AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED- ANZ NEW ZEALAND
REGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2020
NUMBER 42 | ISSUED MAY 2020

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

REGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2020

CONTENTSDISCLOSURE STATEMENT
Condensed Consolidated Interim Financial Statements (Interim Financial Statements)
Income statement

3Statement of comprehensive income

3

Balance sheet

4

Cash flow statement

5

Statement of changes in equity

6

Notes to the interim financial statements

7

Registered Bank Disclosures
General disclosures

24

Additional financial disclosures

25

Asset quality

30

Credit and market risk exposures and capital adequacy

32

Insurance business32

Directors’ and New Zealand Chief Executive Officer’s Statement

33

Independent Auditor’s Review Report34

GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Funds Pty Limited, which is the immediate parent company of ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it wereconducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand, We or Our means the New Zealand business of the Overseas Banking Group.
UDC means UDC Finance Limited.
Registered Office is Level 10, 171 Featherston Street, Wellington, New Zealand, which is also ANZ New Zealand’s address for service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
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 - ANZ NEW ZEALAND

UNAUDITEDINTERIM FINANCIAL STATEMENTS
INCOME STATEMENT
2020
NZ$m

2019
NZ$m

3,006
(1,358)3,322(1,696)

1,648

1,626

507

373

Net income from insurance business-

27

Share of associates' profit

-

4

2,155

2,030

For the six months ended 31 March

Note

Interest income
Interest expense
Net interest income
Other operating income

2

Operating income
Operating expenses

3

Profit before credit impairment and income tax

(836)

(745)

1,319

1,285

(232)

(32)

Profit before income tax

1,087

1,253

Income tax expense

(298)

(324)

Profit for the period

789

929

2020
NZ$m

2019
NZ$m

789

929

(17)

(16)

Credit impairment charge

7

STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 MarchProfit for the period
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity

(65)

-

Realised losses transferred to the income statement

14

4

Income tax attributable to the above items

19

3

Other comprehensive income after tax

(49)

(9)

Total comprehensive income for the period

740

920

The notes appearing on pages 7 to 23 form an integral part of these financial statements

3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDINTERIM FINANCIAL STATEMENTS
BALANCE SHEETAs atAssetsCash and cash equivalents

Note

31 Mar 20
NZ$m

30 Sep 19
NZ$m

5

7,746

2,709

Settlement balances receivable

404

193

Collateral paid

2,527

2,324

Trading securities

11,6798,942

Derivative financial instruments

13,246

11,653

Investment securities

7,293

7,027

135,679

133,264

Deferred tax assets

293

80

Goodwill and other intangible assets

3,267

3,276

Premises and equipment

620

335

Net loans and advances

6

Other assets

670

689

Total assets

183,424

170,492

Settlement balances payable

2,215

1,590

Collateral received

1,290

991

124,091

117,071

12,505

10,912

Liabilities

Deposits and other borrowings

8

Derivative financial instruments
Current tax liabilities

110

110

Payables and other liabilities

1,212

1,174

145

138

Other provisions

9

329

314

Debt issuances

10

28,20525,593

Total liabilities (excluding head office account)

170,102

157,893

Net assets (excluding head office account)

13,322

12,59911,055

11,055

Employee entitlements

EquityShare capital and initial head office account

(15)

21

Retained earnings

2,282

1,523

Total equity & head office account13,322

12,599Reserves

The notes appearing on pages 7 to 23 form an integral part of these financial statements

4

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDCASH FLOW STATEMENT
For the six months ended 31 MarchProfit after income tax

2020
NZ$m

2019
NZ$m

789

929

69

41

Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation
Loss on sale and impairment of premises and equipment
Net derivatives/foreign exchange adjustment

-

5

1,203

(16)

-

(646)

118

(146)

Collateral paid

(203)

(451)

Trading securities(2,737)481

Net loans and advances(2,415)(3,111)Other assets

(405)

625

Deposits and other borrowings (excluding borrowings from Immediate Parent and Ultimate Parent Bank)

7,639

2,968

Settlement balances payable

625

476

Collateral received

299

(326)

Other liabilities

(264)

(421)

Total adjustments

3,929

(521)

Net cash flows from operating activities1

4,718

408

(1,050)(1,054)

768

1,288

-

747

Proceeds from divestments net of intangibles disposed of, classified as investing activities
Other non-cash movements
Net (increase)/decrease in operating assets:

Net increase/(decrease) in operating liabilities:

Cash flows from investing activities
Investment securities:
Purchases
Proceeds from sale or maturity
Proceeds from divestments
Other assets

(21)

(51)

Net cash flows from investing activities

(303)

930

Cash flows from financing activities
Debt issuances2
Issue proceeds

2,327

3,240

Redemptions(966)(3,145)

Borrowings from Immediate Parent and Ultimate Parent Bank:3
Loans drawn down
Repayments

-

512

(715)

(1,280)

(24)

-

-

(375)

Net cash flows from financing activities

622(1,048)Net change in cash and cash equivalents

5,037

290

Cash and cash equivalents at beginning of period

2,709

2,407

Cash and cash equivalents at end of period

7,746

2,697

Repayment of lease liabilities4
Dividends paid

1
2

3

4

Net cash provided by operating activities includes income taxes paid of NZ$485 million (2019: NZ$519 million).
Movement in debt issuances (Note 10 Debt Issuances) also includes a NZ$836 million increase (2019: NZ$942 million decrease) from the effect of foreign exchange rates, a NZ$320 million
increase (2019: NZ$341 million increase) from changes in fair value hedging instruments and a NZ$95 million increase (2019: NZ$89 million decrease) from other changes.
Movement in borrowings from Immediate Parent and Ultimate Parent Bank (Note 8 Deposit and Other Borrowings) also includes a NZ$32 million increase (2019: NZ$83 million decrease) fromthe effect of foreign exchange rates and a NZ$64 million increase (2019: NZ$54 million increase) from changes in fair value hedging instruments.
Relates to repayments of lease liabilities which ANZ New Zealand commenced recognising on 1 October 2019 following the adoption of NZ IFRS 16. Comparative information has not been
restated.

The notes appearing on pages 7 to 23 form an integral part of these financial statements

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDINTERIM FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITYNote
As at 1 October 2018

Sharecapitaland initial Investment
head securities
office revaluationaccount
reserve
NZ$m
NZ$m
11,055

Impact on transition to NZ IFRS 9 Financial Instruments

11

Cash flow
hedging
reserve
NZ$m

Retainedearnings
NZ$m

Total
equity
NZ$m

22

148

11,236

-

-

-

(52)

(52)

11,0551122

96

11,184

Profit or loss

-

-

-

929

929

Unrealised gains / (losses) recognised directly in equity

-

(7)

7

-

-

Realised losses transferred to the income statement

-

-

4

-

4

Actuarial loss on defined benefit schemes

-

-

-

(16)

(16)

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

-

2

(3)

4

3

Total comprehensive income for the period

-

(5)

8

917

920

-

-

-

(375)

(375)

As at 1 October 2018 (adjusted)

Transactions with Immediate Parent Company in its capacity as owner:
Ordinary dividends paid
Transactions with Immediate Parent Company in its capacity as owner

-

-

-

(375)

(375)

As at 31 March 201911,055630

638

11,729As at 1 October 201911,055

(6)

27

1,523

12,599

-

-

-

(17)

(17)

11,055

(6)

27

1,506

12,582

Profit or loss

-

-

-

789

789

Unrealised losses recognised directly in equity

-

(38)

(27)

-

(65)

Realised losses transferred to the income statement

-

-

14

-

14

Actuarial loss on defined benefit schemes

-

-

-

(17)

(17)

Income tax credit on items recognised directly in equity

-

11

4

4

19

Total comprehensive income for the period

-

(27)

(9)

776

740

11,055

(33)

18

2,282

13,322

Impact on transition to NZ IFRS 16 Leases
As at 1 October 2019 (adjusted)

As at 31 March 2020

The notes appearing on pages 7 to 23 form an integral part of these financial statements

6

1

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIESStatement of compliance
These interim financial statements (financial statements) for ANZ New Zealand were issued on 26 May 2020 and should be read in conjunction with
ANZ New Zealand’s financial statements for the year ended 30 September 2019.
These financial statements comply with:• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and• IAS 34 Interim Financial Reporting.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
Basis of measurement
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:• derivative financial instruments;• financial instruments measured at fair value through other comprehensive income; and• financial instruments designated at fair value through profit and loss.
Use of estimates, assumptions and judgements
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect reported amounts
and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective
decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an ongoingbasis.
A brief explanation of the key estimates, assumptions and judgements that have changed during the half year ended 31 March 2020 follows:Coronavirus (COVID-19) pandemic
The ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these financial statements. The estimation
uncertainty is associated with:• the extent and duration of the disruption to business arising from the actions by governments, businesses and consumers to contain the spreadof the virus;• the extent and duration of the expected economic downturn (and forecasts for key economic factors including GDP, employment and house
prices). This includes the disruption to capital markets, deteriorating credit quality, liquidity concerns, increasing unemployment, declines in
consumer discretionary spending, reductions in production because of decreased demand, and other restructuring activities; and• the effectiveness of government and central bank measures that have been and will be put in place to support businesses and consumers
through this disruption and economic downturn.
ANZ New Zealand has developed various accounting estimates in these financial statements based on forecasts of economic conditions which reflect
expectations and assumptions as at 31 March 2020 about future events that the Directors believe are reasonable in the circumstances. There is aconsiderable degree of judgement involved in preparing forecasts, particularly given the substantial uncertainty as to how long the period ofsignificant lockdown restrictions and flow on impacts will last, and the outlook for recovery. The underlying assumptions are also subject touncertainties which are often outside the control of ANZ New Zealand. Accordingly, actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting
estimates included in these financial statements.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses
and recoverable amount assessments of non-financial assets. The impact of the COVID-19 pandemic on each of these accounting estimates isdiscussed further below and/or in the relevant note to these financial statements. Readers should carefully consider these disclosures in light of theinherent uncertainty described above.
Allowance for expected credit losses
ANZ New Zealand measures the allowance for expected credit losses (ECL) using an expected credit loss impairment model as required by NZ IFRS 9
Financial Instruments (NZ IFRS 9). ANZ New Zealand’s accounting policy for the recognition and measurement of the allowance for ECL is described at
Note 12 to ANZ New Zealand’s Financial Statements for the year ended 30 September 2019.
The table below shows ANZ New Zealand’s allowance for ECL (refer to Note 7 and Note 11 for further information).
As at
Individually assessed
Collectively assessed
Total 11.

Mar 20
NZ$m
98
675
773

Sep 19
NZ$m
109
487
596

Includes allowance for ECL for Net Loans and advances – at amortised cost and Off-balance sheet commitments – undrawn and contingent facilities.

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Individually assessed ECL
In estimating individually assessed ECL for Stage 3 exposures, ANZ New Zealand makes judgements and assumptions in relation to expected
repayments, the realisable value of collateral, the business prospects for the customer, competing claims and the likely cost and duration of the workout process. Judgements and assumptions in respect of these matters have been updated to reflect the potential impact of COVID-19.
Collectively assessed ECL
During the six months ended 31 March 2020 the collectively assessed allowance for ECL increased by NZ$188 million. This was attributable to changes
in economic outlook of NZ$167 million and changes in portfolio composition and risk of NZ$21 million.
In estimating collectively assessed ECL, ANZ New Zealand makes judgements and assumptions in relation to:• the selection of an estimation technique or modelling methodology, noting that the modelling of ANZ New Zealand’s ECL estimates arecomplex; and• the selection of inputs for those models, and the interdependencies between those inputs.
The modelling methodology applied in estimating ECL in these financial statements is consistent with that applied in ANZ New Zealand’s Financial
Statements for the year ended 30 September 2019.
The impact of COVID-19 on the global economy and how governments, businesses and consumers respond is uncertain. This uncertainty is reflectedin ANZ New Zealand’s assessment of ECL from its credit portfolio which are subject to a number of management judgements and estimates.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between those
inputs, and highlights significant changes during the six months ended 31 March 2020.
The judgements and associated assumptions have been made within the context of the impact of COVID-19, and reflect historical experience andother factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the circumstances.
In relation to COVID-19, judgements and assumptions include the extent and duration of the pandemic, the impacts of actions of governments andother authorities, and the responses of businesses and consumers in different industries, along with the associated impact on the global economy.
Accordingly, ANZ New Zealand’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.

8

Judgement/assumption

Description

Changes and considerations during the six months
ended 31 March 2020

Determining when asignificant increase incredit risk (SICR) has
occurredIn the measurement of ECL, judgement is involved insetting the rules and trigger points to determine
whether there has been a SICR since initialrecognition of a loan, which would result in thefinancial asset moving from ‘stage 1’ to ‘stage 2’. Thisis a key area of judgement since transition fromstage 1 to stage 2 increases the ECL from anallowance based on the probability of default in thenext 12 months, to an allowance for lifetime ECL.
Subsequent decreases in credit risk resulting intransition from stage 2 to stage 1 may similarly resultin significant changes in the ECL allowance. The
setting of precise trigger points requires judgement
which may have a material impact upon the size of
the ECL allowance.

Various initiatives, such as payment deferrals have beenoffered to customers in the six months ended 31 March
2020 recognising the potential detrimental impact of
COVID-19. Such offers, if accepted, are not automaticallyconsidered to indicate SICR but are used as necessary
within the broader set of indicators used to assess andgrade customer facilities.

Measuring both 12month and lifetime
credit losses

ECL is a function of the probability of default (PD),the loss given default (LGD) and the exposure atdefault (EAD) which are point-in-time measuresreflecting the relevant forward looking information
determined by management. Judgement is involved
in determining which forward-looking information
variables are relevant for particular lending portfolios
and for determining the sensitivity of the parameters
to movements in these forward looking variables.

The PD, EAD and LGD models are subject to ANZ New
Zealand’s model risk policy that stipulates periodic model
monitoring, periodic re-validation and defines approval
procedures and authorities according to model
materiality. There were no material changes to the models
during the six months ended 31 March 2020.

In addition, judgement is required where
behavioural characteristics are applied in estimating
the lifetime of a facility to be used in measuring ECL.

There were no changes to behavioural lifetime estimatesduring the six months ended 31 March 2020.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

Judgement/assumption

Description

Changes and considerations during the six months
ended 31 March 2020

Base case economic
forecast

ANZ New Zealand derives a forward looking “basecase” economic scenario which reflects our view ofthe most likely future macro-economic conditions.

There have been no changes to the types of forward
looking variables (key economic drivers) used as model
inputs in the six months ended 31 March 2020.
As at 31 March 2020, the base case assumptions havebeen updated to reflect the rapidly evolving global
situation with respect to COVID-19. This includes anassessment of the impact of central bank (monetary
policy), government (wage subsidies), and institution
specific responses (such as payment deferrals). These areconsidered in determining the length and severity of theforecast economic downturn.
The expected outcomes of key economic drivers for thebase case scenario as at 31 March 2020 and thosepreviously used at 30 September 2019 are described
below under the heading “Forecast base caseassumptions”.

Probability weighting ofeach scenario (basecase, upside1 ,downside1 and severe
downside2 scenarios)

Probability weighting of each scenario is determinedby management considering the risks anduncertainties surrounding the base case scenario.

The key consideration for probability weightings in thecurrent period is the continuing impact of COVID-19.
In addition to the base case forecast which reflects largely
the negative economic consequences of COVID-19,
greater weighting has been applied to the downside andsevere downside scenarios (base 50%, upside 4%,
downside 36% and severe downside 10%) given ANZ New
Zealand’s assessment of downside risks.
The assigned probability weightings are subject to a highdegree of inherent uncertainty and therefore the actual
outcomes may be significantly different to thoseprojected. ANZ New Zealand considers these weightings
to provide the best estimate of the possible loss outcomes
and has analysed inter-relationships and correlations (overboth the short and long term) within ANZ New Zealand’s
credit portfolios in determining them.

Management
temporary adjustments

Management temporary adjustments to the ECL
allowance are adjustments used in circumstanceswhere it is judged that our existing inputs,
assumptions and model techniques do not capture
all the risk factors relevant to our lending portfolios.
Emerging local or global macroeconomic,
microeconomic or political events, and natural
disasters that are not incorporated into our current
parameters, risk ratings, or forward-looking
information are examples of such circumstances. The
use of management temporary adjustments may
impact the amount of ECL recognised.

Temporary adjustments for agriculture industry exposuresincreased by NZ$15 million, to a total of NZ$30 million as
at 31 March 2020.
Also, temporary adjustments have been assessed in thecontext of COVID-19 and the extent that associated credit
loss exposures are captured within the modelled
economic scenarios, with no further temporary
adjustments considered necessary.

The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
2.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.
1.

Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the forecast resulting in an understatement or overstatement of the ECL
balance due to uncertainties around:• The extent and duration of measures to stop or reduce the speed of the spread of COVID-19;• The extent and duration of the economic downturn, along with the time required for economies to recover; and• The effectiveness of government stimulus measures, in particular their impact on the magnitude of the economic downturn and the extent andduration of the recovery.

9

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
ANZ New Zealand’s base case economic forecast scenarios reflects a sharp deterioration in economic conditions in the second quarter with a gradualimprovement thereafter. It reflects a widespread shutdown in the second quarter of calendar 2020 followed thereafter by a progressive relaxation of
lockdown restrictions.
The economic drivers of the base case economic forecasts at 31 March 2020 and those that were used at 30 September 2019 are set out below. These
reflect ANZ New Zealand’s view, at the respective reporting dates, of the most likely future macro-economic conditions.
New Zealand•GDP

Base case economic forecast as at 31 March 2020

Base case economic forecast as at 30 September 2019

Expected sizeable contraction in GDP in June quarter,
starting to recover partially over the remainder of theyear. Moderate GDP growth is expected in 2021.

Expected to improve modestly.

GDP is expected to contract by 17% in the June 2020
quarter, starting to recover in the September 2020
quarter once activity resumes, with an overall
contraction of 6.7% over the 2020 calendar year. GDP
is expected to grow by 4.2% in calendar year 2021.
•

Unemployment
rate

Unemployment is expected to increase significantly
over the June quarter, recovering gradually over theremainder of 2020 and 2021, but remaining
significantly higher than levels of first half of 2020. It is
expected to average 7.4% for calendar year 2020 and
7.7% for calendar year 2021.

Expected to remain stable.

•

Residential
property prices

Property prices are expected to contract by 1.9% in
calendar year in 2020, followed by 6.0% growth incalendar year 2021.

Expected to achieve modest levels of growth.

•Commercial
property prices

Property prices are expected to increase moderately
in 2020, continuing but less so in 2021.

Expected to grow, however, the growth rate is expected
to be modest through the forecast period.

Expected to grow by 3.1% in calendar year 2020 anda further 0.5% in 2021.
•

Consumer priceindex

CPI growth is forecast at slightly lower levels than
2019 across 2020 and 2021.

Expected to rise modestly.

CPI growth is forecast at 1.5% for calendar year 2020
and 1.5% for calendar year 2021.
Sensitivity analysis
The uncertainty of the impact of COVID-19 introduced significant estimation uncertainty in relation to the measurement of ANZ New Zealand’s
allowance for ECL. While a combined 46% weighting has been applied to the downside and severe downside scenarios as at 31 March 2020, therapidly evolving consequences of COVID-19 and government, business and consumer responses could result in significant adjustments to theallowance within the current and next financial years.
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future periods,
expected credit losses reported by ANZ New Zealand should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of ECL to key factors used in determining it:
ECL sensitivity - weightings applied to forecast scenarios
100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario

Total ECL
NZ$m
322
575
766
986

Impact
NZ$m
(353)
(100)
91
311

Customer remediation and other provisions
ANZ New Zealand holds provisions for various obligations including customer remediation, restructuring costs, leasehold make good andlitigation related claims (refer to Note 9). These provisions involve judgements regarding the outcome of future events, including estimates of
expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice, provisions
and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the cost of
settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of different
assumptions, including, the number of impacted customers, the average refund per customer and the associated remediation costs.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant
evidence and adjustments are made to the provisions where appropriate.

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

Annual goodwill impairment testingManagement judgement is used to assess the recoverable value of goodwill. Goodwill is assessed for indicators of impairment half-yearly and tested
for impairment annually. The level at which goodwill is allocated, the estimation of future cash flows and the selection of discount rates applied
requires significant judgement.
For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a cash generating unit (CGU). ANZ New Zealand’s CGUs are
consistent with the operating segments described in Note 4, and the allocation of goodwill to each CGU as at 31 March 2020 is the same as at 30
September 2019. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. To estimate therecoverable amount of the CGU to which each goodwill component is allocated, we use a value-in-use approach.
Value-in-use
These calculations use cash flow projections based on a number of financial budgets within each segment approved by management covering an
initial forecast period. These projections also incorporate economic assumptions including GDP, inflation, unemployment and residential andcommercial property prices. Cash flows beyond the forecast period are extrapolated using the terminal growth rate. These cash flow projections are
discounted using a discount rate derived using a capital asset pricing model.
Market observable information is not readily available at the CGU level therefore management performed stress tests for key sensitivities in eachsegment. Given the rapidly changing situation associated with COVID-19, a further specific stress scenario was applied as at 31 March 2020. Thisadditional stress scenario decreased the recoverable amount of each CGU by an average of 23.5% compared to the 29 February 2020 annual
impairment test, but did not cause the carrying amount of goodwill for any CGU to exceed its recoverable amount.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential write-off ofpart or all of the goodwill balances.

Forecast period andprojections

29 February 2020 annual impairment test

31 March 2020 stress scenario

Three years

Eight years - incorporating a two and a half year initial stressperiod followed by a three year recovery and a three year
return to maintainable earnings.

Projections based on a number of financial
budgets within each segment approved bymanagement.

The periods of initial stress included allowances for increased
credit impairment losses, based on stress scenarios used in
ANZ New Zealand’s Internal Capital Adequacy Assessment
Process (ICAAP) and having regard to the economic forecasts
used in the calculation of ECL as at 31 March 2020, anddecreased revenue.

Terminal growth rate

2% - based on RBNZ long term inflation target.

2% - based on RBNZ long term inflation target

Discount rates

9.5% (2019: 11.1%). Pre-tax: 12.3% (2019: 14.7%).

7.1% for one year to 10.2% for the terminal cash flows. Pre-tax:
10.1% to 13.2%.

The main variables in the calculation of the
discount rate used are the risk free rate, beta andthe market risk premium. The risk free rate wasbased on a blended yield rate between the 10
year New Zealand government bond rate andthe associated 5 year forward rate. Beta and themarket risk premium were consistent withobservable and comparative market rates
applied in the regional banking sector.

The range of rates used was equivalent to using a flat rate of
10.0% (Pre-tax: 12.9%).
Given RBNZ has stated that the Official Cash Rate will be held
at 0.25% for at least one year, a range of rates applicable tothe discounting period were used.
These were calculated on the same basis as for the annual
impairment test, using risk free rates applicable to thediscount period, and an updated market risk premium.

ResultCarrying amount did not exceed the recoverable
amount for any CGU.

Carrying amount did not exceed the recoverable amount for
any CGU.

Sensitivity testingSensitivity analysis was performed on key
assumptions in early March, and this did notcause the carrying amount of any CGU to
exceed its recoverable amount.

Cashflow forecasts were flexed for changes in credit
impairment charges.
Credit impairment charges as a proportion of gross loans andadvances were increased for the initial stress period to at least
30% above the ICAAP scenario applied, equivalent to at least
30% higher than the levels experienced over 2008 to 2011
(covering the period of the global financial crisis).
Carrying amount did not exceed the recoverable amount for
any CGU.

Conclusion

No impairment of goodwill for any CGU

No impairment of goodwill for any CGU

11

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Other intangible assets
Management judgement is used to assess the recoverable value of other intangible assets, and the useful economic life of an asset, or if an asset
has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
At each reporting date, software and other intangible assets are assessed for indicators of impairment. In addition, software and intangible assets
not ready for use are tested annually for impairment. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the carrying value of the asset is written down immediately.
In addition, the expected useful life of intangible assets, including software assets, are assessed on a semi-annual basis. The assessment requires
management judgement, and in relation to our software assets, a number of factors can influence the expected economic useful lives. These
factors include changes to business strategy, significant divestments and the underlying pace of technological change.
Changes in accounting policies
The accounting policies adopted by ANZ New Zealand are consistent with those adopted and disclosed in the previous full year financial statements,
except as disclosed below.
The following new standard relevant to ANZ New Zealand has been adopted from 1 October 2019 and has been applied in the preparation of thesefinancial statements:
NZ IFRS 16 Leases (NZ IFRS 16)
NZ IFRS 16 became effective for ANZ New Zealand from 1 October 2019 and replaced the previous standard NZ IAS 17 Leases (NZ IAS 17). NZ IFRS 16
primarily impacts ANZ New Zealand’s property and technology leases which were previously classified as operating leases. Under NZ IAS 17, operatingleases were not recognised on the balance sheet and rent payments were expensed over the lease term.
Under NZ IFRS 16, ANZ New Zealand recognises all leases (except for leases of low value assets and short term leases) on the balance sheet under asingle accounting model. Accordingly, ANZ New Zealand recognises its right to use an underlying leased asset over the lease term, as a right-of-use(ROU) asset, and its obligation to make lease payments as a lease liability. In the income statement, ANZ New Zealand recognises depreciation
expense on the ROU asset and interest expense on the lease liability. As a result, lease expenses will be higher in the early periods of a lease and lower
in the later periods of the lease compared to the previous standard where expenses were constant over the lease term. Cumulative expenses over thelife of a lease will not change.
As permitted by the standard, ANZ New Zealand does not recognise ROU assets and lease liabilities for leases of low value items and short term leases(less than 12 months). Instead, the lease payments associated with these leases are recognised as operating expense in the income statement on astraight-line basis over the lease term.
ANZ New Zealand has applied the modified retrospective transition approach whereby initial lease liabilities are recognised based on the present
value of remaining lease payments as of the transition date. The initial ROU asset recognised for certain large commercial leases was measured as if NZ
IFRS 16 had always been applied to the leases. For all other leases, the initial ROU asset was measured as equal to the initial lease liability plus any
future make good obligations associated with exiting the lease.
The implementation of NZ IFRS 16 requires management to make certain key judgements including the determination of lease terms, discount rates
and identifying arrangements that contain a lease.
Based on the modified retrospective transition approach, ANZ New Zealand recognised lease liabilities of $333 million presented within Payables andother liabilities and right-of-use assets of $309 million presented within Premises and equipment. This resulted in a reduction to opening retained
earnings of $17 million and an increase in deferred tax assets of $7 million as of 1 October 2019. Comparatives have not been restated.
In addition, ANZ New Zealand elected to apply the following practical expedients as permitted under the modified retrospective transition approach:• Impairment of ROU assets at the transition date were assessed by relying on onerous lease provisions previously recognised as of 30 September
2019 under NZ IAS 17;• Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised attransition;• No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases
were treated as short-term leases with all lease payments recognised in rent expense as incurred; and• Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
The following table reconciles the operating lease commitments disclosed under NZ IAS 17 as at 30 September 2019 to the opening lease liabilities
recognised under NZ IFRS 16 as at 1 October 2019.
Operating lease commitments as at 30 September 2019
Increase in lease term for extension options
Total undiscounted lease payments
Effect of discounting at a weighted average incremental borrowing rate of 2.75%
Total lease liabilities under NZ IFRS 16

12

NZ$m
279
93
372
(39)
333

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDInterest Rate Benchmark Reform
Background
Interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), play a critical role in global financial markets, serving as reference
rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments.
Uncertainty surrounding the integrity of IBOR rates has in recent years, led regulators, central banks and market participants to work towards atransition to alternative risk-free benchmark reference rates (RFRs) and market-led working groups in respective jurisdictions have recommended
alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant
uncertainty in the future of IBOR benchmarks beyond 1 January 2022.
Accounting amendments
In response to the uncertainty about the long-term viability of these benchmark rates, and LIBOR in particular, the International Accounting Standards
Board (IASB) has established a project to consider the financial reporting implications of the reform. The transition from LIBOR is expected to have an
impact on various elements of financial instrument accounting, including hedge accounting, as well as fair value methodologies and disclosures.
In November 2019, the External Reporting Board (XRB) issued XRB amending standard Interest Rate Benchmark Reform, which amends certain existinghedge accounting requirements to provide relief from potential effects of the uncertainty caused by the interest rate benchmark reform. ANZ New
Zealand elected to early adopt the amendments from 1 October 2019 which have not had a significant impact on ANZ New Zealand.
These amendments address the accounting effects of uncertainty in the period leading up to the reform arising from ANZ New Zealand’s ability tosatisfy the existing prospective hedge effectiveness requirements of NZ IAS 39 Financial Instruments: Recognition and Measurement. This uncertainty
arises as it is not known when the hedged items (such as debt issuances) and associated hedging instruments (such as interest rate swaps) will bechanged to reference the RFRs, or if both the hedging item and the associated hedging instrument will move to the new rates at the same time. ANZ
New Zealand has applied this amendment to all hedge accounted relationships (cash flow or fair value hedges) where the reform gives rise touncertainties about the timing or amount of IBOR based cash flows of the hedged item or hedging instrument.
The IASB has commenced working on Phase 2 of its IBOR Reform project, which focuses on potential issues that might affect financial reporting oncethe existing rate is replaced with an alternative rate. ANZ New Zealand is monitoring these developments and continues to assess the expectedfinancial impact.
Impact of IBOR reform
ANZ New Zealand has exposure to IBOR through its issuance of debt, the structural interest rate risk position, products denominated in foreign
currencies and associated hedging activities in our markets and treasury businesses within Institutional and Other segments respectively.
ANZ New Zealand has established a programme to manage the transition. The programme includes the assessment and actions necessary toaccommodate the transition to RFRs as they apply to internal processes and systems including pricing, risk management, documentation and hedge
arrangements. The programme includes management of the impact on customers.
Impact of IBOR reform on ANZ New Zealand’s hedging relationships
The most significant interest rate benchmarks to which ANZ New Zealand's hedging relationships are exposed are US dollar LIBOR, Euro Interbank
Offered Rate (Euribor), Bank Bill Swap Rate (BBSW) and Bank Bill Market (BKBM).
Of these benchmarks ANZ New Zealand expects BBSW, BKBM and Euribor to exist as benchmark rates for the foreseeable future and therefore does
not believe its BBSW, BKBM or Euribor benchmark fair value or cash flow hedges to be directly impacted by IBOR reform.
The table below details the carrying values of ANZ New Zealand's exposures designated in hedge accounting relationships that will be impacted by
IBOR reform, principally US dollar LIBOR. The nominal value of the associated hedging instruments are also included:
US dollar LIBOR
As at 31 March 2020
NZ$m
Hedged items
Deposits and other borrowings
1,142
Debt issuances
12,572As at 31 March 2020
Hedging Instruments
Fair value hedges

Notional designatedup to
31 December 2021
NZ$m

Notional designatedbeyond31 December 2021
NZ$m

Total notionalamount
NZ$m

5,393

7,715

13,108As at 31 March 2020 ANZ New Zealand also has Swiss franc LIBOR exposures designated in hedge accounting relationships of NZ$1,080 million.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the NZ Branch and all of the New Zealand businesses of all the subsidiaries of the
Ultimate Parent Bank.

13

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
2. OTHER OPERATING INCOME
For the six months ended 31 March(i) Fee and commission revenue
Lending fees
Non-lending fees
Commissions
Funds management income
Fee and commission income
Fee and commission expense
Net fee and commission income(ii) Other income
Net trading gains
Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value
Net foreign exchange earnings and other financial instruments income
Sale of OnePath Life (NZ) Limited (OnePath)
Sale of investment in Paymark Limited (Paymark)
Other
Other income
Other operating income

2020
NZ$m

2019
NZ$m

17
374
21
133
545
(260)
285

16
407
23
127
573
(241)
332

69
143
212
10
222
507

73
(140)
(67)
59
39
10
41
373

2020
NZ$m

2019
NZ$m

454
15
24
493

413
14
10
437

12
65
77

41
34
75

24
60
22
106

24
53
24
101

24
31
21
41
43
160
836

21
27
22
26
36
132
745

3. OPERATING EXPENSES
For the six months ended 31 March
Personnel
Salaries and related costs
Superannuation costs
Other
Personnel
Premises
Rent1
Other 2Premises
Technology
Depreciation and amortisation
Licences and outsourced services
Other
Technology (excluding personnel)
Other
Advertising and public relations
Professional fees
Freight, stationery, postage and communication
Charges from Ultimate Parent Bank
Other
Other
Operating expenses
1

2

Following the adoption of NZ IFRS 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with operating leases are shown as
depreciation of the right-of-use asset and interest expense associated with the lease liability (comparatives are not restated).
Includes depreciation and amortisation on right-of-use assets which ANZ New Zealand commenced recognising on the adoption of NZ IFRS 16 (comparatives not restated).

14

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

4. SEGMENT REPORTING
ANZ New Zealand is organised into three major business segments for segment reporting purposes - 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.
RetailRetail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact
centres.
Commercial
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions throughdedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment, government and government
related entities.
Institutional
The Institutional division services government, global institutional and corporate customers across three product sets: Transaction Banking, Loans &Specialised Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance,
debt structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to
managing ANZ New Zealand’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
RetailCommercial

Institutional

Other

Total

For the six months
ended 31 March

2020
NZ$m

2019
NZ$m

2020
NZ$m

2019
NZ$m

2020
NZ$m

2019
NZ$m

2020
NZ$m

2019
NZ$m

2020
NZ$m

2019
NZ$m

Net interest income

922

940

549

517

176

169

1

-

1,648

1,626

8

Net fee and commission income
8

-

-

9

8

-

-

17

16

- Non-lending fees

343

368

5

9

26

30

-

-

374

407

- Commissions

21

23

-

-

-

-

-

-

21

23

- Lending fees

- Funds management fees

133

127

-

-

-

-

-

-

133

127

- Fee and commission expense

(260)

(241)

-

-

-

-

-

-

(260)

(241)

Net fee and commission income

245
9

285

5
1

9

(40)

285
222

332

75

166

-

1

35
46

38

5

-

19

-

-

-

-

-

8

-

27

-

4

-

-

-

-

-

-

-

4

Other income
Net income from insurance
business
Share of associates' profits

41

Other operating income

254

313

6

10

81

113

166

(32)

507

404

Operating income

1,176
(574)

1,253

527

(17)

2,155
(836)

2,030

(86)

167
(19)

(32)

(128)

257
(96)

282

(514)

555
(147)

602

739

408

399

161

196

148

(49)

1,319

1,285

(82)

(29)

(106)

(2)

(44)

(1)

-

-

(232)

(32)

Profit before income tax

520

(34)

(49)
42

1,087

(33)

195
(55)

148

(85)

397
(111)

117

(146)

710
(200)

302

Income tax expense

(298)

1,253
(324)

Profit after income tax

374

510

217

286

84

140

114

(7)

789

929

Operating expenses
Profit before credit impairment
and income tax
Credit impairment charge

(745)

15

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
RetailCommercial
Institutional
Other
Total
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
As at

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

1,052

1,052

1,069

1,069

-

-

3,160

3,160

43,55943,464

7,110

7,270

9

3

135,679

133,264

16,13819,785

19,232--

113,411109,236

Financial position
Goodwill

1,039

1,039

Net loans and advances

85,001

82,527

Customer deposits

76,40873,866

17,218

NZ$m

NZ$m

NZ$m

NZ$m

Other segment
The Other segment profit after income tax comprises:
2020
NZ$m
3
(1)
112
114

For the six months ended 31 MarchCentral functions
Technology and Group Centre1, 2Economic hedges
Revaluation of insurance policies from changes in interest rates2
Total
1

2

2019
NZ$m
178
(104)
(81)
(7)

Technology and Group Centre’s other income for the six months ended 31 March 2019 includes the NZ$59 million gain on sale of OnePath and the NZ$39 million gain on sale of Paymark(Note 2 Other Operating Income).
Amounts for the six months ended 31 March 2019 include the transfer of NZ$86 million of accumulated after tax gains previously recognised in revaluation of insurance policies from changes
in interest rates to Technology and Group Centre. These gains were transferred upon the sale of OnePath.

5. CASH AND CASH EQUIVALENTS
31 Mar 20
NZ$m
755
557
6,052
382
7,746

Coins, notes and bank deposits
Securities purchased under agreements to resell in less than 3 months
Balances with central banks1
Settlement balances receivable within 3 months
Cash and cash equivalents
1

30 Sep 19
NZ$m
538
297
1,448
426
2,709

From 20 March 2020, RBNZ removed allocated credit tiers for Exchange and Settlement Account System (ESAS) holders, with all ESAS credit balances earning interest at the Official Cash Rate
(OCR).

6. NET LOANS AND ADVANCES
Note
Overdrafts
Credit cards
Term loans - housing
Term loans - non-housing
Finance lease and hire purchase receivables
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Gross loans and advances
Allowance for ECL
Net loans and advances

16

7

31 Mar 20
NZ$m
816
1,426
87,59444,5391,844
136,219(221)
326
136,324(645)
135,679

30 Sep 19
NZ$m
927
1,569
84,74844,586
1,863
133,693(237)
307
133,763(499)
133,264

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

7. ALLOWANCE FOR EXPECTED CREDIT LOSSES
This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.

ALLOWANCE FOR EXPECTED CREDIT LOSSES – BALANCE SHEETNet loans and advances - at amortised cost
Allowance for ECL is included in net loans and advances.

As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020

Stage 1
NZ$m
164
22
20
42
206

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
194
43
98
(25)
3
122
16
72
(15)
(14)
97
19
43
(64)
14
(5)
291
62
86

Total
NZ$m
499
230
(15)
(14)
201
(64)
14
(5)
645

Off-balance sheet credit related commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions
As at 1 October 2019
Transfer between stages
New and increased provisions (net of releases)
Credit impairment charge
As at 31 March 2020

60
4
17
21
81

24
(4)
13
9
33

2
2

11
1
1
12

97
31
31
128

2020
NZ$m

2019
NZ$m

188
73
(15)
(14)
232

64
(21)
(11)
32

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT

For the six months ended 31 March
New and increased provisions- Collectively assessed- Individually assessed
Write-backs
Recoveries of amounts previously written-off
Total credit impairment charge

17

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
8. DEPOSITS AND OTHER BORROWINGS
Term deposits
On demand and short term deposits
Deposits not bearing interest
UDC secured investments
Total customer deposits
Certificates of deposit
Deposits from banks and securities sold under repurchase agreements
Commercial paper
Borrowings from Ultimate Parent Bank and Immediate Parent Company
Deposits and other borrowings

31 Mar 20
NZ$m
51,76947,215
14,427
113,411
1,695
1,461
4,456
3,068
124,091

30 Sep 19
NZ$m
54,98442,329
11,795
128
109,236
1,484
203
2,461
3,687
117,071

31 Mar 20
NZ$m
128
124
27
23
27
329

30 Sep 19
NZ$m
97
139
25
23
30
314

9. OTHER PROVISIONSECL allowance on undrawn facilities
Customer remediation
Restructuring costs
Leasehold make good
Other 1
Total other provisions
1

Note
7

Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities provided in connection with various
disposals of businesses and assets.

10. DEBT ISSUANCES
Senior debt
Covered bonds
Total unsubordinated debt
Subordinated debt
- ANZ Capital Notes- Other
Total subordinated debt
Total debt issued

31 Mar 20
NZ$m
21,812
4,630
26,44230 Sep 19
NZ$m
19,307
4,460
23,767

1,491
272
1,763
28,205

1,540
286
1,826
25,593Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is nota member of the Banking Group.
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are
security for the guarantee by the Covered Bond Guarantor as trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its
wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of theBank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (if any) after all
prior ranking creditors of the Covered Bond Trust have been satisfied.

18

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

11. CREDIT RISKThis note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, thesedifferences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject tomarket risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount ANZ New Zealand would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
ReportedOn-balance sheet positions
Net loans and advances
Other financial assets:
Cash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Other financial assets2
Total other financial assets
Subtotal
Off-balance sheet commitments
Undrawn and contingent facilities3
Total
1
2
3

Maximum exposure tocredit risk

Excluded1

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m135,679

133,264--

135,679

133,264

7,746
404
2,527
11,67913,246
7,293
586
43,481
179,160

2,709
193
2,324
8,942
11,653
7,027
623
33,471
166,735

355
355
355

192
192
192

7,391
404
2,527
11,67913,246
7,293
586
43,126
178,805

2,517
193
2,324
8,942
11,653
7,027
623
33,279166,543

29,769208,929

29,003
195,738355

192

29,769208,574

29,003
195,546

Excluded comprises bank notes and coins and cash at bank within cash and cash equivalents.
Other financial assets mainly comprise accrued interest, insurance receivables and acceptances.
Undrawn facilities and contingent facilities include guarantees, letters of credit and performance related contingencies, net of allowance for ECL.

Credit quality
We use ANZ New Zealand’s internal customer credit rating (CCR) to manage the credit quality of financial assets. To enable wider comparisons, ANZ
New Zealand’s CCRs are mapped to external rating agency scales as follows:
Credit quality
description

Internal CCR

ANZ New Zealand customer requirements

Strong

CCR 0+ to 4-

Satisfactory

CCR 5+ to 6-

Weak

CCR 7+ to 8=

Defaulted

CCR 8- to 10

Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.
Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible tocyclical trends or variability in earnings.
Demonstrated some operational and financial instability, withvariability and uncertainty in profitability and liquidity projected tocontinue over the short and possibly medium term.
When doubt arises as to the collectability of a credit facility, thefinancial instrument (or ‘the facility’) is classified as defaulted.

Moody’s
RatingS&P Global
Ratings

Aaa – Baa3

AAA – BBB-

Ba1 – B1

BB+ – B+B2 – Caa

B - CCC

n/a

n/a

19

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Net loans and advances

Stage 1
NZ$m
100,877
24,539583
125,999(206)
125,793
0.16%

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
2,250
4,571
2,543
579
277
9,364
579
277
(291)
(62)
(86)
9,073
517
191
3.11%
10.71%
31.05%

96,212
26,468
1,229
123,909(164)
123,745
0.13%

2,291
4,629
2,125
9,045
(194)
8,851
2.14%

As at 31 March 2020
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in Other provisions (refer to Note 9)
Net undrawn and contingent facilities
Coverage ratio

Stage 1
NZ$m
24,7694,196
20
28,985(81)
28,904
0.28%

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
131
594
160
4
23
885
4
23
(33)
(2)
(12)
852
2
11
3.73%
50.00%
52.17%

Total
NZ$m
24,9004,790
180
2729,897(128)
29,7690.43%

As at 30 September 2019
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in Other provisions (refer to Note 9)
Net undrawn and contingent facilities
Coverage ratio

23,0464,883
312
28,241(60)
28,181
0.21%

59
641
137
837
(24)
813
2.87%

23,1055,524
449
22
29,100(97)
29,0030.33%

As at 31 March 2020
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amountAs at 30 September 2019
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amount

452
452
(43)
409
9.51%

287
287
(98)
189
34.15%

Total
NZ$m
103,127
29,1103,126856
136,219(645)
135,574
0.47%
(221)
326
135,679

98,50331,097
3,354
739
133,693(499)
133,194
0.37%
(237)
307
133,264

Off-balance sheet commitments - undrawn and contingent facilities

20

3
3
(2)
1
66.67%

19
19
(11)
8
57.89%AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESFinancial assets and financial liabilities carried at fair value on the balance sheet
ANZ New Zealand categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure fair value:• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Using observable
Quoted market priceUsing unobservable
inputs
Total(Level 1)
inputs (Level 3)(Level 2)
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
AssetsTrading securities
Derivative financial instruments
Investment securities
Total
Liabilities
Deposits and other borrowings
Derivative financial instruments
Other financial liabilities
Total

9,265
28
7,292
16,585

8,319
10
7,026
15,3552,414
13,215
15,629623
11,64012,263

3
1
4

3
1
4

11,67913,246
7,293
32,218

8,942
11,653
7,027
27,622

11
154
165

11
213
224

4,456
12,494
16,9502,461
10,901
13,362--

4,456
12,505
154
17,115

2,461
10,912
213
13,586

Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories otherthan those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.
Carrying amountFinancial assets
Net loans and advances1
Total
Financial liabilities
Deposits and other borrowings2
Debt issuances1
Total
1
2

Fair value

31 Mar 20
NZ$m

30 Sep 19
NZ$m

31 Mar 20
NZ$m

30 Sep 19
NZ$m135,679
135,679

133,264
133,264

136,486
136,486

133,827
133,827

119,635
28,205
147,840

114,610
25,593140,203119,738
27,563
147,301

114,840
25,861
140,701

Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.
Excludes commercial paper (Note 7 Deposits and Other Borrowings) designated at fair value through profit or loss.

21

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENT LIABILITIESCredit related commitments and contingencies
Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total

31 Mar 20
NZ$m

30 Sep 19
NZ$m

27,1491,232
1,516
29,897

26,3501,248
1,502
29,100ANZ 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 in extending 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
There are outstanding court proceedings, claims and possible claims for and against ANZ New Zealand. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have notdisclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudiceseriously the interests of ANZ New Zealand.
Regulatory and customer exposures
In recent years there have been significant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement
actions (whether by court action or otherwise), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued byregulators, particularly against financial institutions globally. There has also been an increase in the number of matters on which ANZ New Zealandengages with its regulators. ANZ New Zealand has received various notices and requests for information from its regulators as part of both industrywide and ANZ New Zealand-specific reviews, and has also made disclosures to its regulators at its own instigation. The nature of these interactions canbe wide ranging and, for example, may include a range of matters including responsible lending practices, regulated lending financial transactions,product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance
distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering andcounter-terrorism financing obligations, reporting and disclosure obligations and product disclosure documentation. There may be exposures tocustomers which are additional to any regulatory exposures. These could include class actions, individual claims or customer remediation orcompensation activities. The outcomes and total costs associated with such reviews and possible exposures remain uncertain.
Commerce Commission settlement
Between June 2015 and May 2016, the Bank had an issue with a loan calculator which meant some interest to be charged to customers was left out
when calculating their repayments or loan term. On 2 March 2020, The Commerce Commission announced it had agreed with the Bank that the Bank
would pay some customers affected by the issue a further NZ$29.4 million, in addition to the NZ$8.4 million the Bank has paid previously. All amounts
in relation to this matter were provided for in the period to 30 September 2019.
Reviews under section 95 of the Reserve Bank of New Zealand Act 1989 (RBNZ Act)
On 5 July 2019, the RBNZ issued a notice under section 95 of the RBNZ Act, requiring the Bank to obtain two external reviews, the first on the Bank’s
compliance with certain aspects of the RBNZ Banking Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach)(BS2B) and the second on the effectiveness of the Bank’s directors’ attestation and assurance framework.
• The director attestation and assurance framework review was completed in December 2019, and the Bank is committed to implementing therecommendations identified and addressing the issues raised. On 11 December 2019 RBNZ issued a further notice under section 95 of the RBNZ
Act, requiring the Bank to obtain an external review of the improvements made to the Bank’s directors’ attestation and assurance framework.
• The report regarding the Bank's compliance with the RBNZ's capital adequacy requirements was completed in April 2020. This report identified
instances of both current and historical non-compliance with capital adequacy requirements. The Bank has accepted the findings of this review,
and is working with the RBNZ to rectify the issues identified. The RBNZ has stated that it is confident the Bank will resolve this matter without
issue, and has emphasised that the Banking Group remains sound and well capitalised.
The Section 95 reviews have highlighted the need for a broader programme of improving the Bank's processes covered by those reviews, and thisprogramme is underway.
Warranties and indemnities
ANZ New Zealand has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments.

22

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

14. SUBSEQUENT EVENTSOn 2 April 2020, RBNZ announced that locally incorporated banks, including the Bank, cannot pay dividends on ordinary shares and should notredeem capital notes at this time. Accordingly, the Bank was not permitted to, and did not, redeem NZ$500 million of mandatory convertible
perpetual subordinated securities (ANZ NZ CN) on 25 May 2020 (the Optional Exchange Date). Further, the Bank did not exercise its option to convert
ANZ NZ CN into ordinary shares of the Ultimate Parent Bank on the Optional Exchange Date.

23

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES
Guarantees
No material obligations of the NZ Branch are guaranteed as at 26 May 2020.
Covered bonds issued by ANZ New Zealand (Int’l) Limited, a subsidiary of the Bank, are guaranteed. Refer to page 18 for further details.
Changes in the Ultimate Parent Bank’s Board of Directors
Paul O’Sullivan was appointed as an Independent Non-Executive Director of the Ultimate Parent Bank on 4 November 2019. There have been no otherchanges to the Directors of the Ultimate Parent Bank since 30 September 2019, the balance date of the last full year disclosure statement.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Credit rating
As at 26 May 2020 the Ultimate Parent Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which arepayable in New Zealand in New Zealand dollars.
The Ultimate Parent Bank’s credit ratings are:Rating agency
S&P Global Ratings
Fitch Ratings
Moody’s Investors Service

Credit rating
AAA+
Aa3

Qualification
Outlook Negative
Outlook Negative
Outlook Stable

Other material matters
RBNZ review of capital requirements
Between May 2017 and December 2019, the RBNZ conducted a comprehensive review of the capital adequacy framework applying to New Zealand
locally incorporated registered banks. The RBNZ's final decisions on the capital review as they relate to the Bank are set out below. In response to the
COVID-19 pandemic, the RBNZ has delayed the start date for the increased capital requirements by 12 months to support credit availability, withfurther delays possible if the conditions warrant it in 2021. The new regime is currently expected to be implemented in stages from 1 July 2021, with atransition period of seven years before banks are required to fully comply with the new rules.
•

•
•
•
•

The Banking Group’s total capital requirement will increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to 2.5% can bemade up of additional tier 1 (AT1) capital, with the remaining 13.5% made up of common equity tier 1 (CET1) capital. AT1 capital must consist ofredeemable perpetual preference shares. The total capital requirement can also include tier 2 capital of up to 2% of RWA. Tier 2 capital must
consist of long-term subordinated debt.
The tier 1 capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include a 2% prudential capital buffer; a 1.5%
'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or temporarily increased to prevent
asset price bubbles from developing; and a 5.5% conservation buffer.
Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 31 March 2020, the Bank had approximately
NZ$2,741 million of AT1 instruments that will progressively lose their eligible regulatory capital treatment over a seven year transition period.
As an internal ratings based (IRB)-approach accredited bank, the Banking Group’s RWA outcomes will be increased to approximately 90% ofwhat would be calculated under the standardised approach. This will be achieved by applying an 85% output floor, and increasing the credit
RWA scalar from 1.06 to 1.2.
The Banking Group will be required to report RWA, and resulting capital ratios, using both internal models and the standardised approach.

The RBNZ’s reforms will result in a material increase in the level of capital that the Banking Group is required to hold, although the amount of theincrease is currently uncertain. The reforms could have a material impact on the Banking Group and its business, including on its capital allocation andbusiness planning.
The Banking Group has started preparing for the changes. Of the Banking Group’s NZ$1.8 billion net profit after tax in for the year ended 30
September 2019, approximately 80% was retained in response to the proposals and no ordinary dividends were paid during the six months ended 31
March 2020.
Directors’ and New Zealand Chief Executive Officer’s statements
The Directors' and New Zealand Chief Executive Officer's statement is included on page 33.
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 Group will 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 Group can also be accessed at the website shareholder.anz.com.
Auditor’s review report
The auditor’s review report is included on page 34.

24

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2020
Total interest earning and discount bearing assets
Total interest and discount bearing liabilities
Total amounts due from related entities
Total amounts due to related entities
Total liabilities of the NZ Branch less amounts due to related entities

NZ$m
165,085
140,380
5,003
8,388
1,005

Assets charged as security for liabilities
These amounts exclude the amounts disclosed as collateral paid on the balance sheet that relate to derivative liabilities. The terms and conditions of
the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association
Master Agreement.
Assets charged as security for liabilities include the following types of instruments:• Securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements.
• Specified residential mortgages provided as security for notes and bonds issued to investors as part of the Bank’s covered bond programme.
The carrying amounts of assets pledged as security are as follows:
As at 31 March 2020
Securities sold under agreements to repurchase
Residential mortgages pledged as security for covered bonds

NZ$m
1,161
12,063

Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 Other Operating Income. ANZ New Zealand does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, all other items of other income (all in Note 2 Other Operating Income), net income from insurance business and share of
associates’ profit (both shown on the income statement).

25

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDREGISTERED BANK DISCLOSURES
Additional information on concentrations of credit risk
Analysis of financial assets by industry is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.
Composition of financial instruments that give rise to credit risk by industry group are presented below:

As at 31 March 2020
New Zealand residents
Agriculture
Forestry and fishing, agriculture services
Manufacturing
Electricity, gas, water and waste services
Construction
Wholesale trade
Retail trade and accommodation
Transport, postal and warehousing
Finance and insurance services
Public administration and safety1
Rental, hiring & real estate services
Professional, scientific, technical, administrative and support services
Households
All other New Zealand residents2

Loans andadvances3
NZ$m

Off-balance
Othersheet credit
relatedfinancialassets commitments4
NZ$m
NZ$m

Total
NZ$m

17,449
1,188
2,802
1,246
1,710
1,536
2,884
1,453
565
338
35,0981,063
64,399
2,536

79
10
454
538
30
199
27
175
12,455
12,377
1,325
11
189
258

1,024
173
2,122
1,764
929
1,585
846
735
1,458
1,122
2,224
475
14,133
1,201

18,552
1,371
5,378
3,548
2,669
3,320
3,757
2,363
14,478
13,83738,647
1,549
78,721
3,995

Subtotal
Overseas
Finance and insurance services
Households
All other non-NZ residents

134,267

28,127

29,791

192,185

77
1,197
678

14,919476106-15,102
1,201
754

Subtotal
Gross subtotal
Allowance for ECL
Subtotal
Unearned income
Capitalised brokerage / mortgage origination fees
Maximum exposure to credit risk

1,952
136,219(645)
135,574(221)
326
135,679

14,99943,126
43,126
43,126106
29,897(128)
29,76929,76917,057
209,242(773)
208,469(221)
326
208,5741
2
3
4

Public administration and safety includes exposures to local government administration and central government administration, defence and public safety.
Other includes exposures to mining, information media and telecommunications, education and training, health care and social assistance and arts, recreation and other services.
Excludes individual and collective provisions for credit impairment held in respect of off-balance sheet credit related commitments.
Off-balance sheet credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

26

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

Additional information on concentrations of funding
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
As at 31 March 2020

Note

NZ$m

8

113,411

Funding composition
Customer deposits
Wholesale funding
Debt issuances

28,205

Certificates of deposit and commercial paper

6,151

Other borrowings

4,529

Total wholesale funding

38,885

Total funding

152,296

Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing

3,990

Manufacturing

2,318

Construction

2,563

Wholesale trade

2,081

Retail trade and accommodation

2,053

Financial and insurance services

11,959Rental, hiring and real estate services

3,637

Professional, scientific, technical, administrative and support services

5,806

Public administration and safety

1,441

Arts, recreation and other services

2,074Households

60,917All other New Zealand residents1

4,426
103,265

Customer deposits by industry - overseas
Households

9,508

All other638
10,146

Total customer deposits

113,411Wholesale funding (financial and insurance services industry)
New Zealand

6,756

Overseas32,129Total wholesale funding

38,885

Total funding

152,296

Concentrations of funding by geography
New Zealand

110,021

Australia

4,021

United States

18,603

Europe12,294

Other countries

7,357

Total funding

152,296

1

Other includes mining; electricity, gas, water and waste services; transport, postal and warehousing; information media and telecommunications; education and training; health care and social
assistance.

27

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDREGISTERED BANK DISCLOSURES
Additional information on interest rate sensitivity
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet instruments by showing theperiods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.

As at 31 March 2020
AssetsCash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Other financial assets
Total financial assets
Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Other financial liabilities
Total financial liabilities
Hedging instruments
Interest sensitivity gap
1

Total
NZ$m

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

Over Not bearing
2 years
interest1
NZ$m
NZ$m

7,746
404
2,527
11,67913,246
7,293
135,679586
179,160

7,358
2,527
2,255
294
63,27475,708870
12,385
13,255505
298
21,722
22,5251,652
1,737
30,94734,336

6,397
4,963
7,901
19,261

388
404
13,2461(550)
586
14,0752,215
1,290
124,091
12,50528,205948
169,254
9,906

743
1,290
78,384
3,179
167
83,763
13,814
5,759

15,4203,972
1219,404770(5,379)10,011
1,984
23
12,018(9,850)
657

2,726
5,987
56
8,769
(14,934)
10,633

3,123
13,083220
16,426
10,20013,035

1,472
14,427
12,505
470
28,874(14,799)

Excludes non-coupon bearing discounted financial assets and financial liabilities which are shown as repricing on their maturity date.

Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2020 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which ANZ New Zealand may be required to pay. The amounts represent principal andinterest cash flows – so they may differ from equivalent amounts reported on the balance sheet.

On demand
NZ$mLess than
3 months
NZ$m

3 to 12months
NZ$m

1 to 5
years
NZ$m

After
5 years
NZ$m

Total
NZ$m

Settlement balances payable
Collateral received

1,325
-

900
1,290

-

-

-

2,225
1,290

Deposits and other borrowings

As at 31 March 2020

61,64328,28228,858

5,922

1,183

125,888

Derivative financial liabilities (trading)-

10,772---

10,772

Debt issuances

-

378

5,859

18,355

4,639

29,231Other financial liabilities

-

54

5

107

58

224

- gross inflows

-

749

1,628

8,656

884

11,917- gross outflows

-

(842)

(1,889)(9,047)(885)(12,663)

1

Derivative financial instruments(balance sheet management)

1

Any callable wholesale debt instruments have been included at their next call date.

At 31 March 2020, NZ$51 million of ANZ New Zealand’s NZ$124 million of non-credit related commitments and all NZ$29,897 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which ANZ New Zealand may be required to
pay.

28

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

Liquidity portfolio
ANZ New Zealand holds a diversified portfolio of cash and high quality 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 internal and regulatory liquidity scenario metrics.
As at 31 March 2020
Coins, notes and bank deposits
Balances with central banks
Settlement balances receivable within 3 months
Certificates of deposit
Government, local body stock and bonds
Government treasury bills
Reserve Bank bills
Other bonds
Total liquidity portfolio

NZ$m
755
6,052
170
547
9,186
469
400
7,152
24,731The Bank also held unencumbered internal residential mortgage backed securities which would entitle ANZ New Zealand to enter into repurchasetransactions with a value of NZ$7,087 million at 31 March 2020.
Reconciliation of mortgage related amounts
As at 31 March 2020
Term loans - housing 1
Less: fair value hedging adjustment
Less: housing loans made to corporate customers
On-balance sheet residential mortgage exposures (per LVR analysis)
Add: off-balance sheet residential mortgage exposures (per LVR analysis)
Total residential mortgage exposures as per LVR analysis
1

Note
6

B4
B4
B4

NZ$m
87,594(9)(2,062)85,523
8,527
94,050Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.

Overseas Banking Group Profitability and Size
Net Profit for the six months ended 31 March 2020 (AUDm)1
Net profit after tax for the 12 months ended 31 March 2020 as a percentage of average total assets
Total assets (AUDm)
Percentage change in total assets in the 12 months to 31 March 2020
1

31 Mar 20
1,546
0.43%
1,149,955
17.31%Net profit after tax for the period includes AUD 1 million of profit attributable to non-controlling interests.

29

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDREGISTERED BANK DISCLOSURES
B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1, andNote 7 and Note 11, to the financial statements.
Movements in components of loss allowance - total
Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
194
43
98
(25)
3
122
16
72
(15)
(14)
97
19
43
(64)
14
(5)
291
62
86

Net loans and advances - total
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2020

Stage 1
NZ$m
164
22
20
42
206

Total
NZ$m
499
230
(15)
(14)
201
(64)
14
(5)
645

Off-balance sheet credit related commitments - total
As at 1 October 2019
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge
As at 31 March 2020

60
4
17
21
81

24
(4)
13
9
33

2
2

11
1
1
12

97
31
31
128

Gross loans and advances - total
As at 1 October 2019
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

123,979
19,434
19,434(940)(16,474)(17,414)125,999
206

9,045
713
772
1,485
(1,166)(1,166)
9,364
291

452
192
36
228
(1)
(100)
(101)
579
62

287
36
106
142
(88)
(88)
(64)
277
86

133,763941
20,34821,289(941)(17,828)(18,769)(64)
136,219645

Off-balance sheet credit related commitments - total
As at 1 October 2019
Transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 31 March 2020
Loss allowance as at 31 March 2020

28,241
5,149
5,149
(87)
(4,318)(4,405)28,985
81

837
81
122
203
(155)
(155)
885
33

3
4
1
5
(4)
(4)
4
2

19
2
17
19
(15)
(15)
23
12

29,100
87
5,289
5,376
(87)
(4,492)(4,579)29,897128

Impacts of changes in gross financial assets on loss allowances - total

Explanation of how changes in the gross carrying amounts of gross balances contributed to changes in loss allowance
Overall, loss allowances are 0.5% of gross balances as at 31 March 2020, up from 0.4% as at 30 September 2019. While gross balances have increased,
and there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$177 million (29.7%) increase in loss allowances
is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to the financial
statements.

30

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITED

Past due assets and other asset quality information
As at 31 March 2020
Past due assets
Less than 30 days past due
At least 30 days but less than 60 days past due
At least 60 days but less than 90 days past due
At least 90 days past due
Total past due but not individually impaired
Other asset quality information
Undrawn facilities with impaired customers
Other assets under administration

Total
NZ$m
1,315
359
190
386
2,250
23
4

ANZ New Zealand does not have any loans and advances designated at fair value.
Overseas Banking Group asset quality
As at 31 March 2020
Gross impaired assets (AUDm)
Gross impaired assets as a percentage of total assets
Individual provision (AUDm)
Individual provision as a percentage of gross impaired assets
Collective provision (AUDm)

2,599
0.2%
1,093
42.1%
4,501

31

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

UNAUDITEDREGISTERED BANK DISCLOSURES
B4. CREDIT AND MARKET RISK EXPOSURES AND CAPITAL ADEQUACYAPRA Basel III capital ratios
As at 31 March
Common equity tier 1 capital
Tier 1 capital
Total capital

Ultimate Parent Bank
Overseas Banking Group (Extended Licensed Entity)
2020
2019
2020
2019
10.8%
11.5%
10.6%
11.2%
12.5%
13.4%
12.6%
13.2%
15.5%
15.3%
15.8%
15.3%

The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal tothat specified under the Basel III capital framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets. There are however small portfolios(mainly retail and local corporates in Pacific, and local corporates in Asia) where the Overseas Banking Group applies the standardised approach.
• the Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 31 March 2020 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2020. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2020, in accordance with APS 330: Public Disclosure of Prudential Information, discloses capital
adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Market risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ Banking Supervision Handbook document Capital
Adequacy Framework (Standardised Approach) BS2A. The peak end-of-day market risk exposures are for the six months ended 31 March 2020.

As at 31 March 2020
Interest rate risk
Foreign currency risk
Equity risk

Implied risk weighted
exposure
Period end
Peak
NZ$m
NZ$m
4,952
6,737
38
110
1
1

Notional capital charge
Period end
Peak
NZ$m
NZ$m
396
539
3
9
-

Additional mortgage information
As required by RBNZ, loan-to-valuation-ratios (LVR) 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 drawn
residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by
the customer.
On-balance Off-balance
sheet
sheet
Total
As at 31 March 2020
NZ$m
NZ$m
NZ$m
LVR range
Does not exceed 60%
42,382
5,894
48,276
Exceeds 60% and not 70%
19,363
1,355
20,718
Exceeds 70% and not 80%
18,858951
19,80980,6038,200
88,803
Does not exceed 80%
Exceeds 80% and not 90%
3,699
145
3,844
Exceeds 90%
1,221
182
1,403
Total
85,523
8,527
94,050B5. INSURANCE BUSINESSAs at 31 March 2020, ANZ New Zealand does not conduct any insurance business.

32

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALANDDIRECTORS' AND NEW ZEALAND CHIEF EXECUTIVE OFFICER'S STATEMENT
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive
Officer – NZ Branch believes that:•

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (Overseas Incorporated
Registered Banks) Order 2014; and•The Disclosure Statement is not false or misleading.

Over the six months ended 31 March 2020, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branchbelieves that:•

The Ultimate Parent Bank has complied with all Conditions of Registration that applied during that period; and•The NZ Branch and the Bank had systems in place to monitor and control adequately the material risks of Relevant Members of ANZ New
Zealand including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and other business risks, and thatthose systems were being properly applied.

Signed by the Chief Executive Officer – NZ Branch

Penny Dell
Chief Executive Officer – NZ Branch
26 May 2020
Signed on behalf of all the Directors of the Ultimate Parent Bank

Antonia Watson
Responsible Person
26 May 2020
on behalf of the Directors of the Ultimate Parent Bank:
Ilana Atlas
Paula Dwyer
Shayne ElliottDavid Gonski, AC
Jane Halton, AO, PSM
Rt Hon Sir John Key, GNZM AC
Graeme Liebelt
John Macfarlane
Paul O’Sullivan

33

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND

INDEPENDENT AUDITOR’S REVIEW REPORTTO THE DIRECTORS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDREPORT ON THE HALF YEAR DISCLOSURE STATEMENTCONCLUSION
Based on our review of the interim financial statements and registered bank disclosures (together referred to as ‘the disclosure statement’) of the
New Zealand business of Australia and New Zealand Banking Group Limited and its subsidiaries (ANZ New Zealand) on pages 3 to 32, nothing hascome to our attention that causes us to believe that:•••the interim financial statements on pages 3 to 23 do not present fairly in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34
Interim Financial Reporting, in all material respects, ANZ New Zealand’s financial position as at 31 March 2020 and its financial performanceand cash flows for the six month period ended on that date;
the registered bank disclosures in sections B2, B3 and B5 disclosed in accordance with Schedules 5, 7, 12 and 14 of the Registered Bank
Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly state, in allmaterial respects, the matters to which they relate in accordance with those schedules; andthe registered bank disclosures relating to credit and market risk exposures and capital adequacy in section B4 are not, in all material
respects, disclosed in accordance with Schedule 9 of the Order.

We have completed a review of the accompanying half year disclosure statement which comprises:••

the interim financial statements formed of:• the consolidated balance sheet as at 31 March 2020;• the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the six month period
then ended; and• notes, including a summary of significant accounting policies and other explanatory information.
the registered bank disclosures prescribed in Schedules 5, 7, 9, 12 and 14 of the Order.

BASIS FOR CONCLUSION
A review of the half year disclosure statement in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of ANZ New Zealand, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
Our firm has also provided other services to ANZ New Zealand in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with ANZ New Zealand on normal terms within the ordinary course of trading activities of the business of ANZ New Zealand. These matters havenot impaired our independence as reviewer of ANZ New Zealand. The firm has no other relationship with, or interest in, ANZ New Zealand.
EMPHASIS OF MATTER – ESTIMATION UNCERTAINTY IN THE PREPARATION OF THE INTERIM FINANCIAL
STATEMENTS
We draw attention to Note 1 Use of estimates, assumptions and judgements in the interim financial statements, which describes increased estimation
uncertainty in the preparation of the interim financial statements, specifically as it relates to the potential impacts of Coronavirus (COVID-19) pandemic
on ANZ New Zealand’s allowance for credit losses (ECL) and annual goodwill impairment testing. These disclosures include:• key judgements and assumptions in relation to the ECL model inputs and the interdependencies between those inputs, and highlightsignificant changes made during the six months ended 31 March 2020; and• key changes made in the goodwill impairment test to reflect a further specific stress scenario associated with COVID-19.
As described in Note 1 Use of estimates, assumptions and judgements the underlying forecasts and assumptions are subject to uncertainties which areoften outside the control of ANZ New Zealand. Actual economic conditions are likely to be different from those forecast since anticipated events
frequently do not occur as expected, and the effect of those differences may significantly impact the resulting accounting estimates.
In our view, this issue is fundamental to the users’ understanding of the interim financial statements and the financial position and performance of
ANZ New Zealand.
Our conclusion on the interim financial statements and registered bank disclosures is not modified in respect of this matter.

34

USE OF THE INDEPENDENT REVIEW REPORTThis independent review report is made solely to the Directors as a body of ANZ New Zealand. Our review work has been undertaken so that wemight state to the Directors those matters we are required to state to them in the independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Directors as a body for our work, this independent
review report, or any of the opinions we have formed.
DIRECTORS' RESPONSIBILITIES FOR THE HALF YEAR DISCLOSURE STATEMENTThe Directors, on behalf of ANZ New Zealand, are responsible for:• the preparation and fair presentation of the half year disclosure statement in accordance with IAS 34, NZ IAS 34 and Schedules 3, 5, 7, 12 and 14of the Order;• the preparation and fair presentation of ANZ New Zealand’s disclosures in regards to credit and market risk exposures and capital adequacy inaccordance with Schedule 9 of the Order;• implementing necessary internal controls to enable the preparation of a half year disclosure statement that is fairly presented and free frommaterial misstatement, whether due to fraud or error; and• assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE HALF YEAR DISCLOSURE STATEMENT
Our responsibility is to express a conclusion on the half year disclosure statement based on our review. We conducted our review in accordance with
NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come to attention that causes us to believe that:• the interim financial statements do not present fairly, in all material respects, ANZ New Zealand’s financial position as at 31 March 2020 and its
financial performance and cash flows for the six month period ended on that date;• the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34;• the registered bank disclosures in sections B2, B3, and B5 do not, fairly state, in all material respects, the matters to which it relates in accordancewith Schedules 5, 7, 12 and 14 of the Order; and• the registered bank disclosures relating to credit and market risk exposures and capital adequacy in section B4 is not, in all material respects,
disclosed in accordance with Schedule 9 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the half year disclosure statement. This description forms part of our
independent review report.

KPMG
Auckland
26 May 202035