BASEL III PILLAR 3DISCLOSURE
AS AT 30 JUNE 2018
JUNE 2018 PILLAR 3 /2018 THIRD QUARTER CHART PACKAUSTRALIA AND NEW Z EAL AND BANKINGGROUP LIMITED
14 AUGUST 2018
To be read in conjunction with ANZ 2018 Basel III Pillar 3
disclosure as at 30 June 2018

SU MMA RY••

Level 2 Common Equity Tier 1 (CET1) ratio of 11.07% at Jun-18. 3bps increase from Mar-18 largely driven by: organic capital
generation (+50bps) and receipt of reinsurance proceeds from the One Path Life (OPL) sale (+25bps); offset by the FY18
Interim Dividend (-59bps) and the share buyback (-8bps). 2018 interim DRP was neutralised.
~$1.5bn of the announced $3bn on-market share buyback had been completed as at 30-Jun 2018.

••

Total RWA decreased $2bn to $394bn driven by a $2bn reduction in CRWA.
$2bn reduction in CRWAs from net risk improvement across both Institutional and Retail businesses in Australia & New Zealand.

•

Total provision charge was $121m in 3Q18 with individual provision (IP) charge of $160m. The IP charge in 3Q18 was thelowest quarter since 2014, reflecting both the ongoing benign environment and improved quality of the portfolio.
While typically Q1 and Q3 provision charges are lower than Q2 and Q4 (see slide 7), 3Q18 was substantially lower than theaverage for the past four years, reflecting in part a high level of write backs and recoveries in the Institutional loan book.
ANZ has retained an overlay initially taken at 30 Sep 2017 in relation to the Retail Trade book which remains on watch.
Australian Residential Mortgage 90+ day past due loans (as a % of Residential Mortgage EAD) was flat vs prior quarter. There
are some pockets of stress in the mortgage book, primarily in Western Australia, more particularly in Perth itself.

CapitalPortfoliomovement•
Credit Quality••••

Australia Housingupdate•••••

RegulatoryImpacts•

Throughout FY18 the Australian housing system has been characterised by slowing credit system growth, increased pricecompetition, increased capital intensity and tighter credit conditions. As at end June 2018, YTD APRA System has grown 4.1%,
down 18% vs. prior comparable period 5.3%.
ANZ’s ongoing focus is on the Owner Occupier Principal & Interest segment, with Owner Occupier loan growth of 4.4%
annualised in the June quarter1. Investor segment growth in the June quarter was -2.5% annualised1.
ANZ’s total Australian home lending portfolio grew at 0.4 times system in the June quarter (2% annualised growth).
ANZ Interest Only home loan flows in the June quarter represented 13% of total home loan flows.
$6.5bn of Interest Only loans switched to Principal & Interest in the June quarter (3Q18), compared with $5.2bn in 2Q18, $5.7bn
in 1Q18 and $5.6bn per quarter on average across FY17.
The Bills/OIS spread has remained elevated.
The combined impact of prudential responses over the past 3 financial years including various regulatory changes, together withsubsequent policy changes by the banks, has been a meaningful reduction in the average maximum borrowing capacity forhome loan borrowers.
Banks2 home loan growth over the period Sep-16 to Jun-18 has been circa 11% compared with a circa 28% increase in
Non-Banks2 home loan growth (refer slide 8).

June quarter growth refers to June 2018 vs March 2018 unless otherwise stated1.

2.

Source: ANZ analysis of Home Loans Market Share – APRA Banking statistics. June 2018 report. The current classification of Investor vs Owner Occupier, as reported to regulators andthe market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted
activity to identify, any change in circumstances
Total Housing Lending sourced from RBA Statistical Table D2 - Lending and Credit Aggregates. Bank Housing Lending sourced from RBA Statistical Table D5 - Bank Lending Classified
by Sector and APRA Monthly Banking Statistics. Non-Bank defined as difference between Total Housing Lending and Bank Housing Lending. Data includes securitisation

2C A P I TA L , L I Q U I D I T Y & F U N D I N GAPRA CET1 CAPITAL MOVEMENTAPRA COMMON EQUITY TIER 1 (CET1)

Equivalent to ~11.5% on a pro forma
basis taking into consideration
announced asset divestments yet tosettle (80bps) and $1.5b (~40bps) 2ndtranche of share buy back announcedin June 2018 and commenced in July
2018%

0.45

11.04%
9.6

9.4

9.8

9.7

9.6

9.5

10.1

9.8

10.6 10.8

11.0 11.1

11.07

0.25
-0.59

-0.08

Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun15
1516
16
16
16
17
17
17
17
18
18

LEVERAGE RATIO%
5.1

Mar-18Dividends

OPL
Share Buy Organic Cap
Reinsurance
Backs
Gen & Other
proceeds

Jun-18

4.9

5.1

5.1

5.3

5.1

5.3

5.1

5.4

5.5

5.4

5.3

Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun151516161616171717171818
Leverage Ratio

APRA Proposed Minimum 4%3

PORTFOLIO MOVEMENTRISK WEIGHTED ASSETSTOTAL RISK WEIGHTED ASSETS (RWA)

CREDIT RWA MOVEMENT DRIVERS$b(Note: Corporate Banking included in Institutional1)$b342.8
409

402
388

38
38

1439
1816398

391

394

396

3937373737

1717171616143

133

137

141

1400.0

394

180

0.0

340.9

-2.0
Risk improvement across both
Institutional and Retail businesses inAustralia & New ZealandMar-181520.1

FXRiskLending
Mvmt.

162

Data /Methodology
changesJun-18CREDIT RWA MOVEMENT BY SEGMENT$b342.8200199204203

202

201

172

170

0.2-0.3-1.4

340.9-0.4

Driven by reduction instandardised Corporate
exposuresSep-15Mar-16CRWA (ex. Insto)1.

Sep-16

Mar-17CRWA (Insto)

Sep-17

Dec-17Mar-18

Mkt. & IRRBB RWA

Jun-18Mar-18Residential
Mortgage

Corporate

Sovereign& Banks

Other

Jun-18Op-RWA

Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 2017 and backdated to September 2015 for the purposes of chart timeseries

4PORTFOLIO MOVEMENTRISK WEIGHTED ASSETS & EXPOSURE AT DEFAULT (EAD)EXPOSURE AT DEFAULT (EAD) & CRWA/EAD1$b

CREDIT RWA MOVEMENT DRIVERS%

903889894899

903

920

930

$b (Jun-18 vs Mar-18)

943

8.6
Increase in Bank EAD ($3.1bn)
and Sovereign exposures($5.4bn)

39.4
38.7
37.6

3.1

36.9

38.0
37.3

36.2
36.9
0.5

0.4

0.2

-0.3

-0.4
-1.4

Residential
Mortgage (Housing)Sep-15Mar-16

CRWA/EAD %1.

Sep-16

Mar-17

Sep-17

Dec-17Mar-18

Corporate

Sovereign & Bank

Other

Jun-18EADCredit RWA

EAD

EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330

5PORTFOLIO MOVEMENTMOVEMENT BY SEGMENTS

HOUSING CREDIT RWA & EAD1

NON HOUSING CREDIT RWA & EAD2

RWA/EAD INTENSITY (%)
17.5

17.4

Sep-15Mar-16

RWA/EAD INTENSITY (%)

24.4

24.5

26.3

26.5

26.4

51.0

50.3

49.2

47.0

44.9

43.9

42.6

Sep-16

Mar-17

Sep-17Mar-18Jun-18

Sep-15Mar-16

Sep-16

Mar-17

Sep-17Mar-18Jun-18534553566

EXPOSURES ($b)

EXPOSURES ($b)
572

331

377

369361355

344

60

Sep-15Mar-16

CRWA

1.

2.

EAD

539

538

377

292

58

545

87

89

97

100

100

Sep-16

Mar-17

Sep-17Mar-18Jun-18

Sep-15
CRWA

274

Mar-16265253240243241

Sep-16

Mar-17

Sep-17Mar-18Jun-18

EAD

Housing based on APS330 Pillar 3 Residential Mortgage category. Change in CRWA from Mar-16 to Sep-16 includes impacts from regulatory changes to Australia housing risk weights introduced 1 July 2016. Change inCRWA from Mar-17 to Sep-17 includes impacts from further increases to Australia housing risk weights following APRA having completed its review of ANZ’s mortgage capital model and approved the new model forAustralia residential mortgages effective from June 2017
Non Housing based on APS330 Pillar 3, all Credit RWA categories excluding Residential Mortgage category

6CREDIT QUALITYPROVISION CHARGE
$m555

556

482

338
367
191

247

214

255

287

34-108-8-73

1Q14

2Q14IPC

3Q14

4Q14229226

49

6
1Q15362

278

232

446

157

328

2Q15

72
3Q15

360
-32
4Q1531943
1Q16448

34

2Q16

3Q16

27%
4Q
3Q

243

599

236

462
325-17IP CHARGECOMPOSITION

23%

283

573
295437

While typically Q1 and Q3 provision
charges are lower than Q2 and Q4,
3Q18 was substantially lower than
the average for the past four years,
reflecting in part a high level of write
backs and recoveries in theInstitutional loan book.

308

202

206

1Q

246

220

210

160-18-4-39

1Q18

2Q18-44-42-25-65

-10

4Q16

1Q17

2Q17

3Q17

4Q172Q

31%

121

19%
Avg 20142017

3Q18CPC

PAST DUE LOANS > 90 DAYS AS A % OF EADGROSS IMPAIRED ASSETS1$m%

4,000
3,172
3,000

2,719

0.532,384

0.55

0.48
2,162

2,033

1,877

Dec-17Mar-18Jun-18

2,000

0.43

0.42

Sep 15Mar-16

0.63

0.62

0.60

0.59

0.56

0.50

0.50

Sep-17

Dec-170.56

0.58

Mar-18Jun-180.44
0.39

1,0000
Sep-15Australia1.

Sep-16
New ZealandSep-17

Institutional

OtherSep-16

Residential Mortgage

Mar-17Retail (Pillar 3 QRR & Other Retail categories)

Excluding unsecured 90 days past due

7

AUSTRALIA HOUSINGANZ GROWTH DRIVERSOWNER OCCUPIER & INVESTOR GROWTH1,2

HOUSING LENDING GROWTH1
ANZ growth x System (System = 1)ANZ & SYSTEM Year on year growth (%)

2.020
Below system growth driven by a combination of:• Focus on priority segments & geographies• Tighter credit conditions• Competition

1.63

15105

1.5

Below system growth expected in 4Q18

0

1.32
1.20-5Jun
16

1.13
0.96

1.0

Dec16
ANZ OOJun
17
ANZ Inv

Dec
17APRA OO

Jun
18
APRA Inv

SYSTEM HOUSING BALANCES & GROWTH3
0.5

0.49

0.48
0.38

0.32

+11%

$b0.30

1,508

+28%

1,672
780.0
Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Jun Apr-18 May-18 Jun-18
Half Yr Half Yr Half Yr Half Yr Half Yr Half Yr 18 Qtr

ANZ growth relative to system growth

APRA SystemBanks

Sep-16100

Non-BanksJun-18ANZ monthly growth relative to system growth
1.
2.
3.

ANZ analysis of APRA monthly banking statistics. June 2018 report
The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and theongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances
Total Housing Lending sourced from RBA Statistical Table D2 - Lending and Credit Aggregates. Bank Housing Lending sourced from RBA Statistical Table D5 - Bank Lending Classified
by Sector and APRA Monthly Banking Statistics. Non-Bank defined as difference between Total Housing Lending and Bank Housing Lending. Data includes securitisation

8AUSTRALIA HOUSINGANZ PORTFOLIO DYNAMICS

SWITCHING INTEREST ONLY TO PRINCIPAL &INTERESTANZ AUSTRALIA HOME LOAN DELINQUENCIES1,2%$m

2.0
1.5

6,178

1.01,1890.50.0
Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun15
151616161617171717181830+ DPD %90+ Owner Occupied

1,804

1,857

965

2,267

1,692

3,177

2,638

3,114

3,336

3,439

3,504

1Q17

2Q17

3Q17

4Q17

1Q18

2Q1890+ Investor

Early conversions to principal & interest

4,698

3Q18

Contractual interest only expiry

PORTFOLIO BEHAVIOURSCHEDULED INTEREST ONLY TERM EXPIRY4HOME LOANS - 90+ DPD (BY VINTAGE)3$b%
2.081.542111.060.50.068
FY151.
2.
3.
4.

101214
FY16161820

FY172224262830323436months

67118108745341H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23+
Early conversions to principal & interest

Contractual interest only expiry

Excludes Non Performing Loans
The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and theongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstancesHome loans 90+ dpd vintages % ratio of ever delinquent (measured by # accounts) contains at least 6 application months of that fiscal year contributing to each data point
Includes construction loans

9F U R T H E R I N F O R M AT I O NDISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information about the Bank’s activities current at the dateof the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors
or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should beconsidered, with or without professional advice when deciding if an investment is appropriateThis presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ’sbusiness and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management
practices. When used in this presentation, 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. Such statements constitute “forward-looking statements” for the purposes of the UnitedStates Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to theseforward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

Our Shareholder information
shareholder.anz.com

Equity Investors

Jill Campbell

Cameron Davis

Katherine Hird

Group General Manager Investor Relations+61 3 8654 7749
+61 412 047 448
jill.campbell@anz.com

Executive Manager Investor Relations+61 3 8654 7716
+61 421 613 819
cameron.davis@anz.com

Senior Manager Investor Relations+61 3 8655 3261
+61 435 965 899
katherine.hird@anz.com

Retail Investors

Debt Investors

Michelle Weerakoon

Scott Gifford

Mary Karavias

Manager Shareholder Services & Events+61 3 8654 7682
+61 411 143 090
michelle.weerakoon@anz.com

Head of Debt Investor Relations+61 3 8655 5683
+61 434 076 876
scott.gifford@anz.com

Associate Director, Debt Investor Relations+61 3 8655 4318
mary.karavias@anz.com

10