Australia and New Zealand Banking Group Limited– New Zealand Branch
General Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2010 | NUMBER 8 ISSUED NOVEMBER 2010

Australia and New Zealand Banking Group Limited - New Zealand Branch

General Disclosure Statement
For the year ended 30 September 2010

Contents
General Disclosures
Summary of Financial Statements
Income Statements and 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
Directors’ Statement
Auditors’ Report
Index

2
7
8
9
10
11
12
96
99
101
102
105

Glossary of Terms
This General Disclosure Statement has been issued in accordance with the Registered Bank Disclosure Statement (Full andHalf-Year - Overseas Incorporated Registered Banks) Order 2008 ("the Order").
In this General Disclosure Statement unless the context otherwise requires:(a) "Bank" means ANZ National Bank Limited;(b) "Banking Group" means ANZ National Bank and all its controlled entities;(c) "Immediate Parent Company" means ANZ Funds Pty Limited, which is the immediate parent company of ANZ Holdings(New Zealand) Limited;(d) "NZ Branch" means the New Zealand branch office of Australia and New Zealand Banking Group Limited;(e) "ANZ New Zealand" means the combined New Zealand operations of Australia and New Zealand Banking Group
Limited;(f) "Ultimate Parent Bank" means Australia and New Zealand Banking Group Limited;(g) "Overseas Banking Group" means the worldwide operations of Australia and New Zealand Banking Group Limited
including its controlled entities;(h) "RBNZ" means the Reserve Bank of New Zealand;(i) "APRA" means the Australian Prudential Regulation Authority; and(j) Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given inor prescribed by the Order.

Australia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures
General Matters
The NZ Branch was registered as a bank on 5 January 2009.
Wellington, New Zealand.

Its address for service is Level 6, 1 Victoria Street,

The address for service for the Ultimate Parent Bank is ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.
On 30 November 2009, ANZ New Zealand 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. As
a result of the change in ownership, the name of these businesses was changed to OnePath in November 2010.

Nature of Business
ANZ New Zealand provides a broad range of banking and financial products and services to retail, small business, rural,commercial and institutional clients.

Pending Proceedings or Arbitration
Other than disclosed in the General Disclosure Statement, there are no pending proceedings or arbitration concerning any
member of ANZ New Zealand that may have a material adverse effect on ANZ New Zealand as at 23 November 2010.
Further details on pending proceedings or arbitration are set out in Note 37.

Other Material Matters
There are no matters relating to the business or affairs of the NZ Branch and ANZ New Zealand which are not contained
elsewhere in the General Disclosure Statement and which would, if disclosed, materially adversely affect the decision of aperson to subscribe for debt securities of which the NZ Branch or any member of ANZ New Zealand is the issuer.

Credit Rating Information
Credit ratings are assigned to sovereigns and businesses by the international credit rating agencies. Credit ratings provide
investors with an indication of the credit-worthiness of an entity in which they are considering investing. There are threemajor internationally recognised credit rating agencies: Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
As at 23 November 2010 the Ultimate Parent 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. On 20 May 2010 Fitch changed
the outlook on the Ultimate Parent Bank from Stable to Positive. On 2 March 2009, Moody’s changed the outlook on the
Ultimate Parent Bank from Stable to Negative. During the two years ended 30 September 2010 there were no otherchanges to the Ultimate Parent Bank’s credit ratings or qualifications.

Australia and New Zealand Banking Group Limited - New Zealand Branch

3

General Disclosures
The Ultimate Parent Bank's Credit Ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa1

Outlook Negative

Fitch Ratings

AA-

Outlook Positive

Standard & Poor's

Moody's InvestorsService

Fitch Ratings

The following table describes the credit rating grades available:

The following grades display investment grade characteristics:
Ability to repay principal and interest is extremely strong. Thisis the highest investment category.

AAA

Aaa

AAA

Very strong ability to repay principal and interest.

AA

Aa

AA

Strong ability to repay principal and interest althoughsomewhat susceptible to adverse changes in economic,
business or financial conditions.
Adequate ability to repay principal and interest. Morevulnerable to adverse changes.

A

A

A

BBB

Baa

BBB

BB

Ba

BB

B

B

BB

The following grades have predominantly speculative characteristics:
Significant uncertainties exist which could affect the paymentof principal and interest on a timely basis.
Greater vulnerability and therefore greater likelihood of
default.
Likelihood of default now considered high. Timely repayment ofprincipal and interest is dependent on favourable financial
conditions.
Highest risk of default.
Obligations currently in default.

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & D

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.

Ranking of Local Creditors in Liquidation
There are material legislative restrictions in Australia which subordinate the claims of a class of unsecured creditors of the
NZ Branch on the assets of the Ultimate Parent Bank to those of another class of unsecured creditors of the Ultimate
Parent Bank, in liquidation of the Ultimate Parent Bank.
The Banking Act 1959 of the Commonwealth of Australia (the "Banking Act") gives priority over Australian assets of the
Ultimate Parent Bank to deposits/liabilities in Australia if the Ultimate Parent Bank is unable to meet its obligations orsuspends payment. Accordingly, deposits/liabilities in New Zealand (together with all other senior unsecured creditors of
the Ultimate Parent Bank) will rank after deposits/liabilities in Australia of the Ultimate Parent Bank in relation to claims
against Australian assets.
Specifically, pursuant to section 13A(3) of the Banking Act, if an Authorised Deposit-Taking Institution (defined in that Act
to include a Bank like the Ultimate Parent Bank) (an "ADI") becomes unable to meet its obligations or suspends payment,
the assets of the ADI in Australia are to be available to meet the ADI's liabilities in the following order:(a) first, the ADI's liabilities to APRA (if any), because of the rights APRA has against the ADI because APRA has made,or is required to make, payments to depositors under the Financial Claims Scheme (defined below);(b) second, the ADI's debts to APRA for costs incurred by APRA in administration of the Financial Claims Scheme inrespect of the ADI;(c) third, the ADI's liabilities (if any) in Australia in relation to protected accounts that account-holders keep with theADI;(d) fourth, the ADI’s debts (if any) to the Reserve Bank of Australia;(e) fifth, the ADI’s liabilities (if any) under an industry support contract that is certified by APRA; and(f) sixth, the ADI's other liabilities in the order of their priority (apart from section 13A(3)).
Under section 13A(1) of the Banking Act, in certain circumstances APRA may take control of an ADI’s business or appoint
an administrator (defined in the Banking Act) to take control of the ADI’s business. Section 16(1) and (2) of the Banking
Act provide that, despite anything contained in any law relating to the winding up of companies, but subject to section
13A(3) of the Banking Act, the debts of an ADI to APRA in respect of APRA's costs (including costs in the nature of
remuneration and expenses) of being in control of the ADI's business or of having an administrator in control of the ADI's
business have priority in a winding-up of the ADI over all other unsecured debts.
Section 86 of the Reserve Bank Act provides that notwithstanding anything contained in any law relating to the winding up
of companies, but subject to section 13A(3) of the Banking Act, debts due to the Reserve Bank of Australia by any ADI
shall, in a winding up, have priority over all other debts other than debts due to the Commonwealth of Australia.

Australia and New Zealand Banking Group Limited - New Zealand Branch

4

General Disclosures
Section 13A(3) of the Banking Act affects all of the unsecured deposit liabilities of the NZ Branch which as at 30
September 2010 amounted to $nil (30/09/2009 $nil).

Requirement to Hold Excess Assets over Deposit Liabilities
Section 13A(4) of the Banking Act states that it is an offence for an ADI not to hold assets (other than goodwill) in
Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia, unless APRA has
authorised the ADI to hold assets of a lesser value. During the year ended 30 September 2010, the Overseas Bank has at
all times held assets (other than goodwill and any assets or other amounts prescribed by APRA) in Australia of not lessthan the value of the Overseas Bank's total deposit liabilities in Australia.
Section 13E of the Banking Act states that APRA may give the Ultimate Parent Bank a direction that requires it to increase
its level of capital.
The requirements of these sections of the Act have the potential to impact on the management of the liquidity of ANZ New
Zealand.

Guarantees
The Ultimate Parent Bank has guarantees from the Commonwealth of Australia under:(a) in the case of deposits and certain other accounts up to A$1 million, a scheme (The "Financial Claims Scheme")
pursuant to the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 of
the Commonwealth of Australia (The "Financial Claims Scheme Act");(b) in the case of wholesale funding, by a Deed of Guarantee executed by the Treasurer (and related scheme rules) (the"Wholesale Funding Guarantee").
The Financial Claims Scheme applies to the NZ Branch, as it is a foreign branch of an eligible Australian ADI.
Wholesale Funding Guarantee may also apply as described below.

The

Financial Claims Scheme
Under the Financial Claims Scheme if:• APRA has applied for an ADI to be wound up; and• the responsible Minister makes a declaration that the Financial Claims Scheme applies to that particular ADI
then each account holder of a Protected Account (defined below) with that ADI is entitled to be paid by APRA an amountequal to the balance of the protected account plus accrued interest which has been accrued to the account (subject tovarious adjustments and preconditions described in the Financial Claims Scheme Act). Once the responsible Minister has
made a declaration, there are no other material conditions to payment other than the ADI being unable to meet its
obligations or suspending payment. The deposit must be for an amount less than A$1 million. Deposits for a greater
amount are covered by the Wholesale Funding Guarantee (to the extent that is applicable as described below).
A protected account includes accounts or covered financial products (defined below) kept by an account holder with an
ADI and either:• requiring the ADI to pay the account holder, on demand by the account holder or at a time agreed by them, the net
credit balance of the account at the time of the demand or the agreed time; or• an account prescribed by regulations.
A covered financial product is a financial product declared by the Australian Treasurer to be a covered financial productand includes accounts such as saving, call, current, cheque, debit card, transaction and mortgage offset accounts.
Deposit holders do not have to be Australian residents to obtain the benefit of the Financial Claims Scheme and it applies
to deposits denominated in any currency.
From 12 October 2011 the Financial Claims Scheme will apply to Australian dollar deposits only, and is generally subject
to review at that time.
Wholesale Funding Guarantee
The Wholesale Funding Guarantee is a deed governed by the laws of the State of New South Wales and has been
executed by the Australian Treasurer on behalf of the Australian Government. Australian institutions which are ADIs
under the Banking Act, which includes the Ultimate Parent Bank, were entitled to apply for the Wholesale Funding
Guarantee prior to 25 March 2010 to apply to deposit accounts over A$1 million and certain funding liabilities.
Foreign banks authorised to carry on banking business in Australia were also able to apply to have certain deposits andfunding liabilities held by Australian residents guaranteed by the Australian Government. The Reserve Bank of Australia
administers the Wholesale Funding Guarantee.
On 7 February 2010 the Australian Government announced the withdrawal of the Wholesale Funding Guarantee on 31
March 2010. The final date for ADIs to apply for access to the Wholesale Funding Guarantee was 24 March 2010.
Existing guaranteed liabilities of ADIs, including those of the Ultimate Parent Bank, will continue to be covered by the
Wholesale Funding Guarantee to maturity for wholesale funding and term deposits and to October 2015 for at calldeposits. The Wholesale Funding Guarantee continues to operate for existing guaranteed liabilities as follows.

Australia and New Zealand Banking Group Limited - New Zealand Branch

7

Summary of Financial Statements
ANZ New ZealandYear toYear toYear toYear to1

Year to1

30/09/2010

30/09/2009

30/09/2008

30/09/2007

30/09/2006

Interest income

6,447

7,578

9,858

8,296

7,195

Interest expense

3,952

5,181

7,829

6,239

5,246

Net interest income

2,495

2,397

2,029

2,057

1,949

745

581

1,126

864

801

Operating income

3,240

2,978

3,155

2,921

2,750

Operating expenses

1,565

1,479

1,445

1,331

1,323

Profit before provision for credit impairment andincome tax

1,675

1,499

1,710

1,590

1,427

-

270

112

20

(10)

Individual provision charge

456

613

190

54

28

Provision for credit impairment

456

883

302

74

18

$ millions

Continuing operations

Other operating income

Collective provision charge / (credit)

Profit before income tax

1,219

616

1,408

1,516

1,409

Income tax expense

352

422

418

551

463

Profit after income tax from continuing
operations

867

194

990

965

946

-

-

-

76

5

867

194

990

1,041

951

(492)

(1,000)(1,169)

(600)

(780)

As at

As at

As at

As at1As at1

30/09/2010

30/09/2009

30/09/2008

30/09/2007

30/09/2006

Discontinued operations
Profit from discontinued operations (net of income tax)
Profit after income tax

Dividends paid

ANZ New Zealand$ millions

Total impaired assets

2,047

1,188

327

115

151

Total assets

127,029

126,314123,078

107,606

95,929Total liabilities

119,208

118,999

115,951

100,751

89,543

1

-

-

-

-

7,821

7,315

7,127

6,855

6,386

Non-controlling interests
Equity1

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

The amounts included in this summary have been taken from the audited financial statements of ANZ New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

8

Income Statements
ANZ New Zealand$ millions
Note

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Interest income

4

6,447

7,578

555

241

Interest expense

5

3,952

5,181

416

171

Net interest income

2,495

2,397

139

70

Net trading gains

4

39

187

-

-

Funds management and insurance income

4

218

97

-

-

Other operating income
Share of profit of equity accounted associates and joint
ventures

4

446

284

42

(10)

16

42

13

-

-

3,240

2,978

181

60

1,565

1,479

26

11

1,675

1,499

155

49

456

883

20

9

1,219

616

135

40

352

422

41

12

867

194

94

28

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

867

194

94

28

53

2

-

-

(12)

-

-

-

Operating income
Operating expenses

5

Profit before provision for credit impairment
Provision for credit impairment

15

Profit before income tax
Income tax expense

6

Profit after income tax

Statements of Comprehensive Income
ANZ New Zealand$ millions
Note

Profit after income tax

NZ Branch

Available-for-sale revaluation reserve
Valuation gain before tax
Cumulative gain transferred to the income statement on saleof financial assets
Cash flow hedging reserve
Valuation gain / (loss) before tax

11

89

(1)

-

-

Transferred to income statement

11

21

(3)

-

-

40

27

(25)

-

-

6

(48)

10

-

-

Net income / (expense) recognised directly in equity

130

(17)

-

-

Total comprehensive income for the year

997

177

94

28

Other items recognised directly in equity
Actuarial gain / (loss) on defined benefit schemes
Income tax credit / (expense) on items recognised directly inequityThe notes to the financial statements form part of and should be read in conjunction with these financial statements

Australia and New Zealand Banking Group Limited - New Zealand Branch

9Statements of Changes in Equity
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Balance at beginning of the year

6,424

5,413

11

-

Movement in Head Office account

-

11

-

11

Redeemable preference shares issued in the year

-

1,000

-

-

6,424

6,424

11

11

Balance at beginning of the year

25

23

-

-

Valuation gain recognised after tax

42

2

-

-

Transferred to income statement after tax

(9)

-

-

-

Balance at end of the year

58

25

-

-

Balance at beginning of the year

23

24

-

-

Valuation gain recognised after tax

64

-

-

-

Transferred to income statement after tax

15

(1)

-

-

102

23

-

-

160

48

-

-

Balance at beginning of the year

843

1,667

28

-

Profit after income tax attributable to parent

867

194

94

28

1,710

1,861

122

28

18

(18)

-

-

(492)

(1,000)

-

-

1,236

843

122

28

Note

Share capital and head office accountBalance at end of the year

30

Available-for-sale revaluation reserve

Cash flow hedging reserve

Balance at end of the year

11

Total reserves
Retained earnings

Total available for appropriation
Actuarial gain / (loss) on defined benefit schemes after tax
Dividends paid

30

Balance at end of the year
Non-controlling interests
Balance at beginning of the year
Acquired in a business combination

41

Balance at end of the year

-

-

-

-

1

-

-

-

1

-

-

-

7,315

7,127

39

-

997

177

94

28

(492)

11

-

11

1

-

-

-

7,821

7,315

133

39

Total equity and head office accountBalance at beginning of the year
Total comprehensive income for the year
Transactions with head officeNon-controlling interests
Balance at end of the year

41

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

11

Cash Flow Statements
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2009

30/09/2009

30/09/2009

30/09/2009

6,217

7,467

565

241

2

3

-

-

Net funds management & insurance income

137

97

-

-

Fees and other income received

772

749

-

4

Interest paid

(3,880)(5,137)

(390)

(130)

Operating expenses paid

(1,473)(1,483)(25)(9)

Income taxes paid

(579)

(338)

(15)

-

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

1,196

1,358

135

106
-

$ millions

Note

Cash flows from operating activities
Interest received
Dividends received

Net changes in operating assets and liabilities:
Change in due from other financial institutions - term

1,967

(246)

-

(2,613)(1,505)--

Change in derivative financial instruments

1,083(3,494)29

237

Change in available-for-sale assets(435)(1,388)

-

-

22

-

-

-

218

43

(1,248)(9,144)(11)

Change in trading securities

Change in insurance investment assets
Change in loans and advances
Change in due to related entities
Change in other assets
Change in due to other financial institutions
Change in customer deposits
Change in other borrowings and certificates of deposit
Change in payables and other liabilities
Net cash flows provided by / (used in) operating
activities

35

-

-

39

143

(165)

(3)

-

(914)

9,630

1,048

8,801

(1,493)

672

-

-

(417)

(4,637)

-

-

(65)

(167)

-

-

(1,308)

101

-

(11)

Cash flows from investing activities
Proceeds from sale of shares in associates and jointly
controlled entities

7

-

-

-

Proceeds from sale of premises and equipment

1

33

-

-

Proceeds from sale of software

-

3

-

-

Purchase of shares in associates and jointly controlled entities

-

(92)

-

-

(247)

-

-

-

Purchase of intangible assets

(43)

(21)

-

-

Purchase of premises and equipment

(80)

(95)

-

-

(362)

(172)

-

-

Purchase of shares in subsidiary entities

Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from bonds and notes

5,481

5,012

-

-

Redemptions of bonds and notes(4,307)(7,751)

-

-

(200)

(225)

-

-

-

1,000

-

-

(492)

(1,000)

-

-

-

11

-

11

482

(2,953)-11(1,308)

101

-

(11)

(362)

(172)

-

-

482

(2,953)-11(1,188)(3,024)

-

-

4,766

7,790

-

-

3,578

4,766

-

-

Redemptions of loan capital
Issue of redeemable preference shares
Dividends paid
Proceeds from Head Office
Net cash flows provided by / (used in) financing
activities
Net cash flows provided by / (used in) operating activities
Net cash flows used in investing activities
Net cash flows provided by / (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

35

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

12

Notes to the Financial Statements
1. Significant Accounting Policies(a) Basis of preparation(i) Statement of compliance
These financial statements have been prepared in accordance with the requirements of the Companies Act 1993, theFinancial Reporting Act 1993 and the Order. The NZ Branch’s financial statements are for Australia and New Zealand
Banking Group Limited - New Zealand Branch as a separate entity and ANZ New Zealand’s financial statements are for the
NZ Branch’s consolidated group, which includes subsidiaries, associate companies and jointly controlled entities.
These financial statements have also been prepared in accordance with New Zealand Generally Accepted Accounting
Principles. They comply with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") andother applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statementscomply 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 all members of ANZ New Zealand and all controlled entities and to all periods
presented in these financial statements.
These financial statements were authorised for issue by the Board of Directors on 23 November 2010.
(ii) Use of estimates and assumptions
The preparation of the financial statements requires the use of management judgement, estimates and assumptions that
affect reported amounts and the application of policies. The estimates and associated assumptions are based on historicalexperience and various 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, arecovered 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 exceptthat the following assets and liabilities are stated at their fair value:•
derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying
exposure;•financial instruments held for trading;•assets recognised as available-for-sale;•financial instruments designated at fair value through profit 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 ANZ New Zealand are consistent with those adopted and disclosed in the prior periodwith the exception that all new accounting standards and interpretations applicable to annual reporting periods beginningon or after 1 October 2009 have been applied by ANZ New Zealand effective from the required date of application. The
initial application of these standards and interpretations have only resulted in changes to disclosures in the financial
statements of ANZ New Zealand.
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 ANZ New Zealand for the year ended 30 September 2010.
NZ IFRS 8 replaces NZ IAS 14 Segment Reporting and requires the use of a “management approach” to segment
reporting. Segment information is therefore presented on the same basis as that used for internal reporting purposes.
Goodwill associated with the acquisition of NBNZ Holdings Limited Group is allocated to the reportable segments inaccordance with NZ IFRS 8.
In accordance with NZ IAS 1 a “statement of comprehensive income” has been disclosed showing net profit or loss andrevenues and expenses recognised directly in equity. In addition the revised “statement of changes in equity” shows allchanges in equity.
There have been no other changes in accounting policies since the authorisation date of the previous annual financial
statements on 24 November 2009.
(v) Rounding
The amounts contained in the financial statements have been rounded to the nearest million dollars, except whereotherwise stated.
(vi) Comparatives
In prior years some fee income integral to the effective interest rate of financial assets was presented in other operating
income. For the year ended 30 September 2010 this income has been classified to interest income, to more accuratelyreflect the nature of the income. Also for the year ended 30 September 2010 income from insurance and funds
management activities has been presented as a separate category in the income statement.

Australia and New Zealand Banking Group Limited - New Zealand Branch

13

Notes to the Financial Statements
Comparative data has been restated accordingly. For the year ended 30 September 2009 these reclassifications have, for
ANZ New Zealand, increased interest income by $99 million, increased net funds management and insurance income by$97 million and reduced other operating income by $196 million. There was no impact on total operating income or net
profit after taxation.
Certain other amounts in the comparative information have also been reclassified to ensure consistency with the current
year's presentation.
(vii) Basis of aggregation
The basis of aggregation is an addition of individual financial statements of the entities in ANZ New Zealand.
transactions between entities within ANZ New Zealand have been eliminated.

All

Subsidiaries
The financial statements aggregate the financial statements of the Branch and all New Zealand 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 ofdisposal 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 to obtainbenefits from its activities. All of the facts of a particular situation are considered when determining whether control
exists. Control is usually present when an entity has:•power over more than one-half of the voting rights of the other entity;•
power to govern the financial and operating policies of the other entity;•
power to appoint or remove the majority of the members of the board of directors or equivalent governing body; or•
power to cast the majority of votes at meetings of the board of directors or equivalent governing body of the entity.
In addition, potential voting rights that are presently exercisable or convertible are taken into account in determining
whether control exists.
In relation to special purpose entities control is deemed to exist where:•in substance, the majority of the residual risks and rewards from the activities accrue to ANZ New Zealand; or•in substance, ANZ New Zealand controls decision making powers so as to obtain the majority of the risks andrewards of these activities
Associates and joint ventures
ANZ New Zealand adopts the equity method of accounting for associates and ANZ New Zealand's interest in joint venture
entities.
ANZ New Zealand’s share of the results of associates and joint venture entities is included in the consolidated income
statement. Shares in associates and joint venture entities are carried in the consolidated balance sheet at cost plus ANZ
New Zealand’s share of post acquisition net assets. Interests in associates and joint 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, including a multiples of earning methodology, to determine the reasonableness ofthe valuation.
(viii) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of ANZ New Zealand’s entities are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). ANZ New Zealand’s financial
statements are presented in New Zealand dollars, which is ANZ New Zealand’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the datesof the transactions.
Monetary assets and liabilities resulting from foreign currency transactions are subsequently translated at the spot rate atreporting date.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different tothose at which they were initially recognised or included in a previous financial report, are recognised in the income
statement in the period in which they arise.
Translation differences on non-monetary items, such as derivatives, measured at fair value through profit or loss arereported as part of the fair value gain or loss on these items.
Translation differences on non-monetary items measured at fair value through equity, such as equities classified asavailable-for-sale financial assets, are included in the available-for-sale revaluation reserve in equity.

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Notes to the Financial Statements(b)Income recognition

Income is recognised to the extent that it is probable that economic benefits will flow to ANZ New Zealand and thatrevenue can be reliably measured.
(i) Interest income
Interest income is recognised as it accrues, using the effective interest method.
The effective interest method calculates the amortised cost of a financial asset or financial liability and allocates theinterest income or interest expense, including any fees and directly related transaction costs that are an integral part ofthe effective interest rate, over the expected life of the financial asset or liability so as to achieve a constant yield on thefinancial asset or liability.
For assets subject to prepayment, expected life is determined on the basis of the historical behaviour of the particularasset portfolio, taking into account contractual obligations and prepayment experience assessed 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 theeffective 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 the service is provided.
Fees and commissions that relate to the execution of a significant act (for example, advisory services or arrangement
services, placement fees and underwriting fees) are recognised when the significant act has been completed.
Fees charged for providing ongoing services (for example, maintaining and administering existing facilities) are recognised
as income over the period the service is provided.
(iii) Dividend income
Dividends are recognised as revenue when the right to receive payment is established.
(iv) Leasing income
Finance income on finance leases is recognised on a basis that reflects a constant periodic return on the net investment in
the finance lease.
(v) Gain or loss on sale of plant and equipment
The gain or loss on the disposal of premises and equipment is determined as the difference between the carrying amountof the assets at the time of disposal and the proceeds of disposal, and is recognised as an item of other income in the
period in which the significant risks and rewards of ownership 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 atamortised cost. These loan origination expenses include:•
fees and commissions payable to brokers in respect of originating lending business; and•other 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 initially recognised as part of the cost of acquiring the financial asset and amortised aspart of the expected yield of the financial asset over its expected life using the effective interest method.
(iii) Share-based compensation expense
ANZ New Zealand has various equity settled share-based compensation plans. These are described in Note 39 and largely
comprise the Employee Share Acquisition Plan and the ANZ Share Option Plan.
Shares
The fair value of the Ultimate Parent Bank’s shares granted under the Employee Share Acquisition Plan is measured at
grant date, using a volume weighted average market price of the Ultimate Parent Bank’s shares. The fair value isexpensed immediately when shares vest immediately or on a straight-line basis over the relevant vesting period.

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Notes to the Financial Statements
Share options
The fair value of share options over the Ultimate Parent Bank’s shares 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 a corresponding increase in the share options liability account.
The option pricing model takes into account the exercise price of the option, the risk free interest rate, the expectedvolatility of the Ultimate Parent Bank’s share price and other factors. Market vesting conditions are taken into account inestimating the fair value.
Performance rights
A Performance Right is a right to acquire a share at nil cost to the employee subject to satisfactorily meeting time andperformance hurdles. Upon exercise, each Performance Right entitles the holder to one ordinary share in the Ultimate
Parent Bank. The fair value of Performance Rights is determined at grant date using an option pricing model, taking into
account market 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 numberof equity instruments that eventually vest.
(iv) Lease payments
Leases entered into by ANZ New Zealand as lessee are predominantly operating leases, and the operating lease payments
are recognised as an expense on a straight-line basis over the lease term.
(d)Income tax(i) Income tax expense
Income tax on earnings for the period comprises current and deferred tax and is based on the applicable tax law in eachjurisdiction. 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 a business 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 (and tax laws) which areenacted or substantively enacted by the reporting date and including any adjustment for tax payable in previous periods.
Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (orrefundable).
(iii) Deferred tax
Deferred tax is accounted for using the comprehensive tax balance sheet method. It is generated by providing for
temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax
base.
Deferred tax assets, including those related to the tax effects of income tax losses and credits available to be carriedforward, are recognised only to the extent that it is probable that future taxable profits will be available against which the
deductible temporary differences or unused tax losses and credit can be utilised
Deferred tax liabilities are recognised for all taxable temporary differences, other than those relating to taxable temporary
differences arising from goodwill. They are also recognised for taxable temporary differences arising on investments incontrolled entities, branches, associates and joint ventures, except where ANZ New Zealand is able to control the reversalof the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets associated with these interests are recognised only to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and there will be sufficient taxable profits against which to utilise thebenefits of the temporary difference.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when theasset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the reporting date. The measurement reflects the tax consequences that would follow from themanner in which ANZ New Zealand, at the reporting date, recovers or settles the carrying amount of its assets andliabilities.
(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 is allowed under the tax lawof the relevant jurisdiction.

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Notes to the Financial Statements(e)AssetsFinancial assets(i) Financial assets and liabilities at fair value through profit or loss
Trading securities are financial instruments acquired principally for the purpose of selling in the short-term or which are apart of a portfolio which is managed for short-term profit-taking. Trading securities are initially recognised andsubsequently measured in the balance sheet at their fair value.
Derivatives that are neither financial guarantee contracts nor effective hedging instruments are carried at fair value
through profit or loss. In addition, certain financial assets and liabilities are designated and measured at fair value
through profit or loss where the following applies:•
doing so eliminates or significantly reduces a measurement or recognition inconsistency that would 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 it is clear, with little or no analysis, that it would not be separately recorded.
Changes in the fair value (gains or losses) of these securities are recognised in the income statement in the period inwhich they occur.
Purchases and sales of trading securities are recognised 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, require little or no initial net investment and are settled at a later date. 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 the derivative instruments are used to hedge ANZ New Zealand’s exposures to interest rate risk,
currency risk, price risk, credit risk and other exposures 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 a credit
valuation adjustment to reflect the credit worthiness of the counterparty, modelled using the counterparty's credit
spreads. The valuation adjustment is influenced by the mark-to-market of the derivative trades and by the movement incredit spreads.
Where the derivative is designated and is effective as a hedging instrument, the timing of the recognition of any resultant
gain or loss in the income statement is dependent on the hedging designation. These hedging designations andassociated accounting are as follows:
Fair value hedge
Where ANZ New Zealand hedges the fair value of a recognised asset or liability or firm commitment, changes in the fairvalue of the derivative designated as a fair value hedge are recognised in the income statement. Changes in the fairvalue of the hedged item attributable to the hedged risk are reflected in adjustments to the carrying value of the hedged
item, which are also recognised in the income statement.
Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised or no longer
qualifies for hedge accounting. The resulting adjustment to the carrying amount of the hedged item arising from thehedged risk is amortised to the income statement over a period to maturity of the hedged item. If the hedged item issold or repaid, the unamortised adjustment is recognised immediately in the income statement.
Cash flow hedge
ANZ New Zealand designates derivatives as cash flow hedges where the instrument hedges the variability in cash flows ofa recognised asset or liability, a foreign exchange component of a firm commitment, or a highly probable forecast
transaction. The effective portion of changes in the fair value of derivatives qualifying and designated as 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 in equity 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 deferred in equity remains in the hedging reserve, and is 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 is recognised
immediately in the income statement.

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Notes to the Financial Statements
Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value of derivatives that are not designated in a hedging relationship but areentered into to manage the interest rate and foreign exchange risk of funding instruments are recognised in the income
statement. Under certain circumstances, the component of the fair value change in the derivative which relates to current
period realised and accrued interest is included in net interest income. The remainder of the fair value movement isincluded 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 agreements that 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 are recognised 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 ANZ New Zealand designates as available-for-salebut which are not deemed to be held principally for trading purposes, and include equity investments, certain loans andadvances and debt securities.
They are initially recognised at fair value plus transaction costs. Subsequent gains or losses arising from changes in fairvalue are included as a separate component of equity in the available-for-sale revaluation reserve. When the asset issold, the cumulative gain or loss relating to the asset is transferred to the income statement.
Where there is objective evidence of impairment on an available-for-sale asset, the cumulative loss related to that asset isremoved from equity and recognised in the income statement, as an impairment expense for debt instruments or as noninterest income for equity instruments. If, in a subsequent period, the amount of an impairment loss relating to anavailable-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 ANZ New Zealand 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 that are not quoted in an
active market. They arise when ANZ New Zealand provides money to a debtor with no intention of trading the loans andadvances. The loans and advances are initially recognised at fair value plus transaction costs that are directly attributable
to the issue of the loan or advance.
They are subsequently measured at amortised cost using the effective interest
method, unless specifically designated on initial recognition at fair value through profit or loss.
Loans and advances include direct finance provided 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.
individual provision is raised to cover the expected loss where full recovery of principal is doubtful.

An

Impairment of loans and advances
Loans and advances are reviewed at least at each reporting date for impairment.
Credit impairment provisions are raised for exposures that are known to be impaired. Exposures are impaired andimpairment 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 thatcan be reliably estimated.
Impairment is assessed for assets that are individually significant (or on a portfolio basis for small value loans) and thenon a collective basis for those exposures not individually known to be impaired.
Exposures that are assessed collectively are placed in pools of similar assets with similar risk characteristics. The required
provision is estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in
the collective pool. The historical loss experience is adjusted based on current observable data such as changed economic
conditions. The provision also takes account of the impact of inherent risk of large concentrated losses within theportfolio.
The estimated impairment losses are measured as the difference between the asset’s carrying amount and the estimatedfuture cash flows discounted to their present value. As this discount unwinds during the period between recognition of
impairment and recovery 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 are reviewed regularly to reduceany differences between loss estimates and actual loss experience.

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Notes to the Financial Statements
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 (individual and collective) is deducted from loans and advances in the balance sheet andthe movement for the reporting period is reflected in the income statement.
When a loan is uncollectible, either partially or in full, it is written off against the related provision for loan impairment.
Subsequent recoveries of amounts previously written off are taken to the income statement. Unsecured facilities arenormally written-off when they become 180 days past due or earlier in the event of the customer's bankruptcy or similar
legal release from the obligation. However, a certain level of recoveries is expected after the write-off, which is reflectedin the amount of the provision for credit losses. In the case of secured facilities, remaining balances are written-off after
proceeds from the realisation of collateral have been 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 the income statement.
A provision is also raised for off-balance sheet items such as commitments that are considered likely to result in an
expected loss.
(v) Lease receivables
Contracts to lease assets and hire purchase agreements are classified as finance leases if they transfer substantially all
the risks and rewards of ownership 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 andrewards of ownership remain with ANZ New Zealand, and a counterparty liability is disclosed under the classifications ofdue to other financial institutions or payables and other liabilities. The difference between the sale price and therepurchase 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 ANZ New Zealand does not acquire the risks and rewards ofownership, are recorded as receivables in liquid assets, net loans and advances, or due from other financial institutions,depending on 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 fair value with fair value movements included in the income
statement.
(vii) Derecognition
ANZ New Zealand enters into transactions where it transfers financial assets recognised on its balance sheet yet retains
either all the risks and rewards of the transferred assets or a portion of them. If all, or substantially all, the risks andrewards are retained, the transferred assets are not derecognised from the balance sheet.
In transactions where substantially all the risks and rewards of ownership of a financial asset are neither retained nor
transferred, ANZ New Zealand derecognises the asset if control over the asset is lost. In transfers where control over theasset is retained, ANZ New Zealand continues to recognise the asset to the extent of its continuing involvement,
determined by the extent to which it is exposed to changes in the value of the transferred asset. The rights andobligations retained or created in the transfer are recognised separately as assets and liabilities as appropriate.
(viii)
Investments relating to insurance business
Securities held to back insurance and investment contract liabilities are classified as policyholder assets.
policyholder assets are designated at fair value through profit or loss.

These

Non-financial assets(ix) Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable net assets of acontrolled entity at the date of gaining control. Goodwill is recognised as an asset and not amortised, but is assessed for
impairment at least annually or more frequently if there is an indication 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 results in 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 incurred in acquiring and building software and computer systems ("software") andmanagement rights and customer relationships acquired in business combinations.

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Notes to the Financial Statements
Software is amortised using the straight-line method over its expected useful life to ANZ New Zealand. The period ofamortisation is between 3 and 5 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
useful life. Where management rights and customer relationships do not have finite terms and the cash flows associatedwith these management rights are expected to continue indefinitely, the intangible assets associated with these items aretreated as having an indefinite useful life. Management rights and customer relationships with an indefinite useful life are
not amortised.
At each reporting date, the software assets and other intangible assets are reviewed for impairment. If any such
indication exists, the recoverable amount of the assets is estimated and compared against the existing carrying value.
Where the existing carrying value exceeds the recoverable amount, the difference is charged to the income statement.
Costs incurred in planning or evaluating software proposals, or in maintaining systems after implementation, are notcapitalised.
(xi) Premises and equipment
Premises and equipment are carried at cost less accumulated depreciation and impairment.
Borrowing costs incurred for the construction of qualifying assets are capitalised during the period of time that is required
to complete and prepare the asset for its intended use. The calculation of borrowing costs is based upon ANZ New
Zealand's internal cost of capital.
Assets other than freehold land are depreciated at rates based upon their expected useful lives to ANZ New Zealand,
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 a straight-line basis over the shorter of their useful lives or remaining terms of
the lease.
At each reporting date, the carrying amounts of premises and equipment are reviewed for impairment. If any such
indication exists, the recoverable amount of the assets is estimated and compared 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 to estimate the recoverable amount of an individual asset, ANZ New Zealand estimates the recoverable
amount of the cash generating unit to which the asset belongs.
A previously recognised impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount.
(xii) Insurance policy assets / liabilities
Net insurance policy assets / liabilities include liabilities arising from investment contracts and assets / liabilities arisingfrom life insurance contracts.
Provisions for liabilities under investment contracts are measured at fair value. The provision consists of a 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 the net present value of fees, in respect of theinvestment management service, discounted at the risk 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 net present value of the expected cash flows. An accumulation method is used where the policy assets / liabilities
determined are not materially different from those determined under the projection method.
(f)Liabilities

Financial liabilities(i) Deposits and other borrowings
Deposits and other borrowings include certificates of deposit, interest bearing deposits, debentures, commercial paper andother related interest and non-interest bearing financial instruments.
Deposits and other borrowings, excludingcommercial paper, are initially recognised at fair value plus transaction costs and subsequently measured at amortised
cost. The interest expense is recognised using the effective interest method. Commercial paper is designated at fairvalue through profit or loss, with fair value movements recorded directly in the income statement, which reflects the basis
on which it is managed.

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Notes to the Financial Statements(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 thosebonds and notes which are designated 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 to reimburse the holder fora loss it incurs because a specified debtor fails to make payments when due. Financial guarantees are issued in theordinary course of business, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initiallyrecognised in the financial statements at fair value on the date the guarantee was given; typically this is the premium
received.
Subsequent to initial recognition, ANZ New Zealand's liabilities under such guarantees are measured at the higher of theiramortised amount and the best estimate of the expenditure required to settle any financial obligation arising at thebalance sheet date. These estimates are determined based on experience of similar transactions and history of pastlosses.
(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 are accrued at expected salaryrates including on-costs. Expected future payments for long service leave are discounted using market yields at thereporting date on national government bonds with terms to maturity that match, as closely as possible, the estimatedfuture cash outflows. Liability for long service leave is calculated and accrued for in respect of all applicable employees(including on-costs) using an actuarial valuation.
Superannuation schemes
ANZ New Zealand operates a number of defined contribution schemes and also contributes, according to local law, togovernment and other plans that have the characteristics of defined contribution schemes. ANZ New Zealand’scontributions to these schemes are recognised as an expense in the income statement when incurred.
ANZ New Zealand operates two defined benefit superannuation schemes. The liability and expense related to providing
benefits to employees under each of the defined benefit schemes are calculated by independent actuaries. A defined
benefit liability is recognised to the extent that the present value of the 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 thiscalculation results in a benefit to ANZ New Zealand, a defined benefit asset is recognised which is capped at therecoverable amount.
In each subsequent reporting period, ongoing movements in the carrying value of the defined benefit liability or asset aretreated as follows:•
the net movement relating to the current period’s service cost, interest cost, expected return on scheme assets, past
service costs and other 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 and losses are recognised directly in retained earnings; and•contributions incurred are recognised directly against the net defined benefit position.
The assets of the defined benefit and cash accumulation superannuation schemes are held in trust and are not included inthese financial statements as ANZ New Zealand does not have direct or indirect control of these schemes. The benefits
under the schemes are provided from contributions by employee members and by ANZ New Zealand, and from income
earned by the assets of the schemes. Members’ contributions are at varying rates. Actuarial valuations are carried out at
a minimum of every three years in accordance with the schemes’ Trust Deeds and superannuation legislation.
(vi) Provisions
ANZ New Zealand recognises provisions when there is a present obligation, the future sacrifice of economic benefits is
probable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting
date, taking into account the 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 value of
those cash flows. Any expected third party recoveries are recognised as an asset if it is virtually certain that recovery will
be received and the amount of the receivable can be measured reliably.

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Notes to the Financial Statements(g)Equity(i) Shares
Issued shares are recognised at the amount paid per 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 of available-for-sale financial assets, net of tax. These changes aretransferred to the income statement (in non-interest income) when the asset is derecognised. Where the asset isimpaired, the changes 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 designated cash flow hedging
instruments.
(h)Presentation(i) Offsetting of income and expenses
Income and expenses are not offset unless required or permitted by an accounting standard. This generally arises in thefollowing circumstances:•where transaction costs form an integral part of the effective interest rate of a financial instrument which ismeasured at amortised cost, 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 of similar transactions, such as foreign exchange gains and losses.
(ii) Offsetting of financial assets and liabilities
Assets and liabilities are offset and the net amount reported in the balance sheet only where there is:•a current enforceable legal right to offset the asset and liability; and•an 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 callwith other financial institutions, other short term, highly liquid investments with original terms of maturity of threemonths or less that 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 to provide more meaningful disclosure, as many of the cash flows arereceived and disbursed on behalf of customers and reflect the activities of the customers rather than those of ANZ New
Zealand. These include customer loans and advances, customer deposits, certificates of deposit, related party balances
and trading securities.
(iv) Segment reporting
Business segments are distinguishable components of ANZ New Zealand that provide products or services that are subject
to risks and rewards that are different to those of other business segments. ANZ New Zealand operates predominately inthe banking industry within New Zealand. ANZ New Zealand has very limited exposure to risk associated with operating
in different economic environments or political conditions. On this basis no geographical segment information is provided.
For reporting purposes the three major business segments are Retail, Commercial and Institutional.
(v) Goods and services tax
Income, expenses and assets are recognised net of the amount of goods and services tax ("GST") except where theamount of GST incurred is not recoverable from the Inland Revenue Department ("IRD"). In these circumstances, theGST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, orpayable to, the IRD is included as other assets or other liabilities in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis. The GST components of cash flows arising frominvesting and financing activities, which are recoverable from, or payable to, the IRD are classified as operating cash
flows.
(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 to measure the amount of the obligation with sufficient reliability.

Australia and New Zealand Banking Group Limited - New Zealand Branch

22

Notes to the Financial Statements
Liabilities are no longer contingent, and are recognised on the balance sheet, when the following requirements are met:•
the transaction is probable in that the contingency is likely to occur; and•the contingency can be reasonably estimated.
Further disclosure is made within Note 37, where the above requirements are not met, but there is a possible obligationthat is higher than remote. Specific details of the nature of the contingent liability are provided and, where practicable,
an estimate of its financial effect. Alternatively, where no disclosure is made of its financial effect because it is notpracticable to do so, a statement to that effect is provided.
(ii) Securitisation, funds under management and other fiduciary activities
Certain entities within ANZ New Zealand act as trustees and/or managers for a number of unit trusts and superannuation
investment funds. ANZ New Zealand provides private banking services to customers including portfolio management.
The assets of the managed funds and private banking clients are not included in these financial statements, as direct orindirect control of the assets is not held by ANZ New Zealand. Commissions and fees earned in respect of ANZ New
Zealand’s funds under management are included in net operating income.
Financial services provided by any member of ANZ New Zealand to discretionary private banking activities or entities
conducting funds management, and assets purchased from discretionary private banking activities or entities conducting
funds management are on arm’s length terms and conditions, and at fair value.
Securitised assets are derecognised when the right to receive cash flows have expired or ANZ New Zealand has
transferred substantially all the risks and rewards of ownership.
(iii) Discontinued operations
A discontinued operation is a component of ANZ New Zealand’s business that represents a separate major line of businessor 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 is restated as if theoperation had been discontinued from the start of the comparative period.
(iv) Accounting Standards not early adopted
The following standards and amendments were available for early adoption but have not been applied by ANZ New
Zealand in these financial statements. ANZ New Zealand currently does not intend 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 and measuring 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 the financial results of
the Bank or ANZ New Zealand:
NZ IAS 24 Related Party Disclosures (effective periods commencing after 1 July 2011) – simplifies the definition 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 the classification of share rights, options or warrants for fixed amounts of any currency.
Improvements to New Zealand equivalents to International Financial Reporting Standards (various effective dates) – arethe International Accounting Standards Board’s annual omnibus updates of standards.

2. Critical Estimates and Judgement Used in Applying Accounting Policies
These financial statements are prepared in accordance with NZ IFRS. However, there are a number of critical accounting
treatments which include complex or subjective judgements and estimates that may affect the reported amounts of assets
and liabilities in the financial statements. Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances.
An explanation of the judgements and estimates made by ANZ New Zealand 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.
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring the impairment of loans and advances requires ANZ New Zealand to assess
impairment at least at each reporting date.
The credit provisions raised (individual and collective) represent
management's best estimate of the losses incurred in the loan portfolio at balance date based on their experienced
judgement.

Australia and New Zealand Banking Group Limited - New Zealand Branch

23

Notes to the Financial Statements
The collective provision is estimated on the basis of historical 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 andan assessment of 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 estimates is considered by management to be an essential part of theprocess and does not impact on reliability.
Individual provisioning is applied when the full collectibility of one of the ANZ New Zealand'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 are revised regularly
to reduce any differences between loss estimates and actual loss experience.
Refer to Note 15 for details of credit impairment provisions.
Management regularly reviews and adjusts the estimates and methodologies as improved analysis becomes available.
Changes in these assumptions and methodologies could have a direct impact on the level of provision and impairment
charge recorded in the financial statements.
Critical judgements in applying ANZ New Zealand’s accounting policies
Derivatives and hedging
ANZ New Zealand buys and sells derivatives as part of its trading operations and to hedge its interest rate risk, currency
risk, price risk, credit risk and other exposures relating to non-trading positions.
A hedging instrument is a designated derivative whose fair value or cash flows are expected to offset changes in the fairvalue or cash flows of a designated hedged item. A hedged item is an asset, liability, firm commitment or highly probable
forecast transaction that (a) exposes ANZ New Zealand to the risk of changes in fair value or future cash flows and (b) isdesignated 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 forassessing hedge effectiveness prospectively or retrospectively. ANZ New Zealand adopts the hypothetical derivative
approach to determine hedge effectiveness in line with current risk management strategies. Hedge ineffectiveness canarise for a number of reasons, and whilst a hedge may pass the effectiveness tests above it may not be perfectly
effective, thus creating volatility within the income statement through recognition 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 the balance sheet date. Any excess of carrying value over recoverable amount is taken to theincome statement as an impairment write down. Refer to Note 20 for details of goodwill.
Goodwill has been allocated for impairment purposes to the cash generating units at which the goodwill is monitored forinternal reporting purposes. Each of these cash generating units is represented by an individual reporting segment –Retail, Commercial and Institutional. Refer to Note 7.
Impairment testing of purchased goodwill is performed annually, or more frequently where there is an indication that 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 cash flow projections based on anumber of financial budgets within each segment approved by management covering a three year period. Cash flow
projections are based on a range of readily available economic assumptions including GDP and CPI. Cash flows beyond thethree year period are extrapolated using a 3% growth rate.
These cash flow projections are discounted using a capital asset pricing model. As at 31 March 2010, when the last
valuation was prepared, a discount rate of 11.66% was applied to each segment. The main variables in the calculation of
the discount rate used are the risk free rate, the beta rate and the market risk premium. The risk free rate is based on
the 10 year Government Bond Rate. The beta rate and the market risk premium are consistent with observable andcomparative market rates applied in the regional banking sector. Market observable information is not readily available atthe segment level therefore management performed stress tests for key sensitivities in each segment.
Management believes any reasonable possible change in the key assumptions on which the recoverable amount is based
would not cause ANZ New Zealand’s carrying amount to exceed its recoverable amount.

Australia and New Zealand Banking Group Limited - New Zealand Branch

24

Notes to the Financial Statements
3. Risk Management Policies
ANZ New Zealand recognises the importance of effective risk management to its business success. Management iscommitted to achieving strong control and a distinctive risk management capability that enables ANZ New Zealandbusiness units to meet their performance objectives.
ANZ New Zealand approaches risk through managing the various elements of the system as a whole rather than viewing
them as independent and unrelated parts. The risk management division (“Risk Management”) is independent of thebusiness, with clear delegations from the Board, of the Ultimate Parent Bank and operates within a comprehensive
framework comprising:•
The Boards of the entities making up ANZ New Zealand (“the Boards”) providing leadership, setting risk
appetite/strategy and monitoring progress;•
A strong framework for development and maintenance of ANZ New Zealand-wide risk management policies,
procedures and systems, overseen by an independent team of risk professionals;•
The use of sophisticated risk tools, applications and processes to execute the global risk management strategy as
it is deemed to apply to each entity across ANZ New Zealand;•Business unit level accountability, as the “first line of defence”, and for the management of risks in alignment
with ANZ New Zealand’s strategy; and•Independent oversight to ensure business unit level compliance with policies, regulations and laws, and toprovide regular risk evaluation and reporting.
ANZ New Zealand manages risk through an approval, delegation and limits structure. Regular reviews of the policies,
systems and risk reports, including the effectiveness of the risk management systems, discussions covering ANZ New
Zealand’s response to emerging risk issues and trends, and that the requisite culture and practices are in place across
ANZ New Zealand, are conducted within ANZ New Zealand and also by the Ultimate Parent Bank. The Boards have
responsibility for reviewing all aspects of risk management.
The Boards have ultimate responsibility for overseeing the effective deployment of risk management frameworks, policies
and processes within New Zealand.
ANZ New Zealand’s risk management policies are essentially the same as the Ultimate Parent Bank, but are tailored whererequired to suit the local New Zealand regulatory and business environment.
A number of new and existing types of risk have been recognised following the consolidation of the ING NZ (now known
as OnePath) into ANZ New Zealand. The new risks relate to OnePath’s insurance, real estate management and funds
management businesses. The new risks identified are not considered material to ANZ New Zealand.
Financial risk management
Refer to Note 32 for detailed disclosures on ANZ New Zealand's financial risk management policies.
Operational Risk
Operational risk is the risk arising from day to day operational activities which may result in direct or indirect loss. These
losses may result from failure to comply with policies, procedures, laws and regulations, from fraud or forgery, from a
breakdown in the availability or integrity of services, systems and information, or damage to ANZ New Zealand’s
reputation.
Examples include failure to comply with policy and legislation, human error, natural disasters, fraud and other malicious
acts. Where appropriate, risks are mitigated by insurance.
Risk Management is responsible for establishing ANZ New Zealand’s operational risk framework and associated ANZ New
Zealand-wide policies. Business units are responsible for the identification, analysis, assessment and treatment ofoperational risks on a day-to-day basis.
Compliance
ANZ New Zealand conducts its business in accordance with all relevant compliance requirements in each point ofrepresentation. In order to assist ANZ New Zealand identify, manage, monitor and measure its compliance obligations,
ANZ New Zealand has a comprehensive regulatory compliance framework in place, which addresses both external(regulatory) and internal compliance.
Risk Management, in conjunction with business unit staff ensure ANZ New Zealand operates within a complianceinfrastructure and framework that incorporates new and changing business obligations and processes.
The compliance policies and their supporting framework seek to minimise material risks to ANZ New Zealand’s reputationand value that could arise from non-compliance with laws, regulations, industry codes and internal standards and policies.
Business units have primary responsibility for the identification and management of compliance. Risk Management
provides policy and framework, measurement, monitoring and reporting, as well as leadership in areas such as antimoney laundering procedures and matters of prudential compliance. The Board and the Risk Committee of the Ultimate
Parent Bank Board conduct Board and Executive oversight.

Australia and New Zealand Banking Group Limited - New Zealand Branch

25

Notes to the Financial Statements
Internal audit
ANZ New Zealand’s internal audit function conducts independent reviews that assist the Boards and management to meettheir statutory and other obligations.
Internal Audit reports directly to the Chairman of the ANZ National Bank Limited Audit Committee and through to the
Ultimate Parent Bank Group General Manager Internal Audit. Under its Charter, Internal Audit conducts independent
appraisals of:•
The continued operation and effectiveness of the internal controls in place to safeguard and monitor all material
risks to ANZ New Zealand;•
Compliance with Board policies and management directives;•
Compliance with the requirements of supervisory regulatory authorities;•
The economic and efficient management of resources; and•The effectiveness of operations undertaken by ANZ New Zealand.
In planning audit activities, Internal Audit adopts a risk-based approach that directs and concentrates resources to thoseareas of greatest significance, strategic concern and risk to the business. This encompasses reviews of major credit,
market, technology and operating risks within ANZ New Zealand. Significant findings are reported quarterly to the
Ultimate Parent Bank and ANZ National Bank Limited Audit Committees as appropriate.
The Internal Audit Plan is approved by the ANZ National Bank Limited Audit Committee and endorsed by the Ultimate
Parent Bank Audit Committee.
All issues and recommendations reported to management are tracked and monitored internally to ensure completion andagreed actions are undertaken where appropriate.

Australia and New Zealand Banking Group Limited - New Zealand Branch

26

Notes to the Financial Statements
4. Income
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

346

187

-

-

346

187

-

-

Liquid assets

66

118

-

-

Other financial institutions

67

259

-

-

Available-for-sale assets

69

16

-

-

5,719

6,956

554

241

$ millions

Note

Interest income
Financial assets at fair value through profit or loss
Trading securities

Financial assets not at fair value through profit or loss

Lending on productive loans
Lending on impaired assets

60

8

1

-

120

34

-

-

6,101

7,391

555

241

6,447

7,578

555

241

Net gain on foreign exchange trading

123

201

-

-

Net gain on trading securities

174

43

-

-

Net loss on trading derivatives

(258)

(57)

-

-

39

187

-

-

Fee income on trust and other fiduciary activities

62

52

-

Other funds management and insurance income

156

45

-

-

Total funds management and insurance income

218

97

-

-

Other

Total interest income
Net trading gains

Net trading gains
Funds management and insurance income

Other operating income
Lending and credit facility fee income

45

62

-

-

Other fee income

554

580

-

-

Total fee income

599

642

-

-

Direct fee expense

181

172

Net fee income

418

470

-

-

2

1

-

-

Dividends received
Net gain / (loss) on hedges not qualifying for hedge
accounting
Net ineffectiveness on qualifying fair value hedges
Net cash flow hedge gain / (loss) transferred to income
statement

-

101

(16)

50

(18)

11

(20)

7

(10)

8

11

(21)

3

-

-

1

(20)

-

-

Net gain / (loss) on financial liabilities designated at fair value
ING New Zealand Funds

37

-

(211)

-

-

Loss on re-measuring existing equity interests at fair value

41

(82)

-

-

-

47

50

2

-

446

284

42

(10)

Other income
Total other operating income

Australia and New Zealand Banking Group Limited - New Zealand Branch

27

Notes to the Financial Statements
5. Expenses
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

265

561

-

-

265

561

-

146

Interest expense
Financial liabilities at fair value through profit or loss
Commercial paper

Financial liabilities not at fair value through profit or loss
Other financial institutions

401

359

412

2,150

2,959

-

-

810

910

-

16

Term funding

72

101

-

-

Loan capital

180

207

-

-

74

84

4

9

3,687

4,620

416

171

3,952

5,181

416

171

735

718

-

-

71

73

-

-

36

36

-

-

7

8

-

-

Share-based payments expense

21

18

-

-

Building occupancy costs

44

42

-

-

Depreciation of premises and equipment

47

39

-

-

Leasing and rental costs

82

80

-

-

Related parties (Note 27)

86

91

-

1

Computer expenses

131

120

-

-

Administrative expenses

209

178

-

-

96

76

26

10

1,565

1,479

26

11

Deposits and other borrowings
Bonds and notes

Other

Total interest expense
Operating expenses
Personnel costs
Employee entitlements
Pension costs- Defined contribution schemes- Defined benefit schemes

Other costs
Total operating expenses$ thousands

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Fees paid to principal auditors
Audit or review of financial statements

2,290

2,097

71

80

Other audit-related services

701

369

33

-

Total auditors' remuneration

2,991

2,466

104

80

140

-

-

-

Audit fees paid to other audit firms

It is ANZ New Zealand’s policy that, subject to the approval of the Ultimate Parent Bank Audit Committee, KPMG canprovide assurance and other audit-related services that, while outside the scope of the statutory audit, are consistent withthe role of auditor. KPMG may not provide services that are perceived to be in conflict 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 toexpress an opinion on its own work.
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

28

Notes to the Financial Statements
6. Income Tax Expense
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Reconciliation of the prima facie income tax payable on profit
Profit before income tax

1,219

616

135

40

Prima facie income tax at 30%

366

185

41

12

Rebateable and non-assessable dividends

(6)

(8)

-

-

Effect of changes in tax legislation

45

-

-

-

(54)

240

-

-

1

6

-

-

352

423

41

12

-

(1)

-

-

352

422

41

12

Effective tax rate (%) before change in tax provisions and the effect ofchanges in tax legislation

29.6%

29.5%

30.4%

30.0%

Effective tax rate (%)

28.9%

68.5%

30.4%

30.0%

641

386

45

15

-

(1)

-

-

(316)

136

(4)

(3)

27

(99)

-

-

352

422

41

12

Actuarial gain / (loss) on defined benefit schemes

8

(7)

-

-

Net gain on revaluation of financial instruments

8

-

-

-

Net gain / (loss) on revaluation of financial instruments

32

(3)

-

-

Total income tax charge / (benefit) recognised directly in equity

48

(10)

-

-

645

696

-

-

31

31

-

-

375

138

-

-

(125)

(252)

-

-

9

32

-

-

935

645

-

-

Change in tax provisions
Non-deductible expenses / (non-assessable income)

Income tax under provided in prior years
Total income tax expense

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 ofprior years
Deferred income tax
Deferred tax expense / (income) relating to the origination and reversalof temporary differences
Other (including indemnity)
Total income tax expense recognised in income statement
Amounts recognised directly in equity
Current income tax

Deferred income tax

Imputation Credit AccountBalance at beginning of the year
Imputation credits attached to dividends received
Taxation paid
Imputation credits attached to dividends paid
Other
Balance at end of the year

The above amounts only include items that give rise to imputation credits that are available for use by ANZ New Zealand
and/or the NZ Branch. The figures shown for the NZ Branch include the imputation credits available for use by the NZ
Branch held by the ANZ New Zealand imputation group.
Changes in tax legislation
In May 2010 legislation was passed to reduce the New Zealand corporate tax rate from 30% to 28% and to remove theability to claim tax depreciation on buildings with an estimated useful life greater than fifty years, effective for the 20112012 income tax year. The tax effect shown is the estimated impact on the value of deferred tax as a result of thechanges from 1 October 2011.
Settlement with Inland Revenue Department
The New Zealand Inland Revenue Department ("IRD") had been reviewing a number of structured finance transactions aspart of an audit of the 2000 to 2005 tax years. The Bank has reached a settlement with the IRD in respect of all thetransactions in dispute. This liability, net of amounts receivable from Lloyds Banking Group plc, was met from existing tax
provisions.

Australia and New Zealand Banking Group Limited - New Zealand Branch

29

Notes to the Financial Statements
7. Segmental Analysis
For segment reporting purposes, ANZ New Zealand is organised into three major business segments - Retail, Commercial
and Institutional. Centralised back office and corporate functions support these segments. These segments are
consistent with internal reporting provided to the chief operating decision maker, being the Bank’s Chief Executive Officer.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent
with the 2010 segment definitions.
RetailRetail provides banking products and services to individuals and small businesses through separate ANZ and The National
Bank of New Zealand branded distribution channels. Personal banking customers have access to a wide range of financial
services and products. Small business banking services are offered to enterprises with annual revenues of less than $5
million. ANZ New Zealand's wealth businesses include private banking and investment services provided to high net
worth individuals, the OnePath wealth management and insurance businesses, and other investment products. This
segment also includes other profit centres supporting the Retail Banking segment.
Commercial
Commercial provides services to Rural, Commercial and UDC customers. A full range of banking products and services areprovided to Rural customers. Commercial customers consist of primarily privately owned medium to large businesses
with annual revenues of $2 million and greater. ANZ New Zealand's relationship with these businesses 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 thefinancing and leasing of plant, vehicles and equipment, primarily for small and medium sized businesses, as well as
investment products.
Institutional
Institutional provides financial services to large multi-banked corporations, often global, who require sophisticated productand structuring 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
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

30

Notes to the Financial Statements
Business segment analysis1
ANZ New Zealand$ millions
3

Commercial

External interest income

3,814

2,321

349

(37)

6,447

External interest expense(1,425)

(345)

(414)

(1,768)(3,952)

Net intersegment interest(1,174)(1,118)

544

1,748

-

1,215

858

479

(57)

2,495

481

50

114

58

703

35

-

5

2

42

30/09/2010

Net interest income
Other external operating income4
Share of profit of equity accounted associates andjointly controlled entities
Operating income

RetailInstitutional

Other4

Total

1,731

908

598

3

3,240

Other external expenses

603

153

101

622

1,479

Net intersegment and related party expenses2

482

117

64

(577)

86

Operating expenses

1,085

270

165

45

1,565

Profit before provision for credit impairment

646

638

433

(42)

1,675

Provision for credit impairment

224

292

(60)

-

456

Profit before income tax

422

346

493

(42)

1,219

Income tax expense

127

104

142

(21)

352

Profit after income tax

295

242

351

(21)

867

Other information
Depreciation and amortisation
Goodwill

22

3

1

45

71

1,138

1,052

1,072

-

3,262
125

Intangible assets - indefinite life

125

-

-

-

Intangible assets - definite life

146

8

-

4

158

-

-

57

87

144

Total external assets

56,02436,87330,5583,574

127,029

Total external liabilities

39,631

9,623

31,50038,454

119,208

30/09/2009

Retail3

Commercial

Institutional

Other 4

Total

External interest income

4,429

2,729

481

(61)

7,578

External interest expense(1,775)

(533)

(731)

(2,142)(5,181)

Net intersegment interest(1,470)(1,397)

757

2,110

-

Net interest income

1,184

799

507

(93)

2,397

258

64

259

(13)

568

13

-

(2)

2

13

Shares in associates and jointly controlled entities

Other external operating income
Share of profit of equity accounted associates andjointly controlled entities
Operating income

1,455

863

764

(104)

2,978

Other external expenses

486

160

111

632

1,389

Net intersegment and related party expenses2

464

113

56

(543)

90

Operating expenses

950

273

167

89

1,479

Profit before provision for credit impairment

505

590

597

(193)

1,499

Provision for credit impairment

368

419

96

-

883

Profit before income tax

137

171

501

(193)

616

Income tax expense

36

50

144

192

422

Profit after income tax

101

121

357

(385)

194

Other information
Depreciation and amortisation

13

2

2

35

52

1,138

1,052

1,072

-

3,262

Intangible assets - definite life

45

9

2

4

60

Shares in associates and jointly controlled entities

329

-

61

74

464

Total external assets

55,46437,541

31,055

2,254

126,314

Total external liabilities

38,962

10,51038,65930,868

118,999

Goodwill

1

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.

Australia and New Zealand Banking Group Limited - New Zealand Branch

31

Notes to the Financial Statements
2
3
4

Net intersegment and related party expenses are eliminated at the Overseas Banking Group level.
Includes a loss of $82 million (30/9/2009 nil) on acquisition of ING NZ (refer Note 41) and a charge of $nil (30/9/2009 $211 million) in relation to ING NZ
Funds (refer Note 37).
This segment has negative external revenues as this segment incurs funding costs on behalf of ANZ New Zealand and is reimbursed internally.

8. Liquid assets
ANZ New Zealand$ millions

Cash and balances with central banks
Money at callBills receivable and remittances in transit
Total liquid assets

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

1,830

2,373

-

-

328

341

-

-

81

48

-

-

2,239

2,762

-

-

1,670

2,207

-

-

30/09/2009

30/09/2010

30/09/2009

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

9. Due from other financial institutions
ANZ New Zealand$ millions

30/09/2010

NZ Branch

Able to be withdrawn without prior notice

457

172

-

-

Securities purchased under agreement to resell
Securities purchased under agreement to resell with central
banks

176

1,083

-

-

170

-

-

-

Security settlements

1,535

117

-

-

Certificates of deposit

707

2,338

-

-

-

398

-

-

451

406

-

-

3,496

4,514

-

-

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

None of these assets were used to secure deposit obligations or were encumbered through repurchase agreements at 30
September 2010 (30/09/2009 $nil).

10. Trading securities
ANZ New Zealand$ millions

Government, Local Body stock and bonds

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

3,917

1,389

-

-

Certificates of deposit

32

191

-

-

Promissory notes

64

28

-

-

Other bank bonds

2,655

2,475

-

-

89

83

-

-

6,757

4,166

-

-

222

159

-

-

Other
Total trading securities
Assets encumbered through repurchase agreements included
in trading securities

Australia and New Zealand Banking Group Limited - New Zealand Branch

32

Notes to the Financial Statements
11. Derivative Financial Instruments
The use of derivatives and their sale to customers as risk management products is an integral part of ANZ New Zealand’s
trading activities. Derivatives are also used to manage ANZ New Zealand’s own exposure to fluctuations in exchange andinterest 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 and market risk as other financial instruments and ANZ New Zealandmanages these risks in a consistent manner.
Derivatives, except for those that are specifically designated as 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 ANZ New Zealand’s balance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include thestructuring and marketing of derivative products to customers which enable them to take or mitigate risks. Market making
activities consist of derivatives entered into principally for the purpose of generating profits from short-term fluctuations inprice or margins. Positions may be traded actively or held over a period of time to benefit from expected changes inmarket rates.
Balance sheet risk management
ANZ New Zealand designates balance sheet risk management derivatives into hedging relationships in order to minimise
income statement volatility. This volatility is created 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.
The following tables provide an overview of ANZ New Zealand’s and the NZ Branch's foreign exchange rate, interest rateand commodity derivatives.

Australia and New Zealand Banking Group Limited - New Zealand Branch

33

Notes to the Financial Statements
ANZ New Zealand

NZ Branch

Notional
30/09/2010

Principal$ millions

AmountNotional
Fair values
AssetsLiabilities

Principal

Fair values

AmountAssetsLiabilities

Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts

35,893

465

910

355

15

-

Swap agreements

110,566

2,232

3,206

10,111

460

52

Options purchased

1,563

48

-

-

-

-

Options sold

1,505

1

58

-

-

-

n/a

(361)

(1,242)n/a--

149,527

2,385

2,932

10,466475

52

Collateral received / paid

Interest rate derivatives
Forward rate agreements

44,065

7

7

2,671

-

-

Swap agreements

391,616

7,676

7,177

7,850

25

20

Futures contracts

25,494

3

22

-

-

-

Options purchased

524

21

-

-

-

-

2,630

-

15

-

-

-

464,329

7,707

7,221

10,521

25

20

62

1

1

-

-

-

6

1

1

-

-

-

613,924

10,094

10,15520,987

500

72

Options soldCommodity derivatives
Fuel derivatives
Electricity derivatives
Total derivatives held for trading
Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives
Swap agreements

8,772

227

77

-

-

-

Futures contracts

6,226

-

13

-

-

-

14,998

227

90

-

-

-

53

3

-

-

-

-

Swap agreements

23,437

530

482

7,320

-

70

Total derivatives designated asfair value hedges

23,490

533

482

7,320

-

70

Total derivatives held forhedging

38,488

760

572

7,320

-

70

Total derivative financial
instruments

652,412

10,854

10,72728,307500

142

Total derivatives designated as
cash flow hedges(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
Interest rate derivatives

Australia and New Zealand Banking Group Limited - New Zealand Branch

34

Notes to the Financial Statements
ANZ New Zealand

NZ Branch

Notional
30/09/2009

Principal$ millions

AmountNotional
Fair values
AssetsLiabilities

Principal

Fair values

AmountAssetsLiabilities

Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts

29,918

684

1,581

557

1

3

Swap agreements

76,468

2,398

4,076

8,519

-

245

Options purchased

1,018

42

-

-

-

-

Options sold

953

-

52

-

-

-

Collateral received / paid

n/a

(115)

(2,908)n/a--

108,357

3,009

2,801

9,076

1

248

Interest rate derivatives
Forward rate agreements

30,526

2

3

1,972

-

-

Swap agreements

375,488

7,387

6,986

2,058

2

4

Futures contracts

20,647

45

2

-

-

-

Options purchased

2,026

23

-

-

-

-

Options sold

2,034

-

23

-

-

-

430,721

7,457

7,014

4,030

2

4

Fuel derivatives

23

1

1

-

-

-

Electricity derivatives

13

1

1

-

-

-

539,114

10,468

9,817

13,106

3

252

Swap agreements

15,902

140

111

-

-

-

Total derivatives designated as cash
flow hedges

15,902

140

111

-

-

-

18

-

-

-

-

-

Swap agreements

30,051

407

1,046

6,485

31

2

Total derivatives designated as fairvalue hedges

30,069

407

1,046

6,485

31

2

Total derivatives held for hedging

45,971

547

1,157

6,485

31

2

Total derivative financial instruments

585,085

11,015

10,974

19,591

34

254

Commodity derivatives

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

Hedging relationships
ANZ New Zealand has entered into two types of allowable hedging: fair value hedges and cash flow hedges. For details
on the accounting treatment of each type of hedging relationship refer to Note 1.
Fair value hedges
ANZ New Zealand’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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

35

Notes to the Financial Statements
Gain / (loss) on fair value hedges attributable to the hedged risk
ANZ New Zealand$ millions

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

Gain or (loss) arising from fair value hedges:- hedged item

(458)

115

66

(27)

- hedging instrument

438

(108)

(76)

35

Net ineffectiveness on qualifying fair value hedges

(20)

7

(10)

8

Cash flow hedges
ANZ New Zealand’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 non-trading assets and liabilities which bear interest at variable rates or
which are expected to be refunded or reinvested in the future. ANZ New Zealand 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 and timing 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.
Analysis of the cash flow hedging reserve
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Balance at beginning of the year

23

24

-

-

Valuation gain / (loss) taken to equity

89

(1)

-

-

(25)

1

-

-

Transferred to income statement

21

(3)

-

-

Tax effect of items transferred to income statement

(6)

2

-

-

Balance at end of the year

102

23

-

-

Variable rate loan assets

200

149

-

-

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

(34)

(29)

-

-

(64)

(97)

-

-

Total cash flow hedging reserve

102

23

-

-

Tax effect of valuation loss / (gain) taken to equity

Attributable to:

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 (30/09/2009 0-10 years).
Ineffectiveness recognised in the income statement in respect of cash flow hedges was less than $1 million in ANZ New
Zealand and NZ Branch (30/09/2009 less than $1 million).
There were no transactions where cash flow hedge accounting ceased in the year ended 30 September 2010 as a result ofhighly probable cash flows that were no longer expected to occur (30/09/2009 no transactions).

12. Available-for-sale assets
ANZ New Zealand$ millions

Government, Local Body stock and bonds
Other debt securities
Equity securities
Total available-for-sale assets

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

1,939

1,394

-

-

193

48

-

-

78

71

-

-

2,210

1,513

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

36

Notes to the Financial Statements
13. Net Loans and Advances
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Overdrafts

2,131

2,087

-

-

Credit card outstandings

1,388

1,402

-

-

Term loans - housing

53,89253,45810,0298,795

Term loans - non-housing

39,17940,231--

Finance lease receivables

726

683

-

-

Gross loans and advances

97,316

97,861

10,029

8,795

Provision for credit impairment (Note 15)(1,420)(1,281)

(22)

(9)

(273)

(262)

-

-

Fair value hedge adjustment

386

681

40

(27)

Deferred fee revenue and expenses

(50)

(53)

(1)

(1)

56

78

13

16

96,01597,024

10,059

8,774

Unearned finance income

Capitalised brokerage/mortgage origination fees
Total net loans and advances

As at 30 September 2010 ANZ New Zealand has not entered into any repurchase agreements for residential mortgagebacked securities with the RBNZ (30/09/2009 repurchase agreements of $1,806 million). Therefore no underlying
collateral has been accepted by the RBNZ under this transaction (30/09/2009 mortgages to the value of $2,250 million
were held by the RBNZ as collateral).

14. Impaired Assets, Past Due Assets and Other Assets Under Administration
Individually impaired assets$ millions

ANZ New Zealand

NZ Branch

RetailOther retail

Corporate

mortgages

exposures

exposures

RetailOther retail

Corporate

Total

mortgages

exposures

exposures

Total

10

30/09/2010
Balance at beginning of the year

387

59

740

1,186

10

-

-

Transfers from productive

591

258

1,282

2,131

59

-

-

59

Transfers to productive

(24)

(2)

(73)

(99)

(4)

-

-

(4)

Assets realised or loans repaid

(338)

(110)

(454)

(902)

(16)

-

-

(16)

Write offs

(62)

(124)

(92)

(278)

(6)

-

-

(6)

Individually impaired asset balance at
end of the year

554

81

1,403

2,038

43

-

-

43

9

-

-

9

-

-

-

-

563

81

1,403

2,047

43

-

-

43

Restructured items
Total impaired assets
30/09/2009
Balance at beginning of the year

83

30

214

327

-

-

-

-

Transfers from productive

586

243

882

1,711

10

-

-

10

Transfers to productive

(22)

(20)

(25)

(67)

-

-

-

-

Assets realised or loans repaid

(232)

(45)

(230)

(507)

-

-

-

-

Write offs

(28)

(149)

(101)

(278)

-

-

-

-

Individually impaired asset balance at
end of the year

387

59

740

1,186

10

-

-

10

Restructured items

2

-

-

2

-

-

-

-

Total impaired assets

389

59

740

1,188

10

-

-

10

Restructured assets
A restructured asset is an impaired asset for which the terms have been changed to grant the counterparty a concessionthat would 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 ANZ New Zealand’s cost of funds. An asset isclassified as an other individually impaired asset if, following the restructure, the yield on the asset is below ANZ New
Zealand’s cost of funds.

Australia and New Zealand Banking Group Limited - New Zealand Branch

37

Notes to the Financial Statements
Restructured assets$ millions

ANZ New Zealand

NZ Branch

RetailOther retail

Corporate

RetailOther retailmortgages

exposures

exposures

Corporate

Total

mortgages

exposures

exposures

Total

Balance at beginning of the year

2-

Transfers to restructured items

9

-

-

2

-

-

-

-

-

9

-

-

-

Transfers from restructured items

(2)

-

-

-

(2)

-

-

-

-

9

-

-

9

-

-

-

-

Balance at beginning of the year

-

-

-

-

-

-

-

-

Transfers to restructured items

2

-

18

20

-

-

-

-

Transfers from restructured items

-

-

(18)

(18)

-

-

-

-

Balance at end of the year

2

-

-

2

-

-

-

-

30/09/2010

Balance at end of the year
30/09/2009

Renegotiated loans
Renegotiated loans are loans that would otherwise be past due or impaired had their terms not been renegotiated. At 30
September 2010, loans and advances of $621 million were renegotiated in ANZ New Zealand (30/09/2009 $266 million).
No loans and advances were renegotiated in the NZ Branch (30/09/2009 nil).
Assets acquired through enforcement of security
Assets acquired through enforcement of security are those assets which are legally owned by ANZ New Zealand as aresult of enforcing security, other than any buildings occupied by ANZ New Zealand. ANZ New Zealand held no material
assets acquired through enforcement of security (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 tomake a payment when contractually due.
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
form of 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 loans ofsimilar risk and maturity.

Australia and New Zealand Banking Group Limited - New Zealand Branch

38

Notes to the Financial Statements
30/09/2010$ millions

RetailANZ New ZealandOtherretail Corporate

mortgages exposures exposures

RetailNZ Branch
Otherretail Corporate

Total mortgages exposures exposures

Total

Past due assets (90 days past due assets) 1
Balance at beginning of the year

276

59

111

446

11

-

-

Transfers to past due assets

530

127

510

1,167

80

-

-

80

Transfers from past due assets

(653)

(153)

(494)

(1,300)

(70)

-

-

(70)

153

33

127

313

21

-

-

21

Balance at beginning of the year
Transfers to other assets underadministration
Transfers from other assets underadministration

-

-

-

-

-

-

-

-

-

-

4

4

-

-

-

-

-

-

-

-

-

-

-

-

Balance at end of the year

-

-

4

4

-

-

-

-

Balance at beginning of the year
Net transfers to / (from) undrawn
facilities with impaired customers

-

-

32

32

-

-

-

-

-

-

-

-

-

-

-

-

Balance at end of the year

-

-

32

32

-

-

-

-

Balance at end of the year

11

Other assets under administration

Undrawn facilities with impaired customers

Interest forgone on impaired assets
Gross interest receivable on impaired
loansInterest recognised
Net interest foregone on impaired
loans

44

7

68

119

2

-

-

2

(16)

(3)

(41)

(60)

(1)

-

-

(1)

28

4

27

59

1

-

-

1

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

244

54

11

309

-

-

-

-

Transfers to past due assets

864

149

448

1,461

12

-

-

12

Transfers from past due assets

(832)

(144)

(348)

(1,324)

(1)

-

-

(1)

Balance at end of the year

276

59

111

446

11

-

-

11

Balance at beginning of the year
Transfers to other assets underadministration
Transfers from other assets underadministration

-

-

1

1

-

-

-

-

-

-

42

42

-

-

-

-

-

-

(43)

(43)

-

-

-

-

Balance at end of the year

-

-

-

-

-

-

-

-

Balance at beginning of the year
Net transfers to / (from) undrawn
facilities with impaired customers

-

-

6

6

-

-

-

-

-

-

26

26

-

-

-

-

Balance at end of the year

-

-

32

32

-

-

-

-

Other assets under administration

Undrawn facilities with impaired customers

Interest forgone on impaired assets
Gross interest receivable on impaired
loans

22

4

42

68

-

-

-

-

Interest recognised

(4)

(1)

(3)

(8)

-

-

-

-

Net interest forgone on impaired
loans

18

3

39

60

-

-

-

-

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 beheld for up to 180 days past due.

Australia and New Zealand Banking Group Limited - New Zealand Branch

39

Notes to the Financial Statements
15. Provision for Credit Impairment
ANZ New Zealand$ millions

NZ Branch

RetailOther retail

Corporate

mortgages

exposures

exposures

Total

RetailOther retail

Corporate

mortgages

exposures

exposures

Total

30/09/2010
Collective provision
Balance at beginning of the year

127

159

518

804

6

-

-

6

Charge / (credit) to income statement

(5)

(10)

15

-

5

-

-

5

Balance at end of the year

122

149

533

804

11

-

-

11

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

156

40

281

477

3

-

-

3

Charge to income statement
Recoveries of amounts previously
written off

139

120

197

456

15

-

-

15

2

17

2

21

-

-

-

-

Bad debts written off

(62)

(124)

(92)

(278)

(5)

-

-

(5)

Discount unwind1

(17)

(3)

(40)

(60)

(1)

-

-

(1)

Balance at end of the year

218

50

348

616

11

-

-

12

Total provision for credit impairment

340

199

881

1,420

22

-

-

23

Balance at beginning of the year

81

164

289

534

-

-

-

-

Charge to income statement

46

(5)

229

270

6

-

-

6

Balance at end of the year

127

159

518

804

6

-

-

6

30/09/2009
Collective provision

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

28

10

94

132

-

-

-

-

Charge to income statement
Recoveries of amounts previously
written off

155

161

297

613

3

-

-

3

1

18

1

20

-

-

-

-

Bad debts written off

(28)

(149)

(101)

(278)

-

-

-

-

-

-

(10)

(10)

-

-

-

-

Balance at end of the year

156

40

281

477

3

-

-

3

Total provision for credit impairment

283

199

799

1,281

9

-

-

9

Discount unwind1

1

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 toits present value using the original effective interest rate for the asset. This discount unwinds as interest income over the period the asset is held.

Australia and New Zealand Banking Group Limited - New Zealand Branch

40

Notes to the Financial Statements
Provision movement analysis$ millions

ANZ New Zealand

NZ Branch

RetailOther retail

Corporate

mortgages

exposures

exposures

Total

RetailOther retail

Corporate

mortgages

exposures

exposures

Total

30/09/2010
New and increased provisions

206

160

338

704

20

-

-

20

Provision releases

(65)

(23)

(139)

(227)

(5)

-

-

(5)

141

137

199

477

15

-

-

15

(2)

(17)

(2)

(21)

-

-

-

-

Recoveries of amounts previously
written off
Individual provision charge

139

120

197

456

15

-

-

15

Collective provision charge / (credit)

(5)

(10)

15

-

5

-

-

5

Charge to income statement

134

110

212

456

20

-

-

20

165

182

316

663

3

-

-

3

(9)

(3)

(18)

(30)

-

-

-

-

156

179

298

633

3

-

-

3

(1)

(18)

(1)

(20)

-

-

-

-

Individual provision charge

155

161

297

613

3

-

-

3

Collective provision charge

46

(5)

229

270

6

-

-

6

Charge to income statement

201

156

526

883

9

-

-

9

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

16. Controlled Entities, Associates and Jointly Controlled Entities
ANZ New Zealand$ millions

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

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

143

211

-

-

1

253

-

-

144

464

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

Notes to the Financial Statements
Ownership

Balance

Controlled Entities

Interest %DateNature of business

Alos Holdings Limited

100

30 September

Investment company

ANZ Capel Court Limited (New Zealand Branch)

100

30 September

Securitisation services company

ANZ Capital NZ Limited

100

30 September

Investment company

ANZ Holdings (New Zealand) Limited

100

30 September

Investment company

ANZ Investment Services (New Zealand) Limited

100

30 September

Funds management company

ANZ National Bank Limited

100

30 September

Registered bank

ANZ National (Int'l) Limited

100

30 September

Finance company

ANZ National Staff Superannuation Limited

100

30 September

Staff superannuation scheme trustee

ANZ Nominees Limited (New Zealand Branch)

100

30 September

Nominee company

ANZ Securities (NZ) Limited

100

30 September

Nominee company

ANZMAC Securities (NZ) Nominees Limited

100

30 September

Nominee company

APAC Investments Limited3

65

31 December

Finance company

Arawata Assets Limited

100

30 September

Property company

Arawata Capital Limited

100

30 September

Investment company

Arawata Finance Limited

100

30 September

Investment company

Arawata Holdings Limited

100

30 September

Investment company

Arawata Securities Limited 2

100

30 September

Non operative-

30 September

Finance entity

Arawata Trust Company
Argosy Property Management Limited (formerly ING Property
Trust Management Limited)1

100

30 September

Investment company

100

31 March

Management company

Australian Properties Ltd1AUT Investments Limited (formerly ING NZ AUT Investments
Limited) 1

100

30 September

Management company

100

30 September

Holding company

BHI Limited

100

30 September

Investment company

CBC Finance Limited (registered in British Virgin Islands)

100

31 December

Non operative

Control Nominees Limited

100

30 September

Finance company

Direct Broking Limited

100

30 September

On-line share broker

Direct Nominees Limited
Diversified Yield Fund (formerly ING Diversified Yield Fund,registered in Australia) 1

100

30 September

Nominee company

99

30 JuneFixed income fund

Eastern Specialists Consulting Ltd1

100

30 September

Holding company

EFTPOS New Zealand Limited

100

30 September

EFTPOS service provider

Endeavour Finance Limited

100

30 September

Investment company

31 March

Mortgage financeArawata Trust

General Finance Custodians Limited-

Harcourt Corporation Limited

100

30 September

Investment company

Karapiro Investments Limited

100

30 September

Non operative

Kingfisher NZ Trust 2008-1-

30 September

Finance entity

National Bank of New Zealand Custodians Limited

100

30 September

Nominee company

NBNZ Holdings Hong Kong Limited (registered in Hong Kong)100

31 December

Non operative

NBNZ Holdings Limited

100

30 September

Finance company

OneAnswer Nominees Limited1

100

30 September

Finance company

OnePath (NZ) Limited (formerly ING (NZ) Limited) 1
OnePath Holdings (NZ) Limited (formerly ING (NZ) Holdings
Limited) 1
OnePath Insurance Holdings (NZ) Limited (formerly ING
Insurance Holdings Limited) 1
OnePath Insurance Services (NZ) Limited (formerly ING
Insurance Services (NZ) Limited) 1

100

30 September

Finance company

100

30 September

Holding company

100

30 September

Holding company

100

30 September

Insurance company

OnePath Life (NZ) Limited (formerly ING Life (NZ) Limited) 1
OnePath Nominees (NZ) Limited (formerly ING (NZ) Nominees
Limited) 1

100

30 September

Insurance company

100

30 September

Finance company

Origin Mortgage Management Services Limited-

31 March

Mortgage financeOrigin Mortgage Management Services (2008) Limited-

31 March

Mortgage finance

Private Nominees Limited

100

30 September

Nominee company

Radiola Corporation Limited
Regular Income Fund (formerly ING Regular Income Fund,registered in Australia) 1

100

30 September

Non operative

99

30 JuneFixed income fund

Rural Growth Fund Limited

100

30 September

Investment company

Samson Funding Limited

100

30 September

Finance company

Silver Fern Life Brokers Limited1

100

30 September

Insurance company

South Pacific Merchant Finance Limited

100

30 September

Investment company

Southpac Corporation Limited

100

30 September

Investment company

41

Australia and New Zealand Banking Group Limited - New Zealand Branch

42

Notes to the Financial Statements
Trillium Holdings Limited 2

100

30 September

Non operative

Tui Securities Limited2

100

30 September

Non operative

UDC Finance Limited
Vital Healthcare Australian Properties Proprietary Limited(formerly ING Medical Australian Properties Proprietary
Limited, registered in Australia) 1
Vital Healthcare Management Limited (formerly ING Medical
Properties Limited)1

100

30 September

Finance company

100

30 September

Holding company

100

31 March

Management company

1
2
3

Controlling stake acquired on 30 November 2009.
Currently being wound up.
Sold on 1 October 2010.

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 tothe voting power held. In relation to these companies, control exists through ANZ New Zealand having 100% of thevoting rights.
In relation to Arawata Trust control exists through the Bank being trustee of the Trusts. In relation to Kingfisher NZ Trust
2008-1 control exists as ANZ New Zealand 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, ANZ New Zealand ceased to control Marmion Trust. Control previously existed through the undertaking of
the majority of risks and rewards relating to a particular transaction. This transaction was unwound in April 2009.
On 30 November 2009 ANZ New Zealand acquired control over ING NZ and its subsidiary companies, which had
previously been treated as jointly controlled entities, and of the ING Diversified Yield Fund and the ING Regular Income
Fund, which had been previously treated as investments in associates.
In June 2010 Airlie Investments Limited, Endeavour Securities Limited and Sefton Finance Limited were deregistered.
In August 2010 the following companies were amalgamated:• Harcourt Investments Limited and Corvine Investments Limited into their direct parent company, Harcourt Corporation
Limited;• NBNZ Finance Limited into its direct parent company, Alos Holdings Limited,• Tui Endeavour Limited into its direct parent company, Endeavour Finance Limited; and• Arawata Funding Limited, Culver Finance Limited and Cortland Finance Limited into their direct parent company,
Arawata Finance Limited.
In September 2010 all the assets of three subsidiaries, Arawata Securities Limited, Trillium Holdings Limited and Tui
Securities Limited, were distributed up to their direct parent company, the Bank, as part of the process of winding themup.
Associates
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

211

144

-

-

-

67

-

-

(96)

-

-

-

Impairment

(4)

(2)

-

-

Share of profit of equity accounted associates

34

2

-

-

Dividends received from associates

(2)

-

-

-

Balance at end of the year

143

211

-

-

Balance at beginning of the year
Acquisitions
Transfers to subsidiary company

In August 2009, ANZ New Zealand acquired an interest in the ING Diversified Yield Field and ING Regular Income Fund,giving it significant influence over these entities.
In September 2009, Electronic Transactions Services Limited changed its name to Paymark Limited.
On 30 November 2009 ANZ New Zealand acquired control over the ING Diversified Yield Fund and the ING Regular
Income Fund, which had been previously treated as investments in associates.

Australia and New Zealand Banking Group Limited - New Zealand Branch

43

Notes to the Financial Statements
Shares in associates at 30 September 2010 includes goodwill of $56 million (30/09/2009 $57 million) for ANZ New
Zealand and $nil (30/09/2009 $nil) for the NZ Branch.
All of the following associates are incorporated in New Zealand, except for the ING Diversified Yield Fund and the ING
Regular Income Fund which are incorporated in Australia.

Associates

30/09/2010

30/09/2009

Book ValueBook Value

VotingOwnership

Balance$m$mInterest %Interest %DateNature of business

Bennetts Financial Services
LimitedCards NZ Limited

1

-

20

20

31 March

Financial services

85

85

30

15

30 September

Card services

ING Diversified Yield Fund

-

46

49

49

30 JuneFixed income fund

ING Regular Income Fund

-

21

49

49

30 JuneFixed income fund

43

41

20

20

30 April

Poultry processor

2

2

25

25

31 March

EFTPOS settlements

10

13

40

40

31 March

Rest home operator

2

3

31

31

31 March

Agricultural
machinery supplier

143

211

NZ Poultry Enterprises Limited
Paymark Limited
UCG Investments Limited
Wyma Engineering (NZ) Limited

Total investment in associates

Jointly Controlled Entities
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Balance at beginning of the year

253

219

-

-

Acquisitions

-

23

-

-

Disposals

(2)

-

-

-

(255)

-

-

-

(3)

-

-

-

Share of profit of equity accounted jointly controlled entities

8

11

-

-

Balance at end of the year

1

253

-

-

Transfers to subsidiary company
Impairment

30/09/2010

30/09/2009

VotingBook ValueBook Value

Interest

Interest

$m

$m

%

%

Argenta Limited

1

2

21

BCS Group Limited-2

ING (NZ) Holdings Limited-

JMI Aerospace Limited
Total investment in jointly
controlled entities

Jointly controlled entities

Ownership Balance
Date

Nature of business21

31 July40

40

30 June

248

50

49

31 December

-

1

33

33

31 March

Manufacture andmarketing of animal
remedies
Manufacturer of baggage
handling systems
Funds management andinsurance
Airline maintenance1

253

Shares in jointly controlled entities at 30 September 2010 includes goodwill of $nil million 30/09/2009 $94 million) for
ANZ New Zealand and $nil million (30/09/2009 $nil million) for the NZ Branch.
On 30 November 2009 ANZ New Zealand acquired control over ING NZ and its subsidiary companies which had previously
been treated as jointly controlled entities.
In December 2009 ANZ New Zealand sold its interest in JMI Aerospace Limited and in September 2010 ANZ New Zealandsold its interest in BCS Group Limited.
There are no unrecognised losses in respect of any of ANZ New Zealand's jointly controlled entities. ANZ New Zealand's
share of the contingent liabilities of its joint ventures are incurred jointly with other investors. Other than as referred to in
Note 37, there were no material contingent liabilities as at 30 September 2010 (30/09/2009 $nil).

Australia and New Zealand Banking Group Limited - New Zealand Branch

44

Notes to the Financial Statements
The summarised financial information relating to ANZ New Zealand's investment in ING (NZ) Holdings Limited prior to it
becoming a subsidiary is as follows:
ANZ New Zealand$ millions

30/09/2010

30/09/2009

Share of assets and liabilities
Investments-

91

Other assets-

171

Total assets-

262Life insurance policy liabilities

-

(46)

Other liabilities-

63

Total liabilities-

17

Net assets-

245

Share of revenue, expenses and results
Net underwriting result

16

84

Other revenue

4

32

Total revenue

20

116

Expenses

15

108

Profit before income tax
Income tax credit
Profit after tax

5

8

(1)

(5)

6

13

-

17

Share of commitments
Lease commitments

17. Other Assets
ANZ New Zealand$ millions

Accrued interest and prepaid discounts

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

391

397

-

-

Accrued commission

25

19

-

-

Share-based payments asset

57

52

-

-

Prepaid expenses

60

86

-

-

Security settlements

81

291

-

-

Other assets

356

296

3

-

Total other assets

970

1,141

3

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

45

Notes to the Financial Statements
18. Deferred Tax Assets and Liabilities
ANZ New Zealand$ millions

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

Deferred tax assets / (liabilities)
Balance at beginning of the year

(15)

118

3

-

Credited / (charged) to income statement1

316

(136)

4

3

Credited / (charged) directly to equity

(32)

3

-

-

35

-

-

-

304

(15)

7

3

Acquired through a business combination
Balance at end of the year

Deferred tax assets / (liabilities) comprise the following temporary differences:
Provision for credit impairment

397

384

6

3

Premises and equipment, software and intangibles

(20)

7

-

-

Provisions and accruals

150

191

1

-

Deferred acquisition costs and policy holder liabilities

(72)

-

-

-

Financial instruments

(39)

(7)

-

-

Carried forward losses

82

-

-

-

(126)

(113)

-

-

Other deferred tax assets and liabilities (including provisions)

(68)

(477)

-

-

Net deferred tax assets / (liabilities)2

304

(15)

7

3

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

13

184

3

3

Premises and equipment, software and intangibles

(5)

(4)

-

-

Provisions and accruals

(72)

66

1

-

Deferred acquisition costs and policy holder liabilities

(21)

-

-

-

Financial instruments

(7)

(3)

-

-

Carried forward losses

5

-

-

-

Lease finance

(13)

(23)

-

-

Other deferred tax assets and liabilities (including provisions)

416

(356)

-

-

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

316

(136)

4

3

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

(32)

3

-

-

Total deferred tax charged / (credited) directly to equity

(32)

3

-

-

1
2

Amounts charged / credited to the income statement include deferred tax assets / liabilities which have crystallised and have been transferred to current tax
assets / liabilities. These transfers are accounted for by charging / crediting deferred income tax expense and crediting / charging current tax expense.
Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same income tax authority on either the same taxable entity or
different taxable entities within the same taxable group.

Australia and New Zealand Banking Group Limited - New Zealand Branch

46

Notes to the Financial Statements
19. Premises and Equipment
ANZ New Zealand$ millions

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

Freehold and leasehold land and buildings
At cost

63

69

-

-

(11)

(12)

-

-

Balance at beginning of year

52

57

-

-

Additions

22

10

-

-

Disposals

-

(15)

-

-

(1)

-

-

-

Accumulated depreciation

Depreciation
At costAccumulated depreciation
Balance at end of year

85

63

-

-

(12)

(11)

-

-

73

52

-

-

Leasehold improvements
At costAccumulated depreciation
Balance at beginning of year
Additions
Depreciation

99

98

-

-

(78)

(75)

-

-

21

23

-

-

3

3

-

-

(5)

(5)

-

-

At cost

101

99

-

-

Accumulated depreciation

(82)

(78)

-

-

19

21

-

-

Balance at end of year
Furniture and equipment
At cost

265

255

-

-

(191)

(176)

-

-

Balance at beginning of year

74

79

-

-

Additions

Accumulated depreciation

38

10

-

-

Acquired as part of business combination

2

-

-

-

Disposals

-

(1)

-

-

(17)

(14)

-

-

Depreciation
At costAccumulated depreciation
Balance at end of year

302

265

-

-

(205)

(191)

-

-

97

74

-

-

Computer and office equipment
At cost

251

246

-

-

(200)

(196)

-

-

Balance at beginning of year

51

50

-

-

Additions

62

24

-

-

2

-

-

-

(1)

(4)

-

-

(24)

(19)

-

-

Accumulated depreciation

Acquired as part of business combination
Disposals
Depreciation
At costAccumulated depreciation
Balance at end of year

291

251

-

-

(201)

(200)

-

-

90

51

-

-

Work in progress
Balance at beginning of year
Net additions / (capitalisations)
Balance at end of year
Total premises and equipment

80

33

-

-

(48)

47

-

-

32

80

-

-

311

278

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

47

Notes to the Financial Statements
20. Goodwill and Other Intangible Assets
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Balance at beginning of year

3,262

3,262

-

-

Balance at end of year

3,262

3,262

-

-

Goodwill

SoftwareAt cost

115

96

-

-

Accumulated amortisation

(58)

(47)

-

-

Balance at beginning of year

57

49

-

-

Additions from internal developments

42

19

-

-

Acquired in a business combination

1

-

-

-

(16)

(11)

-

-

(2)

-

-

-

At cost

147

115

-

-

Accumulated amortisation

(65)

(58)

-

-

82

57

-

-

Amortisation expense1
Net book value of software impaired / written off

Balance at end of year
Other intangible assets
At cost

6

4

-

-

Accumulated amortisation

(3)

(1)

-

-

Balance at beginning of year

3

3

-

-

Additions from purchases

-

9

-

-

Acquired in a business combination

209

-

-

-

Amortisation expense1

(8)

(2)

-

-

Net book value of other intangible assets impaired / written off

(3)

(7)

-

-

At cost

209

6

-

-

Accumulated amortisation

(8)

(3)

-

-

Balance at end of year

201

3

-

-

3,545

3,322

-

-

Total goodwill and other intangible assets
1

Software and other intangibles amortisation expense is included in ‘other costs’ in the Income Statement.

The goodwill balance above largely comprises the goodwill purchased on acquisition of NBNZ Holdings Limited in
December 2003. Refer Note 2 for discussion of impairment testing for this goodwill.

21. Due to Other Financial Institutions
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Due to other financial institutions
Securities sold under agreements to repurchase from other financial
institutions
Securities sold under agreements to repurchase from central
banks1

12,071

10,54910,481

8,801

222

159

-

-

-

1,806

-

-

Total due to other financial institutions

12,293

12,514

10,4818,801

1As at 30 September 2010 ANZ New Zealand had entered into no repurchase agreements for residential mortgage-backed securities with the RBNZ (30/09/2009$1,806 million). Therefore no underlying collateral had been accepted by the RBNZ in relation to repurchase agreements (30/09/2009 residential mortgages tothe value of $2,250 million were held by RBNZ as collateral).

Australia and New Zealand Banking Group Limited - New Zealand Branch

48

Notes to the Financial Statements
22. Deposits and Other Borrowings
ANZ New Zealand$ millions

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

Amortised cost
Certificates of deposit

3,245

4,441

-

-

Term deposits

34,68732,997--

Demand deposits bearing interest

18,71421,024--

Deposits not bearing interest

4,964

4,373

-

-

Secured debenture stock

1,378

1,537

-

-

62,98864,372--

Commercial paper

7,307

7,392

-

-

Total deposits and other borrowings recognised at fair value

7,307

7,392

-

-

70,29571,764

-

-

-

-

-

-

Total deposits and other borrowings recognised at amortised
cost
Fair value through profit or loss

Total deposits and other borrowings

Amortised cost of balances included within deposits and other borrowings recognised at fair value:
Commercial paper issued by ANZ National (Int'l) Limited
guaranteed by ANZ National Bank Limited
7,305
7,388
Secured debenture stock is secured over:Carrying value of total tangible assets of UDC Finance Limited

2,111

1,877

ANZ New Zealand has not defaulted on any principal, interest or redemption amounts on its borrowed funds during theyear ended 30 September 2010 (30/09/2009 $nil). Deposits from customers are unsecured and rank equally with otherunsecured liabilities of ANZ New Zealand. 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.
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, primarilyloans and advances, of UDC Finance Limited.

23. Payables and Other Liabilities
ANZ New Zealand$ millions

Creditors

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

98

81

-

-

623

732

67

41

Defined benefit schemes deficit

26

55

-

-

Share-based payments liability

28

28

-

-

Accrued charges

311

257

3

2

Security settlements

195

205

-

-

16

19

-

-

137

170

-

-

1,700

1,547

70

43

Accrued interest and unearned discounts

Equitable assignment of mortgages1
Other liabilities
Total payables and other liabilities
1

The ANZ FlexiMortgage Income Trust holds mortgages under an equitable assignment with the Bank. The ANZ FlexiMortgage Income Trust can at any timerequire the Bank to repurchase any mortgage. The Bank may also require repurchase in certain circumstances. The mortgages are included in these financial
statements.

Australia and New Zealand Banking Group Limited - New Zealand Branch

49

Notes to the Financial Statements
24. Provisions
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

3

4

-

-

Balance at beginning of the year

119

117

-

-

Provisions made during the year

59

60

-

-

Payments made during the year

(58)

(58)

-

-

7

-

-

-

127

119

-

-

Balance at beginning of the year

6

32

-

-

Provisions made during the year

-

17

-

-

Payments made during the year

(4)

(43)

-

-

2

6

-

-

Non-lending losses, frauds and forgeries
Employee entitlements

Acquired as part of a business combination
Balance at end of the year
Personnel restructuring costs

Balance at end of the year
Redundant assets restructuring costs
Balance at beginning of the year

18

1

-

-

Provisions made during the year

13

17

-

-

Payments made during the year

(9)

-

-

-

Balance at end of the year

22

18

-

-

Other provisions
Balance at beginning of the year

136

29

-

-

Provisions made during the year

11

257

-

-

Payments made during the year

(68)

(150)

-

-

Transfer/release of provision

(6)

-

-

-

Acquired as part of business combination

88

-

-

-

Balance at end of the year

161

136

-

-

Total provisions

315

283

-

-

Employee entitlements
The provision for employee entitlements provides mainly for the cost of employee entitlements to annual leave, longservice leave and retirement leave. The majority of employees utilise their annual leave in the year the entitlement
accrued.
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 businessundertaken by ANZ New Zealand and includes termination benefits. Provisions are made when ANZ New Zealand isdemonstrably committed, it is probable that the costs will be incurred, though their timing is uncertain, and the costs canbe reliably estimated. The majority of provisions recognised at 30 September 2010 are expected to be settled over the
coming 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.
Other provisions
Other provisions includes provisions relating to the ING New Zealand Funds (refer to Note 37 for further information) andthe fair value of other contingent liabilities and provisions acquired as part of the acquisition of ING NZ.

Australia and New Zealand Banking Group Limited - New Zealand Branch

50

Notes to the Financial Statements
25. Bonds and Notes$ millions

Currency

Face
value

ANZ New ZealandType of note

Maturity

Interest rate %30/09/2010

30/09/2009

Issued by the Bank
NZD

70m

floating rate notes2010

3 month BKBM + 0.35%

70

70

NZD

100m

fixed rate notes

2010

8.50%

-

100

NZD

75m

fixed rate notes

2010

8.50%

-

75

NZD

65m

fixed rate notes2010

3 month BKBM + 0.80%

-

65

NZD

50m

floating rate notes

2011

3 month BKBM + 1.24%

50

50

NZD

150m

fixed rate notes

2011

6.80%

150

150

NZD

170m

floating rate notes

2011

3 month BKBM + 0.90%

170

170

NZD

50m

fixed rate notes

2011

8.25%

NZD

100m

floating rate notes

2012

NZD

150m

fixed rate notes

NZD

40m

floating rate notes

NZD

100m

NZD

50

50

3 month BKBM + 1.025%

100

100

2012

5.63%

150

150

2012

3 month BKBM + 0.90%

40-

fixed rate notes

2013

6.32%

100

-

175m

fixed rate notes

2014

8.50%

175

175

NZD

60m

fixed rate notes

2014

8.50%

60

60

NZD

250m

fixed rate notes

2015

6.60%

250

-

NZD

350m

fixed rate notes

2015

6.51%

350

-

100

78

Fair value hedge adjustment

365

223

Less Bond instruments held by the Bank

(23)

-

2,157

1,516

150

Index linked notes

Issued by ANZ National (Int'l) Limited
NZD

150m

floating rate notes

2009

3 month BKBM + 0.10%

-

USD

300m

floating rate notes

2009

1 month LIBOR + 0.04%

-

416

USD

789m

floating rate notes2

2009

3 month LIBOR + 0.24%

-

1,093

JPY

6,000mfloating rate notes

2009

3 month JPY LIBOR

-

92

USD

8m

floating rate notes1

2010

1 month LIBOR + 0.03%

-

11

USD

750m

floating rate notes2010

3 month LIBOR + 0.11%

-

1,039

NZD

100m

floating rate notes2010

3 month BKBM + 0.05%

-

100

CHF

275m

floating rate notes2010

3 month CHF LIBOR + 0.75%

-

369

SGD

200m

fixed rate notes

2010

3.22%

-

196

USD

100m

floating rate notes2010

3 month LIBOR + 0.55%

-

139

AUD

50m

floating rate notes2010

3 month BBSW + 0.61%

-

61

USD

890m

floating rate notes32010

3 month LIBOR + 1.03%

1,210

1,234

USD

300m

fixed rate notes

2011

5.50%

407

416

GBP

435m

floating rate notes

2011

3 month GBP LIBOR + 0.05%

935

966

GBP

105m

floating rate notes

2011

3 month GBP LIBOR + 0.05%

226

233

USD

500m

floating rate notes4

2011

3 month LIBOR + 0.18%

679

693

USD

250m

floating rate notes

2011

3 month LIBOR + 0.70%

340

346

USD

100m

floating rate notes4

2011

3 month LIBOR + 0.32%

136

139

USD

20m

floating rate notes4

2011

3 month LIBOR + 0.20%

27

28

USD

100m

floating rate notes

2011

3 month LIBOR + 0.65%

136

139

HKD

155m

floating rate notes

2011

3 month HIBOR + 0.51%

GBP

450m

floating rate notes3

2012

6 month GBP LIBOR + 0.08%

USD

1,000mfixed rate notes4

2012

USD

500m

fixed rate notes4

2012

USD

100m

floating rate notes4

USD

15m

USD

27

28

968

999

3.25%

1,359

1,386

3.25%

679

693

2012

3 month LIBOR + 0.25%

136

139

floating rate notes

2012

3 month LIBOR + 0.80%

20

21

1250m

fixed rate notes

2012

2.38%

1,698

-

HKD

300m

floating rate notes

2012

3 month HIBOR + 0.71%

USD

2,000mfixed rate notes

2013

6.20%

JPY

500m

fixed rate notes

2014

JPY

3,000mfixed rate notes

2014

USD

100m

floating rate notes4

2014

3 month LIBOR + 0.44%

HKD

100m

fixed rate notes

2014

HKD

100m

fixed rate notes

2014

53

-

2,717

2,772

1.40%

8

-

1.50%

49

-

136

139

3.40%

18

18

3.03%

18

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

51

Notes to the Financial Statements
CHF

300m

fixed rate notes

2014

2.01%

417

-

CHF

250m

fixed rate notes

2014

2.01%

347

-

USD

71m

floating rate notes4

2014

3 month LIBOR + 0.28%

96

-

USD

20m

floating rate notes

2014

3 month LIBOR + 1.10%

27

-

USD

50m

floating rate notes

2014

3 month LIBOR + 1.15%

68

-

USD

1,050mfloating rate notes3

2014

3 month LIBOR + 1.16%

1,427

-

HKD

105m

fixed rate notes

2015

3.30%

18

-

JPY

500m

floating rate notes

2015

3 month JPY LIBOR + 0.50%

8

-

JPY

11,800m

fixed rate notes

2015

1.54%

192

-

JPY

7,200mfloating rate notes

2015

3 month JPY LIBOR + 1.00%

117

-

SGD

200m

fixed rate notes

2015

2.95%

206

-

USD

250m

floating rate notes

2015

3 month LIBOR + 0.90%

340

346

USD

1,000mfixed rate notes

2015

3.13%

1,359

-

16,604

14,401

Issued by Samson Funding Limited
USD

350mfixed rate notes5

2010

4.484%

-

516

USD

750mfixed rate notes5

2053

5.36%

1,138

1,107

1,138

1,623

19,89917,540Total bonds and notes

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 ANZ New Zealand.
1

On 6 March 2009, investors elected not to extend these bonds. As a result these bonds carry a fixed maturity of 5 March 2010.
On 10 December 2008, investors elected not to extend which has resulted in these bonds carrying a fixed maturity of 9 October 2009.
These notes were issued to subsidiaries of the Overseas Banking Group.
4
As well as being guaranteed by ANZ New Zealand these notes also benefit from a supporting guarantee from the NZ Crown.
5
These notes were issued in two tranches of USD 350 million and USD 750 million by Samson Funding Limited on 26 November 2003. The notes are ‘stapled’ topreference shares issued by the Ultimate Parent Bank and may not be traded separately from them. The USD 350 million note was repaid on 15 January 2010.
The USD 750 million note can be repaid on 15 December 2013. Interest was payable half yearly in arrears at a fixed rate of 4.484% p.a. on the USD 350
million note and is payable at 5.36% p.a. on the USD 750 million note with interest payments due 15 June and 15 December.
2
3

26. Loan Capital
ANZ New Zealand$ millions

AUD 265,740,000 perpetual subordinated floating rate loan

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

349

324

-

-

AUD 186,100,000 term subordinated floating rate loan

-

227

-

-

AUD 43,767,507 term subordinated floating rate loan

58

53

-

-

AUD 169,520,000 term subordinated floating rate loan

223

207

-

-

Term subordinated fixed rate bonds

950

950

-

-

Perpetual subordinated bond

835

835

-

-

2,415

2,596

-

-

(8)

-

-

-

2,407

2,596

-

-

Total loan capital issued
Less loan capital instruments held by ANZ New Zealand
Total loan capital

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 based on 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 mayelect to repay the loan on 15 September each year commencing from 2011 through to 2015. All interest is payable half
yearly in arrears, with interest payments due 15 March and 15 September. Interest is based on BBSW + 0.29% p.a. to
15 September 2011 and increases to BBSW + 0.79% p.a. thereafter.

Australia and New Zealand Banking Group Limited - New Zealand Branch

52

Notes to the Financial Statements
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 18 September 2017. The Bank mayelect to repay the loan on 17 September each year commencing from 2012 through to 2016. All interest is payable half
yearly in arrears, with interest payments due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to
17 September 2012 and increases to BBSW + 1.18% p.a. thereafter.
NZD subordinated bonds
Term subordinated fixed rate bonds
Issue dateAmount $m

Coupon rate

Call date

Maturity date

15 September 2006

350

7.16% 15 September 2011 15 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 30 September 2010, these bonds carried an AA- rating by Standard & Poor's and an A1 by Moodys.
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.
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 and including 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 theSecond Call Date, the Coupon Rate from the Second Call Date onwards will be set on a quarterly basis to the three month
FRA rate plus 3.00%.
As at 30 September 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 ageneral right 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
announcements of 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 General Disclosure Statement ("GDS") is available on the Bank's website, at any branch and at the NZX; thatbondholders are advised by letter that copies of the GDS are available at the above locations; that all bondholders arenotified on an ongoing basis, by way of a sentence included on the notification of interest payments, that the latest GDS isavailable 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

53

Notes to the Financial Statements
27. Related Party Transactions
ANZ New Zealand$ thousands

Key management personnel

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Key management personnel compensation
Salaries and short-term employee benefits

11,282

10,748--Post-employment benefits

352

373

-

-

Other long-term benefits

1,581

782

-

-

Termination benefits

931

58

-

-

Share-based payments

3,911

4,339

-

-

18,057

16,300--Loans to key management personnel

4,056

4,424

-

-

Deposits from key management personnel

7,539

5,543

-

-

Total compensation of key management personnel

Key management personnel are defined as being Directors and senior management of ANZ New Zealand, 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 andtheir controlled 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
terms of 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 (30/09/2009 $nil).
All 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
the provision of financial and investment services.
Transactions with other related parties
The NZ Branch and ANZ New Zealand undertake transactions with the Immediate Parent Company, Ultimate Parent Bank,other members of the Overseas Banking Group, associates and joint ventures.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment
services, technology and process support, and compensation for share based payments made to ANZ New Zealandemployees. Transactions with related parties outside of ANZ New Zealand are conducted on an arm’s length basis and on
normal commercial terms.
In addition the Bank undertakes similar transactions with controlled entities, which are eliminated in the consolidated ANZ
New Zealand financial statements. Included within the Bank’s transactions with controlled entities is the provision ofadministrative functions to some controlled entities for which no payments have been made.
Transactions with related parties

ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Received from associates

7

2

-

-

Received from joint ventures

2

3

-

-

481

354

416

171

72

100

-

-

2

4

-

-

$ millions

Interest income

Interest expense
Paid to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Paid to Immediate Parent Company
Paid to associates
Other operating income
Dividends received from associates

2

2

-

-

Commission received from joint ventures

6

39

-

-

Operating expenses
Paid to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

88

91

-

-

Paid to Bank

-

-

26

10

Costs recovered from joint ventures

-

(1)

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

54

Notes to the Financial Statements
Balances with related parties
ANZ New Zealand$ millions

Due from financial institutions
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
ZealandNZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

1,507

-

-

-

2,548

2,576

500

34

151

161

-

-

36

36

-

-

-

-

302

341

144

464

-

-

37

28

-

-

4,422

3,264

802

375

10,482

9,286

10,481

8,801

Derivative financial assets
Due from related entities
Net loans and advances
Due from associates
Due from joint ventures
Due from related entities
Shares in associates and joint ventures
Other assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Total due from related parties
Due to other financial institutions
Due to Ultimate Parent Bank
Deposits and other borrowings
Due to associates
Term funding due to Immediate Parent Company

85

85

-

-

1,766

1,766

-

-

Derivative financial liabilities
Due to related entities

2,658

2,550

142

254

Payables and other liabilities
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

105

69

67

41

Bonds and notes
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

3,605

2,233

-

-

Loan capitalDue to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

630

811

-

-

19,33016,79910,6909,096

Total due to related parties

Balances due from / to related parties are unsecured other than that ANZ New Zealand and the Bank have provided
guarantees and commitments to related parties as follows:
ANZ New Zealand$ millions

Financial guarantees provided to the Ultimate Parent BankNZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

1,660

1,617

-

-

A provision for credit impairment of $10 million has been recognised for amounts due from associates as at 30 September
2010 (30/09/2009 $10 million). No credit impairment loss was charged during the year ended 30 September 2010
(30/09/2009 $5 million). No other provisions have been recognised on related party balances.

28. Interest Earning and Discount Bearing Assets and Liabilities
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Interest earning and discount bearing assets

108,325

109,699

10,3409,114Interest and discount bearing liabilities

100,335

101,741

10,481

8,801

Australia and New Zealand Banking Group Limited - New Zealand Branch

55

Notes to the Financial Statements
29. Current and Non-current Assets and Liabilities
ANZ New Zealand$ millions

30/09/2010

30/09/2009

Noncurrent

Current

NZ Branch

Current

30/09/2010

Non-current

30/09/2009

Noncurrent

Current

Current

Non-current

AssetsLiquid assets

2,239

-

2,762

-

-

-

-

-

Due from other financial institutions

3,496

-

4,451

63

-

-

-

-

Trading securities

6,757

-

4,166

-

-

-

-

-

Derivative financial instruments

10,854-

11,015

-

500

-

34

Available-for-sale assets

1,941

269

1,435

78

-

-

-

-

Net loans and advances

25,182

70,833

21,54275,482

396

9,663

230

8,544

-

-

-

-

302

-

341

-

11

17

-

-

-

-

-

-

-

138

-

-

-

-

-

-

Due from related entities
Investments relating to insurance
business
Insurance policy assets
Shares in controlled entities,
associates

-

144

-

464

-

-

-

-

18

-

115

-

-

-

-

-

Other assets

913

57

1,141

-

3

-

-

-

Deferred tax assets

327

(23)

-

-

3

4

1

2

Current tax assets

Premises and equipment

-

311

-

278

-

-

-

-

Goodwill and other intangible assets

-

3,545

-

3,322

-

-

-

-

51,73875,291

46,627

79,687

1,204

9,667

606

8,546

Due to other financial institutions

4,342

7,951

5,825

6,689

2,559

7,922

1,951

6,850

Deposits and other borrowings

68,314

1,981

68,976

2,788

-

-

-

-

Derivative financial instruments

10,727-

10,974

-

142

-

254

-

1,452

54

1,547

-

70

-

43

-

-

-

-

45

-

15

-

Total assets
Liabilities

Payables and other liabilities
Current tax liability
Deferred tax liabilities

-

-

135

(120)

-

-

-

-

228

87

283

-

-

-

-

-

Bonds and notes

3,747

16,152

4,789

12,751----

Due to related entities

1,766

-

1,766

-

-

-

-

-

-

2,407

811

1,785

-

-

-

-

90,57628,632

95,10623,893

2,816

7,922

2,263

6,850

Provisions

Loan capital
Total liabilities

Assets and liabilities are classified as current if:• it is expected they will be realised, consumed or settled in the normal operating cycle or within twelve months after theend of the reporting date; or• they are held primarily for trading; or• they are assets that are cash or a cash equivalent; or• they are liabilities where there is no unconditional right to defer settlement for at least twelve months.
Non-current assets include premises and equipment and intangible assets as well as financial assets of a long-term
nature. Non-current liabilities include financial and non-financial liabilities which are expected to be settled after twelve
months from balance date.
For the purposes of this disclosure, the fair value of both trading and hedging derivatives has been classified as current.
For more information on the contractual timing of expected outflows and inflows in relation to hedging derivatives refer toNote 32.

Australia and New Zealand Banking Group Limited - New Zealand Branch

56

Notes to the Financial Statements
30. Share Capital and Head Office Account
ANZ New Zealand

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

381,655,112

381,655,112--

Redeemable preference shares at beginning of the year

4,005,295,229

3,210,066,601--

Issue of redeemable preference shares during the year-

795,228,628--

Redeemable preference shares at end of the year

4,005,295,229

4,005,295,229--

Total number of issued shares

4,386,950,341

4,386,950,341--

Ordinary share capital at beginning and end of the year

1,453

1,453

-

-

Redeemable preference shares at beginning of the year

4,960

3,960

-

-

-

1,000

-

-

4,960

4,960

-

-

6,413

6,413

-

-

11

11

11

11

6,424

6,424

11

11

Issued share capital
Number of shares

Ordinary shares at beginning and end of the year

Share capital & head office account$ millions

Redeemable preference shares issued during the year

Paid in share capital at end of year
Head office accountTotal capital & head office account at end of year

Ordinary shares
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. 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.
No ordinary dividends were paid during the year ended 30 September 2010. On 24 March 2009 ANZ Holdings (New
Zealand) Limited (“ANZH”) paid an ordinary dividend of $1 billion to the Immediate Parent Company (being $2.64 pershare). On the same day ANZH issued 795,228,628 redeemable preference shares ("RPS") to the value of $1 billion.
Redeemable preference shares
All RPS were issued by ANZH to members of the Overseas Banking Group. RPS carry no voting rights and are redeemable
by ANZH providing notice in writing to holders of the RPS. Dividends are payable at the discretion of the directors of
ANZH and are non-cumulative.
During the year ended 30 September 2010 ANZH paid preference share dividends of $492 million (equivalent to $0.25 pershare) (30/09/2009 nil).
In a liquidation, holders of RPS are entitled to available subscribed capital per share, pari passu with all holders of existing
RPS but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of
profits or assets.
Head office account
The head office account comprises funds provided by the Ultimate Parent Bank. It is non-interest bearing and there is no
fixed date of repayment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

57

Notes to the Financial Statements
31. Capital Adequacy
Overseas Banking Group Basel II capital adequacy ratio (unaudited)
Overseas Banking Group

Ultimate Parent Bank

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Tier One Capital

10.1%

10.6%

11.0%

11.6%

Total Capital

11.9%

13.7%

12.3%

14.2%

Basel II came into force on 1 January 2008. The Overseas Banking Group received accreditation from APRA to apply the
Advanced Internal Ratings Based ("Advanced IRB") methodology for credit risk weighted assets and the Advanced
Measurement Approach ("AMA") for operational risk weighted asset equivalents.
The Overseas Banking Group has Advanced IRB accreditation under Basel II rules. The Overseas Banking Group met therequirements imposed by APRA as at 30 September year and for the comparative periods shown.
Further details of the Overseas Banking Group's capital adequacy requirements and credit risk management processes canbe found in its 2010 Annual Report.
Risk Weighted Credit Risk Exposures
Risk weighted exposures for ANZ New Zealand and NZ Branch have been derived in accordance with the RBNZ document
entitled 'Capital Adequacy Framework (Basel I Approach)' ("BS2") dated October 2010. The credit equivalent amounts formarket related contracts are calculated using the current exposure method.
Total Risk Weighted Exposures of ANZ New Zealand as at 30 September 2010 (unaudited)
Principal
amountOn-balance sheet exposures

Risk weight$m

Risk weighted
exposure$mCash and short term claims on Government

3,752

0%

-

Long term claims on Government

3,973

10%

397

Claims on banks

4,859

20%

972

844

20%

169

Residential mortgages

53,78450%

26,892

Other44,343100%

44,343

Non risk weighted assets

15,474n/a-Claims on public sector entities

127,029

72,773Creditconversion
factorCreditequivalentamountAveragecounterparty Risk weighted
exposurerisk weight

1,750

100%

1,750

39%

691

Commitments with certain drawdown

510

100%

510

62%

314

Transaction related contingent items

735

50%

367

70%

257

98

20%

20

100%

20

3,789

50%

1,895

100%

1,894

16,600

0%

-

n/a

-

Off-balance sheet exposures

Principal
amount$m

Direct credit substitutes

Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of lessthan 1 year or which can be unconditionally cancelled
at any time$m$mMarket related contracts- Foreign exchange

149,580

7,109

22%

1,552

- Interest rate502,764

9,682

23%

2,268

68

9

67%

6

675,894

21,342- Other

7,002

Australia and New Zealand Banking Group Limited - New Zealand Branch

58

Notes to the Financial Statements
Total Risk Weighted Exposures of the NZ Branch as at 30 September 2010 (unaudited)
Principal
amountOn-balance sheet exposures

Risk weight

Risk weighted
exposure

20%

41

10,156

50%

5,078

41

100%

41

470

n/a

-

$m

Claims on banks

204

Residential mortgages
Other
Non risk weighted assets

Principal
amountOff-balance sheet exposures

Creditconversion
factor

10,871

5,160

CreditequivalentamountAveragecounterparty Risk weighted
exposurerisk weight

$m

$m

$m

Other commitments to provide financial services whichhave an original maturity of 1 year or more

$m

63

50%

32

100%

32

- Foreign exchange

10,466

0%

504

20%

101

- Interest rate

17,841

0%

137

20%

27

Market related contracts

28,370673

160

Market risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document ‘Capital
Adequacy Framework (Standardised Approach)’ dated October 2010 (“BS2A”).
The peak end-of-day market risk exposures for the quarter are measured over the Overseas Banking Group’s equity atthe 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.
ANZ New Zealand
Implied risk weighted
exposure

Aggregate capital charge as apercentage of the Overseas
Banking Group's Equity

Aggregate capital charge

As at

Peak

As at

Peak

As at

Peak

$m

$m

$m

$m

%

%

0.7%

0.7%

0.0%

0.0%
0.0%

30/09/2010

Interest rate risk

3,733

3,733

299

299

Foreign currency risk

25

101

2

8

Equity risk

78

81

6

6

0.0%

320

346

0.8%

0.9%

0.0%

0.1%

0.0%

0.0%

3,836

307

30/09/2009

Interest rate risk

3,990

4,321

Foreign currency risk

5

301

-

24

Equity risk

69

82

6

7

4,064

326

Retail mortgages by loan-to-valuation ("LVR") ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the
Bank’s valuation of the security property at origination of the exposure. The exposure amount used to calculate LVR
excludes commitments to lend.
Exposure
Retail mortgages by LVR for ANZ New Zealand as at 30 September 2010 (unaudited)

Amount$m

LVR range
0% - 80%

43,74680% - 90%

6,091

Over 90%

4,888
54,725

Australia and New Zealand Banking Group Limited - New Zealand Branch59

Notes to the Financial Statements
32. Financial Risk Management
Strategy in using financial instruments
Financial instruments are fundamental to ANZ New Zealand’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 ANZ New
Zealand. Financial instruments create, modify or reduce the credit, market (including traded or fair value risks and nontraded or interest and foreign currency related risks) and liquidity risks of ANZ New Zealand’s balance sheet. These risks
and ANZ New Zealand’s policies and objectives for managing such risks are outlined below. ANZ New Zealand’s overallrisk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of ANZ New Zealand.

Credit risk
Credit risk is the risk of financial loss from counterparties being unable to fulfil their contractual obligations. ANZ New
Zealand 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 andcapital market activities around the world.
ANZ New Zealand has an overall lending objective of sound growth for appropriate returns. The credit risk objectives of
ANZ New Zealand are set by each Board and are implemented and monitored within a tiered structure of delegatedauthority, 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 bycomprehensive risk analysis, risk tools, monitoring processes and policies.
Credit risk management
The credit risk management framework is in place across ANZ New Zealand with the aim of ensuring a structured anddisciplined approach is maintained in achieving the objectives set by each Board. The framework focuses on policies,
people, skills, vision, values, controls, risk concentrations and portfolio balance. It is supported by portfolio analysis andbusiness-writing strategies, which guide lending decisions and identify segments of the portfolio requiring attention. The
effectiveness of the framework is monitored through a series of compliance and reporting processes.
An independent Risk Management function is staffed by risk specialists. In regard to credit risk management, theobjective 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 to providing independent credit
assessment on lending decisions, Risk Management also performs key roles in portfolio management by development andvalidation of credit risk measurement systems, loan asset quality reporting, and development of credit standards andpolicies.
The credit risk management framework is top down. Where required, the framework is defined firstly by ANZ New
Zealand'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 business units. All major Business Unit credit decisions require approval from both business writers andindependent risk personnel.
Credit Risk is controlled through a combination of approvals, limits, reviews and monitoring procedures that are carriedout on a regular basis, the frequency of which is dependent upon the level of risk. For the key operating entities within
ANZ New Zealand credit risk policy and management is executed through the Chief Risk Officer who is responsible forvarious dedicated areas within the Risk Management division. A formal outsourcing agreement provides for credit riskfunctions to be provided to a number of ANZ New Zealand entities by staff of ANZ National Bank Limited.
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 ANZ New Zealand.
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, involvethe flow of funds from one country to another or involve transactions in a currency other than the domestic currency of
the relevant country.
Country ratings are assigned to each country where ANZ New Zealand incurs country risk and have a direct bearing on
ANZ New Zealand's risk appetite for each country. The country rating is determined through a defined methodology based

Australia and New Zealand Banking Group Limited - New Zealand Branch

60

Notes to the Financial Statements
around external ratings agencies’ ratings and internal specialist opinion. It is also a key risk consideration in ANZ New
Zealand's capital pricing model for cross border flows.
The recording of country limits provides ANZ New Zealand 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 tomanaging risk appetite and business writing 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 ANZ New
Zealand to model and report periodically to management and the Board Risk Committee on a range of scenarios andstress tests.
Portfolio analysis and reporting
Credit portfolios are actively monitored at each layer of the risk structure to ensure credit deterioration is quickly detected
and mitigated 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 ANZ
New Zealand executives and each Board.
Collateral management
ANZ New Zealand credit principles specify to lend only what the counterparty has the capacity and ability to repay and
ANZ New Zealand 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 to mitigate credit risk. Procedures are designed to ensure collateral is managed, legally enforceable,
conservatively valued and adequately insured where appropriate. ANZ New Zealand 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; and• Financial 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 ANZ New Zealand does not usually hold any real estate or other assets acquired through theenforcement of security.
ANZ New Zealand 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 thecounterparty are terminated and settled on a net basis. Further, it is ANZ New Zealand's preferred practice to include all
products covered by the ISDA in the Credit Support Annex ("CSA"), in order to achieve further credit exposure reduction.
Under a CSA, collateral is 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 theoutstanding positions.
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.
ANZ New Zealand 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
Management monitor large exposure concentrations through a monthly list of ANZ New Zealand's top Corporate
exposures. The ANZ Credit and Market Risk Committee (six monthly) and Board Risk Committee (annually) review acomprehensive 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

61

Notes to the Financial Statements
Concentrations of credit risk analysis
ANZ New Zealand$ millions

30/09/2010

Liquid assets
Tradingand due from securities andother financial available-forinstitutions
sale assets

Derivative
financial
instruments

Net loans and Other financial
advances
assetsCredit related
commitments

Total

Industry
Agriculture, forestry, fishing

48

1

127

19,012

172

1,507

20,867

Business & property services

32

1

80

8,354

76

1,949

10,492

Construction

-

-

2

999

9

825

1,835

Entertainment, leisure and tourism

-

-

39

1,099

10

501

1,649

Finance and insurance

3,756

3,132

9,590

1,793

16

1,240

19,527

Government and local authority1

9,821

1,677

5,582

317

1,425

13

807

Manufacturing

55

20

123

3,093

28

3,273

6,592

Personal lending

-

-

1

55,540503

8,819

64,863Retail trade

105

2

70

1,438

13

961

2,589

6

21

150

1,791

16

577

2,561

56

-

19

1,218

11

1,300

2,604

-

208

336

1,554

14

1,827

3,939

5,735

8,967

10,854

97,316881

23,586

147,339

Provisions for credit impairment

-

-

-

(1,420)--(1,420)Fair value hedge adjustment
Unearned finance income anddeferred fees

-

-

-

386

-

-

386

-

-

-

(267)

-

-

(267)

5,735

8,967

10,85496,015881

23,586

146,038

New Zealand

3,131

6,676

3,122

94,123881

23,586

131,519

Overseas

2,604

2,291

7,732

1,892

-

-

14,519Total financial assets

5,735

8,967

10,85496,015881

23,586

146,038

Transport and storage
Wholesale trade
Other2

Total financial assets
Geography

Australia and New Zealand Banking Group Limited - New Zealand Branch

62

Notes to the Financial Statements
ANZ New Zealand$ millions

30/09/2009

Liquid assets
Tradingand due from securities andother financial available-forinstitutions
sale assets

Derivative
financial
instruments

Net loans and Other financial
advances
assetsCredit related
commitments

Total

Industry
Agriculture, forestry, fishing

48

-

261

20,361

209

1,555

22,434

Business and property services

5

-

49

9,104

94

2,361

11,613

Construction

-

-

3

871

9

853

1,736

Entertainment, leisure and tourism

-

48

28

1,015

10

487

1,588

Finance and insurance

4,606

4,191

10,064

1,312

13

1,371

21,557

Government and local authority1

6,228

2,412

1,392

175

1,432

15

802

Manufacturing

83

1

96

2,807

29

3,835

6,851

Personal lending

-

-

1

54,650560

10,49565,706

Retail trade

91

-

74

1,607

16

1,206

2,994

Transport and storage

6

8

80

1,602

16

686

2,398

Wholesale trade

19

-

6

1,713

18

1,036

2,792

Other2

6

39

178

1,387

14

1,341

2,965

7,276

5,679

11,01597,861

1,003

26,028148,862

Provisions for credit impairment

-

-

-

(1,281)--(1,281)

Fair value hedge adjustment
Unearned finance income anddeferred fees

-

-

-

681

-

-

681

-

-

-

(237)

-

-

(237)

7,276

5,679

11,01597,024

1,003

26,028148,025

New Zealand

6,213

3,272

2,951

95,5491,003

26,028135,016

Overseas

1,063

2,407

8,064

1,475

-

-

13,009Total financial assets

7,276

5,679

11,01597,024

1,003

26,028148,025

Total financial assets
Geography

NZ Branch$ millions

30/09/2010

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
for-salefinancialassets instruments

Net loansandadvances

Due from
relatedentitiesOther
financial Credit related
assets commitments

Total

Industry
Finance and insurance

-

-

500

-

302

-

-

802

Personal lending

-

-

-

10,029-3

63

10,095--500

10,029302

363

10,897

Provisions for credit impairment

-

-

-

(22)

-

-

-

(22)

Fair value hedge adjustment
Unearned finance income anddeferred fees

-

-

-

40

-

-

-

40

-

-

-

12

-

-

-

12

Total financial assets

-

-

500

10,059302

363

10,927

New Zealand

-

-

40

9,754

302

3

63

10,162

Overseas

-

-

460

305

-

-

-

765

Total financial assets

-

-

500

10,059302

363

10,927

Geography

Australia and New Zealand Banking Group Limited - New Zealand Branch

63

Notes to the Financial Statements
NZ Branch$ millions

30/09/2009

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
for-salefinancialassets instruments

Net loansandadvances

Due from
relatedentities

Other Credit related
financial commitments
3
assets

Total

Industry
Finance and insurance

-

-

34

-

341

-

-

375

Personal lending

-

-

-

8,795

-

-

34

8,829

-

-

34

8,795

341

-

34

9,204

Provisions for credit impairment

-

-

-

(9)

-

-

-

(9)

Fair value hedge adjustment
Unearned finance income anddeferred fees

-

-

-

(27)

-

-

-

(27)

-

-

-

15

-

-

-

15

Total financial assets

-

-

34

8,774

341

-

34

9,183

New Zealand

-

-

-

8,774

341

-

34

9,149

Overseas

-

-

34

-

-

-

-

34

Total financial assets

-

-

34

8,774

341

-

34

9,183

Geography

1

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.
2

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 ANZ New Zealand would
have to pay if the contingency is called upon. For undrawn facilities, the maximum exposure to credit risk is the fullamount of the committed 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

64

Notes to the Financial Statements
ANZ New Zealand$ millions

NZ BranchTotalmaximum
Corporate exposure tocredit risk
exposures1

Retailmortgages

Other retail
exposures

Liquid assets

-

-

2,239

Due from other financial institutions

-

-

3,496

Trading securities--

Derivative financial instruments--

30/09/2010

Total
maximum
Corporate exposure tocredit risk
exposures1

Retailmortgages

Other retail
exposures

2,239

-

-

-

-

3,496

-

-

-

-

6,757

6,757

-

-

-

-

10,854

10,854

-

-

500

500

On and off-balance sheet positions

Available-for-sale assets

-

-

2,210

2,210

-

-

-

-

Net loans and advances

50,974

4,089

40,95296,015

10,059--10,059Due from related entities

-

-

-

-

-

-

302

302

Other financial assets

-

-

881

881

-

-

3

3

Credit related commitments

5,324

4,575

13,687

23,586

63

-

-

63

Total exposure to credit risk

56,298

8,664

81,076

146,038

10,122-805

10,927

Liquid assets

-

-

2,762

2,762

-

-

-

-

Due from other financial institutions

-

-

4,514

4,514

-

-

-

-

Trading securities

-

-

4,166

4,166

-

-

-

-

Derivative financial instruments--

11,015

11,015

-

-

34

34

30/09/2009
On and off-balance sheet positions

Available-for-sale assets

-

-

1,513

1,513

-

-

-

-

Net loans and advances

51,011

4,005

42,00897,024

8,774

-

-

8,774

Due from related entities

-

-

-

-

-

-

341

341

Other financial assets

-

-

1,003

1,003

-

-

-

-

Credit related commitments

5,726

4,769

15,53326,028

34

-

-

34

Total exposure to credit risk

56,737

8,774

82,514148,025

8,808

-

375

9,183

1

Includes corporates, sovereigns and banks.

Credit quality
A core component of ANZ New Zealand’s credit risk management capability is the risk grading framework used across all
major Business Units. A set of risk grading principles and policies is supported by a complementary risk grading
methodology. Pronouncements by the International Basel Committee on Banking Supervision have been encapsulated inthese principles and policies including governance, validation and modelling requirements.
ANZ New Zealand’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 withlarger single name borrowers.
Impairment and provisioning of financial assets
ANZ New Zealand's policy relating to the recognition and measurement of impaired assets conforms to the RBNZ'sguidelines.
Loans are classified as either performing or impaired. Impaired assets are credit exposures where: there is doubt as towhether the full contractual amount (including interest) will be received; a material credit obligation is 90 days past due
but not well secured; they are portfolio managed and can be held for up to 180 days past due; or concessional terms havebeen provided due to 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 thecounterparty in question.
The past due but not impaired (over 90 days) classification applies where contractual payments are past due by 90 daysor more, or where the facility remains outside of contractual arrangements for 90 or more consecutive days, but ANZ New
Zealand 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

65

Notes to the Financial Statements
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 ANZ New Zealand’s risk grading
principles and policies supported by a complementary risk grading methodology. The following table presents an analysis
of gross loans and advances by summarised Basel II asset class into exposures neither past due nor impaired, past due
but not impaired and impaired.
Distribution of gross loans and advances by credit quality
ANZ New Zealand
Retailmortgages

Other retail
exposures

Corporate
exposures1

48,8703,967

1 to 89 days

1,339

over 90 days

153

NZ Branch
Total

Retailmortgages

Other retail
exposures

Corporate
exposures1

Total

39,494

92,331

9,628

-

-

9,628

261

1,025

2,625

337

-

-

337

33

127

313

21

-

-

21

563

81

1,403

2,047

43

-

-

43

50,925

4,342

42,04997,316

10,029--10,02948,4903,822

41,49393,805

8,542

-

-

8,542

1 to 89 days

1,445

315

662

2,422

232

-

-

232

over 90 days

276

59

111

446

11

-

-

11

389

59

740

1,188

10

-

-

10

50,6004,255

43,006

97,861

8,795

-

-

8,795

$ millions
30/09/2010

Neither past due nor impaired
Past due but not impaired:Impaired

30/09/2009

Neither past due nor impaired
Past due but not impaired:Impaired1

Includes corporates, sovereigns and banks.

Credit quality of gross loans and advances neither past due nor impaired
The credit quality of financial assets is assessed by ANZ New Zealand using internal ratings which aim to reflect therelative ability of counterparties to fulfil, on time, their credit-related obligations, and is based on their current probabilityof default.
Internal ratings
Strong risk rating - Corporate customers demonstrating superior stability in their operating and financial performance overthe long-term, and whose 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 internalratings based approach disclosures as RBNZ credit risk estimates are not used for these internal ratings. The exposures
recorded in these 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 theunderlying internal ratings applied to customers and to new loans written or loans rolling off.

Australia and New Zealand Banking Group Limited - New Zealand Branch

66

Notes to the Financial Statements
The following table presents an analysis of gross loans and advances neither past due nor impaired by the above internalratings:
Credit quality of gross loans and advances neither past due nor impaired
ANZ New Zealand

NZ Branch

Other retail
exposures

Corporate
exposures2

37,457976

16,60055,033

7,670

-

-

7,670

9,528

2,349

18,30030,177

1,693

-

-

1,693

1,885

642

4,594

7,121

265

-

-

265

48,8703,967

39,494

92,331

9,628

-

-

9,628

Strong risk rating

44,6501,459

17,99364,102

7,924

-

-

7,924

Satisfactory risk rating
Substandard but not past due or
impaired

3,156

2,010

19,07824,244

510

-

-

510

684

353

4,422

5,459

108

-

-

108

48,4903,822

41,49393,805

8,542

-

-

8,542

$ millions

Retailmortgages1

RetailTotal mortgages1

Other retail
Corporate
exposures exposures⁴2

Total

30/09/2010

Strong risk rating
Satisfactory risk rating
Substandard but not past due or
impaired

30/09/2009

1
2

Since September 2009, ANZ New Zealand has agreed new mortgage pooling methodologies with RBNZ and has 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.
Includes corporates, sovereigns and banks.

Credit quality of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by ANZ New Zealand to measure and manage credit quality. Financial assetsthat 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; and•Managed on an individual basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair valueof associated security is sufficient to ensure that ANZ New Zealand 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.
Ageing analysis of loans that are
past due but not impaired
ANZ New Zealand$ millions

Retailmortgages

Other retail
exposures

Corporate
exposures1

NZ Branch
Total

Retailmortgages

Other retail
exposures

Corporate
exposures1

Total

30/09/2010

1 to 5 days

313

92

565

970

89

-

-

89

6 to 29 days

688

113

235

1,036

176

-

-

176

30 to 59 days

259

38

159

456

50

-

-

50

60 to 89 days

79

18

66

163

22

-

-

22

90 days or over

153

33

127

313

21

-

-

21

1,492

294

1,152

2,938

358

-

-

358

1 to 5 days

310

104

397

811

40

-

-

40

6 to 29 days

740

136

122

998

154

-

-

154

30 to 59 days

264

49

71

384

27

-

-

27

60 to 89 days

131

26

72

229

11

-

-

11

90 days or over

276

59

111

446

11

-

-

11

1,721

374

773

2,868

243

-

-

243

30/09/2009

1

Includes corporates, sovereigns and banks.

Credit quality of financial assets that are individually impaired
ANZ New Zealand regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as tothe collectability of a credit facility, the financial asset is classified and reported as individually impaired and an individual

Australia and New Zealand Banking Group Limited - New Zealand Branch

67

Notes to the Financial Statements
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:
ANZ New Zealand
Retailmortgages

Other retail
exposures

Corporate
exposures1

Impaired financial assets
Undrawn facilities with impaired
customers

563

81

1,403

-

-

32

Individual provision balance

218

50

348

Net impaired financial assets

345

31

1,087

Collective provision balance

122

149

Impaired financial assets
Undrawn facilities with impaired
customers

389

59

-

-

32

Individual provision balance

156

40

281

Net impaired financial assets

233

19

491

Collective provision balance

127

159

518

$ millions

NZ Branch
Total

Retailmortgages

Other retail
exposures

Corporate
exposures1

Total

2,047

43

-

-

43

32

-

-

-

-

616

11

-

-

11

1,463

32

-

-

32

533

804

11

-

-

11

740

1,188

10

-

-

10

32

-

-

-

-

477

3

-

-

3

743

7

-

-

7

804

6

-

-

6

30/09/2010

30/09/2009

1

Includes corporates, sovereigns and banks.

Estimated value of collateral 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.
ANZ New Zealand$ millions

Net Loans Credit related
and commitments
2
advances1

NZ Branch

Total

Net Loans Credit related
and commitments2
advances1

Total

30/09/2010
Real estate

977

-

977

32

-

32

Other

462

24

486

-

-

-

Total value of collateral

1,439

24

1,463

32

-

32

Credit exposure

2,047

32

2,079

43

-

43

608

8

616

11

-

11

Unsecured portion of credit
30/09/2009
Real estate

488

-

488

7

-

7

Other

223

32

255

-

-

-

Total value of collateral

711

32

743

7

-

7

1,188

32

1,220

10

-

10

477

-

477

3

-

3

Credit exposure
Unsecured portion of credit
1
2

All individually impaired financial assets are classified as loans and advances.
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

Market risk
Market risk is the risk to ANZ New Zealand’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 and volatilities lead to a decline in the value of assets and liabilities, including financial derivatives. Market risk isgenerated through both trading activities and the interest rate risk inherent in the banking book.
ANZ New Zealand 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, each Board has set a medium market risk appetite for the Markets business which is reflected in
the low/moderate market risk limit framework.
ANZ New Zealand 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

Australia and New Zealand Banking Group Limited - New Zealand Branch

68

Notes to the Financial Statements
trading and balance sheet portfolios. This approach and related analysis identifies the range of possible outcomes that canbe expected over a given period of time, establishes the relative likelihood of those outcomes and allocates an appropriate
amount of capital to support these activities.
The market risk management and policy control framework applicable to the entities comprising ANZ New Zealand has
been set by the Board and Risk Committee of the Bank or the Ultimate Parent Bank, as appropriate. Likewise oversightand monitoring of material market risk exposures of ANZ New Zealand 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 ANZ New Zealand, implicitly involves oversight by both related entities.
Market risk management and control responsibilities
ANZ New Zealand-wide responsibility for the strategies and policies relating to the management of market risk lies witheach 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 tradedmarket 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 andthe Business Units.
The management of market risk is supported by a comprehensive limit and policy framework to control the amount of riskthat ANZ New Zealand will accept. Market risk limits are allocated at various levels and are reported and monitored byMarket 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 and loss limits (to monitor
and manage the performance of the trading portfolios).
These risks are monitored daily against a comprehensive limit framework that includes VaR, aggregate market positionand sensitivity, product and geographic thresholds. To facilitate the management, control, measurements and reporting ofmarket risk, ANZ New Zealand 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
physical and derivative trading positions. They arise in trading transactions where ANZ New Zealand acts as principal withclients or with 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 inforeign exchange 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 inmarket 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 marginor 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 resultof foreign exchange rate movements
Some instruments do not fall into either category but also expose ANZ New Zealand 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.
The traded market risk function provides specific oversight of each of the main trading areas and is responsible for theestablishment of a Value at Risk ("VaR") framework and detailed control limits. In all trading areas ANZ New Zealand has
implemented models that calculate VaR exposures, monitor risk exposures against defined limits on a daily basis, and‘stress test’ trading portfolios. ANZ New Zealand has an ALCO, comprising executive management to provide monthly
oversight of market risk.
The Bank’s Chief Risk Officer is responsible for daily review and oversight of traded market risk reports. The Chief Risk
Officer has the authority 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
given day. 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

69

Notes to the Financial Statements
ANZ New Zealand's standard VaR approach for both traded and non-traded risk is historical simulation. ANZ New Zealandcalculates VaR using historical changes in market rates and prices over the previous 500 business days. Traded and NonTraded VaR 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
that ANZ New Zealand could experience from an extreme market event. As a result of this limitation, ANZ New Zealandutilises a number of other risk measures (e.g. stress testing) and associated detailed control limits to measure andmanage 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 aremanaged on a global product basis.
Below are aggregate VaR exposures covering both derivative and non-derivative trading positions for ANZ New Zealand.

$ millions

30/09/2010
Foreign exchange
riskInterest rate risk
Credit spread risk
Diversification
benefit

ANZ New Zealand
Value at risk at 97.5% confidenceHigh forLow for Average for
As atperiodperiodperiodANZ New Zealand
Value at risk at 99% confidenceHigh forLow for Average for
As atperiodperiodperiod

0.5
2.8
0.6

1.3
5.0
1.2

0.2
1.5
0.3

0.5
2.9
0.6

0.7
4.1
0.8

1.9
6.6
2.7

0.3
2.0
0.4

0.8
4.1
0.8

(1.1)

n/a

n/a

(1.1)

(1.5)

n/a

n/a

(1.5)

Total VaR

2.8

5.2

1.5

2.9

4.1

7.2

2.1

4.2

30/09/2009
Foreign exchange
riskInterest rate risk
Credit spread risk
Diversification
benefit

0.4
2.6
0.4

1.4
3.0
0.5

0.2
1.1
0.2

0.5
2.0
0.3

0.6
3.5
0.6

1.9
4.9
0.8

0.3
1.7
0.2

0.7
3.0
0.5

(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 ANZ New
Zealand. The diversification benefit reflects the historical correlation between Foreign Exchange, Interest Rate and Debt
Markets.
To supplement the VaR methodology, ANZ New Zealand applies a wide range of stress tests, both on individual portfolios
and at ANZ New Zealand level. ANZ New Zealand's stress-testing regime provides senior management with anassessment of the financial impact of identified extreme events on market risk exposures of ANZ New Zealand.
Non-traded market risks (balance sheet risk)
The principal objectives of balance sheet management are to manage net interest income sensitivity while maintaining
acceptable levels of interest rate and liquidity risk and to manage the market value of ANZ New Zealand’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 inwholesale interest rates on the earnings of ANZ New Zealand's banking book. Non-traded interest rate risk relates to thepotential 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 non-interest bearing liabilities in interest bearing assets.
As part of normal business activity ANZ New Zealand 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 ANZ New Zealand of
this financial asset due to movements in interest rates and other pricing factors. As far as possible the true economic
cost is passed 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 wholesalemarket pricing. This is managed through active review of product margins.

Australia and New Zealand Banking Group Limited - New Zealand Branch

70

Notes to the Financial Statements
Non-traded interest rate risk is managed to both value and earnings at risk limits. Interest rate risk is reported using
three measures: VaR; scenario analysis (to a 1% shock); and interest rate sensitivity gap. This treatment excludes theeffect of prepayment and basis risk.
a) VaR non-traded interest rate risk
Below are aggregate VaR figures covering non-traded interest rate risk.
ANZ New ZealandHigh forLow for

Average for

As atperiodperiodperiod

18.6

25.2

18.6

21.8

22.4

22.9

18.9

20.9

$ millions

30/09/2010

Value at risk at 97.5% confidence
30/09/2009

Value at risk at 97.5% confidenceb) 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 apositive number signifying that a rate increase is positive for net interest income over the next 12 months. Conversely, anegative number signifies that a rate increase is negative for the next 12 months’ net interest income.
ANZ New Zealand
30/09/2010

30/09/2009

As at

1.7%

0.2%

Maximum exposure

1.7%

0.6%

Minimum exposure

0.2%

-0.1%

Average exposure (in absolute terms)

1.2%

0.3%

Impact of 1% rate shock

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. ANZ New Zealand quantifies the potential variation in future netinterest 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(for example, products priced at ANZ New Zealand’s discretion), a profile based on historically observed and/or
anticipated rate sensitivity is used. This treatment excludes the effect of basis risk between customer pricing andwholesale market pricing.
The majority of ANZ New Zealand’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 ofdifferent scenarios – with different market interest rate environments and future balance sheet structures – to be
identified. This better enables ANZ New Zealand to quantify the interest rate risks associated with the balance sheet andto formulate strategies to manage current and future risk profiles.
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about ANZ New Zealand's exposure to interest rate risk.
Repricing gaps are based upon contractual repricing information except where the contractual terms are not considered tobe reflective of actual interest rate sensitivity, for example, those assets and liabilities priced at ANZ New Zealand’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 ANZ New Zealand's loan business is conducted domestically in New Zealand. The majority of retaildeposits are also raised in New Zealand but are either fixed or floating in nature. The mix of repricing maturities in thisbook is influenced by the underlying financial needs of customers.
ANZ New Zealand'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 ratesensitivity of this balance sheet contributes little to the aggregate risk exposure, which is primarily a reflection of thepositions in New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

71

Notes to the Financial Statements
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.
The following tables represent the interest rate sensitivity of ANZ New Zealand'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.
ANZ New Zealand
30/09/2010

Less than

3 to 6

6 to 12

1 to 5

Beyond Not bearing

Total

3 months

monthsmonthsyears

5 years

Liquid assets

2,239

2,079

-

-

-

-

160

Due from other financial institutions

3,496

1,932

-

-

-

-

1,564

6,757

836

26

133

5,618

144

-

10,854

-

-

-

-

-

10,854$ miilions

interest

AssetsTrading securities
Derivative financial instruments
Available-for-sale assets

2,210

762

1,061

246

33

30

78

Net loans and advances

96,01561,6395,549

10,20817,97724

618

Other financial assets

881

28

-

-

-

-

853

Total financial assets

122,452

67,276

6,636

10,587

23,628198

14,127

Non-financial assets

4,577

-

-

-

-

-

4,577

127,029

67,276

6,636

10,587

23,628198

18,704Due to other financial institutions

12,293

12,236

-

-

25

-

32

Deposits and other borrowings

70,295

43,695

13,224

6,414

1,998

-

4,964

Derivative financial instruments
Payables and other financial
liabilities

10,727

-

-

-

-

-

10,727

1,075

98

-

-

-

-

977

Bonds and notes

19,899

8,100

150

458

11,191--

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

2,407

-

630

350

1,427

-

-

Total financial liabilities

118,462

65,89514,004

7,222

14,641-

16,700Non-financial liabilities

746

-

-

-

-

-

746

7,821

-

-

-

-

-

7,821

Total liabilities and equity

127,029

65,89514,004

7,222

14,641-

25,267On-balance sheet interest
sensitivity gap

-

1,381

(7,368)

3,365

8,987

198

(6,563)

Hedging instruments

-

8,638

(2,239)(2,671)(3,580)(148)-

Interest sensitivity gap - net
Interest sensitivity gap cumulative-

10,019(9,607)

694

5,407

50

(6,563)-

10,019

412

1,106

6,513

6,563

-

Total assets
Liabilities

EquityAustralia and New Zealand Banking Group Limited - New Zealand Branch

72

Notes to the Financial Statements
ANZ New Zealand
30/09/2009

Less than

3 to 6

6 to 12

1 to 5

Beyond Not bearing

Total

3 months

monthsmonthsyears

5 years

interest

Liquid assets

2,762

2,596

-

-

-

-

166

Due from other financial institutions

4,514

4,013

300

-

63

-

138

Trading securities

4,166

429

66

418

2,575

678

-

Derivative financial instruments

11,015

-

-

-

-

-

11,015$ miilions

AssetsAvailable-for-sale assets

1,513

149

1,286

-

9

-

69

Net loans and advances

97,02450,5397,668

14,024

24,831

55(93)

Other financial assets

1,003

-

-

-

-

-

1,003

Total financial assets

121,997

57,726

9,320

14,442

27,478733

12,298Non-financial assets

4,317

-

-

-

-

-

4,317

126,31457,726

9,320

14,442

27,478733

16,615Due to other financial institutions

12,514

11,533

550

277

22

-

132

Deposits and other borrowings

71,76445,087

14,019

5,497

2,788

-

4,373

Derivative financial instruments
Payables and other financial
liabilities

10,974

-

-

-

-

-

10,974

1,149

66

-

-

-

-

1,083

Bonds and notes

17,540

9,586

672

371

6,911

-

-

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

2,596

227

584

-

1,785

-

-

Total financial liabilities

118,303

68,265

15,825

6,145

11,506-

16,562

Non-financial liabilities

696

-

-

-

-

-

696

7,315

-

-

-

-

-

7,315

Total liabilities and equity

126,314

68,265

15,825

6,145

11,506-

24,573On-balance sheet interest
sensitivity gap-(10,539)(6,505)

8,297

15,972

733(7,958)

Hedging instruments-

11,5895,630(11,762)(4,417)(1,040)-Interest sensitivity gap - net
Interest sensitivity gap cumulative

-

1,050

(875)

(3,465)

11,555(307)(7,958)

-

1,050

175

(3,290)

8,265

7,958

-

Total assets
Liabilities

EquityAustralia and New Zealand Banking Group Limited - New Zealand Branch73

Notes to the Financial Statements
NZ Branch
30/09/2010

Less than

3 to 6

6 to 12

1 to 5

Beyond Not bearing

Total

3 months

monthsmonthsyears

5 years

interest

Liquid assets

-

-

-

-

-

-

-

Due from other financial institutions

-

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

-

500

-

-

-

-

-

500

$ miilions

AssetsDerivative financial instruments
Available-for-sale assets

-

-

-

-

-

-

-

Net loans and advances

10,059

4,784

832

1,536

2,886

-

21

Due from related entities

302

302

-

-

-

-

-

Other financial assets

3

-

-

-

-

-

3

Total financial assets

10,864

5,086

832

1,536

2,886

-

524

Non-financial assets

7

-

-

-

-

-

7

10,871

5,086

832

1,536

2,886

-

531

Total assets
Liabilities
Due to other financial institutions

10,481

10,481

-

-

-

-

-

Deposits and other borrowings

-

-

-

-

-

-

-

Due to subsidiary companies

-

-

-

-

-

-

-

142

-

-

-

-

-

142

Derivative financial instruments
Payables and other financial
liabilities

70

-

-

-

-

-

70

Bonds and notes

-

-

-

-

-

-

-

Term funding

-

-

-

-

-

-

-

Loan capital

-

-

-

-

-

-

-

10,693

10,481

-

-

-

-

212

Total financial liabilities
Non-financial liabilities

45

-

-

-

-

-

45

133

-

-

-

-

-

133

Total liabilities and equity

10,871

10,481

-

-

-

-

390

On-balance sheet interest
sensitivity gap-(5,395)

832

1,536

2,886

-

141

Hedging instruments

-

4,435

(30)

(1,679)(2,726)--

Interest sensitivity gap - net
Interest sensitivity gap cumulative

-

(960)

802

(143)

160

-

141

-

(960)

(158)

(301)

(141)

(141)

-

EquityAustralia and New Zealand Banking Group Limited - New Zealand Branch

74

Notes to the Financial Statements
NZ Branch
30/09/2009

Less than

3 to 6

6 to 12

1 to 5

Beyond Not bearing

Total

3 months

monthsmonthsyears

5 years

interest

Liquid assets

-

-

-

-

-

-

-

Due from other financial institutions

-

-

-

-

-

-

-

Trading securities

-

-

-

-

-

-

-

34

-

-

-

-

-

34

$ miilions

AssetsDerivative financial instruments
Available-for-sale assets

-

-

-

-

-

-

-

Net loans and advances

8,774

2,125

1,165

1,757

3,726

-

1

Due from related entities

341

341

-

-

-

-

-

Other financial assets

-

-

-

-

-

-

-

Total financial assets

9,149

2,466

1,165

1,757

3,726

-

35

Non-financial assets

3

-

-

-

-

-

3

9,152

2,466

1,165

1,757

3,726

-

38

Total assets
Liabilities
Due to other financial institutions

8,801

8,679

122

-

-

-

-

Deposits and other borrowings

-

-

-

-

-

-

-

Due to subsidiary companies

-

-

-

-

-

-

-

254

-

-

-

-

-

254

Derivative financial instruments
Payables and other financial
liabilities

41

-

-

-

-

-

41

Bonds and notes

-

-

-

-

-

-

-

Term funding

-

-

-

-

-

-

-

Loan capital

-

-

-

-

-

-

-

Total financial liabilities

9,096

8,679

122

-

-

-

295

Non-financial liabilities

17

-

-

-

-

-

17

Equity

39

-

-

-

-

-

39

Total liabilities and equity

9,152

8,679

122

-

-

-

351

On-balance sheet interest
sensitivity gap-(6,213)

1,043

1,757

3,726

-

(313)

Hedging instruments

-

6,553

(789)

(2,088)(3,676)--

Interest sensitivity gap - net
Interest sensitivity gap cumulative

-

340

254

(331)

50

-

(313)

-

340

594

263

313

313

-

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 thesesecurities as at 30 September 2010 was $78 million (30/09/2009 $71 million). Regular reviews are performed to
substantiate valuation of the investments within the portfolio. The fair value of the equity securities classified as availablefor-sale can fluctuate considerably. A 10 per cent reduction in the value of the available-for-sale equity securities at 30
September 2010 would have reduced equity by $8 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
arising from 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 andliability, 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
and liabilities in that foreign currency aggregated with the net expected future cash flows from off-balance sheet
purchases and sales from foreign exchange transactions in that foreign currency. The amounts are stated in New Zealanddollar equivalents translated using the spot exchange rates as at balance sheet date.

Australia and New Zealand Banking Group Limited - New Zealand Branch

75

Notes to the Financial Statements
ANZ New Zealand$ millions

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

Net open position
Australian dollar

22

2

1

1

Euro

2

(1)

-

-

Japanese yen

2

-

-

-

Pound sterling

(1)

-

-

-

US dollar

30

2

-

-

2

(1)

-

-

57

2

1

1

Other
Total net open position

Liquidity risk
Liquidity risk is the risk that ANZ New Zealand 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 ANZ New Zealand.
ANZ New Zealand’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 ANZ New Zealand’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,
the framework has been reviewed and updated.
Central to ANZ New Zealand’s liquidity risk management approach is the establishment of a liquidity risk appetite
framework to which ANZ New Zealand must conform at all times. The risk appetite for liquidity has been set as low, andthis objective is achieved by ANZ New Zealand 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 stressscenarios.
Maintaining strength in ANZ New Zealand’s balance sheet structure to ensure long term resilience in ANZ New
Zealand’s liquidity and funding risk profile.
Limiting the potential earnings at risk implications associated with unexpected increases in funding costs or theliquidation of assets under stress.
Ensuring the liquidity management framework is compatible with regulatory requirements.
Daily liquidity reporting and scenario analysis, quantifying ANZ New Zealand’s positions.
Targeting a diversified funding base, avoiding undue concentrations by investor type, maturity, market source andcurrency.
Holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-today operations.
Establishing detailed contingency plans to cover different liquidity crisis events.

Management of liquidity and funding risks are overseen by ALCO.
Scenario Modelling
A key component of ANZ New Zealand’s liquidity management framework is scenario modelling. Liquidity is assessed
under different scenarios, including "going-concern", "name-crisis" and various "survival horizons".
"Going-concern": reflects the normal behaviour of cash flows in the ordinary course of business. ANZ New Zealand must
be able to meet all commitments and obligations under a going concern scenario, within ANZ New Zealand normal funding
capacity (‘available to fund’ limit), over at least the following 30 calendar days.
In estimating the funding requirement, ANZ New Zealand models expected cash flows by reference to historical behaviour
and contractual maturity data.
"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 thesolvency of ANZ New Zealand or adverse rating changes.
Under this scenario ANZ New Zealand may have significant difficulty rolling over or replacing funding. Under the liquidity
policy ANZ New Zealand must be cash flow positive over an eight calendar day period.
"Survival horizons": The global financial crisis has highlighted the importance of differentiating between stressed andnormal market conditions in a name-specific crisis and the different behaviour that offshore and domestic wholesalefunding markets can exhibit during market stress events. ANZ New Zealand has linked its liquidity risk appetite to defined
liquidity "survival horizons" (i.e. the time period under which ANZ New Zealand must maintain a positive cash flow
position). The following stressed scenarios are modelled:

Australia and New Zealand Banking Group Limited - New Zealand Branch

76

Notes to the Financial Statements••••

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 ofdomestic and offshore markets.
Offshore Funding Market Disruption ("OFMD"): Stressed global wholesale funding markets leading to a closure ofoffshore markets only.

As of 30 September 2010 ANZ New Zealand was in compliance with all of the above scenarios.
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealand employs
funding metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including customer
liabilities, longer-dated wholesale debt (with remaining term exceeding one year) and equity. This approach recognisesthat long-term wholesale debt and other sticky liabilities have favourable liquidity characteristics.
ANZ New Zealand$ millions

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

52,18352,065

-

-

7,560

7,866

-

-

59,74359,931--

Funding composition
Customer deposits1
New ZealandOverseas
Total customer deposits
Wholesale funding
Bonds and notes

19,89917,540--Loan capital

2,407

2,596

-

-

Certificates of deposit

3,245

4,441

-

-

Commercial paper

7,307

7,392

-

-

Term funding

1,766

1,766

-

-

Due to other financial institutions

12,293

12,514

10,481

8,801

Total wholesale funding

46,917

46,24910,481

8,801

106,660

106,180

10,481

8,801

Total funding
Concentrations of funding by industry
Households

37,96837,738--Agriculture, forestry and fishing

2,520

3,872

-

-

Manufacturing

2,772

1,354

-

-

596

573

-

-

53,39453,468

10,481

8,801

Retail trade

670

753

-

-

Wholesale trade

677

602

-

-

3,754

3,960

-

-

Transport and storage

620

614

-

-

Construction

731

736

-

-

1,967

1,548

-

-

991

962

-

-

106,660

106,180

10,4818,801

New Zealand

59,98361,515--Australia

14,326

14,593

9,445

8,801

United States

Entertainment, leisure and tourism
Finance and insurance

Business and property services

Government and local authority
Other2
Total concentrations of funding by industry
Concentrations of funding by geography3

17,325

17,031--

Europe

8,708

7,511

-

-

Other countries

6,318

5,530

1,036

-

106,660

106,180

10,481

8,801

Total concentrations of funding by geography
12
3

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.
Funding of ANZ New Zealand 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.

Analysis of funding liabilities by industry sector is based on Australian and New Zealand Standard Industrial Classification("ANZSIC") codes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

77

Notes to the Financial Statements
Wholesale funding
ANZ New Zealand’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds thatbalances 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 and Markets operations. Long-term wholesale funding is managed and executed through Treasury
operations.
ANZ New Zealand also uses maturity concentration limits under the wholesale funding and liquidity management
framework. Maturity concentration limits ensure that ANZ New Zealand does not become reliant on issuing large volumesof new wholesale 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 beraised in the wholesale markets in normal market conditions. ANZ New Zealand adopts a conservative approach todetermine its funding capacity. Funding capacity limits are determined at the Ultimate Parent Bank level and allocated toindividual sites based on their requirements.
Annually, a Funding Plan is ratified by ANZ New Zealand’s Senior Management. The plan is supplemented by monthly
updates, and is linked to ANZ New Zealand’s three year strategic planning cycle.
Liquidity portfolio management
ANZ New Zealand holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity risk
management.
The size of ANZ New Zealand’s liquidity portfolio is based on the amount required to meet its liquidity policy.
Total liquidity portfolio$ millions

Cash and balances with central banks

ANZ New Zealand

NZ Branch

30/09/2010

30/09/2009

30/09/2010

30/09/2009

1,015

2,207

-

-

Securities purchased under agreement to resell

266

1,075

-

-

Certificates of deposit

687

2,736

-

-

Government, Local Body stock and bonds

3,631

1,102

-

-

Available-for-sale assets

1,915

1,435

-

-

Other bonds

2,698

2,522

-

-

10,212

11,077--

Total liquidity portfolio

Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand government securities,
securities issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned
Enterprises, Local Authorities and highly rated NZ domestic corporates. These assets are accepted as collateral by the
RBNZ in repurchase transactions. The post-"haircut" value of these assets at 30 September 2010 was $10,199 million.
The Banking Group also held unencumbered Internal RMBS with a post-"haircut" value of $5,011 million (from 1 April
2010 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
ANZ New Zealand maintains liquidity crisis contingency plans defining an approach for analysing and responding to aliquidity-threatening event on a 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; and•assigned responsibilities for internal and external communications.
Contractual maturity analysis of financial assets and liabilities
The tables below present ANZ New Zealand's financial assets and liabilities within relevant contractual maturity groupings,
based on the earliest date on which the NZ Branch or ANZ New Zealand may be required to realise an asset or settle aliability. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows and may
differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using
the earliest date at which ANZ New Zealand or the NZ Branch can be called upon to pay. The liquidity risk of credit
related commitments and contingent liabilities may be less than the contract amount, and does not necessarily represent
future cash requirements as many of these facilities are expected to be only partially used or to expire unused.

Australia and New Zealand Banking Group Limited - New Zealand Branch

78

Notes to the Financial Statements
ANZ New Zealand does not manage its liquidity risk on the basis of the information below.
ANZ New Zealand$ millions

30/09/2010

Less than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedTotal

At callLiquid assets

2,239

2,239

-

-

-

-

-

Due from other financial institutions

3,496

457

2,956

83

-

-

-

Trading securities

7,991

-

924

396

6,501

170

-

Derivative financial assets (trading)

8,683

-

8,683

-

-

-

-

Available-for-sale assets

2,221

-

634

1,309

54

146

78

Net loans and advances

Financial assets

137,504-

10,10919,59035,801

71,400604

Other financial assets

881

-

860

4

11

6

-

Total financial assets

163,015

2,696

24,166

21,38242,36771,722

682

Financial liabilities
Due to other financial institutions

13,802

690

2,048

2,132

8,932

-

-

Deposits and other borrowings
Derivative financial liabilities(trading)

71,974

23,67823,64922,326

2,280

41

-

9,013

-

9,013

-

-

-

-

1,075

-

1,075

-

-

-

-

21,502

-

1,830

2,426

17,137

109-

Term funding

1,849

-

21

1,828

-

-

-

Loan capital

3,781

-

48

144

960

1,445

1,184

122,996

24,36837,68428,85629,309

1,595

1,184

40,019(21,673)(13,517)(7,474)

13,05870,127(502)- gross inflows

32,644

-

1,206

7,842

23,57323-- gross outflows(34,199)-(1,387)(7,767)(25,020)(25)-

38,464(21,673)(13,698)(7,399)11,611

70,125(502)

Other financial liabilities
Bonds and notes

Total financial liabilities
Net finanical assets
Derivative financial instruments
used for balance sheet
management

Net financial assets after balance
sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New ZealandLess than

Beyond30/09/2010

Total

1 year

1 yearNon-credit related commitments

303

303

-

20,845

20,845

-

2,741

2,741

-

23,88923,889-$ millions

Credit related commitments
Contingent liabilities
Total

Australia and New Zealand Banking Group Limited - New Zealand Branch

79

Notes to the Financial Statements
ANZ New Zealand$ millions

30/09/2009

Less than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedTotal

At callLiquid assets

2,762

2,762

-

-

-

-

-

Due from other financial institutions

4,530

172

3,891

400

67

-

-

Trading securities

5,080

-

403

688

3,248

741

-

Derivative financial instruments

9,076

-

9,076

-

-

-

-

Available-for-sale assets

1,526

-

121

1,295

16

25

69

Net loans and advances

142,476-

9,066

17,92840,32675,249(93)

Other financial assets

1,003

-

1,003

-

-

-

-

166,453

2,934

23,56020,311

43,65776,015(24)

Financial assets

Total financial assets (inclusive ofinterest)
Financial liabilities
Due to other financial institutions

13,852

1,039

2,982

2,236

7,142

453

-

Deposits and other borrowings

73,15525,397

23,17821,408

3,116

56

-

Derivative financial instruments

8,048

-

8,048

-

-

-

-

Other financial liabilities

1,149

-

1,149

-

-

-

-

Bonds and notes

19,039

-

2,234

3,010

13,445350-

Term funding

1,861

-

24

1,837

-

-

-

Loan capital

4,029

-

51

154

1,023

1,642

1,159

Total financial liabilities (inclusive ofinterest)

121,133

26,436

37,66628,64524,726

2,501

1,159

Net finanical assets

45,320(23,502)(14,106)(8,334)

18,93173,514(1,183)- gross inflows

32,634

-

2,368

7,727

21,615923-- gross outflows(34,602)-(2,582)(8,301)(22,835)(884)-

Net financial assets after balance
sheet management

43,351(23,502)(14,319)(8,908)17,71073,553(1,183)

Derivative financial instruments
used for balance sheet
management

Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New ZealandLess than

Beyond30/09/2009

Total

1 year

1 yearNon-credit related commitments

287

287

-

Credit related commitments

22,863

22,863-

Contingent liabilities

3,165

3,165

-

Total

26,31526,315-$ millions

Australia and New Zealand Banking Group Limited - New Zealand Branch

80

Notes to the Financial Statements
NZ Branch$ millions

30/09/2010

Less than

3 to 12

Beyond No Specified

months 1 to 5 years

5 years

MaturityTotal

At call

3 months

Net loans and advances

19,341

-

304

770

3,781

14,46620

Due from related parties

302

-

302

-

-

-

-

3

-

3

-

-

-

-

19,646

-

609

770

3,781

14,46620

Financial assets

Other financial assets
Total financial assets (inclusive ofinterest)
Financial liabilities
Due to other financial institutions

11,970

-

954

2,128

8,888

-

-

Derivative financial instruments

142

-

142

-

-

-

-

Derivative financial instruments

70

-

70

-

-

-

-

12,182

-

1,166

2,128

8,888

-

-

7,464

-

(557)

(1,358)(5,107)

14,46620- gross inflows

10,559

-

927

2,030

7,601

1

-

- gross outflows(12,775)-(1,132)(2,185)(9,457)

(1)

-

5,248

-

(728)

(1,513)(6,963)

14,46620

Total financial liabilities (inclusive ofinterest)
Net finanical assets
Derivative financial instruments
used for balance sheet
management

Net financial assets after balance
sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
NZ BranchLess than

BeyondTotal

1 year

1 yearCredit related commitments

63

63

-

Total

63

63

-

$ millions
30/09/2010

Australia and New Zealand Banking Group Limited - New Zealand Branch81

Notes to the Financial Statements
NZ Branch$ millions

Less than

3 to 12

Beyond No maturity

months 1 to 5 years

5 years

specifiedTotal

At call

3 months

Net loans and advances

16,323

-

188

643

3,061

12,431-

Due from related parties

341

-

341

-

-

-

-

16,664

-

529

643

3,061

12,431-

10,033

-

745

1,550

7,282

456

-

41

-

41

-

-

-

-

Total financial liabilities (inclusive ofinterest)

10,074

-

786

1,550

7,282

456

-

Net finanical assets

6,590

-

(257)

(907)

(4,221)

11,975-- gross inflows

9,393

-

1,373

1,313

6,260

445

-

- gross outflows(11,222)-(1,485)(1,548)(7,736)

(453)

-

4,761

-

(369)

(1,141)(5,697)

11,968-30/09/2009

AssetsTotal financial assets (inclusive ofinterest)
Liabilities
Due to other financial institutions
Other financial liabilities

Derivative financial instruments
used for balance sheet
management

Net financial assets after balance
sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
NZ BranchLess than

BeyondTotal

1 year

1 yearCredit related commitments

34

34

-

Total

34

34

-

$ millions
30/09/2009

33. Concentrations of Credit Risk
ANZ New Zealand has no credit exposures, on the basis of limits, to individual counterparties or groups of closely related
counterparties (whether bank or non-bank exposures) which equal or exceed 10% of the Overseas Banking Group's equity
as at 30/09/2010, or 30/09/2009, or at any time for the quarter ended 30/09/2010 in respect of peak end-of-day
aggregate credit exposures. The peak end-of-day exposures have been calculated using the Overseas Banking Group’s
equity as at 30/09/2010. These calculations exclude credit exposures to the central government of any country with along term credit rating of A- or A3 or above, or its equivalent.

34. 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.
A significant number of financial instruments are carried at fair value in the balance sheet. Below is a comparison of thecarrying amounts, as reported in the balance sheet, and fair values of all financial assets and liabilities.
In the tables below, financial instruments have been allocated by their accounting treatment. The accounting policies
note describes how the categories of financial assets and liabilities are measured and how income and expenses, including
fair value gains and losses, are recognised.

Australia and New Zealand Banking Group Limited - New Zealand Branch82

Notes to the Financial Statements
ANZ New Zealand$ millions

At amortised
cost

Carrying amountAt fair value through profit or
loss
Designated on
initialHeld forrecognition
trading

Hedging

Available-forsale assets

Total

Fair value

30/09/2010
Liquid assets

2,239

-

-

-

-

2,239

2,239

Due from other financial institutions

2,789

-

-

-

707

3,496

3,496

Trading securities

-

-

6,757

-

-

6,757

6,757

Derivative financial instruments1--

10,094760-

10,854

10,854

Available-for-sale assets

-

-

-

-

2,210

2,210

2,210

Net loans and advances2

96,015----96,01595,957

Other financial assets

853

28

-

-

-

881

881

Total financial assets

101,89628

16,851760

2,917

122,452

122,394

Due to other financial institutions

12,293----

12,293

12,486

Deposits and other borrowings

62,988

7,307

-

-

-

70,29570,362--

10,155572-

10,727

10,727

1,075

-

-

-

-

1,075

1,075

19,899----19,89919,935

Term funding

1,766

-

-

-

-

1,766

1,766

Loan capital

2,407

-

-

-

-

2,407

2,361

100,428

7,307

10,155

572-

118,462

118,712Liquid assets

2,762

-

-

-

-

2,762

2,762

Due from other financial institutions

1,778

-

-

-

2,736

4,514

4,514

Trading securities

-

-

4,166

-

-

4,166

4,166

Derivative financial instruments1--

10,468547-

11,015

11,015

Available-for-sale assets

-

-

-

-

1,513

1,513

1,513

Net loans and advances2

97,024----

97,024

96,798Other financial assets

1,003

-

-

-

-

1,003

1,003

Total financial assets

102,567-

14,634547

4,249

121,997

121,771

Due to other financial institutions

12,514----

12,514

12,732

Deposits and other borrowings

64,372

7,392

-

-

-

71,764

71,796

-

-

9,817

1,157

-

10,974

10,974

Other financial liabilities

1,149

-

-

-

-

1,149

1,149

Bonds and notes2

17,540----17,54017,502

Term funding

1,766

-

-

-

-

1,766

1,766

Loan capital

2,596

-

-

-

-

2,596

2,516

Total financial liabilities

99,937

7,392

9,817

1,157

-

118,303

118,435

Derivative financial instruments1
Other financial liabilities
Bonds and notes2

Total financial liabilities
30/09/2009

Derivative financial instruments1

Australia and New Zealand Banking Group Limited - New Zealand Branch

83

Notes to the Financial Statements
NZ Branch$ millions

At amortised
cost

Carrying amount
30/09/2010
Derivative financial instruments1
Net loans and advances2
Due from related entities

At fair value throughprofit or loss
DesignatedHeld foron initialrecognition
trading

Availablefor-saleHedging
assets

Total

Fair Value

10,059

-

500
-

-

-

500
10,059500
10,081

302

-

-

-

-

302

302

Other financial assets

3

-

-

-

-

3

3

Total financial assets

10,364

-

500

-

-

10,864

10,886

Due to other financial institutions
Derivative financial instruments1

10,481
-

-

72

70

-

10,481
142

10,674142

Other financial liabilities
Bonds and notes2

70
-

-

-

-

-

70
-

70
-

Total financial liabilities

10,551

-

72

70

-

10,693

10,88630/09/2009
Derivative financial instruments1
Net loans and advances2

8,774

-

3
-

31
-

-

34
8,774

34
8,797

Due from subsidiary companies

341

-

-

-

-

341

341

Total financial assets

9,115

-

3

31

-

9,149

9,172

Due to other financial institutions

8,801

-

-

-

-

8,801

9,019

Derivative financial instruments1

-

-

252

2

-

254

254

Other financial liabilities
Bonds and notes2

41

-

-

-

-

41

41

-

-

-

-

-

-

-

Total financial liabilities

8,842

-

252

2

-

9,096

9,314

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 financial assets within loans and advances. The resulting fair value adjustment means that the carrying value differs from theamortised cost.

Estimation of fair value
Liquid assets and due from / to other financial institutions
Where these financial instruments are short-term in nature, defined as those that reprice or mature in 90 days or less, or
are receivable on demand, the carrying values is considered to approximate the fair values. When longer term in nature,fair value is based on quoted market prices, or for those debt issues where quoted market prices were not available, adiscounted cash flow model using a yield curve appropriate for the remaining term to maturity of that debt instrument.
Trading securities
Fair value is based on quoted market prices, broker or dealer price quotations, or modelled valuations using prices forsecurities 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 the maturity 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, fairvalue is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics, ormarket accepted valuation models as appropriate (including discounted cash flow models) based on current market yields
for similar types of instruments and the maturity of each instrument.
Net loans and advances
Fair value has been estimated through discounting future cash flows. For fixed rate loans and advances, the discount rateapplied incorporates changes in wholesale market rates, ANZ New Zealand’s cost of wholesale funding and movements incustomer margin. For floating rate loans, only changes in wholesale market rates and ANZ New Zealand’s cost ofwholesale funding are incorporated in the discount rate. For variable rate loans where ANZ New Zealand sets theapplicable rate at its discretion, the carrying value is considered to approximate the fair value.

Australia and New Zealand Banking Group Limited - New Zealand Branch84

Notes to the Financial Statements
Other financial assets / liabilities
Included in this category are accrued interest and fees receivable / payable. For these balances the carrying value isconsidered to approximate the fair values, as they are short term in nature or are receivable / payable on demand.
Deposits and other borrowings
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates
of interest 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 fairvalue 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 and are carried at fair value.
At balance date, the carrying amount of deposits and other borrowings designated by ANZ New Zealand at fair value
through profit or loss was $2 million higher (30/09/2009 $4 million higher) 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 (30/09/2009 less than $3 million). The change in fair value attributable to changes in credit risk has been
determined as the amount of change in fair value that is not attributable to changes in market conditions that give rise tomarket 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 are not available, a discounted cash flow model using a yield curve appropriate for theremaining term to maturity of the debt instrument is used.
Commitments and contingencies
Adjustments to fair value for commitments and contingencies that are not financial instruments recognised in the balance
sheet are not included in this note.
Valuation hierarchy
In determining the carrying amount of financial instruments held at fair value ANZ New Zealand uses a valuation method
within the following hierarchy:“Level 1” - Quoted market price
Where an active market exists fair value is based on quoted market prices for identical financial instruments. The quoted
market price is not adjusted for any potential impact that may be attributed to a large holding of the financial instrument.
“Level 2” - Valuation technique using observable inputs
In the event that there is no quoted market price for the instruments, fair values are based on present value estimates orother market accepted valuation techniques which include data from observable markets wherever possible.
“Level 3” - Valuation technique with significant non observable inputs
The majority of valuation techniques employ only observable market data. However, ANZ New Zealand holds someinvestments in unlisted collateralised debt obligations and other similar assets which do not trade in an active market. For
these instruments the fair value cannot be determined in whole with reference to current market transactions or valuation
techniques whose variables only include data from observable markets. Where observable market data is not available,
the fair value is determined using broker quotes or valuation techniques based on data derived and extrapolated frommarket data and tested against historic transactions and observed market trends.

Australia and New Zealand Banking Group Limited - New Zealand Branch

85

Notes to the Financial Statements
Valuation technique$millions

ANZ New Zealand
Level 1NZ Branch

Level 2

Level 3

Total

Level 1

Level 2

Level 3Total

30/09/2010
Due from other financial institutions

707

-

-

707

-

-

-

-

Trading securities

3,630

3,127

-

6,757

-

-

-

-

Available-for-sale assets

1,990

101

119

2,210

-

-

-

-

3

10,851-

10,854

-

500

-

500

-

28

-

28

-

-

-

-

Total financial assets held at fair
value

6,330

14,107

119

20,556

-

500

-

500

Derivative financial instruments

35

10,692-

10,727

-

142

-

142

-

7,307

-

7,307

-

-

-

-

35

17,999-18,034

-

142

-

142

Derivative financial instruments
Investments relating to insurance
business

Commercial paper
Total financial liabilities held at fairvalue
30/09/2009
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

45

10,970-11,015

-

34

-

34

Total financial assets held at fair
value

5,455

13,975-

19,430

-

34

-

34

Commercial paper

-

7,392

-

7,392

-

-

-

-

Derivative financial instruments

2

10,972-

10,974

-

254

-

254

Total financial liabilities held at fair
value

2

18,364-

18,366

-

254

-

254

Movements in level 3 valuations
ANZ New Zealand$ millions

Opening balance

30/09/2010

NZ Branch

30/09/2009

30/09/2010

30/09/2009

-

-

-

-

127

-

-

-

Revaluations

38

-

-

-

Foreign exchange movements

(8)

-

-

-

Sales

(38)

-

-

-

Closing balance

119

-

-

-

Acquired in a business combination

Australia and New Zealand Banking Group Limited - New Zealand Branch

86

Notes to the Financial Statements
35. Notes to the Cash Flow Statements
ANZ New Zealand$ millions

NZ Branch

Year toYear toYear toYear to30/09/2010

30/09/2009

30/09/2010

30/09/2009

Reconciliation of profit after income tax to net cash flows provided by / (used in) operating activities
Profit after income tax

867

194

94

28

Non-cash items:
Depreciation and amortisation

71

50

-

-

Provision for credit impairment

456

883

20

9

Deferred fee revenue and expenses

(5)

(8)

-

-

Share-based payments expense

21

18

-

-

Amortisation of capitalised brokerage/ mortgage origination fees

45

54

10

4
(107)

Deferrals or accruals of past or future operating cash receipts or payments:
Change in operating assets and liabilities(2,518)(1,346)(177)

Change in interest receivable

6

138

-

-

Change in interest payable

(37)

(259)

26

41

Change in accrued income

(6)

1

-

-

Change in accrued expenses

54

41

1

2

(63)

100

-

-

39

76

-

-

Change in insurance policy assets

(49)

-

-

-

Change in insurance investment assets

(10)

-

-

-

(235)

183

26

12

(42)

(11)

-

-

82

-

-

-

Impairment of associates

7

-

-

-

Loss on disposal of premises and equipment

9

(13)

-

-

(1,308)

101

-

(11)

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Liquid assets

2,239

2,763

-

-

Due from other financial institutions - less than 90 days

1,339

2,003

-

-

Total cash and cash equivalents

3,578

4,766

-

-

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Not later than 1 year

17

19

-

-

Total capital expenditure commitments

17

19

-

-

Change in provisions
Amortisation of premiums and discounts

Change in income tax assets
Items classified as investing/financing:
Share of profit of equity accounted associates and jointly controlled
entities
Re-measuring existing equity interests to fair value

Net cash flows used in operating activities

ANZ New Zealand$ millions

Reconciliation of cash and cash equivalents to the balance
sheetsNZ Branch

36. Commitments
ANZ New Zealand$ millions

NZ Branch

Contracts for outstanding capital expenditurePremises and equipment

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

91

82

-

-

166

155

-

-

29

31

-

-

Total lease rental commitments

286

268

-

-

Total commitments

303

287

-

-

Later than 1 year but not later than 5 years
Later than 5 years

Australia and New Zealand Banking Group Limited - New Zealand Branch

87

Notes to the Financial Statements
37. Credit Related Commitments and Contingent Liabilities$ millions

ANZ New Zealand

NZ Branch

Face or contract value

Face or contract value

30/09/2010

30/09/2010

30/09/2009

30/09/2009

Credit related commitments
Commitments with certain drawdown due within one year

493

735

-

-

Commitments to provide financial services

20,352

22,12863

34

Total credit related commitments

20,84522,863

63

34

1,686

1,753

-

-

60

341

-

-

Transaction related contingent items

898

982

-

-

Trade related contingent liabilities

97

89

-

-

2,741

3,165

-

-

Contingent liabilities
Financial guarantees
Standby letters of credit

Total contingent liabilities

ANZ New Zealand 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 inextending loan facilities to customers, therefore these transactions are subjected to the same credit origination, portfolio
management and collateral requirements for customers applying for loans. As the facilities may expire without being
drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Commerce Commission
ANZ New Zealand is aware that the Commerce Commission is looking at credit contract fees under the Credit Contracts
and Consumer Finance Act 2003 ("CCCFA"). In its 2010-2013 Statement of Intent the Commission stated that:“In CCCFA enforcement, the Commission will continue to focus on unreasonable credit fees, while still being mindful of
disclosure issues.”
In particular ANZ New Zealand is aware that the 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 informal excess
arrangements on credit cards under the CCCFA. At this stage the possible outcome of these investigations and any
liability or impact on fees cannot be determined with any certainty.
ING NZ Funds
ANZ New Zealand 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 andcredit markets. Some of the units in the Funds 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.
Investors holding approximately 99% of the Funds accepted the offer to purchase their units.
In June 2010, the Bank and ING NZ reached settlements with the Commerce Commission and the Securities Commission
in relation to the Commerce Commission’s investigation into the Bank and ING NZ’s marketing and promotion of theFunds.
As part of the settlement with the Commerce Commission, $45 million has been or will be paid to eligible investors in theFunds, and $1 million been paid to the Commerce Commission towards their investigation costs.
As part of the settlement with the Securities Commission, ING NZ has undertaken to engage an external party tocomplete, by 1 February 2011, an audit and review of its procedures and processes to the extent they relate to ING NZ’s
business of developing and offering investment products to the public and to subsequently implement any
recommendations of that review. The Bank has undertaken to facilitate and assist with the ING NZ audit, review andimplementation.
The Commerce Commission and the Securities Commission have agreed they will not take any further action against the
Bank, ING NZ or their affiliates in relation to the Funds.
The ultimate cost to ANZ New Zealand will depend on the final value of units in the Funds, any recoveries underinsurance, the assessment and outcome of customer complaints and the results of any litigation that may be brought inconnection with the Funds or their sale. ANZ New Zealand considers that it has adequately provided for these matters.

Australia and New Zealand Banking Group Limited - New Zealand Branch

88

Notes to the Financial Statements
Other contingent liabilities
ANZ New Zealand has other contingent liabilities in respect of actual and potential claims and proceedings. An
assessment of ANZ New Zealand’s likely loss in respect of these matters has been made on a case-by-case basis andprovision made where appropriate. As at 30 September 2010, there were no other contingent assets or liabilities required
to be disclosed (30/09/2009 nil).

38. Securitisations, Funds Management, Other Fiduciary Activities and Insurance
Securitisation
In October 2008, ANZ New Zealand established an in-house residential mortgage backed securities facility that could issue
securities meeting the RBNZ criteria for use as collateral in repurchase transactions with the RBNZ. As at 30 September
2010 the rights to cash flows associated with residential mortgages with a carrying value of $6,531 million (30/09/2009$5,687 million) were held in the facility. These assets do not qualify for derecognition as the Bank retains a continuing
involvement in the transferred assets, therefore ANZ New Zealand’s financial statements do not change as a result of
establishing these facilities.
Funds management
Certain entities that form part of ANZ New Zealand act as trustee and/or manager for a number of unit trusts andinvestment and superannuation funds. ANZ New Zealand provides private banking services to a number of clients,
including investment advice and portfolio management. ANZ New Zealand is not responsible for any decline inperformance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by ANZ New Zealand, they are not included in these financial statements.
ANZ New Zealand derives fee and commission income from the sale and management of investment funds andsuperannuation bonds, unit trusts and the provision of private banking services to a number of clients. ANZ New Zealandderives commission income from the sale of third party funds management products.
Some funds under management are invested in products owned or securities issued by ANZ New Zealand and arerecorded as liabilities in the balance sheet. At 30 September 2010, $2,888 million of funds under management were
invested in ANZ New Zealand's own products or securities (30/09/2009 $2,664 million).
Aggregate value of funds managed by ANZ New Zealand
ANZ New Zealand$ millions

30/09/2010

30/09/2009

Funds managed by OnePath

7,430

-

The Bonus Bonds Trust

2,973

2,889

Other discretionary funds

4,760

4,360

Totals funds under management

15,163

7,249

Custodial services
ANZ New Zealand provides custodial services to customers in respect of assets that are beneficially owned by thosecustomers.
Provision of financial services
Financial services provided by ANZ New Zealand 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 at fair value.
Except for standard lending facilities provided in the normal course of business on arm’s length terms, ANZ New Zealandhas not provided any funding to entities which conduct any of the following activities: trust, custodial, funds management
or other fiduciary activities established, marketed and/or sponsored by a member of ANZ New Zealand (30/09/2009 $nil).
Insurance business
ANZ New Zealand conducts an insurance business through OnePath Insurance Holdings (NZ) Limited and its subsidiaries(“OnePath Insurance”), the assets, liabilities and operations of which are fully consolidated into ANZ New Zealand.
OnePath Insurance provides risk transfer and investment contract life insurance products. In addition, other entities
within ANZ New Zealand market and distribute a range of insurance products which are underwritten by OnePath
Insurance, or by third party insurance companies.
The aggregate insurance business conducted by OnePath Insurance comprises assets totalling $337 million (30/09/2009:$nil), which is 0.3% (30/09/2009: 0.0%) of the total consolidated assets of ANZ New Zealand.
Risk management

Australia and New Zealand Banking Group Limited - New Zealand Branch

89

Notes to the Financial Statements
The Bank and entities that form part of ANZ New Zealand participating in the activities identified above have in placepolicies and procedures to ensure that those activities are conducted in an appropriate manner. Should adverse
conditions arise, it is considered that these policies and procedures will minimise the possibility that these conditions will
adversely impact the Bank or ANZ New Zealand. The policies and procedures include comprehensive and prominent
disclosure of information regarding products, and formal and regular review of operations and policies by management.
In addition, the following measures have been taken to manage any risk to ANZ New Zealand of marketing anddistributing insurance and fund management products:• Investment statements, prospectuses and brochures for insurance products include disclosures that neither the Bank
nor any member of ANZ New Zealand guarantees the insurer, the insurer’s subsidiaries, or any of the products issued
by the insurer or the insurer’s subsidiaries.
• Investment statements, prospectuses and brochures of fund management products and insurance products subject to
the Securities Act 1978 additionally include disclosures that:- the products do not represent deposits or other liabilities of the entities within ANZ New Zealand;- the products are subject to investment risk, including possible loss of income and principal; and- entities within ANZ New Zealand do not guarantee the capital value or performance of the products.
• Application forms for insurance and fund management products contain acknowledgements to be signed by a purchaser
which are consistent with the disclosures noted above.

39. Employee Share and Option Plans
ANZ New Zealand participates in the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan operated by
the Overseas Banking Group. Any shares or options granted under these plans are shares in the Ultimate Parent Bank.
The closing market price of one ordinary share of the Ultimate Parent Bank quoted on the ASX (Australian Stock
Exchange) at 30 September 2010 was A$23.68 (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 ANZ New Zealand is eligible to participate ina scheme enabling the issue of up to A$1,000 of shares of the Ultimate Parent Bank in each financial year, subject to theapproval of the Ultimate Parent Bank’s Board. The shares vest subject to satisfaction of a three year service period but
will be forfeited in the event of resignation or termination for serious misconduct. On expiration of that period, an
employee may sell the shares, transfer them into their name, or have them retained in trust. The issue price is based on
the Volume Weighted Average Price (VWAP) of ANZ shares traded in the one week up to and including the allocation date.
All eligible employees were allocated shares under the Employee $1,000 Share Plan at no cost on 7 December 2009,
based on an allocation price of $22.06 (the Volume Weighted Average Price (VWAP) of ANZ traded in the one week up to
and including the allocation date).
ANZ New Zealand's employees are required to pay NZ 1 cent per share at the time the shares are issued to them. During
the year to 30 September 2010, 358,313 shares with an average issue price of A$22.02 were issued under the A$1,000
Share Plan (30/09/2009 540,305 shares with an average issue price of A$14.94 were issued).
Deferred share plan
ANZ New Zealand'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 sharesissued under this plan may be held in trust for up to 10 years, and may be required to meet performance hurdles before
being able to be traded after the restriction period has expired. The issue price is based on the VWAP of the shares
traded on the ASX in the five 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 – no longer available
From 2007, ANZ New Zealand will no longer be offering the option to take a portion of any incentive payment received as
Restricted Shares. Selected employees have the option to take some (or all) of their incentive payment as Restricted
Shares. The shares are held in 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 byreferring to the fair value of shares granted. The fair value of shares granted in the current period, measured at the dateof grant of the shares, is $10 million based on 358,313 shares at a weighted average price of A$22.02 converted at theexchange rate of 0.7999 (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).

Australia and New Zealand Banking Group Limited - New Zealand Branch

90

Notes to the Financial Statements
The average issue price of shares granted and the number of shares that are expected to ultimately vest to the employees
at the end of the vesting period are used to calculate the fair value of shares. No dividends are incorporated into themeasurement of 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 the Ultimate
Parent Bank at a price fixed at the time when the options were issued. Voting and dividend rights will be attached to theunissued ordinary shares when the options have been exercised. Each option entitles a holder to purchase one ordinary
share subject to any terms and conditions imposed on issue. The exercise price of the options (excluding zero-priced
options) is determined in accordance with the rules of the plan, and is based on the weighted average price of the
Ultimate Parent Bank's shares traded during the five 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 ANZ New Zealand employees. It grants the right to acquire shares at nil costsubject to satisfactorily meeting the time based hurdle. The Special Retention Deferred Share Rights can only be
exercised between the third 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. All other rights will lapse. In the case of termination on notice, retrenchment, retirement, death ortotal 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 ANZ New Zealand 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
the Ultimate Parent Bank relative to the companies in the comparator group, which consists of selected major financial
services companies in the Standard & Poor's and ASX 100 Index. Performance equal to the median TSR of thecomparator group will result in half the rights 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 the Ultimate Parent Bank'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 grantdate, the rights will lapse. In the case of resignation or termination on notice, only rights that become exercisable by theend 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
and where performance hurdles have been met, performance rights will be pro-rated and a grace period provided in which
to exercise the rights. In case of death or total and permanent disablement, a grace period is provided in which toexercise all performance rights.
LTI Deferred Share Rights
This scheme is a long term incentive program available to certain ANZ New Zealand employees and grants the right toacquire a share at nil cost, subject to satisfactorily meeting the time based hurdle. The LTI Deferred Share Rights canonly 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 the Ultimate Parent Bank, all unvested LTI
Deferred Share Rights as at the time notice of termination of notice is received, 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 andpermanent 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 ANZ New Zealand 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, all unvested
deferred share rights and any vested unexercised share rights will be forfeited. In the case of termination on notice, allunvested share rights will be forfeited and any vested unexercised share rights will be delivered as shares. In the case ofretrenchment, death or total and permanent disablement, all share rights will be available and delivered as shares.
Deferred share options
This scheme is a part of the short term incentive program available whereby certain ANZ New Zealand employees receivea mandatory deferred bonus under the Ultimate Parent Bank's Short Term Incentive ("STI") program. The options canonly be exercised between the first 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 shareprice is greater than the exercise price. In the case of resignation or dismissal for serious misconduct, all unvested STI
deferred options and any vested unexercised options, as at the time notice of resignation is given or upon dismissal, will
be forfeited. In the case of termination on notice, all deferred options will be forfeited and a grace period is provided inwhich to exercise any vested unexercised deferred options. In the case of redundancy, retrenchment, death or total andAustralia and New Zealand Banking Group Limited - New Zealand Branch

91

Notes to the Financial Statements
permanent disablement, all STI deferred options will vest and a grace period is provided in which to exercise all deferredshare options.
Legacy Option Plans
Performance options planThis scheme is a long term incentive program available to certain ANZ New Zealand 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 otherperformance conditions attached to these options. All unexercised options are generally forfeited on resignation but any
options to which ANZ New Zealand 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 andpermanent disablement, all unvested options will become available for exercise. No further performance options havebeen granted to ANZ New Zealand 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 monthsof termination 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 ANZ New Zealand's employees, but continue to be amortised
during their appropriate vesting periods are hurdled options and index linked options ("ILOs").
Details of the options over unissued Ultimate Parent Bank ordinary shares and their related weighted average exercise
prices as at the beginning and end of the year and movements during the year are set out below:
ANZ New Zealand
30/09/2010
Weighted
average
Number of
exercisesharesprice11

30/09/2009
Weighted
Number of average exercise
sharesprice1

A$
Share options at beginning of the year

2,067,345

8.32

Share options granted

495,193

Share options exercised(471,831)

Share options forfeited and expired
Share options at end of the year

10.86

1.39

709,805

2.51

9.30

(109,936)

5.73(139,323)

3.26(274,295)

10.44

1,951,384

6.40

2,067,345

8.32

Weighted average share price during the year
Range of exercise prices on share options at end of the year
Weighted average remaining contractual life on share options at end of the year
1A$
1,741,771

22.80

16.53

0.00 - 23.49

0.00 - 23.49

32 months

35 months

Calculation of weighted average exercise prices are affected by performance rights, deferred share rights and ZPO plans which have nil exercise prices.

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 year, measured at the date of grant are calculated using one of
the following 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 sothat 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 sharerights 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 and nontransferability 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:

Australia and New Zealand Banking Group Limited - New Zealand Branch

92

Notes to the Financial Statements
Option type

STI deferredshare rights

STI deferredshare rights

LTI deferredshare rights

Grant date

Performancerights Share options Share options

13/11/2009

13/11/2009

13/11/2009

13/11/2009

13/11/2009

13/11/2009

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

$nil

$nil

$nil

$nil

$22.80$22.80$22.48$22.48$22.48$22.48$22.48$22.48

35%

35%

35%

35%

35%

35%

Option term

5 years

5 years

5 years

5 years

5 years

5 years

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%

Exercise price (5 day VWAP)
Share price at grant ($A)
Expected volatility22

Expected volatility is based on the Ultimate Parent Bank’s historical volatility.

40. Retirement Benefit Obligations
ANZ New Zealand has established a number of pension and superannuation schemes. ANZ New Zealand may be obliged
to contribute to the schemes as a consequence of legislation and provision of trust deeds. Legal enforceability isdependent 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 Scheme2

Nil

Balance of cost4or

The National Bank Staff Superannuation Fund1

Defined Contribution Scheme 2.5% minimum of salary

7.5% of salary5

Defined Benefit Scheme2

Balance of cost4

5% of salaryorDefined Contribution Scheme 2.0% minimum of salary
1
2
3
4
5
6

11.5% of salary6

These schemes provide for pension benefits and provide for lump sum benefits.
Closed to new members. Operates to make pension payments to retirees who were members of that section of the scheme or to dependents of the members.
30/09/2010: $nil (30/09/2009 $nil).
30/09/2010: 24.8% (30/09/2009 24.8%) of members' salaries.
30/09/2010: 7.5% (30/09/2009 7.5%) of members' salaries.
30/09/2010: 11.5% (30/09/2009 11.5%) of members' salaries.

Actuarial valuations for financial reporting purposes are undertaken every six months. The latest valuations were carriedout as at 30 September 2010.

Australia and New Zealand Banking Group Limited - New Zealand Branch

93

Notes to the Financial Statements
Amounts recognised in the balance sheet arising from ANZ New Zealand's obligation in respect of defined
benefit schemes
ANZ New Zealand$ millions

Defined benefit obligation at beginning of the year
Current service cost
Interest cost
Contributions by scheme participants

30/09/2010

30/09/2009

174

179

3

3

10

11

1

1

Actuarial gains

(6)

(2)

Benefits paid

(17)

(18)

Present value of funded defined benefit obligations

165

174

Fair value of scheme assets at beginning of the year

119

152

Expected return on scheme assets net of tax

8

8

Actuarial gains / (losses)

21

(27)

Contributions by employer

7

3

Contributions by scheme participants11

Benefits paid

(17)

(18)

Fair value of scheme assets

139

119

Net defined benefit liability recognised on balance sheet

(26)

(55)

The fair value of scheme assets include cash deposits and fixed interest investments of $3 million with ANZ New Zealandas at 30 September 2010 (30/09/2009 $4 million).
Amounts recognised in the income statement in respect of defined benefit schemes
ANZ New Zealand$ millions

30/09/2010

Current service cost

30/09/2009

3

3

Interest cost

10

11

Expected return on scheme assets net of tax

(8)

(8)

Contribution withholding tax

2

2

Total pension costs recognised in the income statement

78

Amounts recognised in equity in respect of defined benefit schemes
ANZ New Zealand$ millions

Actuarial gains / (losses) incurred during the year and recognised directly in retained earnings
Cumulative actuarial losses recognised directly in retained earnings

30/09/2010

30/09/2009

18

(18)

(16)

(34)

Principal actuarial assumptions
The National BankANZ National Bank

Staff Superannuation Fund

Staff Superannuation Scheme

30/09/2010

30/09/2009

30/09/2010

30/09/2009

Discount rate gross of tax

6.0%

6.0%

6.0%

6.0%

Future price inflation

2.5%

2.5%

2.5%

2.5%

Future pension increases

2.5%

2.5%

2.5%

2.5%

Future salary increases

3.0%

n/a

n/a

4.5%

4.5%

Defined benefits calculation- 2009 and 2010

2.5%

- Post 2010

3.0%

Scheme assets calculation
Expected return on scheme assets net of tax

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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

94

Notes to the Financial Statements
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 6.9% for the year
ended 30 September 2010 (30/09/2009 -0.7%). The actual return on scheme assets (net of tax) for the ANZ National
Bank Staff Superannuation Scheme was 6.2% for the year ended 30 September 2010 (30/09/2009 0.0%).
The investment return on scheme assets is taxed at 30% (30/09/2009 30%).
Major categories of scheme assets as a percentage of the fair value of scheme plan assets

Cash and short term debt instruments

The National BankANZ National Bank

Staff Superannuation Fund

Staff Superannuation Scheme

30/09/2010

30/09/2009

30/09/2010

30/09/2009

7.3%

14.1%

8.7%

8.1%

New Zealand fixed interest

13.2%

12.6%

19.6%

22.4%

Overseas fixed interest

24.8%

24.3%

37.4%

30.6%

Australasian shares

19.8%

10.4%

9.9%

10.2%

Overseas shares

34.9%

38.6%

24.4%

24.2%

Property fund units

0.0%

0.0%

0.0%

4.5%

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.
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:
ANZ New Zealand$ millions

30/09/2010

30/09/2009

30/09/2008

30/09/2007

30/09/2006

Defined benefit obligation

(165)

(174)

(179)

(181)

(190)

Fair value of scheme assets

139

119

152

189

196

Net benefit asset / (liability)

(26)

(55)

(27)

8

6

Experience adjustments on scheme liabilities
Experience adjustment on scheme assets

3

1

5

(1)

3

14

(20)

(21)

(7)

5

Employer contributions
To ensure the defined benefit schemes remain solvent, the schemes' independent actuaries recommend an employer
contribution rate to ANZ New Zealand 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 $20m in the most recent
actuarial review at 1 April 2010. The ANZ National Bank Staff Superannuation Scheme surplus was valued at less than $1
million in the most recent actuarial valuation at 31 December 2007.
ANZ New Zealand contributed $7 million (net of contributions withholding tax) to its defined benefit schemes in the year
to 30 September 2010 (30/09/2009 $3 million). Employer contributions are taxed at a maximum rate of 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, ANZ New Zealand would be required to pay the Trustee ofthe Fund an amount sufficient to ensure members do not suffer a reduction in benefits to which they would otherwise beentitled.
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 ANZ New Zealand must pay to the Scheme such amounts as the Scheme
Actuary determines are necessary to pay those benefits.

Australia and New Zealand Banking Group Limited - New Zealand Branch

95

Notes to the Financial Statements
41. Business Combinations
On 30 November 2009, ANZ New Zealand 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 acquisition took
ANZ New Zealand’s ownership interest in ING NZ to 100%. The transaction was undertaken to strengthen ANZ New
Zealand’s position in wealth management and more closely integrate its retail banking and wealth businesses. As a resultof the change in ownership, the name of these businesses was changed to OnePath in November 2010.
As part of the transaction ANZ New Zealand also purchased ING Groep’s 51% interests in two fixed income unit trusts, theING Diversified Yield Fund and the ING Regular Income Fund (“the Funds”), taking its ownership interest to over 99% of
the Funds.
ANZ New
Zealand$ millions
Fair values of assets acquired and liabilities assumed as at acquisition date
Due from financial institutions

142

Available-for-sale assets

173

Investments relating to insurance business40

Insurance policy assets

67

Shares in associates

1

Other assets1

24

Deferred tax assets

35

Premises and equipment

4

Intangible assets

210

Total assets

696

Due to financial institutions

30

Payables and other liabilities

27

Current tax liabilities

27

Provisions295

Total liabilities

179

Net assets

517
3

Non-controlling interests in the Funds

Net assets attributable to ANZ New Zealand1
516Book 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

Total consideration less net assets acquired
1
2

3
4

-

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.
Includes employee related provisions and the fair value of contingent liabilities, which related to possible claims by investors in the Funds, investigations byregulatory bodies and other actual and potential claims and proceedings (refer Note 37). The expected timing and ultimate cost of contingent liabilities to ANZ
New Zealand depends on the assessment and outcome of customer complaints, and the results of any litigation and regulatory investigations or proceedingsthat may be brought.
Non-controlling interests are measured at their proportionate share of the identifiable net assets of the Funds.
The loss on re-measuring equity interests of $82 million has been recognised in Other Operating Income in the Income Statement.

Included in ANZ New Zealand’s Income Statement and Statement of Comprehensive Income since 30 November 2009 is
net operating income of $147 million and a profit before tax of $57 million, excluding integration costs, contributed by ING
NZ and the Funds. Had ING NZ and the Funds been consolidated from 1 October 2009, ANZ New Zealand’s Income
Statement and Statement of Comprehensive Income would have included, for the year ended 30 September 2010, net
operating income of $173 million and a profit before tax of $67 million.
Acquisition costs were paid by the Ultimate
Parent Bank.

42. Subsequent Events
There have been no material subsequent events.

Australia and New Zealand Banking Group Limited - New Zealand Branch

96

Directorate and Auditors
The address to which any document or communication may be sent to any Director or the Chief Executive Officer – NZ
Branch is Australia and New Zealand Banking Group Limited – New Zealand Branch, Level 6, 1 Victoria Street, Wellington,
New Zealand. The document or communication should be marked for the attention of that Director or the Chief Executive
Officer.
Directors’ Interests
The Board of the Ultimate Parent Bank has adopted procedures to ensure that conflicts and potential conflicts of interest
between a Director’s duties to the Ultimate Parent Bank and their own interests are avoided or dealt with. Pursuant tothese procedures:a.

each Director should disclose to all Directors any material personal interest they have in any matter which relates tothe affairs of the Ultimate Parent Bank and any other interest which the Director believes is appropriate to disclose inorder to avoid an actual conflict of interest or the perception of a conflict of interest. This disclosure should be madeas soon as practicable after the Director becomes aware of their interest or the need to make a disclosure; andb.

a Director who has an interest of the type referred to in a. above in a matter that is to be considered at a Directors'
meeting, must not vote on the matter nor be present while the matter is considered at the meeting, unless a majorityof Directors who do not have such an interest in the matter agree that the interest should not disqualify such Director
from being present while the matter is being considered and from voting on the matter. The minutes of the meetingshould record the decision taken by the Directors who do not have an interest in the matter.

In addition, Standing Notices about Interests are maintained for each Director. If the Director's interests change, theDirector shall disclose the change as soon as practicable and an updated Standing Notice shall be tabled at the next Board
meeting and recorded in the minutes of that meeting.
Transactions with Directors and the Chief Executive Officer, NZ Branch
There are no transactions entered into by any Director, the Chief Executive Officer – NZ Branch, or any immediate relative
or close business associate of any Director or the Chief Executive Officer – NZ Branch, with any part of ANZ New Zealandwhich 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 Directors' or Chief Executive Officer – NZ Branch, duties in respect of the NZ Branch and ANZ New
Zealand.
Changes in Directorships
Since the authorisation date of the previous General Short Form Disclosure Statement on 25 August 2010, there havebeen no changes to Directors of the Ultimate Parent Bank.

Board Members as at 23 November 2010
The names, qualifications, occupation, country of residence and material external directorships of each director of the
Ultimate Parent Bank as at the date this General Disclosure Statement was signed were:
ChairmanJohn Powell Morschel
DipQS, FAICD
Company Director
Sydney, Australia
Mr Morschel is an ex-officio member of all Board Committees.
External Directorships
Director: CapitaLand Limited, Tenix Group Pty Limited and Gifford Communications Pty Limited.

Australia and New Zealand Banking Group Limited - New Zealand Branch

97

Directorate and Auditors
Chief Executive Officer – Australia and New Zealand Banking Group Limited
Michael Roger Pearson Smith, OBE
BSc (Hons)
Chief Executive Officer and Executive Director
Melbourne, Australia
External Directorships
Director: The Financial Markets Foundation for Children, and The Institute of International Finance.
Member: Chongqing Mayor's International Economic Advisory Council, Australian Bankers' Association Incorporated, Asia
Business Council, Financial Literacy Advisory Board, Visa International Senior Client Council, Shanghai International
Financial Advisory Council, and the Business Council of Australia.
Fellow: The Hong Kong Management Association.
Non-Executive Directors
Dr Gregory John Clark
BSc (Hons), PhD, FAPS, FTSE
Company Director
Based in New York, United States of America and also resides in Sydney, Australia
Dr Clark is Chair of the Technology Committee and a member of the Risk Committee and Human Resources Committee.
External Directorships
Chairman: KaComm Communications Pty Limited.
Principal: Clark Capital Partners.
Peter Algernon Franc Hay
LLB (Melb), FAICD
Company Director
Melbourne, Australia
Mr Hay is Chair of the Governance Committee and a member of the Audit Committee and Human Resources Committee.
External Directorships
Chairman: Lazard Pty Ltd Advisory Board.
Director: Alumina Limited, Landcare Australia Limited, GUD Holdings Limited, NBN Co Limited, Myer Holdings Limited,
and Myer Pty Ltd.
Member: Takeovers Panel.
Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is a member of the Human Resource Committee, Risk Committee and Technology Committee.
External Directorships
Chairman: Fraser & Neave, Limited, Asia Pacific Investments Pte Ltd, and Civil Aviation Authority of Singapore.
Director: Singapore Exchange Limited, The Islamic Bank of Asia Limited, and Kwa Geok Choo Pte Ltd.
Member: Governing Board of Lee Kuan Yew School of Public Policy and Rolls Royce International Advisory Council.
Consultant: Capital International Inc Advisory Board.
Ian John Macfarlane, AC
BEc (Hons), MEc, Hon DSc (Syd), Hon DSc (UNSW), Hon DCom (Melb), Hon DLitt (Macq), Hon LLD (Monash)
Company Director
Sydney, Australia
Mr Macfarlane is Chair of the Risk Committee and a member of the Governance Committee and Audit Committee.
External Directorships
Director: Woolworths Limited, Leighton Holdings Limited, and Lowy Institute for International Policy.
Member: Council of International Advisors to the China Banking Regulatory Commission, International Advisory Board ofGoldman Sachs JB Were, and International Advisory Board of CHAMP Private Equity.

Australia and New Zealand Banking Group Limited - New Zealand Branch

Directorate and Auditors
David Edward Meiklejohn, AM
BCom, Dip Ed, FCPA, FAICD, FAIM
Company Director
Melbourne, Australia
Mr Meiklejohn is Chair of the Audit Committee and a member of the Technology Committee and Risk Committee.
External Directorships
Chairman: PaperlinX Limited.
Director: Coca Cola Amatil Limited and Mirrabooka Investments Limited.
President: Melbourne Cricket Club.
Alison Mary Watkins
BCom, FCA, F Fin, FAICD
Chief Executive Officer – GrainCorp Limited.
Melbourne, Australia
Ms Watkins is Chair of the Human Resources Committee and a member of the Audit Committee and GovernanceCommittee.
External Directorships
Director: AICD Victorian Council and The Nature Conservancy Australian Advisory Board.
Member: Takeovers Panel.

Chief Executive Officer, Australia and New Zealand Banking Group – New Zealand Branch
Susan Ruth Peterson
BComLLB
Chief Executive Officer & Managing Director – NZ Branch
Auckland, New ZealandExternal Directorships
Director: IHC New ZealandAuditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New Zealand98

Australia and New Zealand Banking Group Limited - New Zealand Branch

99

Conditions of Registration
Conditions of Registration, applicable as at 23 November 2010.
There have been no changes in the NZ Branch’s conditions of registration since the issuance of the last General ShortForm Disclosure Statement dated 25 August 2010.
The registration of the NZ Branch as a registered bank is subject to the following conditions:1.

That the New Zealand 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 definedin the Financial Reporting Act 1993.

2.

That the New Zealand Banking Group’s insurance business is not greater than 1% of its total consolidated assets. For
the purposes of this condition:i.
Insurance business means any business of the nature referred to in section 4 of the Insurance Companies(Ratings and Inspections) 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 New Zealand 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 thesolvency or financial soundness needs of the insurance business;c. the amounts measured in relation to parts (a) and (b) shall be summed and compared to the total
consolidated assets of the banking group. All amounts in parts (a) and (b) shall relate to on balance sheet
items only, and shall be determined in accordance with generally accepted accounting practice, as defined in
the Financial Reporting Act 1993;
d. where products or assets of which an insurance business is comprised also contain a non-insurancecomponent, the whole of such products or assets shall be considered part of the insurance business.

3.

That the business of the registered bank in New Zealand does not constitute a predominant proportion of the businessof the Australia and New Zealand Banking Group Limited.

4.

That no appointment to the position of the New Zealand chief executive officer of the registered bank shall be madeunless:i. the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; andii. the Reserve Bank has advised that it has no objection to that appointment.

5.

That Australia and New Zealand Banking Group Limited complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.

6.

That Australia and New Zealand Banking Group Limited complies with the following minimum capital adequacy
requirements, as administered by the Australian Prudential Regulation Authority:• tier one capital of the Australia and New Zealand Banking Group Limited is not less than 4 percent of risk
weighted exposures;• capital of Australia and New Zealand Banking Group Limited is not less than 8 percent of risk weighted
exposures.

7.

That the business of the registered bank in New Zealand is restricted to:i.
acquiring for fair value, and holding, mortgages originated by ANZ National Bank Limited; andii. any other business for which the prior written approval of the Reserve Bank of New Zealand has been obtained;
andiii. activities that are necessarily incidental to the business specified in paragraphs (i) and (ii).

8.

That the value of the mortgages held by the registered bank in New Zealand must not exceed $15 billion inaggregate.

9.

That the registered bank in New Zealand may not incur any liabilities except:i.
to the government of New Zealand in respect of taxation and other charges; andii. to other branches or the head office of the registered bank; andiii. to trade creditors and staff; andiv. to ANZ National Bank Limited in respect of activities, other than borrowing, that are necessarily incidental to thebusiness specified in paragraphs (i) and (ii) of condition 7; andv. any other liabilities for which the prior written approval of the Reserve Bank has been obtained.

Australia and New Zealand Banking Group Limited - New Zealand Branch

100

Conditions of Registration
For the purposes of these Conditions of Registration, the term "Banking Group" means the New Zealand operations ofAustralia and New Zealand Banking Group Limited whose business is required to be reported in the financial statements
for the Group's New Zealand business, prepared in accordance with section 9(2) of the Financial Reporting Act 1993.

Independent Auditor’s Report
To the Directors of Australia and New Zealand Banking Group Limited – New
Zealand Branch
Report on the NZ Branch and ANZ New Zealand General Disclosure Statement
We have audited the accompanying General Disclosure Statement and supplementary information(excluding the supplementary information relating to Capital Adequacy disclosed in note 31) of Australia
and New Zealand Banking Group Limited – New Zealand Branch (the “NZ Branch'') and its related
entities (“ANZ New Zealand”) on pages 8 to 95. The General Disclosure Statement comprises the balance
sheets as at 30 September 2010, the income statements and statements of comprehensive income, changes
in equity and cash flows for the year then ended, and a summary of significant accounting policies andother explanatory information. The supplementary information comprises the information that is required
to be disclosed under the Registered Bank Disclosure Statement (Full and Half Year – Overseas
Incorporated Registered Banks) Order 2008 (the “Order”) and is presented in notes 28, 31, 33 and 38 of
the General Disclosure Statement.
Directors' Responsibility for the General Disclosure Statement
The directors are responsible for the preparation of the General Disclosure Statement in accordance with
Clause 22 of the Order, generally accepted accounting practice in New Zealand, and International
Financial Reporting Standards and that gives a true and fair view of the matters to which they relate. The
directors are also responsible for such internal controls as they determine are necessary to enable thepreparation of the General Disclosure Statement that is free from material misstatement whether due tofraud or error.
The directors are responsible for the preparation and fair presentation of supplementary information, in
accordance with Schedules 4 to 8 and Clauses 19 and 20 of Schedule 3 of the Order, and which isprepared in accordance with the guidelines issued pursuant to Section 78(3) of the Reserve Bank of New
Zealand Act 1989 and any Conditions of Registration.
Auditor’s Responsibility
Our responsibility is to express an opinion on the General Disclosure Statement, including the
supplementary information presented in notes 28, 31, 33 and 38, based on our audit. We conducted our
audit in accordance with International Standards on Auditing (New Zealand). Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the General Disclosure Statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the General Disclosure Statement. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the General Disclosure Statement, whether due tofraud or error. In making those risk assessments, the auditor considers internal controls relevant to the NZ
Branch and ANZ New Zealand’s preparation of the General Disclosure Statement that gives a true andfair view of the matters to which they relate in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the NZ Branch
and ANZ New Zealand's internal controls. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates, as well as evaluating thepresentation of the General Disclosure Statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
Our firm has provided other services to the NZ Branch and ANZ New Zealand in relation to audit related
services. Partners and employees of our firm may also deal with the NZ Branch and ANZ New Zealandon normal terms within the ordinary course of trading activities of the business of ANZ New Zealandsubject to certain restrictions on borrowings. These matters have not impaired our independence asauditors of the NZ Branch and ANZ New Zealand. The firm has no other relationship with, or interest in,
the NZ Branch or ANZ New Zealand.
OpinionIn our opinion, the General Disclosure Statement of Australia and New Zealand Banking Group Limited– New Zealand Branch and its related entities (''the NZ Branch and ANZ New Zealand”) on pages 8 to 95(excluding the supplementary information included in notes 28, 31, 33 and 38):•

complies with generally accepted accounting practice in New Zealand;•

complies with International Financial Reporting Standards; and•gives a true and fair view of the financial position as at 30 September 2010 and of their financial
performance and cash flows for the year ended on that date.

In our opinion, the supplementary information that is required to be disclosed under Schedules 4, 6 to 8
and clause 19 and 20 of Schedule 3 of the Order, and is included within notes 28, 31, 33 and 38 of theGeneral Disclosure Statement:•

has been prepared, in all material respects, in accordance with the guidelines issued pursuant tosection 78(3) of the Reserve Bank of New Zealand Act 1989 and any Conditions of Registration;•is in accordance with the books and records of the NZ Branch and ANZ New Zealand; and•presents fairly, in all material respects, the matters to which it relates, in accordance with those
Schedules.

Report on Other Legal and Regulatory Requirements
In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act
1993, and clauses 2(d) and 2(e) of Schedule 1 of the Order, we report that:•

we have obtained all the information and explanations we have required; and•in our opinion proper accounting records have been kept by the NZ Branch and ANZ New Zealand, as
far as appears from our examination of those records.

Report on the Supplementary Information Relating to Capital Adequacy
We have reviewed the supplementary information relating to Capital Adequacy, as disclosed in note 31 of
the General Disclosure Statement.
Directors’ Responsibility for the Supplementary Information Relating to Capital Adequacy
The directors are responsible for the preparation of supplementary information relating to Capital
Adequacy that is required to disclosed under Schedule 5 of the Order and prepared in accordance with the
NZ Branch’s Conditions of Registration and with the NZ Branch’s internal models for credit risk andoperational risk, as accredited by the Reserve Bank of New Zealand and described in note 31 of theGeneral Disclosure Statement.
Auditor’s Responsibility
Our responsibility is to express an opinion on the supplementary information relating to Capital
Adequacy based on our review. We conducted our review in accordance with the Review Engagement
Standards issued by the New Zealand Institute of Chartered Accountants. Those standards require that wecomply with ethical requirements and plan and perform the review to obtain limited assurance about
whether the supplementary information relating to Capital Adequacy is free from material misstatement.
A review is limited primarily to enquiries of NZ Branch and ANZ New Zealand personnel and analyticalreview procedures applied to the financial data, and thus provides less assurance than an audit. We havenot performed an audit in respect of the Capital Adequacy disclosures, and accordingly, we do not
express an audit opinion on these disclosures.
OpinionBased on our review, nothing has come to our attention that causes us to believe that the supplementary
information relating to Capital Adequacy, disclosed in note 31 of the General Disclosure Statement, is notprepared and disclosed, in all material respects, in accordance with:•

the NZ Branch’s Conditions of Registration;•

the NZ Branch’s internal models for credit risk and operational risk as accredited by the Reserve
Bank of New Zealand; and•Schedule 5 of the Registered Bank Disclosure Statement (Full and Half Year – Overseas Incorporated
Registered Banks) Order 2008, as amended.

23 November 2010
KPMG Wellington

Australia and New Zealand Banking Group Limited - New Zealand Branch

105

Index
Contents and Glossary of Terms

1

General Disclosures2

Summary of Financial Statements

7

Income Statements

8Statements of Comprehensive Income

8Statements of Changes in Equity

9

Balance Sheets

10

Cash Flow Statements

11

1. Significant Accounting Policies

12

2. Critical Estimates and Judgement Used in Applying Accounting Policies

22

3. Risk Management Policies

24

4. Income26

5. Expenses

27

6. Income Tax Expense28

7. Segmental Analysis

29

8. Liquid Assets

31

9. Due from Other Financial Institutions

31

10. Trading Securities

31

11. Derivative Financial Instruments

32

12. Available-for-sale Assets

35

13. Net Loans and Advances36

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

36

15. Provision for Credit Impairment

39

16. Shares in Controlled Entities, Associates and Jointly Controlled Entities

40

17. Other Assets

44

18. Deferred Tax Assets and Liabilities

45

19. Premises and Equipment

46

20. Goodwill and Other Intangible Assets

47

21. Due to Other Financial Institutions

47

22. Deposits and Other Borrowings

48

23. Payables and Other Liabilities

48

24. Provisions

49

25. Bonds and Notes

50

26. Loan Capital

51

27. Related Party Transactions

53

28. Interest Earning and Discount Bearing Assets and Liabilities

54

29. Current and Non-current Assets and Liabilities

55

30. Ordinary Share Capital56

31. Capital Adequacy

57

32. Financial Risk Management59

33. Concentrations of Credit Risk

81

34. Fair Value of Financial Assets and Liabilities

81

35. Notes to the Cash Flow Statements

86

36. Commitments

86

37. Credit Related Commitments and Contingent Liabilities

87

38. Securitisation, Funds Management, Other Fiduciary Activities and Insurance

88

39. Employee Share and Option Plans

89

40. Retirement Benefit Obligations

92

41. Business Combinations

95

42. Subsequent Events

95

Directorate and Auditors

96

Conditions of Registration99

Directors’ Statement

101

Auditors’ Report

102

Index

105