes $524 million restructured items (Sep 2012: $525 million; Mar 2012: $340 million)

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Deposits and other borrowings
Half Year

Movement

Certificates of deposit

Mar 13$M
61,564

Sep 12$M
56,838Mar 12$M
59,603

Mar 13v. Sep 12
8%

Mar 13v. Mar 12
3%

Term deposits

180,169

172,313

164,439

5%

10%

Other deposits bearing interest and other borrowings

150,042

142,753

131,183

5%14%

Deposits not bearing interest

12,97011,782

11,452

10%

13%

Commercial paper

14,486

12,16415,08419%-4%

Borrowing corporations' debt

1,243

1,273

1,380

-2%

-10%

420,474

397,123

383,141

6%

10%

Total deposits and other borrowings
1

11. Loan capital

Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

740

752

768

-2%

-4%

-

-

691

n/a

-100%

ANZ CPS14

1,080

1,078

1,077

0%

0%

ANZ CPS25

1,961

1,958

1,956

0%

0%

ANZ CPS36

1,327

1,326

1,324

0%

0%

Perpetual subordinated notes

957

953

946

0%

1%

Subordinated notes

5,601

5,847

5,843

-4%

-4%

Total Loan Capital

11,666

11,914

12,605-2%-7%

US Stapled Trust Securities2
UK Stapled Securities3

Mar 13v. Mar 12

Convertible Preference Shares (ANZ CPS)

1.

2.

3.

4.

5.

6.

APRA has granted ANZ transitional capital treatment for all outstanding Tier 1 and Tier 2 capital securities. Transition will apply up until the security's first call date, except in the case of
the outstanding USD and NZD Perpetual Subordinated Notes and ANZ CPS3 where the transitional treatment will apply up until the earlier of the end of the transitional period(January 2022) and the first call date when either a step up event (ie an increase in credit margin) or a conversion to ordinary shares occurs
On 27 November 2003, ANZ issued USD750 million Trust Securities each comprising an interest paying unsecured note and a preference share which are stapled together. Subject tocertain conditions, the securities are redeemable by the issuer on 15 December 2013. The instrument converts into ordinary shares of ANZ at a 5% discount (i) at the holder’s request, if
ANZ fails to redeem the instrument on 15 December 2013, or (ii) on 15 December 2053 unless redeemed earlier. The securities constitute Additional Tier 1 capital as defined by APRA for
capital adequacy purposes
On 15 June 2007, ANZ issued £450 million stapled securities, each comprising an interest paying subordinated note and a preference share which are stapled together. ANZ bought-backand cancelled the stapled securities on 15 June 2012. The securities constituted Tier 1 capital as defined by APRA for capital adequacy purposes until 27 April 2012
On 30 September 2008, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 16 June 2014 at a 2.5% discount (subject to certain conditions being
satisfied). The securities constitute Additional Tier 1 capital as defined by APRA for capital adequacy purposes
On 17 December 2009, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 15 December 2016 at a 1% discount (subject to certain conditions
being satisfied). The securities constitute Additional Tier 1 capital as defined by APRA for capital adequacy purposes
On 28 September 2011, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 1 September 2019 at a 1% discount (subject to certain conditions
being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% then the convertible preference shares will immediately convert into ANZ ordinary shares at a
1% discount subject to maximum conversion number. Subject to certain conditions, on and from 1 September 2017 the convertible preference shares are redeemable or convertible into
ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ. The securities constitute Additional Tier 1 capital as defined by APRA for capital adequacy purposes

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. Share capital
Issued and quoted securities

Number quoted

Issue priceper share

Amount paid
up per share€1,000€1,000Ordinary shares
As at 31 March 2013

2,743,728,688

Issued during the half year

26,371,727

Preference shares
As at 31 March 2013
Euro Trust Securities1,21.

2.

500,000

On 13 December 2004, ANZ issued €500 million Trust Securities each comprising subordinated floating rate notes due 2053 stapled to a preference share. Subject to certain conditions,the securities are redeemable by the issuer on 15 December 2014. The securities constitute Additional Tier 1 capital as defined by APRA for capital adequacy purposes
APRA has granted ANZ transitional capital treatment for all outstanding Tier 1 and Tier 2 capital securities. Transition will apply for the Euro Trust Securities (preference shares) until theirfirst call date

13. Shareholders’ equity
Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

23,941

23,06622,214

4%

8%

Dividend reinvestment plan

451

704

757

-36%

-40%

Group employee share acquisition scheme1

20

83

45

-76%

-56%

Treasury shares in OnePath Australia2

27

57

21

-53%

29%

Share capital
Balance at start of period
Ordinary share capitalGroup share option scheme
Total share capital

21

31

29

-32%

-28%

24,46023,941

23,0662%

6%(2,831)(2,830)(2,418)

0%

17%

5

(1)

(412)

large

large

(2,826)(2,831)(2,830)0%0%Foreign currency translation reserve
Balance at start of period
Currency translation adjustments net of hedges after tax
Total foreign currency translation reserve

Share option reserve3
Balance at start of period

54

44

50

23%

8%

Share based payments/(exercises)

-

10

(4)

-100%

-100%

Transfer of options/rights lapsed to retained earnings

(1)

-

(2)

n/a

-50%

Total share option reserve

53

54

44

-2%

20%

1.

2.

3.

As at 31 March 2013, there were 16,583,195 ANZEST Treasury shares outstanding (Sep 12: 15,673,505; Mar 12: 15,962,923). Shares in the Company which are purchased on-market by
ANZEST Pty Ltd (trustee of ANZ employee share and option plans) or issued by the Company to ANZEST Pty Ltd are classified as Treasury shares (to the extent that they relate tounvested employee share-based awards)
As at 31 March 2013, there were 12,076,540 OnePath Australia Treasury shares outstanding (Sep 12:13,081,042; Mar 12: 15,587,499). OnePath Australia purchases and holds shares in
the Company to back policy liabilities in the life insurance statutory funds. These shares are also classified as Treasury shares
The share option reserve arises on the grant of share options/deferred share rights/performance rights (“options and rights”) to selected employees under the ANZ Share Option Plan.
Amounts are transferred from the share option reserve to other equity accounts when the options and rights are exercised and to retained earnings when lapsed or forfeited after vesting.
Forfeited options and rights due to termination prior to vesting are credited to the income statement

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. Shareholders’ equity, cont’d
Half Year

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

Balance at start of period

94

246

126

-62%

-25%

Gain/(loss) recognised after tax

15

85

108

-82%

-86%

Transferred to income statement

29

(237)

12

large

large

Total available-for-sale revaluation reserve

138

94

246

47%

-44%

Balance at start of period

208

133

169

56%

23%

Gain/(loss) recognised after tax

(81)

68

(41)

large

98%

Transferred to income statement

3

7

5

-57%

-40%

130

208

133

-38%

-2%

(23)

(23)

(22)

0%

5%

Available-for-sale revaluation reserve4

Hedging reserve5

Total hedging reserve

Transactions with non-controlling interests reserve
Balance at the start of the period
Transactions with non-controlling interests

-

-

(1)

n/a

-100%

(23)

(23)

(23)

0%

0%

(2,528)(2,498)(2,430)

1%

4%Balance at start of period

19,72818,75817,787

5%

11%

Profit attributable to shareholders of the Company

2,940

2,742

2,919

7%

1%

1

-

2

n/a

-50%

22,66921,50020,708

5%

9%

(27)

(42)

(2)

-36%

large

(2,115)(1,736)(1,955)

22%

8%

10

10

14

0%

-29%

Total transactions with non-controlling interests reserve
Total reserves

Retained earnings

Transfer of options/rights lapsed from share option reserve
Total available for appropriation
Actuarial gain/(loss) on defined benefit plans after tax6
Ordinary share dividends paid
Dividend income on Treasury shares held within theGroup's life insurance statutory funds
Preference share dividends paid

(3)

(4)

(7)

-25%

-57%

Retained earnings at end of period

20,534

19,72818,7584%

9%

Share capital and reserves attributable toshareholders of the Company

42,466

41,17139,3943%8%

Non-controlling interests
Total shareholders' equity
4.

5.

6.

53

49

49

8%

8%

42,51941,22039,443

3%

8%

The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold or impaired, that portion of the reserve
which relates to that financial asset is realised and recognised in the income statement.
The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in theincome statement when the hedged transaction impacts profit or loss, consistent with the applicable accounting policy
ANZ has taken the option available under AASB 119 to recognise actuarial gains/losses on defined benefit superannuation plans directly in retained earnings

107

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. Contingent liabilities and contingent assets
There are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of which cannot readily bequantified. Appropriate legal advice has been obtained and, in the light of such advice, provisions as deemed necessary have been made. In someinstances we have not disclosed the estimated financial impact as this may prejudice the interests of the Group.
Refer to Note 43 of the 2012 ANZ Annual Financial Statements for a description of current contingent liabilities and contingent assets.
–

Bank fees litigation
Litigation funder IMF (Australia) Ltd commenced a class action against ANZ in 2010, followed by a second, similar class action in March 2013.
The separate actions are claimed to be on behalf of more than 40,000 ANZ customers for more than $50 million in fees claimed to have been
charged to those customers. The case is at an early stage. ANZ is defending it. There is a risk that further claims could emerge in Australia or
elsewhere. On 11 March 2013, litigation funder Litigation Lending Services (NZ) announced plans for a class action against banks in New
Zealand for certain fees charged to New Zealand customers over the past six years.

–

Security recovery actions
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets over recent years.
ANZ will defend these claims and any future claims.

108

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. Note to the Cash Flow Statement(a)Reconciliation of profit after income tax to net cash provided by/(used in) operating activities
Half Year
Mar 13

Sep 12

Mar 12

Inflows

Inflows

Inflows(Outflows)(Outflows)(Outflows)

$M

$M

$M

2,940

2,742

2,919

588

660

538

3

7

37

Credit risk on intermediation trades

(48)

(21)

(52)

Depreciation and amortisation

384

372

351

(6)

(7)

3

Provision for employee entitlements, restructuring
and other provisions

182

483

315

Payments from provisions(325)

Profit after income tax
Adjustments to reconcile to net cash provided by/(used in) operating activities
Provision for credit impairment
Impairment on available for sale assets transferred to profit and loss

(Profit)/loss on sale of businesses

(288)

(520)

(Profit)/loss on sale of premises and equipment

33

24

(1)

(Profit)/loss on sale of available-for-sale assets

(10)

(195)

(30)

Amortisation of discounts/premiums included in interest income

(6)

(5)

(2)

101

92

97

1,992

692

1,757

713

(674)

(419)

Trading securities

2,392(7,307)2,718

Liquid assets

(720)

634

(199)

Due from other banks(121)(2,729)(1,527)

Share-based payments expense
Change in policy liabilities
Net derivatives/foreign exchange adjustment
Net (increase)/decrease in operating assets:

Loans and advances(14,590)(14,353)(18,395)

Investments backing policy liabilities(2,282)(1,517)(1,052)

Net derivative financial instruments

119

5,161

(427)

Interest receivable

(18)

8

(118)

Accrued income

(85)

49

(24)

Net tax assets

72

(88)

(437)

Deposits and other borrowings

24,835

15,25018,412

Due to other financial institutions

12,751

(544)

4,728

Payables and other liabilities

1,403

1,095

(886)

Interest payable

(124)

(295)

(104)

Accrued expenses

(103)

73

(528)

(179)

89

(109)

29,928

(824)

7,240

Liquid assets

51,37935,58334,146Due from other financial institutions

9,398

5,867

6,455

60,77741,45040,601Dividends satisfied by share issue

451

704

757

Dividends satisfied by bonus share issue

35

33

47

486

737

804

Net increase/(decrease) in operating liabilities:

Other
Net cash provided by/(used in) operating activities(b)

Reconciliation of cash and cash equivalents

Cash and cash equivalents at the end of the period as shown in the cash flow
statement are reflected to the related items in the balance sheet as follows(c)

Non-cash financing activities

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. Segment analysis(i) Description of segments
The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand and Global Wealth being the
major operating divisions. The IIB and Global Wealth divisions are co-ordinated globally.
Effective 1 October 2012, Corporate Banking Australia transferred to the Australia division from IIB, and comparatives have been restatedaccordingly.
(ii) Operating segments
Transactions between business units across segments within ANZ are conducted on an arms length basis.
Half Year

Movement

Segment Revenue
Australia

Mar 13$M
3,869

Sep 12$M
3,778

Mar 12$M
3,578

Mar 13v. Sep 12
2%

Mar 13v. Mar 12
8%

International and Institutional Banking

3,271

3,171

3,256

3%

0%

New Zealand

1,051

1,051

1,044

0%

1%

Global Wealth

738

717

723

3%

2%

Group Centre

157

411

119

-62%

32%

Subtotal

9,086

9,128

8,720

0%

4%

Other1

(156)

(234)

97

-33%

large

Group total

8,930

8,894

8,817

0%

1%

Half Year

Movement

Segment Profit
Australia

Mar 13$M
1,415

Sep 12$M
1,327

Mar 12$M
1,271

Mar 13v. Sep 12
7%

Mar 13v. Mar 12
11%

International and Institutional Banking

1,199

952

1,159

26%

3%

New Zealand

397

319

323

24%

23%

Global Wealth

203

169

177

20%

15%

Group Centre

(32)

167

(34)

large

-6%

Subtotal

3,182

2,934

2,896

8%

10%

Other1

(242)

(192)

23

26%

large

Group total

2,940

2,742

2,919

7%

1%

Half Year

Movement

Segment Assets
Australia

Mar 13$M
264,974

Sep 12$M
256,805

Mar 12$M
250,514

Mar 13v. Sep 12
3%

Mar 13v. Mar 12
6%

International and Institutional Banking

284,861

266,886

245,861

7%

16%

New Zealand

73,073

71,913

68,9462%

6%Global Wealth47,22345,35345,1754%

5%Group Centre

2,688

1,337

1,868

large

44%

Subtotal

672,819642,294

612,364

5%

10%

Other1,2

(194)

(167)

(152)

16%

28%

672,625

642,127

612,2125%

10%Group total
1.

2.

In evaluating the performance of the operating segments, certain items are removed from the operating segment results, where they are not considered integral to the ongoing
performance of the segment and are evaluated separately. From 1 October 2012, management adopted a revised definition on when gains/losses would ordinarily be removed whenassessing segment performance. Under the revised definition, gains and losses are adjusted where they are significant, or have the potential to be significant in any one period and areeither non-core items not associated with the ongoing operations of the Group (such as changes in tax or accounting legislation); accounting items that represent timing differences thatwill reverse through earnings in the future; or accounting reclassifications between individual line items that do not impact reported results. Comparative information has been restated toreflect the revised definition. These items and the profit after tax impact are set out in part (iii) of this note
Relates to Treasury shares held to support policy liabilities and policyholder related tax liabilities which are included in the Global Wealth segment assets for management reporting
purposes110

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. Segment analysis, cont’d(iii) Other items
The table below sets out the profit after tax impact of other items.
Half Year
Mar 13$M

Sep 12$M

Mar 12$M
70

Item (gains)/losses

Related segment

Treasury shares adjustment

Global Wealth53

26

Revaluation of policy liabilities

Global Wealth

19

(35)

(6)

Economic hedging

IIB

192

207

22

Revenue and net investment hedges

Group Centre

16

10

(63)

Structured credit intermediation trades

IIB

(38)

(16)

(46)

242

192

(23)

Total profit after tax

17. Changes in composition of the Group
There were no material entities acquired or disposed during the half year ended 31 March 2013.

18. Investments in Associates
Half Year

Profit after income tax

Mar 13$M

Sep 12$M

Mar 12
$M

211

229

166

Contributions to profit1
Contribution toGroup post-tax profit

Ownership interest
held by Group

Half Year

As at

Associates

P.T. Bank Pan Indonesia

Mar 13$M
38

Sep 12$M
57

Mar 12$M
30

Mar 13%39

Sep 12%
39

Mar 12%
39

Metrobank Card Corporation Inc

9

8

7

40

40

40

Bank of Tianjin2

44

35

37

18

18

20

AMMB Holdings Berhad

54

65

53

24

24

24

Shanghai Rural Commercial Bank

63

64

46

20

20

20

-

-

(1)

18

18

18

n/a

n/a

n/a

Saigon Securities Inc.2
Other associates
Profit after income tax
1.

2.

3

-

(6)

211

229

166

The results differ from the published results of these entities due to the application of IFRS, Group Accounting Policies and acquisition adjustments. This amounted to a $1 million increase
for the March 2013 half year (Sep 2012 half: $6 million increase; Mar 2012 half: $18 million reduction). Excludes gains or losses on disposal or valuation adjustments
Significant influence was established via representation on the Board of Directors

19. Related party disclosure
There have been no significant changes to the arrangements with related parties. Refer to Notes 46 and 47 of the 2012 Annual Financial
Statements.

20. Significant events since balance date
There are no significant events from 31 March 2013 to the date of signing of this report.

111

DIRECTORS’ DECLARATION AND RESPONSIBILITY STATEMENT
Directors’ Declaration
The Directors of Australia and New Zealand Banking Group Limited declare that:1.

2.

in the Directors’ opinion the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements are inaccordance with the Corporations Act 2001, including;•section 304, that they comply with the Australian Accounting Standards and any further requirements of the Corporations Regulations 2001;
and•section 305, that they give a true and fair view of the financial position of the Group as at 31 March 2013 and of its performance for the halfyear ended on that date; andin the Directors’ opinion as at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.

Signed in accordance with a resolution of the Directors.

John MorschelChairmanMichael R P Smith, OBE
Director

29 April 2013

Responsibility statement of the Directors in accordance with the Disclosure and Transparency Rule 4.2.10(3)(b) of the United Kingdom
Financial Services Authority
The Directors of Australia and New Zealand Banking Group Limited confirm to the best of their knowledge that:
The Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements for the half year ended 31 March
2013, Directors’ Report (including matters included by reference) and Directors’ Declaration as set out on pages 86 to 112 as well as the additional
information on pages 127 to 133 includes a fair review of:(i)

the important events that have occurred during the first six months of the financial year, and their impact on the Condensed Consolidated Financial
Statements; and(ii)

a description of the principal risks and uncertainties for the remaining six months of the financial year.

Signed in accordance with a resolution of the Directors.

John MorschelChairmanMichael R P Smith, OBE
Director

29 April 2013112

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION
Independent auditor’s review report to the members of Australia and New Zealand Banking Group Limited

Report on the condensed consolidated financial statements
We have reviewed the accompanying half year condensed consolidated financial statements of Australia and New Zealand Banking Group Limited (the“Company”), which comprises the condensed consolidated balance sheet as at 31 March 2013, condensed consolidated income statement andcondensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated cash
flow statement for the half year ended on that date, notes 1 to 20 comprising a basis of preparation and other explanatory notes, and the directors’
declaration of the Group comprising the Company and the entities it controlled at the half year’s end or from time to time during the half year.
Directors’ responsibility for the half year condensed consolidated financial statements
The directors of the Company are responsible for the preparation of the half year condensed consolidated financial statements that give a true and fairview in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine isnecessary to enable the preparation of the half year condensed consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
Auditors’ responsibility
Our responsibility is to express a conclusion on the half year condensed consolidated financial statements based on our review. We conducted ourreview in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditorof the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that thehalf year condensed consolidated financial statements are not in accordance with the Corporations Act 2001 including: giving a true and fair view of theGroup’s financial position as at 31 March 2013 and its performance for the half year ended on that date; and complying with Australian AccountingStandard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Australia and New Zealand Banking Group
Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual report.
A review of a half year Condensed Consolidated Financial Statements consists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordancewith Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year condensed consolidated
financial statements of Australia and New Zealand Banking Group Limited are not in accordance with the Corporations Act 2001, including:(a)giving a true and fair view of the Group’s financial position as at 31 March 2013 and of its performance for thehalf year ended on that date; and(b)complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

KPMG
MelbourneAndrew Yates
Partner

29 April 2013
Lead Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
To: the directors of Australia and New Zealand Banking Group Limited
I declare that, to the best of my knowledge and belief, in relation to the review for the half year ended 31 March 2013, there have been:(i)no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and(ii)

no contraventions of any applicable code of professional conduct in relation to the review.

KPMG
MelbourneAndrew Yates
Partner

29 April 2013

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation

113

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATIONThis page has been left blank intentionally

114

SUPPLEMENTARY INFORMATION
Four year summary by half year
Mar 13$M

Sep 12$M

Mar 12$M

Sep 11$M

Mar 11$M

Sep 10$M

Mar 10$M

Sep 09$M

Income Statement
Net interest income

6,236

6,126

5,984

5,848

5,652

5,623

5,239

4,988

Other operating income

2,850

3,002

2,736

2,529

2,856

2,592

2,328

2,339

Operating expense(4,034)(4,386)(4,133)(3,997)(4,026)(3,722)(3,249)(3,124)

Provision for credit impairment

(599)

(688)

(570)

(560)

(660)

(722)

(1,098)(1,621)

Profit before income tax

4,453

4,054

4,017

3,820

3,822

3,771

3,220

2,582

Income tax expense(1,266)(1,118)(1,117)(1,073)(1,094)(1,040)

(920)

(720)

(5)

(2)

(4)

(3)

(5)

(4)

(2)

2

Cash/underlying profit

3,182

2,934

2,896

2,744

2,723

2,727

2,298

1,864

Adjustments to arrive at statutory profit1

(242)

(192)

23

(53)

(59)

(151)

(373)

(338)

Profit attributable to shareholders of the Company

2,940

2,742

2,919

2,691

2,664

2,576

1,925

1,526

Assets672,625

642,127

612,212594,488

537,447

531,739506,708

476,987

Net assets

42,51941,22039,44337,95435,12934,15532,58332,429Return on average ordinary shareholders' equity

14.4%

13.7%

15.6%

14.9%

15.8%

15.5%

12.2%

10.3%

Return on average assets

0.90%

0.85%

0.95%

0.93%

0.97%

0.94%

0.76%

0.63%

Common Equity Tier 1 - APRA Basel 3

8.2%

8.0%

7.8%

7.5%

7.3%

n/a

n/a

n/a

Common Equity Tier 1 - Internationally Harmonised Basel 3

10.3%

10.0%

9.8%

9.5%

9.3%

n/a

n/a

n/a

Tier 1 capital - APRA Basel 2

n/a

10.8%

11.3%

10.9%

10.5%

10.1%

10.7%

10.6%

Total capital - APRA Basel 2

n/a

12.2%

12.6%

12.1%

12.1%

11.9%

13.0%

13.7%

Operating expenses to operating income

45.2%

49.3%

46.9%

48.0%

46.8%

46.3%

46.8%

44.5%

Operating expenses to operating income (cash/underlying)

44.4%

48.0%

47.4%

47.7%

47.3%

45.3%

42.9%

42.6%

Non-controlling interests
1

Balance Sheet

RatiosShareholder value - ordinary shares
Total return to shareholders(share price movement plus dividends)

19.0%

9.6%

23.6%

(15.7%)

3.6%(4.5%)

7.9%

58.0%

Market capitalisation

78,27867,25562,32551,31961,82060,61464,25061,085

Dividend

73 cents

79 cents

66 cents

76 cents

64 cents

74 cents

52 cents

56 cents

100%

100%

100%

100%

100%

100%

100%

100%

- high$29.46$25.12$23.68$24.49$25.96$26.23$25.72$24.99- low$23.42$20.26$18.60$17.63$22.05$19.95$20.13$14.90- closing$28.53$24.75$23.26$19.52$23.81$23.68$25.36$24.39Earnings per share - basic

108.6c102.6c110.8c104.0c104.2c102.1c

76.8

64.8c

Dividend payout ratio

68.2%

78.5%

60.8%

74.6%

62.5%

73.7%

68.7%

92.5%

Franked portion
Share price

Share information (per fully paid)

Net tangible assets per ordinary share$12.56$12.22$11.74$11.44$10.61$10.38$9.99$11.02

Number of fully paid ordinary shares (M)2,743.7

2,717.4

2,679.5

2,629.0

2,596.4

2,559.7

2,533.5

2,504.5

Permanent full time equivalent staff (FTE)

44,64245,243

46,13846,15245,731

43,99239,53636,094

Temporary full time equivalent staff (FTE)

2,777

2,996

3,371

4,145

3,332

3,107

2,608

1,593

Total full time equivalent staff (FTE)

47,41948,23949,50950,29749,06347,09942,14437,687

Number of shareholders

451,621438,958

439,811442,943424,787

411,692

405,698

396,181

Other information

1.

Mar 2013 - Mar 2011 adjustments to arrive at Cash Profit. Sep 2010 - Sep 2009 adjustments to arrive at Underlying Profit

115

SUPPLEMENTARY INFORMATION
Capital management

Basel 3
Qualifying Capital
Tier 1
Shareholders' equity and non-controlling interests

Basel 2

Mar 13$M

Sep 12$M

Mar 12$M

42,51941,22039,443

Table 1(958)

(3,857)(3,170)41,56137,36336,273

Table 2

(15,170)(10,839)(10,858)

Common Equity Tier 1 capital

26,391

26,52425,415Additional Tier 1 capital instruments

5,962

5,977

6,673

Prudential adjustments to shareholders' equity
Gross Common Equity Tier 1 capital
Deductions

Transitional adjustment
Tier 1 capital

Tier 2Tier 2 capital components

Table 3

(597)

-

-

31,75632,501

32,088

6,062

6,887

6,930

n/a

(2,814)(3,217)

Tier 2 capital

6,062

4,073

3,713

Total qualifying capital

37,81836,57435,801

Capital adequacy ratios
Common Equity Tier 1

8.2%

8.8%

8.9%

Tier 1

9.8%

10.8%

11.3%

Tier 2

1.9%

1.4%

1.3%

Total

11.7%

12.2%

12.6%

322,582

300,119284,836

Deductions

Risk weighted assets

Table 4116

SUPPLEMENTARY INFORMATION
Capital management, cont’dBasel 3
Mar 13$M

Basel 2
Sep 12$M

Mar 12$M

Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to OnePath policy holders

253

280

337

Reclassification of preference share capital

(871)

(871)

(871)

Accumulated retained profits and reserves of insurance, funds management
and securitisation entities1(573)(1,660)(1,444)

Deferred fee revenue including fees deferred as part of loan yields

362

415

425

Hedging reserve

n/a

(208)

(133)

(105)

(94)

(246)

Dividend not provided forn/a(2,149)(1,769)Accrual for Dividend Reinvestment Plans

n/a

430

531

Other

(24)

-

-

Total

(958)

(3,857)(3,170)

Unamortised goodwill & other intangibles (excluding OnePath Australia and New Zealand)(3,717)(3,052)(3,017)

Intangible component of investments in OnePath Australia and New Zealand3(2,075)(2,074)(2,071)

Capitalised software(1,800)(1,702)(1,660)Capitalised expenses including loan and lease origination fees

(884)

(850)

(761)

Applicable deferred net tax assets4

(990)

(301)

(92)

Expected losses in excess of eligible provisions5

(526)

(542)

(524)
(327)

Available-for-sale reserve attributable to deconsolidated subsidiaries2

Table 2: Deductions from Common Equity Tier 1 capital

Investment in ANZ insurance and funds management subsidiaries

(684)

(327)

Investment in OnePath Australia and New Zealand(1,042)

(721)

(922)

Investment in banking associates(2,956)(1,070)(1,118)Other deductions6

(496)

(200)

(366)

(15,170)(10,839)(10,858)

General reserve for impairment of financial assets

244

234

230

Perpetual subordinated notes

957

951

943

4,979

5,702

5,757

Less: Adjustment for third party holdings

(87)

-

-

Holdings of Tier 2 instruments in ANZ and other financial institutions

(31)

-

-

-

(2,814)(3,217)

6,062

4,073

3,713

Total

Table 3: Tier 2 capital

Subordinated debt

Deductions
Total
1.
2.
3.
4.
5.
6.

Prior to 2013, included undistributed equity accounted earnings in associates
Prior to 2013, the entire balance was excluded from capital
Calculation based on prudential requirements
From 2013, includes deferred tax on general reserve for impairment of financial assets
From 2013, does not include adjustments for tax
In 2013 includes Cash Flow Hedge Reserve

117

SUPPLEMENTARY INFORMATION
Capital management, cont’dBasel 3Basel 2

Mar 13$M

Sep 12$M

Mar 12$M

On balance sheet

199,121

190,210

186,122

Commitments

45,25042,807

43,571

Contingents

10,174

9,962

9,546

Table 4: Risk weighted assets

Derivatives

1

Total credit risk2

20,433

11,896

10,926274,978

254,875

250,165

Market risk - Traded

6,850

4,664

4,201

Market risk - IRRBB

12,62912,455

10,465

Operational risk

28,12528,12520,005

Total risk weighted assets

322,582

300,119284,836

Basel 3Basel 2

Mar 13$M

Sep 12$M

Mar 12$M

114,700

111,796

101,280

Table 5: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate2
Sovereign

4,382

4,088

4,669

Bank2

15,838

11,077

10,195Residential mortgage

44,59742,95942,684

Qualifying revolving retail (credit cards)

7,234

7,092

7,610

Other retail

23,20021,27720,087

Credit risk weighted assets
subject to Advanced IRB approach

209,951

198,289

186,525

Credit risk specialised lending exposuressubject to slotting criteria

27,842

27,62827,903

Corporate

17,157

18,16824,922

Residential mortgage

1,827

1,812

1,445

Qualifying revolving retail (credit cards)

2,068

2,028

1,933

Other retail

1,248

1,165

1,124

Credit risk weighted assets subject to Standardised approach

22,30023,17329,424Credit Valuation Adjustment andQualifying Central Counterparties

8,949

n/a

n/a

Credit risk weighted assets relating to securitisation exposures

2,549

1,170

1,225
1,235

Subject to Standardised approach

Credit risk weighted assets relating to equity exposures
Other assets
Total credit risk weighted assets
1.
2.

From 2013, includes impact of Credit Valuation Adjustment and Qualifying Central Counterparties
From 2013, includes impact of the increase in asset value correlation with respect to large and unregulated financial institutions

118

n/a

1,030

3,387

3,585

3,853

274,978

254,875

250,165

SUPPLEMENTARY INFORMATION
Capital management, cont’d

Table 6: Collective provision and regulatory expected loss by divisionCollective Provision

Regulatory Expected
Loss

As at ($M)

As at ($M)

Australia

Mar 13
1,090

Sep 12
1,073

Mar 13
2,377

Sep 122,309

International and Institutional Banking

1,239

1,224

1,123

1,270

New Zealand

385

413

792

814

Global Wealth

11

11

23

23

Group Centre

44

44

1

1

2,769

2,765

4,316

4,417

-

-

9

20

2,769

2,765

4,325

4,437

Cash collective provision and regulatory expected loss
Adjustments between statutory and cash
Collective provision and regulatory expected loss

As at ($M)

Movement

Mar 13$M

Sep 12$M

Mar 12$M

Mar 13v. Sep 12

Mar 13v. Mar 12

Defaulted

1,976

2,168

2,130

-9%

-7%

Non-defaulted

2,349

2,269

2,304

4%

2%

4,325

4,437

4,434

-3%

-2%

(2,769)(2,765)(2,994)0%-8%

Non-qualifying collective provision

341

334

312

2%

9%

Standardised collective provision

245

269

296

-9%

-17%

Table 7: Expected loss in excess of eligible provisions
Basel expected loss

Less: Qualifying collective provisionCollective provision

Deferred tax asset

n/a

625

708

n/a

n/a

(2,183)(1,537)(1,678)42%

30%

Less: Qualifying individual provision
Individual provision(1,543)(1,773)(1,714)

-13%

-10%

Standardised individual provision

249

268

300

-7%

-17%

Collective provision on advanced defaulted

(322)

(312)

(293)

3%

10%

(1,616)(1,817)(1,707)-11%-5%

Gross deduction

526

1,083

1,049

50/50 deduction

n/a

542

524

119

SUPPLEMENTARY INFORMATION
Capital management, cont’d
Table 8: APRA Basel 3 Common Equity Tier 1
Half Year
Mar 13 vs Sep 12
APRA Basel 3 Common Equity Tier 1
Cash profit after preference share dividends+101bps($3.2B)

Risk weighted assets (excluding portfolio data review)
Portfolio growth and mix-25bpsRisk migration and Expected Losses in excess of Eligible Provisions

0bps

Non-credit risk

-6bps

Capital retention in insurance businesses and associates-7bps

Capitalised software and intangibles-5bps

Other items-6bps

Organic Capital Generation+52bpsANZ Wealth Refinance+13bps

Other

+3bps

Capital initiatives and divestments+16bpsOrdinary share dividends-68bpsDividends reinvested+15bpsOrdinary share dividends net of reinvestment-53bps

Other

+1bps

Total Common Equity Tier 1 movement+16bpsMarch 2013 APRA Basel 3 Common Equity Tier 1

8.2%

120

SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
Averages used in the following tables are predominantly daily averages. Interest income figures are presented on a tax-equivalent basis. Impaired loans
are included under the interest earning asset category, ‘loans and advances’.
Intra-group interest earning assets and interest bearing liabilities are treated as external assets and liabilities for the geographic segments.
Half year Mar 13

Half year Sep 12

Ave bal
$M

Int
$M

Rate
%

Australia

3,204

52

Asia Pacific, Europe & America

14,48780

New Zealand

1,479

Half year Mar 12

Ave bal
$M

Int
$M

Rate
%

Ave bal
$M

Int
$M

Rate
%

3.3%

3,163

52

1.1%

12,740

93

3.3%

3,403

73

4.3%

1.5%

12,181

95

6

0.8%

1,286

1.6%

6

0.9%

1,732

10

1.2%

939

3

0.7%

1,020

4

0.7%

1,031

4

0.7%

Australia

36,511605

Asia Pacific, Europe & America

15,270124

3.3%

34,044668

3.9%

33,092

704

4.3%

1.6%

14,778128

1.7%

15,267137

New Zealand

9,786

1.8%

180

3.7%

9,626

184

3.8%

8,127

168

4.1%

Australia
Asia Pacific, Europe & America

312,158

9,841

6.3%

308,587

10,523

6.8%

295,540

10,877

7.4%

48,093887

3.7%

44,145915

4.1%

39,665850

New Zealand

4.3%

78,101

2,333

6.0%

74,947

2,301

6.1%

73,041

2,271

6.2%

Australia

5,787

99

3.4%

4,699

86

3.7%

3,733

90

4.8%

Asia Pacific, Europe & America

27,01961

0.4%

26,91473

0.5%

19,69594

1.0%

New Zealand

2,307

55

4.8%

2,212

65

5.9%

2,255

67

5.9%

Australia

1,907

217

22.8%

3,714

269

14.5%

4,920

307

12.5%

Asia Pacific, Europe & America

8,718

1

0.0%

7,696

(5)

-0.1%

6,891

(19)

-0.6%

565,766

14,544

549,571

15,362

520,573

15,728(10,625)(218)(11,410)(264)(11,811)(288)

555,141

14,326538,161

15,098508,762

15,440Interest earning assets
Due from other financial institutions

Regulatory Deposits1
Asia Pacific, Europe & America
Trading and available-for-sale assets

Loans and advances

Other assets1

Intragroup assets

Intragroup elimination

5.2%

5.6%

Non-interest earning assets
Derivatives
Australia

32,97839,21033,774

Asia Pacific, Europe & America

5,193

4,444

5,122

New Zealand

6,758

9,979

9,969

Premises and equipment

2,082

2,069

2,101

Insurance assets

30,216

29,84830,097

Other assets

27,18923,26827,165(2,846)(3,087)(2,987)

(767)

(758)

(828)

Provisions for credit impairment
Australia
Asia Pacific, Europe & America
New Zealand

Total average assets
1.

(843)

(875)

(895)

99,960104,098

103,518

655,101

642,259

612,280

Previously Regulatory deposits were included in Other assets. In the current period these have been presented separately and comparative information has been restated accordingly

121

6.1%

SUPPLEMENTARY INFORMATION
Half year Mar 13

Half year Sep 12

Half year Mar 12

Ave bal
$M

Int
$M

Rate
%

Ave bal
$M

Int
$M

Rate
%

Ave bal
$M

Int
$M

Rate
%

Australia

134,895

2,803

4.2%

138,964

3,354

4.8%

130,046

3,468

5.3%

Asia Pacific, Europe & America

70,817333

0.9%

65,372373

1.1%

55,915368

1.3%

New Zealand

28,654569

4.0%

28,188571

4.1%

27,774560

4.0%Australia

23,564424

3.6%

22,242428

3.8%

21,316433

4.1%

Asia Pacific, Europe & America

4,968

12

0.5%

4,250

12

0.6%

4,311

12

0.6%

New Zealand

6,225

106

3.4%

4,743

79

3.3%

2,772

40

2.9%

Australia

82,892

1,217

2.9%

77,993

1,341

3.4%

77,169

1,505

3.9%

Asia Pacific, Europe & America

10,432

16

0.3%

9,763

14

0.3%

9,872

15

0.3%

New Zealand

15,683195

2.5%

15,159194

2.6%

15,111

197

2.6%

Australia

10,084

137

2.7%

8,201

127

3.1%

6,416

133

4.1%

Asia Pacific, Europe & America

24,32582

0.7%

22,89097

0.8%

20,35784

0.8%

New Zealand

1,481

14

1.9%

2,028

19

1.9%

1,673

13

1.6%

Australia

8,400

139

3.3%

9,376

188

4.0%

13,977322

4.6%

New Zealand

4,395

67

3.1%

4,176

69

3.3%

3,161

54

3.4%

Interest bearing liabilities
Time deposits

Savings deposits

Other demand deposits

Due to other financial institutions

Commercial paper

Borrowing corporations' debt
Australia

81

3

7.7%

158

5

6.3%

282

9

6.4%

1,165

27

4.6%

1,155

27

4.7%

1,094

27

4.9%

Australia

64,881

1,497

4.6%

65,093

1,692

5.2%

62,147

1,769

5.7%

Asia Pacific, Europe & America

1,142

11

1.9%

118

1

1.7%

59

1

3.4%

New Zealand

13,692332

4.9%

12,851331

5.2%

13,706333

4.9%

Australia

1,616

116

n/a

1,083

67

n/a

3,037

139

n/a

Asia Pacific, Europe & America

1,647

19

n/a

1,592

32

n/a

1,197

20

n/a

329

7

n/a

183

(49)

n/a

218

(46)

n/a

4.1%

4.6%

4.9%

New Zealand
Loan capital, bonds and notes

Other liabilities

1

New Zealand
Intragroup liabilities
New Zealand

Intragroup elimination

10,625218

11,410264

11,811

288

521,993

8,344

506,988

9,236

483,421

9,744(10,625)(218)(11,410)(264)(11,811)(288)

511,368

8,126

495,578

8,972

471,610

9,456

3.2%

3.6%

Non-interest bearing liabilities
Deposits
Australia

5,416

5,094

5,112

Asia Pacific, Europe & America

2,765

2,481

2,293

New Zealand

4,143

3,751

3,976

Australia

29,41935,32527,331

Asia Pacific, Europe & America

5,550

4,864

5,223

New Zealand

6,723

9,381

9,034

Insurance Liabilities

29,89128,80527,968Derivatives

External unit holder liabilities (life insurance funds)

3,949

4,525

5,033

Other liabilities

14,111

11,64916,379101,967

105,875

102,349

613,335

601,453

573,959

Total average liabilities
1.

Includes foreign exchange swap costs

122

4.0%

SUPPLEMENTARY INFORMATION

Half Year
Mar 13$M

Sep 12$M

Mar 12$M

Australia

435,205

433,578

417,450

Asia Pacific, Europe & America

128,441

118,569

108,114

New Zealand

102,080

101,522

98,527

Total average assets

less intragroup elimination(10,625)(11,410)(11,811)655,101

642,259

612,280

33.9%

33.1%

32.6%

Australia

359,567

354,207

340,688

Asia Pacific, Europe & America

114,526

107,293

94,730

New Zealand

91,67388,071

85,155% of total average assets attributable to overseas activities

Average interest earning assets

less intragroup elimination(10,625)(11,410)(11,811)555,141

538,161

508,762

Australia

405,565

405,635

391,639

Asia Pacific, Europe & America

123,831

112,761

102,364

New Zealand

94,564

94,467

91,767(10,625)(11,410)(11,811)613,335

601,453

573,959

33.9%

32.6%

31.8%

Australia

326,413323,110314,390

Asia Pacific, Europe & America

113,331103,985

91,711New Zealand

82,24979,89377,320(10,625)(11,410)(11,811)

511,368

495,578

471,61040,89539,93537,450

871

871

871

41,76640,80638,321

655,101

642,259

612,280

Total average liabilities

less intragroup elimination% of total average liabilities attributable to overseas activities

Average interest bearing liabilities

less intragroup elimination

Total average shareholders' equity1
Ordinary share capital, reserves and retained earnings
Preference share capital

Total average liabilities and shareholders' equity
1.

Average shareholders’ equity includes OnePath Australia shares that are eliminated from the closing shareholders’ equity balance of $253 million for March 2013 (Sep 2012: $280 million;
Mar 2012: $337 million)

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Half Year
Mar 13%

Sep 12%

Mar 12%Australia

6.03

6.55

7.07

Asia Pacific, Europe & America

2.02

2.25

2.45

New Zealand

5.63

5.81

5.91

Total Group

5.18

5.61

6.07

Net interest spread

2.14

2.09

2.13

Interest attributable to net non-interest bearing items

0.36

0.39

0.38

Net interest margin - Australia

2.50

2.48

2.51

Net interest spread

1.19

1.24

1.36

Interest attributable to net non-interest bearing items

0.01

0.03

0.03

Net interest margin - Asia Pacific, Europe & America

1.20

1.27

1.39

Net interest spread

1.89

2.04

2.12

Interest attributable to net non-interest bearing items

0.38

0.35

0.35

Net interest margin - New Zealand

2.27

2.39

2.47

Net interest spread

1.99

1.99

2.06

Interest attributable to net non-interest bearing items

0.25

0.29

0.29

Net interest margin

2.24

2.28

2.35

Net interest margin (excluding Global Markets)

2.65

2.67

2.75

Gross earnings rate1

Interest spread and net interest average margin may be analysed as follows:

Australia

Asia Pacific, Europe & America

New Zealand

Group

1.

Average interest rate received on average interest earning assets

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Exchange rates
Major exchange rates used in translation of results of offshore controlled entities and branches and investments in associates were as follows:
Balance sheet

Profit & Loss Average

As atHalf Year

Chinese Yuan

Mar 136.4793

Sep 12
6.5848Mar 12
6.5530Mar 136.4746

Sep 12
6.4923

Mar 12
6.5376Euro

0.81520.80920.7791

0.79380.80710.7758Great British Pound

0.68860.64370.65100.65740.64750.6569

Indian Rupee

56.73855.17153.41456.24055.75652.143

Indonesian Rupiah

10,127.4

10,022.6

9,548.1

10,034.1

9,619.9

9,332.8

Malaysian Ringgit

3.23513.20773.18903.1876

3.1927

3.2068

New Zealand Dollar

1.24691.25291.26971.25331.28081.2959Papua New Guinea Kina

2.22972.17732.15792.18502.11912.2124

United States Dollar

1.0424

1.0462

1.04011.03871.02371.0320125

SUPPLEMENTARY INFORMATION
Derivative financial instruments
Derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices. They include swaps, forward
rate contracts, futures, options and combinations of these instruments. The use of derivatives and their sale to customers as risk management products is
an integral part of the Group’s trading activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in foreign exchange andinterest rates as part of its asset and liability management activities. Derivatives are subject to the same types of credit and market risk as other financial
instruments, and the Group manages these risks in a consistent manner.
The following table provides an overview of the Group’s exchange rate, interest rate, commodity and credit derivatives. It includes all contracts, bothtrading and hedging.
Notional principal amount is the face value of the contract and represents the volume of outstanding transactions. Fair value is the net position ofcontracts with positive market values and negative market values.
As at 31 March 2013
Notional
Principal
amount$M

As at 30 September 2012
Notional
Principal
amount$M

Total fair value
Assets$M

Liabilities$M

Total fair value
Assets$M

Liabilities$M

Foreign exchange contracts
Spot and forward contracts

419,509

5,044(5,567)

390,756

4,147(5,336)

Swap agreements

311,885

6,572(10,503)

280,664

7,863(11,685)

Futures contracts

676

117

(108)

954

99

(134)

Options purchased

60,166

1,282-

66,348

1,228-

Options sold73,605-(1,239)71,318-(1,091)

865,841

13,015(17,417)810,040

13,337(18,246)

23,383

1,096

(770)

34,8201,600(1,803)

182,04212(13)

240,576

24(23)

Swap agreements

1,911,250

25,898(25,074)

1,583,257

32,284(30,745)

Futures contracts

189,884

337

(369)

113,974

157

(176)

Options purchased

16,691918-

26,040963-

Options sold25,762-(1,000)35,367-(1,116)2,325,629

27,165(26,456)

1,999,214

33,428(32,060)

4,495

203

-

7,634

243

-

11,877

159(134)

11,632277(62)16,372362(134)

19,266

520(62)

Commodity contracts
Derivative contracts
Interest rate contracts
Forward rate agreements

Credit default swaps
Structured credit derivatives
purchased1
Other credit derivatives
purchased2
Total credit derivatives purchased

4,495

-

(246)

7,634

-

(346)

Other credit derivatives sold2

10,70662(47)

10,87044(122)

Total credit derivatives sold

15,20162(293)

18,50444(468)

Structured credit derivatives sold

Total
1.
2.

1

31,573424(427)

37,770564(530)

3,246,426

41,700(45,070)

2,881,844

48,929(52,639)

Refer page 78
The notional amounts comprise vanilla credit default swap transactions including credit indices such as Itraxx (Europe and Australia) and CDX. In the case of back-to-back deals, where arisk position from one counterparty is “closed out” with another counterparty, the notional amounts are not netted down in the above table. For example, ANZ may sell credit protection overa particular corporate bond (or reference asset) to a counterparty and simultaneously offset that credit exposure by buying credit protection over the same corporate bond (or reference
asset) from another counterparty. Netting may only occur when there is an offsetting deal with the same counterparty. These credit default swap trades are transacted in conjunction withother financial instruments by reference to the traded market risk limit framework which includes VaR, name and rating specific concentration limits, sensitivity limits and stress testing
limits. VaR disclosures are set out on page 50

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Principal risks and uncertainties
1.

Introduction

The Group’s activities are subject to risks that can adversely impact its business, operations and financial condition. The risks and uncertainties described
below are not the only ones that the Group may face. Additional risks and uncertainties that the Group is unaware of, or that the Group currently deems
to be immaterial, may also become important factors that affect it. If any of the listed or unlisted risks actually occur, the Group’s business, operations,financial condition, or reputation could be materially and adversely affected, with the result that the trading price of the Group’s equity or debt securities
could decline, and investors could lose all or part of their investment.
2.

Changes in general business and economic conditions, including disruption in regional or global credit and capital markets, may
adversely affect the Group’s business, operations and financial condition

The Group’s financial performance is primarily influenced by the economic conditions and the level of business activity in the major countries and regionsin which it operates or trades, i.e. Australia, New Zealand, the Asia Pacific region, Europe and the United States of America. The Group’s business,
operations, and financial condition can be negatively affected by changes to these economic and business conditions.
The economic and business conditions that prevail in the Group’s major operating and trading markets are affected by domestic and international
economic events, political events and natural disasters, and by movements and events that occur in global financial markets.
The global financial crisis saw a sudden and prolonged dislocation in credit and equity capital markets, a contraction in global economic activity and thecreation of many challenges for financial services institutions worldwide that still persist in many regions. Sovereign risk and its potential impact onfinancial institutions in Europe and globally subsequently emerged as a significant risk to the growth prospects of the various regional economies and theglobal economy. The impact of the global financial crisis and its aftermath (such as heightened sovereign risk) continue to affect regional and global
economic activity, confidence and capital markets.
The economic effects of the global financial crisis and the European sovereign debt crisis have been widespread and far-reaching with unfavourable
ongoing impacts on retail spending, personal and business credit growth, housing credit, and business and consumer confidence. While some of these
economic factors have since improved, lasting impacts from the global financial crisis and subsequent volatility in financial markets and the European
sovereign debt crisis suggest ongoing vulnerability and potential adjustment of consumer and business behaviour.
A sovereign debt crisis could have serious implications for the European Union and the euro which, depending on the circumstances in which they takeplace and the countries and currencies affected, could adversely impact the Group’s business operations and financial condition. Likewise, if one or more
European countries re-introduce national currencies, and the Euro destabilises, the Group’s business operations could be disrupted by currency
fluctuations and difficulties in hedging against such fluctuations. The New Zealand economy is also vulnerable to more volatile markets and deteriorating
funding conditions. Economic conditions in Australia, New Zealand, and some Asia Pacific countries remain difficult for many businesses.
Should the difficult economic conditions described above persist or worsen, asset values in the housing, commercial or rural property markets could
decline, unemployment could rise and corporate and personal incomes could suffer. Also, deterioration in global markets, including equity, property,
currency and other asset markets, could impact the Group’s customers and the security the Group holds against loans and other credit exposures, which
may impact its ability to recover some loans and other credit exposures.
All or any of the negative economic and business impacts described above could cause a reduction in demand for the Group’s products and services
and/or an increase in loan and other credit defaults and bad debts, which could adversely affect the Group’s business, operations, and financial condition.
The Group’s financial performance could also be adversely affected if it were unable to adapt cost structures, products, pricing or activities in response toa drop in demand or lower than expected revenues. Similarly, higher than expected costs (including credit and funding costs) could be incurred becauseof adverse changes in the economy, general business conditions or the operating environment in the countries in which it operates.
Other economic and financial factors or events which may adversely affect the Group’s performance and results, include, but are not limited to, the levelof and volatility in foreign exchange rates and interest rates, changes in inflation and money supply, fluctuations in both debt and equity capital markets,
declining commodity prices due to, for example, reduced demand in Asia, especially North Asia/China, and decreasing consumer and business
confidence.
Geopolitical instability, such as threats of, potential for, or actual conflict, occurring around the world, such as the ongoing unrest and conflicts in Syria,
North Korea and the Middle East, may also adversely affect global financial markets, general economic and business conditions and the Group’s ability tocontinue operating or trading in a country, which in turn may adversely affect the Group’s business, operations, and financial condition.
Natural disasters such as (but not restricted to) cyclones, floods and earthquakes, and the economic and financial market implications of such disasters
on domestic and global conditions can adversely impact the Group’s ability to continue operating or trading in the country or countries directly or indirectly
affected, which in turn may adversely affect the Group’s business, operations and financial condition. For more specific risks in relation to earthquakes
and the Christchurch earthquakes, see the risk factor entitled “The Group may be exposed to the impact of future climate change, geological events,
plant and animal diseases, and other extrinsic events which may adversely affect its business, operations and financial condition”.
3.

Changes in exchange rates may adversely affect the Group’s business, operations and financial condition

The previous appreciation in and continuing relatively high level of the Australian and New Zealand dollars relative to other currencies has adversely
affected, and could continue to have an adverse effect on, certain portions of the Australian and New Zealand economies, including some agricultural
exports, tourism, manufacturing, retailing subject to internet competition, and import-competing producers. Recently, commodity prices have fallen and
the Australian and New Zealand dollars have remained high, removing some of the traditional “natural hedge” the currencies have played for commodity
producers and the broader economy. A depreciation in the Australian or New Zealand dollars relative to other currencies would increase the debt service
obligations in Australia or New Zealand dollar terms of unhedged exposures. Appreciation of the Australian dollar against the New Zealand dollar, theUnited States dollar and other currencies has a negative earnings translation effect, and future appreciation could have a greater negative impact, on theGroup’s results from its other non-Australian businesses, particularly its New Zealand and Asian businesses, which are largely based on non-Australian
dollar revenues. The Group has put in place hedges to partially mitigate the impact of currency appreciation, but notwithstanding this, there can be noassurance that the Group’s hedges will be sufficient or effective, and any further appreciation could have an adverse impact upon the Group’s earnings.

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SUPPLEMENTARY INFORMATION
4.

Competition may adversely affect the Group’s business, operations and financial condition, especially in Australia, New Zealand and the
Asian markets in which it operates

The markets in which the Group operates are highly competitive and could become even more so, particularly in those countries and segments that areconsidered to provide higher growth prospects or are in greatest demand (for example, customer deposits or the Asian region). Factors that contribute tocompetition risk include industry regulation, mergers and acquisitions, changes in customers’ needs and preferences, entry of new participants,
development of new distribution and service methods, increased diversification of products by competitors, and regulatory changes in the rules governing
the operations of banks and non-bank competitors. For example, changes in the financial services sector in Australia and New Zealand have made it
possible for non-banks to offer products and services traditionally provided by banks, such as automatic payments systems, mortgages and credit cards.
In addition, banks organised in jurisdictions outside Australia and New Zealand are subject to different levels of regulation and consequently some may
have lower cost structures. Increasing competition for customers could also potentially lead to a compression in the Group’s net interest margins, orincreased advertising and related expenses to attract and retain customers.
Additionally, the Australian Government announced in late 2010 a set of measures with the stated purpose of promoting a competitive and sustainablebanking system in Australia. Any regulatory or behavioural change that occurs in response to this policy shift could have the effect of limiting or reducing
the Group’s revenue earned from its banking products or operations. These regulatory changes could also result in higher operating costs. A reduction orlimitation in revenue or an increase in operating costs could adversely affect the Group’s profitability.
The effect of competitive market conditions, especially in the Group’s main markets and products, may lead to erosion in the Group’s market share or
margins, and adversely affect the Group’s business, operations and financial condition.
5.

Changes in monetary policies may adversely affect the Group’s business, operations and financial condition

Central monetary authorities (including the Reserve Bank of Australia (“RBA”) and the Reserve Bank of New Zealand (“RBNZ”), the United States
Federal Reserve and the monetary authorities in the Asian jurisdictions in which ANZ carries out business) set official interest rates or take othermeasures to affect the demand for money and credit in their relevant jurisdictions (in some Asian jurisdictions currency policy is used to influence generalbusiness conditions and the demand for money and credit). These policies can significantly affect the Group’s cost of funds for lending and investing andthe return that the Group will earn on those loans and investments. Both these factors impact the Group’s net interest margin and can affect the value offinancial instruments it holds, such as debt securities and hedging instruments. The policies of the central monetary authorities can also affect theGroup’s borrowers, potentially increasing the risk that they may fail to repay loans. Changes in such policies are difficult to predict.
6.

Sovereign risk may destabilise global financial markets adversely affecting all participants, including the Group

Sovereign risk, or the risk that foreign governments will default on their debt obligations, increase borrowings as and when required or be unable torefinance their debts as they fall due or nationalise participants in their economy, has emerged as a risk to the recovery prospects of many economies.
This risk is particularly relevant to a number of European countries though it is not limited to these places and includes the United States. Should one
sovereign default, there could be a cascading effect to other markets and countries, the consequences of which, while difficult to predict, may be similar
to or worse than those currently being experienced or which were experienced during the global financial crisis. Such an event could destabilise global
financial markets adversely affecting all participants, including the Group.
7.

The Group is exposed to liquidity and funding risk, which may adversely affect its business, operations and financial condition

Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesaledebt, or that the Group has insufficient capacity to fund increases in assets. Liquidity risk is inherent in all banking operations due to the timing mismatch
between cash inflows and cash outflows.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings and possibly constrain the volume of new lending, which could
adversely affect the Group’s profitability. A significant deterioration in investor confidence in the Group could materially impact the Group’s cost of
borrowing, and the Group’s ongoing operations and funding.
The Group raises funding from a variety of sources including customer deposits and wholesale funding in Australia and offshore markets to ensure that it
continues to meet its funding obligations and to maintain or grow its business generally. In times of systemic liquidity stress, in the event of damage tomarket confidence in the Group or in the event that funding inside or outside of Australia is not available or constrained, the Group’s ability to accesssources of funding and liquidity may be constrained and it will be exposed to liquidity risk. In any such cases, ANZ may be forced to seek alternative
funding. The availability of such alternative funding, and the terms on which it may be available, will depend on a variety of factors, including prevailingmarket conditions and ANZ’s credit ratings. Even if available, the cost of these alternatives may be more expensive or on unfavourable terms.
Since the global financial crisis, developments in the U.S. mortgage industry and in the U.S. and European markets more generally, including recent
European sovereign debt concerns, did adversely affect the liquidity in global capital markets and increased funding costs. Future deterioration in market
conditions may limit the Group’s ability to replace maturing liabilities and access funding in a timely and cost-effective manner necessary to fund andgrow its business.
8.

The Group is exposed to the risk that its credit ratings could change, which could adversely affect its ability to raise capital and wholesalefunding

ANZ’s credit ratings have a significant impact on both its access to, and cost of, capital and wholesale funding. Credit ratings are not a recommendationby the relevant rating agency to invest in securities offered by ANZ. Credit ratings may be withdrawn, subject to qualifiers, revised, or suspended by therelevant credit rating agency at any time and the methodologies by which they are determined may be revised. A downgrade or potential downgrade to
ANZ’s credit rating may reduce access to capital and wholesale debt markets, potentially leading to an increase in funding costs, as well as affecting thewillingness of counterparties to transact with it.
In addition, the ratings of individual securities (including, but not limited to, certain Tier 1 capital and Tier 2 capital securities) issued by ANZ (and banks
globally) could be impacted from time to time by changes in the ratings methodologies used by rating agencies. Ratings agencies may also revise their
methodologies in response to legal or regulatory changes or other market developments.

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SUPPLEMENTARY INFORMATION

9.

The Group may experience challenges in managing its capital base, which could give rise to greater volatility in capital ratios

The Group’s capital base is critical to the management of its businesses and access to funding. The Group is required by regulators including, but notlimited to, APRA, RBNZ, the UK Financial Services Authority, U.S. regulators and regulators in various Asia Pacific jurisdictions (such as the Hong Kong
Monetary Authority and the Monetary Authority of Singapore) where the Group has operations, to maintain adequate regulatory capital.
Under current regulatory requirements, risk-weighted assets and expected loan losses increase as a counterparty’s risk grade worsens. These additional
regulatory capital requirements compound any reduction in capital resulting from lower profits in times of stress. As a result, greater volatility in capitalratios may arise and may require the Group to raise additional capital. There can be no certainty that any additional capital required would be available or
could be raised on reasonable terms.
The Group’s capital ratios may be affected by a number of factors, such as lower earnings (including lower dividends from its deconsolidated subsidiaries
including its insurance and funds management businesses and associates), increased asset growth, changes in the value of the Australian dollar against
other currencies in which the Group operates (particularly the New Zealand dollar and U.S. dollar) that impacts risk weighted assets or the foreign
currency translation reserve and changes in business strategy (including acquisitions and investments or an increase in capital intensive businesses).
Global and domestic regulators have released proposals, including the Basel 3 proposals, to strengthen, among other things, the liquidity and capitalrequirements of banks, funds management entities, and insurance entities. These proposals, together with any risks arising from any regulatory changes,
are described below in the risk factor entitled “Regulatory changes or a failure to comply with regulatory standards, law or policies may adversely affect
the Group’s business, operations or financial condition”.
10. The Group is exposed to credit risk, which may adversely affect its business, operations and financial condition
As a financial institution, the Group is exposed to the risks associated with extending credit to other parties. Less favourable business or economic
conditions, whether generally or in a specific industry sector or geographic region, or natural disasters, could cause customers or counterparties to fail tomeet their obligations in accordance with agreed terms. For example, our customers and counterparties in the natural resources sector could be
adversely impacted in the event of a prolonged slowdown in the Chinese economy. Also, our customers and counterparties in the agriculture, tourism andmanufacturing industries have been and may continue to be adversely impacted by the sustained strength of the Australian and New Zealand dollar
relative to other currencies. The Group holds provisions for credit impairment. The amount of these provisions is determined by assessing the extent of
impairment inherent within the current lending portfolio, based on current information. This process, which is critical to the Group’s financial condition andresults, requires difficult, subjective and complex judgments, including forecasts of how current and future economic conditions might impair the ability ofborrowers to repay their loans. However, if the information upon which the assessment is made proves to be inaccurate or if the Group fails to analyse
the information correctly, the provisions made for credit impairment may be insufficient, which could have a material adverse effect on the Group’sbusiness, operations and financial condition.
In addition, in assessing whether to extend credit or enter into other transactions with customers, the Group relies on information provided by or on behalfof customers, including financial statements and other financial information. The Group may also rely on representations of customers as to the accuracy
and completeness of that information and, with respect to financial statements, on reports of independent auditors. The Group’s financial performance
could be negatively impacted to the extent that it relies on information that is inaccurate or materially misleading.
11. An increase in the failure of third parties to honor their commitments in connection with the Group’s trading, lending, derivatives andother activities may adversely affect its business, operations and financial condition
The Group is exposed to the potential risk of credit-related losses that can occur as a result of a counterparty being unable or unwilling to honour its
contractual obligations. As with any financial services organisation, the Group assumes counterparty risk in connection with its lending, trading,derivatives and other businesses where it relies on the ability of a third party to satisfy its financial obligations to the Group on a timely basis. The Groupis also subject to the risk that its rights against third parties may not be enforceable in certain circumstances.
The risk of credit-related losses may also be increased by a number of factors, including deterioration in the financial condition of the economy, asustained high level of unemployment, a deterioration of the financial condition of the Group’s counterparties, a reduction in the value of assets the Groupholds as collateral, and a reduction in the market value of the counterparty instruments and obligations it holds.
For example, the Group is directly and indirectly exposed to the Australian mining sector and mining-related contractors and industries. Shouldcommodity prices materially decrease due to, for example, reduced demand in Asia, especially North Asia/China, and/or mining activity, demand forresources, or corporate investment in the mining sector suffer material decreases from historical levels, the amount of new lending the Group is able towrite may be adversely affected, and the weakening of the sector could be of sufficient magnitude to lead to an increase in lending losses from this
sector.
Credit losses can and have resulted in financial services organisations realising significant losses and in some cases failing altogether. Should material
unexpected credit losses occur to the Group’s credit exposures, it could have an adverse effect on the Group’s business, operations and financial
condition.
12. Weakening of the real estate markets in Australia, New Zealand or other markets where the Group does business may adversely affect its
business, operations and financial condition
Residential, commercial and rural property lending, together with property finance, including real estate development and investment property finance,
constitute important businesses to the Group.
A decrease in property valuations in Australia, New Zealand or other markets where it does business could decrease the amount of new lending theGroup is able to write and/or increase the losses that the Group may experience from existing loans, which, in either case, could materially and adversely
impact the Group’s financial condition and results of operations. A significant slowdown in the Australian and New Zealand housing markets or in othermarkets where it does business could adversely affect the Group’s business, operations and financial conditions.

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13. The Group is exposed to market risk which may adversely affect its business, operations and financial condition
The Group is subject to market risk, which is the risk to the Group’s earnings arising from changes in interest rates, foreign exchange rates, credit
spreads, equity prices and indices, prices of commodities, debt securities and other financial contracts, including derivatives. Losses arising from theserisks may have a material adverse effect on the Group. As the Group conducts business in several different currencies, its businesses may be affected bya change in currency exchange rates. Additionally, as the Group’s annual and interim reports are prepared and stated in Australian dollars, any
appreciation in the Australian dollar against other currencies in which the Group earns revenues (particularly to the New Zealand dollar and U.S. dollar)
may adversely affect the reported earnings.
The profitability of the Group’s funds management and insurance businesses is also affected by changes in investment markets and weaknesses in
global securities markets.
14. The Group is exposed to the risks associated with credit intermediation and financial guarantors which may adversely affect its business,
operations and financial condition
The Group entered into a series of structured credit intermediation trades from 2004 to 2007. The Group sold protection using credit default swaps overthese structures and then, to mitigate risk, purchased protection via credit default swaps over the same structures from eight U.S. financial guarantors.
The underlying structures involve credit default swaps (“CDSs”) over synthetic collateralised debt obligations (“CDOs”), portfolios of external collateralised
loan obligations (“CLOs”) or specific bonds/floating rate notes (“FRNs”).
Being derivatives, both the sold protection and purchased protection are marked-to-market. Prior to the commencement of the global financial crisis,
movements in valuations of these positions were not significant and the credit valuation adjustment (“CVA”) charge on the protection bought from thenon-collateralised financial guarantors was minimal.
During and after the global financial crisis, the market value of the structured credit transactions increased and the financial guarantors were downgraded.
The combined impact of this was to increase the CVA charge on the purchased protection from financial guarantors. Volatility in the market value andhence CVA will continue to persist given the volatility in credit spreads and USD/AUD rates.
Credit valuation adjustments are included as part of the Group’s profit and loss statement, and accordingly, increases in the CVA charge or volatility inthat charge could adversely affect the Group’s profitability.
15. The Group is exposed to operational risk, which may adversely affect its business, operations and financial condition
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. This definition
includes legal risk, and the risk of reputational loss or damage arising from inadequate or failed internal processes, people and systems, but excludes
strategic risk.
Loss from operational risk events could adversely affect the Group’s financial results. Such losses can include fines, penalties, loss or theft of funds or
assets, legal costs, customer compensation, loss of shareholder value, reputational loss, loss of life or injury to people, and loss of property and/or
information.
Operational risk is typically classified into the risk event type categories to measure and compare risks on a consistent basis. Examples of operational risk
events according to category are as follows:•internal fraud: risk that fraudulent acts are planned, initiated or executed by employees (permanent, temporary or contractors) from inside ANZ, e.g.,rogue trader;•

external fraud: fraudulent acts or attempts which originate from outside ANZ, e.g., valueless checks, counterfeit credit cards, loan applications in falsenames and stolen identity;•

employment practices & workplace safety: employee relations, diversity and discrimination, and health and safety risks to ANZ employees;•

clients, products & business practices: risk of market manipulation, product defects, incorrect advice, money laundering and misuse of customer
information;•business disruption (including systems failure): risk that ANZ’s banking operating systems are disrupted or fail. At ANZ, technology risks are key
operational risks which fall under this category;•damage to physical assets: risk that a natural disaster or terrorist or vandalism attack damages ANZ’s buildings or property; and•execution, delivery & process management: risk that ANZ experiences losses as a result of data entry errors, accounting errors, vendor, supplier oroutsource provider errors, or failed mandatory reporting.

Direct or indirect losses that occur as a result of operational failures, breakdowns, omissions or unplanned events could adversely affect the Group’s
financial results.
16. Disruption of information technology systems or failure to successfully implement new technology systems could significantly interrupt
the Group’s business which may adversely affect its business, operations and financial condition
The Group is highly dependent on information systems and technology and there is a risk that these, or the services the Group uses or is dependent
upon, might fail, including because of unauthorised access or use.
Most of the Group’s daily operations are computer-based and information technology systems are essential to maintaining effective communications withcustomers. The exposure to systems risks includes the complete or partial failure of information technology systems or data centre infrastructure, theinadequacy of internal and third-party information technology systems due to, among other things, failure to keep pace with industry developments andthe capacity of the existing systems to effectively accommodate growth, prevent unauthorised access and integrate existing and future acquisitions andalliances.

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To manage these risks, the Group has disaster recovery and information technology governance in place. However, any failure of these systems could
result in business interruption, customer dissatisfaction and ultimately loss of customers, financial compensation, damage to reputation and/or aweakening of the Group’s competitive position, which could adversely impact the Group’s business and have a material adverse effect on the Group’s
financial condition and operations.
In addition, the Group has an ongoing need to update and implement new information technology systems, in part to assist it to satisfy regulatory
demands, ensure information security, enhance computer-based banking services for the Group’s customers and integrate the various segments of its
business. The Group may not implement these projects effectively or execute them efficiently, which could lead to increased project costs, delays in theability to comply with regulatory requirements, failure of the Group’s information security controls or a decrease in the Group’s ability to service its
customers.
17. The Group is exposed to risks associated with information security, which may adversely affect its financial results and reputation
Information security means protecting information and information systems from unauthorised access, use, disclosure, disruption, modification, perusal,
inspection, recording or destruction. As a bank, the Group handles a considerable amount of personal and confidential information about its customers
and its own internal operations. The Group also uses third parties to process and manage information on its behalf. The Group employs a team of
information security subject matter experts who are responsible for the development and implementation of the Group’s Information Security Policy. The
Group is conscious that threats to information security are continuously evolving and as such the Group conducts regular internal and external reviews toensure new threats are identified, evolving risks are mitigated, policies and procedures are updated, and good practice is maintained. However, there is arisk that information may be inadvertently or inappropriately accessed or distributed or illegally accessed or stolen. Any unauthorised use of confidential
information could potentially result in breaches of privacy laws, regulatory sanctions, legal action, and claims of compensation or erosion to the Group’s
competitive market position, which could adversely affect the Group’s financial position and reputation.
18. The Group is exposed to reputation risk, which may adversely impact its business, operations and financial condition
Damage to the Group’s reputation may have wide-ranging impacts, including adverse effects on the Group’s profitability, capacity and cost of sourcing
funding, and availability of new business opportunities.
Reputation risk may arise as a result of an external event or the Group’s own actions, and adversely affect perceptions about the Group held by the
public (including the Group’s customers), shareholders, investors, regulators or rating agencies. The impact of a risk event on the Group’s reputation may
exceed any direct cost of the risk event itself and may adversely impact the Group’s business, operations and financial condition.
19. The unexpected loss of key staff or inadequate management of human resources may adversely affect the Group’s business, operations
and financial condition
The Group’s ability to attract and retain suitably qualified and skilled employees is an important factor in achieving its strategic objectives. The Chief
Executive Officer and the management team of the Chief Executive Officer have skills and reputation that are critical to setting the strategic direction,
successful management and growth of the Group, and whose unexpected loss due to resignation, retirement, death or illness may adversely affect its
operations and financial condition. The Group may in the future have difficulty retaining or attracting highly qualified people for important roles, which
could adversely affect its business, operations and financial condition.
20. The Group may be exposed to the impact of future climate change, geological events, plant and animal diseases, and other extrinsic
events which may adversely affect its business, operations and financial condition
ANZ is exposed to climate related events (including climate change). These events include severe storms, drought, fires, cyclones, hurricanes, floods andrising sea levels. The impact of these events may temporarily interrupt or restrict the provision of some Group services, and also adversely affect theGroup’s collateral position in relation to credit facilities extended to customers.
ANZ may also be exposed to other events such as geological events (volcanic or seismic activity, tsunamis); plant and animal diseases or a flu
pandemic. These may severely disrupt normal business activity and have a negative effect on the Group’s business, operations and financial condition.
The most recent example of this was the major earthquakes in Christchurch, New Zealand. Whilst much of the widespread property damage was coveredby public (N.Z. Earthquake Commission) and private insurance, there have been and may continue to be negative impacts on property (and hence
security) values and on future levels of insurance and reinsurance coverage across New Zealand. A reduction in value of New Zealand property as aresult of geological events such as earthquakes could increase lending losses which may adversely affect the Group’s business, operations and financial
condition.
21. Regulatory changes or a failure to comply with regulatory standards, law or policies may adversely affect the Group’s business,
operations or financial condition
The Group is subject to laws, regulations, policies and codes of practice in Australia, New Zealand, the United Kingdom, the United States of America,Hong Kong, Singapore, Japan, China and other countries within the Asia Pacific region in which it has operations, trades or raises funds or in respect ofwhich it has some other connection. In particular, the Group’s banking, funds management and insurance activities are subject to extensive regulation,
mainly relating to its liquidity levels, capital, solvency, provisioning, and insurance policy terms and conditions.
Regulations vary from country to country but generally are designed to protect depositors, insured parties, customers with other banking products, andthe banking and insurance system as a whole. Some of the jurisdictions in which the Group operates do not permit local deposits to be used to fundoperations outside of that jurisdiction. In the event the Group experiences reduced liquidity, these deposits may not be available to fund the operations of
the Group.
The Australian Government and its agencies, including APRA, the RBA index and other financial industry regulatory bodies, including the Australian
Securities and Investments Commission (“ASIC”) and the Australian Competition and Consumer Commission (“ACCC”), have supervisory oversight of
the Group. The New Zealand Government and its agencies, including the RBNZ, the Financial Markets Authority and the Commerce Commission, havesupervisory oversight of the Group’s operations in New Zealand. To the extent that the Group has operations, trades or raises funds in, or has someother connection with, countries other than Australia or New Zealand, then such activities may be subject to the laws of, and regulation by agencies in,those countries. Such regulatory agencies include, by way of example, the U.S. Federal Reserve Board, the U.S. Department of Treasury, the U.S. Office131

SUPPLEMENTARY INFORMATIONof the Comptroller of the Currency, the U.S. Office of Foreign Assets Control, the UK Prudential Regulation Authority and the Financial Conduct Authority,
the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the China Banking Regulatory Commission, the Kanto Local Finance Bureau ofJapan, and other financial regulatory bodies in those countries and in other relevant countries. In addition, the Group’s expansion and growth in the Asia
Pacific region gives rise to a requirement to comply with a number of different legal and regulatory regimes across that region.
A failure to comply with any standards, laws, regulations or policies in any of those jurisdictions could result in sanctions by these or other regulatory
agencies, the exercise of any discretionary powers that the regulators hold or compensatory action by affected persons, which may in turn cause
substantial damage to the Group’s reputation. To the extent that these regulatory requirements limit the Group’s operations or flexibility, they could
adversely impact the Group’s profitability and prospects.
These regulatory and other governmental agencies (including revenue and tax authorities) frequently review banking and tax laws, regulations, codes ofpractice and policies. Changes to laws, regulations, codes of practice or policies, including changes in interpretation or implementation of laws,
regulations, codes of practice or policies, could affect the Group in substantial and unpredictable ways and may even conflict with each other. These may
include increasing required levels of bank liquidity and capital adequacy, limiting the types of financial services and products the Group can offer, and/or
increasing the ability of non-banks to offer competing financial services or products, as well as changes to accounting standards, taxation laws andprudential regulatory requirements.
As a result of the global financial crisis, regulators have proposed various amendments to financial regulation that will affect the Group. APRA, the BaselCommittee on Banking Supervision (the “Basel Committee”) and regulators in other jurisdictions where the Group has a presence have released
discussion papers and in some instances final regulations in regard to strengthening the resilience of the banking and insurance sectors, including
proposals to strengthen capital and liquidity requirements for the banking sector. In addition, the United States has passed into law the Dodd-Frank WallStreet Reform and Consumer Protection Act which significantly affects financial institutions and financial activities in the United States.
Uncertainty remains as to the final form that some of the proposed regulatory changes will take in Australia, New Zealand, the United States and othercountries in which the Group operates and any such changes could adversely affect the Group’s business, operations and financial condition. Thechanges may lead the Group to, among other things, change its business mix, incur additional costs as a result of increased management attention, raise
additional amounts of higher-quality capital (such as ordinary shares or Tier 1 or Tier 2 instruments) or retain capital (through lower dividends), and holdsignificant levels of additional liquid assets and undertake further lengthening of the funding base.
In particular, the final regulations promulgated by APRA will require a 100% deduction from Tier 1 Capital for minority equity interests, up from adeduction of 50% currently. ANZ currently holds minority equity interests in banks in multiple Asian jurisdictions, including Malaysia, Indonesia, China andthe Philippines. This change will require ANZ, in order to maintain its Tier 1 Capital ratio, to engage in a combination of raising additional Tier 1 Capital,
divesting these minority equity interests and acquiring controlling interests in the entities in which it currently holds minority equity interests.
The Foreign Tax Compliance Act (“FATCA”) enacted on March 18, 2010, requires foreign financial institutions (such as the Group) to provide the U.S.
Internal Revenue Service with information on certain foreign accounts held by U.S. persons. FATCA is expected to require significant investments byaffected institutions in compliance and reporting framework that will meet FATCA standards.
22. Unexpected changes to the Group’s license to operate in any jurisdiction may adversely affect its business, operations and financial
condition
The Group is licensed to operate in the various countries, states and territories. Unexpected changes in the conditions of the licenses to operate bygovernments, administrations or regulatory agencies which prohibit or restrict the Group from trading in a manner that was previously permitted may
adversely impact the Group’s operations and subsequent financial results.
23. The Group is exposed to insurance risk, which may adversely affect its business, operations and financial condition
Insurance risk is the risk of loss due to unexpected changes in current and future insurance claim rates. In life insurance business, insurance risk arises
primarily through mortality (death) and morbidity (illness and injury) risks being greater than expected and, in the case of annuity business, should
annuitants live longer than expected. For general insurance business, insurance risk arises mainly through weather-related incidents (including floods
and bushfires) and other calamities, such as earthquakes, tsunamis and volcanic activities, as well as adverse variability in home, contents, motor, traveland other insurance claim amounts. For further details on climate and geological events see also the risk factor entitled “The Group may be exposed tothe impact of future climate change, geological events, plant and animal diseases, and other extrinsic events which may adversely affect its business,
operations and financial condition”. The Group has exposure to insurance risk in both life insurance and general insurance business, which may
adversely affect its business, operations and financial condition.
In addition, the Group has various direct and indirect pension obligations towards its current and former staff. These obligations entail various risks which
are similar to, among others, risks involving a capital investment. Risks, however, may also arise due to changes in tax or other legislation, and/or in
judicial rulings, as well as inflation rates or interest rates. Any of these risks could have a material adverse effect on the Group’s business, operations andfinancial condition.
24. The Group may experience reductions in the valuation of some of its assets, resulting in fair value adjustments that may have a material
adverse effect on its earnings
Under Australian Accounting Standards, the Group recognises at fair value:•financial instruments classified as “held-for-trading” or “designated as at fair value through profit or loss”;•

financial assets classified as “available-for-sale”; and•derivatives.

Generally, in order to establish the fair value of these instruments, the Group relies on quoted market prices or, where the market for a financial
instrument is not sufficiently active, fair values are based on present value estimates or other accepted valuation techniques. In certain circumstances,the data for individual financial instruments or classes of financial instruments used by such estimates or techniques may not be available or may become
unavailable due to changes in market conditions. In these circumstances, the fair value is determined using data derived and extrapolated from market
data, and tested against historic transactions and observed market trends.

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SUPPLEMENTARY INFORMATION
The valuation models incorporate the impact of factors that would influence the fair value determined by a market participant. Principal inputs used in thedetermination of the fair value of financial instruments based on valuation techniques include data inputs such as statistical data on delinquency rates,
foreclosure rates, actual losses, counterparty credit spreads, recovery rates, implied default probabilities, credit index tranche prices and correlation
curves. These assumptions, judgments and estimates need to be updated to reflect changing trends and market conditions. The resulting change in thefair values of the financial instruments could have a material adverse effect on the Group’s earnings.
25. Changes to accounting policies may adversely affect the Group’s business, operations and financial condition
The accounting policies and methods that the Group applies are fundamental to how it records and reports its financial position and results of operations.
Management must exercise judgment in selecting and applying many of these accounting policies and methods so that they not only comply withgenerally accepted accounting principles but they also reflect the most appropriate manner in which to record and report on the financial position andresults of operations. However, these accounting policies may be applied inaccurately, resulting in a misstatement of financial position and results ofoperations.
In some cases, management must select an accounting policy or method from two or more alternatives, any of which might comply with generally
accepted accounting principles and be reasonable under the circumstances, yet might result in reporting materially different outcomes than would havebeen reported under another alternative.
26. The Group may be exposed to the risk of impairment to capitalised software, goodwill and other intangible assets that may adversely
affect its business, operations and financial condition
In certain circumstances the Group may be exposed to a reduction in the value of intangible assets. As at 31 March 2013, the Group carried goodwill
principally related to its investments in New Zealand and Australia, intangible assets principally relating to assets recognized on acquisition ofsubsidiaries, and capitalised software balances.
The Group is required to assess the recoverability of the goodwill balances on at least an annual basis. For this purpose the Group uses either adiscounted cash flow or a multiple of earnings calculation. Changes in the assumptions upon which the calculation is based, together with expectedchanges in future cash flows, could materially impact this assessment, resulting in the potential write-off of a part or all of the goodwill balances.
Capitalised software and other intangible assets (including acquired portfolio of insurance and investment business and deferred acquisition costs) are
assessed for indicators of impairment at least annually. In the event that an asset is no longer in use, or that the cash flows generated by the asset do notsupport the carrying value, an impairment may be recorded, adversely impacting the Group’s financial condition.
27. Litigation and contingent liabilities may adversely affect the Group’s business, operations and financial condition
From time to time, the Group may be subject to material litigation, regulatory actions, legal or arbitration proceedings and other contingent liabilities
which, if they crystallise, may adversely affect the Group’s results. The Group’s material contingent liabilities are described in Note 14 of the 2013
Condensed Consolidated Financial Statements. There is a risk that these contingent liabilities may be larger than anticipated or that additional litigation orother contingent liabilities may arise.
28. The Group regularly considers acquisition and divestment opportunities, and there is a risk that ANZ may undertake an acquisition ordivestment that could result in a material adverse effect on its business, operations and financial condition
The Group regularly examines a range of corporate opportunities, including material acquisitions and disposals, with a view to determining whether thoseopportunities will enhance the Group’s financial performance and position. Any corporate opportunity that is pursued could, for a variety of reasons, turnout to have a material adverse effect on the Group.
The successful implementation of the Group’s corporate strategy, including its strategy to expand in the Asia Pacific region, will depend on a range offactors including potential funding strategies, and challenges associated with integrating and adding value to acquired businesses, as well as new
regulatory, market and other risks associated with increasing operations outside of Australia and New Zealand.
There can be no assurance that any acquisition would have the anticipated results, including results relating to the total cost of integration, the timerequired to complete the integration, the amount of longer-term cost savings, the overall performance of the combined entity, or an improved price for theGroup’s securities. Integration of an acquired business can be complex and costly, sometimes including combining relevant accounting and dataprocessing systems, and management controls, as well as managing relevant relationships with employees, customers, counterparties, suppliers andother business partners. Integration efforts could divert management attention and resources, which could adversely affect the Group’s operations or
results. Additionally, there can be no assurance that employees, customers, counterparties, suppliers and other business partners of newly acquired
businesses will remain as such post-acquisition, and the loss of employees, customers, counterparties, suppliers and other business partners could
adversely affect the Group’s operations or results.
Acquisitions and disposals may also result in business disruptions that cause the Group to lose customers or cause customers to remove their businessfrom the Group to competing financial institutions. It is possible that the integration process related to acquisitions could result in the disruption of theGroup’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect the Group’s ability to maintainrelationships with employees, customers, counterparties, suppliers and other business partners, which could adversely affect the Group’s ability to
conduct its business successfully. The Group’s operating performance, risk profile or capital structure may also be affected by these corporate
opportunities and there is a risk that any of the Group’s credit ratings may be placed on credit watch or downgraded if these opportunities are pursued.

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DEFINITIONSAAS - Australian Accounting Standards.
AASB - Australian Accounting Standards Board.
Cash profit is a measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents a measure of
the result of the ongoing business activities of the Group, enabling shareholders to assess Group and Divisional performance against prior periods andagainst peer institutions. To calculate cash profit, the Group excludes items from statutory net profit as below. These items are calculated consistently
period on period so as not to discriminate between positive and negative adjustments.
Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories:
1.

non-core gains or losses included in earnings arising from changes in tax, legal, accounting legislation or other non-core items not associatedwith the ongoing operations of the Group;2.

treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences thatwill reverse through earnings in the future; and3.

accounting reclassifications between individual line items that do not impact reported results, such as policyholder tax gross up.

The adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the Group Condensed
Consolidated Financial Statements review. Cash profit is not subject to review by the external auditor, however, the external auditor has informed the Audit
Committee that the adjustments have been determined on a consistent basis across each period presented.
Collective provision is the provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision may
only be recognised when a loss event has already occurred. Losses expected as a result of future events, no matter how likely, are not recognised.
Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations debt excluding
securitisation deposits.
Economic Profit is a risk adjusted profit measure. Economic Profit is determined by adjusting cash profit with economic credit costs, the benefit of
imputation credits and the cost of capital. This measure is used to evaluate business unit performance and is included in determining the variable
component of remuneration packages.
Expected loss is determined based on the expected average annual loss of principal over the economic cycle for the current risk profile of the lending
portfolio.
IFRS – International Financial Reporting Standards.
Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or whereconcessional terms have been provided because of the financial difficulties of the customer. Financial Assets are impaired if there is objective evidence ofimpairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on
the expected future cash flows of the individual asset or portfolio of assets.
Impaired commitments and contingencies comprises undrawn facilities and contingent facilities where the customer’s status is defined as impaired.
Impaired loans comprises drawn facilities where the customer’s status is defined as impaired.
Individual provision charge is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed
to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments.
Liquid assets are cash and cash equivalent assets. Cash equivalent assets are highly liquid investments with short periods to maturity, are readily
convertible to cash at ANZ’s discretion and are subject to an insignificant risk of material changes in value.
Net interest average margin is net interest income as a percentage of average interest earning assets.
Net loans and advances includes gross loans and advances and acceptances and capitalized brokerage/mortgage origination fees, less unearned
income and provisions for credit impairment.
Net tangible assets equals share capital and reserves attributable to shareholders of the Group less preference share capital and unamortised intangible
assets (including goodwill and software).
Operating expenses excludes the provision for impairment of loans and advances charge.
Operating income includes net funds management and insurance income, share of associates profit and other operating income.
Repo discount is a discount applicable on the repurchase by a central bank of an eligible security pursuant to a repurchase agreement.

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DEFINITIONS

Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of thecustomer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond thosetypically offered to new facilities with similar risk.
Revenue includes net interest income, net funds management and insurance income, share of associates profit and other operating income.

Segment review description
The Group operates and manages its cash results on a divisional structure comprising Australia, International & Institutional Banking (IIB), New Zealandand Global Wealth.
Group Centre comprises functions that service the organisation globally.

Australia
The Australia division comprises Retail and Corporate and Commercial Banking and business units. Retail includes Mortgages, Consumer Cards andUnsecured Lending and Deposits. Corporate and Commercial Banking includes Corporate Banking, Esanda, Regional Business Banking and Small
Business Banking.

••Retail-Retail Distribution delivers banking solutions to customers via the Australian branch network, ANZ Direct and specialist sales channels.

-

Retail Products is responsible for delivering a range of products including mortgages, credit cards, personal loans, transaction banking, savings
accounts and deposits, using capabilities in product, analytics, customer research, segmentation, strategy and marketing. It also provides online
and electronic payment solutions for businesses.
–

Mortgages provides housing finance to consumers in Australia for both owner occupied and investment purposes.

–

Cards and Payments provides consumer and commercial credit cards, personal loans and merchant services.

–

Deposits provides transaction banking, savings and investment products, such as term deposits and cash management accounts.

Corporate and Commercial Banking-

Corporate Banking provides a full range of banking services offering traditional relationship banking and sophisticated financial solutions,largely to privately owned companies with a turnover greater than A$125 million.

-

Esanda provides motor vehicle and equipment finance and investment products.

-

Regional Business Banking provides a full range of banking services to non metropolitan business banking customers.

-

Business Banking provides a full range of banking services, including risk management, to metropolitan based small to medium sized businessclients with a turnover of up to A$125 million.

-

Small Business Banking provides a full range of banking services for metropolitan and regional based small businesses in Australia withlending up to A$1 million.

International and Institutional Banking
The International and Institutional Banking division comprises Global Institutional, Retail Asia Pacific and Asia Partnerships business units, along withRelationship & Infrastructure.
•

Global Institutional provides global financial services to government, corporate and institutional clients with a focus on solutions for clients withcomplex financial needs, based on a deep understanding of their businesses and industries, with particular expertise in natural resources, agriculture
and infrastructure. Institutional delivers transaction banking, specialised and relationship lending and markets solutions in Australia, New Zealand,
Asia Pacific, Europe and America.
-

Transaction Banking provides working capital solutions including deposit products, cash transaction banking management, trade finance,international payments, and clearing services principally to institutional and corporate customers.

-

Global Markets provides risk management services to corporate and institutional clients globally in relation to foreign exchange, interest rates,
credit, commodities, debt capital markets, wealth solutions and equity derivatives. Markets provides origination, underwriting, structuring andrisk management services, advice and sale of credit and derivative products globally. Markets also manages the Group’s interest rate risk
position and liquidity portfolio.

-

Global Loans provides term loans, working capital facilities and specialist loan structuring. It provides specialist credit analysis, structuring,
execution and ongoing monitoring of strategically significant customer transactions, including project and structured finance, debt structuring
and acquisition finance, loan product structuring and management, structured asset and export finance.

•

Retail which provides retail and small business banking services to customers in the Asia Pacific region and also includes investment and insurance•

Asia Partnerships which is a portfolio of strategic partnerships in Asia. This includes investments in Indonesia with PT Bank Pan Indonesia, in the

products and services for Asia Pacific customers.
Philippines with Metrobank Cards Corporation, in China with Bank of Tianjin and Shanghai Rural Commercial Bank, in Malaysia with AMMB Holdings
Berhad and in Vietnam with Saigon Securities Incorporation.
•

Relationship & Infrastructure includes client relationship management teams for global institutional and financial institution and corporate
customers in Australia, New Zealand, Asia Pacific, Europe and America corporate advisory and central support functions. Relationship andinfrastructure also includes businesses within IIB which are discontinued.

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DEFINITIONS
Segment review description, cont’d
New Zealand
The New Zealand division comprises Retail and Commercial business units, and Operations and Support which includes the central support functions(including Treasury funding).

•

Retail•Commercial-

Includes Mortgages, Credit Cards and Unsecured Lending to personal customers in New Zealand.

-Commercial & Agri (CommAgri) provides financial solutions through a relationship management model for medium-sized businesses, including
agri-business, with a turnover of up to NZ$150 million. Asset Finance (including motor vehicle and equipment finance), operating leases andinvestment products are provided under the UDC brand.

-

Small Business Banking provides a full range of banking services to small enterprises, typically with turnover of less than NZ$5 million.

Global Wealth
The Global Wealth division comprises Funds Management, Insurance and Private Wealth which provides investment, superannuation, insurance
products and services (including Private Banking) for customers across Australia, New Zealand and Asia.
•

Private Wealth specialises in assisting individuals and families to manage, grow and preserve their wealth. The businesses within Private Wealthinclude Private Bank, ANZ Trustees and Super Concepts.

•

Funds Management includes Pensions and Investment business of OnePath Group (in Australia and New Zealand), E*Trade and Investment
Lending.

•

Insurance includes the insurance business of OnePath Group (in Australia and New Zealand) and Lender’s Mortgage Insurance.

Group Centre
Group Centre comprises Global Services & Operations, Group Technology, Group Human Resources, Group Risk, Group Strategy, Group Corporate
Affairs, Group Corporate Communications, Group Treasury, Global Internal Audit, Group Finance, and Group Marketing, Innovation and Digital andShareholder functions.

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ALPHABETICAL INDEXPAGE
Basis of preparation ............................................................................................................................................................................................................. 92
CEO Overview ....................................................................................................................................................................................................................... 9
CFO Overview...................................................................................................................................................................................................................... 11
Changes in composition of the Group ................................................................................................................................................................................ 111
Condensed Consolidated Balance Sheet............................................................................................................................................................................. 89
Condensed Consolidated Cash Flow Statement.................................................................................................................................................................. 90
Condensed Consolidated Income Statement ....................................................................................................................................................................... 87
Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 88
Condensed Statement of Changes in Equity........................................................................................................................................................................ 91
Contingent liabilities and contingent assets ....................................................................................................................................................................... 108
Credit quality ...................................................................................................................................................................................................................... 100
Definitions .......................................................................................................................................................................................................................... 134
Deposits and other borrowings........................................................................................................................................................................................... 105
Dividends ............................................................................................................................................................................................................................. 96
Earnings per share............................................................................................................................................................................................................... 97
Geographic review ............................................................................................................................................................................................................... 67
Income ................................................................................................................................................................................................................................. 93
Income tax expense ............................................................................................................................................................................................................. 95
Investments in associates .................................................................................................................................................................................................. 111
Loan capital........................................................................................................................................................................................................................ 105
Media Release ....................................................................................................................................................................................................................... 1
Net loans and advances....................................................................................................................................................................................................... 98
Operating expenses ............................................................................................................................................................................................................. 94
Profit reconciliation............................................................................................................................................................................................................... 75
Provision for credit impairment............................................................................................................................................................................................. 99
Related party disclosure..................................................................................................................................................................................................... 111
Segment analysis............................................................................................................................................................................................................... 110
Segment review ................................................................................................................................................................................................................... 35
Shareholders’ equity .......................................................................................................................................................................................................... 106
Share capital ...................................................................................................................................................................................................................... 106
Significant events since balance date ................................................................................................................................................................................ 111
Snapshot ................................................................................................................................................................................................................................ 5
Supplementary Information – Average balance sheet and related interest ........................................................................................................................ 121
Supplementary Information – Capital management ........................................................................................................................................................... 116
Supplementary Information – Derivative financial instruments........................................................................................................................................... 126
Supplementary Information – Exchange rates ................................................................................................................................................................... 125
Supplementary Information – Four year summary by half year.......................................................................................................................................... 115
Supplementary Information – Principal risks and uncertainties .......................................................................................................................................... 127

137