ANZ National Bank Limited
General Disclosure Statement
FOR THE SIX MONTHS ENDED 31 MARCH 2010 | NUMBER 57 ISSUED MAY 2010

ANZ National Bank Limited and Subsidiary Companies

General Disclosures

For the six months ended 31 March 2010

This Disclosure Statement has been issued in accordancewith the Registered Bank Disclosure Statement (Full andHalf-Year – New Zealand Incorporated Registered Banks)
Order 2008 (“the Order”).

Contents

In this Disclosure Statement unless the context otherwise
requires:

General Disclosures
Summary of Financial Statements
Income Statements
Statements of Comprehensive Income
Statements of Changes in Equity
Balance Sheets
Cash Flow Statements
Notes to the Financial Statements
Directorate and Auditors
Conditions of Registration
Credit Rating Information
Directors’ Statement
Independent Review Report
Index

1-4
5
6
6
7
8
9 - 10
11 - 128
129 - 131
132 - 134
135
136
137
138

a) “Banking Group” means ANZ National Bank Limited andall its subsidiaries; andb) any term or expression which is defined in, or in themanner prescribed by the Order shall have the meaning
given in or prescribed by that Order.

General Matters
The full name of the registered bank is ANZ National Bank
Limited (“the Bank”) and its address for service is Level 6,
1 Victoria Street, Wellington, New Zealand.
The Bank was incorporated under the Companies Act 1955
by virtue of the ANZ Banking Group (New Zealand) Act 1979
on 23 October 1979, and was reregistered under theCompanies Act 1993 on 13 June 1997.
The immediate parent company of the Bank is ANZ Holdings(New Zealand) Limited (incorporated in New Zealand). The
immediate parent company is owned by ANZ Funds Pty
Limited and Australia and New Zealand Banking Group
Limited (“ANZ”) (both incorporated in Australia).
The Ultimate Parent Bank is ANZ and its address for service
is ANZ Centre Melbourne, Level 9, 833 Collins Street,
Docklands, Victoria 3008, Australia.
The Bank is wholly owned by its immediate parent
company and ultimately by the Ultimate Parent Bank.
The immediate parent company has the power under the
Bank’s Constitution to appoint any person as a Director of
the Bank either to fill a casual vacancy or as an additional
Director or to remove any person from the office of Director,
from time to time by giving written notice to the Bank. No
appointment of a new Director may occur unless the Reserve
Bank of New Zealand (“RBNZ”) confirms that it does not
object to the appointment.
A New Zealand Branch (“NZ Branch”) of ANZ was establishedon 5 January 2009. The full name of the NZ Branch
is Australia and New Zealand Banking Group Limited
New Zealand Branch and its address for service is Level 6,
1 Victoria Street, Wellington, New Zealand.
On 30 November 2009, the Banking Group purchased
ING Groep’s 51% interest in ING (NZ) Holdings Limited(“ING NZ”), which was the holding company for the
ANZ-ING wealth management and life insurance joint
venture in New Zealand.

1

General Disclosure Statement

ANZ National Bank Limited and Subsidiary Companies

General Disclosures (continued)

Pending Proceedings or Arbitration

Nature Of Business

Other than disclosed in the Disclosure Statement, there areno pending proceedings or arbitration concerning any
member of the Banking Group that may have a material
adverse effect on the Bank or the Banking Group as at thedate of the General Disclosure Statement.

The principal activities of the Banking Group during theperiod were retail, corporate and rural banking, mortgage
lending, asset and general finance, international andinvestment banking, and nominee and custodian services.

Material Financial Support
In accordance with the requirements issued by the Australian
Prudential Regulation Authority (“APRA”) pursuant to thePrudential Standards, ANZ, as the Ultimate Parent Bank, may
not provide material financial support to the Bank contrary
to the following:
•

•

•

•

•

the Ultimate Parent Bank should not undertake any third
party dealings with the prime purpose of supporting
the business of the Bank;
the Ultimate Parent Bank should not hold unlimited
exposures (should be limited as to specified timeand amount) in the Bank (e.g. not provide a generalguarantee covering any of the Bank’s obligations);
the Ultimate Parent Bank should not enter intocross default clauses whereby a default by the Bankon an obligation (whether financial or otherwise) isdeemed to trigger a default of the Ultimate Parent Bankin its obligations;
the Board of the Ultimate Parent Bank in determining
limits on acceptable levels of exposure to the Bank
should have regard to:• the level of exposure that would be approved tothird parties of broadly equivalent credit status. In
this regard, prior consultation (and in some cases
approval) is required before entering exceptionallylarge exposures; and• the impact on the Ultimate Parent Bank’s capital andliquidity position and its ability to continue operatingin the event of a failure by the Bank;
the level of exposure to the Bank not exceeding:• 50% on an individual exposure basis; and• 150% in aggregate (being exposures to all similar
regulated entities related to the Ultimate
Parent Bank)of the Ultimate Parent Bank’s capital base.
Additionally, the Ultimate Parent Bank may not provide
material financial support in breach of the Australian
Banking Act (1959). This requires APRA to exercise its powers
and functions for the protection of a bank’s depositors andin the event of a bank becoming unable to meet its
obligations or suspending payment, the assets of the bankin Australia shall be available to meet that bank’s deposit
liabilities in Australia in priority to all other liabilities ofthe bank.
The Ultimate Parent Bank has not provided material
financial support to the Bank contrary to any of theabove requirements.

Further details on pending proceedings or arbitration
are set out in Note 38 Contingent Liabilities and Credit
Related Commitments.

Other Material Matters
There are no matters relating to the business or affairs of the
Bank and the Banking Group which are not contained
elsewhere in the General Disclosure Statement and which
would, if disclosed, materially adversely affect the decisionof a person to subscribe for debt securities of which the
Bank or any member of the Banking Group is the issuer.

Guarantors
The Bank has guarantees under the:a) New Zealand Deposit Guarantee Scheme (“Crown Retail
Guarantee”); andb) New Zealand Wholesale Funding Guarantee Facility(“Crown Wholesale Guarantee”).
This section provides a brief description of the Crown Retail
Guarantee and Crown Wholesale Guarantee and also setsout from where further information may be obtained. As at
the date of this General Disclosure Statement the only
material obligations of the Bank that are guaranteed are thedebt securities (as defined in the Retail Deed) guaranteed
under the Crown Retail Guarantee and debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate
under the Crown Wholesale Guarantee (copies of which areavailable on the Treasury website www.treasury.govt.nz).

Crown Retail Guarantee
The Crown Retail Guarantee is provided under a Deed
entered into by the Bank and the Crown on 18 December
2009 (“Retail Deed”).
The Crown Retail Guarantee does not extend to subordinateddebt securities issued by the Bank or debt securities that areissued by the Bank to Related Parties (as defined in the RetailDeed) of the Bank or to Financial Institutions.
As defined in the Retail Deed, “Financial Institutions” meansa financial institution, as defined in section 2 of the Reserve
Bank of New Zealand Act 1989, which carries on the businessof borrowing and lending money, such as a life insurancecompany, a building society or a registered bank, and,without limiting the generality of the foregoing, includes:a) a “collective investment scheme” as that term is definedin section 157B of the Reserve Bank of New ZealandAct 1989 (including any “superannuation fund” or“superannuation scheme”);b) an “insurer” as that term is defined in section 2 of the
Insurance Companies (Rating and Inspections) Act 1994
or any other person carrying on the business of providing
insurance cover (of whatever nature);c) a person carrying on business as a sharebroker, aninvestment adviser or a fund manager (to the extent
that person is acting in that capacity); ord) a person who is a subsidiary of, or who is controlled bya financial institution within a), b), or c) above.

ANZ National Bank Limited and Subsidiary Companies

The Crown Retail Guarantee applies for a period commencing
on 12 October 2008 and expiring on 12 October 2010(“Guarantee Period”).
Under the Crown Retail Guarantee the Crown absolutely
and irrevocably guarantees:a) all obligations of the Bank to pay money to a creditor
under Debt Securities (“Indebtedness”) that becomedue and payable during the Guarantee Period; andb) if a Default Event, as defined in the Retail Deed, occurs
during the Guarantee Period, all Indebtedness that exists
on the date of that Default Event (whether or not that
Indebtedness is due and payable during the Guarantee
Period); andc) all interest accruing on the amounts referred to in b)
after the occurrence of the Default Event.
The Crown undertakes that if the Bank does not pay anamount referred to in a), b) or c) above, the Crown will paythat amount to the creditor when it is due and payable(except to the extent that that Indebtedness or interest is
not paid solely as a result of an administrative error or
technical error and is subsequently paid within 7 days of its
due date).
The Crown’s obligation to pay any amount under the
Crown Retail Guarantee is subject to the Crown receivinga notice of claim from the creditor in respect of therelevant Indebtedness and to the Crown satisfying itself
as to the amount of the relevant Indebtedness andsuch other matters as the Crown reasonably considers
appropriate in order to ascertain the extent of its liability
under the Crown Retail Guarantee in respect of that
Indebtedness. Notice may be served on the Crown inrespect of the Crown Retail Guarantee by service on
The Treasury at 1 The Terrace, Wellington.
The maximum liability of the Crown to each creditor under
the Crown Retail Guarantee is one million New Zealanddollars ($1,000,000). For this purpose amounts owed
to creditors by the Bank under any debt security will
be aggregated with other amounts owed to the same
creditor by the Bank which are supported by the Crown
Retail Guarantee.
On 25 August 2009 the Government announced that it will
extend the Crown Retail Guarantee to 31 December 2011
and change some of its terms and conditions. The Reserve
Bank has stated that there is no need for banks to partake inthe scheme, and therefore at this stage the Bank does notintend to apply to be covered by it.

Crown Wholesale Guarantee
The Crown Wholesale Guarantee is provided under the
Crown Wholesale Funding Guarantee in respect of the Bank
entered into by the Crown on 23 December 2008 andsupplemented on 19 February 2009 (“Wholesale Deed”).
The Government closed the Crown Wholesale Guarantee to
new debt securities on 30 April 2010. The closure did notaffect debt securities previously issued with the benefit of
the Crown Wholesale Guarantee.

If a Guarantee Eligibility Certificate was issued in respect ofa debt securities, the Crown (subject to any special conditions
specified in a Guarantee Eligibility Certificate and provided
the debt securities are not varied, amended, waived,
released, novated, supplemented, extended or restated inany respect without the prior written consent of the Crown)
has irrevocably:a) guaranteed the payment by the Bank of any liability of
the Bank to pay principal and interest (excluding any
penalty interest or other amount only payable following
a default) in respect of the debt securities; andb) undertaken that if the Bank does not pay any suchliability on the date on which it becomes due andpayable, the Crown shall, within five Business Days of ademand being made in accordance with the Wholesale
Deed and following the expiry of any applicable grace
period, pay such liability.
The Crown Wholesale Guarantee does not extend to debt
securities held by a Related Party (as defined in the Wholesale
Deed) of the Bank.
In the event of a claim made on the Crown, the Crown will
only pay the interest and principal due to the holders of thedebt security on the originally scheduled dates for payment
of interest and principal.
The Crown’s obligations in respect of any debt security
terminate on the date falling 30 days after the earlier of:a) the scheduled maturity date for the debt security underwhich the guaranteed liability arises; andb) the date falling five years after the date of issue of thedebt security under which the guaranteed liability arises,
unless valid demand has been made on the Crown prior
to that time.
Any demand on the Crown in respect of debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate
must be made in the prescribed form and delivered by handto the Minister of Finance, Parliament Buildings, Wellington,
New Zealand or to one of the other addresses specified in
the Wholesale Deed.

Further information
Further information about the Crown Retail Guarantee
and the Crown Wholesale Guarantee, including a copyof the Retail Deed and Wholesale Deed, and any
Guarantee Eligibility Certificate issued by the Crown inrespect of the Bank, is available on The Treasury website at
www.treasury.govt.nz.
Further information about the Crown, including a copy of its
most recent audited financial statements can be obtainedat www.treasury.govt.nz.

2–3

General Disclosures (continued)

ANZ National Bank Limited and Subsidiary Companies

General Disclosures (continued)

Supplemental Disclosure Statement

The Crown’s credit ratings are available on the New Zealand
Debt Management Office website www.nzdmo.govt.nz.
The Crown’s long-term foreign currency and domestic debt
credit ratings have not changed in the two years immediately
before the date of this General Disclosure Statement. The
Crown’s credit ratings are:

The most recent Supplemental Disclosure Statement for thesix months ended 31 March 2010 is available at no charge:

Foreign Currency
Rating Agency

Current
Credit Rating

Qualification

Standard & Poor’s

AA+

Outlook Stable

Moody’s
Investors Service

Aaa

Outlook Stable

Fitch Ratings

AA+

Outlook Negativea) on the Bank’s websites www.anz.co.nz andwww.nationalbank.co.nz;b) immediately if request is made at the Bank’s head
office, located at Level 6, 1 Victoria Street, Wellington,
New Zealand; andc) within five working days of a request, if a request is
made at any branch of ANZ or The National Bank of
New Zealand.
The Bank’s most recent Supplemental DisclosureStatement contains a copy of the bilateral netting
agreement and a copy of the Crown Retail Guarantee andCrown Wholesale Guarantee.

Directorate

Domestic Currency
Rating Agency

Current
Credit Rating

Qualification

Standard & Poor’s

AAA

Outlook Stable

Moody’s
Investors Service

Aaa

Outlook Stable

Fitch RatingsAAA

Outlook Negative

Credit ratings are assigned to sovereigns and businesses by
the international credit rating agencies. Credit ratings
provide investors with an indication of the credit-worthinessof an entity in which they are considering investing. There
are three major internationally recognised credit rating
agencies: Standard & Poor’s, Moody’s Investors Service andFitch Ratings. AAA is the highest rating level while a rating in
the AA range is also seen as a very high level of creditworthiness. Refer to “Credit Rating Information” for a fulldescription of credit rating scales.

Since the authorisation date of the previous General ShortForm Disclosure Statement on 11 February 2010, there havebeen no changes to Directors of the Bank. However, effective
4 March 2010, Dr Don Brash commenced an approved
indefinite leave of absence from the Board.

ANZ National Bank Limited and Subsidiary Companies
4–5

Summary of Financial Statements
Consolidated
Unaudited
6 months to
31/03/2010$m

AuditedYear to30/09/2009$m

AuditedYear to30/09/2008$m

AuditedYear to1
30/09/2007$m

AuditedYear to1
30/09/2006$m

AuditedYear to1
30/09/2005
$m

2,778

7,246

9,857

8,309

7,206

6,009

Continuing operations
Interest income
Interest expense

1,681

4,892

7,568

6,059

5,077

4,069

Net interest income

1,097

2,354

2,289

2,250

2,129

1,940

433

762

1,124

861

802

794

Operating income

1,530

3,116

3,413

3,111

2,931

2,734

Operating expenses

748

1,477

1,444

1,331

1,323

1,312

Other operating income

Profit before provision for credit impairment and income tax

782

1,639

1,969

1,780

1,608

1,422

Collective provision charge / (credit)

58

264

112

20

(10)

121

Individual provision charge

256

610

190

54

28

-

Provision for credit impairment

314

874

302

74

18

121

Profit before income tax

468

765

1,667

1,706

1,590

1,301

Income tax expense

101

467

504

614

523

398

Profit after income tax from continuing operations

367

298

1,163

1,092

1,067

903

Discontinued operations
-

-

-

76

5

14

Profit after income tax

367

298

1,163

1,168

1,072

917

Ordinary dividends paid-

(1,000)

-

(728)

(900)

(360)

Unaudited
As at
31/03/2010$m

AuditedAs at
30/09/2009$m

AuditedAs at
30/09/2008$m

Audited
As at1
30/09/2007$m

Audited
As at1
30/09/2006$m

Audited
As at1
30/09/2005$mProfit from discontinued operations (net of income tax)

Consolidated

1,712

1,178

327

115

151

213

Total assets

113,577

117,891

122,915

107,787

95,81485,501

Total liabilities

103,045

107,803

113,108

99,08487,581

77,555

Total impaired assets

Non-controlling interests
Equity

1

-

-

-

-

-

10,532

10,088

9,807

8,703

8,233

7,946

The amounts included in this summary have been taken from the audited financial statements of the Banking Group, except
for the amounts for the six months ended 31 March 2010 which have been taken from unaudited financial statements

1

Truck Leasing Limited has been classified as a discontinued operation for the comparative years ending 30 September 2007, 30 September 2006 and
30 September 2005.

ANZ National Bank Limited and Subsidiary Companies

Income Statements
For the six months ended 31 March 2010
Consolidated

Parent

Note

Unaudited
6 months to
31/03/2010$mInterest income

4

2,778

4,226

7,246

2,822

4,321

7,429

Interest expense

5

1,681

2,951

4,892

1,890

3,346

5,538

1,097

1,275

2,354

932

975

1,891

16

119

187

15

118

185

Net interest income

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Net trading gains

4

Net funds management and insurance income

4

91

47

97

28

38

78

Other operating income

4

290

266

465

343

235

1,492

Share of profit of equity accounted associates
and jointly controlled entities

15

Operating income
Operating expenses

5

Profit before provision for credit impairment
and income tax
Provision for credit impairment

14

Profit before income tax
Income tax expense

6

Profit after income tax

36

8

13

-

-

-

1,530

1,715

3,116

1,318

1,366

3,646

748

738

1,477

667

704

1,410

782

977

1,639

651

662

2,236

314

285

874

300

265

840

468

692

765

351

397

1,396

101

204

467

65

109

386

367

488

298

286

288

1,010

Statements of Comprehensive Income
For the six months ended 31 March 2010
Consolidated

Note

Profit after income tax

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

367

488

298

286

288

1,010

59

4

2

42

4

2

(9)

(1)

2

(9)

(1)

Available-for-sale revaluation reserve:– Valuation gain before tax
Cash flow hedging reserve:– Valuation gain / (loss) before tax

102– Transferred to income statement

10

21

(19)

(3)

21

(19)

(3)

Actuarial gain / (loss) on defined benefit schemes

14

(39)

(25)

14

(39)

(25)

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

(20)

20

10

(20)

20

10

Net credit / (expense) recognised directly in equity

76

(43)

(17)

59

(43)

(17)

Total comprehensive income for the period

443

445

281

345

245

993

The notes on pages 11 to 128 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited and Subsidiary Companies
6–7

Statements of Changes in Equity
For the six months ended 31 March 2010
Consolidated

Note

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

6,943

5,943

5,943

6,943

5,943

5,943

Ordinary share capital
Balance at beginning of the period
Ordinary share capital issued during the period
Balance at end of the period

27

-

1,000

1,000

-

1,000

1,000

6,943

6,943

6,943

6,943

6,943

6,943

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

25

23

23

25

23

23

Valuation gain recognised after tax

51

3

2

34

3

2

Balance at end of the period

76

26

25

59

26

25

23

24

24

23

24

24

Cash flow hedging reserve
Balance at beginning of the period
Valuation gain / (loss) recognised after tax

1

(6)

-

1

(6)

-

Transferred to income statement

14

(12)

(1)

14

(12)

(1)

Balance at end of the period

10

Total reserves

38

6

23

38

6

23

114

32

48

97

32

48

3,097

3,817

3,817

2,314

2,322

2,322

367

488

298

286

288

1,010

3,464

4,305

4,115

2,600

2,610

3,332

Retained earnings
Balance at beginning of the period
Profit after income tax attributable to parent
Total available for appropriation
Actuarial gain / (loss) on defined benefit schemes after tax
Interim ordinary dividend paid

27

Balance at end of the period

10

(28)

(18)

10

(28)

(18)

-

(1,000)(1,000)-(1,000)(1,000)

3,474

3,277

3,097

2,610

1,582

2,314

-

-

-

-

-

-

Non-controlling interests
Balance at beginning of the period
Acquired in business combination

42

Balance at end of the period

1

-

-

-

-

-

1

-

-

-

-

-

10,088

9,807

9,807

9,305

8,312

8,312

443

445

281

345

245

993

-

-

-

-

-

-

Total equity
Balance at beginning of the period
Total comprehensive income for the period
Transactions with shareholders
Other transactions
Balance at end of the period

42

1

-

-

-

-

-

10,532

10,252

10,088

9,650

8,557

9,305

The notes on pages 11 to 128 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited and Subsidiary Companies

Balance Sheets
As at 31 March 2010
Consolidated

Parent

Note

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$mLiquid assets

7

2,519

3,390

2,762

2,502

3,390

2,758

Due from other financial institutions

8

2,101

7,631

4,514

1,949

6,874

4,361

Trading securities

9

6,366

2,565

4,166

6,366

2,565

4,166
11,449AssetsDerivative financial instruments

10

8,713

14,985

11,408

8,719

15,162Available-for-sale assets

11

1,850

597

1,513

1,674

594

1,511

Net loans and advances

12

85,67093,72088,25983,41691,32985,952

Due from subsidiary companies

41

7,703

-

-

-

8,826

9,610

Investments relating to insurance business

38

-

-

-

-

-

Insurance policy assets

106

-

-

-

-

-

Due from parent company

25

500

-

-

500

-

-

Shares in controlled entities, associates
and jointly controlled entities

15

144

396

464

7,821

7,773

7,702

107

60

65

204

283

168
1,081

Current tax assets
Other assets

16

1,170

823

1,137

1,130

745

Deferred tax assets

17

425

200

-

357

174

-

Premises and equipment

18

305

250

278

79

60

63

Goodwill and other intangible assets

19

Total assets

3,563

3,324

3,325

3,290

3,275

3,274

113,577

127,941

117,891

126,833

141,834

130,188

Liabilities
Due to other financial institutions

20

1,336

4,162

3,725

1,054

3,250

3,239

Deposits and other borrowings

21

70,636

72,76071,764

61,86164,91362,835Due to subsidiary companies

41

-

-

-

38,25444,78537,362

Due to parent company

25

-

1,096

930

-

1,096

930

Derivative financial instruments

10

9,152

12,868

10,762

9,170

12,868

10,769
1,278

Payables and other liabilities

22

2,084

2,100

1,809

2,156

1,879

Deferred tax liabilities

17

-

-

17

-

-

83

Provisions

23

341

340

283

224

336

275

Bonds and notes

24

16,855

21,52815,917

1,823

1,315

1,516

Loan capital

26

2,641

2,835

2,596

2,641

2,835

2,596

Total liabilities

103,045

117,689

107,803

117,183

133,277

120,883

Net assets

10,532

10,252

10,088

9,650

8,557

9,305

6,943

6,943

6,943

6,943

6,943

6,943

EquityOrdinary share capital

27

114

32

48

97

32

48

Retained earnings

3,474

3,277

3,097

2,610

1,582

2,314

Parent shareholders' equity

10,531

10,252

10,088

9,650

8,557

9,305

1

-

-

-

-

-

10,532

10,252

10,088

9,650

8,557

9,305

Reserves

Non-controlling interests
Total equity

The notes on pages 11 to 128 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited and Subsidiary Companies
8–9

Cash Flow Statements
For the six months ended 31 March 2010
Consolidated

Note

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

2,714

4,169

7,131

2,745

4,250

7,270

Cash flows from operating activities
Interest received
Dividends received
Net cash from funds management & insurance

-

-

3

-

-

1,100

61

47

97

28

38

78

433

565

920

461

549

848

(1,734)(3,001)(4,884)(1,938)(3,349)(5,465)

Operating expenses paid

(746)

(735)

(1,480)

(673)

(712)

(1,452)

Income taxes paid

(577)

(265)

(425)

(526)

(231)

(245)

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

151

780

1,362

97

545

2,134

Change in due from other financial institutions – term

1,258

159

(246)

1,081

(147)

(596)

Change in trading securities(2,207)90(1,505)(2,207)90(1,505)

Change in derivative financial instruments

1,927

(683)

(3,936)

1,967

(672)

(3,842)

(80)

(485)

(1,388)(103)(8,309)(1,390)

7

-

-

-

-

-

Change in loans and advances

(576)

(564)

(1,108)

(615)

(590)

(1,206)

Proceeds from sale of loans and advances to NZ branch

Fees and other income received
Interest paid

Change in operating assets and liabilities:

Change in available-for-sale assets
Change in insurance investment assets

2,612

4,877

9,863

2,612

4,877

9,863

Change in due from subsidiary companies

-

-

-

(348)

207

(5,711)

Change in due to subsidiary companies

-

-

-

(1,116)

1,664

978

(43)

72

(164)

(71)

48

(174)

Change in due to other financial institutions(2,427)921

509(2,185)

1,310

1,299

Change in deposits(1,205)

1,923

672

(1,027)

1,903

(268)

Change in other borrowings(578)(5,615)(4,637)---

Change in payables and other liabilities

352

496

165

977

537

(98)

(809)

1,971

(413)

(938)

1,463

(516)

Change in other assets

Net cash flows used in operating activities

34

The notes on pages 11 to 128 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited and Subsidiary Companies

Cash Flow Statements (continued)
For the six months ended 31 March 2010
Consolidated

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Proceeds from sale of shares in associates
and jointly controlled entities

1

-

-

-

-

-

Proceeds from sale of premises and equipment

10

34

33

7

1

2

-

-

1

-

-

1

Note

Cash flows from investing activities

Proceeds from sale of software
Purchase of shares in associates
and jointly controlled entities

-

(25)

(92)

-

(23)

(29)

Purchase of shares in subsidiary entities

(247)

-

-

(182)

-

-

Purchase of intangible assets

(24)

(14)

(20)

(24)

(13)

(18)

Purchase of premises and equipment

(55)

(42)

(95)

(34)

(15)

(32)

Net cash flows used in investing activities

(315)

(47)

(173)

(233)

(50)

(76)

Cash flows from financing activities
Proceeds from bonds and notes

2,791

135

5,012

350

135

500

Redemptions of bonds and notes(1,803)(3,323)(7,751)

-

(222)

(270)

Redemptions of loan capital

-

-

(225)

-

-

(225)

Change in due to subsidiary companies – term

-

-

-

638

(3,147)(2,964)

Proceeds from share issue

-

1,000

1,000

-

1,000

1,000

Dividends paid-

(1,000)(1,000)-(1,000)(1,000)(1,430)692

526(1,430)692

526

Net cash flows provided by financing activities(442)(2,496)(2,438)(442)(2,542)(2,433)

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

(809)

1,971

(413)

(938)

1,463

(516)

Net cash flows used in investing activities

(315)

(47)

(173)

(233)

(50)

(76)

Net cash flows used in financing activities(442)(2,496)(2,438)(442)(2,542)(2,433)Net decrease in cash and cash equivalents(1,566)(572)(3,024)(1,613)(1,129)(3,025)

Cash and cash equivalents at beginning of the period

4,765

7,789

7,789

4,761

7,786

7,786

3,199

7,217

4,765

3,148

6,657

4,761

Change in related party funding

Cash and cash equivalents at end of the period34

The notes on pages 11 to 128 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited and Subsidiary Companies

1. Significant Accounting Policies(a) Basis of preparation(i) Statement of compliance
These financial statements have been prepared inaccordance with the requirements of the Companies
Act 1993, the Financial Reporting Act 1993 and theRegistered Bank Disclosure Statement (Full and HalfYear – New Zealand Incorporated Registered Banks)
Order 2008 (the “Order”). The parent’s financial
statements are for ANZ National Bank Limited (the“Bank” or “Parent”) as a separate entity and theconsolidated financial statements are for the ANZ
National Bank Limited Group (the “Banking Group” or“reporting entity”), which includes subsidiaries,
associate companies and jointly controlled entities.
These financial statements have also been prepared inaccordance with New Zealand Generally Accepted
Accounting Principles. They comply with New Zealandequivalents to International Financial ReportingStandards (“NZ IFRS”) and other applicable Financial
Reporting Standards, as appropriate for profit-oriented
entities. The financial statements comply with
International Financial Reporting Standards (“IFRS”).
The principal accounting policies adopted in the
preparation of these financial statements are set out
below. These policies have been consistently applied by
the Parent and all consolidated entities and to all periods
presented in the consolidated financial statements.
These financial statements were authorised for issue by
the Board of Directors on 21 May 2010.
(ii) Use of estimates and assumptions
The preparation of the financial statements requires theuse of management judgement, estimates andassumptions that affect reported amounts and theapplication of policies. The estimates and associatedassumptions are based on historical experience andvarious other factors that are believed to be reasonable.
Actual results may differ from these estimates.
Discussion of the critical accounting treatments, which
include complex or subjective decisions or assessments,
are covered in Note 2. Such estimates may require
review in future periods.
(iii) Basis of measurement
The financial statements have been prepared on a going
concern basis in accordance with historical cost concepts
except that the following assets and liabilities are statedat their fair value:• derivative financial instruments, including in thecase of fair value hedging, the fair value of any
applicable underlying exposure;• financial instruments held for trading;• assets recognised as available-for-sale;• financial instruments designated at fair value
through profit and loss; and• defined benefit scheme asset or liability.

(iv) Changes in accounting policies and application of
new accounting statements
The accounting policies adopted by the Banking
Group are consistent with those adopted and disclosed
in the prior period with the exception that all new
accounting standards and interpretations applicable
to annual reporting periods beginning on or after
1 October 2009 have been applied by the Banking
Group effective from the required date of application.
The initial application of these standards andinterpretations has not had a material impact on thefinancial results of the Banking Group.
NZ IFRS 8 Operating Segments (“NZ IFRS 8”), NZ IAS 1
Presentation of Financial Statements (revised) (“NZ IAS 1”),NZ IAS 27 Consolidated and Separate Financial Statements
and NZ IFRS 3 Business Combinations (revised) have been
applied by the Banking Group for the six months ended
31 March 2010.
NZ IFRS 8 replaces NZ IAS 14 Segment Reporting andrequires the use of a “management approach” tosegment reporting. Segment information is therefore
presented on the same basis as that used for internalreporting purposes. Goodwill associated with theacquisition of NBNZ Holdings Limited Group is allocatedto the reportable segments in accordance with NZ IFRS 8.
In accordance with NZ IAS 1 a “statement ofcomprehensive income” has been disclosed showing
net profit or loss and revenues and expenses recognised
directly in equity. In addition the revised “statement ofchanges in equity” shows all changes in equity.
There have been no other changes in accounting
policies since the authorisation date of the previous
General Disclosure Statement on 13 November 2009.
(v) Rounding
The amounts contained in the financial statements
have been rounded to the nearest million dollars, except
where otherwise stated.
(vi) Comparatives
Certain amounts in the comparative information
have been reclassified to ensure consistency with thecurrent period.
(vii) Principles of consolidation
Subsidiaries
The financial statements consolidate the financial
statements of the Bank and all its subsidiaries where it isdetermined that there is capacity to control.
Where subsidiaries have been sold or acquired during
the period, their operating results have been included
to the date of disposal or from the date of acquisition.
Control means the power to govern, directly or indirectly,
the financial and operating policies of an entity so as toobtain benefits from its activities. All of the facts of aparticular situation are considered when determining
whether control exists. Control is usually present whenan entity has:••power over more than one-half of the voting rightsof the other entity;
power to govern the financial and operating policiesof the other entity;

10 – 11

Notes to the
Financial Statements

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
1. Significant Accounting Policies (continued)••

power to appoint or remove the majority of themembers of the board of directors or equivalent
governing body; or
power to cast the majority of votes at meetings ofthe board of directors or equivalent governing bodyof the entity.

In addition, potential voting rights that are presently
exercisable or convertible are taken into account indetermining whether control exists.
In relation to special purpose entities control is deemed
to exist where:••

In substance, the majority of the residual risks andrewards from the activities accrue to the Banking
Group; orIn substance, the Group controls decision making
powers so as to obtain the majority of the risks andrewards of these activities

Associates and joint ventures
The Banking Group adopts the equity method of
accounting for associates and the Banking Group’s
interest in joint venture entities.
The Banking Group’s share of the results ofassociates and joint venture entities is included in the
consolidated income statement. Shares in associates
and joint venture entities are carried in the consolidatedbalance sheet at cost plus the Banking Group’s share ofpost acquisition net assets. Interests in associates andjoint ventures are reviewed for any indication of
impairment at least at each reporting date. This
impairment review may use a discounted cash flow
methodology and other methodologies to determine
the reasonableness of the valuation including a
multiples of earning methodology.
(viii) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the
Banking Group’s entities are measured using thecurrency of the primary economic environment inwhich the entity operates (the functional currency). The
Banking Group’s financial statements are presented in
New Zealand dollars, which is the Bank’s functional andpresentation currency.

Translation differences on non-monetary items, such asderivatives, measured at fair value through profit or loss
are reported as part of the fair value gain or loss onthese items.
Translation differences on non-monetary items
measured at fair value through equity, such as equities
classified as available-for-sale financial assets, areincluded in the available-for-sale revaluation reservein equity.
(b) Income recognition
Revenue is recognised to the extent that it is probablethat economic benefits will flow to the Banking Groupand that revenue can be reliably measured.
(i) Interest income
Interest income is recognised as it accrues, using
the effective interest method.
The effective interest method calculates theamortised cost of a financial asset or financial
liability and allocates the interest income or interest
expense, including any fees and directly relatedtransaction costs that are an integral part of theeffective interest rate, over the expected life of thefinancial asset or liability so as to achieve a constantyield on the financial asset or liability.
For assets subject to prepayment, expected life isdetermined on the basis of the historical behaviourof the particular asset portfolio, taking into accountcontractual obligations and prepayment experienceassessed on a regular basis.
(ii) Fee and commission income
Fees and commissions received that are integral
to the effective interest rate of a financial asset
are recognised using the effective interest method.
For example, loan commitment fees, together
with related direct costs, are deferred andrecognised as an adjustment to the effective
interest rate on a loan once drawn. Commitment
fees to originate a loan which is unlikely to be
drawn down are recognised as fee income as theservice is provided.
Fees and commissions that relate to the executionof a significant act (for example, advisory services
or arrangement services, placement fees andunderwriting fees) are recognised when thesignificant act has been completed.
Fees charged for providing ongoing services (forexample, maintaining and administering existing
facilities) are recognised as income over the period
the service is provided.

Foreign currency transactions
Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailingat the dates of the transactions.

(iii) Dividend income

Monetary assets and liabilities resulting from foreign
currency transactions are subsequently translated at
the spot rate at reporting date.

(iv) Leasing income

Exchange differences arising on the settlement ofmonetary items or on translating monetary items at
rates different to those at which they were initiallyrecognised or included in a previous financial report,
are recognised in the income statement in the period inwhich they arise.

Dividends are recognised as revenue when the rightto receive payment is established.
Finance income on finance leases is recognised on abasis that reflects a constant periodic return on the
net investment in the finance lease.

ANZ National Bank Limited and Subsidiary Companies

1. Significant Accounting Policies (continued)(v) Gain or loss on sale of property, plant andequipment
The gain or loss on the disposal of premises andequipment is determined as the difference between
the carrying amount of the assets at the time ofdisposal and the proceeds of disposal, and isrecognised as an item of other income in the period
in which the significant risks and rewards ofownership are transferred to the buyer.
(c) Expense recognition
Expenses are recognised in the income statement on an
accruals basis.
(i) Interest expense
Interest expense on financial liabilities measured
at amortised cost is recognised in the income
statement as it accrues using the effective interest
method.
(ii) Loan origination expenses
Certain loan origination expenses are an integral
part of the effective interest rate of a financial asset
measured at amortised cost. These loan origination
expenses include:••

fees and commissions payable to brokers in
respect of originating lending business; andother expenses of originating lending business,such as external legal costs and valuation fees,
provided these are direct and incremental costs
related to the issue of a financial asset.

Such loan origination expenses are initiallyrecognised as part of the cost of acquiring thefinancial asset and amortised as part of the expected
yield of the financial asset over its expected life
using the effective interest method.
(iii) Share-based compensation expense
The Banking Group has various equity settled
share-based compensation plans. These aredescribed in Note 39 and largely comprise the
Employee Share Acquisition Plan and the ANZ
Share Option Plan.
ANZ ordinary shares
The fair value of ANZ ordinary shares granted under
the Employee Share Acquisition Plan is measured at
grant date, using the one-day volume weighted
average market price of ANZ shares. The fair value isexpensed immediately when shares vest
immediately or on a straight-line basis over the
relevant vesting period.
Share Options
The fair value of ANZ share options is measured
at grant date, using an option pricing model. The
fair value is expensed on a straight-line basis
over the relevant vesting period. This is recognised
as an employee compensation expense with acorresponding increase in the share options
liability account.

The option pricing model takes into account theexercise price of the option, the risk free interest
rate, the expected volatility of ANZ’s ordinary shareprice and other factors. Market vesting conditions
are taken into account in estimating the fair value.
Performance Rights
A Performance Right is a right to acquire a share atnil cost to the employee subject to satisfactorily
meeting time and performance hurdles. Upon
exercise, each Performance Right entitles the holder
to one ordinary share in ANZ. The fair value of
Performance Rights is determined at grant dateusing an option pricing model, taking into accountmarket conditions. The fair value is expensed over
the relevant vesting period with a corresponding
increase in the share options liability account.
Other adjustments
Subsequent to the grant of an equity-based award,
the amount recognised as an expense is adjusted
for vesting conditions other than market conditions
so that, ultimately, the amount recognised as an
expense is based on the number of equity
instruments that eventually vest.
(iv) Lease payments
Leases entered into by the Banking Group as
lessee are predominantly operating leases, andthe operating lease payments are recognised as
an expense on a straight-line basis over thelease term.
(d) Income tax(i) Income tax expense
Income tax on earnings for the period
comprises current and deferred tax and is basedon the applicable tax law in each jurisdiction. It is
recognised in the income statement as tax expense,
except when it relates to items credited directly toequity, in which case it is recorded in equity, or
where it arises from the initial accounting for abusiness combination, in which case it is included in
the determination of goodwill.
(ii) Current tax
Current tax is the expected tax payable on taxable
income for the period, based on tax rates (andtax laws) which are enacted or substantively
enacted by the reporting date and including any
adjustment for tax payable in previous periods.
Current tax for current and prior periods isrecognised as a liability (or asset) to the extent that
it is unpaid (or refundable).
(iii) Deferred tax
Deferred tax is accounted for using thecomprehensive tax balance sheet method. It is
generated by providing for temporary differences
between the carrying amounts of assets andliabilities for financial reporting purposes and theirtax base.
Deferred tax assets, including those related to thetax effects of income tax losses and credits available
to be carried forward, are recognised only to theextent that it is probable that future taxable profits
will be available against which the deductible
temporary differences or unused tax losses andcredit can be utilised.

12 – 13

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
1. Significant Accounting Policies (continued)
Deferred tax liabilities are recognised for all taxable
temporary differences, other than those relating totaxable temporary differences arising from goodwill.
They are also recognised for taxable temporary
differences arising on investments in controlled entities,
branches, associates and joint ventures, except where
the Banking Group is able to control the reversal of thetemporary differences and it is probable that thetemporary differences will not reverse in the foreseeable
future. Deferred tax assets associated with theseinterests are recognised only to the extent that it isprobable that the temporary difference will reverse in
the foreseeable future and there will be sufficienttaxable profits against which to utilise the benefits ofthe temporary difference.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)when the asset and liability giving rise to them arerealised or settled, based on tax rates (and tax laws) thathave been enacted or substantively enacted by thereporting date. The measurement reflects the tax
consequences that would follow from the manner inwhich the Banking Group, at the reporting date, recovers
or settles the carrying amount of its assets and liabilities.
(iv) Offsetting
Current and deferred tax assets and liabilities are offset
only to the extent that they relate to income taxes
imposed by the same taxation authority, there is a legal
right and intention to settle on a net basis and it isallowed under the tax law of the relevant jurisdiction.
(e) Assets
Financial assets(i) Financial assets and liabilities at fair value throughprofit or loss
Trading securities are financial instruments acquired
principally for the purpose of selling in the shortterm or which are a part of a portfolio which ismanaged for short-term profit-taking. Trading
securities are initially recognised and subsequently
measured in the balance sheet at their fair value.
Derivatives that are neither financial guarantee
contracts nor effective hedging instruments arecarried at fair value through profit or loss. In addition,certain financial assets and liabilities are designatedand measured at fair value through profit or loss
where the following applies:••

doing so eliminates or significantly reduces ameasurement or recognition inconsistency thatwould otherwise arise from measuring assets
and liabilities, or recognising the gains or losses
thereon, on different bases;a group of financial assets or financial liabilities
or both is managed and its performance
evaluated on a fair value basis; or•the financial instrument contains an embedded
derivative, unless the embedded derivative
does not significantly modify the cash flows or itis clear, with little or no analysis, that it would
not be separately recorded.

Changes in the fair value (gains or losses) of thesesecurities are recognised in the income statementin the period in which they occur.
Purchases and sales of trading securities arerecognised on trade date.
(ii) Derivative financial instruments
Derivative financial instruments are contracts
whose value is derived from changes in one or more
underlying price index or other variables. They
include swaps, forward rate agreements, futures,
options and combinations of these instruments.
Derivative financial instruments are entered into for
trading purposes (including customer-related
reasons) or for hedging purposes (where thederivative instruments are used to hedge the
Banking Group’s exposures to interest rate risk,
currency risk, price risk, credit risk and otherexposures relating to non-trading positions).
Derivative financial instruments are recognised
initially at fair value with gains or losses from
subsequent measurement at fair value being
recognised in the income statement. Included in
the determination of fair value of derivatives is acredit valuation adjustment to reflect the credit
worthiness of the counterparty, modelled using thecounterparty’s credit spreads. The valuation
adjustment is influenced by the mark-to-marketof the derivative trades and by the movement incredit spreads.
Where the derivative is designated and is effective
as a hedging instrument, the timing of therecognition of any resultant gain or loss in theincome statement is dependent on the hedging
designation. These hedging designations andassociated accounting are as follows:
Fair value hedge
Where the Banking Group hedges the fair value of arecognised asset or liability or firm commitment,changes in the fair value of the derivative designatedas a fair value hedge are recognised in theincome statement. Changes in the fair value of thehedged item attributable to the hedged risk arereflected in adjustments to the carrying value ofthe hedged item, which are also recognised in theincome statement.
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercisedor no longer qualifies for hedge accounting. The
resulting adjustment to the carrying amount of thehedged item arising from the hedged risk isamortised to the income statement over a period tomaturity of the hedged item. If the hedged item issold or repaid, the unamortised adjustment isrecognised immediately in the income statement.

ANZ National Bank Limited and Subsidiary Companies

1. Significant Accounting Policies (continued)
Cash flow hedge
The Banking Group designates derivatives as cash
flow hedges where the instrument hedges thevariability in cash flows of a recognised asset or
liability, a foreign exchange component of a firm
commitment, or a highly probable forecast
transaction. The effective portion of changes in thefair value of derivatives qualifying and designatedas cash flow hedges is deferred to the hedging
reserve, which forms part of shareholders’ equity.
Any ineffective portion is recognised immediately
in the income statement. Amounts deferred inequity are recognised in the income statement in
the period during which the hedged forecast
transactions take place.
When the hedge expires, is sold, terminated,
exercised, or no longer qualifies for hedge
accounting, the cumulative amount deferredin equity remains in the hedging reserve, andis subsequently transferred to the income
statement when the hedged item is recognised in
the income statement.
When a forecast hedged transaction is no longer
expected to occur, the amount deferred in equity isrecognised immediately in the income statement.
Derivatives that do not qualify for hedge
accounting
All gains and losses from changes in the fair value ofderivatives that are not designated in a hedging
relationship but are entered into to manage theinterest rate and foreign exchange risk of funding
instruments are recognised in the income statement.
Under certain circumstances, the component of thefair value change in the derivative which relates tocurrent period realised and accrued interest is
included in net interest income. The remainder of thefair value movement is included in other income.
Set-off arrangements
Fair value gains/losses arising from trading
derivatives are not offset against fair value gains/losses on the balance sheet unless a legal right of
set-off exists and there is an intention to settle net.
For contracts subject to master netting agreementsthat create a legal right of set-off for which only the
net revaluation amount is recognised in the income
statement, net unrealised gains on derivatives arerecognised as part of other assets and net unrealised
losses are recognised as part of other liabilities.
(iii) Available-for-sale assets
Available-for-sale assets comprise non-derivative
financial assets which the Banking Group designates
as available-for-sale but which are not deemed tobe held principally for trading purposes, and include
equity investments, certain loans and advances,and quoted debt securities.

They are initially recognised at fair value plustransaction costs. Subsequent gains or losses arisingfrom changes in fair value are included as a separate
component of equity in the available-for-salerevaluation reserve. When the asset is sold, thecumulative gain or loss relating to the asset istransferred to the income statement.
Where there is objective evidence of impairment on
an available-for-sale asset, the cumulative loss
related to that asset is removed from equity andrecognised in the income statement, as an
impairment expense for debt instruments or as
non-interest income for equity instruments. If, in a
subsequent period, the amount of an impairment
loss relating to an available-for-sale debt instrument
decreases and the decrease can be linked objectively
to an event occurring after the impairment event,the loss is reversed through the income statement
through the impairment expense.
Purchases and sales of available-for-sale financial
assets are recognised on trade date as with all
regular way assets, being the date on which theGroup commits to purchase or sell the asset.
(iv) Net loans and advances
Loans and advances are non-derivative financial
assets with fixed or determinable payments thatare not quoted in an active market. They arise whenthe Banking Group provides money to a debtor
with no intention of trading the loans and advances.
The loans and advances are initially recognised atfair value plus transaction costs that are directly
attributable to the issue of the loan or advance.
They are subsequently measured at amortised costusing the effective interest method, unlessspecifically designated on initial recognition at fairvalue through profit or loss.
Loans and advances include direct financeprovided to customers such as bank overdrafts,
credit cards, term loans, finance lease receivables
and commercial bills.
All loans are graded according to the level of credit
risk. Loans are classified as either productive
or impaired.
Impaired assets include loans where there is doubt
as to full recovery, and loans that have been
restructured. An individual provision is raised tocover the expected loss where full recovery of
principal is doubtful.
Impairment of loans and advances
Loans and advances are reviewed at least at eachreporting date for impairment.
Credit impairment provisions are raised for
exposures that are known to be impaired. Exposures
are impaired and impairment losses are recorded if,
and only if, there is objective evidence of impairment
as a result of one or more loss events, that occurred
after the initial recognition of the loan and prior to
the reporting date, and that loss event, or events,
has had an impact on the estimated future cash
flows of the individual loan or the collective
portfolio of loans that can be reliably estimated.

14 – 15

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
1. Significant Accounting Policies (continued)
Impairment is assessed for assets that are
individually significant (or on a portfolio basis forsmall value loans) and then on a collective basis for
those exposures not individually known to
be impaired.
Exposures that are assessed collectively are placedin pools of similar assets with similar risk
characteristics. The required provision is estimatedon the basis of historical loss experience for assets
with credit risk characteristics similar to those in thecollective pool. The historical loss experience isadjusted based on current observable data such aschanged economic conditions. The provision also
takes account of the impact of inherent risk of large
concentrated losses within the portfolio.
The estimated impairment losses are measured as
the difference between the asset’s carrying amountand the estimated future cash flows discounted totheir present value. As this discount unwinds during
the period between recognition of impairment andrecovery of the cash flow, it is recognised in interest
income. The process of estimating the amount andtiming of cash flows involves considerable
management judgement. These judgements arereviewed regularly to reduce any differences
between loss estimates and actual loss experience.
Impairment of capitalised acquisition expenses
is assessed through comparing the actual
behaviour of the portfolio against initial expected
life assumptions.
The provision for impairment loss (individualand collective) is deducted from loans andadvances in the balance sheet and the movement
for the reporting period is reflected in theincome statement.
When a loan is uncollectible, either partially or in
full, it is written off against the related provision forloan impairment. Subsequent recoveries of amounts
previously written off are taken to the income
statement. Unsecured facilities are normally
written-off when they become 180 days past due or
earlier in the event of the customer’s bankruptcy orsimilar legal release from the obligation. However, acertain level of recoveries is expected after thewrite-off, which is reflected in the amount of theprovision for credit losses. In the case of secured
facilities, remaining balances are written-off after
proceeds from the realisation of collateral havebeen received, if there is a shortfall.
Where impairment losses recognised in previous
periods have subsequently decreased or no longer
exist, such impairment losses are reversed in theincome statement.
A provision is also raised for off-balance sheet items
such as commitments that are considered likely toresult in an expected loss.

(v) Lease receivables
Contracts to lease assets and hire purchaseagreements are classified as finance leases if theytransfer substantially all the risks and rewards ofownership of the asset to the customer or an
unrelated third party. All other lease contracts areclassified as operating leases.
(vi) Repurchase agreements
Securities sold under repurchase agreements are
retained in the financial statements where
substantially all the risks and rewards of ownership
remain with the Banking Group, and a counterparty
liability is disclosed under the classifications of due
to other financial institutions or payables and otherliabilities. The difference between the sale priceand the repurchase price is accrued over the life of
the repurchase agreement and charged to interest
expense in the income statement.
Securities purchased under agreements to resell,
where the Banking Group does not acquire the risks
and rewards of ownership, are recorded asreceivables in liquid assets, net loans and advances,or due from other financial institutions, dependingon the term of the agreement and the counterparty.
The security is not included in the balance sheet.
Interest income is accrued on the underlying loan
amount.
Securities borrowed are not recognised in
the balance sheet, unless these are sold to third
parties, at which point the obligation to
repurchase is recorded as a financial liability at fairvalue with fair value movements included in theincome statement.
(vii) Derecognition
The Banking Group enters into transactions whereit transfers financial assets recognised on its balance
sheet yet retains either all the risks and rewards ofthe transferred assets or a portion of them. If all, or
substantially all, the risks and rewards are retained,
the transferred assets are not derecognised fromthe balance sheet.
In transactions where substantially all the risks andrewards of ownership of a financial asset are neither
retained nor transferred, the Banking Groupderecognises the asset if control over the asset islost. In transfers where control over the asset isretained, the Banking Group continues to recognise
the asset to the extent of its continuing involvement,
determined by the extent to which it is exposed tochanges in the value of the transferred asset. The
rights and obligations retained or created in thetransfer are recognised separately as assets andliabilities as appropriate.
(viii) Investments relating to insurance business
Securities held to back insurance and investment
contract liabilities are classified as policyholder
assets. These policyholder assets are designated atfair value through profit or loss.

ANZ National Bank Limited and Subsidiary Companies

1. Significant Accounting Policies (continued)
Non-financial assets(ix) Goodwill
Goodwill represents the excess of the purchaseconsideration over the fair value of the identifiable
net assets of a controlled entity at the date ofgaining control. Goodwill is recognised as an asset
and not amortised, but is assessed for impairment
at least annually or more frequently if there is anindication that the goodwill may be impaired. This
involves using the discounted cash flow (“DCF”) or
the capitalisation of earnings methodology (“CEM”)
to determine the expected future benefits of the
cash generating units. Where the assessment resultsin the goodwill balance exceeding the value of
expected future benefits, the difference is charged
to the income statement. Any impairment of
goodwill may not be subsequently reversed.
(x) Other intangible assets
Other intangible assets include costs incurredin acquiring and building software andcomputer systems (“software”) and management
rights and customer relationships acquired inbusiness combinations.
Software is amortised using the straight-line
method over its expected useful life to the Banking
Group. The period of amortisation is between 3 and5 years, except for certain core infrastructure
projects where the useful life has been determined
to be 7 years.
Management rights and customer relationships,
including the value of in force insurance contracts,
are initially measured at fair value. Management
rights and customer relationships with a definite
useful life are amortised over the expected usefullife. Management rights and customer relationships
with an indefinite useful life are not amortised.
At each reporting date, the software assets andother intangible assets are reviewed for impairment.
If any such indication exists, the recoverable amountof the assets is estimated and compared against theexisting carrying value. Where the existing carrying
value exceeds the recoverable amount, thedifference is charged to the income statement.
Costs incurred in planning or evaluating software
proposals, or in maintaining systems after
implementation, are not capitalised.
(xi) Premises and equipment
Premises and equipment are carried at cost lessaccumulated depreciation and impairment.
Borrowing costs incurred for the construction ofqualifying assets are capitalised during the periodof time that is required to complete and prepare theasset for its intended use. The calculation ofborrowing costs is based upon the Banking Group’s
internal cost of capital.

Assets other than freehold land are depreciated at
rates based upon their expected useful lives to the
Banking Group, using the straight-line method. The
depreciation rates used for each class of asset are:
Buildings

1.5%

Building integrals

10%

Furniture & equipment

10%

Computer & office equipment

12.5 % - 33%

Leasehold improvements are amortised on astraight-line basis over the shorter of their useful
lives or remaining terms of the lease.
At each reporting date, the carrying amounts ofpremises and equipment are reviewed for
impairment. If any such indication exists, therecoverable amount of the assets is estimated andcompared against the existing carrying value.
Where the existing carrying value exceeds
the recoverable amount, the difference is charged
to the income statement. If it is not possible toestimate the recoverable amount of an individual
asset, the Banking Group estimates the recoverable
amount of the cash generating unit to which theasset belongs.
A previously recognised impairment loss is reversed
if there has been a change in the estimates used todetermine the recoverable amount.
(xii) Insurance policy assets/liabilities
Net insurance policy assets/liabilities include
liabilities arising from investment contracts
and assets/liabilities arising from life insurance
contracts.
Provisions for liabilities under investment contracts
are measured at fair value. The provision consists ofa deposit component, being a financial instrument,
which is recognised as an increase in investment
contract liabilities, and an investment management
services element. Fair value is determined as thenet present value of fees, in respect of theinvestment management service, discounted at therisk free rate.
Life insurance contract assets/liabilities are
determined using either a projection method or an
accumulation method. Using a projection method,
expected policy cash flows are projected into the
future. The asset/liability is determined as the netpresent value of the expected cash flows. An
accumulation method is used where the policy
assets/liabilities determined are not materiallydifferent from those determined under the
projection method.

16 – 17

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
1. Significant Accounting Policies (continued)(f) Liabilities
Financial liabilities(i) Deposits and other borrowings
Deposits and other borrowings include certificatesof deposit, interest bearing deposits, debentures,commercial paper and other related interest bearing
financial instruments. Deposits and otherborrowings, excluding commercial paper, areinitially recognised at fair value plus transaction
costs and subsequently measured at amortised
cost. The interest expense is recognised using theeffective interest method. Commercial paper isdesignated at fair value through profit or loss, withfair value movements recorded directly in theincome statement, which reflects the basis onwhich it is managed.
(ii) Bonds, notes and loan capital
Bonds, notes and loan capital are accounted for in
the same way as deposits and other borrowings,
except for those bonds and notes which aredesignated at fair value through profit or loss on
initial recognition, with fair value movements
recorded in the income statement.
(iii) Financial guarantee contracts
Financial guarantee contracts are contracts that
require the issuer to make specified payments toreimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due.
Financial guarantees are issued in the ordinary
course of business, consisting of letters of credit,
guarantees and acceptances. Financial guarantees
are initially recognised in the financial statements
at fair value on the date the guarantee was given;typically this is the premium received.
Subsequent to initial recognition, the Banking
Group’s liabilities under such guarantees aremeasured at the higher of their amortised amountand the best estimate of the expenditure required
to settle any financial obligation arising at thebalance sheet date. These estimates are determinedbased on experience of similar transactions andhistory of past losses.
(iv) Derecognition
Financial liabilities are derecognised when the
obligation specified in the contract is discharged,
cancelled or expires.

Non-financial liabilities(v) Employee benefits
Leave benefits
The amounts expected to be paid in respect of
employees’ entitlements to annual leave areaccrued at expected salary rates including on-costs.
Expected future payments for long service leave
are discounted using market yields at the reporting
date on national government bonds with terms tomaturity that match, as closely as possible, theestimated future cash outflows. Liability for longservice leave is calculated and accrued for in respectof all applicable employees (including on-costs)
using an actuarial valuation.
Superannuation schemes
The Banking Group operates a number of defined
contribution schemes and also contributes,
according to local law, to government and otherplans that have the characteristics of defined
contribution schemes. The Banking Group’s
contributions to these schemes are recognised as
an expense in the income statement whenincurred.
The Banking Group operates two defined benefit
superannuation schemes. The liability and expense
related to providing benefits to employees undereach of the defined benefit schemes are calculated
by independent actuaries. A defined benefit liability
is recognised to the extent that the present value ofthe defined benefit obligation of each scheme,
calculated using the Projected Unit Credit Method,is greater than the fair value of each scheme’s assets.
Where this calculation results in a benefit to the
Banking Group, a defined benefit asset is recognised
which is capped at the recoverable amount.
In each subsequent reporting period, ongoing
movements in the carrying value of the defined
benefit liability or asset are treated as follows:•••

the net movement relating to the current
period’s service cost, interest cost, expected
return on scheme assets, past service costs andother costs (such as the effects of any
curtailments and settlements), is recognised as
an employee expense in the income statement;
movements relating to actuarial gains andlosses are recognised directly in retained
earnings; andcontributions incurred are recognised directlyagainst the net defined benefit position.

The assets of the defined benefit and cash
accumulation superannuation schemes are held in
trust and are not included in these financial
statements as the Banking Group does not havedirect or indirect control of these schemes. The
benefits under the schemes are provided fromcontributions by employee members and by the
Banking Group, and from income earned by
the assets of the schemes. Members’ contributions
are at varying rates. Actuarial valuations arecarried out at minimum of every three years inaccordance with the schemes’ Trust Deeds andsuperannuation legislation.

ANZ National Bank Limited and Subsidiary Companies

1. Significant Accounting Policies (continued)(vi) Provisions
The Banking Group recognises provisions when
there is a present obligation, the future sacrifice ofeconomic benefits is probable, and the amount of
the provision can be measured reliably.
The amount recognised is the best estimate of theconsideration required to settle the present
obligation at the reporting date, taking into accountthe risks and uncertainties surrounding the obligation
at the reporting date. Where a provision is measured
using the cash flows estimated to settle the present
obligation, its carrying amount is the present valueof those cash flows. Any expected third party
recoveries are recognised as an asset if it is virtuallycertain that recovery will be received and the amountof the receivable can be measured reliably.
(g) Equity(i) Ordinary shares
Ordinary shares in the Bank are recognised at theamount paid per ordinary share net of directly
attributable issue costs.
(ii) Non-controlling interests
Non-controlling interests represent the share in the
net assets of subsidiaries attributable to equity
interests not owned directly or indirectly by
the Bank.
(iii) Reserves
Available-for-sale revaluation reserve
This reserve includes changes in the fair value ofavailable-for-sale financial assets, net of tax. Thesechanges are transferred to the income statement(in non-interest income) when the asset isderecognised. Where the asset is impaired, thechanges are transferred to the impairment
expense line in the income statement for debt
instruments and in the case of equity instruments
to non-interest income.
Cash flow hedging reserve
This reserve includes the fair value gains and losses
associated with the effective portion of designatedcash flow hedging instruments.
(h) Presentation(i) Offsetting of income and expenses
Income and expenses are not offset unless requiredor permitted by an accounting standard. This
generally arises in the following circumstances:••where transaction costs form an integral part ofthe effective interest rate of a financial
instrument which is measured at amortisedcost, these are offset against the interest income
generated by the financial instrument;
where gains and losses relating to fair value
hedges are assessed as being effective; or•where gains and losses arise from a group ofsimilar transactions, such as foreign exchange
gains and losses.

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

(iii) Statement of cash flows
For cash flow statement presentation purposes,
cash and cash equivalents includes cash on hand,deposits held at call with other financial institutions,other short term, highly liquid investments withoriginal terms of maturity of three months or lessthat are readily convertible to cash and which are
subject to an insignificant risk of changes in value.
Certain cash flows have been netted in order toprovide more meaningful disclosure, as many of the
cash flows are received and disbursed on behalf ofcustomers and reflect the activities of the customers
rather than those of the Banking Group. These
include customer loans and advances, customer
deposits, certificates of deposit, related party
balances and trading securities.
(iv) Segment reporting
Business segments are distinguishable componentsof the Banking Group that provide products
or services that are subject to risks and rewards
that are different to those of other businesssegments. The Banking Group operates
predominately in the banking industry within New
Zealand. The Banking Group has very limited
exposure to risk associated with operating indifferent economic environments or politicalconditions. On this basis no geographical segment
information is provided. For reporting purposes thethree major business segments are Retail Banking,Commercial Banking and Institutional.
(v) Goods and services tax
Income, expenses and assets are recognised net ofthe amount of goods and services tax (“GST”) except
where the amount of GST incurred is not recoverablefrom the Inland Revenue Department (“IRD”). In
these circumstances, the GST is recognised as partof the cost of acquisition of the asset or as part ofthe expense.
Receivables and payables are stated withthe amount of GST included. The net amount of
GST recoverable from, or payable to, the IRD is
included as other assets or other liabilities in thebalance sheet.
Cash flows are included in the cash flow statement
on a gross basis. The GST components of cash flows
arising from investing and financing activities,
which are recoverable from, or payable to, the IRD
are classified as operating cash flows.

18 – 19

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
1. Significant Accounting Policies (continued)(i) Other(i) Contingent liabilities
A contingent liability is a possible or present
obligation where it is less than probable there will
be an outflow of resources or it is not possible tomeasure the amount of the obligation with
sufficient reliability.
Liabilities are no longer contingent, and arerecognised on the balance sheet, when thefollowing requirements are met:••

the transaction is probable in that thecontingency is likely to occur; andthe contingency can be reasonably estimated.

Further disclosure is made within Note 38
Contingent Liabilities and Credit Related
Commitments, where the above requirements are
not met, but there is a possible obligation that ishigher than remote. Specific details of the nature of
the contingent liability are provided and, wherepracticable, an estimate of its financial effect.
Alternatively, where no disclosure is made of its
financial effect because it is not practicable to doso, a statement to that effect is provided.
(ii) Securitisation, funds under management andother fiduciary activities
Certain entities within the Banking Group act
as trustees and/or managers for a number ofunit trusts and superannuation investment funds.
The Banking Group provides private banking
services to customers including portfolio
management. The assets of the managed funds andprivate banking clients are not included in thesefinancial statements, as direct or indirect control of
the assets is not held by the Banking Group.
Commissions and fees earned in respect of the
Banking Group’s funds under management areincluded in net operating income.
Financial services provided by any member of the
Banking Group to discretionary private banking
activities or entities conducting funds management,
and assets purchased from discretionary privatebanking activities or entities conducting funds
management are on arm’s length terms andconditions, and at fair value.
Securitised assets are derecognised when the rightto receive cash flows have expired or the Banking
Group has transferred substantially all the risks andrewards of ownership.

(iii) Discontinued operations
A discontinued operation is a component of the
Banking Group’s business that represents a separate
major line of business or geographical area of
operations that has been disposed of or is classified
as held for sale, or is a subsidiary that has been
disposed of or is classified as held for sale.
When an operation is classified as a discontinued
operation the comparative income statement isrestated as if the operation had been discontinued
from the start of the comparative period.
(iv) Accounting Standards not early adopted
The following standards and amendments wereavailable for early adoption but have not been
applied by the Banking Group in these financial
statements. The Banking Group currently does notintend to apply any of these pronouncements until
their effective date.
NZ IFRS 9 Financial Instruments (effective periods
commencing after 1 January 2013) – specifies
a simpler methodology for classifying andmeasuring financial assets. The Bank is currently
assessing the impact of applying this standard to its
financial statements.
The following amendments to accounting standards
are not expected to have a material impact on thefinancial results of the Bank or the Banking Group:
NZ IAS 24 Related Party Disclosures (effective periods
commencing after 1 July 2011) – simplifies thedefinition of a related party clarifying its intended
meaning.
NZ IAS 32 Financial Instruments: Presentation –Classification of rights issues (effective periods
commencing after 1 February 2010) – clarifies theclassification of share rights, options or warrants for
fixed amounts of any currency.
Improvements to New Zealand equivalents toInternational Financial Reporting Standards (various
effective dates up to periods commencing 1 January2010) – is the International Accounting Standards
Board’s annual omnibus update of standards.

2. Critical Estimates and Judgements used in
Applying Accounting Policies
These financial statements are prepared in accordancewith NZ IFRS. However, there are a number of criticalaccounting treatments which include complex or
subjective judgements and estimates that may affectthe reported amounts of assets and liabilities in thefinancial statements. Estimates and judgements arecontinually evaluated and are based on historicalexperience and other factors, including expectations of
future events that are believed to be reasonable under
the circumstances.
An explanation of the judgements and estimates madeby the Banking Group in the process of applying its
accounting policies, that have the most significant
effect on the amounts recognised in the financial
statements are set out below.

ANZ National Bank Limited and Subsidiary Companies

2. Critical Estimates and Judgements used in
Applying Accounting Policies (continued)
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring theimpairment of loans and advances requires the Banking
Group to assess impairment at least at each reporting
date. The credit provisions raised (individual andcollective) represent management’s best estimate of
the losses incurred in the loan portfolio at balance datebased on their experienced judgement.
The collective provision is estimated on the basis ofhistorical loss experience for assets with credit
characteristics similar to those in the collective pool.
The historical loss experience is adjusted based on
current observable data and events and an assessmentof the impact of model risk. The provision also takes into
account the impact of large concentrated losses within
the portfolio.
The use of such judgements and reasonable estimatesis considered by management to be an essential part ofthe process and does not impact on reliability.
Individual provisioning is applied when the fullcollectibility of one of the Group’s loans is identified as
being doubtful. Individual and collective provisioning is
calculated using discounted expected future cash flows.
The methodology and assumptions used for estimating
both the amount and timing of future cash flows arerevised regularly to reduce any differences between
loss estimates and actual loss experience.
Refer to Note 14 for details of credit impairment
provisions.
Management regularly reviews and adjusts theestimates and methodologies as improved analysis
becomes available. Changes in these assumptions andmethodologies could have a direct impact on the levelof provision and impairment charge recorded in thefinancial statements.

Critical judgements in applying the Banking
Group’s accounting policies
Derivatives and hedging
The Banking Group buys and sells derivatives as part ofits trading operations and to hedge its interest rate risk,
currency risk, price risk, credit risk and other exposuresrelating to non-trading positions.
Hedging
A hedging instrument is a designated derivative
whose fair value or cash flows are expected to offset
changes in the fair value or cash flows of a designatedhedged item. A hedged item is an asset, liability, firm
commitment or highly probable forecast transactionthat (a) exposes the Banking Group to the risk of changes
in fair value or future cash flows and (b) is designated as
being hedged.

Judgement is required by management in selecting
and designating hedging relationships and assessing
hedge effectiveness. NZ IAS 39 Financial Instruments:
Recognition and Measurement does not specify a single
method for assessing hedge effectiveness prospectively
or retrospectively. The Banking Group adopts the
hypothetical derivative approach to determine hedge
effectiveness in line with current risk management
strategies. Hedge ineffectiveness can arise for a numberof reasons, and whilst a hedge may pass the effectivenesstests above it may not be perfectly effective, thus
creating volatility within the income statement throughrecognition of this ineffectiveness.
Goodwill
The carrying value of goodwill is subject to an
impairment test to ensure that the current carrying
value does not exceed its recoverable value at thebalance sheet date. Any excess of carrying value overrecoverable amount is taken to the income statement
as an impairment writedown.
Refer to Note 19 for details of goodwill.
Goodwill has been allocated for impairment purposes
to the cash generating units at which the goodwill
is monitored for internal reporting purposes. Eachof these cash generating units is represented by anindividual reporting segment – Retail, Institutional,
Commercial. Refer to Note 33.
Impairment testing of purchased goodwill is performed
annually, or more frequently where there is an indicationthat the goodwill may be impaired, by comparing
the recoverable value of each cash generating unit
with the current carrying amount of its net assets,
including goodwill.
The recoverable amount is based on value-in
use calculations. These calculations use cashflow
projections based on financial budgets approved bymanagement covering a three year period. Cashflows
beyond the three year period are extrapolated using a
3% growth rate.
These cashflow projections are discounted using acapital asset pricing model. As at 31 March 2010 a
discount rate of 11.66% was applied to each segment.
The main variables in the calculation of the discountrate used are the risk free rate, the beta rate and themarket risk premium. The risk free rate is based on the
10 year Government Bond Rate. The beta rate and themarket risk premium are consistent with observableand comparative market rates applied in the regionalbanking sector. Market observable information is notreadily available at the segment level therefore
management performed stress tests for key sensitivities
in each operating segment. Management believes any
reasonable possible change in the key assumptions on
which the recoverable amount is based would not cause
the Banking Group’s carrying amount to exceed its
recoverable amount.

20 – 21

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
3. Risk Management Policies
The Banking Group recognises the importance ofeffective risk management to its business success.
Management is committed to achieving strong control
and a distinctive risk management capability thatenables the Banking Group business units to meet theirperformance objectives.
The Banking Group approaches risk through managing
the various elements of the system as a whole rather
than viewing them as independent and unrelated parts.
The Risk function is independent of the business withclear delegations from the Board and operates within acomprehensive framework comprising:
•
•

•

•

•

The Board, providing leadership, setting risk
appetite/strategy and monitoring progress;
A strong framework for development andmaintenance of Banking Group-wide risk
management policies, procedures and systems,
overseen by an independent team of risk
professionals;
The use of sophisticated risk tools, applications andprocesses to execute the global risk management
strategy across the Banking Group;
Business Unit level accountability, as the “first line ofdefence”, and for the management of risks inalignment with the Banking Group’s strategy; andIndependent oversight to ensure Business Unit levelcompliance with policies, regulations and laws, andto provide regular risk evaluation and reporting.

The Banking Group manages risk through an approval,delegation and limits structure. Regular reviews of thepolicies, systems and risk reports, including theeffectiveness of the risk management systems,
discussions covering the Banking Group’s responseto emerging risk issues and trends, and that therequisite culture and practices are in place acrossthe Banking Group, are conducted within the
Banking Group and also by the Ultimate Parent Bank.
The Board has responsibility for reviewing all aspects ofrisk management.
The Board has ultimate responsibility for overseeing theeffective deployment of risk management frameworks,
policies and processes within New Zealand. The Banking
Group’s Risk Committee assists the Board in thisfunction. The role of the Risk Committee is to assist theBoard in the effective discharge of its responsibilities
for business, market, credit, operational, compliance,liquidity, product and reputational risk management,
and to liaise and consult with the Ultimate Parent Bank
Risk Committee as required. The Banking Group has anindependent Risk Management function which, via theChief Risk Officer, coordinates risk management directly
between Business Unit risk functions and Ultimate
Parent Bank Group Risk Management functions.

The risk management process is subject to oversight by
the Risk Committee of the Ultimate Parent Bank Board.
This includes the review of risk portfolios and theestablishment of prudential policies and controls.
The Banking Group’s risk management policies are
essentially the same as the Ultimate Parent Bank, but
are tailored where required to suit the local New Zealand
regulatory and business environment.
The Audit Committee, which is a sub-committee of theBoard, has responsibility for reviewing all aspects ofpublished financial statements and internal and external
audit processes. The Committee has a quorum of two
directors, both of whom must be non-executive
directors. It meets at least four times a year, and reports
directly to the Board.
A number of new and existing types of risk have beenrecognised following the consolidation of the ING (NZ)
Holdings Limited group (“ING NZ”) into the Banking
Group. The new risks relate to ING NZ’s insurance, realestate management and funds management businesses.
The new risks identified are not considered material to
the Banking Group. ING NZ identifies, controls andmonitors these risks through a set of policies and a risk
management framework which is broadly in line withthat in place across the Banking Group.
Financial risk management
Credit risk is the risk of financial loss from counterparties
being unable to fulfil their contractual obligations.
Market risk is the risk to the Banking Group’s earnings
arising from changes in interest rates, currency exchange
rates, credit spreads, or from fluctuations in bond,commodity or equity prices.
Liquidity risk is the risk that the Banking Grouphas insufficient capacity to fund increases in assets,or is unable to meet its payment obligations as they falldue, including repaying depositors or maturingwholesale debt.
Refer to the Financial Risk Management note for detailed
disclosures on the Banking Group’s financial risk
management policies.
Operational Risk
Operational risk is the risk arising from day to day
operational activities which may result in direct orindirect loss. These losses may result from failure tocomply with policies, procedures, laws and regulations,from fraud or forgery, from a breakdown in theavailability or integrity of services, systems andinformation, or damage to the Bank’s reputation.
Examples include failure to comply with policy andlegislation, human error, natural disasters, fraud andother malicious acts. Where appropriate, risks are
mitigated by insurance.

ANZ National Bank Limited and Subsidiary Companies

3. Risk Management Policies (continued)
Risk Management is responsible for establishing the
Banking Group’s operational risk framework andassociated Banking Group-level policies. Business Units
are responsible for the identification, analysis,
assessment and treatment of operational risks on a dayto-day basis.
Business Units have primary responsibility for theidentification and management of operational risk withexecutive oversight provided by the relevant Retail andWholesale Risk Committees. The Banking Group’s
Operational Risk Executive Committee (“OREC”)
undertakes the governance function through themonthly monitoring of operational risk performanceacross the Banking Group. The Board and Risk
Management conduct effective oversight through theapproval of operational risk policies and frameworks
and monitoring key operational risk metrics.
Compliance
The Banking Group conducts its business in accordancewith all relevant compliance requirements in eachpoint of representation. In order to assist the Banking
Group identify, manage, monitor and measure its
compliance obligations, the Banking Group has acomprehensive regulatory compliance framework inplace, which addresses both external (regulatory) andinternal compliance.
Risk Management, in conjunction with Business Unit
staff ensure the Banking Group operates within acompliance infrastructure and framework thatincorporates new and changing business obligations
and processes.
The compliance policies and their supporting framework
seek to minimise material risks to the Banking Group’s
reputation and value that could arise from noncompliance with laws, regulations, industry codes andinternal standards and policies. Business Units haveprimary responsibility for the identification andmanagement of compliance. The Banking Group’s Risk
Management division provides policy and framework,measurement, monitoring and reporting, as well as
leadership in areas such as anti-money laundering
procedures and matters of prudential compliance. The
Banking Group’s OREC, the Chief Risk Officer, the Boardand the Risk Committee of the Ultimate Parent Bank
Board conduct Board and Executive oversight.

Internal audit
The Banking Group’s internal audit function,
conducts independent reviews that assist the Board of
Directors and management to meet their statutory andother obligations.
Internal Audit reports directly to the Chairman of theBank’s Audit Committee. Under its Charter, Internal
Audit conducts independent appraisals of:
•

•
•
•
•

The continued operation and effectiveness of theinternal controls in place to safeguard and monitor
all material risks to the Banking Group;
Compliance with Board policies and management
directives;
Compliance with the requirements of supervisory
regulatory authorities;
The economic and efficient management of
resources; andThe effectiveness of operations undertaken by the
Banking Group.

In planning the audit activities, Internal Audit adopts arisk-based approach that directs and concentrates
resources to those areas of greatest significance,
strategic concern and risk to the business. This
encompasses reviews of major credit, market,
technology and operating risks within the wider
Banking Group. Significant findings are reported
quarterly to the Audit Committee.
The Internal Audit Plan is approved by the Audit
Committee and endorsed by the ANZ Group Audit
Committee.
All issues and recommendations reported to
management are tracked and monitored internally toensure completion and agreed actions are undertaken
where appropriate.

22 – 23

Notes to the Financial
Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
4. IncomeConsolidated

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010
$m

160

95

187

160

95

187

-

-

-

126

238

380

160

95

187

286

333

567

33

86

118

33

86

118

Other financial institutions

38

178

259

33

156

230

Available-for-sale assets

28

2

16

26

2

16

Lending on productive loans

2,420

3,839

6,563

2,328

3,695

6,354

Lending on impaired assets

19

2

8

18

2

8

-

-

-

20

25

46

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$mInterest income
Financial assets at fair value through profit or loss
Trading securities
Due from subsidiary companies
Financial assets not at fair value through profit or loss
Liquid assets

Subsidiary companies
Related parties
Other
Total interest income

-

-

-

-

-

-

80

24

95

78

22

90

2,618

4,131

7,059

2,536

3,988

6,862

2,778

4,226

7,246

2,822

4,321

7,429

69

111

201

69

110

199

Net trading gains
Net gain on foreign exchange trading
Net gain on trading securities

51

71

43

51

71

43

Net loss on trading derivatives

(104)

(63)

(57)

(105)

(63)

(57)

16

119

187

15

118

185

30

25

52

11

16

32

Other funds management and insurance income

61

22

45

17

22

46

Total net funds management and insurance income

91

47

97

28

38

78

Net other fee income1

291

283

579

291

266

574

Dividends received

-

-

1

-

-

1,100

Associate investments

-

-

-

-

2

-

Total net trading gains
Net funds management and insurance income
Fee income on trust and other fiduciary activities

Other operating income

Net gain / (loss) on financial assets designated at fair value

-

-

-

60

-

(2)

Net gain / (loss) on hedges not qualifying for hedge accounting

7

144

3

(27)

171

43

Net ineffectiveness on qualifying cash flow hedges

-

-

-

-

-

-

Net ineffectiveness on qualifying fair value hedges

68

(17)

71

68

(17)

71

Net cash flow hedge gains transferred to income statement

(21)

19

3

(21)

19

3

2

(26)

(21)

25

(26)

(59)
(211)

Net gain / (loss) on financial liabilities designatedat fair value through profit or loss

-

(166)

(211)

-

(166)

Loss on re-measuring existing equity interests to fair value

(82)

-

-

(61)

-

-

Other income

25

29

40

8

(14)

(27)

Total other operating income

290

266

465

343

235

1,492

Lending and credit facility fee income

85

76

161

85

61

162

Other fee income

298

294

560

298

292

555

Total fee income

383

370

721

383

353

717

ING New Zealand Funds

2

Net other fee income comprises:

1

2

Direct fee expense

92

87

142

92

87

142

Net fee income

291

283

579

291

266

574

Refer to the Contingent Liabilities and Credit Related Commitments note for further information on ING New Zealand Funds.

ANZ National Bank Limited and Subsidiary Companies
24 – 25

Notes to the Financial Statements (continued)
5. Expenses
Consolidated

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010
$m

119

306

561

-

-

-

-

-

-

206

254

504

119

306

561

206

254

504

56

141

242

25

61

115

1,047

1,804

2,959

1,046

1,934

3,203

-

-

-

426

895

1,300

329

546

819

58

52

108

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$mInterest expense
Financial liabilities at fair value through profit or loss
Commercial paper
Due to subsidiary companies
Deposits at amortised cost
Other financial institutions
Deposits and other borrowings
Subsidiary companies
Bonds and notes
Related party funding

3

16

28

3

16

28

Loan capital

91

112

207

91

112

207

36

26

76

35

22

73

1,562

2,645

4,331

1,684

3,092

5,034

1,681

2,951

4,892

1,890

3,346

5,538

Personnel costs

354

374

718

319

357

684

Employee entitlements

35

36

72

34

35

71

– Defined contribution schemes

18

18

36

17

18

35

– Defined benefit schemes

4

3

8

4

3

8

Other
Total interest expense
Operating expenses

Pension costs

Share-based payments expense

10

9

18

10

9

18

Building occupancy costs

20

22

42

2

6

10
16

Depreciation of premises and equipment

21

18

39

10

7

Leasing and rental costs

41

40

80

7

7

14

Related parties (Note 41)

39

41

91

95

95

200

Computer expenses

66

57

120

62

54

114

Administrative expenses

94

85

177

84

80

173

Other costs

46

35

76

23

33

67

Total operating expenses

748

738

1,477

667

704

1,410

Unaudited
6 months to
31/03/2010$’000

Unaudited
6 months to
31/03/2009$’000

AuditedYear to30/09/2009$’000

Unaudited
6 months to
31/03/2010$’000

Unaudited
6 months to
31/03/2009$’000

AuditedYear to30/09/2009$’000

Auditors' remuneration to KPMG comprises:
1,398

1,182

1,994

968

891

1,508

Other audit-related services

171

155

369

138

118

448

Total auditors' remuneration

1,569

1,337

2,363

1,106

1,009

1,956

219

-

-

-

-

-

Audit or review of financial statements

Audit fees paid to other audit firms

It is Banking Group policy that KPMG can provide assurance and other audit-related services that, while outside the scopeof the statutory audit, are consistent with the role of auditor. KPMG may not provide services that are perceived to be inconflict with the role of auditor. Services that are perceived to be in conflict with the role of auditor include consulting
advice and subcontracting of operational activities normally undertaken by management, and engagements where
the auditor may ultimately be required to express an opinion on its own work. However, non-audit services that are notperceived to be in conflict with the role of auditor may be provided by KPMG subject to the approval of the Ultimate Parent
Bank Audit Committee.
Other audit-related services include services for the audit or review of financial information other than financial reports
including prudential supervision reviews, prospectus reviews and other audits required for local regulatory purposes.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
6. Income Tax Expense
Consolidated
Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

ParentAuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

1,396

Reconciliation of the prima facie income tax payableon profit with the income tax expense charge in theincome statement
Profit before income tax

468

692

765

351

397

Prima facie income tax at 30%

140

208

230

105

119

419

Rebateable and non-assessable dividends

(3)

(4)

(8)

-

-

(329)

(Release of) / additional tax provision

(44)

-

240

(44)

-

240

9

-

6

5

(10)

56

102

204

468

66

109

386

Non-deductible expenses (non-assessable income)
Income tax over provided in prior years
Total income tax expense

(1)

-

(1)

(1)

-

-

101

204

467

65

109

386

Effective tax rate (%) before tax provisions

31.0%

29.5%

29.6%

31.1%

27.5%

10.4%

Effective tax rate (%)

21.6%

29.5%

61.0%

18.6%

27.5%

27.6%

525

291

426

487

191

299

(1)

-

(1)

(1)

-

-

The major components of the income tax expense comprise:Amounts recognised in the income statement
Current income tax charge
Current income tax charge
Adjustments recognised in the current year in relation
to current tax of prior periods
Deferred income tax
Deferred tax (income) / expense relating to the origination
and reversal of temporary differences

(450)

(87)

141

(448)

(82)

186

Other (including indemnity)

27

-

(99)

27

-

(99)

Total income tax expense recognised in income statement

101

204

467

65

109

386

12

(12)

(7)

12

(12)

(7)

The following amounts were credited directly to equity:
Current income tax
Actuarial gain / (loss) on defined benefit schemes
and available-for-sale assets
Deferred income tax
Net gain / (loss) on revaluation of financial instruments

8

(8)

(3)

8

(8)

(3)

Total income tax credit recognised directly in equity

20

(20)

(10)

20

(20)

(10)

Balance at beginning of the year

645

696

696

528

446

446

Imputation credits attached to dividends received

19

41

31

16

35

285

Taxation paid

394

67

138

350

62

55

Imputation credits attached to dividends paid

(97)

(252)

(252)

(95)

(252)

(282)

Imputation Credit Account

Additions from companies joining the Imputation Group

-

-

-

-

-

-

Other

1

-

32

4

-

24

962

552

645

803

291

528

Balance at end of the period

The above amounts only include items that give rise to imputation credits that are available for use by the Banking Group and/or the Bank.
The parent is a member of an Imputation Group with other members of the Banking Group. The figures shown for the Parent
above include the imputation credits available for use by the Parent held by the Imputation Group.
Settlement with Inland Revenue Department
The New Zealand Inland Revenue Department (“IRD”) had been reviewing a number of structured finance transactions as partof an audit of the 2000 to 2005 tax years. The Bank has reached a settlement with the IRD in respect of all the transactions in
dispute. This liability, net of amounts receivable from Lloyds Banking Group plc, was met from existing tax provisions.

ANZ National Bank Limited and Subsidiary Companies
26 – 27

Notes to the Financial Statements (continued)
7. Liquid Assets
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

2,188

2,606

2,373

2,188

2,606

2,373

-

9

-

-

9

-

Money at call

227

672

341

216

672

340

Bills receivable and remittances in transit

104

103

48

98

103

45

2,519

3,390

2,762

2,502

3,390

2,758

1,965

2,418

2,207

1,965

2,418

2,207

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Cash and balances with central banks
Securities purchased under agreement to resell

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

8. Due from Other Financial Institutions
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

ParentAudited30/09/2009$mAble to be withdrawn without prior notice

35

167

172

35

167

172

Securities purchased under agreement to resell

128

558

1,083

128

558

1,083

-

38

-

-

38

-

Securities purchased under agreement to resell with central banks
Security settlements

14

1,760

370

14

1,760

370

Certificates of deposit

1,807

4,269

2,338

1,772

4,269

2,338
398

Reserve bank bills
Term loans and advances
Total due from other financial institutions

-

-

398

-

82

117

839

153

-

-

-

2,101

7,631

4,514

1,949

6,874

4,361

There are no assets used to secure deposit obligations or assets encumbered through repurchase agreements at 31 March2010 (31/03/2009 $nil; 30/09/2009 $nil).

9. Trading Securities
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

3,257

677

1,389

3,257

677

1,389

Certificates of deposit

125

317

191

125

317

191

Promissory notes

47

88

28

47

88

28

Other bank bonds

2,894

1,366

2,475

2,894

1,366

2,475

Government, Local Body stock and bonds

Other
Total trading securities

43

117

83

43

117

83

6,366

2,565

4,166

6,366

2,565

4,166

36

104

159

36

104

159

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

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial
Statements (continued)
10. Derivative Financial Instruments
Derivative instruments are contracts whose value is derived
from one or more underlying variables or indices, require
little or no initial net investment and are settled at a futuredate. Derivatives include contracts traded on registeredexchanges and contracts agreed between counterparties,
called “Over the Counter” or “OTCs”. The use of derivatives
and their sale to customers as risk management products is
an integral part of the Banking Group’s trading activities.
Derivatives are also used to manage the Banking Group’s
own exposure to fluctuations in exchange and interest rates
as part of its asset and liability management activities (i.e.
balance sheet risk management).
Derivatives are subject to the same types of credit andmarket risk as other financial instruments and the Banking
Group manages these risks in a consistent manner.
Types of derivatives instruments
The principal foreign exchange rate contracts used by the
Banking Group are forward foreign exchange contracts,
currency swaps and currency options. Forward foreignexchange contracts are agreements to buy or sell a specified
quantity of foreign currency on a specified future date at anagreed rate. A currency swap generally involves theexchange, or notional exchange, of equivalent amounts of
two currencies and a commitment to exchange interest
periodically until the principal amounts are re-exchanged
on a future date. Currency options provide the buyer withthe right, but not the obligation, either to purchase or sell afixed amount of a currency at a specified rate on or before afuture date. As compensation for assuming the option risk,
the option writer generally receives a premium at the startof the option period.
The principal interest rate contracts used by the Banking
Group are forward rate agreements, interest rate futures,interest rate swaps and options. Forward rate agreements
are contracts for the payment of the difference between a
specified interest rate and a reference rate on a notional
deposit at a future settlement date. There is no exchange ofprincipal. An interest rate future is an exchange traded
contract for the delivery of a standardised amount of a fixedincome security or time deposit at a future date. Interest
rate swap transactions generally involve the exchange of
fixed and floating interest payment obligations without theexchange of the underlying principal amounts. Interest rate
options provide the buyer with the right but not the
obligation either to receive or pay interest at a specified rateon or before a future date. As compensation for assuming
the option risk, the option writer generally receives apremium at the start of the option period.

The principal commodity contracts used by the Banking
Group are commodity swaps. A commodity swap generally
involves the exchange of the return on the commodity for a
fixed or floating interest payment without the exchange ofthe underlying commodity or principal amount.
Equity related contracts are transacted by the Banking
Group to offset the equity risk associated with financial
instruments priced against various share indices.
Derivatives, except for those that are specifically designatedas effective hedging instruments, are classified as held for
trading. The held for trading classification includes two
categories of derivative instruments: those held as trading
positions and those used for the Banking Group’s balance
sheet risk management.
Trading positions
Trading positions consist of both sales to customers andmarket making activities. Sales to customers include thestructuring and marketing of derivative products tocustomers which enable them to take or mitigate risks.
Market making activities consist of derivatives entered into
principally for the purpose of generating profits from shortterm fluctuations in price or margins. Positions may be
traded actively or held over a period of time to benefit fromexpected changes in market rates.
Gains or losses, including any current period interest, fromthe change in fair value of trading positions are recognisedin the income statement as other operating income in the
period in which they occur.
Balance sheet risk management
The Banking Group designates balance sheet risk
management derivatives into hedging relationships in orderto minimise income statement volatility. This volatility iscreated by differences in the timing of recognition of gains
and losses between the derivative and the hedged item.
Hedge accounting is not applied to all balance sheet risk
management positions.
Gains or losses from the change in fair value of balance sheet
risk management derivatives that form part of an effective
hedging relationship are recognised in the income statement
based on the hedging relationship. Any ineffectiveness isrecognised in the income statement as other operating
income in the period in which it occurs.
Gains or losses, excluding any current period interest, fromthe change in fair value of balance sheet risk management
positions that are not designated into hedging relationships
are recognised in the income statement as other operating
income in the period in which they occur. Current periodinterest is included in interest income and expense.

ANZ National Bank Limited and Subsidiary Companies
28 – 29

Notes to the Financial Statements (continued)
10. Derivative Financial Instruments (continued)
The following tables provide an overview of the Banking Group’s and the Bank’s foreign exchange rate, interest rate andcommodity derivatives. They include all trading and balance sheet risk management contracts. Notional principal amounts
measure the amount of the underlying financial commodity and represent the volume of outstanding transactions. They are
not a measure of the risk associated with a derivative. The derivative instruments become favourable (assets) or unfavourable(liabilities) as a result of fluctuations in market rates relative to their terms. The aggregate contractual or notional amount ofderivative financial instruments on hand, the extent to which instruments are favourable or unfavourable, and as a consequence
the aggregate fair values of derivative financial assets and liabilities, can fluctuate significantly from time to time. The fairvalues of derivative instruments held and notional principal amounts are set out as follows.
Consolidated
Notional
Principal
Amount$m

ParentLiabilities$m

Notional
Principal
Amount$m

Fair values
Assets$m

Fair values
Assets$m

Liabilities$m

Unaudited 31/03/2010
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts

34,633495

696

34,685495

699

Swap agreements

86,920

1,280

2,202

87,018

1,280

2,215

Options purchased

1,331

36

-

1,331

36

-

Options sold

1,197

-

43

1,197

-

43

n/a

(299)

(837)

n/a

(299)

(837)

124,081

1,512

2,104

124,231

1,512

2,120

Forward rate agreements

54,28713

13

54,287

13

13

Collateral received / paid
Interest rate derivatives
Swap agreements

398,529

6,717

6,386

405,318

6,723

6,388

Futures contracts

18,6853

46

18,685

3

46

Options purchased

1,199

18

-

1,199

18

-

Options sold

2,883

-

14

2,883

-

14

475,583

6,751

6,459

482,372

6,757

6,461

Commodity derivatives
Fuel derivatives

42

1

1

42

1

1

Electricity derivatives

9

1

1

9

1

1

599,715

8,265

8,565

606,654

8,271

8,583

Swap agreements

14,406146

118

14,406

146

118

Total derivatives designated as cash flow hedges

14,406146

118

14,406

146

118

55

-

-

55

-

-

20,089302

469

20,089

302

469
469

Total derivatives held for trading
Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
Interest rate derivatives
Swap agreements
Total derivatives designated as fair value hedges

20,144302

469

20,144302

Total derivatives held for hedging

34,550448

587

34,550448

587

Total derivative financial instruments

634,265

8,713

9,152

641,204

8,719

9,170

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
10. Derivative Financial Instruments (continued)
Consolidated
Notional
Principal
Amount$m

Assets$m

Spot and forward contracts

30,046

Swap agreements
Options purchased
Options sold

ParentLiabilities$m

Notional
Principal
Amount$m

Assets$m

Liabilities
$m

1,223

1,199

30,046

1,223

1,199

70,236

3,545

3,471

70,324

3,562

3,471

1,255

72

-

1,255

72

-

1,234

-

65

1,234

-

65

n/a

(328)

(2,824)

n/a

(328)

(2,824)

102,771

4,512

1,911

102,859

4,529

1,911

Fair values

Fair values

Unaudited 31/03/2009
Derivatives held for trading
Foreign exchange derivatives

Collateral received / paid
Interest rate derivatives
Forward rate agreements

39,12147

20

39,121

47

20

Swap agreements

363,063

9,744

9,600

372,229

9,904

9,600

Futures contracts

16,02196

11

16,021

96

11

Options purchased

1,941

31

-

1,941

31

-

Options sold

1,941

-

31

1,941

-

31

422,087

9,918

9,662

431,253

10,078

9,662

32

7

6

32

7

6

Commodity derivatives
Fuel derivatives
Electricity derivatives

25

2

2

25

2

2

524,915

14,43911,581

534,169

14,616

11,581

Swap agreements

9,669

189

113

9,669

189

113

Total derivatives designated as cash flow hedges

9,669

189

113

9,669

189

113

68

3

-

68

3

-

Swap agreements

22,152354

1,174

22,152354

1,174

Total derivatives designated as fair value hedges

22,220357

1,174

22,220357

1,174

Total derivatives held for trading
Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
Interest rate derivatives

Total derivatives held for hedging

31,889546

1,287

31,889546

1,287

Total derivative financial instruments

556,804

14,985

12,868566,058

15,162

12,868ANZ National Bank Limited and Subsidiary Companies
30 – 31

Notes to the Financial Statements (continued)
10. Derivative Financial Instruments (continued)
Consolidated
Notional
Principal
Amount$m

Assets$m

Spot and forward contracts

30,475

Swap agreements
Options purchased
Options sold

ParentLiabilities$m

Notional
Principal
Amount$m

Assets$m

Liabilities
$m

687

1,582

30,475687

1,582

69,971

2,900

3,831

70,062

2,900

3,838

1,018

42

-

1,018

42

-

953

-

52

953

-

52

n/a

(115)

(2,908)

n/a

(115)

(2,908)102,417

3,514

2,557

102,508

3,514

2,564

Fair values

Fair values

Audited 30/09/2009
Derivatives held for trading
Foreign exchange derivatives

Collateral received / paid
Interest rate derivatives
Forward rate agreements

32,4982

332,4982

3

Swap agreements

390,183

7,400

7,275

396,033

7,441

7,275
2

Futures contracts

20,64745

220,64745

Options purchased

2,026

23

-

2,026

23

-

Options sold

2,034

-

23

2,034

-

23

447,388

7,470

7,303

453,238

7,511

7,303

23

1

1

23

1

1

Commodity derivatives
Fuel derivatives
Electricity derivatives

13

1

1

13

1

1

549,841

10,986

9,862

555,782

11,027

9,869

Swap agreements

15,910140

111

15,910140111

Total derivatives designated as cash flow hedges

15,910140

111

15,910

140

111

18

-

-

18

-

-

Swap agreements

22,366282

789

22,366282

789

Total derivatives designated as fair value hedges

22,384282

789

22,384282

789

Total derivatives held for trading
Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
Interest rate derivatives

Total derivatives held for hedging

38,294422

900

38,294422

900

Total derivative financial instruments

588,135

11,408

10,762594,076

11,44910,769Hedging relationships
The Banking Group has two types of allowable hedging relationships entered into by the Banking Group: fair value hedges andcash flow hedges. Each has specific requirements when accounting for the fair value changes in the hedging relationship. For
details on the accounting treatment of each type of hedging relationship refer to Note 1.
Fair value hedges
The risk being hedged in a fair value hedge is a change in the fair value of an asset or liability or unrecognised firm commitmentthat may affect the income statement. Changes in fair value might arise through changes in interest rates or foreign exchange
rates. The Banking Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes
in the fair value of fixed-rate long-term financial instruments due to movements in market interest rates.
The application of fair value hedge accounting results in the fair value adjustment on the hedged item attributable to thehedged risk being recognised in the income statement at the same time the hedging instrument impacts the income statement.
If a hedging relationship is terminated, the fair value adjustment to the hedged item continues to be recognised as part of thecarrying amount of the item or group of items and is amortised to the income statement as a part of the effective yield overthe period to maturity. The table following shows the gain or loss on fair value hedges by hedging instrument and hedge item
attributable to the hedged risk:

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
10. Derivative Financial Instruments (continued)
Consolidated
Unaudited
6 months to
31/03/∫2010$m

UnauditedYear to31/03/2009$m

ParentAuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

UnauditedYear to31/03/2009$m

AuditedYear to30/09/2009$m

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

(263)

424

263

(263)

424

263

– hedging instrument

331

(441)

(192)

331

(441)

(192)

Net ineffectiveness on qualifying fair value hedges

68

(17)

71

68

(17)

71

Cash flow hedges
The risk being hedged in a cash flow hedge is the potential volatility in future cash flows that may affect the income statement.
Volatility in the future cash flows may result from changes in interest rates or changes in exchange rates arising from recognised
financial assets and liabilities and highly probable forecast transactions. The Banking Group’s cash flow hedges consist
principally of interest rate swaps that are used to protect against exposures to variability in future interest cash flows on nontrading assets and liabilities which bear interest at variable rates or which are expected to be refunded or reinvested in the
future. The Banking Group primarily applies cash flow hedge accounting, where necessary, to its variable rate loan assets,
variable rate liabilities and short term re-issuances of fixed rate customer and wholesale deposit liabilities. The amounts andtiming of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets
and liabilities on the basis of their forecast repricing profile. This forms the basis for identifying gains and losses on the effective
portions of derivatives designated as cash flow hedges.
The effective portion of changes in the fair value of derivatives qualifying and designated as cash flow hedges is deferredto the cash flow hedging reserve which forms part of equity. Amounts deferred in equity are recognised in the income
statement in the period during which the hedged forecast transactions take place and is fully amortised when the hedging
relationship matures.
The table below shows the movements in the cash flow hedging reserve:
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$mBalance at beginning of the period

23

24

24

23

24

24
(3)

Transferred to income statement

21

(19)

(3)

21

(19)

Tax effect of items transferred to income statement

(7)

7

2

(7)

7

2

Valuation gain / (loss) taken to equity

2

(9)

(1)

2

(9)

(1)

Tax effect of valuation loss taken to equity

(1)

3

1

(1)

3

1

Balance at end of the period

38

6

23

38

6

23

The mechanics of hedge accounting results in the gain or loss in the cash flow hedging reserve above being released into theincome statement at the same time that the corresponding loss or gain attributable to the hedged item impacts the income
statement. It will not necessarily be released to the income statement uniformly over the period of the hedging relationship as
the fair value of the derivative is driven by changes in market rates over the term of the instrument. As market rates do notalways move uniformly across all time periods, a change in market rates may drive more value in one forecast period thananother, which impacts when the hedging reserve is released to the income statement.
The table below shows the breakdown of the cash flow hedging reserve attributable to each type of cash flow hedging
relationship:
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Variable rate loan assets

141

214

149

141

214

149

Variable rate liabilities

(32)

(60)

(29)

(32)

(60)

(29)

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

(71)

(148)

(97)

(71)

(148)

(97)

Total cash flow hedging reserve

38

6

23

38

6

23

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur
which is anticipated to take place over the next 0 - 10 years (31/03/2009 0-10 years; 30/09/2009 0-10 years).

ANZ National Bank Limited and Subsidiary Companies
32 – 33

Notes to the Financial Statements (continued)
10. Derivative Financial Instruments (continued)
All gains and losses associated with the ineffective portion of the hedging derivatives are recognised immediately as otheroperating income in the income statement. The ineffectiveness recognised in the income statement in respect of cash flow
hedges was less than $1 million in the Banking Group (31/03/2009 less than $1 million; 30/09/2009 less than $1 million) and lessthan $1 million in the Bank (31/03/2009 less than $1 million; 30/09/2009 less than $1 million).
There were no transactions where cash flow hedge accounting ceased in the period ended 31 March 2010 as a result of highly
probable cash flows that were no longer expected to occur (31/03/2009 no transactions; 30/09/2009 no transactions).

11. Available-For-Sale Assets
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

1,546

496

1,394

1,527

496

1,394

Other debt securities

208

30

48

51

30

48

Equity securities

96

71

71

96

68

69

1,850

597

1,513

1,674

594

1,511

Government, Local Body stock and bonds

Total available-for-sale assets

12. Net Loans and Advances
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Overdrafts

2,014

2,094

2,087

2,014

2,094

2,087

Credit card outstandings

1,417

1,429

1,402

1,417

1,429

1,402

Term loans – housing

43,495

48,84944,76343,495

48,84944,763

Term loans – non-housing

39,382

40,69640,23137,472

38,644

38,251

1

Finance lease receivables

692

741

683

27

38

30

Gross loans and advances

87,00093,80989,16684,42591,05486,533

Provision for credit impairment (Note 14)(1,457)(876)(1,272)(1,392)(811)(1,212)

Unearned finance income

(252)

(295)

(262)

-

-

-

Fair value hedge adjustment

378

1,050

615

378

1,050

615

Deferred fee revenue and expenses

(50)

(53)

(51)

(46)

(49)

(47)

Capitalised brokerage/ mortgage origination fees
Total net loans and advances

1

Parent

51

85

63

51

85

63

85,67093,72088,25983,41691,32985,952As at 31 March 2010 the Banking Group has not entered into any repurchase agreements for residential mortgage-backed securities with the Reserve Bank of
New Zealand (“RBNZ”) (31/03/2009 mortgages to the value of $1,806 million; 30/09/2009 $1,806 million). Therefore no underlying collateral has been acceptedby the RBNZ under this transaction (in previous periods mortgages to the value of 31/03/2009 $2,250 million; 30/09/2009 $2,250 million were held by the RBNZ
as collateral).
In February 2009 and July 2009, the Banking Group sold $4,877 million and $4,986 million, respectively, of residential mortgages to the NZ Branch. These
existing tranches of residential mortgages are regularly topped up with additional mortgages. Further sales of $2,612 million occurred in the six months
ended 31 March 2010. Repurchases and repayments have resulted in an outstanding balance of $10,025 million as at 31 March 2010. These assets qualify for
derecognition as the Bank does not retain a continuing involvement in the transferred assets. Net loans and advances have decreased as a result of sellingthese assets.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
13. Impaired Assets, Past Due Assets and Other Assets Under Administration
Individually impaired assets
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

Unaudited 31/03/2010
Balance at beginning of the period

377

59

740

1,176

377

51

689

1,117

Transfers from productive

282

132

666

1,080

282

126

623

1,031

Transfers to productive

(7)

(1)

(52)

(60)

(7)

(1)

(76)

(84)

Assets realised or loans repaid

(172)

(32)

(169)

(373)

(172)

(29)

(129)

(330)

Write offs

(36)

(63)

(20)

(119)

(36)

(55)

(18)

(109)

Individually impaired asset balanceat end of the period

444

95

1,165

1,704

444

92

1,089

1,625

Restructured items and otherindividually impaired assets

8

-

-

8

8

-

-

8

452

95

1,165

1,712

452

92

1,089

1,633

Balance at beginning of the period

83

30

214

327

83

14

191

288
483

Total impaired assets
Unaudited 31/03/2009
Transfers from productive

200

127

186

513

200

106

177

Transfers to productive

(10)

(20)

(14)

(44)

(10)

(20)

(12)

(42)

Assets realised or loans repaid

(64)

(15)

(28)

(107)

(64)

(11)

(23)

(98)

Write offs

(9)

(66)

(5)

(80)

(9)

(58)

(5)

(72)

200

56

353

609

200

31

328

559

2

-

18

20

2

-

-

2

202

56

371

629

202

31

328

561

Balance at beginning of the year

83

30

214

327

83

14

191

288

Transfers from productive

576

243

882

1,701

576

235

802

1,613

Transfers to productive

(22)

(20)

(25)

(67)

(22)

(20)

(17)

(59)

Assets realised or loans repaid

(232)

(45)

(230)

(507)

(232)

(37)

(206)

(475)

Write offs

(28)

(149)

(101)

(278)

(28)

(141)

(81)

(250)

Individually impaired asset balanceat end of the year

377

59

740

1,176

377

51

689

1,117

Individually impaired asset balanceat end of the period
Restructured items and other individually
impaired assets
Total impaired assets
Audited 30/09/2009

Restructured items and other individually
impaired assets
Total impaired assets

-

2

-

2

-

2

-

2

377

61

740

1,178

377

53

689

1,119

ANZ National Bank Limited and Subsidiary Companies
34 – 35

Notes to the Financial Statements (continued)
13. Impaired Assets, Past Due Assets and Other Assets Under Administration
Restructured assets
A restructured asset is an impaired asset for which the terms have been changed to grant the counterparty a concession thatwould not otherwise have been available, due to the counterparty’s difficulty in complying with the original terms, and where
the yield on the asset following restructuring is still above the Banking Group’s cost of funds. An asset is classified as an otherindividually impaired asset if, following the restructure, the yield on the asset is below the Banking Group’s cost of funds.
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

Unaudited 31/03/2010
Balance at beginning of the period

2

-

-

2

2

-

-

2

Transfers to restructured assets

6

-

-

6

6

-

-

6

Transfers from restructured assets

-

-

-

-

-

-

-

-

Balance at end of the period

8

-

-

8

8

-

-

8

Balance at beginning of the period

-

-

-

-

-

-

-

-

Transfers to restructured assets

2

-

18

20

2

-

-

2

Transfers from restructured assets

-

-

-

-

-

-

-

-

Balance at end of the period

2

-

18

20

2

-

-

2

Balance at beginning of the year

-

-

-

-

-

-

-

-

Transfers to restructured assets

2

18

20

2

-

-

2

Transfers from restructured assets

-

-

(18)

(18)

-

-

-

-

Balance at end of the year

2

-

-

2

2

-

-

2

Unaudited 31/03/2009

Audited 30/09/2009

Renegotiated loans
Renegotiated loans are loans that would otherwise be past due or impaired had their terms not been renegotiated. At 31
March 2010, loans and advances of $677 million were renegotiated in the Banking Group (30/09/2009 $266 million). In the
Parent, loans and advances of $626 million were renegotiated at 31 March 2010 (30/09/2009 $196 million).
Assets acquired through enforcement of security
Assets acquired through enforcement of security are those assets which are legally owned by the Banking Group as a result of
enforcing security, other than any buildings occupied by the Banking Group. The Banking Group held no material assets
acquired through enforcement of security (31/03/2009 $nil; 30/09/2009 $nil).
Past due assets
A past due asset is any loan where the counterparty has failed to make a payment when contractually due, and which is not
an impaired asset. A 90 days past due asset is any past due asset which has not been operated by the counterparty within
its key terms for at least 90 days. Further analysis of past due assets can be found in the Financial Risk Management note,
including an ageing analysis of all past due assets 1 day and over where the counterparty has failed to make a payment whencontractually due.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
13. Impaired Assets, Past Due Assets and Other Assets Under Administration (continued)
Other assets under administration
Other assets under administration are any loans, not being impaired or 90 days past due, where the customer is in any formof voluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management.
Interest forgone
Interest forgone on impaired assets has been calculated based on interest rates that would have been applied to loansof similar risk and maturity.
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

100

416

Unaudited 31/03/2010
Past due assets (90 days past due assets)1
Balance at beginning of the period

265

59

111

435

265

51

Transfers to past due assets

251

69

231

551

251

69

211

531

Transfers from past due assets

(334)

(80)

(221)

(635)

(334)

(79)

(200)

(613)

Balance at end of the period

182

48

121

351

182

41

111

334

Balance at beginning of the period

-

-

-

-

-

-

-

-

Transfers to other assets under administration

-

-

1

1

-

-

1

1

Transfers from other assets underadministration

-

-

-

-

-

-

-

-

Balance at end of the period

-

-

1

1

-

-

1

1

Balance at beginning of the period

-

-

32

32

-

-

32

32

Transfers to undrawn facilities with
impaired customers

-

-

68

68

-

-

68

68

Balance at end of the period

-

-

100

100

-

-

100

100

Other assets under administration

Undrawn facilities with impaired
customers

Interest forgone on impaired assets
Gross interest receivable on impaired loans

21

3

50

74

21

1

48

70

Interest recognised

(7)

(1)

(12)

(20)

(7)

(1)

(10)

(18)

Net interest forgone on impaired loans

14

2

38

54

14

-

38

52

244

54

11

309

244

47

5

296

Unaudited 31/03/2009
Past due assets (90 days past due assets)1
Balance at beginning of the period
Transfers to past due assets

437

77

230

744

433

53

203

689

Transfers from past due assets

(275)

(60)

(171)

(506)

(271)

(41)

(162)

(474)

Balance at end of the period

406

71

70

547

406

59

46

511

Balance at beginning of the period

-

-

1

1

-

-

1

1

Transfers to other assets under administration

-

-

10

10

-

-

10

10

Transfers from other assets underadministration

-

-

(7)

(7)

-

-

(7)

(7)

Balance at end of the period

-

-

4

4

-

-

4

4

Balance at beginning of the period

-

-

6

6

-

-

6

6

Transfers to undrawn facilities with
impaired customers

-

-

5

5

-

-

5

5

Balance at end of the period

-

-

11

11

-

-

11

11

Gross interest receivable on impaired loans

6

2

10

18

7

1

10

18

Interest recognised

-

-

(2)

(2)

-

-

(2)

(2)

Net interest forgone on impaired loans

6

2

8

16

7

1

8

16

Other assets under administration

Undrawn facilities with impaired customers

Interest forgone on impaired assets

1

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

ANZ National Bank Limited and Subsidiary Companies
36 – 37

Notes to the Financial Statements (continued)
13. Impaired Assets, Past Due Assets and Other Assets Under Administration (continued)
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

Audited 30/09/2009
Past due assets (90 days past due assets)1
Balance at beginning of the year

244

54

11

309

244

47

5

296

Transfers to past due assets

852

149

448

1,449

852

104

399

1,355

Transfers from past due assets

(831)

(144)

(348)

(1,323)

(831)

(100)

(304)

(1,235)

Balance at end of the year

265

59

111

435

265

51

100

416

Balance at beginning of the year

-

-

1

1

-

-

1

1

Transfers to other assets under administration

-

-

42

42

-

-

42

42

Transfers from other assets
under administration

-

-

(43)

(43)

-

-

(43)

(43)

Balance at end of the year

-

-

-

-

-

-

-

-

Balance at beginning of the year

-

-

6

6

-

-

6

6

Transfers to undrawn facilities with
impaired customers

-

-

26

26

-

-

26

26

Balance at end of the year

-

-

32

32

-

-

32

32

22

4

42

68

22

4

42

68

Interest recognised

(4)

(1)

(7)

(12)

(4)

(1)

(7)

(12)

Net interest forgone on impaired loans

18

3

35

56

18

3

35

56

Other assets under administration

Undrawn facilities with impaired customers

Interest forgone on impaired assets
Gross interest receivable on impaired loans

1

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

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
14. Provision for Credit Impairment
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

Unaudited 31/03/2010
Collective provision
Balance at beginning of the period

121

159

518

798

121

140

501

762

Charge / (credit) to income statement

(4)

2

60

58

1

1

58

60

Balance at end of the period

117

161

578

856

122

141

559

822

Balance at beginning of the period

153

40

281

474

153

23

274

450

Charge to income statement

95

60

101

256

95

52

93

240

Individual provision (individually
impaired assets)

Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

1

8

1

10

1

7

1

9

(36)

(63)

(20)

(119)

(36)

(57)

(18)

(111)

(7)

(1)

(12)

(20)

(7)

(1)

(10)

(18)

Balance at end of the period

206

44

351

601

206

24

340

570

Total provision for credit impairment

323

205

929

1,457

328

165

899

1,392

81

164

289

534

81

146

270

497

Unaudited 31/03/2009
Collective provision
Balance at beginning of the period
Charge to income statement

12

(16)

77

73

12

(14)

73

71

Balance at end of the period

93

148

366

607

93

132

343

568

Balance at beginning of the period

28

10

94

132

28

4

83

115

Charge to income statement

Individual provision (individually
impaired assets)
35

77

100

212

35

69

90

194

Recoveries of amounts previously written off

-

10

-

10

-

10

-

10

Bad debts written off

(9)

(66)

(5)

(80)

(9)

(58)

(5)

(72)

Discount unwind1

-

-

(5)

(5)

-

-

(4)

(4)

Balance at end of the period

54

31

184

269

54

25

164

243

Total provision for credit impairment

147

179

550

876

147

157

507

811

Audited 30/09/2009
Collective provision
Balance at beginning of the year

81

164

289

534

81

146

270

497

Charge to income statement

40

(5)

229

264

40

(6)

231

265

Balance at end of the year

121

159

518

798

121

140

501

762

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

28

10

94

132

28

4

83

115

Charge to income statement

152

161

297

610

152

142

281

575

Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

1

1

18

1

20

1

18

1

20

(28)

(149)

(101)

(278)

(28)

(141)

(81)

(250)

-

-

(10)

(10)

-

-

(10)

(10)

Balance at end of the year

153

40

281

474

153

23

274

450

Total provision for credit impairment

274

199

799

1,272

274

163

775

1,212

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

ANZ National Bank Limited and Subsidiary Companies
38 – 39

Notes to the Financial Statements (continued)
14. Provision for Credit Impairment (continued)
Provision movement analysis
Consolidated
Retail Other retailmortgages exposures$m$m

ParentCorporate
exposures$mRetail Other retail
Total mortgages exposures
$m
$m
$m

Corporate
exposures
$m

Total
$m

Unaudited 31/03/2010
New and increased provisions

121

73

176

370

121

64

167

352

Provision releases

(25)

(5)

(74)

(104)

(25)

(5)

(73)

(103)

96

68

102

266

96

59

94

249

Recoveries of amounts previously written off

(1)

(8)

(1)

(10)

(1)

(7)

(1)

(9)

Individual provision charge

95

60

101

256

95

52

93

240

Collective provision charge / (credit)

(4)

2

60

58

1

1

58

60

Total charge to income statement

91

62

161

314

96

53

151

300

New and increased provisions

36

87

103

226

36

79

93

208

Provision releases

(1)

-

(3)

(4)

(1)

-

(3)

(4)

35

87

100

222

35

79

90

204

Unaudited 31/03/2009

Recoveries of amounts previously written off

-

(10)

-

(10)

-

(10)

-

(10)

Individual provision charge

35

77

100

212

35

69

90

194

Collective provision charge

12

(16)

77

73

12

(14)

73

71

Total charge to income statement

47

61

177

285

47

55

163

265

162

182

316

660

162

162

299

623

Audited 30/09/2009
New and increased provisions
Provision releases
Recoveries of amounts previously written off

(9)

(3)

(18)

(30)

(9)

(2)

(17)

(28)

153

179

298

630

153

160

282

595

(1)

(18)

(1)

(20)

(1)

(18)

(1)

(20)

Individual provision charge

152

161

297

610

152

142

281

575

Collective provision charge

40

(5)

229

264

40

(6)

231

265

Total charge to income statement

192

156

526

874

192

136

512

840

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
15. Shares in Controlled Entities, Associates and Jointly Controlled Entities
Consolidated
Unaudited
31/03/2010$m

Shares in controlled entities
Shares in associates
Shares in jointly controlled entities
Total shares in controlled entities, associates andjointly controlled entities

Unaudited
31/03/2009$m

ParentAudited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

-

-

-

7,734

7,452

7,377

142

148

211

87

90

94

2

248

253

-

231

231

144

396

464

7,821

7,773

7,702

Shares in associates comprise:
211

144

144

94

88

88

Acquisitions

-

2

67

-

-

6

Disposals

-

-

-

-

-

-

Balance at beginning of the period

Transfers to subsidiary company

(96)

-

-

(7)

-

-

Impairment

(3)

-

(2)

-

2

-

Share of profit of equity accounted associates

30

2

2

-

-

-

Balance at end of the period

142

148

211

87

90

94

Shares in associates at 31 March 2010 includes goodwill of $56 million (31/03/2009 $59 million; 30/09/2009 $57 million) for the
Banking Group and $nil (31/03/2009 $nil; 30/09/2009 $nil) for the Parent:
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

253

219

219

231

208

208

-

23

23

-

23

23
-

Shares in jointly controlled entities comprise:
Balance at beginning of the period
Acquisitions
Disposals
Transfers to subsidiary company
Impairment

(1)

-

-

-

-

(255)

-

-

(231)

-

-

(1)

-

-

-

-

-

Share of profit of jointly controlled entities

6

6

11

-

-

-

Balance at end of the period

2

248

253

-

231

231

Shares in jointly controlled entities at 31 March 2010 includes goodwill of $nil million (31/03/2009 $97 million; 30/09/2009$94 million) for the Group and $nil million (31/03/2009 $90 million; 30/09/2009 $90 million) for the Parent.

16. Other Assets
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Accrued interest and prepaid discounts

398

434

397

440

429

425

Accrued commission

21

25

19

15

19

16

Share-based payments asset

58

51

52

58

51

52

Prepaid expenses

98

58

86

91

51

78

Security settlements

448

55

291

448

55

291

Other assets

147

200

292

78

140

219

Total other assets

1,170

823

1,137

1,130

745

1,081

ANZ National Bank Limited and Subsidiary Companies
40 – 41

Notes to the Financial Statements (continued)
17. Deferred Tax Assets / Liabilities
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$mBalance at beginning of the period

(17)

121

Credited / (charged) to income statement

450

87

(8)

(8)

425

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009
$m

121

(83)

100

100

(141)

448

82

(186)

3

(8)

(8)

3

200

(17)

357

174

(83)

437

250

381

418

230

363

5

4

3

5

5

4
(3)

Audited30/09/2009$m

Audited30/09/2009$m

Deferred tax assets / (liabilities)(Charged) / credited directly to equity
Balance at end of the period
Deferred tax assets / (liabilities) comprisethe following temporary differences:
Provision for credit impairment
Deferred fee revenue and expenses
Premises and equipment

1

1

2

(5)

(4)

Software

5

6

5

6

6

4

148

168

191

136

163

148

Provisions and accruals
Derivative financial instruments

2

3

1

-

4

-

Defined benefit schemes

11

20

17

11

20

17

Tax losses generated not utilised
Lease finance
Other (including provisions)
Net deferred tax assets / (liabilities)

1

42

-

-

-

-

-

(123)

(101)

(112)

(120)

(97)

(110)

(103)

(151)

(505)

(94)

(153)

(506)

425

200

(17)

357

174

(83)

Deferred tax credited / (charged) to the income statement
comprises the following temporary differences:
Provision for credit impairment

56

50

181

55

46

179

Deferred fee revenue and expenses

2

1

-

1

2

1

Premises and equipment

(1)

1

2

(2)

(1)

-

Software

-

(5)

(6)

2

(6)

(8)

(43)

43

66

(12)

45

30

Derivative financial instruments

1

-

(2)

-

-

(4)

Defined benefit schemes

(6)

12

9

(6)

12

9

Provisions and accruals

Tax losses generated not utilised

42

-

-

-

-

-

Lease finance

(11)

(11)

(22)

(10)

(12)

(25)

Other (including provisions)

410

(4)

(369)

420

(4)

(368)

Total deferred tax (charged) / credited to the income statement

450

87

(141)

448

82

(186)

Deferred tax credited / (charged) to equity comprises
the following temporary differences:
Financial instruments

(8)

(8)

3

(8)

(8)

3

Total deferred tax credited / (charged) directly to equity

(8)

(8)

3

(8)

(8)

3

There were unrecognised deferred tax assets of $51m relating to ING NZ tax losses as at 31 March 2010 (31/03/2009 $nil;
30/09/2009 $nil).

1

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

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
18. Premises And Equipment
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

At cost

63

63

63

-

-

-

Accumulated depreciation

(11)

(11)

(11)

-

-

-

Total carrying amount

52

52

52

-

-

-

Freehold and leasehold land and buildings

Leasehold improvements
At cost

99

100

99

2

2

2

Accumulated depreciation

(80)

(77)

(78)

(1)

(1)

(1)

Total carrying amount

19

23

21

1

1

1

At cost

274

264

265

18

18

18

Accumulated depreciation

(200)

(184)

(191)

(12)

(9)

(11)

74

80

74

6

9

7

Furniture and equipment

Total carrying amountComputer and office equipment
At cost

277

252

251

236

212

212

Accumulated depreciation

(200)

(204)

(200)

(170)

(175)

(170)

Total carrying amount

77

48

51

66

37

42

Work in progress

83

47

80

6

13

13

Total premises and equipment

305

250

278

79

60

63

ANZ National Bank Limited and Subsidiary Companies
42 – 43

Notes to the Financial Statements (continued)
18. Premises And Equipment (continued)
Reconciliations of the carrying amounts for each class of premises and equipment are set out below:
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Freehold and leasehold land and buildings
52

57

57

-

-

-

Additions

-

10

10

-

-

-

Disposals

-

(15)

(15)

-

-

-

52

52

52

-

-

-

21

23

23

1

1

1
-

Balance at beginning of the period

Balance at end of the period
Leasehold improvements
Balance at beginning of the period
Additions

-

2

3

-

-

Depreciation

(2)

(2)

(5)

-

-

-

Balance at end of the period

19

23

21

1

1

1

74

79

79

7

8

8
2

Furniture and equipment
Balance at beginning of the period
Additions

7

8

10

-

1

Acquired as part of business combination

2

-

-

-

-

-

Disposals

-

-

(1)

-

-

(1)

Depreciation

(9)

(7)

(14)

(1)

-

(2)

Balance at end of the period

74

80

74

6

9

7

Computer and office equipment
Balance at beginning of the period

51

50

50

42

38

38

Additions

35

9

24

33

7

23

Acquired as part of business combination

2

-

-

-

-

-

Disposals

(1)

(2)

(4)

(1)

(1)

(4)

Depreciation

(10)

(9)

(19)

(8)

(7)

(15)

Balance at end of the period

77

48

51

66

37

42

80

33

33

13

6

6

Work in progress
Balance at beginning of the period
Net additions

3

14

47

(7)

7

7

Balance at end of the period

83

47

80

6

13

13

Total premises and equipment

305

250

278

79

60

63

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
19. Goodwill and Other Intangible Assets
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$mBalance at beginning of the period

3,265

3,265

3,265

3,217

3,217

3,217

Balance at end of the period

3,265

3,265

3,265

3,217

3,217

3,217

Balance at beginning of the period

115

96

96

110

93

93
17

Goodwill
Gross carrying amount

SoftwareGross carrying amount
Additions from internal developments

21

4

19

19

4

Additions from purchases

3

-

-

3

-

-

Acquired as part of a business combination

1

-

-

-

-

-

Impairment

(9)

-

-

(9)

-

-

Balance at end of the period

131

100

115

123

97

110

(58)

(47)

(47)

(56)

(45)

(45)

8

-

-

8

-

-

Accumulated amortisation
Balance at beginning of the period
Accumulated amortisation on impaired assets
Amortisation expense

(4)

(6)

(11)

(4)

(5)

(11)

Balance at end of the period

(54)

(53)

(58)

(52)

(50)

(56)

Total software

77

47

57

71

47

54

Balance at beginning of the period

6

4

4

6

4

4

Additions from purchases

-

9

9

-

9

9

Impairment

-

-

(7)

-

-

(7)

1

Other intangible assets
Gross carrying amount

Acquired as part of a business combination

222

-

-

-

-

-

Balance at end of the period

228

13

6

6

13

6

Balance at beginning of the period

(3)

(1)

(1)

(3)

(1)

(1)

Amortisation expense1

(4)

-

(2)

-

-

(2)

Balance at end of the period

(7)

(1)

(3)

(3)

(1)

(3)

Accumulated amortisation

Total other intangible assets
Total goodwill and other intangible assets

221

12

3

2

11

3

3,563

3,324

3,325

3,290

3,275

3,274

As at 31 March 2010, the balance of goodwill recorded as an asset which relates to the acquisition of The National Bank of
New Zealand Limited in June 2004 was $3,217 million (31/03/2009 $3,217 million; 30/09/2009 $3,217 million).

1

Software amortisation expense is included in other costs in the income statement.

ANZ National Bank Limited and Subsidiary Companies
44 – 45

Notes to the Financial Statements (continued)
20. Due to Other Financial Institutions
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)

340

531

497

58

3

12

Securities sold under agreements to repurchasefrom other financial institutions

36

45

159

36

45

159

Securities sold under agreements to repurchasefrom central banks1
Other financial institutions
Total due to other financial institutions

-

1,856

1,806

-

1,856

1,806

960

1,730

1,263

960

1,346

1,262

1,336

4,162

3,725

1,054

3,250

3,239

282

528

485

-

-

-

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

Balances owing to the Ultimate Parent Bank are due within twelve months. Interest is paid at variable bank rates.

21. Deposits and Other Borrowings
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

ParentAudited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Amortised cost
Certificates of deposit

3,950

7,054

4,441

3,950

7,054

4,441

Term deposits

33,39430,02032,99733,39430,02032,997

Demand deposits bearing interest

19,623

23,58321,024

19,622

23,582

21,024

Deposits not bearing interest

4,895

4,248

4,373

4,895

4,248

4,373

Secured debenture stock

1,358

1,702

1,537

-

-

-

Securities sold under agreement to repurchase

-

9

-

-

9

-

Total deposits and other borrowings recognised
at amortised cost

63,22066,61664,372

61,86164,91362,835

7,416

6,144

7,392

-

-

-

Fair value through the profit or loss
Commercial paper
Total deposits and other borrowings recognised at fair value

7,416

6,144

7,392

-

-

-

Total deposits and other borrowings

70,636

72,76071,764

61,86164,91362,835The Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed funds during theperiod ended 31 March 2010 (31/03/2009 $nil; 30/09/2009 $nil). Deposits from customers are unsecured and rank equally withother unsecured liabilities of the Banking Group. In the unlikely event that the Bank was put into liquidation or ceased to trade,secured creditors and those creditors set out in the Seventh Schedule of the Companies Act 1993 would rank ahead of theclaims of unsecured creditors.
Amortised cost of balances included within deposits
and other borrowings designated as at fair value
through profit or loss:
Commercial paper issued by ANZ National (Int'l) Limited
guaranteed by ANZ National Bank Limited

7,415

6,135

7,388

-

-

-

1,898

2,006

1,877

-

-

-

UDC Finance Limited secured debentures
Carrying value of total tangible assets

Registered secured debenture stock is constituted and secured by a trust deed between UDC Finance Limited and its
independent trustee, Trustees Executors Limited. The trust deed creates floating charges over all the assets, primarily loans
and advances, of UDC Finance Limited.
1

As at 31 March 2010 the Banking Group had entered into no repurchase agreements for residential mortgage-backed securities with the RBNZ (31/03/2009$1,806 million; 30/09/2009 $1,806 million). Therefore no underlying collateral has been accepted by the RBNZ under this transaction (in previous periods
mortgages to the value of 31/03/2009 $2,250 million; 30/09/2009 $2,250 million were held by RBNZ as collateral.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
22. Payables and Other Liabilities
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

ParentAudited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Creditors

396

61

81

344

30

38

Accrued interest and unearned discounts

581

722

687

458

598

559

Defined benefit schemes deficit

37

66

55

37

66

55

Share-based payments liability

23

18

28

23

18

28

Accrued charges

276

200

257

255

184

239

97

552

205

93

552

201

Security settlements
Equitable assignment of mortgages

18

22

19

18

22

19

Other liabilities2

656

459

477

928

409

139

2,084

2,100

1,809

2,156

1,879

1,278

1

Total payables and other liabilities

23. Provisions
Consolidated

Non-lending losses, frauds and forgeries

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

3

4

4

3

4

4

119

117

117

117

115

115

Employee entitlements3
Balance at beginning of the period
Acquired as part of business combination

6

-

-

-

-

-

New provisions

29

31

60

29

30

59

Provisions utilised

(34)

(35)

(58)

(30)

(34)

(57)

Balance at end of the period

120

113

119

116

111

117

Balance at beginning of the period

6

32

32

6

32

32

New provisions

-

17

17

-

17

17

Provisions utilised

(3)

(22)

(43)

(3)

(22)

(43)

Balance at end of the period

3

27

6

3

27

6

18

1

1

14

1

1

Personnel restructuring costs4

Redundant assets restructuring costs4
Balance at beginning of the period
New provisions

-

-

17

-

-

17

Transfers from subsidiary companies

-

-

-

-

-

(4)

Provisions utilised

(1)

-

-

-

-

-

Balance at end of the period

17

1

18

14

1

14

Balance at beginning of the period

136

29

29

134

27

27

Acquired as part of business combination

108

-

-

-

-

-

-

179

257

-

179

257
(150)

Other provisions5

New provisions
Provisions utilised

(46)

(13)

(150)

(46)

(13)

Balance at end of the period

198

195

136

88

193

134

Total provisions

341

340

283

224

336

275

The ANZ FlexiMortgage Income Trust holds mortgages under an equitable assignment with the Bank. The ANZ FlexiMortgage Income Trust can at any time require
the Bank to repurchase any mortgage. The Bank may also require repurchase in certain circumstances. The mortgages are included in these financial statements.
2
Includes amounts payable to related parties of $495m (31/03/09 $193 million; 30/09/09 $330 million) for the Banking Group and $778 million (31/03/09 $193
million; 30/09/09 nil) for the Bank.
3
Employee entitlements
The provision for employee entitlements provides mainly for the cost of employee entitlements to annual leave, long service leave and retirement leave. The
majority of employees utilise their annual leave in the year the entitlement accrued.
4
Personnel restructuring costs and redundant assets restructuring costs
Restructuring cost provisions arise from exit activities relating to material changes in the scope or manner of business undertaken by the Banking Group andincludes termination benefits. Provisions are made when the Banking Group is demonstrably committed, it is probable that the costs will be incurred, though
their timing is uncertain, and the costs can be reliably estimated. The majority of provisions recognised at 31 March 2010 are expected to be settled over the2010 financial year, with the exception that provisions for losses arising from rental commitments on leased premises which have become vacant as a result of
restructuring will be settled over the remaining term of the leases.
5
Other provisions
Other provisions includes provisions relating to the ING New Zealand Funds, refer to the Contingent Liabilities and Credit Related Commitments note for further
information, and the fair value of other contingent liabilities and provisions acquired as part of the acquisition of ING NZ.
1ANZ National Bank Limited and Subsidiary Companies
46 – 47

Notes to the Financial Statements (continued)
24. Bonds and Notes
Issued by ANZ National Bank Limited (Parent)
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

-

50

-

Denomination

Face
value

Maturity

Interest rate %

NZD

50m

floating rate notes

2009

3 month BKBM + 0.30%

NZD

70m

floating rate notes2010

3 month BKBM + 0.35%

70

70

70

NZD

100m

fixed rate notes

2010

8.50%

100

100

100

NZD

75m

fixed rate notes

2010

8.50%

75

75

75

NZD

65m

fixed rate notes2010

3 month BKBM + 0.80%

65

-

65

NZD

50m

floating rate notes

2011

3 month BKBM + 1.24%

50

-

50

NZD

150m

fixed rate notes

2011

6.80%

150

150

150

NZD

170m

floating rate notes

2011

3 month BKBM + 0.90%

170

170

170

NZD

50m

fixed rate notes

2011

8.25%

50

50

50

NZD

100m

floating rate notes

2012

3 month BKBM + 1.025%

100

-

100

NZD

150m

fixed rate notes

2012

5.63%

150

-

150

NZD

100m

fixed rate notes

2013

6.32%

100

-

-

NZD

175m

fixed rate notes

2014

8.50%

175

175

175

NZD

60m

fixed rate notes

2014

8.50%

60

60

60

NZD

250m

fixed rate notes

2015

6.60%

250

-

-

Index linked notes

92

81

78

Fair value hedge adjustment

248

334

223

Less Bond instruments held by the Banking Group

(82)

-

-

1,823

1,315

1,516

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
24. Bonds and Notes (continued)
Issued by ANZ National (Int’l) Limited
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

1,057
363
201
141
65
1,254
423
924
223
704
352
141
28
141
28
955
1,409
705
141
21
54
1,761
2,816
141
18
396
45
28
18
8
100
352
19
15,032

1,748
227
150
68
1,320
528
20
2
2,132
1,389
155
108
14
1,320
100
422
232
176
60
1,567
528
1,094
1,132
1,760
3,521
440
20,213

150
416
1,093
92
11
1,039
100
369
196
139
61
1,234
416
966
233
693
346
139
28
139
28
999
1,386
693
139
21
2,772
139
18
346
14,401

Total bonds and notes

16,855

21,52815,917

Included within bonds and notes is the following related party balance:
Subsidiaries of the Australia and New Zealand Banking Group Limited

2,209

2,699

2,233

Denomination
EUR
HKD
NZD
HKD
USD
USD
NZD
USD
USD
USD
JPY
JPY
USD
USD
NZD
CHF
SGD
USD
AUD
USD
USD
GBP
GBP
USD
USD
USD
USD
USD
HKD
GBP
USD
USD
USD
USD
HKD
USD
USD
USD
HKD
CHF
JPY
USD
HKD
JPY
USD
USD
HKD

Face
value
750m
1,000m
150m
300m
750m
300m
20m
1m
1,211m
789m
8,640m6,000m
8m
750m
100m
275m
200m
100m
50m
890m
300m
435m
105m
500m
250m
100m
20m
100m
155m
450m
1,000m
500m
100m
15m
300m
1,250m
2,000m
100m
100m
300m
3,000m
20m
100m
500m
71m
250m
105m

floating rate notes
fixed rate notes
floating rate notes
fixed rate notes
floating rate notes
floating rate notes
floating rate notes
floating rate notes1
floating rate notes2
floating rate notes2
fixed rate notes
floating rate notes
floating rate notes1
floating rate notes
floating rate notes
floating rate notes
fixed rate notes
floating rate notes
floating rate notes
floating rate notes3
fixed rate notes
floating rate notes
floating rate notes
floating rate notes4
floating rate notes
floating rate notes4
floating rate notes4
floating rate notes
floating rate notes
floating rate notes3
fixed rate notes4
fixed rate notes4
floating rate notes4
floating rate notes
floating rate notes
fixed rate notes
fixed rate notes
floating rate notes4
fixed rate notes
fixed rate notes
fixed rate notes
floating rate notes
fixed rate notes
fixed rate notes
floating rate notes4
floating rate notes
fixed rate notes

Maturity

Interest rate %

2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2010
2010
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
2011
2011
2011
2011
2011
2012
2012
2012
2012
2012
2012
2012
2013
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015

3 month EURIBOR + 0.12%
4.40%
3 month BKBM + 0.10%
4.93%
3 month LIBOR + 0.04%
1 month LIBOR + 0.04%
3 month BKBM + 0.05%
1 month LIBOR + 0.01%
3 month LIBOR + 0.22%
3 month LIBOR + 0.22%
0.114%
3 month JPY LIBOR
1 month LIBOR + 0.02%
3 month LIBOR + 0.11%
3 month BKBM + 0.05%
3 month CHF LIBOR + 0.75%
3.22%
3 month LIBOR + 0.55%
3 month BBSW + 0.61%
3 month LIBOR + 1.03%
5.50%
3 month GBP LIBOR + 0.05%
3 month GBP LIBOR + 0.05%
3 month LIBOR + 0.18%
3 month LIBOR + 0.70%
3 month LIBOR + 0.32%
3 month LIBOR + 0.20%
3 month LIBOR + 0.65%
3 month HIBOR + 0.51%
6 month GBP LIBOR + 0.08%
3.25%
3.25%
3 month LIBOR + 0.25%
3 month LIBOR + 0.80%
3 month HIBOR + 0.71%
2.38%
6.20%
3 month LIBOR + 0.44%
3.40%
2.01%
1.50%
3 month LIBOR +1.10%
3.03%
1.40%
3 month LIBOR 0.28%
3 month LIBOR + 0.90%
3.30%

Bonds and notes issued by ANZ National (Int’l) Limited are guaranteed by the Bank. Bonds and notes are unsecured and rank
equally with other unsecured liabilities of the Banking Group.
The interest rate payable on these notes is stepped as follows: Year 1 1 month LIBOR - 0.02%, Year 2 1 month LIBOR, Year 3 1 month LIBOR + 0.01%, Year 4 1 month
LIBOR + 0.02% and Year 5 1 month LIBOR + 0.03%. The investors were able to elect to extend the maturity of the notes for a year on a monthly basis. These notes
were originally for USD 1.5 billion, but between 7 August 2007 and 6 March 2009, investors elected not to extend these notes. As a result these notes carry afixed maturity as follows: 7 August 2008 USD 89 million; 5 September 2008 USD 1,232 million; 7 October 2008 USD 164 million; 5 December 2008 USD 6 million;
7 May 2009 USD 1 million; and 5 March 2010 USD 8 million.
2
The interest rate payable on these notes is stepped as follows: Year 1 3 month LIBOR + 0.22%, Year 2 3 month LIBOR + 0.24% Year 3 3 month LIBOR + 0.26%, Year
4 3 month LIBOR + 0.28% and Year 5 3 month LIBOR + 0.29%. The investors were able to elect to extend the maturity of the notes for a year on a 3 monthly basis.
On 10 June 2008 and 10 September 2008 and 10 December 2008, investors elected not to extend USD 686 million, USD 525 million and USD 789 million of notes
which has resulted in these notes carrying a fixed maturity on 9 April 2009, 10 July 2009 and 9 October 2009 respectively.
3
These notes were issued to subsidiaries of the ANZ Group.
4
These notes are guaranteed by the Banking Group and benefit from a supporting guarantee from the NZ Crown.
1

ANZ National Bank Limited and Subsidiary Companies
48 – 49

Notes to the Financial Statements (continued)
25. Due from / (to) Parent Company
Consolidated

ANZ Holdings (New Zealand) Limited (Parent Company)

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

500(1,096)

(930)

500

(1,096)(930)

These funds were advanced/(borrowed) in New Zealand dollars on an overnight basis and are at call. Interest is receivable/
payable monthly, based on New Zealand overnight deposit rates.

26. Loan Capital
Consolidated

AUD 207,450,000 term subordinated floating rate loan

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

-

249

-

-

249

-

AUD 265,740,000 perpetual subordinated floating rate loan

343

321

324

343

321

324

AUD 186,100,000 term subordinated floating rate loan

240

225

227

240

225

227

AUD 43,767,507 term subordinated floating rate loan

56

53

53

56

53

53

AUD 169,520,000 term subordinated floating rate loan

219

205

207

219

205

207

NZD term subordinated fixed rate bonds

950

950

950

950

950

950

NZD perpetual subordinated bond

835

835

835

835

835

835

2,643

2,838

2,596

2,643

2,838

2,596

(2)

(3)

-

(2)

(3)

-

2,641

2,835

2,596

2,641

2,835

2,596

858

1,053

811

858

1,053

811

Total loan capital issued
Less loan capital instruments held by the Banking Group
Total loan capital
Included within loan capital is the following related
party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)

AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and had an ultimate maturity date of 31 August 2014. On 31 August 2009 theBank repaid the loan. All interest was payable half yearly in arrears, with interest payments due 28 February and 31 August.
Interest was based on BBSW + 0.40% p.a. up until, and including, 31 August 2009.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly in arrears based on
BBSW + 0.95% p.a., with interest payments due 15 March and 15 September.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. On 19 April 2010 the Bank repaid
the loan. All interest was payable half yearly in arrears, with interest payments due 19 April and 19 October. Interest was basedon BBSW + 0.32% p.a. to 19 April 2010.
AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The Bank may elect torepay the loan on 15 September each year commencing from 2011 through to 2016. All interest is payable half yearly in arrears,
with interest payments due 15 March and 15 September. Interest is based on BBSW + 0.29% p.a. to 15 September 2011 andincreases to BBSW + 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The Bank may elect torepay the loan on 17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears,
with interest payments due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 andincreases to BBSW + 1.18% p.a. thereafter.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
26. Loan Capital (Continued)
NZD subordinated bonds
The terms and conditions of the term subordinated fixed rate bonds are as follows:
Term subordinated fixed rate bonds
Issue dateAmount $m

Coupon rate

Call date

Maturity date

15 September 2006

350

7.16%

15 September 201115 September 2016

2 March 2007

250

7.60%

2 March 2012

2 March 201723 July 2007

350

8.23%

23 July 201223 July 2017

As at 31 March 2010, these bonds carried an AA- rating by Standard & Poor’s.
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to pay interest to
maturity at the five year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. for the 15 September 2006; 2 March
2007 and 23 July 2007 bonds respectively. Interest is payable half yearly in arrears based on the fixed coupon rate.
The terms and conditions of the perpetual subordinated bond are as follows:
Perpetual subordinated bondIssue date

18 April 2008

Amount $m

Coupon rate

1st Call date

2nd Call date

835

9.66%

18 April 201318 April 2018

The Bank may elect to redeem the bond on 18 April 2013, 18 April 2018 or any interest payment date subsequent to 18 April
2018. Interest is payable half yearly in arrears on 18 April and 18 October each year, beginning on 18 October 2008, up to andincluding the Second Call Date and then quarterly thereafter. If the bond is not called at the First Call Date, the coupon rate will
reset to the five year interest swap rate plus 2.00%. Should the bond not be called at the Second Call Date, the Coupon Ratefrom the Second Call Date onwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 31 March 2010, this bond carried an A+ rating by Standard and Poor’s.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds, the Bank has a generalright and in certain specified circumstances an obligation, to defer payment of interest on the Bonds.
All of the NZD subordinated bonds are listed on the New Zealand Exchange (“NZX”). The Market Surveillance Panel of the NZX
granted the Bank a waiver from the requirements of Listing Rules 10.4 (relating to the provision of preliminary announcementsof half yearly and annual results to the NZX) and 10.5 (relating to preparing and providing a copy of half yearly and annual
reports to the NZX). The Bank has been granted a waiver from these rules on the conditions that the Bank’s quarterly General
Disclosure Statement (“GDS”) is available on the Bank’s website, at any branch and at the NZX; that bondholders are advised byletter that copies of the GDS are available at the above locations; that all bondholders are notified on an ongoing basis, by wayof a sentence included on the notification of interest payments, that the latest GDS is available for review at the above locations;and that a copy of the GDS is sent to the NZX on an ongoing basis.
Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all
creditors of the Bank.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for the perpetual
subordinated debt which qualifies as Upper Level Tier Two Capital.

ANZ National Bank Limited and Subsidiary Companies
50 – 51

27. Ordinary Share Capital
Consolidated

ParentUnaudited
31/03/2010
Number ofIssued Shares

Unaudited
31/03/2009
Number ofIssued Shares

Audited30/09/2009
Number ofIssued Shares

Unaudited
31/03/2010
Number ofIssued Shares

Unaudited
31/03/2009
Number ofIssued Shares

Audited30/09/2009
Number ofIssued Shares

Ordinary shares at beginningof the period

1,700,755,498

700,755,498

700,755,498

1,700,755,498

700,755,498

700,755,498

Ordinary shares issued during
the period-

1,000,000,000

1,000,000,000-

1,000,000,000

1,000,000,000

1,700,755,498

1,700,755,498

1,700,755,498

1,700,755,498

1,700,755,498

1,700,755,498

Ordinary shares at endof the period

Consolidated

Ordinary share capital at
beginning of the period

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

6,943

5,943

5,943

6,943

5,943

5,943

Ordinary share capital issued
during the period

-

1,000

1,000

-

1,000

1,000

Ordinary share capital at endof the period

6,943

6,943

6,943

6,943

6,943

6,943

The issued capital of the Bank comprises 1,700,755,498 ordinary shares, of which 650,712 shares are uncalled (31/03/2009
650,712 shares uncalled; 30/09/2009 650,712 shares uncalled).
There were no changes to issued capital during the period ended 31 March 2010. On 24 March 2009 the Bank paid an ordinary
dividend of $1 billion to its parent company (equivalent to $1.43 per share). On the same day the Bank issued 1 billion ordinary
shares to the value of $1 billion.
All shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On ashow of hands every member who is present at a meeting in person or by proxy or by representative is entitled to one vote,and upon a poll every member shall have one vote for each share held.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
28. Capital Adequacy
Adoption of Basel II Accord
The Bank received accreditation from the RBNZ to adopt the internal ratings based approach under the Basel II Accord for
calculating capital adequacy ratios on 10 December 2007, effective from 31 March 2008. The objective of the Basel II Accord is
to develop capital adequacy guidelines that are more accurately aligned with the individual risk profiles of banks. Basel II
consists of three pillars: Pillar I covers the capital requirements for banks for credit, operational and market risks; Pillar II covers
all other material risks not already included in Pillar I; and Pillar III relates to market disclosure. These market disclosure
requirements are set out below.
Capital Management Policies
The Bank is subject to regulation by the RBNZ. The RBNZ specifies, in the Bank’s Conditions of Registration, minimum capitalrequirements that the Bank must comply with. The Bank’s Conditions of Registration require capital adequacy ratios for the
Banking Group to be calculated under the Basel II framework, in accordance with the RBNZ document entitled ‘Capital
Adequacy Framework (Internal Models Based Approach)’ (“BS2B”), dated March 2008.
The RBNZ defines total regulatory capital as tier one capital plus tier two capital less deductions from total capital. Tier one
capital consists of equity less prescribed deductions such as goodwill. Tier two capital consists of subordinated loan capitalless any prescribed deductions.
The Bank has an Internal Capital Adequacy Assessment Process (“ICAAP”) which complies with the requirements under the
Bank’s Conditions of Registration, set out in the RBNZ document entitled ‘Guidelines on a Bank’s Internal Capital Adequacy
Assessment Process (“ICAAP”)’ (“BS12”). The Bank’s ICAAP incorporates: overall capital policies and objectives; capitalmanagement policies and plans; allocation of capital to business units; and stress testing of both risk and capital positions.
The Bank’s ICAAP policy outlines the core capital management principles that must be maintained to demonstrate that its
capital levels: consider all material risks; are consistent with its overall risk appetite and profile; take account of the current
operating environment and stage in business cycle; and that forward-looking stress testing of capital requirements
is performed.
The Bank’s core capital objectives are to:• Protect the interests of depositors, creditors and the shareholder;• Ensure the safety and soundness of the Bank’s capital position; and• Ensure that the capital base supports the Bank’s risk appetite, and strategic business objectives, in an efficient andeffective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting, monitoringand obtaining assurance for the Bank’s ICAAP policy and framework; standardised risk definitions for all material risks;materiality thresholds; capital adequacy targets; internal economic risk capital principles; and risk appetite.
The Board has set capital minimum, trigger and operating range targets for both tier one and total capital that ensure sufficient
capital is maintained to:•••

Meet minimum prudential requirements, as defined in the Bank’s Conditions of Registration;
Ensure consistency with the Bank’s overall risk profile and financial positions, taking into account its strategic focus andbusiness plan; andSupport the economic risk capital requirements of the business.

The Bank aims to maintain capital consistent with a long-term Standard & Poor’s AA credit rating and equivalent ratings fromother rating agencies.
The Bank’s Asset & Liability Committee and its related Capital Management sub-committee are responsible for developing,
implementing and maintaining the Bank’s ICAAP framework, including ongoing monitoring, reporting and compliance. The
Bank’s ICAAP is subject to independent and periodic review conducted by internal audit.
The Bank has complied with all externally imposed capital requirements to which it is subject during the current andcomparative periods.

ANZ National Bank Limited and Subsidiary Companies
52 – 53

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Capital Adequacy Ratios under the Basel II Internal Models Based Approach
Consolidated

Tier One Capital

Unaudited
31/03/2010

Unaudited
31/03/2009

Unaudited
30/09/2009

9.54%

8.74%

9.03%

RBNZ minimum Tier One Capital ratio

4.00%

4.00%

4.00%

Total Capital

13.24%

12.34%

12.67%

RBNZ minimum Total Capital ratio

8.00%

8.00%

8.00%

Capital of The Banking Group as at 31 March 2010 (Unaudited)$mTier One Capital
Ordinary share capital

6,943

Revenue and similar reserves

3,221

Current period's profit after tax

367

Non-controlling interests

1

Less deductions from Tier One Capital– Goodwill

3,265– Software and other intangible assets

298– Future income tax benefits

140– Cash flow hedging reserve38– 50% of expected loss to the extent higher than total eligible allowances for impairment

12

Total Tier One Capital

6,779

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

1,178

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

1,463
2,641

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

12

Total Tier Two Capital

2,629

Total Capital

9,408

Total Required Capital of the Banking Group as at 31 March 2010 (Unaudited)
Risk weighted
exposure or
implied risk
Exposure atweighted Total capitaldefault
exposure requirement
$m
$m
$m

Exposures subject to internal ratings based approach
Specialised lending exposures subject to slotting approach
Exposures subject to standardised approach

50,688

4,056

6,640

6,820

544

453

402

32

Equity exposures

242

925

74

Other exposures

3,022

884

71

Total credit risk

129,001

59,7194,777

Operational risk

n/a

5,178

414

Market risk

n/a

4,630

371

Supervisory adjustment1
Total capital requirement

1

118,644

n/a

1,528

122

129,001

71,055

5,684

The supervisory adjustment includes an adjustment of 15% of risk-weighted retail mortgages and an adjustment, if required, in order to maintain the Basel II
minimum capital requirement at no less than 90% of the Basel I minimum capital requirement, in accordance with the Bank’s Conditions of Registration. No
adjustment was required to maintain the Basel II minimum capital requirement at no less than 90% of the Basel I minimum capital requirement at 31 March 2010.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Capital Adequacy Ratios under the Basel I Approach
Consolidated

Registered Bank

Unaudited
31/03/2010

Unaudited
31/03/2009

Unaudited
30/09/2009

Unaudited
31/03/2010

Unaudited
31/03/2009

Unaudited
30/09/2009

Tier One Capital

9.12%

8.24%

8.43%

9.01%

8.15%

8.34%

Total Capital

12.67%

11.74%

11.82%

12.48%

11.58%

11.66%

Total risk-weighted exposures ($m)

74,46181,09376,467

72,846

79,19374,665RBNZ minimum ratios:Tier One Capital

4.00%

4.00%

4.00%

4.00%

4.00%

4.00%

Total Capital

8.00%

8.00%

8.00%

8.00%

8.00%

8.00%

Basel I capital adequacy in respect of the Banking Group and Registered Bank has been derived in accordance with the RBNZ
document entitled ‘Capital Adequacy Framework (Basel I Approach)’ (“BS2”) dated March 2008.
Implementation of the Advanced Internal Ratings Based Approach to Credit Risk Measurement
The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based (“IRB”)
banks in the RBNZ document BS2B.
Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers andexposures, by way of the primary components of:
Probability of Default (“PD”) – an estimate of the level of risk of borrower default graded by way of rating models used bothat loan origination and for ongoing monitoring. For Retail Mortgage exposures the Banking Group is required to use the RBNZ
prescribed exposure weighted minimum PD of 1.25%;
Exposure at Default (“EAD”) – the expected facility exposure at default; andLoss Given Default (“LGD”) – an estimate of the potential economic loss on a credit exposure, incurred as a consequence ofobligor default and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply
the downturn LGDs according to Loan To Value (“LVR”) band as set out in BS2B. For Rural Banking exposures the Banking Groupis required to adopt RBNZ prescribed downturn LGDs which are more conservative than internal estimates.
For exposures classified under Specialised Lending, the Banking Group uses slotting tables supplied by the RBNZ rather thaninternal estimates.
The exceptions to IRB treatment are six minor portfolios where, due to systems constraints or other reasons, determining these
IRB risk estimates is not currently feasible or appropriate. Risk weights for these exposures are calculated under a separate
treatment as set out in the RBNZ document entitled ‘Capital Adequacy Framework (Standardised Approach)’ (“BS2A”).

ANZ National Bank Limited and Subsidiary Companies
54 – 55

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Set out below is a schedule showing the classification of Banking Group exposures according to rating approach:Internal Ratings Based Approach
IRB Asset Class

Borrower Type

Rating Approach

SovereignCrown

IRB – Advanced

RBNZ

IRB – Advanced

Any other sovereign and its central bank

IRB – Advanced

Bank

Registered banks

IRB – Advanced

Corporate

Corporation, partnerships or proprietorships that do not fit any other asset
classification

IRB – Advanced

Corporate Small to Medium Enterprises ('SME') with turnover of less than
$50 million

IRB – Advanced

Retail Mortgages

Individuals' borrowings against residential property

IRB – Advanced

Other Retail

Other lending to individuals (including credit cards)

IRB – Advanced

SME Business borrowers

IRB – Advanced

Project Finance

IRB – Slotting

Income-Producing Real Estate

IRB – Slotting

Corporate sub-class –Specialised lending
EquityIRB

Other assets

All other assets not falling within any of the above classes

IRB

Standardised Approach
Exposure class

Exposure Type

Reason for Standardised Approach Due toFuture Treatment

Residential mortgages

ANZ Retail residential investment loans

System constraints

Move to IRB

Corporate

Purchased receivables

Nature of productRemainStandardised

Merchant card prepayment exposures

System constraints

Move to IRB

Corporate credit cards

System constraints

Move to IRB

Bank, Corporate& Sovereign

Exposures held by ING

Nature of productMove to IRB

Other Retail

Personal Credit Cards

System constraints

Move to IRB

Controls Surrounding Credit Risk Rating Systems
The term “Rating Systems” covers all of the methods, processes, controls, data collection and technology that support
the assessment of credit risk, the assignment of internal credit risk ratings and the quantification of associated default andloss estimates.
All material aspects of the Rating Systems and risk estimate processes are governed by the Risk Committee of the Banking
Group. Risk grades are an integral part of reporting to senior management and executives. Management and staff of credit
risk functions, in conjunction with the relevant Retail and Wholesale Risk Committees, regularly assess the performanceof the rating systems, identify any areas for improvement and monitor progress on previously identified development
work needed.
The Banking Group’s Rating Systems are governed by a comprehensive framework of controls that operate at the business unit
and support centres, and through central audit and validation processes. All policies, model designs, model reviews,
methodologies, validations, responsibilities, systems and processes supporting the ratings systems are fully documented.
The Banking Group’s Retail and Wholesale ratings functions work closely with the Ultimate Parent Bank’s risk ratings functions,
are independent of operational lending activities and are responsible for the ratings strategies and ongoing management ofcredit risk models within New Zealand. The annual validation of models used across the Banking Group is a function undertakenby the ANZ Decision Model Validation unit, which is also independent of credit risk operational functions and is responsible foroverseeing the design, implementation and performance of all rating models in the Banking Group.
The target approach to modelling for the Banking Group is to deploy the model most suitable for the environment. At present
this involves an approach to modelling that combines models developed in New Zealand and models developed by the
Ultimate Parent Bank, tested and validated for use in New Zealand, as appropriate.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Credit Risk Exposures subject to the Internal Ratings Based Approach
The following tables analyse the capital requirements by asset class under the IRB approach:
Consolidated as at 31/03/2010 (Unaudited)
Total
exposureor principal
amount$m

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

Exposureweighted
risk
weight%Riskweighted
exposure1$m

Total capitalrequirement
$m

1,978

On-balance sheet exposures
Corporate

35,35935,35937

66

24,719Sovereign

7,130

7,130

5

1

74

6

Bank

4,023

3,484

62

14

520

42

Retail mortgages

40,666

40,666

21

23

9,719

778

Other retail

4,286

4,286

62

79

3,568

285

Total on-balance sheet exposures

91,46490,92529

40

38,6003,089

12,942

10,862

48

56

6,416

513

Off-balance sheet exposures
Corporate
Sovereign

54

54

5

-

-

-

Bank

821

728

50

22

170

14

5,351

4,942

20

21

1,077

86

Retail mortgages
Other retail

4,549

4,560

75

53

2,575

206

Total off-balance sheet exposures

23,717

21,14647

46

10,238819

Corporate

61,600

1,485

55

54

849

68

Sovereign

8,608

511

5

1

6

-

Bank

543,212

4,577

65

21

995

80

Total market related contracts

613,420

6,573

58

27

1,850

148

Total credit risk exposures subject to theinternal ratings based approach

728,601

118,64434

40

50,6884,056

Market related contracts

1

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

ANZ National Bank Limited and Subsidiary Companies
56 – 57

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Consolidated as at 31/03/2010 (Unaudited)

Probabilityof default%

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

Exposureweighted
risk
weight%Riskweighted
exposure1$m

Total capitalrequirement
$m

60

21

1,050

84
588

Corporate
Customer Credit Rating
0-2

0.05%

4,701

3-4

0.34%

19,167

37

36

7,338

5

1.01%

10,752

36

62

7,090

567

6

2.32%

6,876

38

83

6,047

484

7-8

7.32%

4,926

40

118

6,166

493

Default

100.00%

1,284

49

315

4,293

343

4.15%

47,70640

63

31,984

2,559

0

0.01%

7,695

5

1

80

6

1

n/a

-

-

-

-

-

2

n/a

-

-

-

-

-

3

n/a

-

-

-

-

-

4-8

n/a

-

-

-

-

-

Default

n/a

-

-

-

-

-

0.01%

7,695

5

1

80

6

Total corporate credit risk exposures
Sovereign
Customer Credit Rating

Total sovereign credit risk exposures
Bank
Customer Credit Rating
0

0.01%

5,865

65

17

1,029

83

1

0.02%

2,293

56

17

419

34

2-4

0.13%

568

57

30

183

15

5-6

1.29%

42

65

117

52

4

7-8

5.45%

1

65

189

2

-

Default

100.00%

20

65

-

-

-

0.25%

8,789

62

18

1,685

136

0-3

0.21%

7,646

21

9

702

56
269

Total bank credit risk exposures
Retail mortgages
Customer Credit Rating
4

0.44%

23,345

19

14

3,352

5

1.13%

8,719

21

29

2,639

211

6

2.55%

3,235

21

48

1,659

133

7-8

14.16%

1,850

24

112

2,204

176

Default

100.00%

813

29

28

240

19

3.01%

45,60820

22

10,796864

Total residential mortgage credit risk exposures
Other retailCustomer Credit Rating
0-2

0.10%

14

75

20

3

-

3-4

0.31%

4,424

72

37

1,734

139

5

1.16%

1,642

69

73

1,272

102

6

2.61%

1,593

60

81

1,369

109

7-8

11.52%

1,008

69

121

1,291

103

Default

100.00%

165

70

271

474

38

4.02%

8,846

69

66

6,143

491

Total other retail credit risk exposures

Credit risk exposures subject to the IRB approach have been derived in accordance with the RBNZ document BS2B and otherrelevant correspondence from the RBNZ setting out prescribed credit risk estimates.
1

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

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Specialised Lending Exposures Subject to the Slotting Approach
Consolidated as at 31/03/2010 (Unaudited)
Exposureamount$m

Risk Risk weighted
weightexposure1$m%

Total capitalrequirement$mOn-balance sheet exposures2Strong

1,521

70

1,128

90

Good

2,428

90

2,316

185

Satisfactory

1,696

115

2,067

165

Weak

322

250

854

68

Default

200

-

-

-

Total on-balance sheet exposures subject to the slotting approach

6,167

97

6,365

508

Average risk Risk weighted
weightexposure1$m%

Total capitalrequirement$m

Exposureamount$m

Exposure atdefault
$m

509

380

90

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

364

29

Market related contracts

2,048

93

92

91

7

Total off-balance sheet exposures subject to the slotting approach

2,557

473

91

455

36

Specialised lending exposures subject to the slotting approach have been derived in accordance with the RBNZ document BS2B.
Credit Risk Exposures subject to the Standardised Approach
Consolidated as at 31/03/2010 (Unaudited)
Exposureamount$m

Risk Risk weighted
weightexposure1$m%

Total capitalrequirement$mOn-balance sheet exposures
Corporates

201

100

214

17

Banks

11

20

2

-

Residential mortgages

58

39

24

2

Other retail

20

100

21

2

2

150

4

-

292

86

265

21

Average risk Risk weighted
weightexposure1$m%

Total capitalrequirement$m

Past due assets
Total on-balance sheet exposures subject to the standardised approach

Exposureamount$m

Average credit
conversion
factor%Creditequivalentamount
$m

487

33

161

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

80

137

11

Credit risk exposures subject to the standardised approach have been calculated in accordance with the RBNZ document BS2A.
Equity Exposures
Consolidated as at 31/03/2010 (Unaudited)
Exposureamount$m

All other equity holdings (not deducted from capital)

242

Risk Risk weighted
weightexposure1
$m
%

361

925

Total capitalrequirement$m74

Equity exposures have been calculated in accordance with the RBNZ document BS2B.
1
2

Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.
The supervisory categories of specialised lending above are associated with a specific risk-weight. These categories broadly correspond to the following
external credit assessments using the Standard & Poor’s rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak: B to C-.

ANZ National Bank Limited and Subsidiary Companies
58 – 59

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Other Exposures
Consolidated as at 31/03/2010 (Unaudited)
Exposureamount$m

Cash and gold bullion
New Zealand dollar denominated claims on the Crown and the RBNZ
Other assets
Total other IRB credit risk exposures

Risk Risk weighted
weightexposure1
$m
%

223

-

-

Total capitalrequirement
$m

-

1,965

-

-

-

834

100

884

71

3,022

28

884

71

Other exposures have been calculated in accordance with the RBNZ document BS2B.
A risk weight of 100% applies to premises and equipment and all other exposures not otherwise defined in BS2B, except for
cash, gold, New Zealand dollar denominated claims on the Crown and the RBNZ, which receive a 0% risk weight.
Operational Risk
Implied risk
weighted
exposure$m

Total
operationalrisk capitalrequirement
$m

5,178

414

Operational risk capital requirement as at 31 March 2010 (Unaudited)
Advanced Measurement Approach for operational risk

The Banking Group uses the Advanced Measurement Approach for determining its regulatory capital requirement for
operational risk calculated in accordance with the RBNZ document BS2B.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external
events. Operational risk incorporates legal risk which includes, but is not limited to, exposures to fines, penalties, or punitive
damages resulting from regulatory actions, as well as private settlements.
Operational Risk capital is modelled at a New Zealand divisional level and then distributed and adjusted for the businessenvironment and internal controls down to the business units using the Risk Scenario Methodology. The Risk Scenario
Methodology is a risk based methodology that ensures that there is sufficient operational risk capital held as a buffer for rare
and severe unexpected operational loss events that may impact the New Zealand business. The Methodology applies a
combination of expert judgement, business unit risk profiles, audit findings, and internal and external loss events to derive aseries of business specific Risk Scenarios that are applied to the capital model. The Risk Scenario approach:•••assesses the level of the Bank’s exposure to specified risk scenarios;
assesses the scope and quality of the Bank’s internal control environment, key operational processes and risk mitigants;
anddirectly links the risk scenarios to operational risk capital.

The Banking Group’s Operating Risk Capital is calculated using the Ultimate Parent Bank’s methodology, but with standalone
New Zealand inputs to ensure there are no diversification benefits.
The Banking Group does not incorporate any insurance mitigation impact into its capital number. Accordingly, there are no
insurance related questions contained within the Risk Scenario Methodology.

1

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

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Market Risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B.
The peak end-of-day market risk exposures for the quarter are measured over equity at the end of the quarter and are calculated
separately for each category of exposure. The peak for all categories of exposure may not have occurred at the same time.
Consolidated

Implied risk weighted
exposure

Aggregate
capital charge
as a percentageof the Banking
Group’s Equity

Aggregate
capital charge

As at
$m

Peak
$m

As at
$m

Peak
$m

As at
%

Peak
%

4,486

4,486

359

48

91

4

359

3.4%

3.4%

7

0.0%

0.1%

96

96

8

8

0.1%

0.1%

Unaudited 31/03/2010
Interest rate risk
Foreign currency risk
Equity risk

4,630

371

Unaudited 31/03/2009
Interest rate risk

3,406

4,055

273

324

2.7%

3.2%

Foreign currency risk

41

108

3

9

0.0%

0.1%

Equity risk

68

78

5

6

0.0%

0.1%

3,515

281

Unaudited 30/09/2009
3,824

3,824

306

306

3.0%

3.0%

Foreign currency risk

Interest rate risk

5

301

-

24

0.0%

0.2%

Equity risk

69

82

6

7

0.1%

0.1%

3,898

312

Credit Risk Mitigation
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for
repayment. The Banking Group generally takes collateral security in the form of real property or a security interest in personal
property, except for major government, bank and corporate counterparties of strong financial standing. Longer term consumer
finance, in the form of housing loans, is generally secured against real estate while short term revolving consumer credit isgenerally unsecured.
Netting is defined as the set-off of two or more cash flows, assets or liabilities. The types of netting used by the Banking Groupare payment or settlement, close-out, bilateral or multilateral. The Banking Group establishes its netting rights through various
means including legally binding set-off agreements, collateral agreements, facility agreements, security agreements and theterms and conditions of trading (including International Swaps and Derivatives Association (“ISDA”) Master Agreements when
considered appropriate). Where documented rights to net have been established, a net limit may be used for exposure
assessment and monitoring.
Guarantees used for credit risk mitigation may be provided by bank, sovereign, corporate or individual counterparties.
Guarantors are separately rated, and their capacity to honour their commitments under the guarantee is also assessed. The
obligor is also separately rated on a stand-alone basis, and then the rating of the obligor is adjusted to take into account thestrength of the guarantor. The size of the adjustment reflects the Banking Group’s assessment of the strength of the guarantor,
but is capped at the guarantor’s rating so there is no recognition of “double default”. Guaranteed exposures are subject toBanking Group policy covering market and credit risk concentrations.
As at 31 March 2010, under the IRB approach, the Banking Group had $1,607 million of Corporate exposures covered byguarantees and $nil of Corporate exposures covered by credit derivatives, where the presence of the guarantees or credit
derivatives was judged to reduce the underlying credit risk of the exposures. Information on the total value of exposurescovered by financial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateralon the underlying credit risk exposures is not considered to be material.

ANZ National Bank Limited and Subsidiary Companies
60 – 61

Notes to the Financial Statements (continued)
28. Capital Adequacy (continued)
Retail Mortgages by Loan-to-Valuation Ratio (“LVR”)
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Bank’svaluation of the security property at origination of the exposure. The exposure amount used to calculate LVR excludes
commitments to lend.
Exposure amount$m

LVR range
0% - 59%

21,212

60% - 69%6,609

70% - 79%

7,844

80% - 89%4,443Over 90%

4,254

Total retail mortgage exposures subject to the internal ratings based approach

44,362

Pillar II Capital for Other Material Risks
The Banking Group has an Internal Capital Adequacy Assessment Process (“ICAAP”) which complies with the requirements of
the Bank’s Conditions of Registration.
Under the Banking Group’s ICAAP it identifies and measures all “other material risks”, which are those material risks that are notexplicitly captured in the calculation of the Banking Group’s tier one and total capital ratios. The other material risks identified
by the Banking Group include premises and equipment risk and capitalised origination fees risk.
The Banking Group’s internal capital allocation for these other material risks is:
Total capital requirement

Internal capital allocation for other material risks

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Unaudited
30/09/2009
$m

158

145

148

Capital Adequacy of Ultimate Parent Bank
Ultimate Parent Banking Group

Ultimate Parent Bank

Unaudited
31/03/2010
Basel II

Unaudited
31/03/2009
Basel II

Unaudited
30/09/2009
Basel II

Unaudited
31/03/2010
Basel II

Unaudited
31/03/2009
Basel II

Unaudited
30/09/2009
Basel II

Tier One Capital

10.7%

8.2%

10.6%

11.9%

9.0%

11.6%

Total Capital

13.0%

11.0%

13.7%

13.7%

11.5%

14.2%

For calculation of minimum capital requirements under Pillar I of the Basel II Accord, the Australian Prudential Regulation
Authority (“APRA”) has accredited the Ultimate Parent Bank to use the Advanced Internal Ratings Based (“AIRB”) methodology
for calculation of credit risk weighted assets and the Advanced Measurement Approach (“AMA”) for the operational risk
weighted asset equivalent. The Basel II Accord came into effect from 1 January 2008.
Under prudential regulations, the Ultimate Parent Bank is required to hold a minimum Prudential Capital Ratio (“PCR”) as
determined by APRA. The Ultimate Parent Bank met the minimum capital adequacy requirements set by APRA as at 31 March2010 and for the comparative prior period.
The Ultimate Parent Bank is required to publicly disclose Pillar III financial information as at 31 March 2010. The Ultimate Parent
Bank’s Consolidated Financial Report, Dividend Announcement and Appendix 4E, for the Half Year to 31 March 2010, discloses
capital adequacy ratios calculated under the Basel II methodology. These documents can be accessed at the following website:www.anz.com.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management
Strategy in using financial instruments
Financial instruments are fundamental to the Banking Group’s business, constituting the core element of its operations.
Accordingly, the risks associated with financial instruments are a significant component of the risks faced by the Banking
Group. Financial instruments create, modify or reduce the credit, market (including traded or fair value risks and non-traded orinterest and foreign currency related risks) and liquidity risks of the Banking Group’s balance sheet. These risks and the Banking
Group’s policies and objectives for managing such risks are outlined below. The Banking Group’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Banking Group.
Credit Risk
Credit risk is the risk of financial loss from counterparties being unable to fulfil their contractual obligations. The Banking
Group assumes credit risk in a wide range of lending and other activities in diverse markets and many jurisdictions. The credit
risks arise not only from traditional lending to customers, but also from inter-bank, treasury, international trade and capital
market activities around the world.
The Banking Group has an overall lending objective of sound growth for appropriate returns. The credit risk objectives of the
Banking Group are set by the Board and are implemented and monitored within a tiered structure of delegated authority,
designed to oversee multiple facets of credit risk, including asset writing strategies, credit policies/controls, single exposures,
portfolio monitoring and risk concentrations.
The credit risk management framework exists to provide a structured and disciplined process to support those objectives. The
integrity of the credit risk function is maintained by the independence of the credit chain and is supported by comprehensive
risk analysis, risk tools, monitoring processes and policies.
Credit Risk Management
The credit risk management framework is in place across the Banking Group with the aim of ensuring a structured anddisciplined approach is maintained in achieving the objectives set by the Board. The framework focuses on policies, people,
skills, vision, values, controls, risk concentrations and portfolio balance. It is supported by portfolio analysis and asset-writing
strategies, which guide lending decisions and identify segments of the portfolio requiring attention. The effectiveness of theframework is monitored through a series of compliance and reporting processes.
An independent Risk Management function, at Banking Group, Divisional and Business Unit levels, is staffed by risk specialists.
In regard to credit risk management, the objective is for Risk Management to provide robust credit policies, to make independent
credit decisions, and to provide strong support to front line staff in the application of sound credit practices. In addition toproviding independent credit assessment on lending decisions, Risk Management also performs key roles in portfolio
management by development and validation of credit risk measurement systems, loan asset quality reporting, and developmentof credit standards and policies.
The credit risk management framework is top down. Where required, the framework is defined firstly by the Banking Group’s
Vision and Values and secondly, by Credit Principles and Policies. The effectiveness of the credit risk management framework
is validated through the compliance and monitoring processes.
Risk Management’s responsibilities for credit risk policy and management are executed through dedicated departments,
which support the Banking Group’s business units. All major Business Unit credit decisions require approval from both businesswriters and independent risk personnel.
Credit Risk is controlled through a combination of approvals, limits, reviews and monitoring procedures that are carried out ona regular basis, the frequency of which is dependent upon the level of risk. Credit risk policy and management is executed
through the Chief Risk Officer who is responsible for various dedicated areas within the Risk Management division. Wholesale
Risk services the Banking Group’s corporate, investment banking and rural lending activities through dedicated teams. Retail
Risk services the Banking Group’s small business and consumer customers. The Portfolio Reporting team within Risk
Management provides an independent overview of credit risk across the Bank at a portfolio level. The Banking Group allows
sole discretion for transaction approvals at the Business Unit level in both the retail and wholesale lending sectors, with larger
transactions approved by Retail Risk and Wholesale Risk.
The credit risk review function within Internal Audit also provides a further independent check mechanism to ensure thequality of credit decisions. This includes providing independent periodic checks on asset quality and compliance with theagreed standards and policies across the Banking Group.

ANZ National Bank Limited and Subsidiary Companies

29. Financial Risk Management (continued)
Country Risk Management
Some customer credit risks involve country risk, whereby actions or events at a national or international level could
disrupt servicing of commitments. Country risk arises when payment or discharge of an obligation will, or could, involve theflow of funds from one country to another or involve transactions in a currency other than the domestic currency of therelevant country.
Country ratings are assigned to each country where the Banking Group incurs country risk and have a direct bearing on the
Banking Group’s risk appetite for each country. The country rating is determined through a defined methodology basedaround external ratings agencies’ ratings and internal specialist opinion. It is also a key risk consideration in the Banking Group’s
capital pricing model for cross border flows.
The recording of country limits provides the Banking Group with a means to identify and control country risk. Country limits
ensure that there is a country-by-country ceiling on exposures that involve country risk. They are recorded by time to maturity
and purpose of exposure, e.g. trade, markets, project finance. Country limits are managed centrally by the Ultimate Parent
Bank, through a global country risk exposure management system managed by a specialist unit within Institutional Risk.
Portfolio Stress Testing
Stress testing is integral to strengthening the predictive approach to Risk Management and is a key component to managing
risk appetite, asset writing strategies and business strategies. It creates greater understanding of impacts on financial
performance through modelling relationships and sensitivities between geographic, industry and business unit exposures
under a range of macro economic scenarios.
The Ultimate Parent Bank has a dedicated stress testing team that assists business and risk executives in the Banking Group tomodel and report periodically to management and the Board Risk Committee on a range of scenarios and stress tests.
Portfolio Analysis and Reporting
Credit portfolios are actively monitored at each layer of the risk structure to ensure credit deterioration is quickly detected andmitigated through the implementation of remediation strategies.
Businesses incurring credit risk undertake regular and comprehensive analysis of their credit portfolios. Issue identification
and adherence to performance benchmarks are reported to risk and business executives through a series of reports including
monthly ‘asset quality’ reporting. This process is undertaken by or overseen by Banking Group Risk Management ensuring
an efficient and independent conduit exists to quickly identify and communicate emerging credit issues to executives andthe Board.
Collateral Management
Banking Group credit principles specify to lend only what the counterparty has the capacity and ability to repay and the
Banking Group sets limits on the acceptable level of credit risk. Acceptance of credit risk is firstly based on the counterparty’s
assessed capacity to meet contractual obligations (i.e. interest and capital repayments). Obtaining collateral is only used tomitigate credit risk. Procedures are designed to ensure collateral is managed, legally enforceable, conservatively valued andadequately insured where appropriate. Banking Group policy sets out the types of acceptable collateral, including:
•
•
•
•
•

Cash;
Mortgages over property;
Charges over business assets, e.g. premises, stock and debtors;
Charges over financial instruments, e.g. debt securities and equities in support of trading facilities; andFinancial guarantees.

In the event of customer default, any loan security is usually held as mortgagee in possession while action is taken to realise
it. Therefore the Banking Group does not usually hold any real estate or other assets acquired through the enforcementof security.
The Banking Group uses ISDA Master Agreements to document derivatives’ activities to limit exposure to credit losses. The
credit risk is reduced by a master agreement to the extent that, if an event of default occurs, all contracts with the counterparty
are terminated and settled on a net basis. Further, it is the Banking Group’s preferred practice to include all products coveredby the ISDA in the Credit Support Annex (“CSA”), in order to achieve further credit exposure reduction. Under a CSA, collateralis passed between the parties, depending on the aggregate mark-to-market (positive or negative) of derivative trades between
the two entities, to mitigate the market contingent counterparty risk inherent in the outstanding positions.

62 – 63

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Concentrations of Credit Risk
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities within
the same geographic region, or when they have similar risk characteristics that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic or other conditions.
The Banking Group monitors its portfolios to identify and assess risk concentrations. Concentration limits are used to guard
against large single customer or correlated credit risks. Risk Management, Business Unit Executives and Senior Managementmonitor large exposure concentrations through a monthly list of the Banking Group’s top Corporate exposures. The ANZ
Credit and Market Risk Committee (six monthly) and Board Risk Committee (annually) review a comprehensive list of single
customer concentration limits and customers’ adherence to these limits.
Analyses of financial assets by industry sector are based on Australian and New Zealand Standard Industrial Classification(“ANZSIC”) codes.
Concentrations of credit risk analysis:

The composition of financial instruments that give rise to credit risk, by industry and geography:
Consolidated
Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments
$m

Total
$m

Agriculture, forestry, fishing

26

4

114

20,024238

1,727

22,133Business services

2

-

13

819

10

609

1,453

Construction

-

-

2

961

11

783

1,757

Entertainment, leisure and tourism

-

-

30

1,028

12

462

1,532

Unaudited 31/03/2010
Industry

Finance and insurance

2,187

4,776

7,790

1,383

529

1,486

18,151Government and local authority1

2,196

3,320

273

1,425

36

814

8,064

69

31

96

2,913

34

3,474

6,617
53,943

Manufacturing
Personal lending

-

-

-

44,264517

9,162

Property services

4

6

45

8,072

94

1,600

9,821

113

-

65

1,454

17

1,147

2,796

Transport and storage

9

12

80

1,589

19

619

2,328

Wholesale trade

8

-

9

1,487

17

1,491

3,012

Retail trade

6

67

196

1,330

18

1,339

2,956

4,620

8,216

8,713

86,7491,552

24,713

134,563

Individual provision for
credit impairment

-

-

-

(601)

-

-

(601)

Collective provision for
credit impairment

-

-

-

(856)

-

-

(856)

-

-

-

(1,457)--(1,457)Other

2Fair value hedge adjustment
Total financial assets

-

-

-

378

-

-

378

4,620

8,216

8,713

85,6701,552

24,713

133,484

4,307

5,695

2,442

83,932

1,552

24,713

122,641

313

2,521

6,271

1,738

-

-

10,843

4,620

8,216

8,713

85,6701,552

24,713

133,484

Geography
New ZealandOverseas
Total financial assets

1
2

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.

ANZ National Bank Limited and Subsidiary Companies
64 – 65

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Consolidated
Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments3
$m

Total
$m

21,144

Unaudited 31/03/2009
Industry
214

-

225

18,708143

1,854

Business services

Agriculture, forestry, fishing

-

-

9

1,484

11

517

2,021

Construction

-

-

5

901

7

532

1,445

Entertainment, leisure and tourism

-

30

47

976

7

379

1,439

Finance and insurance

7,711

2,380

13,418

1,618

12

1,568

26,707

Government and local authority1

2,670

680

486

1,099

8

996

5,939

Manufacturing

141

14

358

3,261

25

3,917

7,716

Personal lending

-

-

-

50,085383

10,40060,868
11,138Property services

4

-

68

9,157

70

1,839

Retail trade

211

-

54

1,712

13

1,174

3,164

Transport and storage

23

2

77

1,448

11

859

2,420

Wholesale trade

22

-

16

1,634

12

1,237

2,921

Other2

25

56

222

1,463

12

1,504

3,282

11,021

3,162

14,98593,546714

26,776150,204

Individual provision for
credit impairment

-

-

-

(269)

-

-

(269)

Collective provision for
credit impairment

-

-

-

(607)

-

-

(607)

Fair value hedge adjustment

-

-

-

(876)

-

-

(876)

Total financial assets

-

-

-

1,050

-

-

1,050

11,021

3,162

14,98593,720714

26,776150,378

10,120

1,678

4,075

92,521714

26,776

135,884

901

1,484

10,910

1,199

-

-

14,494

11,021

3,162

14,98593,720714

26,776150,378

Geography
New ZealandOverseas
Total financial assets

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.
3
Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer. Credit related commitments for 31 March 2009
have been restated to be consistent with current period treatment.
1
2

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Consolidated
Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments
$m

Total
$m

Audited 30/09/2009
Industry
Agriculture, forestry, fishing

48

-

261

20,328228

1,555

22,420Business services

2

-

13

857

10

638

1,520

Construction

-

-

3

848

10

853

1,714

Entertainment, leisure and tourism

-

48

28

1,011

11

487

1,585

Finance and insurance

4,606

4,191

10,457

1,297

15

1,371

21,937

Government and local authority1

2,412

1,392

175

1,412

16

802

6,209

Manufacturing

83

1

96

2,786

31

3,835

6,832

Personal lending

-

-

1

45,930516

10,461

56,90810,085

Property services

3

-

36

8,231

92

1,723

Retail trade

91

-

74

1,592

18

1,206

2,981

Transport and storage

6

8

80

1,561

18

686

2,359

Wholesale trade

19

-

6

1,706

19

1,036

2,786

Other2

6

39

178

1,357

15

1,341

2,936

7,276

5,679

11,40888,916

999

25,994140,272

Individual provision for
credit impairment

-

-

-

(474)

-

-

(474)

Collective provision for
credit impairment

-

-

-

(798)

-

-

(798)

-

-

-

(1,272)--(1,272)

-

-

-

615

-

-

615

7,276

5,679

11,40888,259999

25,994

139,615

New Zealand

6,213

3,272

2,951

86,784

999

25,994

126,213

Overseas

1,063

2,407

8,457

1,475

-

-

13,402

Total financial assets

7,276

5,679

11,40888,259999

25,994

139,615

Fair value hedge adjustment
Total financial assets
Geography

1
2

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.

ANZ National Bank Limited and Subsidiary Companies
66 – 67

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentLiquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments
$m

Due
Net
from
loans and subsidiaryadvances companies
$m
$m

Other
financialassets$m

Creditrelatedcommitments
$m

Total
$m

Unaudited 31/03/2010
Industry
Agriculture, forestry, fishing

26

-

114

19,676

-

229

1,710

21,755Business services

2

-

13

764

-

9

606

1,394

Construction

-

-

2

765

-

9

754

1,530

-

-

30

982

-

11

461

1,484

Finance and insurance

2,018

4,626

7,796

1,322

8,826

515

1,486

26,589Government and local authority1

2,196

3,300

273

1,169

-

14

813

7,765

Entertainment, leisure and tourism

Manufacturing

69

31

96

2,726

-

32

3,454

6,408

Personal lending

-

-

-

43,936

-

510

9,156

53,602

Property services

4

6

45

7,985

-

93

1,583

9,716

113

-

65

1,315

-

15

1,061

2,569

Transport and storage

9

12

80

1,220

-

14

578

1,913

Wholesale trade

8

-

9

1,430

-

17

1,472

2,936

Other2

6

65

196

1,140

-

13

1,335

2,755

4,451

8,040

8,719

84,430

8,826

1,481

24,469140,416

Individual provision for
credit impairment

-

-

-

(570)

-

-

-

(570)

Collective provision for
credit impairment

-

-

-

(822)

-

-

-

(822)

-

-

-

(1,392)---(1,392)

Fair value hedge adjustment

-

-

-

378

-

-

-

378

4,451

8,040

8,719

83,416

8,826

1,481

24,469139,402

4,138

5,519

2,448

82,217

8,826

981

24,469128,598

313

2,521

6,271

1,199

-

500

-

10,804

4,451

8,040

8,719

83,416

8,826

1,481

24,469139,402

Retail trade

Total financial assets
Geography
New ZealandOverseas
Total financial assets

1
2

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentLiquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments
$m

Due
Net
from
loans and subsidiaryadvances companies
$m
$m

Other
financialassets$m

Creditrelatedcommitments3
$m

Total
$m

Unaudited 31/03/2009
Industry
214

-

225

18,383

-

130

1,837

20,789Business services

Agriculture, forestry, fishing

-

-

9

1,356

-

10

516

1,891

Construction

-

-

5

688

-

5

500

1,198

-

30

47

947

-

7

377

1,408

Finance and insurance

Entertainment, leisure and tourism

6,992

2,377

13,595

1,443

9,610

10

1,568

35,595Government and local authority1

2,632

680

486

1,006

-

7

995

5,806

Manufacturing

141

14

358

3,079

-

22

3,901

7,515

Personal lending

-

-

-

49,633-348

10,40060,381

Property services

4

-

68

9,154

-

65

1,823

11,114Retail trade

211

-

54

1,554

-

11

1,091

2,921

Transport and storage

23

2

77

1,071

-

8

812

1,993

Wholesale trade

22

-

16

1,571

-

11

1,218

2,838

Other2

25

56

222

1,205

-

9

1,489

3,006

10,264

3,159

15,162

91,0909,610

643

26,527

156,455

Individual provision for
credit impairment

-

-

-

(243)

-

-

-

(243)

Collective provision for
credit impairment

-

-

-

(568)

-

-

-

(568)

-

-

-

(811)

-

-

-

(811)

Fair value hedge adjustment

-

-

-

1,050

-

-

-

1,050

10,264

3,159

15,162

91,3299,610

643

26,527

156,694

9,897

1,675

4,252

90,1309,610

643

26,527

142,734

367

1,484

10,910

1,199

-

-

-

13,96010,264

3,159

15,162

91,3299,610

643

26,527

156,694

Total financial assets
Geography
New ZealandOverseas
Total financial assets

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.
3
Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer. Credit related commitments for 31 March 2009
have been restated to be consistent with current period treatment.
1
2

ANZ National Bank Limited and Subsidiary Companies
68 – 69

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentLiquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments
$m

Due
Net
from
loans and subsidiaryadvances companies
$m
$m

Other
financialassets$m

Creditrelatedcommitments
$m

Total
$m

22,024

Audited 30/09/2009
Industry
Agriculture, forestry, fishing

48

-

261

19,997

-

219

1,499

Business services

2

-

13

797

-

9

620

1,441

Construction

-

-

3

642

-

7

806

1,458

Entertainment, leisure and tourism

-

48

28

971

-

11

469

1,527

Finance and insurance

4,449

4,189

10,498

1,166

7,703

13

1,336

29,354Government and local authority1

2,412

1,392

175

1,238

-

14

780

6,011

Manufacturing

83

1

96

2,599

-

29

4,561

7,369

Personal lending

-

-

1

45,618-501

10,461

56,581

Property services

3

-

36

8,135

-

89

1,667

9,930

Retail trade

91

-

74

1,457

-

16

1,073

2,711

Transport and storage

6

8

80

1,194

-

13

632

1,933

Wholesale trade

19

-

6

1,644

-

18

993

2,680

Other2

6

39

178

1,091

-

12

1,302

2,628

7,119

5,677

11,44986,5497,703

951

26,199145,647

Individual provision for
credit impairment

-

-

-

(450)

-

-

-

(450)

Collective provision for
credit impairment

-

-

-

(762)

-

-

-

(762)

-

-

-

(1,212)---(1,212)

Fair value hedge adjustment

-

-

-

615

-

-

-

615

7,119

5,677

11,44985,952

7,703

951

26,199145,050

New Zealand

6,056

3,270

2,992

84,477

7,703

951

26,199131,648

Overseas

1,063

2,407

8,457

1,475

-

-

-

13,402

Total financial assets

7,119

5,677

11,44985,952

7,703

951

26,199145,050

Total financial assets
Geography

1
2

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications, and personal services.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Maximum Exposure to Credit Risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount. For
contingent exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would have to
pay if the contingency is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of thecommitted facilities.
The following table presents the maximum exposure to credit risk of on and off-balance sheet financial instruments before
taking account of any collateral held or other credit enhancements unless such collateral meets the offsetting criteria in NZ IAS
32 Financial Instruments: Presentation and after deductions such as provisions for credit impairment. The exposure is classified
into summarised Basel II asset classes.
Consolidated

ParentRetail Other retail Corporate
mortgages exposures exposures1
$m
$m
$m

Retail Other retail Corporate
Total mortgages exposures exposures1
$m
$m
$m
$m

Total
$m

Unaudited 31/03/2010
On and off-balance sheet positions
Liquid assets

-

-

2,519

2,519

-

-

2,502

2,502

Due from other financial institutions

-

-

2,101

2,101

-

-

1,949

1,949

Trading securities

-

-

6,366

6,366

-

-

6,366

6,366

Derivative financial instruments

-

-

8,713

8,713

-

-

8,719

8,719

Available-for-sale assets

-

-

1,850

1,850

-

-

1,674

1,674

Net loans and advances

83,41640,025

3,916

41,72985,67040,3193,289

39,808Investments relating to insurance business

-

-

38

38

-

-

-

-

Due from parent company

-

-

500

500

-

-

500

500

Due from subsidiary companies

-

-

-

-

-

-

8,826

8,826

Other financial assets

-

-

1,014

1,014

-

-

981

981

Credit related commitments

5,363

4,554

14,796

24,713

5,400

4,550

14,51924,469Total exposure to credit risk

45,388

8,470

79,626

133,484

45,7197,839

85,844

139,402

Liquid assets

-

-

3,390

3,390

-

-

3,390

3,390

Due from other financial institutions

-

-

7,631

7,631

-

-

6,874

6,874

Trading securities

-

-

2,565

2,565

-

-

2,565

2,565

Derivative financial instruments--

14,985

14,985--

15,162

15,162Available-for-sale assets

-

-

597

597

-

-

594

594

Net loans and advances

46,0595,172

42,48993,72046,0594,287

40,98391,329

-

-

-

-

-

-

9,610

9,610

Unaudited 31/03/2009
On and off-balance sheet positions

Due from subsidiary companies
Other financial assets

-

-

714

714

-

-

643

643

Credit related commitments

5,666

5,115

15,995

26,776

5,666

5,083

15,77826,527

Total exposure to credit risk

51,725

10,28788,366150,378

51,725

9,370

95,599156,694

Liquid assets

-

-

2,762

2,762

-

-

2,758

2,758

Due from other financial institutions

-

-

4,514

4,514

-

-

4,361

4,361

Trading securities

-

-

4,166

4,166

-

-

4,166

4,166

Derivative financial instruments--

11,408

11,408--

11,44911,449Audited 30/09/2009
On and off-balance sheet positions

1

Available-for-sale assets

-

-

1,513

1,513

-

-

1,511

1,511

Net loans and advances

42,692

4,456

41,111

88,25942,692

3,889

39,371

85,952

Due from subsidiary companies

-

-

-

-

-

7,703

7,703

Other financial assets

-

-

999

999

-

-

951

951

Credit related commitments

5,692

4,769

15,53325,994

5,692

4,769

15,73826,199Total exposure to credit risk

48,3849,225

82,006

139,615

48,384

8,658

88,008145,050

Includes corporates, sovereigns and banks.

ANZ National Bank Limited and Subsidiary Companies
70 – 71

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Credit Quality
A core component of the Banking Group’s credit risk management capability is the risk grading framework used across all
major Business Units. A set of risk grading principles and policies are supported by a complementary risk grading methodology.
Pronouncements by the International Basel Committee on Banking Supervision have been encapsulated in these principles
and policies including governance, validation and modelling requirements.
The Banking Group’s risk grade profile changes dynamically through new counterparty lending and/or existing counterparty
movements in either risk or volume. All counterparty risk grades are subject to frequent review, including statistical andbehavioural reviews in consumer and small business segments, and individual counterparty reviews in segments with larger
single name borrowers.
Impairment and provisioning of financial assets
The Banking Group’s policy relating to the recognition and measurement of impaired assets conforms with the RBNZ’s guidelines.
Loans are classified as either performing or impaired. Impaired assets are credit exposures where: there is doubt as to whether
the full contractual amount (including interest) will be received; a material credit obligation is 90 days past due but not wellsecured; they are portfolio managed and can be held for up to 180 days past due; concessional terms have been provided dueto the financial difficulties of the customer.
An exposure is classified as past due but not impaired (less than 90 days) where the value of collateral is sufficient to repay
both the principal debt and all other potential interest and there is no concern as to the creditworthiness of the counterparty
in question.
The past due but not impaired (over 90 days) classification applies where contractual payments are past due by 90 days or
more, or where the facility remains outside of contractual arrangements for 90 or more consecutive days, but the Banking
Group believes that impairment is not appropriate on the basis of the level of security/collateral available, or the facility is
portfolio managed.
The provision for credit impairment represents management’s best estimate of the losses incurred in the loan portfolio atbalance date based on its experienced judgement.
Distribution of gross loans and advances assets by credit quality
The credit quality of the portfolio of loans and advances is assessed by reference to the Banking Group’s risk grading principles
and policies supported by a complementary risk grading methodology. The following table presents an analysis of grossloans and advances by summarised Basel II asset class into exposures neither past due nor impaired, past due but not impaired
and impaired.
Consolidated

ParentRetail Other retail Corporate
mortgages exposures exposures1
$m
$m
$m

Retail Other retail Corporate
Total mortgages exposures exposures1
$m
$m
$m
$m

Total
$m

Unaudited 31/03/2010
Neither past due nor impaired

38,711

3,840

40,147

82,69838,711

3,171

38,42380,305
2,153

Past due but not impaired (1 to 89 days)

1,225

313

701

2,239

1,225

265

663

Past due but not impaired (over 90 days)

182

48

121

351

182

41

111

334

Impaired

452

95

1,165

1,712

452

92

1,089

1,633

40,5704,296

42,13487,00040,5703,569

40,28684,425Neither past due nor impaired

42,652

4,723

41,92089,29542,652

3,926

40,17986,757

Past due but not impaired (1 to 89 days)

1,898

501

959

3,358

1,898

428

901

3,227

Past due but not impaired (over 90 days)

406

71

70

547

406

59

46

511

Unaudited 31/03/2009

Impaired

2

200

56

353

609

200

31

328

559

45,156

5,351

43,30293,80945,156

4,444

41,454

91,054

Audited 30/09/2009
Neither past due nor impaired

39,9483,822

41,59385,36339,948

3,166

39,77082,884

Past due but not impaired (1 to 89 days)

1,213

315

662

2,190

1,213

266

635

2,114

Past due but not impaired (over 90 days)

265

59

111

435

265

51

100

416

Impaired1
2

Includes corporates, sovereigns and banks.
Excludes restructured assets.

377

61

740

1,178

377

53

689

1,119

41,803

4,257

43,106

89,16641,803

3,536

41,19486,533

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Credit quality of gross loans and advances neither past due nor impaired
The credit quality of financial assets is assessed by the Banking Group using internal ratings which aim to reflect the relative
ability of counterparties to fulfil, on time, their credit-related obligations, and is based on their current probability of default.
Internal rating
Strong risk rating
Corporate customers demonstrating superior stability in their operating and financial performance over the long-term, andwhose debt servicing capacity is not significantly vulnerable to foreseeable events. Retail customers with low expected loss.
This rating band broadly corresponds to ratings “Aaa” to “Ba1” and “AAA” to “BB+” of Moody’s Investors Service and Standard& Poor’s respectively.
Satisfactory risk rating
Corporate customers consistently demonstrating sound operational and financial stability over the medium to long term,even though some may be susceptible to cyclical trends or variability in earnings. Retail customers with moderate expected
loss. This rating band broadly corresponds to ratings “Ba2” to “Ba3” and “BB” to “BB-” of Moody’s Investors Service and Standard& Poor’s respectively.
Substandard but not past due or impaired
Corporate customers demonstrating some operational and financial instability, with variability and uncertainty in profitability
and liquidity projected to continue over the short and possibly medium term. Retail customers with higher expected loss.
This rating band broadly corresponds to ratings “B1” to “Caa” and “B+” to “CCC” of Moody’s Investors Service and Standard &Poor’s respectively.
The rating bands presented below differ from the Capital Adequacy note credit risk exposures subject to the internal ratings
based approach disclosures as RBNZ credit risk estimates are not used for these internal ratings. The exposures recorded inthese rating bands in the table below also differ from the Capital Adequacy note tables as off-balance sheet exposures are
excluded. Movements in the rating categories between balance dates are due to both changes in the underlying internalratings applied to customers and to new loans written or loans rolling off.
The following table presents an analysis of gross loans and advances neither past due nor impaired by the above internalratings:
Consolidated
Retail Other retail Corporate
mortgages1 exposures exposures2
$m
$m
$m

ParentRetail Other retail Corporate
Total mortgages1 exposures exposures2
$m
$m
$m
$m

Total
$m

Unaudited 31/03/2010
29,328

1,191

16,39946,918Satisfactory risk rating

8,136

2,268

19,710Substandard but not past due or impaired

1,247

381

4,038

38,7113,840

Strong risk rating

39,805

Satisfactory risk rating
Substandard but not past due or impaired

Strong risk rating

29,328

1,191

15,601

46,12030,114

8,136

1,621

18,88328,640

5,666

1,247

359

3,939

5,545

40,147

82,69838,711

3,171

38,42380,305

1,687

19,05960,55139,805

1,687

18,51260,004

2,144

2,745

19,791

24,680

2,144

1,959

18,78822,891

703

291

3,070

4,064

703

280

2,879

3,862

42,652

4,723

41,92089,29542,652

3,926

40,17986,757

Unaudited 31/03/2009

Audited 30/09/2009
Strong risk rating

36,726

1,459

18,09356,27836,726

1,382

17,18555,293

Satisfactory risk rating

2,646

2,010

19,07823,734

2,646

1,446

18,34622,438Substandard but not past due or impaired

1
2

576

353

4,422

5,351

576

338

4,255

5,169

39,9483,822

41,59385,36339,9483,166

39,78682,900Includes corporates, sovereigns and banks.
Since September 2009, the Banking Group has agreed new mortgage pooling methodologies with RBNZ and have also implemented new spot PD estimates
which take account of more recent performance data. The change in the Retail Mortgage bands between the periods reflects these modelling changes.

ANZ National Bank Limited and Subsidiary Companies
72 – 73

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Credit quality of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by the Banking Group to measure and manage credit quality. Financial assets that are
past due but not impaired include those:•••

Assessed, approved and managed on a portfolio basis within a centralised environment (for example, credit cards andpersonal loans);
Held on a productive basis until they are 180 days past due; andManaged on an individual basis.

A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair value of
associated security is sufficient to ensure that the Banking Group will recover the entire amount owing over the life of the
facility and there is reasonable assurance that collection efforts will result in payment of the amounts due in a timely manner.
The following table presents an ageing analysis of past due loans that are not impaired:
Consolidated

ParentRetail Other retail Corporate
mortgages exposures exposures1
$m
$m
$m

Retail Other retail Corporate
Total mortgages exposures exposures1
$m
$m
$m
$m

Total
$m

Unaudited 31/03/2010
1 to 5 days

274

100

449

823

274

100

444

818

6 to 29 days

607

142

133

882

607

109

109

825

30 to 59 days

266

47

85

398

266

38

79

383

60 to 89 days

79

24

34

137

79

18

31

128

90 days or over

182

48

121

351

182

41

111

334

1,408

361

822

2,591

1,408

306

774

2,488

Unaudited 31/03/2009
1 to 5 days

510

145

605

1,260

510

132

595

1,237

6 to 29 days

812

250

162

1,224

812

209

127

1,148

30 to 59 days

435

71

129

635

435

58

121

614

60 to 89 days

141

35

63

239

141

29

58

228

90 days or over

406

71

70

547

406

59

46

511

2,304

572

1,029

3,905

2,304

487

947

3,738

1 to 5 days

270

104

397

771

270

104

397

771

6 to 29 days

586

136

122

844

586

104

106

796

30 to 59 days

237

49

71

357

237

38

64

339

60 to 89 days

120

26

72

218

120

20

68

208

Audited 30/09/2009

90 days or over1

Includes corporates, sovereigns and banks.

265

59

111

435

265

51

100

416

1,478

374

773

2,625

1,478

317

735

2,530

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Credit quality of financial assets that are individually impaired
The Banking Group regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to thecollectability of a credit facility, the financial asset is classified and reported as individually impaired and an individual provision
is allocated against it. The following table presents an analysis of individually impaired assets, undrawn facilities with impaired
customers and provision for credit impairment by summarised Basel II asset class:
Consolidated

ParentRetail Other retail Corporate
mortgages exposures exposures1
$m
$m
$m

Retail Other retail Corporate
Total mortgages exposures exposures1
$m
$m
$m
$m

Total
$m

Unaudited 31/03/2010
Impaired financial assets

452

95

1,165

1,712

452

92

1,089

1,633

-

-

100

100

-

-

100

100

Individual provision balance

206

43

352

601

206

24

340

570

Net impaired financial assets

246

52

913

1,211

246

68

849

1,163

Collective provision balance

117

161

578

856

122

141

559

822

200

56

353

609

200

31

328

559

-

-

11

11

-

-

11

11

Individual provision balance

54

31

184

269

54

25

164

243

Net impaired financial assets

146

25

180

351

146

6

175

327

Collective provision balance

93

148

366

607

93

132

343

568

377

61

740

1,178

377

53

689

1,119

-

-

32

32

-

-

32

32

Individual provision balance

153

40

281

474

153

23

274

450

Net impaired financial assets

224

21

491

736

224

30

447

701

Collective provision balance

121

159

518

798

121

140

501

762

Undrawn facilities with impaired customers

Unaudited 31/03/2009
Impaired financial assets2
Undrawn facilities with impaired customers

Audited 30/09/2009
Impaired financial assets
Undrawn facilities with impaired customers

Security held by the Banking Group in respect of individually impaired financial assets, both drawn and undrawn, in the analysis
above has an estimated fair value of $1,211 million (31/03/2009 $351 million; 30/09/2009 $736 million).
Security held by the Bank in respect of individually impaired financial assets, both drawn and undrawn, in the analysis above
has an estimated fair value of $1,163 million (31/03/2009 $327 million; 30/09/2009 $701 million).

1
2

Includes corporates, sovereigns and banks.
Excludes restructured assets.

ANZ National Bank Limited and Subsidiary Companies
74 – 75

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Estimated value of collateral
The table below discloses the estimated value of collateral and other charges related to financial assets that are individually
impaired. For the purposes of this disclosure, where security held is valued at more than the corresponding credit exposure,coverage is capped at the value of the credit exposure.
Consolidated
Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mCash and securities

-

-

-

Real estate

-

-

-

Other

-

-

-

440

Net
loans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

-

-

-

-

693

-

-

693

-

78

518

Total
$m

Unaudited 31/03/2010

Total value of collateral

-

-

-

1,133

-

78

1,211

Credit exposure

-

-

-

1,712

-

100

1,812

Unsecured portion of credit

-

-

-

579

-

22

601

Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

Total
$m

Cash and securities

-

-

-

-

-

-

-

Real estate

-

-

-

176

-

-

176

Other

-

-

-

163

-

11

174

Total value of collateral

-

-

-

339

-

11

350

Credit exposure

-

-

-

608

-

11

619

Unsecured portion of credit

-

-

-

269

-

-

269

Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

Total
$m

Cash and securities

-

-

-

-

-

-

-

Real estate

-

-

-

488

-

-

488

Other

-

-

-

216

-

32

248

Total value of collateral

-

-

-

704

-

32

736

Credit exposure

-

-

-

1,178

-

32

1,210

Unsecured portion of credit

-

-

-

474

-

-

474

Unaudited 31/03/2009

Audited 30/09/2009

1

Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentLiquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

Total
$m

Cash and securities

-

-

-

-

-

-

-

Real estate

-

-

-

692

-

-

692

Other

-

-

-

391

-

78

469

Total value of collateral

-

-

-

1,083

-

78

1,161

Unaudited 31/03/2010

Credit exposure

-

-

-

1,631

-

100

1,731

Unsecured portion of credit

-

-

-

548

-

22

570

Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

Total
$m

Cash and securities

-

-

-

-

-

-

-

Real estate

-

-

-

182

-

-

182

Other

-

-

-

133

-

11

144

Unaudited 31/03/2009

Total value of collateral

-

-

-

315

-

11

326

Credit exposure

-

-

-

558

-

11

569

Unsecured portion of credit

-

-

-

243

-

-

243

Liquidassets anddue fromotherfinancial
institutions$m

Tradingsecurities
andavailablefor-saleassets$m

Derivative
financial
instruments$mNetloans andadvances$m

Otherfinancialassets$m

Creditrelatedcommitments1
$m

Total
$m

Cash and securities

-

-

-

-

-

-

-

Real estate

-

-

-

488

-

-

488

Other

-

-

-

181

-

32

213

Total value of collateral

-

-

-

669

-

32

701

Credit exposure

-

-

-

1,119

-

32

1,151

Unsecured portion of credit

-

-

-

450

-

-

450

Audited 30/09/2009

1

Credit related commitments comprise undrawn facilities, customer contingent liabilities, and letters of offer.

ANZ National Bank Limited and Subsidiary Companies

29. Financial Risk Management (continued)
Market Risk
Market risk is the risk to the Banking Group’s earnings arising from changes in interest rates, currency exchange rates, credit
spreads, or from fluctuations in bond, commodity or equity prices. Market risk arises when changes in market rates, prices andvolatilities lead to a decline in the value of assets and liabilities, including financial derivatives. Market risk is generated throughboth trading activities and the interest rate risk inherent in the banking book.
The Banking Group conducts trading operations in interest rates, foreign exchange, commodities and debt securities. Trading
operations largely focus on supporting customer hedging and investing activities, rather than outright proprietary trading.
Consequently, the Board has set a medium market risk appetite for the Markets business which is reflected in the low/moderatemarket risk limit framework.
The Banking Group has a detailed risk management and control framework to support its trading and balance sheet activities.
The framework incorporates a risk measurement approach to quantify the magnitude of market risk within trading and balance
sheet portfolios. This approach and related analysis identifies the range of possible outcomes that can be expected over agiven period of time, establishes the relative likelihood of those outcomes and allocates an appropriate amount of capital tosupport these activities.
The market risk management and policy control framework applicable to the entities comprising the Banking Group has been
set by the Board and Risk Committee of the Bank or the Ultimate Parent Bank, as appropriate. Likewise oversight and monitoringof material market risk exposures of the Banking Group is undertaken by the Market Risk functions of the Bank and also the
Ultimate Parent Bank. Throughout this document, references to the risk management of the operations within the entities
comprising the Banking Group, implicitly involves oversight by both related entities.
Market risk management and control responsibilities
NZ Banking Group-wide responsibility for the strategies and policies relating to the management of market risk lies with each
Board Risk Committee. Responsibility for day to day management of both market risks and compliance with market risk policy
is delegated by the Risk Committee to the ANZ Credit and Market Risk Committee (“CMRC”) and the Bank’s Asset & Liability
Committee (“ALCO”). The CMRC, chaired by the ANZ Group Chief Risk Officer, is responsible for traded market risk, while the
ALCO, chaired by the NZ Group Chief Executive Officer, is responsible for non-traded market risk (or balance sheet risk). All
committees receive regular reporting on the range of trading and balance sheet market risks incurred.
Within overall strategies and policies, the control of market risk is the joint responsibility of Business Units and Risk Management,with the delegation of market risk limits from each Board and CMRC allocated to both Risk Management and the Business Units.
The management of market risk is supported by a comprehensive limit and policy framework to control the amount of risk thatthe Banking Group will accept. Market risk limits are allocated at various levels and are reported and monitored by Market Risk
on a daily basis. The detailed limit framework allocates individual limits to manage and control asset classes (e.g. interest rates,
foreign exchange), risk factors (e.g. interest rates, volatilities) and profit or loss limits (to monitor and manage the performanceof the trading portfolios).
These risks are monitored daily against a comprehensive limit framework that includes VaR, aggregate market position andsensitivity, product and geographic thresholds. To facilitate the management, control, measurements and reporting of market
risk, the Banking Group has grouped market risk into two broad categories:
a. Traded market riskThis is the risk of loss from changes in the value of financial instruments due to movements in price factors for both physicaland derivative trading positions. They arise in trading transactions where the Banking Group acts as principal with clients orwith the market. The principal risk categories monitored are:•••

Currency risk is the potential loss arising from the decline in the value of a financial instrument due to changes in foreignexchange rates or their implied volatilities.
Interest rate risk is the potential loss arising from the change in the value of a financial instrument due to changes in market
interest rates or their implied volatilities.
Credit spread risk is the potential loss arising from a change in value of an instrument due to a movement of its margin or
spread relative to a bench mark.

b. Non-traded market risk (or balance sheet risk)This comprises the management of non-traded interest rate risk, liquidity, and the risk to capital and earnings as a result of
foreign exchange rate movements
Some instruments do not fall into either category but also expose the Banking Group to market risk. These include equity
securities classified as available-for-sale. Regular reviews are performed to substantiate valuation of the investments within
this portfolio.

76 – 77

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
The traded market risk function provides specific oversight of each of the main trading areas and is responsible for the establishmentof a Value at Risk (“VaR”) framework and detailed control limits. In all trading areas the Banking Group has implemented models
that calculate VaR exposures, monitor risk exposures against defined limits on a daily basis, and ‘stress test’ trading portfolios. The
Banking Group has an ALCO, comprising executive management to provide monthly oversight of market risk.
The Chief Risk Officer is responsible for daily review and oversight of traded market risk reports. The Chief Risk Officer has theauthority for instructing the business to close exposures and withdraw limits where appropriate.
Value at Risk (“VaR”) measure
A key measure of market risk is Value at Risk. VaR is a statistical estimate of the likely daily loss and is based on historicalmarket movements.
The confidence level is such that there is 97.5% or 99% probability that the loss will not exceed the VaR estimate on any givenday. Conversely there is a 2.5% or 1% probability of the decrease in market value exceeding the VaR estimate on any given day.
The 99% confidence level encompasses a wider range of potential outcomes.
The Banking Group’s standard VaR approach for both traded and non-traded risk is historical simulation. The Banking Groupcalculates VaR using historical changes in market rates and prices over the previous 500 business days. Traded and Non-TradedVaR is calculated using a one-day holding period.
It should be noted that because VaR is driven by actual historical observations, it is not an estimate of the maximum loss thatthe Banking Group could experience from an extreme market event. As a result of this limitation, the Banking Group utilises anumber of other risk measures (e.g. stress testing) and associated detailed control limits to measure and manage market risk.
Traded and non-traded market risks are considered separately.
Traded market risks
Trading activities are focused on customer trading, distribution and underwriting of a range of securities and derivative
instruments. The principal activities include foreign exchange, interest rate, and debt markets. These activities are managed
on a global product basis.
Below are aggregate VaR exposures covering both derivative and non-derivative trading positions for the Banking Group.
Consolidated

Consolidated

Value at risk at 97.5% confidence

Value at risk at 99% confidence

As at
$m

High for
period$m

Low forperiod$m

Averagefor period
$m

As at
$m

High for
period$m

Low forperiod$m

Averagefor period$mUnaudited 31/03/2010
Foreign exchange risk

0.5

1.3

0.2

0.6

0.7

1.9

0.3

0.8

Interest rate risk

2.9

3.6

1.7

2.7

4.2

5.6

2.3

3.9

Credit spread risk

1.2

1.2

0.3

0.5

1.6

1.6

0.4

0.7

Diversification benefit

(1.6)

n/a

n/a

(1.0)

(2.6)

n/a

n/a

(1.4)

Total VaR

3.0

3.7

1.5

2.7

3.9

5.9

2.1

4.0

Unaudited 31/03/2009
Foreign exchange risk

0.5

1.4

0.2

0.5

0.8

1.9

0.3

0.7

Interest rate risk

2.4

2.8

1.1

1.9

2.8

4.3

1.7

2.9

Credit spread risk

0.4

0.4

0.2

0.3

0.6

0.6

0.4

0.5

Diversification benefit

(1.0)

n/a

n/a

(0.8)

(1.4)

n/a

n/a

(1.2)

Total VaR

2.3

3.4

1.1

1.9

2.8

4.4

1.7

2.9

1.4

0.2

0.5

0.6

1.9

0.3

0.7

Audited 30/09/2009
Foreign exchange risk

0.4

Interest rate risk

2.6

3.0

1.1

2.0

3.5

4.9

1.7

3.0

Credit spread risk

0.4

0.5

0.2

0.3

0.6

0.8

0.2

0.5

Diversification benefit

(0.8)

n/a

n/a

(0.8)

(1.2)

n/a

n/a

(1.2)

Total VaR

2.6

3.4

1.1

2.0

3.5

4.6

1.7

3.0

VaR is calculated separately for foreign exchange and for interest rate/debt markets businesses as well as for the Banking Group.
The diversification benefit reflects the historical correlation between Foreign Exchange, Interest Rate and Debt Markets.
To supplement the VaR methodology, the Banking Group applies a wide range of stress tests, both on individual portfolios andat a Banking Group level. The Banking Group’s stress-testing regime provides senior management with an assessment of thefinancial impact of identified extreme events on market risk exposures of the Banking Group.

ANZ National Bank Limited and Subsidiary Companies
78 – 79

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Non-traded market risks (balance sheet risk)
The principal objectives of balance sheet management are to manage interest income sensitivity while maintaining acceptablelevels of interest rate and liquidity risk and to manage the market value of the Banking Group’s capital. Liquidity risk is dealt
with in the next section.
Interest rate risk
The objective of balance sheet interest rate risk management is to mitigate the negative impact of movements in wholesaleinterest rates on the earnings of the Banking Group’s banking book. Non-traded interest rate risk relates to the potential
adverse impact to earnings principally from changes in swap market interest rates. This risk arises from two principal sources:
mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital and other noninterest bearing liabilities in interest bearing assets.
As part of normal business activity the Banking Group has additional risks from fixed rate mortgage prepayments and basis
risk where:••

Prepayment risk is the potential risk to earnings or market value from when a customer prepays all or part of a fixed rate
mortgage and where any customer fee charged is not sufficient to offset the loss in value to the Banking Group of thisfinancial asset due to movements in interest rates and other pricing factors. As far as possible the true economic cost ispassed through to customers in line with their terms and conditions and relevant legislation.
Basis risk is the potential risk to earnings or market value from differences between customer pricing and wholesale market
pricing. This is managed through active review of product margins.

Non-traded interest rate risk is managed to both value and earnings at risk limits. Interest rate risk is reported using threemeasures: VaR; scenario analysis (to a 1% shock); and interest rate sensitivity gap. This treatment excludes the effect of
prepayment and basis risk.
a) VaR non-traded interest rate risk
Below are aggregate VaR figures covering non-traded interest rate risk.
Consolidated
As at
$m

High for
period$m

Low forperiod$m

Averagefor period
$m

20.2

24.9

20.0

21.9

21.0

21.0

12.4

14.6

22.4

22.8

18.9

20.8

Unaudited 31/03/2010
Value at risk at 97.5% confidence
Unaudited 31/03/2009
Value at risk at 97.5% confidence
Audited 30/09/2009
Value at risk at 97.5% confidence

To supplement the VaR methodology, the Banking Group applies a wide range of stress tests, both on individual portfolios andat the Banking Group level. The Banking Group’s stress-testing regime provides senior management with an assessment of thefinancial impact of identified extreme events on market risk exposures of the Banking Group.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)b) Scenario analysis – A 1% shock on the next 12 months’ net interest income
A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest income
over the succeeding 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and comparative periods – expressed
as a percentage of reported net interest income. The sign indicates the nature of the rate sensitivity with a positive number
signifying that a rate increase is positive for net interest income over the next 12 months. Conversely, a negative number
signifies that a rate increase is negative for the next 12 months’ net interest income.
Consolidated
Unaudited
31/03/10

Unaudited
31/03/09

Audited30/09/09

1.5%

0.1%

0.2%

Impact of 1% rate shock
As at
Maximum exposure

1.8%

0.7%

0.7%

Minimum exposure

0.2%

0.0%

-0.1%

Average exposure (in absolute terms)

0.7%

0.3%

0.3%

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities at any
point has implications for future net interest income. The Banking Group quantifies the potential variation in future net interest
income as a result of these repricing mismatches each month using a static gap model.
The repricing gaps themselves are constructed based on contractual repricing information. However, for those assets andliabilities where the contractual term to repricing is not considered to be reflective of the actual interest rate sensitivity (forexample, products priced at the Banking Group’s discretion), a profile based on historically observed and/or anticipated ratesensitivity is used. This treatment excludes the effect of basis risk between customer pricing and wholesale market pricing.
The majority of the Banking Group’s non-traded interest exposure exists in New Zealand. A separate balance sheet simulation
process supplements the static gap information. This allows the net interest income outcomes of a number of different
scenarios – with different market interest rate environments and future balance sheet structures – to be identified. This better
enables the Banking Group to quantify the interest rate risks associated with the balance sheet and to formulate strategies tomanage current and future risk profiles.
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about the Banking Group’s exposure to interest rate risk.
Repricing gaps are based upon contractual repricing information except where the contractual terms are not considered to bereflective of actual interest rate sensitivity, for example, those assets and liabilities priced at the Banking Group’s discretion. In
such cases, the rate sensitivity is based upon historically observed and/or anticipated rate sensitivity. This treatment excludes
the effect of basis risk between customer pricing and wholesale market pricing.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability
funding. These mismatches are managed within policy guidelines for mismatch positions.
The majority of the Banking Group’s loan business is conducted domestically in New Zealand. The majority of retail deposits
are also raised in New Zealand but are either fixed or floating in nature. The mix of repricing maturities in this book is influenced
by the underlying financial needs of customers.
The Banking Group’s offshore operations are wholesale in nature and are able to minimise interest rate sensitivity throughclosely matching the maturities of loans and deposits. Given both the size and nature of this business, the interest rate sensitivityof this balance sheet contributes little to the aggregate risk exposure, which is primarily a reflection of the positions in
New Zealand.
A combination of off-balance sheet instruments and pricing initiatives is used in the management of interest rate risk. For
example, where a strong medium to long term rate view is held, hedging and pricing strategies are used to modify the profile’s
interest rate sensitivity so that it is positioned to take advantage of the expected movement in interest rates. However, such
positions are taken within the overall risk limits specified by Banking Group policy.

ANZ National Bank Limited and Subsidiary Companies
80 – 81

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
The following tables represent the interest rate sensitivity of the Banking Group’s assets, liabilities and off balance sheet
instruments repricing (that is, when interest rates applicable to each asset or liability can be changed) in the periods shown.
Consolidated
3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest
$m

Total
$m

Less than
3 months$m

Liquid assets

2,519

2,295

-

-

-

-

224

Due from other financial institutions

2,101

2,018

-

47

-

-

36

Trading securities

6,366

430

389

230

3,877

1,440

8,713

Unaudited 31/03/2010
AssetsDerivative financial instruments

8,713

-

-

-

-

-

Available-for-sale assets

1,850

948

729

33

29

11

100

Net loans and advances

85,67051,692

7,127

9,014

17,543

50

244

500

500

-

-

-

-

-

Other financial assets1

1,052

25

-

-

7

-

1,020

Total financial assets

108,771

57,908

8,245

9,324

21,456

1,501

10,337

Due from Parent

Non-financial assets
Total assets

4,806

-

-

-

-

-

4,806

113,577

57,908

8,245

9,324

21,456

1,501

15,143Liabilities
Due to other financial institutions

1,336

1,209

7

-

70

50

-

Deposits and other borrowings

70,636

47,116

9,338

6,785

2,502

-

4,895

-

-

-

-

-

-

-

Derivative financial instruments

9,152

-

-

-

-

-

9,152

Payables and other financial liabilities

1,698

-

-

-

-

-

1,698

Bonds and notes

16,855

8,101

201

150

8,403

-

-

Loan capital

2,641

240

618

-

1,783

-

-

102,318

56,666

10,164

6,935

12,75850

15,745Due to parent company

Total financial liabilities

727

-

-

-

-

-

727

Equity10,532

-

-

-

-

-

10,532

Total liabilities and equity

Non-financial liabilities

1

113,577

56,666

10,164

6,935

12,75850

27,004On-balance sheet interest sensitivity gap

-

1,242

(1,919)

2,389

8,698

1,451

(11,861)

Hedging instruments

-

2,952

(4,511)

1,004

1,443

(888)

-

Interest sensitivity gap – net

-

4,194

(6,430)

3,393

10,141563(11,861)Interest sensitivity gap – cumulative

-

4,194

(2,236)

1,157

11,298

11,861-Other financial assets in the table above include investments related to insurance business.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Consolidated

Total
$m

Less than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest$mUnaudited 31/03/2009
AssetsLiquid assets

3,390

3,201

-

-

-

-

189

Due from other financial institutions

7,631

3,364

2,000

300

92

-

1,875

Trading securities

2,565

511

384

5

1,497

168

-

Derivative financial instruments

14,985

-

-

-

-

-

14,985

Available-for-sale assets

597

-

395

121

10

-

71
(269)

Net loans and advances

93,72052,130

6,843

10,853

24,10657

Other financial assets

714

-

-

-

-

-

714

Total financial assets

123,60259,206

9,622

11,27925,705225

17,565

Non-financial assets
Total assets

4,339

-

-

-

-

-

4,339

127,941

59,206

9,622

11,27925,705

225

21,904

Liabilities
Due to other financial institutions

4,162

1,878

-

1,805

408

25

46

Deposits and other borrowings

72,76051,135

8,349

6,544

2,484

-

4,248

Due to parent company

1,096

1,096

-

-

-

-

-

Derivative financial instruments

12,868

-

-

-

-

-

12,868

Payables and other financial liabilities

1,743

226

92

-

85

-

1,340

Bonds and notes

21,52814,877

-

-

6,416

235

-

Loan capital

2,835

225

828

-

1,782

-

-

116,992

69,437

9,269

8,349

11,175260

18,502

Total financial liabilities
Non-financial liabilities

697

-

-

-

-

-

697

Equity10,252

-

-

-

-

-

10,252

Total liabilities and equity

127,941

69,437

9,269

8,349

11,175260

29,451On-balance sheet interest sensitivity gap-(10,231)

353

2,930

14,530(35)(7,547)

Hedging instruments

-

5,721

7,227

(9,426)(3,129)(393)-

Interest sensitivity gap – net-(4,510)7,580(6,496)

11,401(428)(7,547)

Interest sensitivity gap – cumulative-(4,510)3,070(3,426)

7,975

7,547

-

ANZ National Bank Limited and Subsidiary Companies
82 – 83

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Consolidated
3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest
$m

Total
$m

Less than
3 months$m

Liquid assets

2,762

2,596

-

-

-

-

166

Due from other financial institutions

4,514

4,013

300

-

63

-

138

Audited 30/09/2009
AssetsTrading securities

4,166

429

66

418

2,575

678

-

Derivative financial instruments

11,408

-

-

-

-

-

11,408Available-for-sale assets

1,513

149

1,286

-

9

-

69

Net loans and advances

88,25948,408

6,503

12,26921,11855(94)

Other financial assets

999

-

-

-

-

-

999

Total financial assets

113,62155,595

8,155

12,687

23,765733

12,686

Non-financial assets
Total assets

4,270

-

-

-

-

-

4,270

117,891

55,595

8,155

12,687

23,765733

16,956

Liabilities
Due to other financial institutions

3,725

2,866

428

277

22

-

132

Deposits and other borrowings

71,76445,087

14,019

5,497

2,788

-

4,373

930

930

-

-

-

-

-

Derivative financial instruments

Due to parent company

10,762

-

-

-

-

-

10,762

Payables and other financial liabilities

1,414

64

-

-

-

-

1,350

Bonds and notes

15,917

9,488

187

371

5,871

-

-

Loan capital

2,596

227

584

-

1,785

-

-

107,108

58,662

15,218

6,145

10,466-

16,617

Total financial liabilities
Non-financial liabilities

695

-

-

-

-

-

695

Equity10,088

-

-

-

-

-

10,088

Total liabilities and equity

117,891

58,662

15,218

6,145

10,466-

27,400On-balance sheet interest sensitivity gap-(3,067)(7,063)

6,542

13,299733(10,444)

Hedging instruments

-

6,075

6,419

(9,673)(1,781)(1,040)-Interest sensitivity gap – net

-

3,008

(644)

(3,131)

11,518(307)(10,444)

Interest sensitivity gap – cumulative

-

3,008

2,364

(767)

10,751

10,444-

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentTotal$mLess than
3 months$m

3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest$mUnaudited 31/03/2010
AssetsLiquid assets

2,502

2,279

-

-

-

-

223

Due from other financial institutions

1,949

1,913

-

-

-

-

36

Trading securities

6,366

431

389

230

3,878

1,440

-

Derivative financial instruments

8,719

-

-

-

-

-

8,719

Available-for-sale assets

1,674

794

738

33

6

8

96

Net loans and advances

83,41650,744

6,881

8,784

16,73842

227

Due from subsidiary companies

8,826

8,504

128

47

148

-

-

500

500

-

-

-

-

-

Due from Parent
Other financial assets

981

-

-

-

-

-

981

Total financial assets

114,933

65,164

8,135

9,094

20,7691,490

10,282

Non-financial assets

11,900

-

-

-

-

-

11,900Total assets

126,833

65,164

8,135

9,094

20,7691,490

22,182

Liabilities
Due to other financial institutions

1,054

928

7

-

70

50

-

Deposits and other borrowings

61,861

41,142

7,223

6,370

2,231

-

4,895

Due to subsidiary companies

38,254

24,399

2,825

1,264

9,766

-

-

-

-

-

-

-

-

-

Derivative financial instruments

9,170

-

-

-

-

-

9,170

Payables and other financial liabilities

1,800

-

-

-

0

-

1,800

Bonds and notes

1,823

888

-

150

785

-

-

Loan capital

2,641

240

618

-

1,783

-

-

Total financial liabilities

116,603

67,597

10,673

7,784

14,63550

15,865

Non-financial liabilities

580

-

-

-

-

-

580

9,650

-

-

-

-

-

9,650

Due to parent company

Equity126,833

67,597

10,673

7,784

14,63550

26,095On-balance sheet interest sensitivity gap-(2,433)(2,538)

1,310

6,134

1,440

(3,913)

Hedging instruments-(1,120)(3,746)

2,155

3,598

(888)

Total liabilities and equity

Interest sensitivity gap – net-(3,552)(6,284)

3,465

9,732

551

(3,913)

Interest sensitivity gap – cumulative-(3,552)(9,836)(6,371)

3,361

3,913

-

ANZ National Bank Limited and Subsidiary Companies
84 – 85

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Parent3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest
$m

Total
$m

Less than
3 months$m

Liquid assets

3,390

3,200

-

-

-

-

190

Due from other financial institutions

6,874

2,699

2,000

300

-

-

1,875

Trading securities

2,565

511

384

5

1,497

168

-

Derivative financial instruments

15,162

-

-

-

-

-

15,162Available-for-sale assets

594

1

394

121

10

-

68
(254)

Unaudited 31/03/2009
AssetsNet loans and advances

91,32951,261

6,705

10,50523,06745

Due from subsidiary companies

9,610

8,870

-

-

-

-

740

Other financial assets

643

-

-

-

-

-

643

Total financial assets

130,167

66,542

9,483

10,931

24,574213

18,424Non-financial assets

11,667

-

-

-

-

-

11,667

Total assets

141,834

66,542

9,483

10,931

24,574213

30,091

3,250

1,349

-

1,805

25

25

46

Liabilities
Due to other financial institutions
Deposits and other borrowings

64,91345,903

6,576

5,902

2,284

-

4,248

Due to subsidiary companies

44,78530,898

1,586

261

7,295

4,745

-

Due to parent company

1,096

1,096

-

-

-

-

-

Derivative financial instruments

12,868

-

-

-

-

-

12,868

Payables and other financial liabilities

1,548

220

92

-

25

6

1,205

Bonds and notes

1,315

705

-

-

375

235

-

Loan capital
Total financial liabilities
Non-financial liabilities

2,835

225

828

-

1,782

-

-

132,61080,396

9,082

7,968

11,786

5,011

18,367

667

-

-

-

-

-

667

8,557

-

-

-

-

-

8,557

141,834

80,396

9,082

7,968

11,786

5,011

27,591On-balance sheet interest sensitivity gap-(13,854)

401

2,963

12,788(4,798)2,500

Hedging instruments

-

30

7,312

(9,264)(2,429)4,351-Interest sensitivity gap – net-(13,824)

7,713(6,301)

10,359

(447)

2,500

Interest sensitivity gap – cumulative-(13,824)(6,111)(12,412)(2,053)(2,500)-EquityTotal liabilities and equity

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Parent3 to 6months$m

6 to 12months$m

1 to 5years$mBeyond5 years$m

Notbearing
interest
$m

Total
$m

Less than
3 months$m

Liquid assets

2,758

2,592

-

-

-

-

166

Due from other financial institutions

4,361

3,923

300

-

-

-

138

Trading securities

4,166

429

66

418

2,575

678

-

Derivative financial instruments

11,449

-

-

-

-

-

11,449Available-for-sale assets

1,511

150

1,283

-

9

-

69

Net loans and advances

85,95247,426

6,378

11,91520,28145(93)

Due from subsidiary companies

7,703

6,736

-

128

225

-

614

Other financial assets

951

-

-

-

-

-

951

Total financial assets

118,851

61,256

8,027

12,461

23,090723

13,294Non-financial assets

11,337

-

-

-

-

-

11,337

Total assets

130,188

61,256

8,027

12,461

23,090723

24,631

Due to other financial institutions

3,239

2,865

220

-

22

-

132

Deposits and other borrowings

62,83541,414

9,813

4,653

2,582

-

4,373

Due to subsidiary companies

37,362

23,497

4,892

2,017

6,956

-

-

930

930

-

-

-

-

-

Audited 30/09/2009
AssetsLiabilities

Due to parent company
Derivative financial instruments

10,769

-

-

-

-

-

10,769

Payables and other financial liabilities

909

65

-

-

-

-

844

Bonds and notes

1,516

756

-

175

585

-

-

Loan capital
Total financial liabilities
Non-financial liabilities
EquityTotal liabilities and equity

2,596

227

584

-

1,785

-

-

120,156

69,754

15,5096,845

11,930-

16,118

727

-

-

-

-

-

727

9,305

-

-

-

-

-

9,305

130,188

69,754

15,5096,845

11,930-26,150(1,519)On-balance sheet interest sensitivity gap-(8,498)(7,482)

5,616

11,160723

Hedging instruments

-

6,065

6,419

(9,673)(1,771)(1,040)-Interest sensitivity gap – net-(2,433)(1,063)(4,057)

9,389

(317)

(1,519)Interest sensitivity gap – cumulative-(2,433)(3,496)(7,553)

1,836

1,519

-

ANZ National Bank Limited and Subsidiary Companies
86 – 87

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Equity price risk
The portfolio of financial assets, classified as available-for-sale for measurement and financial reporting purposes, also contains
equity investment holdings held for longer term strategic intentions. These equity investments are also subject to market
risk which is not captured by the VaR measures for traded and non-traded market risks. The fair value of these securities as at
31 March 2010 was $96 million (31/03/2009 $71 million; 30/09/2009 $71 million). Regular reviews are performed to substantiatevaluation of the investments within the portfolio. The fair value of the equity securities classified as available-for-sale canfluctuate considerably. A 10 per cent reduction in the value of the available-for-sale equity securities at 31 March 2010 would
have reduced equity by $10 million (31/03/2009 $7 million; 30/09/2009 $7 million).
Foreign currency related risksThis risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes inforeign exchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk arisingfrom individual funding and other transactions is actively managed. The total amounts of unmatched foreign currency assets
and liabilities and consequent foreign currency exposures, arising from each class of financial asset and liability, whether
recognised or unrecognised, within each currency are not material.
The net open position in each foreign currency, detailed in the table below, represents the net on-balance sheet assets andliabilities in that foreign currency aggregated with the net expected future cash flows from off-balance sheet purchases andsales from foreign exchange transactions in that foreign currency. The amounts are stated in New Zealand dollar equivalents
translated using the spot exchange rates as at balance sheet date.
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Australian dollar

26

27

1

26

27

1

Canadian dollar

(1)

3

-

(1)

3

-

Net open position

Swiss Franc

-

(4)

-

-

(4)

-

Euro

6

9

(1)

6

9

(1)

Pound sterling

11

1

-

11

1

-

US dollar

(42)

(4)

2

(42)

(4)

2

Other

4

-

(1)

4

-

(1)

Total net open position

4

32

1

4

32

1

Liquidity Risk
Liquidity risk is the risk that the Banking Group has insufficient capacity to fund increases in assets or is unable to meet its
payment obligations as they fall due, including repaying depositors or maturing wholesale debt. The timing mismatch of cash
flows and the related liquidity risk is inherent in all banking operations and is closely monitored by the Banking Group.
The Banking Group’s liquidity and funding risks are governed by a detailed policy framework which is approved by the Risk
Committee of the Board of Directors. The core objective of the Banking Group’s framework is to manage liquidity to meet
obligations as they fall due, without incurring unacceptable losses. In response to the impact of the global financial crisis, theframework has been reviewed and updated.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Central to the Banking Group’s liquidity risk management approach is the establishment of a liquidity risk appetite framework
to which the Banking Group must conform at all times. The risk appetite for liquidity has been set as low, and this objective isachieved by the Banking Group managing liquidity risks within the boundaries of the following requirements and principles:
•
•
•
•
•
•
•
•
•

Maintaining the ability to meet all payment obligations in the immediate term.
Ensuring the ability to meet “survival horizons” under a range of ANZ specific and general market liquidity stress scenarios.
Maintaining strength in the Banking Group’s balance sheet structure to ensure long term resilience in the Banking Group’s
liquidity and funding risk profile.
Limiting the potential earnings at risk implications associated with unexpected increases in funding costs or the liquidationof assets under stress.
Ensuring the liquidity management framework is compatible with regulatory requirements.
Daily liquidity reporting and scenario analysis, quantifying the Banking Group’s positions.
Targeting a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
Holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day
operations.
Establishing detailed contingency plans to cover different liquidity crisis events.

Management of liquidity and funding risks are overseen by ALCO.
Supervision and Regulation
The RBNZ requires the Banking Group to have a comprehensive Board approved liquidity strategy defining: policy, systems
and procedures for measuring, assessing, reporting and managing domestic and foreign currency liquidity. This also includes
a formal contingency plan for dealing with a liquidity crisis. From 22 October 2009, the Reserve Bank has modified the Banking
Group’s conditions of registration with respect to liquidity policy. These revised conditions became effective from 30 March
2010. The Banking Group has systems and process in place to comply with these new regulations.
Scenario Modelling
A key component of the Banking Group’s liquidity management framework is scenario modelling. Liquidity is assessed under
different scenarios, including “going-concern” and “name-crisis” and various “survival horizons”.
“Going-concern”: reflects the normal behaviour of cash flows in the ordinary course of business. The Banking Group must beable to meet all commitments and obligations under a going concern scenario, within the Banking Group normal funding
capacity (‘available to fund’ limit), over at least the following 30 calendar days.
In estimating the funding requirement, the Banking Group models expected cash flows by reference to historical behaviour
and contractual maturity data. As of 31 March 2010 the Banking Group was in compliance with this scenario.
“Name-crisis”: refers to a potential name-specific liquidity crisis scenario which models the behaviour of cash flows where
there is a problem (real or perceived) which may include, but is not limited to, operational issues, doubts about the solvency of
the Banking Group or adverse rating changes.
Under this scenario the Banking Group may have significant difficulty rolling over or replacing funding. Under the liquidity
policy the Banking Group must be cash flow positive over an eight calendar day period. As of 31 March 2010 the Banking Groupwas in compliance with this scenario.
“Survival horizons”: The global financial crisis has highlighted the importance of differentiating between stressed and normal
market conditions in a name-specific crisis and the different behaviour that offshore and domestic wholesale funding markets
can exhibit during market stress events. As a result, the Banking Group has recently enhanced its liquidity risk scenario
modelling. The Banking Group has linked its liquidity risk appetite to defined liquidity “survival horizons” (i.e. the time period
under which the Banking Group must maintain a positive cash flow position). The following stressed scenarios are modelled:••••

Extreme Short Term Crisis Scenario (“ESTC”): A name-specific stress during a period of market stress.
Short Term Crisis Scenario (“NSTC”): A name-specific stress during a period of normal markets conditions.
Global Funding Market Disruption (“GFMD”): Stressed global wholesale funding markets leading to a closure of domestic
and offshore markets.
Offshore Funding Market Disruption (“OFMD”): Stressed global wholesale funding markets leading to a closure of offshore
markets only.

As of 31 March 2010 the Banking Group was in compliance with this scenario.

ANZ National Bank Limited and Subsidiary Companies
88 – 89

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Banking Group Funding Composition
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs
funding metrics to ensure that an appropriate proportion of the Group’s assets are funded from stable sources, including
customer liabilities, longer-dated wholesale debt (with remaining term exceeding one year) and equity. This approach
recognises that long-term wholesale debt and other sticky liabilities have favourable liquidity characteristics.
The table below outlines the Banking Group’s funding composition.
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Funding composition
Customer deposits1
New Zealand

51,83052,12752,06550,58151,05650,640Overseas

7,440

7,435

7,866

7,330

6,803

7,754

Total customer deposits

59,27059,56259,931

57,911

57,85958,394

Bonds and notes

16,855

21,52815,917

1,823

1,315

1,516

Wholesale funding
Loan capital

2,641

2,835

2,596

2,641

2,835

2,596

Certificates of deposit

3,950

7,054

4,441

3,950

7,054

4,441

Commercial paper

7,416

6,144

7,392

-

-

-

Due to subsidiary companies– ANZ National (Int'l) Limited

-

-

-

22,84026,96922,378Due to subsidiary companies – other

-

-

-

15,414

17,816

14,984Due to parent company

-

1,096

930

-

1,096

930

Due to other financial institutions

1,336

4,162

3,725

1,054

3,250

3,239

Total wholesale funding

32,19842,81935,00147,72260,33550,084

Total funding

91,468102,381

94,932

105,633

118,194

108,478

Households

37,82437,49137,73836,46535,78936,208Agriculture, forestry and fishing

3,503

4,186

3,872

3,503

4,186

3,872

Manufacturing

1,539

1,419

1,354

1,539

1,419

1,354

666

625

573

666

625

573
57,296

Concentrations of funding by industry

Entertainment, leisure and tourism
Finance and insurance

38,36649,18742,22053,89066,702Retail trade

783

768

753

783

768

753

Wholesale trade

850

690

602

850

690

602
3,960

Business and property services

4,020

4,082

3,960

4,020

4,082

Transport and storage

586

480

614

586

480

614

Construction

732

743

736

732

743

736

Government and local authority

1,561

1,752

1,548

1,561

1,752

1,548

Other2

1,038

958

962

1,038

958

962

Total concentrations of funding by industry

91,468102,381

94,932

105,633

118,194

108,478

New Zealand

59,39265,35662,45673,66781,452

76,114

Concentrations of funding by geography3
United States

17,167

21,44017,031

17,15521,04517,019Europe

7,638

7,476

7,511

7,613

7,458

7,486

Other countries

7,271

8,109

7,934

7,198

8,239

7,859

Total concentrations of funding by geography

91,468102,381

94,932

105,633

118,194

108,478

Analyses of funding liabilities by industry sector are based on Australian and New Zealand Standard Industrial Classification(“ANZSIC”) codes.
Represents: term deposits, demand deposits bearing interest, deposits not bearing interest and secured debenture stock.
Other includes exposures to electricity, gas and water, communications, and personal services.
3
Funding of the Bank via ANZ National (Int’l) Limited is classified as either from the United States or Europe, as the company conducts overseas funding activities
through its London branch.
1
2

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Wholesale funding
The Banking Group’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds that balances
cost efficiency while targeting diversification by markets, investors, currencies, maturities and funding structures. Short-term
wholesale funding requirements, with a contractual maturity of less than one year, are managed through the Treasury andMarkets operations. Long-term wholesale funding is managed and executed through Treasury operations.
The Banking Group also uses maturity concentration limits under the wholesale funding and liquidity management framework.
Maturity concentration limits ensure that the Banking Group does not become reliant on issuing large volumes of newwholesale funding within a short time period. Funding instruments used to meet the wholesale borrowing requirement must
be on a pre-established list of approved products.
Funding capacity and debt issuance planning
Under the normal business conditions scenario, borrowing capacity is an estimate of the amount of funding that can be raisedin the wholesale markets in normal market conditions. The Banking Group adopts a conservative approach to determine its
funding capacity. Funding capacity limits are determined at the Ultimate Parent Bank level and allocated to individual sites
based on their requirements.
Annually, a Funding Plan is ratified by the Banking Group’s Senior Management. The plan is supplemented by monthly updates,
and is linked to the Banking Group’s three year strategic planning cycle.
Liquidity portfolio management
The Banking Group holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity
risk management.
The size of the Banking Group’s liquidity portfolio is based on the amount required to meet the liquidity policy.
Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand government securities,
securities issued by supranational agencies and securities issued by highly rated banks. These assets are accepted as collateralby the RBNZ in repurchase transactions. The post-”haircut” value of these assets at 31 March 2010 was $10,524 million.
The Banking Group also held unencumbered Internal RMBS with a post-”haircut” value of $5,079 million (from 1 April the RBNZ
has imposed a cap limiting the amount of RMBS deemed as eligible in the liquidity portfolio to 4% of total assets).
Liquidity crisis contingency planning
The Banking Group maintains liquidity crisis contingency plans defining an approach for analysing and responding to aliquidity-threatening event at a Banking Group-wide basis. The framework includes:
•
•
•
•
•
•
•

the establishment of crisis severity/stress levels;
clearly assigned crisis roles and responsibilities;
early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;
outlined action plans, and courses of action for altering asset and liability behaviour.
procedures for crisis management reporting, and covering cash-flow shortfalls;
guidelines determining the priority of customer relationships in the event of liquidity problems; andassigned responsibilities for internal and external communications.

Contractual maturity analysis of financial assets and liabilities
The tables below analyse the Banking Group’s financial assets and liabilities, within relevant maturity groupings based on theearliest date on which the Bank or Banking Group may be required to pay. The amounts represent undiscounted principal andinterest cash flows and may differ the amounts reported on the balance sheet.
The analysis, by remaining contractual maturities at balance date, of financial assets and liabilities represents the estimatedobligation date expected for the asset and liability to be recovered or settled within one year, and greater than one year.

ANZ National Bank Limited and Subsidiary Companies
90 – 91

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Contractual maturity analysis for financial assets and financial liabilities, including expected interest to maturity:
Consolidated
Total
$m

At call$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Unaudited 31/03/2010
AssetsLiquid assets

2,519

2,519

-

-

-

-

-

Due from other financial institutions

2,101

35

1,934

132

-

-

-

Trading securities

6,366

-

416

621

3,887

1,442

8,713

Derivative financial instruments

8,713

-

-

-

-

-

Available-for-sale assets

1,850

-

802

737

43

168

100

Gross loans and advances

87,000-8,556

14,43324,011

38,298

1,702

500

500

-

-

-

-

-

1,052

-

1,026

1

12

13

-

Due from parent
Other financial assets1
Interest

36,714

-

1,378

3,322

11,932

20,082-

Total

146,815

3,054

14,112

19,24639,88560,003

10,515

Liabilities
Due to other financial institutions

1,336

724

478

10

74

50

-

Deposits and other borrowings

70,636

19,62329,60018,927

2,486

-

-

Derivative financial instruments

9,152

-

-

-

-

-

9,152

Other financial liabilities

1,698

-

1,698

-

-

-

-

Gross bonds and notes

16,606

-

1,353

2,103

12,706

444

-

-

-

-

-

-

-

-

Loan capital

2,641

-

-

-

-

1,463

1,178

Interest

4,225

-

571

1,087

2,289

278

-

Total

106,294

20,34733,70022,127

17,5552,235

10,330Due to parent company

Unaudited 31/03/2009
AssetsLiquid assets

3,390

3,390

-

-

-

-

-

Due from other financial institutions

7,631

167

4,407

2,405

652

-

-

Trading securities

2,565

-

504

389

1,503

169

-

Derivative financial instruments

14,985

-

-

-

-

-

14,985

Available-for-sale assets

597

-

-

493

10

23

71

Net loans and advances

93,720-9,311

12,30327,27945,096(269)

Other financial assets

714

-

714

-

-

-

-

Interest

44,236

-

1,707

4,113

13,72024,696-

Total

167,837

3,557

16,642

19,703

43,16469,985

14,787

4,162

1,187

736

1,806

408

25

-

Liabilities
Due to other financial institutions

1

Deposits and other borrowings

72,76028,07926,864

15,334

2,484

-

-

Derivative financial instruments

12,868

-

-

-

-

-

12,868Other financial liabilities

1,743

-

1,560

92

85

6

-

Bonds and notes

21,528

-

2,125

6,300

12,428675-

Due to parent company

1,096

1,096

-

-

-

-

1,156

Loan capital

2,835

-

-

-

-

1,679

Interest

4,681

9

723

1,201

2,498

250

-

Total

121,673

30,371

32,00824,732

17,902

2,635

14,024

Other financial assets in the table above include investments related to insurance business.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
Consolidated
Total
$m

At call$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Audited 30/09/2009
AssetsLiquid assets

2,762

2,762

-

-

-

-

-

Due from other financial institutions

4,514

172

3,888

391

63

-

-

Trading securities

4,166

-

362

506

2,620

678

11,408Derivative financial instruments

11,408

-

-

-

-

-

Available-for-sale assets

1,513

-

119

1,294

9

22

69

Net loans and advances

88,259-6,478

14,06626,18841,621

(94)

999

-

999

-

-

-

-

Interest

Other financial assets

46,417

-

1,600

4,019

14,423

26,375-

Total

160,038

2,934

13,446

20,27643,303

68,696

11,383Due to other financial institutions

3,725

1,139

1,859

705

22

-

-

Deposits and other borrowings

71,76425,39722,757

20,835

2,775

-

-

Derivative financial instruments

10,762

-

-

-

-

-

10,762Other financial liabilities

1,414

-

1,414

-

-

-

-

Bonds and notes

15,917

-

2,050

2,155

11,365

347

-

930

930

-

-

-

-

-

2,596

-

-

-

-

1,437

1,159

Liabilities

Due to parent company
Loan capitalInterest

3,264

-

745

785

1,470

264

-

Total

110,372

27,46628,82524,48015,632

2,048

11,921

ANZ National Bank Limited and Subsidiary Companies
92 – 93

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentTotal$m

At call$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Unaudited 31/03/2010
AssetsLiquid assets

2,502

2,502

-

-

-

-

-

Due from other financial institutions

1,949

35

1,914

-

-

-

-

Trading securities

6,366

-

416

621

3,887

1,442

8,719

Derivative financial instruments

8,719

-

-

-

-

-

Available-for-sale assets

1,674

-

793

737

6

42

96

Gross loans and advances

84,425-

8,253

14,054

22,39038,1081,620

Due from subsidiary companies

8,826

-

1,569

313

158

6,786

-

500

500

-

-

-

-

-

Due from parent company

981

-

981

-

-

-

Interest

46,305

-

1,387

3,450

12,931

28,537-

Total

162,247

3,037

15,313

19,17539,372

74,915

10,435

Other financial assets

Liabilities
Due to other financial institutions

1,054

724

323

3

4

-

-

Deposits and other borrowings

61,861

19,62225,495

14,529

2,215

-

-

Due to subsidiary companies

38,254-

12,528

5,697

13,7986,231-

Derivative financial instruments

9,170

-

-

-

-

-

9,170

Other financial liabilities

1,800

-

1,800

-

-

-

-

Gross bonds and notes

1,575

-

93

285

1,105

92

-

Due to parent company

-

-

-

-

-

-

-

Loan capital

2,641

-

-

-

-

1,463

1,178

Interest

8,515

-

707

1,494

3,814

2,500

-

Total

124,871

20,34640,94722,00820,936

10,286

10,348

3,390

3,390

-

-

-

-

-

Due from other financial institutions

6,874

167

4,407

2,300

-

-

-

Trading securities

2,565

-

504

389

1,503

169

-

Derivative financial instruments

15,162

-

-

-

-

-

15,162Available-for-sale assets

594

-

-

493

10

23

68

Net loans and advances

91,329-8,896

12,13725,57044,980(254)

Due from subsidiary companies

9,610

127

-

5

1,653

7,825

-

Other financial assets

643

-

643

-

-

-

-

Interest

47,501

-

1,409

4,238

15,002

26,851-

Total

177,6683,684

15,85919,562

43,73979,848

14,976

3,250

1,178

217

1,806

24

25

-

Deposits and other borrowings

64,91328,206

21,945

12,478

2,284

-

-

Due to subsidiary companies

44,785

12,260

5,660

8,347

11,6496,869

12,868Unaudited 31/03/2009
AssetsLiquid assets

Liabilities
Due to other financial institutions

Derivative financial instruments

12,868

-

-

-

-

-

Other financial liabilities

1,548

-

1,425

92

25

6

-

Bonds and notes

1,315

-

465

-

615

235

-

Due to parent company

1,096

1,096

-

-

-

-

-

Loan capital

2,835

-

-

-

-

1,679

1,156

Interest

10,136

9

1,655

1,923

5,811

738

-

Total

142,746

42,74931,36824,645

20,408

9,552

14,024

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
29. Financial Risk Management (continued)
ParentTotal$m

At call$mLess than
3 months$m

3 to 12months$m

1 to 5years$mBeyond No maturity
5 years
specified$m$m

Audited 30/09/2009
AssetsLiquid assets

2,758

2,758

-

-

-

-

-

Due from other financial institutions

4,361

172

3,889

300

-

-

-

Trading securities

4,166

-

361

507

2,620

678

11,449Derivative financial instruments

11,449

-

-

-

-

-

Available-for-sale assets

1,511

-

119

1,294

9

20

69

Net loans and advances

85,952-

6,251

13,772

24,55541,467(93)

Due from subsidiary companies

7,703

-

1,414

181

235

5,873

-

Other financial assets

951

-

951

-

-

-

-

Interest

55,153

-

1,563

4,095

15,33034,165-

Total

174,004

2,930

14,54820,14942,74982,203

11,425

Liabilities
Due to other financial institutions

3,239

1,116

1,881

220

22

-

-

Deposits and other borrowings

62,83525,397

19,084

15,785

2,569

-

-

Due to subsidiary companies

37,362-

13,223

6,933

11,565

5,641-

Derivative financial instruments

10,76910,769

-

-

-

-

-

Other financial liabilities

909

-

909

-

-

-

-

Bonds and notes

1,516

-

301

240

975

-

-

930

-

930

-

-

-

-

2,596

-

-

-

-

1,437

1,159

Due to parent company
Loan capitalInterest

5,108

-

771

1,347

2,782

208

-

Total

125,264

26,51337,09924,525

17,913

7,286

11,928ANZ National Bank Limited and Subsidiary Companies
94 – 95

Notes to the Financial Statements (continued)
30. Concentrations of Credit Risk
Concentrations of credit risk to individual counterparties
The number of individual counterparties other than banks or groups of closely related counterparties of which a bank is aparent (excluding OECD Governments and connected persons), where the period end and peak end-of-day credit exposure
equals or exceeds 10% of equity (as at the end of the period), in ranges of 10% of equity, on the basis of limits:
Consolidated
Unaudited 31/03/2010
Number ofCounterparties

10% to 20% of equity

Unaudited 31/03/2009
Number ofCounterparties

Audited 30/09/2009
Number ofCounterparties

As at

Peak forthe quarter

As at

Peak forthe quarter

As at

Peak forthe quarter

1

1

1

1

1

1

The number of individual counterparties disclosed within the various equity ranges is based on counterparty limits rather thanactual exposures outstanding. No account is taken of security and/or guarantees which the Banking Group may hold in respectof the various counterparty limits.
The amount and percentage of period end credit exposures to individual counterparties other than banks or groups of closely
related counterparties of which a bank is a parent (excluding OECD Governments and connected persons) where the period
end credit exposure equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
Unaudited 31/03/2010

Unaudited 31/03/2009

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

1,117

100.0%

1,544

100.0%

1,194

100.0%

Audited 30/09/2009

As at
Investment grade credit rating1

Concentrations of credit risk to bank counterparties
The number of bank counterparties or groups of closely related counterparties of which a bank is the parent (excluding OECD
Governments and connected persons) where the period end and peak end-of-day credit exposure equals or exceeds 10% of
equity (as at the end of the period), in ranges of 10% of equity, on the basis of actual exposures:Consolidated
Unaudited 31/03/2010
Number ofCounterparties

10% to 20% of equity

1

Unaudited 31/03/2009
Number ofCounterparties

Audited 30/09/2009
Number ofCounterparties

As at

Peak
for period

As at

Peak
for period

As at

Peak
for period

2

3

2

5

3

2

20% to 30% of equity

-

-

2

1

1

2

30% to 40% of equity

-

-

-

1

-

-

All of the individual and bank counterparties included in the above tables have an investment grade credit rating. An investment grade credit rating means acredit rating of BBB or Baa3 or above, or its equivalent. In the case of a group of closely related counterparties, the credit rating applicable is that of the entity
heading the group of closely related counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations payable in New
Zealand, in New Zealand dollars, or to an entity’s long term senior unsecured foreign currency obligations.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
30. Concentrations of Credit Risk (continued)
The amount and percentage of period end credit exposures to bank counterparties or groups of closely related counterpartiesof which a bank is a parent (excluding OECD Governments and connected persons) where the period end credit exposuresequals or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
Unaudited 31/03/2010

Unaudited 31/03/2009

Audited 30/09/2009

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

2,627

100.0%

6,723

100.0%

6,201

100.0%

As at
Investment grade credit rating1

The number of individual counterparties disclosed within the various equity ranges and the total exposure as at the end of theperiod are gross exposures. No account is taken of collateral, security and/or netting agreements which the Banking Groupmay hold in respect of the various counterparty exposures. The peak number is calculated separately for each individual
counterparty and the peak for all counterparties may not have occurred at the same time.
Concentrations of credit risk to connected persons
Credit exposures to connected persons reported in the table below have been calculated partially on a bilateral net basis andpartially on a gross basis. With effect from 11 August 2008, netting has occurred in respect of certain transactions which are thesubject of a bilateral netting agreement disclosed in the Bank’s most recent Supplemental Disclosure Statement for the six
months ended 31 March 2010. The amount of gross credit exposures to connected persons netted off must not be greater than
125% of the Banking Group’s tier one capital.
Consolidated
Unaudited 31/03/2010
Amount$m% of Tier
One Capital

Unaudited 31/03/2009

Audited 30/09/2009

Amount$m% of Tier
One Capital

Amount$m% of Tier
One Capital

Aggregate at end of period4
Other connected persons (on gross basis, before netting)2

4,020

59.3%

5,268

80.6%

4,503

69.9%

Other connected persons (amount netted off)2

2,982

44.0%

3,309

50.6%

3,010

46.7%

Other connected persons (on partial bilateral net basis)2

1,038

15.3%

1,959

30.0%

1,493

23.2%

-

0.0%

-

0.0%

-

0.0%

Other connected persons (on gross basis, before netting)

4,264

62.9%

7,037

107.6%

5,490

85.2%

Other connected persons (amount netted off)

2,715

40.1%

4,175

63.9%

2,693

41.8%

Other connected persons (on partial bilateral net basis)

1,549

22.8%

2,862

43.8%

2,797

43.4%

-

0.0%

-

0.0%

-

0.0%

Other connected persons

n/a

70.0%

n/a

70.0%

n/a

70.0%

Non-bank connected persons

n/a

15.0%

n/a

15.0%

n/a

15.0%

Non-bank connected persons3Peak end-of-day for the quarter4

Non-bank connected persons
Rating-contingent limit5

The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusiveof exposures of a capital nature. The peak end-of-day credit exposures for the period to connected persons are measured overtier one capital as at the end of the period. There were no individual provisions provided against credit exposures to connected
persons as at 31 March 2010 (31/03/2009 $nil; 30/09/2009 $nil). The Banking Group had no contingent exposures arising fromrisk lay-off arrangements to connected persons as at 31 March 2010 (31/03/2009 $nil; 30/09/2009 $nil).
All of the individual and bank counterparties included in the above tables have an investment grade credit rating. An investment grade credit rating means acredit rating of BBB or Baa3 or above, or its equivalent. In the case of a group of closely related counterparties, the credit rating applicable is that of the entity
heading the group of closely related counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations payable in New
Zealand, in New Zealand dollars, or to an entity’s long term senior unsecured foreign currency obligations.
2
The Banking Group has amounts due from its Parent Company and Ultimate Parent Bank and other entities within the Ultimate Parent Group arising in theordinary course of business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate
Parent Bank. As at 31 March 2010, the gross exposures to the Bank’s Parent Company were $510 million (31/03/2009 $nil; 30/09/2009 $522 million). As at 31
March 2010, the gross exposures to the Bank’s Ultimate Parent Bank were $3,510 million (31/03/2009 $5,268 million; 30/09/2009 $3,981 million).
3
Non-bank connected persons exposures consist of loans to directors of the Bank. Any loans are made in the ordinary course of business of the Bank, on an arm’s
length basis and on normal commercial terms and conditions.
4
The Banking Group has complied with the limits on aggregate credit exposure (of a non-capital nature and net of individual provisions) to connected persons
and non-bank connected persons, calculated in accordance with the Conditions of Registration, at all times during the period.
5
Represents the maximum peak end-of-day aggregate credit exposures limit (of a non-capital nature and net of individual provisions) to all connected persons.
This limit is based on the ratings applicable to the Bank’s long term senior unsecured obligations payable in New Zealand in New Zealand dollars. Within theoverall limit a sub-limit of 15% of Tier One Capital applies to aggregate credit exposures (exclusive of exposures of a capital nature and net of individual
provisions) to non-bank connected persons.
1

ANZ National Bank Limited and Subsidiary Companies
96 – 97

Notes to the Financial Statements (continued)
31. Interest Earning and Discount Bearing Assets and Liabilities
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$mInterest earning and discount bearing assets

98,434106,037

100,935

104,651

111,743

105,557

Interest and discount bearing liabilities

86,57398,49090,491

100,738

114,243

104,038

Unaudited
31/03/2009$m

Audited30/09/2009$m

32. Fair Value of Financial Assets and Financial Liabilities
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties
in an arm’s length transaction. The determination of the fair value of financial instruments is fundamental to the financial
reporting framework as all financial instruments are recognised initially at fair value and, with the exception of those financial
instruments carried at amortised cost, are remeasured at fair value in subsequent periods.
The fair value of a financial instrument on initial recognition is normally the transaction price, however, in certain circumstances
the initial fair value may be based on other observable current market transactions in the same instrument, without modification
or repackaging, or on a valuation technique whose variables include only data from observable markets.
Subsequent to initial recognition, the fair value of financial instruments measured at fair value is based on quoted market
prices, where available. In cases where quoted market prices are not available, fair value is determined using market acceptedvaluation techniques that employ observable market data. In limited cases where observable market data is not available, theinput is estimated based on other observable market data, historical trends and other factors that may be relevant.
A significant number of financial instruments are carried at fair value in the balance sheet. Additional disclosure of the fairvalue of those financial instruments not carried at fair value has been provided below. The fair value disclosure does not coverthose instruments that are not considered financial instruments from an accounting perspective such as income tax andintangible assets. The aggregate fair value amounts do not represent the underlying value of the Banking Group.
In the tables set out on the following pages, classes of financial assets have been allocated based on their accounting
treatment. The significant accounting policies in Note 1 describe how the categories of financial assets and financial liabilities
are measured and how income and expenses, including fair value gains and losses, are recognised.
Financial asset classes have been allocated into the following groups: amortised cost; financial assets at fair value throughprofit or loss; derivatives in effective hedging relationships; and available-for-sale financial assets. Similarly, each class offinancial liability has been allocated into three groups: amortised cost; financial liabilities at fair value through profit or loss;
and derivatives in effective hedging relationships.
The fair values are based on relevant information available as at the respective balance sheet dates and have not been updated
to reflect changes in market conditions after the balance sheet date.
Financial Assets
Liquid assets and due from other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they are short-term innature, defined as those that reprice or mature in 90 days or less, or are receivable on demand. When longer term in nature, fairvalue is based on quoted market prices.
Trading securities
Trading securities are carried at fair value. Fair value is generally based on quoted market prices, broker or dealer pricequotations, or modelled valuations using prices for securities with similar credit risk, maturity and yield characteristics.
Derivative financial instruments
The fair values of derivative financial instruments are determined using market prices and market accepted valuation models
as appropriate (including discounted cash flow models) based on current market yields for similar types of instruments and thematurity of each instrument.
Available-for-sale assets
Fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available, fair value isestimated using quoted market prices for securities with similar credit, maturity and yield characteristics, or market acceptedvaluation models as appropriate (including discounted cash flow models) based on current market yields for similar types of
instruments and the maturity of each instrument.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
Net loans and advances
The carrying value of loans and advances includes deferred fees and expenses, and is net of provision for credit impairment
and income yet to mature. Fair value has been determined through discounting future cash flows. For fixed rate loans andadvances, the discount rate applied incorporates changes in wholesale market rates, the Banking Group’s cost of wholesalefunding and movements in customer margin. For floating rate loans, only changes in wholesale market rates and the Banking
Group’s cost of wholesale funding are incorporated in the discount rate. For variable rate loans where the Banking Group sets
the applicable rate at its discretion, the fair value is set equal to the carrying value.
The difference between estimated fair values for loans and advances and their carrying value reflects changes in interest rates
and the credit worthiness of borrowers since loan origination.
Other financial assets
Included in this category are accrued interest and fees receivable. The carrying values of accrued interest and fees receivable
are considered to approximate their net fair values as they are short term in nature or are receivable on demand.
Financial assets designated at fair value through profit or loss
The Banking Group has not reclassified any financial assets previously measured at amortised cost to fair value, or previously
measured at fair value to amortised cost, during the period ended 31 March 2010 (31/03/2009 $nil; 30/09/2009 $nil).
Financial Liabilities
Due to other financial institutions
The carrying value of short term financial instruments is their net fair value, or when longer term in nature, fair value is basedon quoted market prices, or for those debt issues where quoted market prices were not available, a discounted cash flow
model using a yield curve appropriate for the remaining term to maturity of the debt instrument is used.
Deposits and other borrowings
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates ofinterest for debt with a similar maturity are used to discount contractual cash flows. The fair value of a deposit liability without
a specified maturity or at call is deemed to be the amount payable on demand at the reporting date. The fair value is not
adjusted for any value expected to be derived from retaining the deposit for a future period of time.
Certain items included in deposits and other borrowings have been designated as financial liabilities at fair value throughprofit or loss in order to eliminate an accounting mismatch which would arise if the liabilities were otherwise carried atamortised cost. This mismatch arises where a derivative, which is required to be measured at fair value through profit or loss,
has been acquired to mitigate a financial risk within the financial liability.
At balance date, the carrying amount of deposits and other borrowings designated by the Banking Group at fair value throughprofit or loss was $7,416 million (31/03/2009 $6,144 million; 30/09/2009 $7,392 million). This is $1 million higher (31/03/2009 $9
million higher; 30/09/2009 $4 million lower) than their amortised cost.
The accumulated amount of the change in fair value attributable to changes in credit risk on these liabilities was less than $3
million (31/03/2009 less than $3 million; 30/09/2009 less than $3 million). The change in fair value attributable to changes incredit risk has been determined as the amount of change in fair value that is not attributable to changes in market conditions
that give rise to market risks (benchmark interest rate, and foreign exchange rates).
Bonds and notes, due to parent company and loan capital
The aggregate fair value of bonds and notes and loan capital is calculated based on quoted market prices. For those debt
issues where quoted market prices were not available, a discounted cash flow model using a yield curve appropriate for theremaining term to maturity of the debt instrument is used.
Other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered to approximate thefair value.
Commitments and contingencies
As outlined in the Contingent Liabilities and Credit Related Commitments note, the Banking Group and the Bank have various
credit related commitments. Based upon the level of fees currently charged for granting such commitments, taking into
account maturity and interest rates, together with any changes in the creditworthiness of counterparties since origination of
the commitments, their estimated replacement or net fair value is not material.

ANZ National Bank Limited and Subsidiary Companies

32. Fair Value of Financial Assets and Financial Liabilities (continued)
Valuation Methodology
A significant number of financial instruments are carried on the balance sheet at fair value. The Banking Group has implemented
controls that ensure that the fair value is either determined, or validated, by a function independent of the party that undertakes
the transaction.
The best evidence of fair value is a quoted price in an active market. Accordingly, wherever possible fair value is based onquoted market prices for the financial instrument. The net position of non-derivative financial instruments with offsetting
market risks and all derivative portfolios, are valued at the quoted bid price for assets and the quoted ask price forliabilities. The quoted market price is not adjusted for any potential impact that may be attributed to a large holding of thefinancial instrument.
Where quoted market prices are used, independent price determination or validation is utilised. The results of independentvalidation processes are reported to senior management, and adjustments to the fair values are made as appropriate.
In the event that there is no quoted market price for the instrument, fair values are based on present value estimates or othermarket accepted valuation techniques which include data from observable markets wherever possible. The majority ofvaluation techniques employ only observable market data however, for certain financial instruments the fair value cannot be
determined in whole with reference to current market transactions or valuation techniques whose variables only include datafrom observable markets. In respect of the valuation component where market observable data is not available, the fair value
is determined using valuation techniques based on data derived and extrapolated from market data and tested against historictransactions and observed market trends.
The valuation models incorporate the impact of the bid/ask spread, counterparty credit spreads and other factors that would
influence the fair value determined by a market participant.
For fair values determined using a valuation model, the control framework may include, as applicable, independent
development or validation of: (i) valuation models; (ii) any inputs to those models; and (iii) any adjustments required outside of
the valuation model, and, where possible, independent validation of model outputs.

98 – 99

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
ConsolidatedAt
amortised
cost

Carrying amountFinancial assets

At fair value throughprofit or loss

Availablefor-saleassetsHedging$m

Designatedon initialrecogntion$m

Held fortrading
$m

$m

2,519

-

-

294

-

-

$m

Total
$m

-

-

2,519

-

1,807

2,101
6,366

Unaudited 31/03/2010
Liquid assets
Due from other financial institutions
Trading securities

-

-

6,366

-

-

Derivative financial instruments1

-

-

8,265

448

-

8,713

Available-for-sale assets

-

-

-

-

1,850

1,850

Net loans and advances2

85,670----85,670

-

38

-

-

-

38

500

-

-

-

-

500

Investments relating to insurance business
Due from parent company
Other financial assets

1,014

-

-

-

-

1,014

Total financial assets

89,99738

14,631

448

3,657

108,771

Liquid assets

3,390

-

-

-

-

3,390

Due from other financial institutions

3,362

-

-

-

4,269

7,631

Unaudited 31/03/2009

Trading securities

-

-

2,565

-

-

2,565

Derivative financial instruments1--

14,439546-

14,985

Available-for-sale assets

-

-

-

-

597

597

Net loans and advances

93,720----93,720

Other financial assets

714

-

-

-

-

714

Total financial assets

101,186-

17,004546

4,866

123,602

Liquid assets

2,762

-

-

-

-

2,762

Due from other financial institutions

4,514

2

Audited 30/09/2009
1,778

-

-

-

2,736

Trading securities

-

-

4,166

-

-

4,166

Derivative financial instruments1--

10,986422-

11,408Available-for-sale assets

-

-

-

-

1,513

1,513

Net loans and advances2

88,259----88,259Other financial assets

999

-

-

-

-

999

Total financial assets

93,798-15,152

422

4,249

113,621

The following table summarises the carrying amounts and fair values of those financial assets not presented in the Banking
Group’s balance sheet at their fair value:
Consolidated

Liquid assets
Due from other financial institutions
Net loans and advances2

Due from parent company

1
2

Unaudited 31/03/2010

Unaudited 31/03/2009

Audited 30/09/2009

Carrying
amount$m

Fair value$m

Carrying
amount$m

Fair value$m

Carrying
amount$m

Fair value
$m

2,519

2,519

3,390

3,390

2,762

2,762

294

294

3,362

3,362

1,778

1,778

85,67085,501

93,72093,572

88,25987,996

500

500

-

-

-

-

Other financial assets

1,014

1,014

714

714

999

999

Total financial assets at amortised cost

89,99789,828101,186

101,038

93,79893,535Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from theamortised cost.

ANZ National Bank Limited and Subsidiary Companies
100 – 101

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
Consolidated
At amortised
cost

Carrying value
Financial liabilities

At fair value throughprofit or loss$m

Designatedon initialrecogntion$m

Held fortrading$m

Hedging

Sub-total
$m

$m

Total
$m

Unaudited 31/03/2010
Due to other financial institutions

1,336

-

-

-

-

1,336

Deposits and other borrowings

63,220

7,416

-

7,416

-

70,636

-

-

8,565

8,565

587

9,152

Other financial liabilities

1,698

-

-

-

-

1,698

Bonds and notes2

16,855----

16,855Derivative financial instruments1

-

-

-

-

-

-

Loan capital

2,641

-

-

-

-

2,641

Total financial liabilities

85,750

7,416

8,565

15,981

587

102,318

Due to other financial institutions

4,162

-

-

-

-

4,162

Deposits and other borrowings

66,616

6,144

-

6,144

-

72,760Derivative financial instruments1--

11,581

11,581

1,287

12,868Other financial liabilities

1,743

-

-

-

-

1,743
21,528Due to parent company

Unaudited 31/03/2009

Bonds and notes

21,528----Due to parent company

1,096

-

-

-

-

1,096

Loan capital

2,835

-

-

-

-

2,835

Total financial liabilities

97,9806,144

11,581

17,725

1,287

116,992

2

Audited 30/09/2009
Due to other financial institutions

3,725

-

-

-

-

3,725

Deposits and other borrowings

64,372

7,392

-

7,392

-

71,764

Derivative financial instruments1

-

-

9,862

9,862

900

10,762Other financial liabilities

1,414

-

-

-

-

1,414

Bonds and notes2

15,917----

15,917

930

-

-

-

-

930

Due to parent company
Loan capital

2,596

-

-

-

-

2,596

Total financial liabilities

88,954

7,392

9,862

17,254900

107,108

The following table summarises the carrying amounts and fair values of those financial liabilities not presented in the Banking
Group’s balance sheet at their fair value:
Consolidated
Unaudited 31/03/2010

Unaudited 31/03/2009

Audited 30/09/2009

Carrying
amount$m

Fair value$m

Carrying
amount$m

Fair value$m

Carrying
amount$m

Fair value$m

Due to other financial institutions

1,336

1,336

4,162

4,162

3,725

3,725

Deposits and other borrowings

63,22063,261

66,616

66,74364,37264,404

Other financial liabilities

1,698

1,698

1,743

1,743

1,414

1,414

Bonds and notes2

16,855

17,205

21,52820,826

15,917

16,051

-

-

1,096

1,096

930

930

Loan capital

2,641

2,601

2,835

2,642

2,596

2,516

Total financial liabilities at amortised cost

85,75086,102

97,98097,212

88,95489,040Due to parent company

1
2

Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to bonds and notes. The resulting fair value adjustment means that the carrying value differs from the amortised cost.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
ParentAt amortised
cost

Carrying amountFinancial assets

At fair value throughprofit or loss

Available- forsale assets

Hedging$m

Designatedon initialrecogntion$m

Held fortrading
$m

$m

2,502

-

-

177

-

-

$m

Total
$m

-

-

2,502

-

1,772

1,949

Unaudited 31/03/2010
Liquid assets
Due from other financial institutions
Trading securities

-

-

6,366

-

-

6,366

Derivative financial instruments1

-

-

8,271

448

-

8,719

Available-for-sale assets

-

-

-

-

1,674

1,674

Net loans and advances

83,416

83,416----Due from parent company

500

-

-

-

-

500

Due from subsidiary companies

1,916

6,910

-

-

-

8,826

2

Other financial assets

981

-

-

-

-

981

Total financial assets

89,492

6,910

14,637448

3,446

114,933

Liquid assets

3,390

-

-

-

-

3,390

Due from other financial institutions

2,605

-

-

-

4,269

6,874

Unaudited 31/03/2009

Trading securities

-

-

2,565

-

-

2,565

Derivative financial instruments1--

14,616546-

15,162Available-for-sale assets

-

-

-

-

594

594

Net loans and advances

91,329----91,329

1,785

7,825

-

-

-

9,610

2

Due from subsidiary companies
Other financial assets

643

-

-

-

-

643

Total financial assets

99,752

7,825

17,181

546

4,863

130,167

Liquid assets

2,758

-

-

-

-

2,758

Due from other financial institutions

1,625

-

-

-

2,736

4,361

-

-

4,166

-

-

4,166
11,449Audited 30/09/2009

Trading securities
Derivative financial instruments--

11,027422-

Available-for-sale assets

-

-

-

-

1,511

1,511

Net loans and advances2

85,952----

85,952

Due from subsidiary companies

1

1,865

5,838

-

-

-

7,703

Other financial assets

951

-

-

-

-

951

Total financial assets

93,151

5,838

15,193422

4,247

118,851

The following table summarises the carrying amounts and fair values of those financial assets not presented in the Bank’sbalance sheet at their fair value:
ParentLiquid assets
Due from other financial institutions

Audited 30/09/2009

Fair value$m

Carrying
amount$m

Fair value$m

Carrying
amount$m

Fair value
$m

2,502

2,502

3,390

3,390

2,758

2,758

177

177

2,605

2,605

1,625

1,625
85,67583,416

83,234

91,32991,15785,952

500

500

-

-

-

-

Due from subsidiary companies

1,916

1,916

1,785

1,785

1,865

1,865

2

Other financial assets
Total financial assets at amortised cost2

Unaudited 31/03/2009

Carrying
amount$m

Due from parent company

Net loans and advances

1

Unaudited 31/03/2010

981

981

643

643

951

951

89,49289,31099,752

99,58093,151

92,874

Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from theamortised cost.

ANZ National Bank Limited and Subsidiary Companies
102 – 103

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
ParentAt amortisedcost

At fair value throughprofit or loss

Hedging$m

Designatedon initialrecogntion$m

Held fortrading$m

Sub-total$m$m

Due to other financial institutions

1,054

-

-

-

-

1,054

Deposits and other borrowings

61,861----

61,861

Due to subsidiary companies

31,748

6,506

-

6,506

-

38,254

-

-

8,583

8,583

587

9,170

Other financial liabilities

1,800

-

-

-

-

1,800

Bonds and notes2

1,823

-

-

-

-

1,823

-

-

-

-

-

-

2,641

-

-

-

-

2,641

100,927

6,506

8,583

15,089587

116,603

Due to other financial institutions

3,250

-

-

-

-

3,250

Deposits and other borrowings

64,913----64,91338,356

6,429

-

6,429

-

44,785Carrying amountFinancial liabilities

Total
$m

Unaudited 31/03/2010

Derivative financial instruments1

Due to parent company
Loan capital
Total financial liabilities
Unaudited 31/03/2009

Due to subsidiary companies
Derivative financial instruments--

11,581

11,581

1,287

12,868Other financial liabilities

1,548

-

-

-

-

1,548

Bonds and notes2

1,315

-

-

-

-

1,315

Due to parent company

1,096

-

-

-

-

1,096

Loan capital

2,835

-

-

-

-

2,835

113,313

6,429

11,58118,0101,287

132,610Due to other financial institutions

3,239

-

-

-

-

3,239

Deposits and other borrowings

62,835----62,835Due to subsidiary companies

31,675

5,687

-

5,687

-

37,362

-

-

9,869

9,869

900

10,7691

Total financial liabilities
Audited 30/09/2009

Derivative financial instruments1
Other financial liabilities

909

-

-

-

-

909

Bonds and notes2

1,516

-

-

-

-

1,516

Due to parent company

930

-

-

-

-

930

Loan capital
Total financial liabilities

2,596

-

-

-

-

2,596

103,700

5,687

9,869

15,556900

120,156

The following table summarises the carrying amounts and fair values of those financial liabilities not presented in the Bank’sbalance sheet at their fair value:
ParentAudited 30/09/2009

Carrying
amount$m

Carrying
amount$m

Fair value$m

Fair value$m

Fair value
$m

1,054

1,054

3,250

3,250

3,239

3,239

Deposits and other borrowings

61,861

61,89864,91365,02062,83562,860Due to subsidiary companies

31,74832,19738,356

38,64931,67531,997

Other financial liabilities

1,800

1,800

1,548

1,548

909

908

Bonds and notes2

1,823

1,845

1,315

1,010

1,516

1,545

-

-

1,096

1,096

930

930

Loan capital
Total financial liabilities at amortised cost2

Unaudited 31/03/2009

Carrying
amount$m

Due to other financial institutions

Due to parent company

1

Unaudited 31/03/2010

2,641

2,601

2,835

2,642

2,596

2,516

100,927

101,395

113,313113,215

103,700

103,995

Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from theamortised cost.

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
The table below provides an analysis of the methodology used for valuing financial assets and financial liabilities that are
required to be re-measured at fair value. The fair value of the financial instrument has been allocated in full to the category
which most accurately reflects the determination of the fair value.
Valuation technique

Quotedmarket price
$m

Using
observable
inputs$m

Usingsignificant
non-observable
inputs
$m

Total
$m

Unaudited 31/03/2010
Consolidated
Financial assets
Due from other financial institutions

1,807

-

-

1,807

Trading securities

3,178

3,188

-

6,366

Available-for-sale assets

1,642

69

139

1,850

Derivative financial instruments

3

8,710

-

8,713

Investments relating to insurance business

-

38

-

38

6,630

12,005

139

18,774

46

9,106

-

9,152

-

7,416

-

7,416

46

16,522-

16,568

4,269

-

-

4,269

Trading securities

719

1,846

-

2,565

Available-for-sale assets

518

79

-

597

Derivative financial instruments

96

14,889-14,985

5,602

16,814-

22,416

11

12,857-

12,868

Total financial assets
Financial liabilities
Derivative financial instruments
Commercial paper
Total financial liabilities
Unaudited 31/03/2009
Consolidated
Financial assets
Due from other financial institutions

Total financial assets
Financial liabilities
Derivative financial instruments
Commercial paper

-

6,144

-

6,144

Total financial liabilities

11

19,001-

19,012

Audited 30/09/2009
Consolidated
Financial assets
Due from other financial institutions

2,736

-

-

2,736

Trading securities

1,261

2,905

-

4,166

Available-for-sale assets

1,413

100

-

1,513

Derivative financial instruments
Total financial assets

45

11,363-

11,4085,455

14,368-19,823Financial liabilities
Derivative financial instruments

2

10,760-10,762

Commercial paper

-

7,392

-

7,392

Total financial liabilities

2

18,152-

18,154

ANZ National Bank Limited and Subsidiary Companies
104 – 105

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
The Banking Group holds investments in certain unlisted collateralised debt obligations and other similar assets which arevalued using broker quotes and other valuation methods that rely on significant non observable inputs. The movements inthese balances across the period were:
Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

-

-

-

127

-

-

Sales

(5)

-

-

Revaluations

23

-

-

Foreign exchange movements

(6)

-

-

139

-

-

Opening balance
Purchases

Closing balance

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
32. Fair Value of Financial Assets and Financial Liabilities (continued)
Valuation technique

Quotedmarket price
$m

Using
observable
inputs$m

Usingsignificant
non-observable
inputs
$m

Total
$m

1,772

-

-

1,772

Trading securities

3,178

3,188

-

6,366

Available-for-sale assets

1,632

42

-

1,674

-

6,910

-

6,910

Unaudited 31/03/2010
ParentFinancial assets
Due from other financial institutions

Due from subsidiary companies

3

8,716

-

8,719

6,585

18,856-25,441

Due to subsidiary companies

-

6,506

-

6,506

Derivative financial instruments

46

9,124

-

9,170

Total financial liabilities

46

15,630-15,676

Derivative financial instruments
Total financial assets
Financial liabilities

Unaudited 31/03/2009
ParentFinancial assets
4,269

-

-

4,269

Trading securities

Due from other financial institutions

719

1,846

-

2,565

Available-for-sale assets

515

79

-

594

Due from subsidiary companies

-

7,825

-

7,825

Derivative financial instruments

96

15,066-15,162

5,599

24,816-30,415

Total financial assets
Financial liabilities
Due to subsidiary companies

-

6,429

-

6,429

Derivative financial instruments

11

12,857-

12,868

Total financial liabilities

11

19,286-

19,297

Audited 30/09/2009
ParentFinancial assets
Due from other financial institutions

2,736

-

-

2,736

Trading securities

1,261

2,905

-

4,166

Available-for-sale assets

1,413

98

-

1,511

Due from subsidiary companies

-

5,838

-

5,838

Derivative financial instruments

45

11,404-

11,4495,455

20,245-25,700Due to subsidiary companies

-

5,687

-

5,687

Derivative financial instruments

2

10,767-

10,769Total financial liabilities

2

16,454-

16,456

Total financial assets
Financial liabilities

ANZ National Bank Limited and Subsidiary Companies

33. Segmental Analysis
For segment reporting purposes, the Banking Group is organised into three major business segments – Retail, Commercial andInstitutional. Centralised back office and corporate functions support these segments.
The segments as reported below are consistent with internal reporting provided to the chief operating decision maker, being
the Chief Executive Officer.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent withthe 2010 segment definitions.
A summarised description of each business segment is shown below:
RetailProvides banking products and services to individuals and small businesses through separate ANZ and The National Bankof New Zealand branded distribution channels. Personal banking customers have access to a wide range of financial services
and products. Small business banking services are offered to enterprises with annual revenues of less than $5 million.
Included in this segment is Private Banking, a stand-alone business unit, which offers a fully inclusive banking and investment
service to high net worth individuals. This segment also includes the ING NZ and other profit centres supporting the Retail
Banking segment.
Commercial
This segment provides services to Rural, Corporate and Commercial and UDC customers. A full range of banking products
and services are provided to Rural customers. Corporate and Commercial customers consist of primarily privately owned
medium to large businesses with annual revenues of $2 million and greater. The Banking Group’s relationship with thesebusinesses ranges from simple banking requirements with revenue from deposit and transactional facilities, and cash flow
lending, to more complex funding arrangements with revenue sourced from a wider range of products. UDC is primarily
involved in the financing and leasing of plant, vehicles and equipment, primarily for small and medium sized businesses, aswell as investment products.
Institutional
Institutional provides financial services to large multi-banked corporates, often global, who require sophisticated product andstructuring solutions. The Institutional business unit includes the following specialised units:•••

Markets – provides foreign exchange and commodity trading and sales-related services, origination, underwriting,structuring, risk management and sale of credit and derivative products globally.
Transaction Banking – provides cash management, trade finance and international payments.
Specialised Lending – provides origination, credit analysis, structuring and execution of specific customer transactions.

Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.

106 – 107

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
33. Segmental Analysis (continued)
Business Segment Analysis1,2
Consolidated
Retail$mCommercial$mInstitutional
$m

Other
$m

Total
$m

External interest income

1,570

1,122

93

(7)

2,778

External interest expense

(682)

(173)

(208)

(618)

(1,681)

Net intersegment interest

(435)

(566)

338

663

-

Net interest income

453

383

223

38

1,097

Other external operating income4

209

51

96

41

397

Unaudited 31/03/2010

Share of profit of equity accounted associates andjointly controlled entities

35

-

-

1

36

Operating income

697

434

319

80

1,530
710

Other external expenses

286

82

48

294

Net intersegment and related party expenses3

227

59

28

(276)

38

Operating expenses

513

141

76

18

748

Profit before provision for credit impairment and income tax

184

293

243

61

782

Provision for credit impairment

131

208

(26)

1

314

Profit before income tax

53

85

269

60

468

Income tax expense

23

26

78

(26)

101

Profit after income tax

30

59

191

87

367

4

1

-

20

25

Goodwill

1,141

1,052

1,072

-

3,265

Intangible assets

283

9

2

4

298

Non-cash expenses
Depreciation and amortisation
Balance sheet

-

-

56

88

144

Total external assets

45,84436,901

29,851

981

113,577

Total external liabilities

39,784

10,142

24,57828,541103,045

Share in associates and jointly controlled entities

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3
Net intersegment expenses are eliminated at the Ultimate Parent Bank level.
4
Includes a loss of $82 million (30/9/2009 nil; 31/3/2009 nil) on acquisition of ING NZ and a charge of $nil (30/9/2009 $211 million; 31/3/2009: $166 million) in relation to
ING New Zealand Funds.
1
2

ANZ National Bank Limited and Subsidiary Companies
108 – 109

Notes to the Financial Statements (continued)
33. Segmental Analysis (continued)
Business Segment Analysis1,2
Consolidated
Retail$mCommercial$mInstitutional
$m

Other
$m

Total
$m

External interest income

2,296

1,514

413

3

4,226

External interest expense(1,048)

(322)

(520)

(1,062)(2,951)

Net intersegment interest

(676)

(796)

356

1,115

-

Net interest income

572

397

250

56

1,275

Other external operating income4

85

49

191

107

432

Unaudited 31/03/2009

Share of profit of equity accounted associates andjointly controlled entities

7

-

-

1

8

Operating income

663

446

441

165

1,715
697

Other external expenses

246

82

54

315

Net intersegment and related party expenses3

220

54

27

(261)

41

Operating expenses

467

136

81

54

738

Profit before provision for credit impairment and income tax

197

310

360

110

977

Provision for credit impairment

133

120

32

-

285

Profit before income tax

64

190

328

110

693

Income tax expense

17

57

96

35

204

Profit after income tax

47

133

233

76

488

6

1

1

17

24

1,141

1,052

1,072

-

3,265

40

5

5

8

59

Non-cash expenses
Depreciation and amortisation
Balance sheet
Goodwill
Intangible assets

253

-

65

78

396

Total external assets

Share in associates and jointly controlled entities

50,93337,69635,7793,532

127,941

Total external liabilities

39,062

11,29634,54232,788

117,689

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3
Net intersegment expenses are eliminated at the Ultimate Parent Bank level.
4
Includes a $166 million charge in relation to ING New Zealand Funds.
1
2

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
33. Segmental Analysis (continued)
Business Segment Analysis1,2
Consolidated
Retail$mCommercial$mInstitutional
$m

Other
$m

Total
$m

Audited 30/09/2009
External interest income

4,106

2,697

446

(3)

7,246

External interest expense(1,765)

(533)

(731)

(1,862)(4,892)

Net intersegment interest(1,300)(1,399)

743

1,956

-

Net interest income

1,041

765

458

90

2,354

Other external operating income4

290

99

300

61

749

Share of profit of equity accounted associates andjointly controlled entities

13

-

(2)

3

13

Operating income

1,343

863

756

153

3,116

Other external expenses

486

160

111

629

1,387

Net intersegment and related party expenses3

463

113

56

(542)

90

Operating expenses

948

273

167

88

1,477

Profit before provision for credit impairment and income tax

395

590

588

66

1,639

Provision for credit impairment

359

419

96

-

874

Profit before income tax

36

171

492

66

765

Income tax expense

6

51

142

269

467

Profit after income tax

30

121

351

(203)

298

11

2

2

35

50

1,141

1,052

1,072

-

3,265

45

9

2

4

60

Non-cash expenses
Depreciation and amortisation
Balance sheet
Goodwill
Intangible assets

329

-

61

74

464

Total external assets

Share in associates and jointly controlled entities

46,43037,57431,3182,569

117,891

Total external liabilities

38,96010,51030,24828,085

107,803

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3
Net intersegment expenses are eliminated at the Ultimate Parent Bank level.
4
Includes a $211 million charge in relation to ING New Zealand Funds.
1
2

ANZ National Bank Limited and Subsidiary Companies
110 – 111

Notes to the Financial Statements (continued)
34. Notes to the Cash Flow Statements
Consolidated

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

367

488

298

286

288

1,010

Reconciliation of profit after income tax to net cash
provided by / (used in) operating activities flows
Profit after income tax
Non-cash items:
Depreciation and amortisation

25

24

50

14

13

27

Provision for credit impairment

314

285

874

300

265

840

Deferred fee revenue and expenses

6

3

(8)

6

2

(7)

Share-based payments expense

10

9

18

10

9

18

Amortisation of capitalised brokerage/ mortgage
origination fees

18

27

50

18

27

50

(960)

1,191

(1,874)(1,035)918(2,749)Deferrals or accruals of past or future operating
cash receipts or payments:
Change in net operating assets less liabilities
Change in interest receivable

(1)

101

138

(16)

86

90

Change in interest payable

(106)

(260)

(295)

(101)

(213)

(252)

Change in accrued income

(2)

(5)

1

1

(3)

-

Change in accrued expenses

19

(15)

42

16

(14)

41

Change in provisions

(58)

150

100

(51)

150

96

9

59

76

9

59

76

Increase in insurance policy assets

(25)

-

-

-

-

-

Increase in insurance investment assets

(5)

-

-

-

-

-

Amortisation of premiums and discounts

Decrease in value of associates

-

-

-

-

-

-

Change in net income tax assets

(476)

(61)

141

(461)

(122)

240

Items classified as investing/financing:
Share of profit of equity accounted associates
and jointly controlled entities

(36)

(8)

(11)

-

(2)

-

Impairment of associates

4

-

-

-

-

-

Re-measuring existing equity interest to fair value

82

-

-

61

-

-

Loss / (gain) on disposal of premises and equipment
and intangibles

6

(17)

(13)

5

-

4

(809)

1,971

(413)

(938)

1,463

(516)

Net cash flows (used in) / provided byoperating activities

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
34. Notes to the Cash Flow Statements (continued)
Reconciliation of core liquidity portfolio to cash and cash equivalents
The Banking Group’s core liquidity portfolio held for managing liquidity risk comprises:
Consolidated

Balances with central banks
Securities purchased under agreement to resell

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

1,965

2,418

2,207

1,965

2,418

2,207

128

448

1,075

128

448

1,075
2,736

Certificates of deposit

1,892

4,314

2,736

1,857

4,314

Government, Local Body stock and bonds

2,961

477

1,102

2,961

477

1,102

Available-for-sale assets

1,524

394

1,435

1,524

394

1,435

Other bank bonds

2,934

1,324

2,522

2,934

1,324

2,522

Total liquidity portfolio1

11,404

9,375

11,077

11,369

9,375

11,077

Liquid assets not with central banks

554

963

555

538

963

551

Due from other financial institutions – less than 90 days

48

2,726

550

48

2,726

550

(5,980)(1,846)(3,624)(5,980)(1,846)(3,624)

Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:

Non-cash items included within liquidity portfolio:
Trading securities
Available-for-sale assets(1,524)(394)(1,435)(1,524)(394)(1,435)Due from other financial institutions – greater than 90 days

(1,303)(3,607)(2,358)(1,303)(4,167)(2,358)

Total cash and cash equivalents

3,199

7,217

4,765

3,148

6,657

4,761

Reconciliation of cash and cash equivalents tothe balance sheets
Liquid assets

1

2,519

3,390

2,762

2,502

3,390

2,758

Due from other financial institutions – less than 90 days

680

3,827

2,003

646

3,267

2,003

Total cash and cash equivalents

3,199

7,217

4,765

3,148

6,657

4,761

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

ANZ National Bank Limited and Subsidiary Companies
112 – 113

Notes to the Financial Statements (continued)
35. Significant Controlled Entities, Associates and Interests in Jointly Controlled Entities
Controlled entities
Airlie Investments Limited2
Alos Holdings Limited
ANZ Capital NZ Limited
ANZ Investment Services (New Zealand) Limited
ANZ National (Int'l) Limited
ANZ National Staff Superannuation Limited
APAC Investments Limited
Arawata Assets Limited
Arawata Capital Limited
Arawata Finance Limited
Arawata Funding Limited
Arawata Holdings Limited
Arawata Securities Limited
Arawata Trust
Arawata Trust Company
BHI Limited
CBC Finance Limited (incorporated in British Virgin Islands)
Control Nominees Limited
Cortland Finance Limited
Corvine Investments Limited
Culver Finance Limited
Direct Broking Limited
Direct Nominees Limited
EFTPOS New Zealand Limited
Endeavour Finance Limited
Endeavour Securities Limited2
General Finance Custodians Limited
Harcourt Corporation Limited
Harcourt Investments Limited
ING (NZ) Holdings Limited1
ING (NZ) Limited1
ING (NZ) Nominees Limited1
ING Insurance Holdings Limited1
ING Insurance Services (NZ) Limited1
ING Life (NZ) Limited1
ING Medical Properties Limited1
ING NZ AUT Investments Limited1
ING Property Trust Management Limited1
ING Diversified Yield Fund1 (incorporated in Australia)
ING Regular Income Fund1 (incorporated in Australia)
Karapiro Investments Limited
Kingfisher NZ Trust 2008-1
National Bank of New Zealand Custodians Limited
NBNZ Finance Limited
NBNZ Holdings Hong Kong Limited (incorporated in Hong Kong)
NBNZ Holdings Limited
OneAnswer Nominees Limited1
Origin Mortgage Management Services Limited
Origin Mortgage Management Services (2008) Limited
Private Nominees Limited
Radiola Corporation Limited
Rural Growth Fund Limited
Sefton Finance Limited2
Silver Fern Life Brokers Limited1
South Pacific Merchant Finance Limited
Southpac Corporation Limited
Trillium Holdings Limited
Tui Endeavour Limited
Tui Securities Limited
UDC Finance Limited
1
2

Controlling stake acquired on 30 November 2009.
Currently being wound up.

Ownership
Interest %
100
100
100
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99
99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Balance Date
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 December
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 March
30 September
30 September
31 December
31 December
31 December
31 December
31 December
31 December
31 March
31 December
31 March
30 June30 June30 September
30 September
30 September
30 September
31 December
30 September
31 December
31 March
31 March
30 September
30 September
30 September
30 September
31 December
30 September
30 September
30 September
30 September
30 September
30 September

Nature of business
Non-operating company
Investment company
Investment company
Funds management company
Finance company
Staff superannuation scheme trustee
Finance company
Property company
Investment company
Investment company
Non-operating company
Investment company
Non-operating company
Finance entity
Investment company
Non-operating company
Non-operating company
Finance company
Non-operating company
Non-operating company
Non-operating company
On-line share broker
Nominee company
Eftpos service provider
Investment company
Non-operating company
Mortgage finance
Investment company
Non-operating company
Holding company
Funds management company
Finance company
Holding company
Insurance company
Insurance company
Management company
Holding company
Management company
Fixed income fundFixed income fundNon-operating company
Finance entity
Nominee and custody services
Non-operating company
Non-operating company
Non-operating company
Finance company
Mortgage financeMortgage financeNominee company
Distribution company
Investment company
Non-operating company
Non-operating company
Investment company
Investment company
Non-operating company
Non-operating company
Non-operating company
Finance company

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
35. Significant Controlled Entities, Associates and Interests in Jointly Controlled Entities (continued)
All controlled entities are incorporated in New Zealand, unless stated.
For all controlled entities, with the exception of General Finance Custodians Limited, Origin Mortgage Management Services
Limited and Origin Mortgage Management Services (2008) Limited, the ownership interest percentage equates to the voting
power held. In relation to these companies, control exists through the Banking Group having 100% of the voting rights.
In relation to Arawata Trust control exists through ANZ National Bank Limited being trustee of the Trusts. In relation to Kingfisher
NZ Trust 2008-1 control exists as the Banking Group retains substantially all the risks and rewards of the operations.
Movements in controlled entities
In October 2008, Kingfisher Trust 2008-1 was established.
In October 2008, ETRADE New Zealand Limited, ETRADE New Zealand Securities Limited and ETRADE New Zealand Securities
Nominees Limited were deregistered.
In April 2009, the Bank ceased to control Marmion Trust. Control previously existed through the undertaking of the majority ofrisks and rewards relating to a particular transaction. This transaction was unwound in April 2009.
On 30 November 2009 the Bank acquired control over ING NZ and its subsidiary companies which had previously been treatedas jointly controlled entities.
Associates
Unaudited
31/03/10
Book
Value
$m

Unaudited
31/03/09
Book Value$m

Audited30/09/09
Book Value$m

VotingInterest%

Ownership
Interest %Balance
Date

Nature of business

Cards NZ Limited

85

87

85

30

15

30 September

Card services

Paymark Limited

2

2

2

25

25

31 March

Eftpos settlements

Bennetts Financial Services
Limited

1
-

-

20

20

31 March

ING Diversified Yield Fund

-

-

46

49

49

30 JuneFixed income fundFinancial services

-

-

21

49

49

30 JuneFixed income fund

NZ Poultry Enterprises Limited

41

41

41

20

20

30 April

Poultry processor

UCG Investments Limited

10

15

13

40

40

31 March

Rest home operator

Wyma Engineering (NZ)
Limited

3

3

3

31

31

31 March

Agricultural
machinery supplier

142

148

211

ING Regular Income Fund

Total investment in associates

All associates are incorporated in New Zealand, excluding the ING Diversified Yield Fund and ING Regular Income Fund which
are incorporated in Australia.
Movements in associates
In August 2009, the Banking Group acquired an interest in the ING Diversified Yield Field and ING Regular Income Fund.
In September 2009, Electronic Transactions Services Limited changed its name to Paymark Limited.
On 30 November 2009 the Bank acquired control over ING NZ and its subsidiaries. This acquisition gave the Bank control overthe ING Diversified Yield Fund and the ING Regular Income Fund which had been previously treated as investments
in associates.

ANZ National Bank Limited and Subsidiary Companies
114 – 115

Notes to the Financial Statements (continued)
35. Significant Controlled Entities, Associates and Interests in Jointly Controlled Entities (continued)
Jointly controlled entities
Unaudited
31/03/10
Book
Value
$m

Argenta Limited

1

Unaudited
31/03/09
Book
Value
$m

2

Audited30/09/09
Book
Value
$m

2

VotingInterest%

21

Ownership
Interest %21

Balance
Date

Nature of business

31 July

Manufacture andmarketing of animal
remedies

BCS Group Limited

1

3

2

40

40

30 JuneManufacturer ofbaggage handlingsystems

ING (NZ) Holdings Limited

-

242

248

50

49

31 December

Funds management
and insurance

JMI Aerospace Limited

-

1

1

33

33

31 March

Airline maintenanceand service provider

Total investment injointly controlled entities

2

248

253

All jointly controlled entities are incorporated in New Zealand. The Banking Group has joint control of all these entities due toa combination of control factors, none of which gives either party overall control.
On 30 November 2009 the Bank acquired control over ING and its subsidiaries. This acquisition gave the Bank control overING (NZ) Holdings Limited which had been previously treated as a jointly controlled entity. In December 2009 the Banking
Group disposed of its investment in JMI Aerospace Limited.
The summarised financial information relating to the Banking Group’s investment in ING (NZ) Holdings Limited prior to it
becoming a subsidiary is as follows:
Consolidated
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Investments

-

67

91

Other assets

-

179

171

Total assets

-

246

262

Life insurance policy liabilities

-

(36)

(46)

Other liabilities

-

46

63

Total liabilities

-

10

17

Net assets

-

236

245

16

43

84

Share of assets and liabilities

Share of revenue, expenses and results
Net underwriting result
Other revenue

4

7

32

Total revenue

20

50

116

Expenses

15

46

108

Profit before income tax

5

4

8

Income tax credit

(1)

(2)

(5)

Profit after tax

6

6

13

-

17

17

Share of commitments
Lease commitments

There are no unrecognised losses in respect of any of the Banking Group’s jointly controlled entities. The Banking Group’s
share of the contingent liabilities of its joint ventures are incurred jointly with other investors. Other than as referred to in Note38, there were no material contingent liabilities as at 31 March 2010 (31/03/2009 $nil; 30/09/2009 $nil).

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
36. Securitisation, Funds Management, Other Fiduciary Activities and the Marketing and Distribution of
Insurance Products
Securitisation
The Bank enters into transactions in the normal course of business by which it transfers financial assets directly to third parties
or to special purpose entities. These transfers may give rise to the full or partial derecognition of those financial assets.
••

Full derecognition occurs when the Bank transfers its contractual right to receive cash flows from the financial assets, or
retains the right but assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks
and rewards of ownership. These risks include credit, interest rate, currency, prepayment and other price risks.
Partial derecognition occurs when the Bank sells or otherwise transfers financial assets in such a way that some but not
substantially all of the risks and rewards of ownership are transferred but control is retained. These financial assets arerecognised on the balance sheet to the extent of the Bank’s continuing involvement.

In May 2008 the RBNZ expanded the range of acceptable collateral that banks can pledge and borrow against as part ofchanges to its liquidity management arrangement designed to help ensure adequate liquidity for New Zealand financial
institutions in the event that global market disruption was to intensify. From 31 July 2008, acceptable collateral includes
residential mortgage backed securities (“RMBS”) that satisfy RBNZ criteria.
In October 2008, the Banking Group established an in-house RMBS facility that could issue securities meeting the RBNZ criteria.
The establishment of the facility resulted in the Parent financial statements recognising a payable and receivable of equalamount to Kingfisher NZ Trust 2008-1. These assets do not qualify for derecognition as the Bank retains a continuing involvementin the transferred assets, therefore the Consolidated Group’s financial statements do not change as a result of establishingthese facilities.
The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent that any loans arefound to be ineligible in terms of the RBNZ criteria, they are removed from the facility. Additional lending to existing RMBS
customers is added into the facility on a monthy basis.
The establishment of this facility increases the Banking Group’s contingent funding ability from the RBNZ.
Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and investment and superannuation
funds. The Bank provides private banking services to a number of clients, including investment advice and portfolio
management. The Banking Group is not responsible for any decline in performance of the underlying assets of the investors
due to market forces.
As funds under management are not controlled by the Banking Group, they are not included in these financial statements. The
Banking Group derives fee and commission income from the sale and management of investment funds and superannuation
bonds, unit trusts and the provision of private banking services to a number of clients. The Banking Group derives commission
income from the sale of third party funds management products.
Some funds under management are invested in products owned or securities issued by the Banking Group and are recorded
as liabilities in the balance sheet. At 31 March 2010, $2,715 million of funds under management were invested in the Banking
Group’s own products or securities (31/03/2009 $2,735 million; 30/09/2009 $2,664 million).
The aggregate value of funds managed by the Banking Group at balance date was:
Consolidated

Funds managed by ING

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

6,992

-

-

Bonus Bonds

2,919

2,611

2,889

Discretionary funds

4,697

4,251

4,360

Totals funds under management

14,608

6,862

7,249

In October 2008, the ANZ Call Fund and ANZ Term Fund, managed by UDC Finance Limited, commenced as portfolio investment
entities. The funds invest in New Zealand dollar call and term deposits with the Bank.

ANZ National Bank Limited and Subsidiary Companies

36. Securitisation, Funds Management, Other Fiduciary Activities and the Marketing and Distribution of
Insurance Products (continued)
Custodial services
The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by those customers.
Provision of financial services
Financial services provided by the Banking Group to entities which are involved in trust, custodial, funds management andother fiduciary activities, and to affiliated insurance companies which conduct marketing or distribution of insurance products,
or on whose behalf the marketing or distribution of insurance products are conducted, are provided on arm’s length terms
and conditions and at fair value. Any assets purchased from such entities have been purchased on an arm’s length basis and atfair value.
The Banking Group has not provided any funding to entities except standard lending facilities provided in the normal
course of business on arm’s length terms which conduct any of the following activities: trust, custodial, funds management orother fiduciary activities established, marketed and/or sponsored by a member of the Banking Group (31/03/2009 $nil;
30/09/2009 $nil).
Insurance business
The Banking Group conducts insurance business through subsidiaries of ING NZ – the assets, liabilities and operations of which
are fully consolidated into the Banking Group since acquisition. Previously the Banking Group did not conduct any insurance
business directly, although it held a 49% ownership share in ING NZ. The Banking Group also markets and distributes a range
of insurance products which are underwritten by subsidiaries of ING NZ, as well as third party insurance companies.
The insurance business comprises risk transfer and investment contract life insurance products. The aggregate insurance
business conducted by companies in the Banking Group comprises assets totalling $333 million (31/3/2009: $nil; 30/9/2009:$nil) which is 0.3% (31/03/2009: 0.0%; 30/9/2009: 0.0%) of the total consolidated assets of the Banking Group.
Risk management
The Bank and subsidiaries of the Banking Group participating in the activities identified above have in place policies andprocedures to ensure that those activities are conducted in an appropriate manner. Should adverse conditions arise, it isconsidered that these policies and procedures will minimise the possibility that these conditions will adversely impact theBank. The policies and procedures include comprehensive and prominent disclosure of information regarding products, andformal and regular review of operations and policies by management.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing
insurance products:
Investment statements, prospectuses and brochures for insurance products include disclosures that the Bank and its
subsidiaries do not guarantee the insurer, nor the insurer’s subsidiaries, nor any of the products issued by the insurer or the
insurer’s subsidiaries.
Where the insurance products are subject to the Securities Act 1978, investment statements, prospectuses and brochures
additionally include disclosures that:•••the policies do not represent deposits or other liabilities of the Bank or its subsidiaries;
the policies are subject to investment risk, including possible loss of income and principal; andthe Bank and its subsidiaries do not guarantee the capital value or performance of the policies.

Application forms for insurance products contain acknowledgements to be signed by a purchaser which are consistent withthe disclosures for insurance products noted above.
In addition, the following measures have been taken to manage any risk to the Bank of marketing and distributing fundmanagement products:
Prospectuses, investment statements and brochures for funds management products include disclosures:•••that the securities do not represent deposits or other liabilities of the Bank;
that the securities are subject to investment risk including possible loss of income and principal invested; andthat the Bank does not guarantee the capital value or performance of the securities.

Application forms for funds management products contain acknowledgements to be signed by a purchaser which areconsistent with the disclosures for funds management products noted above.

116 – 117

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
37. Commitments
Consolidated

ParentUnaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Not later than 1 year

11

22

19

2

-

-

Total capital expenditure commitments

11

22

19

2

-

-

Capital expenditure
Contracts for outstanding capital expenditure:
Premises and equipment

Lease rentals
Future minimum lease payments under
non-cancellable operating leases:
Premises and equipment
Not later than 1 year

88

86

82

15

15

15

Later than 1 year but not later than 5 years

165

156

155

9

15

12

Later than 5 years

38

31

31

-

-

-

Total lease rental commitments

291

273

268

24

30

27

Total commitments

302

295

287

26

30

27

38. Contingent Liabilities and Credit Related Commitments
For contingent exposures, the maximum exposure to credit risk is the maximum amount that the Banking Group would haveto pay if the contingent is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of thecommitted facilities.
Consolidated

ParentFace or contract value
Unaudited
31/03/2010$m

Unaudited
31/03/2009$mFace or contract value

Audited30/09/2009$m

Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009$m

Credit related commitments
566

732

735

566

732

735

Commitments to provide financial services

21,30822,60922,09421,06722,36022,302

Total credit related commitments

21,874

23,341

22,82921,63323,092

23,037

1,716

1,913

1,753

1,716

1,913

1,753

Commitments with certain drawdown due within one year

Contingent liabilities
Financial guarantees
Standby letters of credit

62

374

341

62

374

341

Transaction related contingent items

977

1,083

982

977

1,083

982

Trade related contingent liabilities
Total contingent liabilities

84

65

89

81

65

86

2,839

3,435

3,165

2,836

3,435

3,162

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third
parties, including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan
facilities to customers, therefore these transactions are subjected to the same credit origination, portfolio management andcollateral requirements for customers applying for loans. As the facilities may expire without being drawn upon, the notionalamounts do not necessarily reflect future cash requirements.
A summary of other contingent liabilities follows.

ANZ National Bank Limited and Subsidiary Companies

38. Contingent Liabilities and Credit Related Commitments (continued)
Commerce Commission
The Bank is aware that the Commerce Commission is looking at credit contract fees under the Credit Contracts and Consumer
Finance Act 2003 (“CCCFA”). In its 2009-2012 Statement of Intent the Commission stated that:“Compliance with the Credit Contracts and Consumer Finance Act is a priority area for the Commission, given the deterioration in
consumer confidence in the financial sector and the important role that a competitive lending market can play in strengthening the
New Zealand economy.”
In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged on credit cards,
the level of currency conversion charges on overseas transactions using credit cards and also informal excess arrangements on
credit cards under the CCCFA. At this stage the possible outcome of these investigations and any liability or impact on feescannot be determined with any certainty. The Commission has concluded its investigation into early repayment charges on
fixed rate mortgages with no action being taken against the Bank.
ING NZ Funds
The Bank markets and distributes a range of wealth management products in New Zealand. The products are manufactured
and managed by ING NZ. Trading in two of the products, the ING Diversified Yield Fund and the ING Regular Income Fund(together, “the Funds”), was suspended on 13 March 2008, due to deterioration in the liquidity and credit markets. Units in theFunds were sold by the Bank to its customers.
In June 2009, ING NZ AUT Investments Limited, a subsidiary of ING NZ, made an offer to investors in the Funds. The offer closed
on 13 July 2009. Investors holding approximately 99% of the Funds accepted the offer to purchase their units and have received
a payment of 60 cents per unit in the ING Diversified Yield Fund or 62 cents per unit in the ING Regular Income Fund, asapplicable, either (i) in cash, or (ii) by way of deposit in an on-call account with the Bank, paying 8.30% per annum fixed for up
to five years.
The Commerce Commission is separately investigating both the Bank and ING NZ in respect of their roles inmanufacturing, managing and selling of the Funds. On 15 April 2010, the Commission said that it has reached a decision onwhether it will prosecute the Bank over the promotion of the Funds but is not publicly releasing the outcome yet. The
Commission commented:“We are involved in ongoing discussions with the ANZ and won’t be making any further comment until those discussions
are complete”
The ultimate cost to the Bank will depend on the final value of units in the Funds, any recoveries under insurance, the assessmentand outcome of the customer complaints and the results of any litigation and regulatory investigations or proceedings that
may be brought in connection with the Funds or their sale. The Banking Group considers it has adequately provided for thesematters at this time.
Other contingent liabilities
The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessmentof the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision made whereappropriate. As at 31 March 2010, there were no other contingent assets or liabilities required to be disclosed (31/03/2009 nil;
30/09/2009 nil).

39. Employee Share and Option Plans
The Banking Group participates in the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan operated by the
ANZ Banking Group. Any shares or options granted under these plans are shares in ANZ.
The closing market price of one ordinary share of ANZ quoted on the ASX (Australian Stock Exchange) at 31 March 2010 was
A$25.36 (31/03/2009 A$15.75; 30/09/2009 A$24.39).
ANZ Employee Share Acquisition Plan
The ANZ Employee Share Acquisition Plan includes the A$1,000 Share Plan, the Deferred Share Plan and the Restricted
Share Plan.
A$1,000 share plan
Each permanent employee who has had continuous service for one year with the Banking Group is eligible to participate in ascheme enabling the issue of up to A$1,000 of shares of ANZ in each financial year, subject to the approval of the Ultimate
Parent Bank Board. The shares vest subject to satisfaction of a three year service period but may be forfeited in the event of
resignation or termination for serious misconduct. On expiration of that period, an employee may sell the shares, transfer theminto their name, or have them retained in trust. The issue price is based on the one-day volume weighted average price(“VWAP”) of the shares traded on the ASX on the date of issue.
The Banking Group’s employees are required to pay NZ 1 cent per share as soon after the issuing of shares to them. During thesix months to 31 March 2010, 358,313 shares with an average issue price of A$22.02 were issued under the A$1,000 Share Plan
(31/03/2009 540,305 shares with an average issue price of A$14.94 were issued; 30/09/2009 540,305 shares with an average
issue price of A$14.94 were issued).

118 – 119

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
39. Employee Share and Option Plans (continued)
Deferred share plan
The Banking Group’s last issue of shares under this plan was in November 2004. Selected employees were issued deferredshares, which vest subject to satisfaction of a minimum three year service period from the date of issue. Ordinary shares issued
under this plan may be held in trust for up to 10 years, and may be required to meet performance hurdles before being able tobe traded after the restriction period has expired. The issue price is based on the VWAP of the shares traded on the ASX in thefive trading days leading up to and including the date of issue. Unvested shares are forfeited on resignation or dismissal, or if a
performance condition has not been met.
Restricted share plan
Selected employees have the option to take some (or all) of their incentive payment as Restricted Shares. The shares are heldin trust and may not be traded until the conclusion of the one-year restriction period, after which they may be transferred into
the employee’s name. Until they are transferred into the employee’s name, they continue to be subject to forfeiture on
termination for serious misconduct.
Shares valuations
The fair value of services received in return for shares in the ANZ Employee Share Acquisition Plan are measured by referring to
the fair value of shares granted. The fair value of shares granted in the current period, measured at the date of grant of theshares, is $10 million based on 358,313 shares at a weighted average price of A$22.02 converted at the exchange rate of 0.7999(31/03/2009 $10 million based on 540,305 shares at a weighted average price of A$14.94 converted at the exchange rate of
0.8232 were issued; 30/09/2009 NZ $10 million based on 540,305 shares at a weighted average price of A$14.94 converted at
the exchange rate of 0.8232 were issued).
The average issue price of shares granted and the number of shares that are expected to ultimately vest to the employees atthe end of the vesting period are used to calculate the fair value of shares. No dividends are incorporated into the measurementof the fair value of shares.
ANZ Share Option Plan
Selected employees may be granted options, which entitle them to purchase ordinary fully paid shares in ANZ at a price fixedat the time when the options were issued. Voting and dividend rights will be attached to the unissued ordinary shares when
the options have been exercised. Each option entitles a holder to purchase one ordinary share subject to any terms andconditions imposed on issue. The exercise price of the options (excluding zero-priced options) is determined in accordancewith the rules of the plan, and is based on the weighted average price of the Ultimate Parent Bank’s shares traded during thefive business days preceding the date of granting the options.
The main schemes of the ANZ Share Option Plan are as follows:
Current option plans
Special Retention Deferred Share Rights
This is a program available to certain Banking Group employees. It grants the right to acquire shares at nil cost subject tosatisfactorily meeting the time based hurdle. The Special Retention Deferred Share Rights can only be exercised between thethird and fifth anniversary of their allocation (the ‘Exercise Period’). In the case of resignation, only rights that become
exercisable by the end of the notice period may be exercised. A grace period is provided in which to exercise the rights. Allother rights will lapse. In the case of termination on notice, retrenchment, retirement, death or total and permanent disablement,a grace period is provided in which to exercise all deferred share rights.
Performance rights planThis scheme is a long term incentive program available to certain Banking Group employees since November 2005 andgrants the right to acquire shares at nil cost, subject to a three year vesting period and a Total Shareholder Return (“TSR”)
performance hurdle. The proportion of rights that will become exercisable will depend upon the TSR achieved by ANZ
relative to the companies in the comparator group, which consists of selected major financial services companies in theStandard & Poor’s and ASX 100 Index. Performance equal to the median TSR of the comparator group will result in half therights becoming exercisable. Performance above the median will result in further performance rights becoming exercisable,
increasing on a straight line basis until all of the rights become exercisable where ANZ’s TSR is at or above the 75th percentile
in the comparator group.
The TSR hurdle will only be tested once at the end of the three-year vesting period. If the rights do not pass the hurdle
on testing date, or if they pass the hurdle on testing date and are not exercised by the end of five years from the grant date,
the rights will lapse. In the case of resignation or termination on notice, only rights that become exercisable by the end of
the notice period may be exercised. A grace period is provided in which to exercise the rights. All other rights will lapse. In
the case of retrenchment or retirement, performance rights will be performance tested at the date of termination andwhere performance hurdles have been met, performance rights will be pro-rated and a grace period provided in which toexercise the rights. In case of death or total and permanent disablement, a grace period is provided in which to exercise all
performance rights.

ANZ National Bank Limited and Subsidiary Companies

39. Employee Share and Option Plans (continued)
LTI Deferred Share Rights
This scheme is a long term incentive program available to certain Banking Group employees and grants the right to acquire ashare at nil cost, subject to satisfactorily meeting the time based hurdle. The LTI Deferred Share Rights can only be exercised
between the third and fifth anniversary of their allocation (their ‘Exercise Period’). In the case of resignation, all unvested LTI
Deferred Share Rights (in addition to any vested unexercised rights) as at the time notice of resignation is given, will be forfeited.
In case of termination on notice by ANZ, all unvested LTI Deferred Share Rights as at the time notice of termination of notice isreceived, will be forfeited. Any vested unexercised LTI Deferred Share Rights will be delivered as shares. In case of retrenchment(redundancy), any unvested LTI Deferred Share Rights as at the termination date will be pro-rated and be delivered as shares.
In case of death or total and permanent disablement, all LTI Deferred Share Rights will vest and be delivered as shares.
Deferred share rights
This scheme is a short term incentive program available to certain Banking Group employees since November 2004 and grants
the right to acquire shares at nil cost after a specified vesting period ranging from one to three years. Deferred share rights
must be exercised by the seventh anniversary of grant date. In the case of resignation, only rights that become exercisable by
the end of the notice period may be exercised. A grace period is provided in which to exercise the rights. All other rights will
lapse. In the case of termination on notice, retrenchment, retirement, death or total and permanent disablement, a grace
period is provided in which to exercise all deferred share rights.
Deferred share options
This scheme is a part of the short term incentive program available whereby certain Banking Group employees receive amandatory deferred bonus under ANZ’s Short Term Incentive (“STI”) program. The options can only be exercised between thefirst and fifth anniversary (one-year deferred options) and between the second and fifth anniversary (two-year deferred
options) of the grant date (exercise period) and subject to the requirement that the share price is greater than the exercise
price. In the case of dismissal for serious misconduct, irrespective of whether it is on notice or not, all unvested STI deferred
options and any vested unexercised options will be forfeited. In the case of resignation, all unvested STI deferred options andany vested unexercised options as at the time notice of resignation is given will be forfeited. In the case of redundancy,
retrenchment, death or total and permanent disablement, all STI deferred options will vest and a grace period is provided inwhich to exercise all deferred share options.
Legacy Option Plans
Performance options planThis scheme is a long term incentive program available to certain Banking Group employees. The options can only be exercised
after a three year vesting period and before the seventh anniversary of the grant date. There are no other performance
conditions attached to these options. All unexercised options are generally forfeited on resignation but any options to which
the Banking Group employee is entitled will need to be exercised within a specified period of termination. On retrenchment,
entitlements to options will be pro-rated over the three year vesting period. On death or total and permanent disablement, allunvested options will become available for exercise. No further performance options have been granted to Banking Group
employees after November 2005.
Zero-price options (“ZPO”)
A ZPO is a right to acquire a share at nil cost and is granted to certain employees as part of their employment contracts. The
ZPO’s have no time based vesting criteria, so can be exercised at any time during employment and within 6 months oftermination of employment. ZPO’s must be exercised within two years of grant date or they lapse.
Other past option plans which are no longer available to the Banking Group’s employees, but continue to be amortised during
their appropriate vesting periods are hurdled options and index linked options (“ILOs”).

120 – 121

Notes to the Financial Statements (continued)

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
39. Employee Share and Option Plans (continued)
Details of the options over unissued ANZ ordinary shares and their related weighted average exercise prices as at the beginningand end of the period and movements during the period are set out below:
Consolidated / Parent
Unaudited 31/03/2010

Share options at beginning of the period

Unaudited 31/03/2009

Number ofshares

Weighted
average
exercise
price1A$

2,067,345

Audited 30/09/2009

Number ofshares

Weighted
average
exercise
price1A$

Number ofshares

Weighted
average
exercise
price1A$

8.32

1,741,771

10.86

1,741,771

10.86
2.51

Share options granted

494,168

1.39

709,805

2.51

709,805

Share options exercised(300,938)

6.90(66,823)

1.28(109,936)

5.73

Share options forfeited and expired(99,556)

1.25(150,781)

3.68(274,295)

10.44

Share options at end of the period

2,161,019

7.00

2,233,972

8.98

2,067,345

8.32

Weighted average share price during the period

22.65

14.86

16.53

Range of exercise prices on share options at endof the period

0.00 - 23.49

0.00 - 23.49

0.00 - 23.49

Weighted average remaining contractual life on
share options at end of the period

36 months

39 months

35 months

Options valuations
The fair value of services received in return for share options are measured by referring to the fair value of share options
granted. The fair value of options granted in the current period, measured at the date of grant are calculated using one of thefollowing models:a.

Monte-Carlo simulation model utilising the assumptions underlying Black-Scholes. In terms of factoring in early exercise,the model assumes that deferred share rights and performance rights are exercised as soon as they vest so that the option
holder can benefit from the dividends. It assumes that the performance options are exercised when the share price reaches
twice the exercise price; orb. an adjusted form of the Binomial Option pricing model (“BOM”). In terms of factoring in early exercise, the model assumes
that the expected life of vanilla options is 5 years, performance rights is 4 years and that deferred share rights are exercised
immediately to account for lack of marketability.
In addition, both models are designed such that they take into account as appropriate, any performance hurdles andnon-transferability of the options.
The following inputs are used to measure the fair value of instruments granted during the year. All prices are quoted inAustralian dollars:
Option type
Grant date2

STI deferredshare rights

LTI deferredshare rights

PerformancerightsShareoptions

Shareoptions

13/11/09

13/11/09

13/11/09

13/11/09

13/11/09

13/11/09

Number of options

79,646

83,635

259,71341,084

15,046

15,044

Option value

21.41

20.39

19.42

12.17

4.83

5.09

Exercise price (5 day VWAP)

$nil

$nil

$nil

$nil

22.8

22.8

Share price at grant ($A)

22.48

22.48

22.48

22.48

22.48

22.48

ANZ expected volatility2

35%

35%

35%

35%

35%

35%

5 years

5 years

5 years

5 years

5 years

5 years

Option term

1

STI deferredshare rights

Vesting period

1 year

2 years

3 years

3 years

1 year

2 years

Expected life

1 year

2 years

3 years

3 years

3 years

4 years

Expected dividends

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

Risk free interest rate

4.3%

4.7%

5.0%

5.0%

5.0%

5.2%

Calculation of weighted average exercise prices are affected by performance rights, deferred share rights and ZPO plans which have nil exercise prices.
Expected volatility is based on ANZ’s historic volatility.

ANZ National Bank Limited and Subsidiary Companies
122 – 123

Notes to the Financial Statements (continued)
40. Retirement Benefit Obligations
The Banking Group has established a number of pension and superannuation schemes. The Banking Group may be obliged tocontribute to the schemes as a consequence of legislation and provision of trust deeds. Legal enforceability is dependent on
the terms of the legislation and the requirements of Scheme Trust Deeds. The major schemes are:Contribution levels
SchemeScheme type

Employee

Employer

ANZ National Bank Staff Superannuation Scheme1

Defined Benefit Scheme2orDefined Contribution Scheme

Nil

Balance of cost4

2.5% minimum of salary

7.5% of salary6

The National Bank Staff Superannuation Fund

Defined Benefit SchemeorDefined Contribution Scheme

5% of salary

Balance of cost5

2.0% minimum of salary

11.5% of salary7

1

3

Details of the defined benefit schemes are as follows:
Actuarial valuations for financial reporting purposes are undertaken every six months. The latest valuations were carried out
as at 31 March 2010.
The amounts recognised in the balance sheet arising from the Banking Group’s obligation in respect of its defined benefit
schemes are determined as follows:
Consolidated / Parent
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

179

174

179

Current service cost

1

1

3

Interest cost

5

5

11

Defined benefit obligation at beginning of the period

Contributions by scheme participants

-

1

1

Actuarial (gains) / losses

(5)

(1)

(2)

(9)

(8)

(18)

Present value of funded defined benefit obligations

166

177

174

Fair value of scheme assets at beginning of the period

119

152

152

Benefits paid

Expected return on scheme assets (net of tax)

4

4

8

Actuarial gains / (losses)

10

(38)

(27)

Contributions by employer

6

1

3

Contributions by scheme participants

-

-

1

Benefits paid

(9)

(8)

(18)

Fair value of scheme assets

130

111

119

Net defined benefit liability recognised on balance sheet

(36)

(66)

(55)

The fair value of scheme assets include cash deposits and fixed interest investments of $2 million with the Banking Group as at
31 March 2010 (31/03/2009 $6 million; 30/09/2009 $4 million).
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:
Current service cost/contributions

1

1

3

Interest cost

5

5

11

Expected return on scheme assets (net of tax)

(4)

(4)

(8)

Contribution withholding tax

2

1

2

Total pension costs recognised in the income statement – defined benefit superannuation schemes

4

3

8

These schemes provide for pension benefits and provide for lump sum benefits.
Closed to new members on 31 March 1990. Operates to make pension payments to retirees who were members of that section of the scheme or to dependentsof the members.
3
Closed to new members on 1 October 1991.
4
31/03/2010: $nil (31/03/2009 $nil; 30/09/2009 $nil).
5
31/03/2010: 24.8% (31/03/2009 24.8%; 30/09/2009 24.8%) of members’ salaries.
6
31/03/2010: 7.5% (31/03/2009 7.5%; 30/09/2009 7.5%) of members’ salaries.
7
31/03/2010: 11.5% (31/03/2009 11.5%; 30/09/2009 11.5%) of members’ salaries.
1
2

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
40. Retirement Benefit Obligations (continued)
The actuarial gains and losses recognised directly in equity via the statement of recognised income and expense are as follows:
Consolidated / Parent
Unaudited
31/03/2010$m

Unaudited
31/03/2009$m

Audited30/09/2009
$m

(50)

(25)

(25)

Actuarial losses (pre-tax) at beginning of the period
Actuarial gain / (loss) (pre-tax) incurred

14

(39)

(25)

Balance of actuarial losses (pre-tax) at end of the period

(36)

(64)

(50)

Income tax expense / (credit) recognised directly in equity

4

(11)

(7)

(32)

(75)

(57)

Balance of actuarial losses at end of the period

The principal actuarial assumptions used were as follows:
The National Bank
Staff Superannuation FundANZ National Bank
Staff Superannuation Scheme

Unaudited
31/03/2010

Unaudited
31/03/2009

Audited30/09/2009

Unaudited
31/03/2010

Unaudited
31/03/2009

Audited30/09/2009

Defined benefits calculation
Discount rate (gross of tax)

6.0%

6.0%

6.0%

6.0%

6.0%

6.0%

Future price inflation

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

Future pension increases

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

Future salary increases

3.0%

3.7%

n/a

n/a

n/a

4.5%

4.5%

4.5%

2009 & 2010

2.5%

Post 2010

3.0%

Scheme assets calculation
Expected return on scheme assets (net of tax)

5.5%

5.5%

5.5%

The overall expected return on scheme assets is determined by reference to market expectations at the beginning of therelevant period of asset performance applicable to the period over which the defined benefit obligation is to be settled. The
overall expected return on scheme assets reflects an aggregation of the expected returns on the underlying asset classes.
The actual return on scheme assets (net of tax) for The National Bank Staff Superannuation Fund was 7.3% for the six months
ended 31 March 2010 (31/03/2009 -10.57%; 30/09/2009 -0.7%). The actual return on scheme assets (net of tax) for the ANZ National
Bank Staff Superannuation Scheme was 3.4% for the six months ended 31 March 2010 (31/03/2009 -7.25%; 30/09/2009 0.0%).
The investment return on scheme assets is taxed at 30% (31/03/2009 30%; 30/09/2009 30%).
The major categories of scheme assets as a percentage of the fair value of scheme plan assets are as follows:
The National Bank
Staff Superannuation Fund
Unaudited
31/03/2010

Unaudited
31/03/2009

ANZ National Bank
Staff Superannuation Scheme

Audited30/09/2009

Unaudited
31/03/2010

Unaudited
31/03/2009

Audited30/09/2009

Cash and short term debt instruments

12.1%

24.0%

14.1%

2.1%

13.0%

8.1%

New Zealand fixed interest

12.9%

13.7%

12.6%

20.9%

28.0%

22.4%

Overseas fixed interest

23.6%

20.2%

24.3%

34.6%

26.6%

30.6%

Australasian shares

10.5%

9.9%

10.4%

10.8%

9.2%

10.2%

Overseas shares

40.9%

32.2%

38.6%

26.7%

19.4%

24.2%

Property fund units

0.0%

0.0%

0.0%

4.9%

3.8%

4.5%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%The benchmark weightings of each asset class are determined by the Trustee in conjunction with the investment manager.

ANZ National Bank Limited and Subsidiary Companies
124 – 125

Notes to the Financial Statements (continued)
40. Retirement Benefit Obligations (continued)
Historical summary
Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial
assumptions and what has actually occurred in the period) and the effects of changes in actuarial assumptions on valuation
date. The history of the schemes’ net position and experience adjustments is as follows:
Consolidated / Parent
Unaudited
31/03/2010$m

Audited31/03/2009$m

Audited30/09/2008$m

Audited31/03/2007$m

Audited31/03/2006$m

Audited31/03/2005$m

Defined benefit obligation

(166)

(174)

(179)

(181)

(190)

(187)

Fair value of scheme assets

130

119

152

189

196

195

Net benefit (liability) / asset

(36)

(55)

(27)

8

6

8

Experience adjustments on scheme liabilities

3

1

5

(1)

3

-

Experience adjustment on scheme assets

6

(20)

(21)

(7)

5

11

Employer contributions
To ensure the defined benefit schemes remain solvent, the schemes’ independent actuaries recommend an employer
contribution rate to the Banking Group annually for The National Bank Staff Superannuation Fund and every three years for the
ANZ National Bank Staff Superannuation Scheme.
The National Bank Staff Superannuation Fund deficit for funding purposes was valued at $50m in the most recent actuarial
review at 1 April 2009. The ANZ National Bank Staff Superannuation Scheme surplus was valued at less than $1 million in themost recent actuarial valuation at 31 December 2007.
The Banking Group contributed $6 million (net of contributions withholding tax) to its defined benefit schemes in the period
to 31 March 2010 (31/03/2009 $2 million; 30/09/2009 $3 million). Employer contributions are taxed at a maximum rate of 33%(31/03/2009 33%; 30/09/2009 33%).
Contingent liabilities
The National Bank Staff Superannuation Fund
Under the Fund’s Trust Deed, if this scheme were wound up, the Banking Group would be required to pay the Trustee of theFund an amount sufficient to ensure members do not suffer a reduction in benefits to which they would otherwise
be entitled.
ANZ National Bank Staff Superannuation Scheme
If the Scheme is wound up then its assets must be cashed up and applied to all members’ benefits. If Scheme funds are
insufficient to pay all members’ benefits then the Banking Group must pay to the Scheme such amounts as the Scheme Actuary
determines are necessary to pay those benefits.

41. Related Party Transactions
Consolidated

ParentUnaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

4,401

5,673

10,748

4,401

5,673

10,748Post-employment benefits

178

243

373

178

243

373

Other long-term benefits

51

39

782

51

39

782

Termination benefits

931

-

58

931

-

58

Share-based payments

1,751

1,400

4,339

1,751

1,400

4,339

Total compensation of key management personnel

7,312

7,355

16,300

7,312

7,355

16,300Key management personnel
Key management personnel compensation
Salaries and short-term employee benefits

Loans to key management personnel

4,743

3,936

4,424

4,743

3,936

4,424

Deposits from key management personnel

5,604

5,856

5,543

5,604

5,856

5,543

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
41. Related Party Transactions (continued)
Key management personnel are defined as being Directors and senior management of the Banking Group, those persons
having authority and responsibility for planning, directing and controlling the activities of the entity. The information above
relating to key management personnel includes transactions with those individuals, their close family members and theircontrolled entities.
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal
commercial terms and conditions no more favourable than those given to other employees or customers. Loans are on termsof repayment that range between fixed, variable and interest only, all of which have been made in accordance with the Bank’s
lending policies. No provision for credit impairment has been recognised for loans made to key management personnel(31/03/2009 $nil; 30/09/2009 $nil).
All other transactions with key management personnel (including personally related parties) are conducted on an arm’s length
basis in the ordinary course of business and on commercial terms and conditions. These transactions principally consist of theprovision of financial and investment services.
Transactions with the Parent Company, Ultimate Parent Bank and subsidiaries
Details of amounts provided by/to the Parent Company, Ultimate Parent Bank and subsidiaries of the Banking Group during
the ordinary course of business are set out in the relevant notes to these financial statements. No provision for credit impairment
has been recognised during the six months ended 31 March 2010 relating to transactions with related parties (31/03/2009 $nil;
30/09/2009 $nil). These transactions principally consist of the provision of financial and investment services, technology andprocess support and compensation for share based payments made to Banking Group employees.
The Bank has sold residential mortgage assets to the NZ Branch as detailed in the Net Loans and Advances note.
Consolidated
Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

ParentAuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$mInterest income– Subsidiary companies– Parent Company– Ultimate Parent Bank

-

-

-

146

263

426

19

-

43

19

-

43

-

-

-

-

-

-

-

-

-

632

895

1,300

Interest expense– Subsidiary companies– Parent Company

17

16

71

17

16

71

– Ultimate Parent Bank

35

162

176

20

39

58

Operating expenses– Subsidiary companies

-

-

-

56

54

109

– Ultimate Parent Bank

39

41

91

39

41

91

-

-

-

-

-

1,098

Dividends received– Subsidiary companies

Amounts related to Kingfisher NZ Trust 2008-1 have not been included in the table above, but separately disclosed below.
Due from and due to subsidiary companies
The Bank has purchased securities issued by the Kingfisher NZ Trust 2008-1 as part of the securitisation detailed in Note 36.
These are in exchange for the transfer of residential mortgages to the Trust and forms part of the due from and due to subsidiarycompany balances. These assets, the associated liabilities and items recognised in operating income are eliminated on
consolidation as they are part of an in-house residential mortgage-backed securities facility.

ANZ National Bank Limited and Subsidiary Companies
126 – 127

Notes to the Financial Statements (continued)
41. Related Party Transactions (continued)
ParentUnaudited
As at
31/03/2010$m

Unaudited
As at
31/03/2009$m

AuditedAs at
30/09/2009
$m

6,727

7,825

5,838

(6,506)(6,429)(5,687)(221)(1,396)

(151)

-

-

-

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

126

238

380

Fees received

1

10

17

Gains from hedging activity

79

6

106

(206)

(254)

(503)

-

-

-

Residential mortgage-backed securities
Due from subsidiary companies
Carrying amount of associated liabilities
Due to subsidiary companies
Other

Associated items recognised in operating income
Interest received

Interest paid

Transactions with associates and joint venture entities
During the period the Banking Group conducted transactions with associates and joint venture entities on normal commercial
terms and conditions as shown below:
Consolidated

ParentUnaudited
As at
31/03/2010$m

Unaudited
As at
31/03/2009$m

AuditedAs at
30/09/2009$m

Unaudited
As at
31/03/2010$m– associates

159

167

161

– joint venture entities

34

40

36

-

85

Unaudited
6 months to
31/03/2010$m– associates– joint venture entities

Unaudited
As at
31/03/2009$m

AuditedAs at
30/09/2009
$m

15

-

-

-

-

-

85

-

85

85

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009$m

Unaudited
6 months to
31/03/2010$m

Unaudited
6 months to
31/03/2009$m

AuditedYear to30/09/2009
$m

4

1

2

-

-

-

1

2

3

-

-

-

-

-

4

-

-

4

Amounts receivable

Amounts payable– associates

Interest income

Interest expense– associates
Dividends received– associates

-

-

-

-

-

2

Commission received from ING NZ joint venture

6

13

39

6

13

39

Costs recovered from ING NZ joint venture

-

-

1

-

-

1

The Banking Group provides general administration, strategic and governance services to ING (NZ) Limited under a Technical
Services Agreement.
A provision for credit impairment of $10 million is recognised for amounts outstanding from associates as at 31 March 2010
(31/03/2009 $6 million; 30/09/2009 $10 million). No credit impairment loss was charged during the six months ended 31 March2010 (31/03/2009 $nil; 30/09/2009 $5 million charged).

ANZ National Bank Limited and Subsidiary Companies

Notes to the Financial Statements (continued)
42. Business Combinations
On 30 November 2009, the Banking Group purchased ING Groep’s 51% interest in ING NZ, which was the holding company
for the ANZ-ING wealth management and life insurance joint venture in New Zealand. The transaction was undertaken tostrengthen the NZ Banking Group’s position in wealth management and more closely integrate its retail banking and wealthbusinesses. The acquisition takes the Banking Group’s ownership interest in ING NZ to 100%.
As part of the transaction the Banking Group also purchased ING Groep’s 51% interests in two fixed income unit trusts, the ING
Diversified Yield Fund and the ING Regular Income Fund (“the Funds”), taking its ownership interest to over 99% of the Funds.
Consolidated
Unaudited$m

Fair values of assets acquired and liabilities assumed as at acquisition date (provisional)
Due from financial institutions

142

Available-for-sale assets

173

Investments relating to insurance business40

Insurance policy assets

81

Shares in associates

1

Other assets1

24

Deferred tax assets

27

Premises and equipment

4

Intangible assets

223

Total assets

715

Due to financial institutions

30

Payables and other liabilities

27

Current tax liabilities

27

Provisions

2

114

Total liabilities

198

Net assets

517

Non-controlling interests in the Funds3
Net assets attributable to the Banking Group1
516

Book value of existing equity interests

351

Loss on re-measuring existing equity interests to fair value4(82)

Acquisition date fair value of existing equity interests

269

Cash consideration transferred

247

Total consideration

516

Provisional value of goodwill5-

Included in the Banking Group’s Income Statement and Statement of Comprehensive Income since 30 November 2009 is net
operating income of $52 million and a profit before tax of $16 million, excluding integration costs, contributed by ING NZ and
the Funds. Had ING NZ and the Funds been consolidated from 1 October 2009, the Banking Group’s Income Statement andStatement of Comprehensive Income would have included, for the six months ended 31 March 2010, net operating income of$78 million and a profit before tax of $25 million. Acquisition costs were paid by the Ultimate Parent Bank.
The initial accounting for the business combination, including the fair values of the assets acquired and liabilities assumed andthe calculation of goodwill, is provisional while valuations of the assets acquired and liabilities assumed are finalised.

43. Subsequent Events
There have been no material subsequent events.
Includes receivables with a fair value of $16m and a gross contractual amount receivable of $17m. The best estimate at the acquisition date of the contractual cash
flows not expected to be collected on these receivables is $1m.
2
Includes employee related provisions and the fair value of contingent liabilities, which relate to possible claims by investors in the Funds and investigations byregulatory bodies and other actual and potential claims and proceedings (refer to Credit commitments and Contingencies note). The expected timing and ultimate
cost of contingent liabilities to the Banking Group will depend on the assessment and outcome of customer complaints, and the results of any litigation and regulatory
investigations or proceedings that may be brought.
3
Non-controlling interests are measured at their proportionate share of the identifiable net assets of the Funds.
4
The loss on re-measuring equity interests has been recognised in Other Operating Income in the Income Statement.
5
Upon finalisation of fair value procedures, including recognition of intangible assets acquired, the remaining balance will be recognised as either goodwill or adiscount on acquisition as appropriate. Goodwill, if recognised, is not is expected to be deductible for income tax purposes.
1

ANZ National Bank Limited and Subsidiary Companies

The address to which any document or communication may be sent to any Director is ANZ National Bank Limited, Level 6,
1 Victoria Street, Wellington, New Zealand. The document or communication should be marked for the attention ofthat Director.
Directors’ Interests
In order to ensure that members of the Board are reminded of their disclosure obligations under the Companies Act 1993, thefollowing procedures are adopted:a.

At least once in each year, Directors are requested to complete, in terms of section 140(1) of the Companies Act 1993,
a disclosure of any interests which they have with the Bank itself. Directors are reminded at this time of their obligation
under the Companies Act 1993 to disclose promptly any transaction or proposed transaction with the Bank in which they
have an interest.
b. Directors are also requested to make a general disclosure of their interest in other entities in terms of section 140(2) of theCompanies Act 1993. In addition, they are requested to initiate a review of that disclosure if there are any significant
alterations which occur subsequently during the period.
In addition to the written disclosures referred to in paragraphs (a) and (b) above, Directors disclose relevant interest which they
have before discussion of particular business items.
The Companies Act 1993 (subject to any different provision in the Bank’s Constitution) allows a Director with an interest in atransaction to participate in discussions and to vote on all matters relating to that particular transaction. The Bank’s Constitution
does not alter that situation. However, the Board has adopted a guideline whereby a Director with an interest in a transaction
should not be present during any discussions, and should not vote, on any matter pertaining to that particular transaction.
Transactions with Directors
No Director has disclosed that he/she or any immediate relative or professional associate has any dealing with the Banking
Group which has been either entered into on terms other than those which would in the ordinary course of business be given
to any other person of like circumstances or means or which could otherwise be reasonably likely to influence materially theexercise of the Director’s duties as a Director of the Bank.
Changes in Directorships
Since the authorisation date of the previous General Short Form Disclosure Statement on 11 February 2010, there have been
no changes to Directors of the Bank.

128 – 129

Directorate and Auditors

ANZ National Bank Limited and Subsidiary Companies

Directorate and Auditors (continued)
Board Members as at 21 May 2010
Independent Non-Executive Director, Chairman
Sir Dryden Spring
DSc
Company Director
Matamata, New Zealand
Sir Dryden is the Chair of the Remuneration Committee and a Member of the Audit Committee and Risk Committee
Directorships
Director: SkyCity Entertainment Group Limited, SkyCity Investments Australia Limited, Port of Tauranga Limited,
Fletcher Building Limited, Fletcher Building Finance Limited
Executive Director
Jennifer Anne Fagg
Ph.D, BEc (Hons)
Chief Executive
ANZ National Bank Limited
Wellington, New Zealand
Directorships
Director: ANZ Holdings (New Zealand) Limited
Non-Executive Directors
Michael Roger Pearson Smith, OBE
BSc (Hons)
Chief Executive Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia
Mr Smith is a Member of the Remuneration CommitteePeter Ralph Marriott
BEc (Hons), FCA
Chief Financial Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia
Mr Marriott is a Member of the Audit Committee and the
Risk Committee

Directorships
Director: Australia and New Zealand Banking Group
Limited, The Financial Markets Foundation for Children

Directorships
Director: ANZ Capital Hedging Pty Limited,
ANZ (Delaware) Inc., ANZ Holdings (New Zealand)
Limited, Esanda Finance Corporation Limited, ANZEST Pty
Limited, ANZ Funds Pty Limited, ANZ Investments Pty
Limited, ASX Limited, LFD Pty Limited, RFDL Pty Limited,
ASX Clearing Corporation Limited, Australian Clearing
House Pty Limited, SFE Clearing Corporation Pty Limited,
ASX Settlement & Transfer Corporation Pty Limited,
Austraclear Limited

Shayne Cary Elliott
B Com
Group Managing Director, Institutional
Australia and New Zealand Banking Group Limited
Melbourne, Australia
Directorships
Director: ANZ Securities Limited

ANZ National Bank Limited and Subsidiary Companies

Independent Non-Executive Directors
Norman Michael Thomas Geary, CBE
B Com, FACA, FNZIM, FCIT
Company Director
Auckland, New Zealand

Dr Donald Thomas Brash
Ph.D, MA (Econ)
Company Director
Auckland, New Zealand

Mr Geary is the Chair of the Risk Committee and a Memberof the Audit Committee and the Remuneration Committee
Directorships
Director: Otago Innovation Limited

Directorships
Director: Brash Forestry Limited, Eljeans Orchard Limited,
Huljich Limited, Huljich (New Zealand) Limited, Huljich
Wealth Management (New Zealand) Limited, Brash
Consultancy Services Limited, Oceania Dairy Group
Limited, Oceania Milk Limited, Oceania Dairy Limited,
Transpower New Zealand Limited, Troika Family Trust
Nominees Limited(effective 4 March commenced an indefinite leave of absence)John Frederick JudgeB Com, FICA
Company Director
Auckland, New Zealand
Mr Judge is the Chair of the Audit Committee and a Memberof the Risk Committee and the Remuneration Committee
Directorships
Director: Fletcher Building Limited, Fletcher Building Finance
Limited, Aquatx Holdings Limited, Aquatx Limited, Janohn
Limited, Sebca Limited, John Judge Limited, Health TV Limited,
Sails Friday Limited, Crop Solutions Limited, Hortigro Home
& Garden Limited, Hortigro Limited, Hortigro Group Limited,
Elisio Limited, Formerly Fuel Equipment Limited
Auditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New Zealand

130 – 131

Directorate and Auditors (continued)

ANZ National Bank Limited and Subsidiary Companies

Conditions of Registration
Conditions of Registration, applicable as at 21 May 2010. These Conditions of Registration have applied from30 March 2010.
There have been no changes in the Bank’s conditions of registration since the issuance of the last General Short Form DisclosureStatement dated 11 February 2010 other than the change to condition 13 to update the RBNZ documents referred to.
The registration of ANZ National Bank Limited (“the Bank”) as a registered bank is subject to the following conditions:1.

That the Banking Group complies with the following requirements:(a) the total capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 8%;(b) the tier one capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 4%; and(c) the capital of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than $30 million.
For the purposes of this condition of registration the scalar referred to in the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is 1.06.
For the purposes of this condition of registration, the supervisory adjustment referred to in the Reserve Bank of New
Zealand document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is the sum of:(a) 15% of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(b) 12.5 times the greater of: zero; and 90% of adjusted Basel I capital, less adjusted Basel II capital; where(i) “adjusted Basel I capital” means 8% of total risk-weighted exposures, plus deductions from tier one capital, plus
deductions from total capital, all calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (Basel I approach)” (BS2) dated March 2008;(ii) “adjusted Basel II capital” means 8% of total Basel II risk-weighted exposures plus deductions from tier one capital,plus deductions from total capital, less any amount included in tier two capital arising from the excess of eligible
allowances for impairment over EL (expected losses), all calculated in accordance with the Reserve Bank of
New Zealand document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008;
and(iii) “total Basel II risk-weighted exposures” means scalar x (risk-weighted on and off balance sheet credit exposures)+ 12.5 x total capital charge for market risk exposure + 12.5 x total capital requirement for operational risk + 15%
of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008.
1A. That(a) the Bank has an internal capital adequacy assessment process (“ICAAP”); that with effect from 31 August 2008 theBank’s ICAAP accords with the requirements set out in the document “Guidelines on a Bank’s internal capital adequacy
process (“ICAAP”)” (BS12) dated December 2007;(b) under its ICAAP the Bank identifies and measures its “other material risks” defined as all material risks of the Banking
Group that are not explicitly captured in the calculation of tier one and total capital ratios under the requirements set
out in the document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(c) the Bank determines an internal capital allocation for each identified and measured “other material risk”.
1B. That the Banking Group complies with all requirements set out in the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008.
1C. That the Bank complies with the following requirements:
The total capital ratio of the Bank is not less than 8%.
The tier one capital ratio of the Bank is not less than 4%.
For the purposes of this condition of registration:• the total capital ratio is defined as capital as a percentage of risk-weighted exposures where capital and risk-weighted
exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)”(BS2) dated March 2008; and• the tier one capital ratio is defined as tier one capital as a percentage of risk-weighted exposures where tier one capitaland risk-weighted exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework(Basel I approach)” (BS2) dated March 2008.

ANZ National Bank Limited and Subsidiary Companies

2.

That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total
activities, where the term material is based on generally accepted accounting practice, as defined in the Financial ReportingAct 1993.

3.

That the Banking Group’s insurance business is not greater than 1% of its total consolidated assets. For the purposes ofthis condition:(i) Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings andInspections) Act 1994 (including those to which the Act is disapplied by sections 4(1)(a) and (b) and 9 of that Act), or any
business of the nature referred to in section 3(1) of the Life Insurance Act 1908;(ii) In measuring the size of the Banking Group’s insurance business:(a) where insurance business is conducted by any entity whose business predominantly consists of insurance business,the size of that insurance business shall be:• The total consolidated assets of the group headed by that entity;• Or if the entity is a subsidiary of another entity whose business predominantly consists of insurance business,
the total consolidated assets of the group headed by the latter entity;(b) otherwise, the size of each insurance business conducted by any entity within the Banking Group shall equal the
total liabilities relating to that insurance business, plus the equity retained by the entity to meet the solvency or
financial soundness needs of the insurance business;(c) the amounts measured in relation to parts a) and b) shall be summed and compared to the total consolidated
assets of the Banking Group. All amounts in parts a) and b) shall relate to on balance sheet items only, and shallbe determined in accordance with generally accepted accounting practice, as defined in the Financial ReportingAct 1993;(d) where products or assets of which an insurance business is comprised also contain a non-insurance component,
the whole of such products or assets shall be considered part of the insurance business.

4.

That the aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the Banking
Group to all connected persons do not exceed the rating-contingent limit outlined in the following matrix:

Credit Rating1

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

AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to
non-bank connected persons shall not exceed 15 percent of the Banking Group’s Tier One capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit isdetermined in accordance with the Reserve Bank of New Zealand document entitled ‘Connected Exposure Policy’ (BS8)
dated March 2008.
5.

That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit
assessment, tenor, interest rates, amortisation schedules and requirement for collateral) than corresponding exposures
to non-connected persons.

6.

That the board of the Bank contains at least two independent directors and that alternates for those directors, if any, arealso independent. In this context an independent director (or alternate) is a director (or alternate) who is not an employeeof the Bank, and who is not a director, trustee, or employee of any holding company (as that term is defined in section 5of the Companies Act 1993) of the Bank, or any other entity capable of controlling or significantly influencing the Bank.

7.

That the chairperson of the Bank’s board is not an employee of the Bank.

8. That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing
duties as a director, to act other than in what he or she believes is the best interests of the company (i.e. the Bank).
9.

That a substantial proportion of the Bank’s business is conducted in and from New Zealand.

10. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief
executive officer, shall be made in respect of the Bank unless:(i) The Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee, and(ii) The Reserve Bank has advised that it has no objection to that appointment.
1This table uses the rating scales of Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. (Fitch Ratings’ scale is Identical to Standard & Poor’s.)

132 – 133

Conditions of Registration (continued)

ANZ National Bank Limited and Subsidiary Companies

Conditions of Registration (continued)
11. That the Bank has legal and practical ability to control and execute any business, and any functions relating to any business,of the Bank that are carried on by a person other than the Bank, sufficient to achieve, under normal business conditions
and in the event of stress or failure of the Bank or of a service provider to the Bank, the following outcomes:(a) that the Bank’s clearing and settlement obligations due on a day can be met on that day;(b) that the Bank’s financial risk positions on a day can be identified on that day;(c) that the Bank’s financial risk positions can be monitored and managed on the day following any failure and on
subsequent days; and(d) that the Bank’s existing customers can be given access to payments facilities on the day following any failure and on
subsequent days.
For the purposes of this condition of registration, the term “legal and practical ability to control and execute” is explainedin the Reserve Bank of New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated January 2006.
12. (a) That the business and affairs of the Bank are managed by, or under the direction and supervision of, the board of
the Bank.
(b) That the employment contract of the chief executive officer of the Bank or person in an equivalent position (together“CEO”) is with the Bank, and the terms and conditions of the CEO’s employment agreement are determined by, and any
decision relating to the employment or termination of employment of the CEO are made by, the board of the Bank.
(c) That all staff employed by the Bank shall have their remuneration determined by (or under the delegated authority of )the board or the CEO of the Bank and be accountable (directly or indirectly) to the CEO of the Bank.
13. That the Banking Group complies with the following quantitative requirements for liquidity-risk management with effectfrom 1 April 2010:(a) the one-week mismatch ratio of the Banking Group is not less than zero percent at the end of each business day;(b) the one-month mismatch ratio of the Banking Group is not less than zero percent at the end of each business day;and(c) the one-year core funding ratio of the Banking Group is not less than 65 percent at the end of each business day.
For the purposes of this condition of registration, the ratios identified must be calculated in accordance with the Reserve
Bank of New Zealand documents entitled “Liquidity Policy” (BS13) dated March 2010 and “Liquidity Policy Annex: Liquid
Assets” (BS13A) dated March 2010.
14. That, with effect from 1 April 2010, the Registered Bank has an internal framework for liquidity risk management thatis adequate in the Registered Bank’s view for managing the Bank’s liquidity risk at a prudent level, and that, in particular:(a) is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity
and liquidity risk;(b) identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity
risk management;(c) identifies the principal methods that the Bank will use for measuring, monitoring and controlling liquidity risk; and(d) considers the material sources of stress that the Bank might face, and prepares the Bank to manage stress througha contingency funding plan.
For the purposes of these conditions of registration, the term “Banking Group” means ANZ National Bank Limited’s financial
reporting group (as defined in section 2(1) of the Financial Reporting Act 1993).

ANZ National Bank Limited and Subsidiary Companies
134 – 135

Credit Rating Information
Credit Ratings applicable as at 21 May 2010
The Bank has three current credit ratings, which are applicable to its long-term senior unsecured obligations which are payable
in New Zealand in New Zealand dollars. The credit ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Positive

On 20 May 2010, Fitch changed the outlook on ANZ National Bank Limited from Stable to Positive . During the two year period
ended 31 March 2010 there were no other changes to the Bank’s credit ratings or qualifications.
Description of Credit Rating grades
Standard & Poor's

Moody's InvestorsService

Fitch
Ratings

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

AAA

Aaa

AAA

Very strong ability to repay principal and interest.

AA

Aa

AA

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

A

A

A

Adequate ability to repay principal and interest. More vulnerable toadverse changes.

BBB

Baa

BBB

Significant uncertainties exist which could affect the payment ofprincipal and interest on a timely basis.

BB

Ba

BB

Greater vulnerability and therefore greater likelihood of default.

B

B

BB

Likelihood of default now considered high. Timely repayment ofprincipal and interest is dependent on favourable financial conditions.

CCC

Caa

CCC

Highest risk of default.

CC to CCa to CCC to CD-

RD & DThe following grades display investment grade characteristics:

The following grades have predominantly speculative characteristics:

Obligations currently in default.

Credit ratings from Standard & Poor’s and Fitch Ratings may be modified by the addition of “+” or “-” to show the relative
standing within the ‘AA’ to ‘B’ categories. Moody’s Investors Service applies numerical modifiers 1, 2, and 3 to each of the ‘Aa’
to ‘Caa’ classifications, with 1 indicating the higher end and 3 the lower end of the rating category.

ANZ National Bank Limited and Subsidiary Companies

Directors’ Statement
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:(i) The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statement(Full and Half Year – New Zealand Incorporated Registered Banks) Order 2008;(ii) The Disclosure Statement is not false or misleading.
Over the six months ended 31 March 2010, after due enquiry, each Director believes that:(i) ANZ National Bank Limited has complied with the Conditions of Registration;(ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks,
including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operationalrisk and other business risks, and that those systems were being properly applied.
This General Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on 21 May
2010. On that date, the Directors of the Bank were:

Dr D T Brash

S C Elliott

J A Fagg

N M T Geary, CBEJ F Judge

P R Marriott

M R P Smith, OBE

Sir Dryden Spring

ANZ National Bank Limited and Subsidiary Companies
136 – 137

Independent Review Report to the Directors of
ANZ National Bank Limited
We have reviewed the interim financial statements on pages 6 to 128 prepared and disclosed in accordance with Clause 23of the Registered Bank Disclosure Statement (Full and Half-Year – New Zealand Incorporated Registered Banks) Order 2008
(the ‘Order’) and the supplementary information prescribed in Schedules 3 to 9. The interim financial statements, andsupplementary information, provide information about the past financial performance and cash flows of ANZ National
Bank Limited and its subsidiary companies (the ‘Banking Group’) and their financial position as at 31 March 2010. This
information is stated in accordance with the accounting policies set out on pages 11 to 20.

Directors’ responsibilities
The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of interim financial statementsin accordance with Clause 23 of the Order which give a true and fair view of the financial position of the Banking Group as at
31 March 2010 and its financial performance and cash flows for the six months ended on that date.
They are also responsible for the preparation of supplementary information which gives a fair view, in accordance with theOrder, of the matters to which it relates; and complies with Schedules 3 to 9 of the Order.

Reviewers’ responsibilities
We are responsible for reviewing the interim financial statements, including the supplementary information disclosed inaccordance with Schedules 4, 6 to 9, and Clause 17 of Schedule 3 of the Order presented to us by the Directors and reporting
our findings to you.
It is also our responsibility to express a review opinion on the supplementary information as required by Schedule 5B of theOrder in order to state whether, on the basis of the procedures described below, anything has come to our attention thatwould indicate that the information disclosed in accordance with Schedule 5B is not in all material respects prepared inaccordance with the Bank’s Conditions of Registration and with the Bank’s internal models for credit risk and operational risk
as accredited by the Reserve Bank of New Zealand and disclosed in accordance with Schedule 5B and for reporting our findings
to you.

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

Review opinion
Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that:a.

the interim financial statements (excluding the supplementary information disclosed in Notes 28, 30, 31 and 36) do notpresent a true and fair view of the financial position of the Banking Group as at 31 March 2010 and its financial performanceand cash flows for the six months ended on that date;b. the supplementary information disclosed in Notes 30, 31 and 36 prescribed by Schedules 4, 6 to 9 and Clause 17 of Schedule
3 of the Order is not fairly stated in accordance with those Schedules; andc. the supplementary information relating to Capital Adequacy disclosed in Note 28 of the interim financial statements, as
required by Schedule 5B of the Order, is not in all material respects prepared in accordance with the Bank’s Conditions ofRegistration, with the Reserve Bank of New Zealand document Capital Adequacy Framework (Internal Models BasedApproach) (BS2B), and with the Banking Group’s internal models for credit risk and operational risk as accredited by the
Reserve Bank of New Zealand, and disclosed in accordance with Schedule 5B of the Order.
Our review was completed on 21 May 2010 and our review opinion is expressed as at that date.

Wellington

ANZ National Bank Limited and Subsidiary Companies

Index
General Disclosures

1-4

23. Provisions

46

Summary of Financial Statements

5

24. Bonds and Notes

Income Statements

6

25. Due to/from Parent Company

Statements of Comprehensive Income

6

26. Loan CapitalStatements of Changes in Equity

7

27. Ordinary Share Capital

Balance Sheets

8

28. Capital Adequacy

52 - 6147 - 48
49
49 - 50
51

Cash Flow Statements

9 - 1029. Financial Risk Management

62 - 941.

Significant Accounting Policies

11 - 20

30. Concentrations of Credit Risk

95 - 962.

Critical Estimates and Judgements Used in
Applying Accounting Policies

20 - 2131. Interest Earning and Discount Bearing Assets
and Liabilities

3.

Risk Management Policies

22 - 23

4.

Income24

5.

Expenses25

6.

Income Tax Expense26

7.

Liquid Assets

27

8.

Due from Other Financial Institutions

27

9.

Trading Securities

27

10. Derivative Financial Instruments

28 - 33

11. Available-for-Sale Assets

33

12. Net Loans and Advances

33

13. Impaired Assets, Past Due Assets and Other
Assets Under Administration

34 - 37

14. Provision for Credit Impairment

38 - 3997

32. Fair Value of Financial Assets andFinancial Liabilities

97 - 106

33. Segmental Analysis

107 - 110

34. Notes to the Cash Flow Statements

111 - 112

35. Significant Controlled Entities, Associatesand Interests in Jointly Controlled Entities

113 - 115

36. Securitisation, Funds Management, Other
Fiduciary Activities and the Marketing andDistribution of Insurance Products

116 - 117

37. Commitments

118

38. Contingent Liabilities and Credit
Related Commitments

118 - 119

39. Employee Share and Option Plans

119 - 122

40. Retirement Benefit Obligations

123 - 125

41. Related Party Transactions

125 - 127

15. Shares in Controlled Entities, Associates andJointly Controlled Entities

40

42. Business Combinations

128

16. Other Assets

40

43. Subsequent Events

128

17. Deferred Tax Assets/Liabilities

41

Directorate and Auditors

129 - 131

42 - 43

Conditions of Registration

132 - 134

19. Goodwill and Other Intangible Assets

44

Credit Rating Information

135

20. Due to Other Financial Institutions

45

Directors’ Statement

136

21. Deposits and Other Borrowings

45

Independent Review Report

137

22. Payables and Other Liabilities

46

18. Premises and Equipment

ANZ National Bank Limited and Subsidiary Companies
138 – 139

ANZ National Bank Limited anzacc1223 05/10

anz.co.nz