Australia and New Zealand Banking Group Limited– New Zealand Branch
Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2011 | NUMBER 11 ISSUED NOVEMBER 2011Australia and New Zealand Banking Group Limited - New Zealand Branch

Disclosure Statement
For the year ended 30 September 2011

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
4
5
6
7
8
9
74
77
79
80
83

Glossary of Terms
In this Disclosure Statement unless the context otherwise requires:(a) "Bank" means ANZ National Bank Limited;(b) "Banking Group" means ANZ National Bank Limited 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) "Ultimate Parent Bank" means Australia and New Zealand Banking Group Limited;(e) "Overseas Banking Group" means the worldwide operations of Australia and New Zealand Banking Group Limited
including its controlled entities;(f) “New Zealand business” means all business, operations, or undertakings conducted in or from New Zealand identified
and treated as if it were conducted by a company formed and registered in New Zealand;(g) "NZ Branch" means the New Zealand business of the Ultimate Parent Bank;(h) "ANZ New Zealand" means the New Zealand business of the Overseas Banking Group;(i) "Registered Office" is Level 6, 1 Victoria Street, Wellington, New Zealand, which is also ANZ New Zealand’s address
for Service;(j) "RBNZ" means the Reserve Bank of New Zealand;(k) "APRA" means the Australian Prudential Regulation Authority;(l) "the Order" means the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order (No3) 2011; and(m) Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given
in or prescribed by the Order.

Australia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures
General Matters
The Disclosure Statement has been issued in accordance with the Order.
The address for service for the NZ Branch is Level 6, 1 Victoria Street, Wellington, New Zealand.
The address for service for the Ultimate Parent Bank is ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.

Credit Rating Information
As at 29 November 2011 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 18 May 2011, Moody’s
downgraded the Ultimate Parent Bank’s debt and deposit ratings from Aa1. This followed a similar action on other major
Australian banks. On 20 May 2010 Fitch changed the outlook on the Ultimate Parent Bank from Stable to Positive. During
the two years ended 30 September 2011 there were no other changes to the Ultimate Parent Bank’s credit ratings orqualifications.
The Ultimate Parent Bank's Credit Ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Positive

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.

A

A

A

Adequate ability to repay principal and interest. Morevulnerable to adverse changes.

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

3

General Disclosures(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.
Section 13A(3) of the Banking Act affects all of the unsecured deposit liabilities of the NZ Branch, which as at 30
September 2011 amounted to $nil (30/09/2010 $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 2011, 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.

Guarantors
As at the date of signing this Disclosure Statement, the Ultimate Parent Bank has guarantees from the Commonwealth ofAustralia 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 Australian Government closed this scheme to new debt securities on 31 March2010.
As at the date of signing this Disclosure Statement, the NZ Branch has no obligations guaranteed under these schemes.
New Zealand Guarantee Arrangements
The Crown guarantees wholesale funding of participating New Zealand financial institutions under the New Zealand
Wholesale Funding Guarantee Facility. The Government closed this scheme to new debt securities on 30 April 2010. The
NZ Branch does not have a guarantee under this Scheme.

Financial Statements of the Ultimate Parent Bank and Overseas Banking Group
Copies of the most recent publicly available financial statements of the Ultimate Parent Bank and Overseas Banking Groupwill be provided immediately, free of charge, to any person requesting a copy where request is made at the Registered
Office. The most recent publicly available financial statements for the Ultimate Parent Bank and Overseas Banking Groupcan also be accessed at the internet address anz.com.

Australia and New Zealand Banking Group Limited - New Zealand Branch

4

Summary of Financial Statements
ANZ New ZealandYear toYear toYear toYear toYear to1

30/09/2011

30/09/2010

30/09/2009

30/09/2008

30/09/2007

Interest income

6,757

6,447

7,578

9,858

8,296

Interest expense

4,157

3,952

5,181

7,829

6,239

Net interest income

2,600

2,495

2,397

2,029

2,057

809

745

581

1,126

864

Operating income

3,409

3,240

2,978

3,155

2,921

Operating expenses

1,688

1,565

1,479

1,445

1,331

Profit before provision for credit impairment andincome tax

1,721

1,675

1,499

1,710

1,590

190

456

883

302

74

1,531

1,219

616

1,408

1,516

446

352

422

418

551

1,085

867

194

990

965

-

-

-

-

76

Profit after income tax

1,085

867

194

990

1,041

Dividends paid

(421)

(492)

(1,000)(1,169)

(600)

As at

As at

As at

As at

As at1

30/09/2011

30/09/2010

30/09/2009

30/09/2008

30/09/2007$ millions

Continuing operations

Other operating income

Provision for credit impairment
Profit before income tax
Income tax expense
Profit after income tax from continuing
operations
Profit from discontinued operations (net of income tax)

ANZ New Zealand$ millions

Total impaired assets

1,792

2,047

1,188

327

115

Total assets

129,083

127,029

126,314123,078

107,606

Total liabilities

120,618

119,208

118,999

115,951

100,751

-

1

-

-

-

8,465

7,821

7,315

7,127

6,855

Non-controlling interests
Equity1

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

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

5

Income Statements
ANZ New Zealand$ millions
Note

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

Interest income

4

6,757

6,447

581

555

Interest expense

5

4,157

3,952

444

416

Net interest income

2,600

2,495

137

139

Net trading gains

4

228

39

-

-

Funds management and insurance income

4

265

218

-

-

Other operating income / (loss)

4

314

446

(32)

42

2

42

-

-

3,409

3,240

105

181

1,688

1,565

29

26

1,721

1,675

76

155

190

456

13

20

1,531

1,219

63

135

446

352

19

41

1,085

867

44

94

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

1,085

867

44

94

72

142

-

-

Realised losses/ (gains) transferred to the income statement

(38)

9

-

-

Actuarial gain / (loss) on defined benefit schemes
Income tax credit / (expense) on items recognised directly inequity

(64)

27

-

-

11

(48)

-

-

1,066

997

44

94

Share of profit of associates and jointly controlled entities
Operating income
Operating expenses

5

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

15

Profit before income tax
Income tax expense
Profit after income tax

6

Statements of Comprehensive Income
ANZ New Zealand$ millions

Profit after income tax
Unrealised gains recognised directly in equity

Total comprehensive income for the year

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

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

6

Statements of Changes in Equity
ANZ New Zealand$ millions

As at 1 October 2009
Profit after income tax attributable toparentValuation gain recognised in othercomprehensive income
Losses / (gains) transferred to the income
statement

Ordinary sharecapital and Available-forhead office sale revaluationaccount
reserve

Cash flow
hedging
reserve

Retainedearnings

Total equity
attributable toowners of the Non-controllingparent entity
interests

Total equity

6,424

25

23

843

7,315

-

7,315

-

-

-

867

867

-

867

-

53

89

-

142

-

142

-

(12)

21

-

9

-

9

Actuarial gain on defined benefit schemes
Income tax expense on items recognised
directly in equity

-

-

-

27

27

-

27

-

(8)

(31)

(9)

(48)

-

(48)

Total comprehensive income for the year

-

33

79

885

997

-

997

Preference dividend paid

-

-

-

(492)

(492)

-

(492)

Acquired in a business combination
As at 30 September 2010
Profit after income tax attributable toparentValuation gain recognised in othercomprehensive income
Losses / (gains) transferred to the income
statement

-

-

-

-

-

1

1

6,424

58

102

1,236

7,820

1

7,821

-

-

-

1,085

1,085

-

1,085

-

21

51

-

72

-

72

-

(42)

4

-

(38)

-

(38)

Actuarial loss on defined benefit schemes
Income tax credit / (expense) on items
recognised directly in equity

-

-

-

(64)

(64)

-

(64)

-

9

(16)

18

11

-

11

Total comprehensive income for the year

-

(12)

39

1,039

1,066

-

1,066

Ordinary dividend paid

-

-

-

(215)

(215)

-

(215)

Preference dividend paid

-

-

-

(206)

(206)

-

(206)

Movement in non-controlling interests

-

-

-

-

-

(1)

(1)

6,424

46

141

1,854

8,465

-

8,465

Total equity
attributable toowners of the Non-controllingparent entity
interests

Total equity

As at 30 September 2011

NZ Branch$ millions

As at 1 October 2009
Profit after income tax attributable toparentTotal comprehensive income for the year

Ordinary sharecapital and Available-forhead office sale revaluationaccount
reserve

Cash flow
hedging
reserve

Retainedearnings

11

-

-

28

39

-

39

-

-

-

94

94

-

94

-

-

-

94

94

-

94

11

-

-

122

133

-

133

Profit after income tax attributable toparent

-

-

-

44

44

-

44

Total comprehensive income for the year

-

-

-

44

44

-

44

11

-

-

166

177

-

177

As at 30 September 2010

As at 30 September 2011

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

7

Balance Sheets
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

AssetsLiquid assets

8

2,455

2,239

-

-

Due from other financial institutions

9

3,633

3,496

-

-

Trading securities

10

9,466

6,757

-

-

Derivative financial instruments

11

14,294

10,854172

500

Available-for-sale assets

12

411

2,151

-

-

Net loans and advances

13

93,61396,015

9,931

10,059Due from related entities
Investments backing insurance policyholder liabilities
Insurance policy assets
Shares in associates and jointly controlled entities

16

Current tax assets

-

-

338

302

97

87

-

-

200

138

-

-

100

144

-

-

-

18

-

-

Other assets

17

857

970

-

3

Deferred tax assets

18

125

304

8

7

325

311

-

-

3,507

3,545

-

-

Total assets

129,083

127,029

10,44910,871

Interest earning and discount bearing assets

108,126

108,325

10,23010,340Premises and equipment
Goodwill and other intangible assets

19

Liabilities
Due to other financial institutions

20

12,247

12,293

10,011

10,481

Deposits and other borrowings

21

69,23870,295

-

-

-

-

51

-

Due to related parties
Derivative financial instruments

11

14,178

10,727

117

142

Payables and other liabilities

22

2,416

1,506

73

70

Provisions

23

309

315

-

-

4

-

20

45

Current tax liability
Bonds and notes

24

18,472

19,899--Term funding

26

1,766

1,766

-

-

Loan capital

25

1,988

2,407

-

-

120,618

119,208

10,272

10,738

8,465

7,821

177

133

6,424

6,424

11

11

187

160

-

-

Retained earnings

1,854

1,236

166

122

Parent shareholder's equity and head office account

8,465

7,820

177

133

-

1

-

-

Total equity & head office account

8,465

7,821

177

133

Interest and discount bearing liabilities

98,397

100,335

10,011

10,481

Total liabilities (excluding head office account)
Net assets (excluding head office account)Represented by:
Share capital and head office accountReserves

Non-controlling interests

28

For and on behalf of the Board of Directors:

John MorschelChairmanAustralia and New Zealand Banking Group Limited
29 November 2011

Michael Smith
Executive Director
Australia and New Zealand Banking Group Limited
29 November 2011

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

8

Cash Flow Statement
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

6,661

6,217

590

565

2

2

-

-

Net funds management & insurance income

203

137

-

-

Fees and other income received

752

772

-

-

Interest paid

(4,088)(3,880)

(440)

(390)

Operating expenses paid

$ millions

Note

Cash flows from operating activities
Interest received
Dividends received(1,605)(1,473)

(30)

(25)

Income taxes paid

(233)

(579)

(46)

(15)

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

1,692

1,196

74

135
-

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

755

1,967

-

(2,777)(2,613)

-

-

137

1,083

274

29

1,745

(444)

-

-

(10)

31

-

-

1,914

218

103

(1,248)Change in due from related parties

-

-

(36)

-

Change in due to related entities

-

-

51

39

Change in trading securities
Change in derivative financial instruments
Change in available-for-sale assets
Change in insurance investment assets
Change in loans and advances

Change in other assets

42

143

3

(3)

237

(914)

(470)

1,048

(1,570)(1,910)

-

-

917

(65)

1

-

3,082

(1,308)

-

-

49

7

-

-

-

1

-

-

Proceeds from sale of intangible assets

20

-

-

-

Purchase of shares in subsidiary entities

-

(247)

-

-

Purchase of intangible assets

(54)

(43)

-

-

Purchase of premises and equipment

(65)

(80)

-

-

Net cash flows used in investing activities

(50)

(362)

-

-

Change in due to other financial institutions
Change in deposits and other borrowings
Change in payables and other liabilities
Net cash flows provided by / (used in) operating
activities

33

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

Cash flows from financing activities
Proceeds from issue of bonds and notes

3,992

5,481

-

-

(3,687)(4,307)

-

-

(405)

(200)

-

-

(1)

-

-

-

Dividends paid

(421)

(492)

-

-

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

(522)

482

-

-

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

3,082(1,308)

-

-

(50)

(362)

-

-

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

(522)

482

-

-

Net increase / (decrease) in cash and cash equivalents

2,510(1,188)--Cash and cash equivalents at beginning of the year

3,578

4,766

-

-

6,088

3,578

-

-

Redemptions of bonds and notes
Redemptions of loan capital
Distributions to non-controlling interests

Net cash flows used in investing activities

Cash and cash equivalents at end of the year

33

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

9

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
Practice. They comply with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") and otherapplicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements comply with
International Financial Reporting Standards ("IFRS").
The principal accounting policies adopted in the preparation of these financial statements are set out below.
These financial statements were authorised for issue by the Board of Directors on 29 November 2011.
(ii) Use of estimates and assumptions
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 treated as available-for-sale; and•financial instruments designated at fair value through profit and loss.
Insurance policy assets are measured using the Margin on Services basis, and defined benefit obligations are measured
using the Projected Unit Credit method.
(iv) Changes in accounting policies and application of new accounting standards
The accounting policies adopted by ANZ New Zealand are consistent with those adopted and disclosed in the prior period.
(v) Rounding
The amounts contained in the financial statements have been rounded to the nearest million dollars, except whereotherwise stated.
(vi) Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current year's
presentation. This includes reclassifying certain investment assets that relate to the insurance business from availablefor-sale assets to investments backing insurance policyholder liabilities, to better reflect the purpose the assets are heldfor.
(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 year, 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 their activities accrue to ANZ New Zealand; orAustralia and New Zealand Banking Group Limited - New Zealand Branch

10

Notes to the Financial Statements•

in substance, ANZ New Zealand controls decision making powers so as to obtain the majority of the risks andrewards from their 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 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 earnings methodology, to determine the reasonableness ofthe valuation.
In the NZ Branch’s financial statements investments in subsidiaries, associates and joint ventures are carried at cost lessaccumulated impairment losses.
(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 at reporting 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.
(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.

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Notes to the Financial Statements(v) Gain or loss on sale of premises 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) 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 year 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 year, 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:•
investments backing insurance policyholder liabilities;•
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 financial instruments are recognised in the income statement in the
period in which 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 variable, 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.
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

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Notes to the Financial Statements
period realised and accrued interest is included in net interest income.
included in other income.

The remainder of the fair value movement is

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 quoted 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 line.
Purchases and sales of available-for-sale financial assets are recognised on trade date, 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.
All loans are graded according to the level of credit risk.
Net loans and advances include direct finance provided to customers such as bank overdrafts, credit cards, term loans,finance lease receivables and commercial bills.
Impairment of loans and advances
Loans and advances are reviewed at least at each reporting date for impairment. Credit impairment provisions are raisedfor exposures that are known to be impaired. Exposures are impaired and impairment losses are recorded if, and only if,
there is objective evidence of impairment as a result of one or more loss events, that occurred after the initial recognitionof the loan and prior to the reporting date, and that loss event, or events, has had an impact on the estimated future cash
flows of the individual loan or the collective portfolio of loans that can be reliably estimated.
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 and an assessment of the economic cycle.
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.
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.
Unsecured facilities are normally 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 writeoff, which is reflected in 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.

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Notes to the Financial Statements
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 backing insurance policyholder liabilities
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 to which the goodwill relates. 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 is not 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.
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.

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Notes to the Financial Statements(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 life investment contracts and assets / liabilities arisingfrom life insurance contracts.
Provisions for liabilities under life 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.
Profits from life insurance contracts are brought to account using the Margin on Services model, under which profit isrecognised as premiums are received and services are provided to policyholders. Where premiums are received but theservice has not been provided, the profit is deferred. Losses are expensed when identified.
(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.
(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 thehigher of their amortised amount and the best estimate of the expenditure required to settle any financial obligation
arising at the balance sheet date. These estimates are determined based on experience of similar transactions andhistory of past losses.
(iv) Derecognition
Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.

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Notes to the Financial Statements
Non-financial liabilities(v) Employee leave benefits
The amounts expected to be paid in respect of employees’ entitlements to annual leave are accrued at expected salaryrates including on-costs. Liability for long service leave is calculated and accrued for in respect of all applicable employees(including on-costs) using an actuarial valuation. Expected future payments for long service leave are discounted using
market yields at the reporting date on national government bonds with terms to maturity that match, as closely as
possible, the estimated future cash outflows.
(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.
(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; and 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.

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Notes to the Financial Statements
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 net 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
Contingent liabilities acquired in a business combination are individually measured at fair value at the acquisition date. At
subsequent reporting dates the value of such contingent liabilities is reassessed based on the estimate of expenditure
required to settle the contingent liability.
Other contingent liabilities are not recognised in the balance sheet but disclosed in Note 35 unless it is considered remotethat ANZ New Zealand will be liable to settle the possible obligation.
(ii) 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 and is assessing their impact on its financial statements.
Standards and amendments effective for periods commencing after 1 January 2013
NZ IFRS 9 Financial Instruments (2009 & 2010)
Specifies a simpler methodology for classifying and measuring financial assets, with two primary measurement categories:
amortised cost and fair value. Requires the amount of change in the fair value attributable to changes in credit risk ofcertain liabilities designated under the fair value option to be presented in other comprehensive income.
NZ IFRS 10 Consolidated Financial Statements
Establishes a new approach to determining which investees should be consolidated and provides a single model to be
applied in the control analysis for all investors.
NZ IFRS 11 Joint Arrangements
Introduces a new approach to joint arrangements, which focuses on the rights and obligations of the arrangement rather
than its legal form, and requires the equity method of accounting for joint ventures.
NZ IFRS 12 Disclosure of Interests in Other Entities
Provides a single, consistent approach for disclosures of all interests in subsidiaries, joint arrangements, associates andunconsolidated structured entities.
NZ IFRS 13 Fair value measurement
Provides a single source of guidance on fair value measurement and requires certain disclosures regarding fair value.
NZ IAS 27 (2011) Separate Financial Statements
Carries forward the existing accounting and disclosure requirements for separate financial statements.
Other amendments
Improvements to New Zealand equivalents to International Financial Reporting Standards 2010
Is the International Accounting Standards Board’s annual omnibus updates of standards.

2. Critical Estimates and Judgement Used in Applying Accounting Policies
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 arecontinually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
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 (collective and individual) represent
management's best estimate of the losses incurred in the loan portfolio at balance date based on their experienced
judgement.
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 collectability of one of ANZ New Zealand's loans is identified as being
doubtful.
Individual and collective provisioning is calculated using discounted expected future cash flows.
TheAustralia and New Zealand Banking Group Limited - New Zealand Branch

18

Notes to the Financial Statements
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)is designated as being hedged.
Judgement is required in selecting and designating hedging relationships and assessing hedge effectiveness. NZ IAS 39
Financial Instruments: Recognition and Measurement does not specify a single method for assessing hedge effectivenessprospectively or retrospectively. ANZ New Zealand adopts the hypothetical derivative approach to determine hedge
effectiveness in line with current risk management strategies. Hedge ineffectiveness can arise 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
Refer to Note 19 for details of goodwill held by ANZ New Zealand
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.
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 2011 when the last
valuation was prepared, a discount rate of 12.04% 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.
Insurance policy assets
Insurance policy assets represent deferred policy acquisition costs less policy liabilities for life investment contracts andlife insurance contracts. Policy liabilities are computed using statistical or mathematical methods, expected to give
approximately the same results as if an indiividual liability was calculated for each contract. The computations are madeby suitably qualified personnel on the basis of recognised actuarial methods, with due regard to relevant actuarial
principles and standards. Deferred policy acquisition costs are connected with the measurement basis of the policy
liabilities and are equally sensitive to the factors that are considered in the liability measurement.
The key factors that affect the estimation of these liabilities and related assets are: the cost of providing the benefits andadministering the contracts; mortality and morbidity experience; discontinuance rates; for life investment contracts, theamounts credited to policyholders' accounts compared to the returns on invested assets; interest rates; inflation; rates oftaxation; and general market and economic conditions.

Australia and New Zealand Banking Group Limited - New Zealand Branch

19

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”, 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. The Bank’s Risk Committee assists the Board in this function. The role of the Risk
Committee is to assist the Board in the effective discharge of its responsibilities for business, market, credit, operational,
compliance, liquidity, product and reputational risk management, and to liaise and consult with the Ultimate Parent Bank
Risk Committee as required. Risk Management, via the Chief Risk Officer, coordinates risk management activities directly
between Business Unit risk functions and Ultimate Parent Bank Group Risk Management functions.
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.
The Bank’s Audit Committee, which is a sub-committee of the Board of the Bank, has responsibility for reviewing all
aspects of published financial statements and internal and external audit processes. The Bank’s Audit Committee has aquorum of two directors, both of whom must be non-executive directors. It meets at least four times a year and reports
directly to the Board of the Bank.
Financial risk management
Refer to Note 30 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.
Business units have primary responsibility for the identification and management of operational risk with executive
oversight provided by the relevant Retail and Wholesale Risk Committees. The Bank’s Operational Risk Executive
Committee ("OREC") undertakes the governance function through the bi-monthly monitoring of operational risk
performance across ANZ New Zealand. The Board and Risk Management conduct effective oversight through the approvalof operational risk policies and frameworks and monitoring key operational risk metrics.
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

20

Notes to the Financial Statements
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.
Global Internal Audit
ANZ New Zealand’s internal audit function (“Global Internal Audit”) conducts independent reviews that assist the Boards
and management to meet their statutory and other obligations.
Global Internal Audit reports directly to the Chairman of the Bank’s Audit Committee and through to the Ultimate Parent
Bank Group General Manager Global Internal Audit. Under its Charter, Global 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, Global Internal Audit adopts a risk-based approach that directs and concentrates resources tothose areas 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 Global Internal Audit Plan is approved by the Bank’s 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

21

Notes to the Financial Statements
4. Income
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

404

346

-

-

404

346

-

-

Liquid assets

64

66

-

-

Other financial institutions

43

67

-

-

$ 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

Available-for-sale assets
Lending on productive loans
Lending on impaired assets
Other

Total interest income

34

69

-

-

6,008

5,719

579

554

78

60

2

1

126

120

-

-

6,353

6,101

581

555

6,757

6,447

581

555

137

123

-

-

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

204

174

-

-

Net loss on trading derivatives

(113)

(258)

-

-

228

39

-

-

Net trading gains
Funds management and insurance income
Fee income on trust and other fiduciary activities

61

62

-

-

Other funds management and insurance income

204

156

-

-

Total funds management and insurance income

265

218

-

-

Other operating income
Lending and credit facility fee income

41

45

1

-

Other fee income

566

554

-

-

Total fee income

607

599

1

-

Direct fee expense

185

181

-

-

Net fee income

422

418

1

-

2

2

-

-

(132)

101

(29)

50

11

(20)

(7)

(10)

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

11

(4)

(21)

-

-

Net gain on financial liabilities designated at fair value

2

1

-

-

Loss on re-measuring existing equity interests to fair value

-

(82)

-

-

13

47

3

2

314

446

(32)

42

Other income
Total other operating income

Australia and New Zealand Banking Group Limited - New Zealand Branch

22

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

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

158

265

-

-

158

265

-

-

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

445

401

444

412

2,347

2,150

-

-

939

810

-

-

Term funding

68

72

-

-

Loan capital

177

180

-

-

23

74

-

4

3,999

3,687

444

416

4,157

3,952

444

416

760

735

-

-

75

71

-

-

36

36

-

-

6

7

-

-

Share-based payments expense

22

21

-

-

Building occupancy costs

41

44

-

-

Depreciation of premises and equipment

49

47

-

-

Leasing and rental costs

84

82

-

-

Related parties (Note 26)

80

86

-

-

105

126

-

-

Impairment of software and other intangible assets

15

5

-

-

Amortisation of software and other intangible assets

25

24

-

-

209

209

-

-

26

-

-

-

136

-

-

-

19

72

29

26

1,688

1,565

29

26

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

Technology expenses

Administrative expenses
Asset write-offs associated with core system simplification
Other core system simplification costs
Other costs
Total operating expenses$ thousands

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

2,325

2,290

72

71

567

701

33

33

58

-

-

-

2,950

2,991

105

104

55

140

-

-

Fees paid to principal auditors
Audit or review of financial statements
Other audit-related services
Taxation services
Total auditors' remuneration
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

23

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

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

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

1,531

1,219

63

135

Prima facie income tax at 30%

459

366

19

41

Imputed and non-assessable dividends

(6)

(6)

-

-

Effect of changes in tax legislation

(5)

45

-

-

Change in tax provisions

(11)

(54)

-

-

Non-deductible expenses

7

1

-

-

444

352

19

41

2

-

-

-

446

352

19

41

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

30.2%

29.6%

30.0%

30.4%

Effective tax rate (%)

29.1%

28.9%

30.0%

30.4%

262

649

20

45

3

-

-

-

181

(324)

(1)

(4)

-

27

-

-

446

352

19

41

(9)

8

-

-

Net gain on revaluation of financial instruments

16

32

-

-

Actuarial gain / (loss) on defined benefit schemes

(18)

8

-

-

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

(11)

48

-

-

935

645

-

-

5

31

-

-

187

375

-

-

(145)

(125)

-

-

3

9

-

-

985

935

-

-

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 the income statement
Amounts recognised directly in equity
Current income tax
Net gain / (loss) on revaluation of financial instruments
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

A number of companies within ANZ New Zealand are members of an imputation group. The imputation credit accountfigures for ANZ New Zealand include those in relation to both the imputation group and other companies in ANZ New
Zealand that are not in the 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 depreciation on buildings with an estimated useful life greater than fifty years, effective for the 2011-2012
income tax year.

Australia and New Zealand Banking Group Limited - New Zealand Branch

24

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.
During the year ended 30 September 2011 a specialist Business Banking unit was created within the Commercial
segment. Segmental reporting has been updated to reflect this and other minor changes to ANZ New Zealand’s structure.
Comparative data has been adjusted to be consistent with the current year’s segment definitions.
RetailRetail provides banking products and services to individuals 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 andproducts. Retail contains ANZ New Zealand's wealth businesses which 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 Business Banking, Commercial & Agri, and UDC customers. Business Banking services
are offered to small enterprises (typically with annual revenues of less than $5 million). Commercial & Agri customers
consist of primarily privately owned medium to large enterprises. ANZ New Zealand's relationship with these businesses
ranges from simple banking requirements with revenue from deposit and transactional facilities, and cash flow lending, tomore complex funding arrangements with revenue sourced from a wider range of products. UDC is principally involved in
the financing and leasing of plant, vehicles and equipment, mainly 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, interest rate 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

25

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

Retail3

Commercial

External interest income

2,533

3,443

810

(29)

6,757

External interest expense(1,309)

(625)

(486)

(1,737)(4,157)

Net intersegment interest(354)(1,483)

73

1,764

-

Net interest income

870

1,335

397

(2)

2,600

Other external operating income
Share of profit of associates and jointly controlled
entities

572

127

238

(130)

807

-

-

-

2

2

30/09/2011

Operating income

Institutional

Other 4

Total

1,442

1,462

635

(130)

3,409

Other external expenses

598

245

109

656

1,608

Net intersegment and related party expenses 2

249

246

67

(482)

80

Operating expenses

847

491

176

174

1,688

Profit before provision for credit impairment

595

971

459

(304)

1,721

77

139

(26)

-

190

Profit before income tax

518

832

485

(304)

1,531

Income tax expense

151

250

142

(97)

446

Profit after income tax

367

582

343

(207)

1,085

Provision for credit impairment

Other information
Depreciation and amortisation
Goodwill

29

8

-

37

74

724

1,466

1,072

-

3,262

Intangible assets - indefinite life

73

-

-

-

73

Intangible assets - definite life

142

7

1

22

172

Shares in associates and jointly controlled entities

-

-

13

87

100

Total external assets

37,32550,88835,8675,003

129,083

Total external liabilities

32,862

17,95735,791

34,008120,618

30/09/2010

Retail3

Commercial

Institutional

Other 4

Total

External interest income

2,686

3,439

359

(37)

6,447

External interest expense(1,201)

(569)

(414)

(1,768)(3,952)

Net intersegment interest(674)(1,629)

549

1,754

-

Net interest income

811

1,241

494

(51)

2,495

Other external operating income3
Share of profit of associates and jointly controlled
entities

386

143

116

58

703

35

-

5

2

42

Operating income

1,232

1,384

615

9

3,240

Other external expenses

609

255

103

512

1,479

Net intersegment and related party expenses 2

237

250

62

(463)

86

Operating expenses

846

505

165

49

1,565

Profit before provision for credit impairment

386

879

450

(40)

1,675

Provision for credit impairment

151

365

(60)

-

456

Profit before income tax

235

514

510

(40)

1,219

Income tax expense

71

155

146

(20)

352

Profit after income tax

164

359

364

(20)

867

Other information
Depreciation and amortisation

26

8

1

36

71

Goodwill

724

1,466

1,072

-

3,262

Intangible assets - indefinite life

125

-

-

-

125

Intangible assets - definite life

148

8

-

2

158

-

-

56

88

144

Total external assets

38,36451,72930,141

6,795

127,029

Total external liabilities

32,147

16,97931,63938,443

119,208

Shares in associates and jointly controlled entities

1
2
3
4

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Net intersegment and related party expenses are eliminated at the Overseas Banking Group level.
Comparative information includes a loss of $82 million on acquisition of ING (NZ) Holdings Limited.
This segment has negative external revenues as this segment incurs funding costs on behalf of ANZ New Zealand and is reimbursed internally.

Australia and New Zealand Banking Group Limited - New Zealand Branch

26

Notes to the Financial Statements
8. Liquid Assets
ANZ New Zealand$ millions

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

1,954

1,830

-

-

50

-

-

-

Money at call

330

328

-

-

Bills receivable and remittances in transit

121

81

-

-

2,455

2,239

-

-

30/09/2011

30/09/2010

30/09/2011

30/09/2010

380

457

-

-

1,085

176

-

-

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

Total liquid assets

9. Due from Other Financial Institutions
ANZ New Zealand$ millions

Able to be withdrawn without prior notice
Securities purchased under agreement to resell
Securities purchased under agreement to resell with centralbanks

NZ Branch

-

170

-

-

Security settlements

606

1,535

-

-

Certificates of deposit

1,562

707

-

-

-

451

-

-

Total due from other financial institutions

3,633

3,496

-

-

Fair value of securities purchased under agreement to resell

1,133

352

-

-

30/09/2011

30/09/2010

30/09/2011

30/09/2010

5,961

3,917

-

-

334

32

-

-

Promissory notes

59

64

-

-

Other bank bonds

3,047

2,655

-

-

65

89

-

-

Total trading securities

9,466

6,757

-

-

Assets encumbered through repurchase agreements included
in trading securities

1,219

222

-

-

Term loans and advances

10. Trading Securities
ANZ New Zealand$ millions

Government, local body stock and bonds
Certificates of deposit

Other

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

27

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 own asset and liability management activities.
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 in price or margins. Positions may be traded actively or held over a period of time to benefit from expectedchanges in market rates.
Balance sheet risk management
ANZ New Zealand designates certain balance sheet risk management derivatives into hedging relationships in order tominimise income statement volatility. This volatility is created by differences in the timing of recognition of gains andlosses between the derivative and the hedged item. Hedge accounting is not applied to all balance sheet risk
management positions as other balance sheet risk management derivatives are classified as held for trading.
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

28

Notes to the Financial Statements
ANZ New Zealand

NZ Branch

Notional
30/09/2011

Principal$ millions

AmountNotional
Fair values
AssetsPrincipal

Liabilities

Fair values

AmountAssetsLiabilities

Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts

62,682

2,111

1,437

154

3

-

Swap agreements

126,313

4,727

5,609

9,875

145

31

Options purchased

2,271

66

1

-

-

-

Options sold

2,280

-

69

-

-

-

193,546

6,904

7,116

10,029148

31Interest rate derivatives
Forward rate agreements

73,346

13

11

295

-

-

Swap agreements

617,014

8,137

7,488

3,446

24

27

Futures contracts

12,841

18

8

-

-

-

Options purchased

4,623

24

-

-

-

-

Options sold

6,446

-

26

-

-

-

714,270

8,192

7,533

3,741

24

27

Commodity derivatives

182

13

12

-

-

-

Collateral received / paid

n/a(1,475)

(944)

n/a

-

-

907,998

13,634

13,717

13,770

172

58

76

3

-

-

-

-

Swap agreements

23,699

382

382

4,460

-

59

Total derivatives designated as fairvalue hedges

23,775

385

382

4,460

-

59

Swap agreements

11,090

275

69

-

-

-

Futures contracts

13,431

-

10

-

-

-

Total derivatives designated as cash
flow hedges

24,521

275

79

-

-

-

Total derivatives held for hedging

48,296

660

461

4,460

-

59

956,294

14,294

14,17818,230172

117

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

Total derivative financial instruments

Australia and New Zealand Banking Group Limited - New Zealand Branch

29

Notes to the Financial Statements
ANZ New Zealand

NZ Branch

Notional
30/09/2010

Principal$ millions

AmountNotional
Fair values
AssetsPrincipal

Liabilities

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

-

-

-

149,527

2,746

4,174

10,466475

52Interest 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

Options soldCommodity derivatives

68

2

2

-

-

-

Collateral received / paid

n/a

(361)

(1,242)n/a--

613,924

10,094

10,15520,987

500

72

53

3

-

-

-

-

Swap agreements

23,437

530

482

7,320

-

70

Total derivatives designated as fairvalue hedges

23,490

533

482

7,320

-

70

Swap agreements

8,772

227

77

-

-

-

Futures contracts

6,226

-

13

-

-

-

Total derivatives designated as cash
flow hedges

14,998

227

90

-

-

-

Total derivatives held for hedging

38,488

760

572

7,320

-

70

Total derivative financial instruments

652,412

10,854

10,72728,307500

142

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

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

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

(100)

(458)

(3)

66

111

438

(4)

(76)

11

(20)

(7)

(10)

Gain / (loss) arising from fair value hedges:- hedged item- hedging instrument
Net ineffectiveness on qualifying fair value hedges

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

30

Notes to the Financial Statements
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

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Variable rate loan assets

219

200

-

-

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

(33)

(34)

-

-

(45)

(64)

-

-

Total cash flow hedging reserve

141

102

-

-

Deferred gain / (loss) 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 (30/09/2010 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 (30/09/2010 less than $1 million).
There were no transactions where cash flow hedge accounting ceased in the year ended 30 September 2011 as a result ofhighly probable cash flows that were no longer expected to occur (30/09/2010 no transactions).

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

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

247

1,939

-

-

48

134

-

-

Equity securities

116

78

-

-

Total available-for-sale assets

411

2,151

-

-

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Overdrafts

1,698

2,131

-

-

Credit card outstandings

1,367

1,388

-

-

Term loans - housing

53,69653,892

9,916

10,029Term loans - non-housing

37,39839,179--Finance lease receivables

768

726

-

-

Gross loans and advances

94,927

97,316

9,916

10,029Provision for credit impairment (Note 15)(1,183)(1,420)

(27)

(22)

(256)

(273)

-

-

Fair value hedge adjustment

134

386

37

40

Deferred fee revenue and expenses

(51)

(50)

(1)

(1)

42

56

6

13

93,61396,015

9,931

10,059Government, local body stock and bonds
Other debt securities

13. Net Loans and Advances
ANZ New Zealand$ millions

Unearned finance income

Capitalised brokerage/mortgage origination fees
Total net loans and advances

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

31

Notes to the Financial Statements
14. Impaired Assets, Restructured Assets and Other Assets Under Administration
Individually impaired assets$ millions

ANZ New Zealand
Retail Other retailmortgages

NZ BranchNon-retail

Retail Other retail

Non-retail

exposures

exposuresTotal

mortgages

exposures

exposures

Total

43

30/09/2011
Balance at beginning of the year

554

81

1,403

2,038

43

-

-

Transfers from productive

527

158

774

1,459

85

-

-

85

Transfers to productive

(83)

(1)

(101)

(185)

(6)

-

-

(6)

Assets realised or loans repaid

(407)

(71)

(691)

(1,169)

(50)

-

-

(50)

Write offs

(74)

(106)

(191)

(371)

(6)

-

-

(6)

Individually impaired asset balance at
end of the year

517

61

1,194

1,772

66

-

-

66

Restructured items

20

-

-

20

-

-

-

-

Total impaired assets

537

61

1,194

1,792

66

-

-

66

30/09/2010
Balance at beginning of the year

387

59

740

1,186

10

-

-

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

Restructured items

9

-

-

9

-

-

-

-

Total impaired assets

563

81

1,403

2,047

43

-

-

43

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.
Restructured assets$ millions

ANZ New Zealand
Retail Other retailmortgages

exposures

Balance at beginning of the year

9-

Transfers to restructured items

17-

Transfers from restructured items(6)-

Balance at end of the year

20

Balance at beginning of the year
Transfers to restructured items

NZ BranchNon-retail
exposures

Retail Other retail

Non-retailTotal

mortgages

exposures

exposures

Total

-

9

-

-

-

-

58

75

-

-

-

-

(58)

(64)

-

-

-

-

-

-

20

-

-

-

-

2

-

-

2

-

-

-

-

9

-

-

9

-

-

-

-

Transfers from restructured items

(2)

-

-

(2)

-

-

-

-

Balance at end of the year

9

-

-

9

-

-

-

-

30/09/2011

30/09/2010

Renegotiated loans
Renegotiated loans are loans that would otherwise be past due or impaired had their terms not been renegotiated. At 30
September 2011, loans and advances of $590 million were renegotiated in ANZ New Zealand (30/09/2010 $621 million)
and $40 million were renegotiated in the NZ Branch (30/09/2010 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 (30/09/2010 $nil).
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

32

Notes to the Financial Statements
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.

30/09/2011$ millions
Other assets underadministration
Undrawn facilities with impaired
customers

RetailANZ New ZealandOtherretail Non-retailmortgages exposures exposures

Interest forgone on impaired assets
Gross interest receivable on impaired
loansInterest recognised
Net interest forgone on impairedloans
30/09/2010
Other assets underadministration
Undrawn facilities with impaired
customers

RetailNZ Branch
Otherretail Non-retail

Total mortgages exposures exposures

Total

-

-

6

6

-

-

-

-

-

-

26

26

-

-

-

-

54

7

82

143

3

-

-

3

(18)

(4)

(56)

(78)

(2)

-

-

(2)

36

3

26

65

1

-

-

1

-

-

4

4

-

-

-

-

-

-

32

32

-

-

-

-

Interest forgone on impaired assets
Gross interest receivable on impaired
loans

44

7

68

119

2

-

-

2

Interest recognised

(16)

(3)

(41)

(60)

(1)

-

-

(1)

Net interest forgone on impaired
loans

28

4

27

59

1

-

-

1

Australia and New Zealand Banking Group Limited - New Zealand Branch

33

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

Retail Other retail

NZ BranchNon-retailmortgages

exposures

exposures

122

149

533

8

(2)

(138)

130

147

395

Retail Other retail
Total

Non-retailmortgages

exposures

exposures

Total

804

11

-

-

11

(132)

(1)

-

-

(1)

672

10

-

-

10

30/09/2011
Collective provision
Balance at beginning of the year
Charge / (credit) to income statement
Balance at end of the year

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

218

50

348

616

12

-

-

12

Charge to income statement
Recoveries of amounts previously
written off

37

79

206

322

14

-

-

14

2

17

3

22

-

-

-

-

Bad debts written off

(74)

(106)

(191)

(371)

(7)

-

-

(7)

Discount unwind1

(18)

(4)

(56)

(78)

(2)

-

-

(2)

Balance at end of the year

165

36

310

511

17

-

-

17

Total provision for credit impairment

295

183

705

1,183

27

-

-

27

127

159

518

804

6

-

-

6

(5)

(10)

15

-

5

-

-

5

122

149

533

804

11

-

-

11

30/09/2010
Collective provision
Balance at beginning of the year
Charge / (credit) to income statement
Balance at end of the year

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

12

-

-

12

Total provision for credit impairment

340

199

881

1,420

23

-

-

23

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

34

Notes to the Financial Statements
Provision movement analysis$ millions

ANZ New Zealand
Retail Other retailmortgages

exposures

NZ BranchNon-retail
exposures

Retail Other retail
Total

Non-retailmortgages

exposures

exposures

Total

30/09/2011
New and increased provisions
Provision releases

165

115

319

599

20

-

-

20

(126)

(19)

(110)

(255)

(6)

-

-

(6)

39

96

209

344

14

-

-

14

Recoveries of amounts previously
written off

(2)

(17)

(3)

(22)

-

-

-

-

Individual provision charge

37

79

206

322

14

-

-

14

8

(2)

(138)

(132)

(1)

-

-

(1)

45

77

68

190

13

-

-

13

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)

-

-

-

-

139

120

197

456

15

-

-

15

(5)

(10)

15

-

5

-

-

5

134

110

212

456

20

-

-

20

Collective provision charge / (credit)
Total charge to income statement
30/09/2010

Recoveries of amounts previously
written off
Individual provision charge
Collective provision charge / (credit)
Total charge to income statement

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

30/09/2011

30/09/2010

30/09/2011

30/09/2010

99

143

-

-

1

1

-

-

100

144

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

35

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

Investment 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-

30 September

Securitisation entity

Arawata Assets Limited

100

30 September

Property company

Arawata Finance Limited

100

30 September

Investment company

Arawata Holdings Limited

100

30 September

Investment company-

30 September

Investment entity

Arawata Trust Company

100

30 September

Investment company

Australian Properties Ltd

100

30 September

Management company

AUT Investments Limited

100

30 September

Investment company

BHI Limited

100

30 September

Non operative

Control Nominees Limited

100

30 September

Investment company

Direct Broking Limited

100

30 September

On-line share broker

Direct Nominees Limited

100

30 September

Nominee company

Diversified Yield Fund (registered in Australia)

99

30 JuneFixed income fund

Eastern Specialists Consulting Ltd

100

30 September

Non operative

EFTPOS New Zealand Limited

100

30 September

EFTPOS service provider

Endeavour Finance Limited

100

30 September

Investment company

Harcourt Corporation Limited

100

30 September

Investment company

Karapiro Investments Limited

100

30 September

Non operative

Kingfisher NZ Trust 2008-1-

30 September

Securitisation entity

Medical Properties Holding Company No.1 Limited1

100

30 September

Holding company

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

Investment company

OneAnswer Nominees Limited

100

30 September

Nominee company

OnePath (NZ) Limited

100

30 September

Funds management company

OnePath Holdings (NZ) Limited

100

30 September

Holding company

OnePath Insurance Holdings (NZ) Limited

100

30 September

Holding company

OnePath Insurance Services (NZ) Limited

100

30 September

Insurance company

OnePath Life (NZ) Limited

100

30 September

Insurance company

OnePath Nominees (NZ) Limited

100

30 September

Nominee company

ANZNZ Covered Bond Trust

Arawata Trust

Origin Mortgage Management Services Limited-

31 March

Mortgage financeOrigin Mortgage Management Services (2008) Limited-

31 March

Mortgage financeOrigin Mortgage Management Services (2011) Limited2-

31 March

Mortgage finance

Private Nominees Limited

100

30 September

Nominee company

Radiola Corporation Limited

100

30 September

Non operative

Regular Income Fund (registered in Australia)

99

30 JuneFixed income fund

Rural Growth Fund Limited

100

30 September

Investment company

Samson Funding Limited

100

30 September

Investment company

Silver Fern Life Brokers Limited

100

30 September

Non operative

South Pacific Merchant Finance Limited

100

30 September

Investment company

Southpac Corporation Limited

100

30 September

Investment company

UDC Finance Limited
Vital Healthcare Australian Properties Proprietary Limited(registered in Australia)

100

30 September

Finance company

100

30 September

Management company

Vital Healthcare Management Limited

100

30 September

Management company

12Previously known as Argosy Property Management Limited.
Previously known as General Finance Custodians Limited.

All controlled entities are incorporated in New Zealand, unless stated.
For all companies, with the exception of Origin Mortgage Management Services Limited, Origin Mortgage Management
Services (2008) Limited, and Origin Mortgage Management Services (2011) Limited, the ownership interest percentage

Australia and New Zealand Banking Group Limited - New Zealand Branch

36

Notes to the Financial Statements
equates to the voting power held. In relation to these companies, control exists through ANZ New Zealand having 100%of the voting rights.
In relation to Arawata Trust control exists through the Bank being trustee of the Trust. In relation to Kingfisher NZ Trust
2008-1 and ANZNZ Covered Bond Trust control exists as ANZ New Zealand retains substantially all the risks and rewardsof the operations.
Associates
30/09/2011

30/09/2010

Book ValueBook Value

Interest

Voting Ownership Balance

Associates

$m

$m

%

%

Cards NZ Limited
Kepler Group Southland / Central
Otago Limited1

85

85

30

15 30 September

Card services

Interest Date

Nature of business

-

1

20

20 31 March

Financial services

NZ Poultry Enterprises Limited

-

43

n/a

n/a 30 April

Poultry processor

Paymark Limited

2

2

25

25 31 March

EFTPOS settlements

10

10

40

40 31 MarchRest home operator

Wyma Engineering (NZ) Limited

2

2

30

30 31 March

Agricultural machinery

Total investment in associates

99

143

UCG Investments Limited

1

Previously known as Bennetts Financial Services Limited.

Shares in associates at 30 September 2011 includes goodwill of $12 million (30/09/2010 $56 million) for ANZ New
Zealand and $nil (30/09/2010 $nil) for the NZ Branch.
All associates are incorporated in New Zealand.
Joint Ventures

Jointly controlled entities

30/09/2011

30/09/2010

VotingBook ValueBook Value

Interest

Ownership Balance
Interest

$m

$m

%

%

1

1

21

21

1

1

Argenta Limited
Total investment in jointly
controlled entities

Date

Nature of business

31 July

Manufacture andmarketing of animal
remedies

Movements in controlled entities, associates and joint ventures
In October 2010 ANZ New Zealand sold its interest in APAC Investments Limited.
In December 2010 Trillium Holdings Limited, Tui Securities Limited and Arawata Securities Limited were deregistered.
In February 2011 ANZNZ Covered Bond Trust was established.
In April 2011 ANZ New Zealand sold its interest in NZ Poultry Enterprises Limited.
In May 2011 CBC Finance Limited was deregistered.
In September 2011 Arawata Capital Limited was amalgamated into its direct parent company Arawata Finance Limited.

Australia and New Zealand Banking Group Limited - New Zealand Branch

37

Notes to the Financial Statements
17. Other Assets
ANZ New Zealand$ millions

Accrued interest and prepaid discounts

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

343

391

-

-

Accrued commission

22

25

-

-

Share-based payments asset

57

57

-

-

Prepaid expenses

29

60

-

-

Security settlements

250

81

-

-

Other assets

156

356

-

3

Total other assets

857

970

-

3

30/09/2010

30/09/2011

30/09/2010

18. Deferred Tax Assets and Liabilities
ANZ New Zealand$ millions

30/09/2011

NZ Branch

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

304

(15)

7

3

(181)

324

1

4

Credited / (charged) directly to equity

2

(40)

-

-

Acquired as part of a business combination

-

35

-

-

125

304

8

7

6

Credited / (charged) to the income statement1

Balance at end of the year

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

331

397

8

Premises and equipment, software and intangibles

(17)

(20)

-

-

Provisions and accruals

126

150

-

1

Deferred acquisition costs and policy holder liabilities

(90)

(72)

-

-

Financial instruments

(55)

(39)

-

-

Carried forward losses

16

82

-

-

(147)

(126)

-

-

Other deferred tax assets and liabilities (including provisions)

(39)

(68)

-

-

Net deferred tax assets2

125

304

8

7

3

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

(66)

13

2

3

(5)

-

-

Provisions and accruals

(24)

(72)

(1)

1

Deferred acquisition costs and policy holder liabilities

Premises and equipment, software and intangibles

(18)

(21)

-

-

Financial instruments

-

(7)

-

-

Carried forward losses

(66)

5

-

-

Lease finance

(21)

(13)

-

-

11

424

-

-

(181)

324

1

4

Other deferred tax assets and liabilities (including provisions)Deferred tax credited / (charged) to equity comprises the following temporary differences:
Defined benefit schemes
Financial instruments
Total deferred tax charged / (credited) directly to equity
1

2

18

(8)

-

-

(16)

(32)

-

-

2

(40)

-

-

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

38

Notes to the Financial Statements
19. Goodwill and Other Intangible Assets
ANZ New Zealand

NZ Branch$ millions

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Goodwill

3,262

3,262

-

-

Software

85

82

-

-

Other intangibles with a definite life

87

76

-

-

Other intangibles with an indefinite life

73

125

-

-

3,507

3,545

-

-

The goodwill balance above largely comprises the goodwill purchased by ANZ New Zealand on the acquisition of NBNZ
Holdings Limited in December 2003 and the subsequent acquisition and amalgamation of The National Bank of New
Zealand Limited from NBNZ Holdings Limited in June 2004. Refer Note 2 for discussion of impairment testing for thisgoodwill.

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

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

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

11,033

12,071

10,011

10,481

1,164

222

-

-

Securities sold under agreements to repurchase from central banks

50

-

-

-

12,247

12,293

10,011

10,481

Total due to other financial institutions

21. Deposits and Other Borrowings
ANZ New Zealand$ millions

30/09/2011

NZ Branch

30/09/2010

30/09/2011

30/09/2010

Amortised cost
Certificates of deposit

2,454

3,245

-

-

Term deposits

33,79934,687--

Demand deposits bearing interest

21,58918,714--

Deposits not bearing interest

5,118

4,964

-

-

Secured debenture stock

1,488

1,378

-

-

64,44862,988--Commercial paper

4,790

7,307

-

-

Total deposits and other borrowings recognised at fair value

4,790

7,307

-

-

69,23870,295

-

-

-

-

-

-

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
4,790
7,305
Secured debenture stock are secured over:Carrying value of total tangible assets of UDC Finance Limited

2,007

2,111

Deposits from customers are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand. In theunlikely 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 the claims 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

39

Notes to the Financial Statements
22. Payables and Other Liabilities
ANZ New Zealand$ millions

Creditors

30/09/2011

NZ Branch

30/09/2010

30/09/2011

30/09/2010

78

98

-

-

679

695

71

67

Defined benefit schemes deficit

84

26

-

-

Share-based payments liability

30

28

-

-

255

311

2

3

1,242

195

-

-

-

16

-

-

48

137

-

-

2,416

1,506

73

70

30/09/2010

30/09/2011

30/09/2010

Accrued interest and unearned discounts

Accrued charges
Security settlements
Equitable assignment of mortgages
Other liabilities
Total payables and other liabilities

23. Provisions
ANZ New Zealand$ millions

Non-lending losses, frauds and forgeries

30/09/2011

NZ Branch

1

3

-

-

135

127

-

-

Personnel restructuring costs

13

2

-

-

Other restructuring costs

58

22

-

-

Other provisions

102

161

-

-

Total provisions

309

315

-

-

Employee entitlements

Employee entitlements
The provision for employee entitlements provides for the cost of employee entitlements for annual leave, long service
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 and costs relating to core system simplification.
Provisions are made when ANZ New Zealand is demonstrably committed, it is probable that the costs will be incurred,
though their timing is uncertain, and the costs can be reliably estimated. The majority of provisions recognised at 30
September 2011 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 make-good provisions on leased premises, the acquisition of ING (NZ)
Holdings Limited, and related managed funds.

Australia and New Zealand Banking Group Limited - New Zealand Branch

40

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

Currency

Face value Type of note

Maturity

Interest rate %30/09/2011

30/09/2010

Issued by the Bank
NZD

70m

floating rate notes2010

3 month BKBM + 0.35%

-

70

NZD

150m

fixed rate notes

2011

6.80%

-

150

NZD

170m

floating rate notes

2011

3 month BKBM + 0.90%

-

170

NZD

50m

fixed rate notes

2011

8.25%

-

50

NZD

50m

floating rate notes

2011

3 month BKBM + 1.24%

-

50

NZD

40m

floating rate notes

2012

3 month BKBM + 0.90%

40

40

NZD

100m

floating rate notes

2012

3 month BKBM + 1.025%

100

100

NZD

150m

fixed rate notes

2012

5.63%

150

150

NZD

100m

fixed rate notes

2013

6.32%

100

100

NZD

175m

floating rate notes

2013

3 month BKBM + 1.30%

175

-

NZD

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

250

NZD

350m

fixed rate notes

2015

6.51%

350

350

NZD

150m

fixed rate notes

2016

6.32%

150

-

NZD

250m

floating rate notes

2016

3 month BKBM + 1.50%

250

-

NZD

100m

fixed rate notes

2018

6.85%

100

-

NZD

125m

fixed rate notes

2018

6.08%

125

-

78

100

Fair value hedge adjustment

246

365

Less bonds and notes held by the Bank

(30)

(23)

2,319

2,157

Index linked notes

Issued by ANZ National (Int'l) Limited
USD

890m

floating rate notes1

2010

3 month LIBOR + 1.03%

-

1,210

USD

100m

floating rate notes2

2011

3 month LIBOR + 0.32%

-

136

USD

500m

floating rate notes2

2011

3 month LIBOR + 0.18%

-

679

USD

300m

fixed rate notes

2011

5.50%

-

407

USD

250m

floating rate notes

2011

3 month LIBOR + 0.70%

-

340

USD

20m

floating rate notes2

2011

3 month LIBOR + 0.20%

-

27

USD

100m

floating rate notes

2011

3 month LIBOR + 0.65%

131

136

HKD

155m

floating rate notes

2011

3 month HIBOR + 0.51%

GBP

435m

floating rate notes

2011

3 month GBP LIBOR + 0.05%

GBP

105m

floating rate notes

2011

3 month GBP LIBOR + 0.05%

214

226

USD

1,000mfixed rate notes2

2012

3.25%

1,308

1,359

USD

500m

fixed rate notes2

2012

3.25%

654

679

USD

100m

floating rate notes2

2012

3 month LIBOR + 0.25%

131

136

USD

15m

floating rate notes

2012

3 month LIBOR + 0.80%

20

20

USD

1,250mfixed rate notes

2012

2.38%

1,634

1,698

HKD

300m

floating rate notes

2012

3 month HIBOR + 0.71%

GBP

450m

floating rate notes1

2012

6 month GBP LIBOR + 0.08%

USD

2,000mfixed rate notes

2013

6.20%

USD

750m

floating rate notes

2013

3 month LIBOR + 1.00%

USD

250m

floating rate notes

2013

USD

100m

floating rate notes

JPY

1,300m

USD

26

27

886

935

50

53

917

968

2,613

2,717

981

-

3 month LIBOR + 1.00%

327

-

2013

Fed Funds + 1.25%

131-

floating rate notes

2013

3 month JPY LIBOR +0.40%

1,050mfloating rate notes1

2014

USD

100m

floating rate notes2

USD

50m

floating rate notes

USD

71m

USD

22

-

3 month LIBOR + 1.16%

1,373

1,427

2014

3 month LIBOR + 0.44%

131

136

2014

3 month LIBOR + 1.15%

65

68

floating rate notes2

2014

3 month LIBOR + 0.28%

93

96

20m

floating rate notes

2014

3 month LIBOR + 1.10%

26

27

HKD

100m

fixed rate notes

2014

3.03%

17

18

HKD

100m

fixed rate notes

2014

3.40%

17

18

HKD

150m

fixed rate notes

2014

2.04%

25

-

HKD

150m

fixed rate notes

2014

2.02%

25

-

JPY

500m

fixed rate notes

2014

1.40%

9

8

JPY

3,000mfixed rate notes

2014

1.50%

51

49

CHF

250m

fixed rate notes

2014

2.01%

363

347

CHF

300m

fixed rate notes

2014

2.01%

435

417

Australia and New Zealand Banking Group Limited - New Zealand Branch

41

Notes to the Financial Statements
USD

250m

floating rate notes

2015

3 month LIBOR + 0.90%

USD

1,000mfixed rate notes

2015

3.13%

327

340

1,308

1,359

USD

5m

floating rate notes

2015

3 month LIBOR + 1.25%

HKD

105m

fixed rate notes

2015

3.30%

JPY

500m

floating rate notes

2015

3 month JPY LIBOR + 0.50%

9

8

JPY

11,800m

fixed rate notes

2015

1.54%

201

192

JPY

7,200mfloating rate notes

2015

3 month JPY LIBOR + 1.00%

123

117

SGD

200m

fixed rate notes

2015

2.95%

201

206

CHF

150m

fixed rate notes

2016

2.13%

218

-

15,087

16,604

1,066

1,138

18,472

19,899

7

-

18

18

Issued by Samson Funding Limited
USD

750m

fixed rate notes3

2053

5.36%

Total bonds and notes

Bonds and notes issued by ANZ National (Int’l) Limited are guaranteed by the Bank. Bonds and notes are unsecured andrank equally with other unsecured liabilities of ANZ New Zealand.
1
2
3

These notes were issued to subsidiaries of the Overseas Banking Group.
As well as being guaranteed by the Bank these notes also benefit from a supporting guarantee from the NZ Crown.
These notes were issued by Samson Funding Limited on 26 November 2003. The notes are ‘stapled’ to preference shares issued by the Ultimate Parent Bank
and, prior to a conversion event, may not be traded separately from them. The notes can be redeemed for cash on 15 December 2013. Interest is payable half
yearly in arrears at a fixed rate of 5.36% p.a. with interest payments due 15 June and 15 December.

25. Loan Capital
ANZ New Zealand$ millions

AUD 265,740,000 perpetual subordinated floating rate loan

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

338

349

-

-

AUD 43,767,507 term subordinated floating rate loan

-

58

-

-

AUD 169,520,000 term subordinated floating rate loan

216

223

-

-

Term subordinated fixed rate bonds

600

950

-

-

Perpetual subordinated bond

835

835

-

-

1,989

2,415

-

-

(1)

(8)

-

-

1,988

2,407

-

-

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

AUD 265,740,000 loan
This loan 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 43,767,507 loan
The Bank elected to repay this loan on 15 September 2011. Interest was based on BBSW + 0.29% p.a..
AUD 169,520,000 loan
This loan has an ultimate maturity date of 18 September 2017. The Bank may elect to repay the loan on 17 September
each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest payments
due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW
+ 1.18% p.a. thereafter.
NZD subordinated bonds
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

On 15 September 2011 the Bank fully redeemed the bonds that were originally issued on 15 September 2006.
The Bank may elect to redeem the remaining bonds on their respective call dates. If the bonds are not called the Bank
will continue to pay interest to maturity at the five year interest rate swap rate plus 0.76% p.a. and 0.62% p.a. for the 2
March 2007 and 23 July 2007 bonds respectively. Interest is payable half yearly in arrears based on the fixed coupon
rate.

Australia and New Zealand Banking Group Limited - New Zealand Branch

42

Notes to the Financial Statements
As at 30 September 2011, these bonds carried an AA- rating by Standard & Poor's.
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 2011, this bond carried an A+ rating by Standard and Poor's and an A3 rating by Moody’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).
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.

26. Related Party Transactions
ANZ New Zealand$ thousands

Key management personnel

NZ Branch

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

Key management personnel compensation
Salaries and short-term employee benefits

13,557

12,857--

Post-employment benefits

344

352

-

-

Other long-term benefits

153

78

-

-

Termination benefits

2,656

931

-

-

Share-based payments

2,080

3,911

-

-

18,79018,129--Loans to key management personnel

3,300

4,056

-

-

Deposits from key management personnel

6,387

7,539

-

-

Total compensation of key management personnel

Key management personnel are defined as being Directors and senior management of ANZ New Zealand - those persons
having the 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.
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

43

Notes to the Financial Statements
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 to30/09/2011

30/09/2010

30/09/2011

30/09/2010

Received from associates

6

7

-

-

Received from joint ventures

-

2

-

-

509

481

444

416

68

72

-

-

2

2

-

-

Dividends received from associates

2

2

-

-

Commission received from joint ventures

-

6

-

-

80

86

-

-

-

-

29

26

$ 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

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

Balances with related parties
ANZ New Zealand$ millions

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

30/09/2011

30/09/2010

30/09/2011

30/09/2010

133

1,507

-

-

2,754

2,548

172

500
-

Derivative financial assets
Due from related entities
Net loans and advances
Due from associates
Due from joint ventures
Due from related entities
Shares in controlled entities, associates and joint ventures
Other assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Total due from related parties

4

151

-

33

36

-

-

-

-

338

302

100

144

-

-

57

37

-

-

3,081

4,423

510

802

10,786

10,482

10,011

10,481

85

85

85

-

-

-

52

-

4,210

2,658

117

142

Due to other financial institutions
Due to Ultimate Parent Bank
Deposits and other borrowings
Due to associates
Due to controlled entities
Derivative financial liabilities
Due to related entities
Payables and other liabilities
Due to Bank
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

-

-

69

67

75

77

-

-

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

3,356

4,743

-

-

Term funding due to Immediate Parent Company

1,766

1,766

-

-

554

630

-

-

20,832

20,441

10,334

10,690Loan capitalDue to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
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:Australia and New Zealand Banking Group Limited - New Zealand Branch

44

Notes to the Financial Statements
ANZ New Zealand$ millions

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

1,296

1,660

-

-

Financial guarantees provided to the Ultimate Parent Bank

A provision for credit impairment of $1 million has been recognised for amounts due from associates as at 30 September
2011 (30/09/2010 $10 million).

27. Current and Non-current Assets and Liabilities
ANZ New Zealand$ millions

30/09/2011

Noncurrent

Current

NZ Branch

30/09/2010

Current

30/09/2011

Non-current

30/09/2010

Noncurrent

Current

Current

Non-current

AssetsLiquid assets

2,455

-

2,239

-

-

-

-

-

Due from other financial institutions

3,633

-

3,496

-

-

-

-

-

Trading securities

9,466

-

6,757

-

-

-

-

-

14,294-

10,854

-

172

-

500

-

Derivative financial instruments
Available-for-sale assets

393

18

1,882

269

-

-

-

-

Net loans and advances

28,10565,50825,57070,445

201

9,730

396

9,663

-

-

-

-

338

-

302

-

Due from related entities
Investments relating to insurance
business

71

26

70

17

-

-

-

-

Insurance policy assets
Shares in controlled entities,
associates

-

200

-

138

-

-

-

-

-

100

-

144

-

-

-

-

Current tax assets

-

-

18

-

-

-

-

-

800

57

913

57

-

-

3

-

Deferred tax assets

-

125

-

304

-

8

-

7

Premises and equipment

-

325

-

311

-

-

-

-

Goodwill and other intangible assets

-

3,507

-

3,545

-

-

-

-

59,217

69,866

51,79975,230

711

9,738

1,201

9,670

Due to other financial institutions

4,684

7,563

4,342

7,951

2,585

7,426

2,559

7,922

Deposits and other borrowings

66,6592,579

68,314

1,981

-

-

-

-

-

-

-

-

51

-

-

-

14,178-

10,727

-

117

-

142

-

2,302

114

1,452

54

73

-

70

-

4

-

-

-

20

-

45

-

Other assets

Total assets
Liabilities

Due to related parties
Derivative financial instruments
Payables and other liabilities
Current tax liabilities
Provisions

211

98

228

87

-

-

-

-

Bonds and notes

4,882

13,5903,747

16,152----

Term funding

1,766

-

1,766

-

-

-

-

-

Loan capital

-

1,988

-

2,407

-

-

-

-

94,68625,932

90,57628,632

2,846

7,426

2,816

7,922

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 30.

Australia and New Zealand Banking Group Limited - New Zealand Branch

45

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

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Issued share capital
Number of shares

Ordinary shares at beginning and end of the year
Redeemable preference shares at beginning and end of
the year

381,655,112

381,655,112--

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
Redeemable preference share capital at beginning andend of the year

1,453

1,453

-

-

4,960

4,960

-

-

Paid in share capital at end of the year

6,413

6,413

-

-

11

11

11

11

6,424

6,424

11

11

Share capital & head office account$ millions

Head office accountTotal capital & head office account at end of the 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.
During the year ended 30 September 2011 ANZ Holdings (New Zealand) Limited (“ANZH”) paid an ordinary dividend of$215 million (30/09/2010 $nil) to the Immediate Parent Company (equivalent to $0.57 per share).
Redeemable preference shares
All redeemable preference shares (“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 thediscretion of the directors of ANZH and are non-cumulative.
There are five classes of RPS, relating to issues in 1988, 2005, 2007, 2008 and 2009. During the year ended 30
September 2011 ANZH paid dividends on the 2007 class of RPS of $206 million (equivalent to $0.10 per share).
(30/09/2010 ANZH paid $492 million of dividends on the 2007 class of RPS (equivalent to $0.25 per share)).
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.

29. Capital Adequacy
Capital management policies
ANZ New Zealand’s core capital objectives are to:• Protect the interests of depositors, creditors and shareholders;• Ensure the safety and soundness of ANZ New Zealand’s capital position; and• Ensure that the capital base supports ANZ New Zealand’s risk appetite, and strategic business objectives, in an
efficient and effective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting,monitoring and obtaining assurance for ANZ New Zealand’s Internal Capital Adequacy Assessment Process (“ICAAP”)
policy and framework; standardised risk definitions for all material risks; materiality thresholds; capital adequacy targets;internal economic risk capital principles; and risk appetite.
ANZ New Zealand has minimum, trigger and operating range targets for both tier one and total capital that ensuresufficient capital is maintained to:• Meet minimum prudential requirements imposed by regulators;• Ensure consistency with ANZ New Zealand’s overall risk profile and financial positions, taking into account its strategic
focus and business plan; and• Support the economic risk capital requirements of the business.

Australia and New Zealand Banking Group Limited - New Zealand Branch

46

Notes to the Financial Statements
ANZ New Zealand’s Asset & Liability Committee and its related Capital Management sub-committee are responsible fordeveloping, implementing and maintaining ANZ New Zealand's ICAAP framework, including ongoing monitoring, reportingand compliance. ANZ New Zealand’s ICAAP is subject to independent and periodic review conducted by Internal Audit.
ANZ New Zealand has complied with all externally imposed capital requirements to which it is subject during the current
and comparative periods.
Overseas Banking Group Basel II capital adequacy ratio (unaudited)
Overseas Banking Group

Ultimate Parent Bank

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Tier One Capital

10.9%

10.1%

11.5%

11.0%

Total Capital

12.1%

11.9%

12.3%

12.3%

For calculation of minimum capital requirements under Pillar I of the Basel II Accord, APRA has accredited the Overseas
Banking Group to use the Advanced Internal Ratings Based ("AIRB") methodology for calculation of credit risk weighted
assets and the Advanced Measurement Approach ("AMA") for the operational risk weighted asset equivalent.
Under prudential regulations, the Ultimate Parent Bank is required to hold a minimum Prudential Capital Ratio ("PCR") as
determined by APRA. The Overseas Banking Group exceeded the minimum capital adequacy requirements set by APRA as
at 30 September 2011 and for the comparative prior period.
The Overseas Banking Group is required to publicly disclose Pillar III financial information as at 30 September 2011. The
Overseas Banking Group's Basel II Pillar 3 Disclosure document for the year ended to 30 September 2011, prepared inaccordance with APS 330, discloses capital adequacy ratios calculated under the Basel II methodology. These documents
can be accessed at the website anz.com.
Risk weighted credit risk exposures
Risk weighted exposures for ANZ New Zealand and the NZ Branch have been derived in accordance with the RBNZ
document entitled 'Capital Adequacy Framework (Basel I Approach)' ("BS2") dated June 2011. The credit equivalentamounts for market related contracts are calculated using the current exposure method.
Total Risk Weighted Exposures of ANZ New Zealand as at 30 September 2011 (Unaudited)
Principal
amountOn-balance sheet exposures

Risk weight$m

Risk weighted
exposure$mCash and short term claims on Government

3,551

0%

-

Long term claims on Government

5,251

10%

525

Claims on banks

6,229

20%

1,246

855

20%

171

Residential mortgages

53,21650%

26,608

Other

42,190100%

42,190

Non risk weighted assets

17,791n/a-Claims on public sector entities

129,083

70,740Creditconversion
factorCreditequivalentamountAveragecounterparty Risk weighted
risk weight
exposure

1,813

100%

1,813

47%

856

Commitments with certain drawdown

540

100%

540

56%

302

Transaction related contingent items

673

50%

337

62%

209

Short term, self liquidating trade related contingencies

110

20%

22

100%

22

5,040

50%

2,520

100%

2,520

17,324

0%

-

n/a

-

Off-balance sheet exposures

Principal
amount$m

Direct credit substitutes

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

193,622

12,10822%2,657- Interest rate762,490

10,288

23%

2,389

182

31

39%

12

981,794

27,659- Other

Total on and off balance sheet exposures

8,967
79,707

Australia and New Zealand Banking Group Limited - New Zealand Branch

47

Notes to the Financial Statements
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B.
The peak end-of-day market risk exposures are for the half-years ended 30 September 2011 and 2010.
calculated separately for each category of exposure and may not have occurred at the same time.

Implied risk weighted
exposure

They areAggregate capital charge

As at

Peak

As at

Peak

$m

$m

$m

$m

3,544

6,262

284

501

6

72

-

6

123

126

10

10

30/09/2011

Interest rate risk
Foreign currency risk
Equity risk

3,673

294

30/09/2010

Interest rate risk

3,733

4,745

299

380

Foreign currency risk

25

101

2

8

Equity risk

78

96

6

8

3,836

307

Retail mortgages by loan-to-valuation ratio (“LVR”)
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by ANZ
New Zealand's valuation of the security property at origination of the exposure. Off-balance sheet exposures include
undrawn and partially undrawn residential mortgage loans as well as commitments to lend. Commitments to lend areformal offers for housing lending which may or may not be accepted by the customer.
Retail mortgages by LVR for ANZ New Zealand as at 30 September 2011
(Unaudited)On-balancesheet

Off-balance
sheet

Total

0% - 80%

40,164

4,937

45,10180% - 90%

6,380

643

7,023

Over 90%

4,626

271

4,897

51,1705,851

57,021$ millions

LVR range

Total

Australia and New Zealand Banking Group Limited - New Zealand Branch

48

Notes to the Financial Statements
Reconciliation of mortgage related amounts
ANZ New ZealandUnaudited$ millions

Note

30/09/2011

Total residential mortgage exposures (Basel I approach)29

53,216

Adjustments between Basel I approach and financial reporting presentation:
Less: fair value hedge adjustment(134)

Less: accrued interest on housing loans(210)

Plus: impaired housing loans

566

Plus: other adjustments

258

Term loans - housing

13

Plus: short-term housing loans classified as overdrafts

339

Less: housing loans made to corporate customers
On-balance sheet retail mortgage exposures / Gross retail mortgage loans(2,865)30

Plus: off-balance sheet retail mortgage exposures
Total retail mortgage exposures as per LVR analysis

51,1705,851

29Gross retail mortgage loans

57,021

51,170

Provisions for credit impairment(295)

Fair value hedge adjustment

134

Deferred fees and expenses / capitalised fees
Maximum exposure to credit risk

53,6962
30

51,011

30. 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 and liquidity risks of ANZ New Zealand’sbalance sheet. These risks and ANZ New Zealand’s policies and objectives for managing such risks are outlined below.
ANZ New Zealand’s overall risk management program focuses on the unpredictability of financial markets and seeks tominimise potential adverse effects on the financial performance of ANZ New Zealand.
The 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 oversight andmonitoring of material risk exposures of ANZ New Zealand is undertaken by the Risk Management functions of the Bankand 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.

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 business writing strategies, credit policies/controls,
single exposures, portfolio monitoring and risk concentrations.
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

Australia and New Zealand Banking Group Limited - New Zealand Branch

49

Notes to the Financial Statements
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 values and vision, 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 carried out
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 for various
dedicated areas within the Risk Management division. A formal outsourcing agreement provides for credit risk functions
to be provided to a number of ANZ New Zealand entities by staff of ANZ National Bank Limited.
The credit risk review function within Global Internal Audit also provides a further independent check mechanism toensure the quality of credit decisions. This includes providing independent periodic checks on asset quality andcompliance with the agreed 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 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 and 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 ofreports including monthly ‘asset quality’ reporting. This process is undertaken by or overseen by 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 lending 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 typesof 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

50

Notes to the Financial Statements
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 and Board Risk Committee regularly review a comprehensive listof single customer concentration limits and customers’ adherence to these limits.
Analyses of financial assets by industry sector are based on Australian and New Zealand Standard Industrial Classification("ANZSIC") codes.
Concentrations of credit risk analysis
ANZ New Zealand$ millions

30/09/2011

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

Derivative
financial
instruments

Net loans and Other financial
advances
assetsCredit related
commitments
3

Total

19,057

Industry
Agriculture

38

-

95

17,322125

1,477

Forestry, fishing and mining

9

-

12

484

4

326

835

Business & property services

24

-

19

8,575

62

2,054

10,734

Construction

-

-

4

930

7

863

1,804

Entertainment, leisure and tourism

-

-

43

1,118

8

419

1,588

Finance and insurance

3,908

3,501

12,780

1,011

258

1,505

22,963Government and local authority 1

11,199

1,887

6,253

537

1,442

10

1,070

Manufacturing

41

10

197

2,558

19

3,304

6,129

Personal lending

-

-

38

55,328332

9,577

65,275Retail trade

75

2

32

1,552

11

878

2,550

Transport and storage

19

57

42

1,584

11

639

2,352

Wholesale trade

51

-

106

1,174

8

1,306

2,645

Other2

36

54

389

1,849

13

2,278

4,619

6,088

9,877

14,294

94,927868

25,696

151,750

Provisions for credit impairment

-

-

-

(1,183)--(1,183)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

134

-

-

134

-

-

-

(265)

-

-

(265)

6,088

9,877

14,294

93,613868

25,696

150,436

New Zealand

4,939

8,017

2,605

91,895868

25,696

134,020

Overseas

1,149

1,860

11,689

1,718

-

-

16,416

Total financial assets

6,088

9,877

14,294

93,613868

25,696

150,436

Total financial assets
Geography

Australia and New Zealand Banking Group Limited - New Zealand Branch

51

Notes to the Financial Statements
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
3

Total

20,269Industry
Agriculture

2

-

118

18,546168

1,435

Forestry, fishing and mining

46

-

9

466

5

259

785

Business and property services

32

-

80

8,354

77

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

3,103

9,590

1,793

45

1,240

19,527

Government and local authority 1

9,821

1,677

5,556

317

1,425

39

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

Transport and storage

6

21

150

1,791

16

577

2,561

Wholesale trade

56

-

19

1,218

11

1,300

2,604

-

206

336

1,554

16

1,640

3,752

5,735

8,908

10,854

97,316940

23,586

147,339

Provisions for credit impairment

-

-

-

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

-

-

-

386

-

-

386

-

-

-

(267)

-

-

(267)

5,735

8,908

10,85496,015940

23,586

146,038

New Zealand

3,131

6,617

3,122

94,123940

23,586

131,519

Overseas

2,604

2,291

7,732

1,892

-

-

14,519Total financial assets

5,735

8,908

10,85496,015940

23,586

146,038

Other 2

Total financial assets
Geography

NZ Branch$ millions

30/09/2011

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andDerivative
availablefinancial
for-saleassets instruments

Net loansandadvances

Due from
relatedparties

Other Credit related
financial commitments
3
assets

Total

Industry
Finance and insurance

-

-

172

-

338

-

-

Government and local authority 1

-

-

-

-

-

-

-

510
-

Personal lending

-

-

-

9,916

-

-

88

10,004

Other 2

-

-

-

-

-

-

-

-

-

-

172

9,916

338

-

88

10,514

Provisions for credit impairment

-

-

-

(27)

-

-

-

(27)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

37

-

-

-

37

-

-

-

5

-

-

-

5

Total financial assets

-

-

172

9,931

338

-

88

10,529New Zealand

-

-

145

9,621

338

-

88

10,192

Overseas

-

-

27

310

-

-

-

337

Total financial assets

-

-

172

9,931

338

-

88

10,529Geography

Australia and New Zealand Banking Group Limited - New Zealand Branch

52

Notes to the Financial Statements
NZ Branch$ millions

30/09/2010

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
for-salefinancialassets instruments

Net loansandadvances

Due from
relatedparties

Other Credit related
financial commitments
3
assets

Total

Industry
Finance and insurance

-

-

500

-

302

-

-

Government and local authority1

-

-

-

-

-

-

-

-

Personal lending

-

-

-

10,029-3

63

10,095

Other2

-

-

-

-

-

-

-

-

-

10,897

63

802

-

-

500

10,029302

3Provisions for credit impairment

-

-

-

(22)

-

-

-

(22)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised 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

1
2
3

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

Maximum exposure to credit risk
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.
ANZ New Zealand$ millions

30/09/2011

Retail Other retailmortgages
exposures

NZ BranchTotalmaximum
Non-retail exposure to
exposures
credit risk

Retail Other retailmortgages
exposuresTotal
maximum
Non-retail exposure to
exposures
credit risk

On and off-balance sheet
positions
Liquid assets

-

-

2,266

2,266

-

-

-

-

Due from other financial institutions

-

-

3,633

3,633

-

-

-

-

Trading securities

-

-

9,466

9,466

-

-

-

-

Derivative financial instruments--

14,294

14,294

-

-

172

172

Available-for-sale assets

-

-

295

295

-

-

-

-

Net loans and advances

51,011

4,076

38,526

93,613

9,931

-

-

9,931

Due from related entities

-

-

-

-

-

-

338

338

Other financial assets

-

-

868

868

-

-

-

-

Credit related commitments

5,851

4,919

14,926

25,696

88

-

-

88

Total exposure to credit risk

56,862

8,995

84,274150,131

10,019-510

10,529Liquid assets

-

-

2,079

2,079

-

-

-

-

Due from other financial institutions

-

-

3,496

3,496

-

-

-

-

Trading securities

-

-

6,757

6,757

-

-

-

-

Derivative financial instruments--

10,854

10,854

-

-

500

500

30/09/2010

On and off-balance sheet
positions

Available-for-sale assets

-

-

2,073

2,073

-

-

-

-

Net loans and advances

50,974

4,089

40,95296,015

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

-

-

-

-

-

-

302

302

Other financial assets

-

-

940

940

-

-

3

3

Credit related commitments

5,324

4,575

13,687

23,586

63

-

-

63

Total exposure to credit risk

56,298

8,664

80,838145,800

10,122-805

10,927

Australia and New Zealand Banking Group Limited - New Zealand Branch

53

Notes to the Financial Statements
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 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.
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

54

Notes to the Financial Statements
Distribution of gross loans and advances by credit quality
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

NZ BranchNon-retail
exposures

Total

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

30/09/2011

Strong risk rating

38,881

1,071

17,29757,249

7,919

-

-

7,919

8,688

2,312

16,561

27,561

1,412

-

-

1,412

1,689

557

3,489

5,735

205

-

-

205

49,2583,940

37,34790,545

9,536

-

-

9,536

1 to 5 days

433

126

545

1,104

97

-

-

97

6 to 29 days

497

94

119

710

132

-

-

132

1 to 29 days

930

220

664

1,814

229

-

-

229

30 to 59 days

216

35

99

350

49

-

-

49

60 to 89 days

77

18

24

119

17

-

-

17

152

38

117

307

19

-

-

19

1,375

311

904

2,590

314

-

-

314

537

61

1,194

1,792

66

-

-

66

51,1704,312

39,44594,927

9,916

-

-

9,916

Satisfactory risk rating
Substandard but not past due or
impaired
Total neither past due nor
impaired
Past due but not impaired:

90 days and overTotal past due but not impaired
Individually impaired

30/09/2010

Strong risk rating

37,457976

16,60055,033

7,670

-

-

7,670

Satisfactory risk rating
Substandard but not past due or
impaired

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

Total neither past due nor
impaired
Past due but not impaired:
1 to 5 days

313

92

565

970

89

-

-

89

6 to 29 days

688

113

235

1,036

176

-

-

176

1 to 29 days

1,001

205

800

2,006

265

-

-

265

30 to 59 days

259

38

159

456

50

-

-

50

60 to 89 days

79

18

66

163

22

-

-

22

90 days and over

153

33

127

313

21

-

-

21

1,492

294

1,152

2,938

358

-

-

358

563

81

1,403

2,047

43

-

-

43

50,925

4,342

42,04997,316

10,029--10,029Total past due but not impaired
Individually impaired

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-” ofMoody'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.
These rating bands differ from the Capital Adequacy note credit risk exposures subject to the internal ratings based
approach disclosures as RBNZ credit risk estimates are not used for these internal ratings. The exposures recorded inAustralia and New Zealand Banking Group Limited - New Zealand Branch

55

Notes to the Financial Statements
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 the underlying internalratings applied to customers and to new loans written or loans rolling off.
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.
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
provision is allocated against it.
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

NZ BranchNon-retail
exposures

Total

1,194

1,792

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

66

30/09/2011

Impaired financial assets
Undrawn facilities with impaired
customers

537

61

66

-

-

-

-

26

Individual provision balance

165

36

310

26

-

-

-

-

511

17

-

-

17

Net impaired financial assets

372

25

910

1,307

49

-

-

49

Collective provision balance

130

147

395

672

10

-

-

10

Impaired financial assets
Undrawn facilities with impaired
customers

563

81

1,403

2,047

43

-

-

43

-

-

32

Individual provision balance

218

50

348

32

-

-

-

-

616

11

-

-

11

Net impaired financial assets

345

31

1,087

1,463

32

-

-

32

Collective provision balance

122

149

533

804

11

-

-

11

30/09/2010

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 andadvances 1

Credit related
commitments 2

1,069
216

Total value of collateral

1,285

Credit exposure

1,792
507

NZ Branch
Total

Net Loans andadvances 1

Credit related
commitments 2

Total

-

1,069

49

-

49

22

238

-

-

-

22

1,307

49

-

49

26

1,818

66

-

66

4

511

17

-

17

30/09/2011
Real estate
Other

Unsecured portion of credit
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

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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

56

Notes to the Financial Statements
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 is generated 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
trading and balance sheet portfolios. This approach and related analysis identifies the range of possible outcomes thatcan be expected over a given period of time, establishes the relative likelihood of those outcomes and allocates anappropriate amount of capital to support these activities.
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 Value at Risk, aggregate market
position and sensitivity, product and geographic thresholds. To facilitate the management, control, measurements andreporting of market 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

57

Notes to the Financial Statements
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.
ANZ New Zealand's standard VaR approach for both traded and non-traded risk is historical simulation.
ANZ New
Zealand calculates VaR using historical changes in market rates and prices over the previous 500 business days. Tradedand Non-Traded 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$ millions

30/09/2011
Foreign exchange
riskInterest rate risk
Credit spread risk
Diversification
benefit
Total VaR
30/09/2010
Foreign exchange
riskInterest rate risk

ANZ New Zealand

ANZ New Zealand

Value at risk at 97.5% confidence

Value at risk at 99% confidence

As atHigh foryear

Low for Average for
year
year

As at

High for
year

0.4

0.9

0.2

1.9
0.8

4.3
1.0

1.2
0.3

(1.1)

n/a

2.0

Low for Average for
year
year

0.4

0.4

1.3

0.3

0.5

2.8
0.6

2.3
0.9

7.2
1.1

1.6
0.4

3.9
0.7

n/a

(1.0)

(1.4)

n/a

n/a

(1.3)

4.4

1.4

2.8

2.2

6.7

1.8

3.8

0.5
2.8

1.3
5.0

0.2
1.5

0.5
2.9

0.7
4.1

1.9
6.6

0.3
2.0

0.8
4.1

Credit spread risk
Diversification
benefit

0.6

1.2

0.3

0.6

0.8

2.7

0.4

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

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:•

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.

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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

58

Notes to the Financial Statementsa) VaR non-traded interest rate risk
ANZ New ZealandHigh forLow for

Average for

As at

year

year

year

7.9

13.5

7.3

9.3

11.7

13.6

7.2

11.3

$ millions

30/09/2011

Value at risk at 97.5% confidence
30/09/2010

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
30/09/2011

30/09/2010

As at

1.3%

0.7%

Maximum exposure

1.4%

1.0%

Minimum exposure

-0.1%

-0.7%

Average exposure (in absolute terms)

0.7%

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 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.
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.
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 ANZ New Zealand's policy.
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet
instruments by showing the periods in which these instruments may reprice (that is, when interest rates applicable toeach asset or liability can be changed).
The repricing gaps are based upon contractual repricing information except where the contractual terms are notconsidered to be 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 ratesensitivity. This treatment excludes the effect of basis risk between customer pricing and wholesale market pricing.

Australia and New Zealand Banking Group Limited - New Zealand Branch59

Notes to the Financial Statements
ANZ New Zealand
30/09/2011

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

Total

3 months

monthsmonthsyears

2 years

interest

Liquid assets

2,455

2,266

-

-

-

-

189

Due from other financial institutions

3,633

2,985

-

-

-

-

648

Trading securities

9,466

2,684

18

496

2,218

4,050

-

14,294

-

-

-

-

-

14,294$ millions

AssetsDerivative financial instruments
Available-for-sale assets

411

94

72

122

-

-

123

Net loans and advances

93,61368,355

5,115

7,974

7,680

3,900

589

Other financial assets

868

66

4

7

14

6

771

Total financial assets

124,740

76,450

5,209

8,599

9,912

7,956

16,614Due to other financial institutions

12,247

11,774

-

-

-

62

411

Deposits and other borrowings

69,23845,86911,227

4,427

1,080

1,517

5,118

Derivative financial instruments
Payables and other financial
liabilities

14,178

-

-

-

-

-

14,178

1,995

24

-

-

2

189

1,780

Bonds and notes

18,472

6,960

-

2,110

4,348

5,054

-

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

1,988

-

250

903

835

-

-

Total financial liabilities

119,884

66,393

11,477

7,440

6,265

6,822

21,487

Hedging instruments-(3,707)

6,748(4,850)

680

1,129

-

Interest sensitivity gap

4,856

6,350

480

(3,691)

4,327

2,263

(4,873)

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

Total

3 months

monthsmonthsyears

2 years

Liquid assets

2,239

2,079

-

-

-

160

Due from other financial institutions

3,496

1,932

-

-

-

-

1,564

Trading securities

6,757

836

26

133

1,536

4,226

-

Derivative financial instruments

10,854

-

-

-

-

-

10,854

Liabilities

ANZ New Zealand
30/09/2010$ millions

interest

AssetsAvailable-for-sale assets

2,151

703

1,061

246

23

40

78

Net loans and advances

96,01561,6395,549

10,20812,313

5,688

618

Other financial assets

940

87

-

-

-

-

853

Total financial assets

122,452

67,276

6,636

10,587

13,872

9,954

14,127

Due to other financial institutions

12,293

10,809

-

-

-

25

1,459

Deposits and other borrowings

70,295

43,695

13,224

6,414

1,000

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

3,207

7,984

-

Term funding

1,766

1,766

-

-

-

-

-

Loan capital

2,407

-

630

350

592

835

-

Total financial liabilities

118,462

64,46814,004

7,222

4,799

9,842

18,127

Hedging instruments

-

8,638

(2,239)(2,671)(9,252)

5,524-Interest sensitivity gap

3,990

11,446(9,607)

694

(179)

5,636

(4,000)Liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

60

Notes to the Financial Statements
NZ Branch
30/09/2011$ millions

Total

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

3 months

monthsmonthsyears

2 years

interest

AssetsDerivative financial instruments

172

-

-

-

-

-

172

Net loans and advances

9,931

6,203

762

1,297

1,243

387

39

Due from related entities

338

338

-

-

-

-

-

10,441

6,541

762

1,297

1,243

387

211

10,011

10,011

-

-

-

-

-

117

-

-

-

-

-

117

71

-

-

-

-

-

71

51

-

-

-

-

-

51

Total financial liabilities

10,25010,011

-

-

-

-

239

Hedging instruments

-

3,263

(295)

(1,405)(1,167)(396)-

Interest sensitivity gap

191

(207)

467

(108)

76

(9)

(28)

Less than

3 to 6

6 to 12

1 to 2

Beyond Not bearing

3 months

monthsmonthsyears

2 years

interest

Total financial assets
Liabilities
Due to other financial institutions
Derivative financial instruments
Payables and other financial
liabilities
Due to subsidiary companies

NZ Branch
30/09/2010$ millions

Total

AssetsDerivative financial instruments

500

-

-

-

-

-

500

Net loans and advances

10,059

4,784

832

1,536

2,073

813

21

Due from related entities

302

302

-

-

-

-

-

Other financial assets

3

-

-

-

-

-

3

Total financial assets

10,864

5,086

832

1,536

2,073

813

524

10,481

10,481

-

-

-

-

-

142

-

-

-

-

-

142

70

-

-

-

-

-

70

Total financial liabilities

10,693

10,481

-

-

-

-

212

Hedging instruments

-

4,435

(30)

(1,679)(2,052)(674)-

Interest sensitivity gap

171

(960)

802

(143)

21

139

312

Liabilities
Due to other financial institutions
Derivative financial instruments
Payables and other financial
liabilities

Equity price risk
The portfolio of financial assets classified as available-for-sale contains equity investment holdings held for longer term
strategic intentions. These equity investments are also subject to market risk which is not captured by the VaR measures
for traded and non-traded market risks. The fair value of these securities as at 30 September 2011 was $116 million(30/09/2010 $78 million). A 10 per cent reduction in the value of the available-for-sale equity securities at 30 September
2011 would have reduced equity by $12 million (30/09/2010 $8 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 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 foreignexchange transactions in that foreign currency. The amounts are stated in New Zealand dollar equivalents translatedusing the spot exchange rates as at balance sheet date.

Australia and New Zealand Banking Group Limited - New Zealand Branch

61

Notes to the Financial Statements
ANZ New Zealand$ millions

30/09/2011

NZ Branch

30/09/2010

30/09/2011

30/09/2010

Net open position
Australian dollar

(3)

20

1

2

Euro

-

(1)

-

-

Japanese yen

-

(2)

-

-

Pound sterling

-

1

-

-

US dollar

2

(3)

-

-

(1)

15

1

2

Total net open position

Liquidity risk
Liquidity risk is the risk that ANZ New Zealand is unable to meet its payment obligations as they fall due. 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
Committees of the Bank’s and Ultimate Parent Bank’s Boards. The core objective of ANZ New Zealand’s framework is to
manage liquidity to meet obligations as they fall due, without incurring unacceptable losses.
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 New Zealand specific and general market
liquidity stress scenarios.
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 associated with unexpected increases in funding costs or the liquidation ofassets 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.
under different scenarios, including "going-concern", "name-crisis" and various "survival horizons".

Liquidity is assessed"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 aneight 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 todefined 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:••••

Extreme Short Term Crisis Scenario: A name-specific stress during a period of market stress.
Short Term Crisis Scenario: A name-specific stress during a period of normal markets conditions.
Global Funding Market Disruption: Stressed global wholesale funding markets leading to a closure of domestic andoffshore markets.
Offshore Funding Market Disruption: Stressed global wholesale funding markets leading to a closure of offshore
markets only.

As of 30 September 2011 ANZ New Zealand was in compliance with all of the above scenarios.

Australia and New Zealand Banking Group Limited - New Zealand Branch

62

Notes to the Financial Statements
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealandemploys 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
recognises that long-term wholesale debt and other sticky liabilities have favourable liquidity characteristics.
ANZ New Zealand$ millions

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

55,04452,183

-

-

6,950

7,560

-

-

61,99459,743--Funding composition
Customer deposits1
New ZealandOverseas
Total customer deposits
Wholesale funding
Bonds and notes

18,472

19,899--Loan capital

1,988

2,407

-

-

Certificates of deposit

2,454

3,245

-

-

Commercial paper

4,790

7,307

-

-

-

-

51

-

1,766

1,766

-

-

Due to other financial institutions

12,247

12,293

10,011

10,481

Total wholesale funding

41,717

46,917

10,062

10,481

103,711

106,660

10,062

10,481

Households

40,59537,968--Agriculture

2,240

1,993

-

-

504

527

-

-

2,464

2,772

-

-

668

596

-

-

48,80153,395

10,062

10,481Retail trade

690

670

-

-

Wholesale trade

873

677

-

-

3,281

3,754

-

-

Transport and storage

507

620

-

-

Construction

762

731

-

-

1,347

1,967

-

-

979

990

-

-

103,711

106,660

10,062

10,481New Zealand

61,132

59,98334-

Australia

15,48014,326

9,936

9,445

United States-

Due to related entities
Term funding

Total funding
Concentrations of funding by industry

Forestry, fishing and mining
ManufacturingEntertainment, leisure and tourism
Finance and insurance

Business and property services

Government and local authority
Other2
Total funding
Concentrations of funding by geography

314,19817,325-

Europe

7,776

8,708

-

-

Other countries

5,125

6,318

92

1,036

103,711

106,660

10,062

10,481

Total funding
1
2
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.
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 volumes

Australia and New Zealand Banking Group Limited - New Zealand Branch

63

Notes to the Financial Statementsof 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

ANZ New Zealand

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

1,765

1,015

-

-

992

266

-

-

Certificates of deposit

1,562

687

-

-

Govt, local body stock and bonds

4,329

3,631

-

-

169

1,915

-

-

3,269

2,698

-

-

12,086

10,212--

Balances with central banks
Securities purchased under agreement to resell

Government treasury bills
Other bonds
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. At 30 September 2011 ANZ New Zealand would be eligible to enter into repurchasetransactions with a value of $11,634 million. The Banking Group also held unencumbered internal residential mortgage
backed securities (“RMBS”) which would entitle ANZ New Zealand to enter into repurchase transactions with a value of$4,963 million at 30 September 2011 (the RBNZ has imposed a cap limiting the amount of RMBS deemed as eligible in theliquidity 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.
ANZ New Zealand does not manage its liquidity risk on the basis of the information below.

Australia and New Zealand Banking Group Limited - New Zealand Branch

64

Notes to the Financial Statements
ANZ New Zealand$ millions

Less than

3 to 12

Beyond No maturity

3 months

months 1 to 5 years

5 years

specifiedTotal

At callLiquid assets

2,455

2,455

-

-

-

-

-

Due from other financial institutions

3,641

972

2,669

-

-

-

-

Trading securities

10,220

-

1,797

851

6,984

588

-

Derivative financial assets (trading)

12,426-

12,426----

Available-for-sale assets

418

-

73

201

-

21

123

Net loans and advances

30/09/2011

Financial assets

130,422-

10,473

22,11634,39263,441-Other financial assets

525

-

494

11

14

6

-

Total financial assets

160,107

3,427

27,932

23,17941,39064,056123

Financial liabilities
Due to other financial institutions

13,549

726

2,412

2,074

8,275

62

-

Deposits and other borrowings
Derivative financial liabilities(trading)

70,611

26,34024,483

16,785

2,887

116

-

12,574-

12,574

-

-

-

-

1,345

-

1,104

6

198

37

-

19,663

-

1,450

3,751

14,139323-

Term funding

1,841

-

19

1,822

-

-

-

Loan capital

3,135

-

40

120

797

1,005

1,173

122,718

27,06642,082

24,55826,296

1,543

1,173

37,389(23,639)(14,150)(1,379)15,09462,513(1,050)- gross inflows

30,523

-

3,596

7,375

19,48270-- gross outflows(29,602)-(3,781)(7,223)(18,521)(77)-

38,310(23,639)(14,335)(1,227)

16,05562,506(1,050)

Other financial liabilities
Bonds and notes

Total financial liabilities
Net financial assets / (liabilities)
Derivative financial instruments
used for balance sheet
management

Net financial assets / (liabilities)
after balance sheet management

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

Beyond30/09/2011

Total

1 year

1 yearNon-credit related commitments

257

93

164

22,891

22,891

-

2,805

2,805

-

25,95325,789164$ millions

Credit related commitments
Contingent liabilities
Total

Australia and New Zealand Banking Group Limited - New Zealand Branch

65

Notes to the Financial Statements
ANZ New Zealand$ millions

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

30/09/2010

Financial assets

136,900-

10,121

19,96637,657

69,156-

Other financial assets

490

-

469

4

11

6

-

Total financial assets

162,020

2,696

23,78721,75844,22369,47878

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

-

-

-

-

380

-

380

-

-

-

-

Bonds and notes

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

Total financial liabilities

122,301

24,36836,98928,85629,309

1,595

1,184

Net financial assets / (liabilities)

39,719(21,672)(13,202)(7,098)14,91467,883(1,106)- gross inflows

32,644

-

1,206

7,842

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

Net financial assets / (liabilities)
after balance sheet management

38,164(21,672)(13,383)(7,023)

13,46767,881(1,106)

Other financial liabilities

Derivative financial instruments
used for 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

108

195

Credit related commitments

20,845

20,845-

Contingent liabilities

2,741

2,741

-

Total

23,88923,694195$ millions

Australia and New Zealand Banking Group Limited - New Zealand Branch

66

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

17,762

-

375

507

2,472

14,408-Due from related entities

338

-

338

-

-

-

-

18,100

-

713

507

2,472

14,408-

11,384

-

1,118

2,065

8,201

-

-

51

-

51

-

-

-

-

11,435

-

1,169

2,065

8,201

-

-

6,665

-

(456)

(1,558)(5,729)14,408-- gross inflows

11,174

-

1,025

2,048

8,101

-

-

- gross outflows(10,743)-(982)(1,938)(7,823)

-

-

7,096

-

(413)

(1,448)(5,451)

14,408-30/09/2011

Financial assets

Total financial assets
Financial liabilities
Due to other financial institutions
Due to subsidiary companies
Total financial liabilities
Net financial assets / (liabilities)
Derivative financial instruments
used for balance sheet
management

Net financial assets / (liabilities)
after balance sheet management

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

BeyondTotal

1 year

1 yearCredit related commitments

88

88

-

Total

88

88

-

$ millions
30/09/2011

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

19,321

-

304

770

3,781

14,466-Due from related parties

302

-

302

-

-

-

-

Other financial assets

3

-

3

-

-

-

-

Total financial assets

19,626

-

609

770

3,781

14,466-

11,970

-

954

2,128

8,888

-

-

30/09/2010

AssetsLiabilities
Due to other financial institutions
Derivative financial instruments(trading)

142

-

142

-

-

-

-

Other financial liabilities

3

-

3

-

-

-

-

Total financial liabilities

12,115

-

1,099

2,128

8,888

-

-

Net financial assets / (liabilities)

7,511

-

(490)

(1,358)(5,107)

14,466-- gross inflows

10,559

-

927

2,030

7,601

1

-

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

(1)

-

5,295

-

(695)

(1,513)(6,963)

14,466-

Derivative financial instruments
used for balance sheet
management

Net financial assets / (liabilities)
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 Branch

67

Notes to the Financial Statements
31. Concentrations of Credit Risk to Individual Counterparties
ANZ New Zealand measures its concentration of credit risk in respect to bank counterparties on the basis of approved
exposures and in respect to non-bank counterparties on the basis of limits.
For the three month period ending 30 September 2011 there were no individual counterparties (excluding connectedparties, governments and banks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or
peak end-of-day credit exposure equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of theperiod).
This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

32. Fair Value of Financial Assets and Financial Liabilities
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

30/09/2011
Liquid assets

2,455

-

-

-

-

2,455

2,455

Due from other financial institutions

2,071

-

-

-

1,562

3,633

3,633

Trading securities

-

-

9,466

-

-

9,466

9,466

Derivative financial instruments1--

13,634660-

14,294

14,294

Available-for-sale assets

-

-

-

-

411

411

411

Net loans and advances2

93,613----

93,61393,762Other financial assets

771

97

-

-

-

868

868

Total financial assets

98,91097

23,100660

1,973

124,740

124,889

Due to other financial institutions

12,247----

12,247

12,453

Deposits and other borrowings

64,448

4,790

-

-

-

69,23869,343--

13,717461-

14,17814,178

1,995

-

-

-

-

1,995

1,995

18,472----

18,472

18,344

Term funding

1,766

-

-

-

-

1,766

1,766

Loan capital

1,988

-

-

-

-

1,988

1,922

100,916

4,790

13,717461-

119,884

120,001

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

-

-

-

-

2,151

2,151

2,151

Net loans and advances2

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

Other financial assets

853

87

-

-

-

940

940

Total financial assets

101,896

87

16,851760

2,858

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

Other financial liabilities

1,075

-

-

-

-

1,075

1,075

Bonds and notes2

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

118,712

Derivative financial instruments1
Other financial liabilities
Bonds and notes2

Total financial liabilities
30/09/2010

Derivative financial instruments1

Total financial liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

68

Notes to the Financial Statements
NZ Branch$ millions

At amortised
cost

Carrying amountAt fair value throughprofit or loss
Designatedon initial
Held forrecognition
trading

Availablefor-saleHedging
assets

Total

Fair Value

30/09/2011
Derivative financial instruments1
Net loans and advances2

9,931

-

172
-

-

-

172
9,931

172
9,938

Due from subsidiary companies

338

-

-

-

-

338

338

Total financial assets

10,269

-

172

-

-

10,441

10,448Due to other financial institutions

10,011----

10,011

10,217

51

-

-

-

-

51

51

-

-

58

59

-

117

117

Other financial liabilities

71

-

-

-

-

71

71

Total financial liabilities

10,133

-

58

59

-

10,25010,456

10,059

-

500
-

-

-

500
10,059500
10,081

Due to subsidiary companies
Derivative financial instruments1

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

302

-

-

-

-

302

302

Other financial assets

3

-

-

-

-

3

3

Total financial assets

10,364

-

500

-

-

10,864

10,886

Due to other financial institutions

10,481----

10,481

10,674

Derivative financial instruments1

-

-

72

70

-

142

142

70

-

-

-

-

70

70

Bonds and notes2

1,516

-

-

-

-

1,516

1,545

Total financial liabilities

12,067

-

72

70

-

12,20912,431Other financial liabilities

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 certain financial assets within loans and advances and certain financial liabilities within bonds and notes. The resulting fair value
adjustment means that the carrying value differs from the amortised 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 are considered to approximate the fair values. When longer term innature, fair value is based on quoted market prices, or for those debt issues where quoted market prices are notavailable, a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of that debt
instrument.
Trading securities, derivative financial instruments and available for sale assets
Fair value is based on quoted market prices, 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.
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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

69

Notes to the Financial Statements
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 funds or other investments which do not trade in an active market. For these instruments the fairvalue 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 isdetermined using broker quotes or valuation techniques, including discounted cash flow analysis, using data derived andextrapolated from market data and tested against historic transactions and observed market trends.
Valuation technique$millions

ANZ New Zealand
Level 1NZ Branch

Level 2

Level 3

Total

Level 1

Level 2

Level 3Total

30/09/2011
Due from other financial institutions

1,562

-

-

1,562

-

-

-

-

Trading securities

5,565

3,901

-

9,466

-

-

-

-

334

72

5

411

-

-

-

-

18

14,275

1

14,294

-

172

-

172

27

70

-

97

-

-

-

-

7,506

18,318

6

25,830

-

172

-

172

Available-for-sale assets
Derivative financial instruments
Investments relating to insurance
business
Total financial assets held at fairvalue
Commercial paper

-

4,790

-

4,790

-

-

-

-

Derivative financial instruments

18

14,160-14,178

-

117

-

117

Total financial liabilities held at fair
value

18

18,950-18,968

-

117

-

117

30/09/2010
Due from other financial institutions

707

-

-

707

-

-

-

-

Trading securities

3,630

3,127

-

6,757

-

-

-

-

Available-for-sale assets

1,990

42

119

2,151

-

-

-

-

3

10,851-

10,854

-

500

-

500

-

87

-

87

-

-

-

-

6,330

14,107

119

20,556

-

500

-

500

Derivative financial instruments
Investments relating to insurance
business
Total financial assets held at fairvalue
Commercial paper

-

7,307

-

7,307

-

-

-

-

Derivative financial instruments

35

10,692-

10,727

-

142

-

142

Total financial liabilities held at fair
value

35

17,999-18,034

-

142

-

142

Australia and New Zealand Banking Group Limited - New Zealand Branch

70

Notes to the Financial Statements
Movements in level 3 valuations
ANZ New Zealand$ millions

Opening balance

30/09/2011

NZ Branch

30/09/2010

30/09/2011

30/09/2010

119

-

-

-

-

127

-

-

Purchases

11

-

-

-

Revaluations

38

38

-

-

4

(8)

-

-

(166)

(38)

-

-

6

119

-

-

Year toYear toYear toYear to30/09/2011

30/09/2010

30/09/2011

30/09/2010

1,085

867

44

94

Acquired in a business combination

Foreign exchange movements
Sales
Closing balance

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

NZ Branch

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

74

71

-

-

Provision for credit impairment

190

456

13

20
-

Deferred fee revenue and expenses

4

(5)

-

Share-based payments expense

22

21

-

-

Amortisation of capitalised brokerage / mortgage origination fees
Deferrals or accruals of past or future operating cash receipts or
payments:

42

45

9

10

(177)

Change in net operating assets less liabilities

1,431(2,528)(42)

Change in interest receivable

48

6

-

-

Change in interest payable

(16)

(37)

4

26

Change in accrued income

3

(6)

-

-

Change in accrued expenses

(56)

54

(1)

1

Change in provisions

(6)

(63)

-

-

Amortisation of premiums and discounts

109

39

-

-

Change in insurance policy assets

(62)

(49)

-

-

Change in net income tax assets / liabilities

213

(235)

(27)

26

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

(2)

(42)

-

-

Impairment of associates

-

7

-

-

Re-measuring existing equity interest to fair value

-

82

-

-

Gain on disposal of interests in associates
Loss on disposal and impairment of premises and equipment andintangibles

(5)

-

-

-

8

9

-

-

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

3,082(1,308)--ANZ New Zealand$ millions

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Liquid assets

2,455

2,239

-

-

Due from other financial institutions - less than 90 days

3,633

1,339

-

-

Total cash and cash equivalents

6,088

3,578

-

-

Reconciliation of cash and cash equivalents to the balance
sheetsAustralia and New Zealand Banking Group Limited - New Zealand Branch

71

Notes to the Financial Statements
34. Commitments
ANZ New Zealand$ millions

NZ Branch

30/09/2011

30/09/2010

30/09/2011

30/09/2010

Not later than 1 year

13

17

-

-

Total capital expenditure commitments

13

17

-

-

Contracts for outstanding capital expenditure

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

80

91

-

-

135

166

-

-

29

29

-

-

Total lease rental commitments

244

286

-

-

Total commitments

257

303

-

-

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

35. Credit Related Commitments and Contingent Liabilities$ millions

ANZ New Zealand

NZ Branch

Face or contract value

Face or contract value

30/09/2011

30/09/2011

30/09/2010

30/09/2010

Credit related commitments
Commitments with certain drawdown due within one year

527

493

-

-

Commitments to provide financial services

22,364

20,352

88

63

Total credit related commitments

22,891

20,845

88

63

1,753

1,686

-

-

60

60

-

-

Transaction related contingent items

882

898

-

-

Trade related contingent liabilities

110

97

-

-

2,805

2,741

-

-

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.
Other contingent liabilities
ANZ New Zealand has other contingent liabilities in respect of actual and possible claims and court 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 deemed necessary.

36. Securitisation, Funds Management, Other Fiduciary Activities and Insurance
The Kingfisher Trust
ANZ New Zealand has established the Kingfisher Trust as an in-house residential mortgage backed securities facility that
can issue securities meeting the RBNZ criteria to use as collateral in repurchase transactions with the RBNZ.
As at 30 September 2011 the rights to cash flows associated with residential mortgages with a carrying value of $6,666
million (30/09/2010 $6,531 million) were held in this facility. These assets do not qualify for derecognition as the Bank
retains substantially all of the risks and rewards of the transferred assets, therefore ANZ New Zealand’s financial
statements do not change as a result of establishing this facility.
As at 30 September 2011 and 30 September 2010 ANZ New Zealand had entered into no repurchase agreements with the
RBNZ for residential mortgage backed securities and therefore no collateral had been accepted by the RBNZ under thisfacility.
The Covered Bond TrustOn 11 February 2011, as part of the establishment of the Bank’s covered bond programme, the Covered Bond Trust wasestablished. The assets of the Covered Bond Trust are made up of certain housing loans and related securities originatedAustralia and New Zealand Banking Group Limited - New Zealand Branch

72

Notes to the Financial Statements
by the Bank and which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of the Covered
Bond Trust of issuances of covered bonds by the Bank or its wholly owned subsidiary ANZ National (Int’l) Limited, fromtime to time.
As at 30 September 2011 the rights to cash flows associated with housing loans and related securities with a carrying
value of $2,745 million were held in the Covered Bond Trust. The assets of the Covered Bond Trust do not qualify for
derecognition as the Bank retains substantially all of the risks and rewards of the transferred assets. Therefore, theestablishment of the covered bond programme and the Covered Bond Trust do not change ANZ New Zealand’s financial
statements.
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 2011, $2,500 million of funds under management were
invested in ANZ New Zealand's own products or securities (30/09/2010 $2,888 million).
Aggregate value of funds managed by ANZ New Zealand
ANZ New Zealand$ millions

30/09/2011

30/09/2010

Funds managed by OnePath

6,709

7,430

The Bonus Bonds Trust

2,996

2,973

Other discretionary funds

5,016

4,760

14,721

15,163

Totals funds under management

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 (30/09/2010 $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 $438 million (30/09/2010:$337 million), which is 0.3% (30/09/2010: 0.3%) of the total consolidated assets of ANZ New Zealand.
Risk management
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 funds management products:

Australia and New Zealand Banking Group Limited - New Zealand Branch73

Notes to the Financial Statements• 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.

37. Subsequent Events
On 20 October 2011 ANZ National (Int'l) Limited, a wholly owned subsidiary of the Bank, issued fixed rate covered bonds
with a face value of EUR 500 million, a coupon rate of 3.0% and a maturity date of 20 October 2016. The covered bonds
are guaranteed by ANZNZ Covered Bond Trust Limited as trustee of the Covered Bond Trust under the terms of the Bank’s
covered bond programme. The assets of the Covered Bond Trust are not available to creditors of the Bank, although the
Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (ifany) after all prior ranking creditors of the Covered Bond Trust have been satisfied. Refer to note 36 for further details of
the covered bond programme.
There have been no other material subsequent events.

38. Additional Disclosures
Overseas Banking Group profitability and size
AUD millions

30/09/2011

Net profit after tax for the year1

5,363

Net profit after tax for the year as a percentage of average total assets

0.95%

Total assets
Percentage change in total assets over the preceding year

1594,488
11.8%

Net profit after tax for the year includes $8m of profit attributable to non-controlling interests.

Overseas Banking Group asset quality
AUD millions

30/09/2011

Gross impaired assets

5,581

Gross impaired assets as a percentage of total assets

0.94%

Total individually assessed provisions for impairment

1,697

Individually assessed provisions for impairment as a percentage of gross impaired assets

30.4%

Collective provision for credit impairment

3,176

Australia and New Zealand Banking Group Limited - New Zealand Branch

74

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.

Board Members as at 29 November 2011
The names, qualifications, occupation, country of residence and material external directorships of each director of the
Ultimate Parent Bank as at the date this 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 and Tenix Group Pty Limited.

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, Shanghai International Financial Advisory Council, and the BusinessCouncil 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

Australia and New Zealand Banking Group Limited - New Zealand Branch

75

Directorate and Auditors
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.
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 and Myer Holdings Limited.
Member: Takeovers Panel.
Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is a member of the Human Resources 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.
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
Director: Coca Cola Amatil Limited and Mirrabooka Investments Limited.
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: The Nature Conservancy Australian Advisory Board.
Member: Takeovers Panel.

Chief Executive Officer, Australia and New Zealand Banking Group – New Zealand Branch
Fiona J Brown
LLB (Hons) / BA
Chief Executive Officer– NZ Branch
Wellington, New ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

Directorate and Auditors
Auditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New Zealand76

Australia and New Zealand Banking Group Limited - New Zealand Branch

77

Conditions of Registration
Conditions of Registration, applicable as at 30 September 2011.
applied from 30 September 2011.

These Conditions of Registration haveSince issuance of the last Disclosure Statement dated 19 August 2011 the RBNZ has issued revised conditions ofregistration for the NZ Branch. Condition 2 has changed to incorporate a new definition of insurance business, and thedefinition of “generally accepted accounting practice” has been moved to the end of the conditions. None of the changes
change the intent of the conditions.
The registration of Australia and New Zealand Banking Group Limited (the registered bank) in New Zealand is subject tothe following conditions:1.

That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total
activities.
In this condition of registration, the meaning of “material” is based on generally accepted accounting practice.

2.

That the banking group’s insurance business is not greater than 1% of its total consolidated assets.
For the purposes of this condition of registration, the banking group’s insurance business is the sum of the following
amounts for entities in the banking group:a) If the business of an entity predominately consists of insurance business and the entity is not a subsidiary of
another entity in the banking group whose business predominantly consists of insurance business, the amount of
the insurance business to sum is the total consolidated assets of the group headed by the entity; andb) If the entity conducts insurance business and its business does not predominantly consist of insurance businessand the entity is not a subsidiary of another entity in the banking group whose business predominantly consistsof insurance business, the amount of the insurance business to sum is the total liabilities relating to the entity’s
insurance business plus the equity retained by the entity to meet the solvency or financial soundness needs of its
insurance business.
In determining the total amount of the banking group’s insurance business:a) all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting
practice; andb) if products or assets of which an insurance business is comprised also contain a non-insurance component,
the whole of such products or assets must be considered part of the insurance business.
For the purpose of this condition of registration:“insurance business” means the undertaking or assumption of liability as an insurer under a contract of
insurance;“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance(Prudential Supervision) Act 2010.

3.

That the business of the registered bank in New Zealand does not constitute a predominant proportion of the businessof 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:a) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; andb) 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:a) tier one capital of the Australia and New Zealand Banking Group Limited is not less than 4 percent of risk
weighted exposures;b) 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:a) acquiring for fair value, and holding, mortgages originated by ANZ National Bank Limited; andb) any other business for which the prior written approval of the Reserve Bank of New Zealand has been obtained;andc) activities that are necessarily incidental to the business specified in paragraphs (a) and (b).

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:a) to the government of New Zealand in respect of taxation and other charges; andb) to other branches or the head office of the registered bank; andc) to trade creditors and staff; andd) to ANZ National Bank Limited in respect of activities, other than borrowing, that are necessarily incidental to thebusiness specified in paragraphs (a) and (b) of condition 7; ande) any other liabilities for which the prior written approval of the Reserve Bank has been obtained.

In these conditions of registration:

Australia and New Zealand Banking Group Limited - New Zealand Branch

78

Conditions of Registration"banking group" means the New Zealand business of the registered bank and its subsidiaries as required to be reported in
the financial statements for the group's New Zealand business under section 9(2) of the Financial Reporting Act 1993;“business of the registered bank in New Zealand” means the New Zealand business of the registered bank as required tobe reported in the financial statements under section 8(2) of the Financial Reporting Act 1993;“generally accepted accounting practice” has the same meaning as in section 2 of the Financial Reporting Act 1993.

Australia and New Zealand Banking Group Limited - New Zealand Branch

79

Directors’ and New Zealand Chief Executive Officer’s
Statement
Each Director of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branch believes, after due enquiry, that,as at the date on which this Disclosure Statement is signed:i.

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements(Overseas Incorporated Registered Banks) Order (No 3) 2011;

ii.

The Disclosure Statement is not false or misleading.

Each Director of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branch believes, after due enquiry, that,over the year ended 30 September 2011:i.

The registered bank has complied with all the conditions of registration;ii.

ANZ New Zealand had systems in place to monitor and control adequately ANZ New Zealand’s material risks,
including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and otherbusiness risks, and that those systems were being properly applied.

This Disclosure Statement is dated 29 November 2011, and has been signed by the Chairman of the Ultimate
Parent Bank as agent for all Directors and by the Chief Executive Officer – NZ Branch.

J P MorschelChairmanF J Brown
Chief Executive Officer – NZ Branch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 Disclosure Statement (excluding Supplementary
Information relating to Credit and Market Risk Exposures and Capital Adequacy)
We have audited the accompanying Disclosure Statement and supplementary information (excluding the
supplementary information relating to Credit and Market Risk Exposures and Capital Adequacy disclosed
in note 29) of Australia and New Zealand Banking Group Limited – New Zealand Branch (the “NZ
Branch'') and its related entities (the “ANZ New Zealand”) on pages 5 to 73. The Disclosure Statement
comprises the balance sheets as at 30 September 2011, the income statements and statements ofcomprehensive income, changes in equity and cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory information of the NZ Branch and ANZ New
Zealand. The supplementary information comprises the information that is required to be disclosed under
the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order (No 3) 2011
(the “Order”).
Directors' Responsibility for the Financial Statements
The Directors are responsible for the preparation of the Disclosure Statement, which includes financial
statements prepared in accordance with Clause 25 of the Order, generally accepted accounting practice in
New Zealand, and International Financial Reporting Standards and that gives a true and fair view of thematters to which they relate. The Directors are also responsible for such internal controls as they
determine are necessary to enable the preparation of the Disclosure Statement that is free from material
misstatement whether due to fraud or error.
The Directors are responsible for the preparation and fair presentation of supplementary information, in
accordance with Schedules 2, 4, 7, 10, 11, and 13 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Disclosure Statement, including the supplementary
information (excluding the supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy disclosed in note 29), disclosed in accordance with Schedules 4, 7, 10, 11, and 13 of
the Order and presented to us by the Directors. 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 Disclosure Statement isfree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe Disclosure Statement. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the Disclosure Statement, whether due to fraud 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 Disclosure Statement that gives a true and fair view of thematters to which they relate in order to design audit procedures that are appropriate in the circumstances,
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 the presentation of theDisclosure 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 the ANZ New Zealand.
These matters have not impaired our independence as auditors 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 Disclosure Statement of Australia and New Zealand Banking Limited – New Zealand
Branch and its related entities (“the NZ Branch” and “ANZ New Zealand”) on pages 5 to 73 (excluding
the supplementary information disclosed in accordance with Schedules 4, 7, 9, 10, 11 and 13 of theOrder):


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 2011 and of their financial
performance and cash flows for the year ended on that date.

Opinion on Supplementary Information (excluding Supplementary Information relating to Credit andMarket Risk Exposures and Capital Adequacy)
In our opinion, the supplementary information that is required to be disclosed in accordance with
Schedules 4, 7, 10, 11 and 13 of the Order, and is included within notes 14, 30, 31, 36 and 38 of theDisclosure 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 (excluding Supplementary Information
relating to Credit and Market Risk Exposures and Capital Adequacy)
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 Credit and Market Risk Exposures andCapital Adequacy
We have reviewed the supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy, as disclosed in note 29 of the Disclosure Statement for the year ended 30 September
2011.

Directors’ Responsibility for the Supplementary Information Relating to Credit and Market Risk
Exposures and Capital Adequacy
The Directors are responsible for the preparation of supplementary information relating to Credit andMarket Risk Exposures and Capital Adequacy that is required to be disclosed under Schedule 9 of theOrder and prepared in accordance with the Capital Adequacy Framework (Basel I Approach) (BS2) and
Capital Adequacy Framework (Standardised Approach) (BS2A), and described in note 29 of theDisclosure Statement.
Auditor’s Responsibility
Our responsibility is to express an opinion on the supplementary information relating to Credit andMarket Risk Exposures and Capital Adequacy based on our review. We conducted our review inaccordance with the Review Engagement Standards issued by the New Zealand Institute of Chartered
Accountants.
We are responsible for reviewing the disclosures in order to state whether, on the basis of the procedures
described below, anything has come to our attention that would cause us to believe that the supplementary
information is not, in all material respects:

prepared in accordance with Capital Adequacy Framework (Basel I Approach) (BS2) and Capital
Adequacy Framework (Standardised Approach) (BS2A); anddisclosed in accordance with Schedule 9 of the Orderand for reporting our findings to you.
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 Credit and Market Risk Exposures and 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 Credit and Market Risk Exposures and Capital Adequacy, disclosed in note 29 of
the Disclosure Statement, is not prepared and disclosed, in all material respects, in accordance with:

the Capital Adequacy Framework (Basel I Approach) (BS2) and Capital Adequacy Framework(Standardised Approach) (BS2A); and

Schedule 9 of the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks)
Order (No 3) 2011.

Wellington
29 November 2011Australia and New Zealand Banking Group Limited - New Zealand Branch

83

Index
Contents and Glossary of Terms

1

General Disclosures2

Summary of Financial Statements

4

Income Statements

5Statements of Comprehensive Income

5Statements of Changes in Equity

6

Balance Sheets

7

Cash Flow Statements

8

1. Significant Accounting Policies

9

2. Critical Estimates and Judgement Used in Applying Accounting Policies

17

3. Risk Management Policies

19

4. Income21

5. Expenses

22

6. Income Tax Expense

23

7. Segmental Analysis

24

8. Liquid Assets

26

9. Due from Other Financial Institutions

26

10. Trading Securities

26

11. Derivative Financial Instruments

27

12. Available-for-sale Assets

30

13. Net Loans and Advances30

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

31

15. Provision for Credit Impairment

33

16. Controlled Entities, Associates and Jointly Controlled Entities

34

17. Other Assets

37

18. Deferred Tax Assets and Liabilities

37

19. Goodwill and Other Intangible Assets

38

20. Due to Other Financial Institutions

38

21. Deposits and Other Borrowings

38

22. Payables and Other Liabilities

39

23. Provisions

39

24. Bonds and Notes

40

25. Loan Capital

41

26. Related Party Transactions

42

27. Current and Non-current Assets and Liabilities

44

28. Ordinary Share Capital45

29. Capital Adequacy

45

30. Financial Risk Management48

31. Concentrations of Credit Risk to Individual Counterparties

67

32. Fair Value of Financial Assets and Financial Liabilities

67

33. Notes to the Cash Flow Statements

70

34. Commitments

71

35. Credit Related Commitments and Contingent Liabilities

71

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

71

37. Subsequent Events73

38. Additional Disclosures73

Directorate and Auditors

74

Conditions of Registration

77

Directors’ Statement

79

Auditors’ Report

80

Index

83