Australia and New Zealand Banking Group Limited– New Zealand Branch
General Short Form Disclosure Statement
FOR THE THREE MONTHS ENDED 31 DECEMBER 2009 | NUMBER 5 ISSUED FEBRUARY 2010

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED- NEW ZEALAND BRANCHGENERAL SHORT FORMDISCLOSURE STATEMENTFOR THE THREE MONTHSENDED 31 DECEMBER 2009

CONTENTS

Page

General Disclosures

2-6

Income Statement

7

Statement of Comprehensive Income

8Statement of Changes in Equity

9

Balance Sheet

10

Cash Flow Statement

11

Notes to the Financial Statements

12 - 34

Conditions of Registration

35 – 36

Credit Rating Information37

Directors’ and New Zealand Chief Executive Officer’s Statement
Independent Review Report

38
39

1

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURESThis Disclosure Statement has been issued in accordance with the Registered Bank Disclosure Statement (OffQuarter - Overseas Incorporated Registered Banks) Order 2008 ("the Order").
In this Disclosure Statement unless the context otherwise requires:(a) "Overseas Banking Group" means the worldwide operations of Australia and New Zealand Banking
Group Limited including its controlled entities;(b) "Overseas Bank" or "Ultimate Parent Bank" means the worldwide operations of Australia and New
Zealand Banking Group Limited excluding its controlled entities;(c) "NZ Banking Group" means the aggregated NZ operations of Australia and New Zealand Banking Group
Limited, including those operations conducted through the New Zealand Branch and controlled entitiesof the Overseas Bank registered in New Zealand;(d) "NZ Branch" or "Registered Bank" means the New Zealand operations of Australia and New Zealand
Banking Group Limited, as conducted through the NZ Branch;(e) "Bank" means ANZ National Bank Limited;(f) "RBNZ" means the Reserve Bank of New Zealand;(g) Any term or expression which is defined in, or in the manner prescribed by, the Registered Bank
Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks) Order 2008 shall havethe meaning given in or prescribed by that Order.
GENERAL MATTERS
Australia and New Zealand Banking Group Limited - New Zealand Branch ("NZ Branch") was registered as abank on 5 January 2009. The full name of the NZ Branch is Australia and New Zealand Banking Group Limited New Zealand Branch and its address for service is Level 14, ANZ Tower, 215-229 Lambton Quay, Wellington,
New Zealand. From 1 March 2010, the address for service will be Level 6, 1 Victoria Street, Wellington, New
Zealand.
The full name of the Overseas Bank is Australia and New Zealand Banking Group Limited and its address forservice is Level 14, 100 Queen Street, Melbourne, Australia.
NATURE OF BUSINESSThe principal activities of the NZ Banking Group during the period were retail, corporate and rural banking,mortgage lending, asset and general finance, and international and investment banking.
RANKING OF LOCAL CREDITORS IN LIQUIDATION
There are material legislative restrictions in the Overseas Bank's country of incorporation which subordinate theclaims of a class of unsecured creditors of the Registered Bank on the assets of the Overseas Bank to those ofanother class of unsecured creditors of the Overseas Bank, in liquidation of the Overseas Bank.
The Banking Act 1959 of the Commonwealth of Australia (the "Banking Act") gives priority over Australianassets of the Overseas Bank to deposits/liabilities in Australia if the Overseas Bank is unable to meet its
obligations or suspends payment. Accordingly, deposits/liabilities in New Zealand (together with all other seniorunsecured creditors of the Overseas Bank) will rank after deposits/liabilities in Australia of the Overseas Bank in
relation to claims against Australian assets.
Specifically, pursuant to section 13A(3) of the Banking Act, if an Authorised Deposit-Taking Institution (definedin that Act to include a Bank like the Overseas Bank) (an "ADI") becomes unable to meet its obligations orsuspends payment, the assets of the ADI in Australia are to be available to meet the ADI's liabilities in thefollowing order:(a) first, the ADI's liabilities to the Australian Prudential Regulation Authority ("APRA") (if any), because of
the rights APRA has against the ADI because APRA has made, or is required to make, payments todepositors under the Financial Claims Scheme (defined below);(b) second, the ADI's debts to APRA for costs incurred by APRA in administration of the Financial Claims
Scheme in respect of the ADI;(c) third, in payment of the ADI's deposit liabilities in Australia (other than liabilities covered underparagraph (a)); and(d) fourth, the ADI's other liabilities (in order of priority apart from section 13A(3)).
Under section 13A(1) of the Banking Act, in certain circumstances APRA may take control of an ADI’s businessor appoint an administrator (defined in the Banking Act) to take control of the ADI’s business. Section 16(1)and (2) of the Banking Act provide that, despite anything contained in any law relating to the winding up ofcompanies, but subject to section 13A(3) of the Banking Act, the debts of an ADI to APRA in respect of APRA's
costs (including costs in the nature of remuneration and expenses) of being in control of the ADI's business or of
having an administrator in control of the ADI's business have priority in a winding-up of the ADI over all otherunsecured debts.

2

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Section 86 of the Reserve Bank Act provides that notwithstanding anything contained in any law relating to thewinding up of companies, but subject to section 13A(3) of the Banking Act, debts due to the Reserve Bank ofAustralia by any ADI shall, in a winding up, have priority over all other debts other than debts due to the
Commonwealth of Australia.
Section 13A(3) of the Banking Act affects all of the unsecured deposit liabilities of the NZ Branch which as at 31
December 2009 amounted to $nil (31/12/2008 $nil; 30/09/2009 $nil).
REQUIREMENT TO HOLD EXCESS ASSETS OVER DEPOSIT LIABILITIESSection 13A(4) of the Banking Act states that it is an offence for an ADI not to hold assets (other than goodwill)in Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia,
unless APRA has authorised the ADI to hold assets of a lesser value. During the three months ended 31
December 2009, the Overseas Bank has at all times held assets (other than goodwill) in Australia of not lessthan the value of the Overseas Bank's total deposit liabilities in Australia. The requirements of this section of
the Act have the potential to impact on the management of the liquidity of the NZ Banking Group.
GUARANTEESThe Overseas Bank has guarantees from the Commonwealth of Australia under:(a) in the case of deposits and certain other accounts up to A$1 million, a scheme (The "Financial Claims
Scheme") pursuant to the Financial System Legislation Amendment (Financial Claims Scheme and Other
Measures) Act 2008 of the Commonwealth of Australia (The "Financial Claims Scheme Act");(b) in the case of wholesale funding, by a Deed of Guarantee executed by the Treasurer (and related
scheme rules) (the "Wholesale Funding Guarantee").
The Financial Claims Scheme applies to the Registered Bank, as it is a foreign branch of an eligible Australian
ADI. The Wholesale Funding Guarantee may also apply as described below.
Financial Claims Scheme
Under the Financial Claims Scheme if:•
APRA has applied for an ADI to be wound up; and•the responsible Minister makes a declaration that the Financial Claims Scheme applies to that particular
ADI
then each account holder of a Protected Account (defined below) with that ADI is entitled to be paid by APRA an
amount equal to the balance of the protected account plus accrued interest which has been accrued to theaccount (subject to various adjustments and preconditions described in the Financial Claims Scheme Act). Oncethe responsible Minister has made a declaration, there are no other material conditions to payment other thanthe ADI being unable to meet its obligations or suspending payment. The deposit must be for an amount lessthan A$1 million. Deposits for a greater amount are covered by the Wholesale Funding Guarantee (to theextent that is applicable as described below).
A protected account includes accounts or covered financial products (defined below) kept by an account holder
with an ADI and either:•requiring the ADI to pay the account holder, on demand by the account holder or at a time agreed bythem, the net credit balance of the account at the time of the demand or the agreed time; and•an account prescribed by regulations.
A covered financial product is a financial product declared by the Australian Treasurer to be a covered financial
product and includes accounts such as saving, call, current, cheque, debit card, transaction and mortgage offset
accounts.
Deposit holders do not have to be Australian residents to obtain the benefit of the Financial Claims Scheme andit applies to deposits denominated in any currency.
From 12 October 2011 the Financial Claims Scheme is to apply to Australian dollar deposits only, and isgenerally subject to review at that time.

3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Wholesale Funding Guarantee
The Wholesale Funding Guarantee is a deed governed by the laws of the State of New South Wales and has
been executed by the Australian Treasurer on behalf of the Australian Government. Australian institutions
which are ADIs under the Banking Act, which includes the Overseas Bank, are entitled to apply for the
Wholesale Funding Guarantee to apply to deposit accounts over A$1 million and certain funding liabilities.
Foreign banks authorised to carry on banking business in Australia may also apply to have certain deposits andfunding liabilities held by Australian residents guaranteed by the Australian Government. The Reserve Bank ofAustralia administers the Wholesale Funding Guarantee.
Under the Wholesale Funding Guarantee, the Commonwealth of Australia irrevocably guarantees the payment ofliabilities covered by an eligibility certificate issued by the Australian Government in response to an application
made by the ADI, and irrevocably undertakes that whenever the ADI does not pay a liability covered by aneligibility certificate on the date on which it becomes due or payable, it shall, upon a claim by a person to whoma guaranteed liability is owed, and following the expiry of any applicable grace period, pay the guaranteed
liability in accordance with the scheme rules. A claim must be made in the form provided in the scheme rules.
In the case of a liability of an Australian ADI, such as the Overseas Bank, the claimant need not be a resident ofAustralia.
In order to have the Wholesale Funding Guarantee apply, an ADI must apply to the Reserve Bank of Australia
for an eligibility certificate. Fees will also be payable, calculated by reference to the term and amount of theliabilities guaranteed and the credit rating of the ADI (as at the date of this document, the fee which will apply
to the Overseas Bank based on its rating by Standard and Poor’s of AA, is 70 basis points per annum applied in
respect of its guaranteed liabilities in accordance with the Wholesale Funding Guarantee). The fees will belevied on a monthly basis. An ADI may apply for an eligibility certificate in respect of a programme under which
it issues debt instruments from time to time or on a series-by-series basis.
A person to whom a guaranteed liability is owed may rely on the eligibility certificate issued by the AustralianGovernment as conclusive evidence that the liability satisfies the criteria for eligibility to be guaranteed under
the Wholesale Funding Guarantee.
An application must set out details of the liabilities to be guaranteed and be accompanied by an executedcounter indemnity in favour of the Australian Government, external legal opinions in a prescribed form, an
executed fee letter and a letter of prudential compliance. Further information with respect to the application
procedure
and
fees
can
be
found
at
the
AustralianGovernment
Guarantee
websiteatwww.guaranteescheme.gov.au.
If the ADI is an Australian ADI (such as the Overseas Bank) or an Australian subsidiary of a bank incorporated
overseas, it may apply for the guarantee to apply to:•
Deposit liabilities for amounts over A$1 million: The deposit can be at call or with maturity of up to
60 months in excess of $1 million per customer per ADI, be in any currency and may pre-date theWholesale Funding Guarantee. There are no restrictions on the types of depositors;•
Deposits held in overseas branches: Deposits held in overseas branches of Australian-owned ADIs
can be covered by the Wholesale Funding Guarantee. There are no restrictions on the types ofdepositors;•
Short Term Wholesale Funding Liabilities: The liability (which may be in any currency) must be asenior and unsecured debt instrument with a maturity not exceeding 15 months. In addition, theinstrument must be "not complex" and be either a bank bill, a certificate of deposit or transferable
deposit, a debenture or commercial paper; and•Term Wholesale Funding Liabilities: The liability (which may be in any currency) must be a senior
and unsecured debt instrument with a maturity not exceeding 60 months but greater than 15 months.
The instrument must also be "not complex" and be either a bond, a note or a debenture.
In the case of all instruments, they may be issued in bearer, registered or dematerialised form. An instrument
will not be granted an eligibility certificate unless it is "not complex". The Government has published a list of thefeatures that are likely to be regarded by the Government as "complex" at www.guaranteescheme.gov.au.
If the Australian Government does not perform its obligations under the Wholesale Funding Guarantee, abeneficiary of the guarantee could sue the Commonwealth of Australia under the Judiciary Act 1903 of Australia.
In such a suit, the rights of parties are as nearly as possible the same as in a suit between subjects of theCommonwealth of Australia. Jurisdiction to hear claims against the Commonwealth of Australia in contract isvested in certain Australian courts under the Judiciary Act 1903 of Australia. If a judgment is obtained against
the Australian Government, no execution or attachment can be issued against the property or revenues of theCommonwealth of Australia. However, if any judgment is given against the Australian Government, the Minister
4

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Wholesale Funding Guarantee (Continued)
for Finance is obliged to satisfy the judgment out of money legally available, on receipt of a certificate of thejudgment issued by an officer of a court in which such judgment has been obtained.
In order to render money legally available, specific appropriation by legislation passed by the Parliament of theCommonwealth of Australia would be necessary before any payment is made, unless the amount involved issuch that it could be paid out of funds available under an existing standing appropriation. The AustralianGovernment has enacted legislation which appropriates funds from consolidated revenue for the purposes ofpaying claims under the Wholesale Funding Guarantee. The Wholesale Funding Guarantee does not contain any
submission to the courts of a foreign jurisdiction or any waiver of any immunity which might be available to the
Commonwealth of Australia under the law of any foreign jurisdiction.
The Wholesale Funding Guarantee is subject to being withdrawn or changed, which may have a negative impact
on the availability of funding in the markets in which the Overseas Bank operates.
The Australian Government shall not be liable to perform its obligations under the Wholesale Funding Guarantee
in respect of liabilities which have been varied, amended, waived, released, novated, supplemented, extended
or restated in any material respect without the written consent of the Australian Government.
On 7 February 2010 the Australian Government announced the withdrawal of the Wholesale Funding Guarantee
on 31 March 2010. Existing guaranteed liabilities of ADIs, including those of the Overseas Bank, will continue tobe covered by the Wholesale Funding Guarantee to maturity for wholesale funding and term deposits, or to
October 2015 for at call deposits. The final date for ADIs to apply for access to the Guarantee is 24 March2010.
Further information on the Wholesale Funding Guarantee including the Wholesale Deed of Guarantee is available
in the most recent Supplemental Disclosure Statement.
Copies of eligibility certificates issued by the Reserve Bank of Australia under the Wholesale Funding Guarantee
are available at www.guaranteescheme.gov.au.
The name of the Guarantor and address for service is: The Scheme Administrator, Australian Government
Guarantee Scheme for Large Deposits and Wholesale Funding, c/- The Secretary, Reserve Bank of Australia,
GPO Box 5367, Sydney, New South Wales 2001, Australia.
Further details of the arrangements, together with relevant legislation, regulations and other documents settingout the terms and conditions of the current guarantee arrangements, are available at the Treasury website
www.treasury.gov.au, www.apra.gov.au and www.guaranteescheme.gov.au.
The most recent audited financial statements of the Commonwealth of Australia can be obtained at theTreasury's Budget website www.finance.gov.au. As at the date of signing of the General Short Form DisclosureStatement, the following ratings were assigned to the Commonwealth of Australia's long term, AUD
denomination debt: AAA Outlook Stable (Standard & Poor's), Aaa Outlook Stable (Moody's) and AAA Outlook
Stable (Fitch). These ratings have remained unchanged in the two preceding years. Refer to 'Credit Rating
Information' for a full description of credit rating scales.
New Zealand Guarantee Arrangements
The Crown guarantees retail deposits and wholesale funding of participating New Zealand financial institutions
under the New Zealand Deposit Guarantee Scheme and New Zealand Wholesale Funding Guarantee Facility
respectively. The Registered Bank does not have a guarantee under either Scheme.

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)PENDING PROCEEDINGS OR ARBITRATIONOther than disclosed in the General Short Form Disclosure Statement, there are no pending proceedings orarbitration concerning any member of the NZ Banking Group that may have a material adverse effect on the NZ
Banking Group as at the date of the General Short Form Disclosure Statement.
Further details on pending proceedings or arbitration are set out in Note 26 Contingent Liabilities, Credit Related
Commitments and Market Related Contracts.
OTHER MATERIAL MATTERS
There are no matters relating to the business or affairs of the NZ Branch and the NZ Banking Group which are
not contained elsewhere in the General Short Form Disclosure Statement and which would, if disclosed,materially adversely affect the decision of a person to subscribe for debt securities of which the NZ Branch or
any member of the NZ Banking Group is the issuer.
SUPPLEMENTAL DISCLOSURE STATEMENT
A copy of the most recent Supplemental Disclosure Statement for the three months ended 31 December 2009
can be obtained immediately where request is made within normal banking hours at Level 14, ANZ Tower, 215229 Lambton Quay, Wellington (at Level 6, 1 Victoria Street, Wellington, New Zealand effective 1 March 2010).
It is also available at no charge:(a) on the NZ Banking Group's website at www.anz.com;(b) immediately if request is made at the NZ Banking Group's head office; and(c) within five working days of a request, if a request is made at any branch of the ANZ or The National
Bank of New Zealand.
The NZ Banking Group's most recent Supplemental Disclosure Statement contains a copy of the 30 September
2009 Annual Report for the Overseas Banking Group and a copy of the Deed of Guarantee for the Guarantee
Scheme.
FINANCIAL STATEMENTS OF THE OVERSEAS BANK AND OVERSEAS BANKING GROUP
Copies of the most recent publicly available financial statements of the Overseas Bank and Overseas Banking
Group, will be provided immediately, free of charge, to any person requesting a copy where the request is madeat Level 14, ANZ Tower, 215-229 Lambton Quay, Wellington (at Level 6, 1 Victoria Street, Wellington, New
Zealand effective 1 March 2010). The most recent publicly available financial statements for the Overseas Bankand Overseas Banking Group can also be accessed at the internet address www.anz.com.
DIRECTORATE
Since the authorisation date of the previous General Disclosure Statement on 24 November 2009, Mr J K Ellis
retired as an Independent Non-Executive Director on 18 December 2009.

6

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHINCOME STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2009

Note

NZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008
30/09/2009
$m
$m
$m

Interest income

1,547

2,312

7,479

Interest expense

975

1,774

5,181

Net interest income

572

538

2,298

Net trading gains

19

70

187

Funds management and insurance income

36

24

97

181

66

383

36

6

13

Operating income

844

704

2,978

Operating expenses

375

375

1,479

469

329

1,499

152

94

883

317

235

616

64

68

422

253

167

194

Other operating income
Share of profit of equity accounted associates
and jointly controlled entities

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

10

Profit before income tax
Income tax expense

3

Profit after income tax

The notes on pages 12 to 34 form part of and should be read in conjunction with these financial statements

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHSTATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED 31 DECEMBER 2009
NZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008
30/09/2009

Profit after income tax
Available-for-sale revaluation reserve:- Valuation gain taken to equity
Cash flow hedging reserve:- Valuation gain (loss) taken to equity

$m

$m

$m

253

167

194

22

10

2

4

25

(1)

13

(9)

(3)

-

-

(25)

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

(5)

(7)

10

Net income (expense) recognised directly in equity

34

19

(17)

287

186

177

- Transferred to income statement
Actuarial loss on defined benefit schemes

Total comprehensive income for the period

The notes on pages 12 to 34 form part of and should be read in conjunction with these financial statements

8

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHSTATEMENT OF CHANGES IN EQUITY AND HEAD OFFICE ACCOUNTFOR THE THREE MONTHS ENDED 31 DECEMBER 2009

Note

NZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008
30/09/2009

$m

$m

$m

6,424
-

5,413
-

5,413
11
1,000

6,424

5,413

6,424

Available-for-sale revaluation reserve
Balance at beginning of the period
Valuation gain recognised after tax

25
22

23
7

23
2

Balance at end of the period

47

30

25

Cash flow hedging reserve
Balance at beginning of the period
Valuation gain recognised after tax
Transferred to income statement

23
3
9

24
18
(6)

24
(1)

Balance at end of the period

35

36

23

Total reserves

82

66

48

Retained earnings
Balance at beginning of the period

843

1,667

1,667

Profit after income tax attributable to parent

253

167

194

1,096

1,834

1,861

-

-

(18)
(1,000)

1,096

1,834

843

1

-

-

1

-

-

7,315

7,127

7,127

287
1

186
-

177
11
-

7,603

7,313

7,315

Ordinary share capital & Head Office accountBalance at beginning of the period
Movement in Head Office accountRedeemable preference shares issued in the period
Balance at end of the period

16

Total available for appropriation
Actuarial loss on defined benefit schemes after tax
Interim ordinary dividend paid
Balance at end of the period
Minority interests
Balance at beginning of the period
Minority interests in acquired subsidiaries

27

Balance at end of the period
Total equity & Head Office accountBalance at beginning of the period
Total comprehensive income for the period
Transactions with Head Office
Other transactions

27

Balance at end of the period

The notes on pages 12 to 34 form part of and should be read in conjunction with these financial statements

9

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHBALANCE SHEETAS AT 31 DECEMBER 2009

Note

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Investments relating to insurance businessInsurance policy assets
Shares in associates and jointly controlled entities
Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets

NZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009

4
5
6
7
8

Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Payables and other liabilities
Current tax liabilities
Deferred tax liabilities
Provisions
Bonds and notes
Loan capital
Term funding

11
12

13
14
15

Total liabilities (excluding Head Office Account)
Net assets (excluding Head office Account)Represented by:
Ordinary share capital & Head Office accountReserves
Retained earnings

16

Share capital and reserves attributable
Minority interests
Total equity and Head Office accountThe notes on pages 12 to 34 form part of and should be read in conjunction with these financial statements

10

$m

$m

$m

2,870
4,562
5,910
7,970
2,458
95,519
40
81
148
24
896
434
298
3,543

3,050
7,127
2,484
15,148101
99,268
370
24
935
164
247
3,325

2,762
4,514
4,166
11,015
1,513
97,024
464
115
1,141
278
3,322

124,753

132,243

126,314

11,347
72,970
8,857
1,559
375
17,671
2,605
1,766

6,395
74,145
13,962
1,704
355
23,7772,826
1,766

12,514
71,764
10,974
1,547
15
283
17,5402,596
1,766

117,150

124,930

118,999

7,603

7,313

7,315

6,424
82
1,096

5,413
66
1,834

6,424
48
843

7,602

7,313

7,315

1

-

-

7,603

7,313

7,315

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCASH FLOW STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2009

Note

NZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008 30/09/2009
$m
$m
$m

CASH FLOWS FROM OPERATING ACTIVITIESInterest received
Dividends received
Fees and other income received
Interest paid
Operating expenses paid
Income taxes (paid) received

1,500
337
(979)
(375)
(368)

2,199
161
(1,670)
(201)
8

7,368
3
945
(5,137)(1,483)
(338)

115

497

1,358

1,795
(1,746)
1,230
(738)
1,158
278
(1,353)
(455)
1,350
8

(1,420)
162
3,147
17
(872)
66
3,084
1,188
(5,178)
(141)

(246)
(1,505)(3,494)(1,388)
43
(165)
9,630
672
(4,637)
(167)

1,642

550

101

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of shares in associates and jointly controlled entities
Proceeds from sale of premises and equipment
Proceeds from sale of software
Purchase of shares in associates and jointly controlled entities
Purchase of shares in subsidiary entities
Purchase of intangible assets
Purchase of premises and equipment

1
1
(247)
(2)
(32)

33
(1)
(19)
(30)

33
3
(92)
(21)
(95)

Net cash flows used in investing activities

(279)

(17)

(172)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bonds and notes
Redemptions of bonds and notes
Redemptions of loan capital
Proceeds from issue of redeemable preference shares
Dividends paid
Cash contributed from Head Office

2,121(1,692)-135(1,868)-

5,012(7,751)(225)
1,000(1,000)11

Net cash flows from (used in) financing activities

429(1,733)(2,953)

Net cash flows from operating activities
Net cash flows used in investing activities
Net cash flows from (used in) financing activities

1,642
(279)
429

550
(17)
(1,733)101(172)(2,953)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period

1,792
4,766

(1,200)7,790(3,024)
7,790

1

6,558

6,590

4,766

Cash flows from operating profits before changes in operating
assets and liabilities
Net changes in operating assets and liabilities:
Decrease (increase) in due from other financial institutions - term
(Increase) decrease in trading securities
Decrease (increase) in derivative financial instruments(Increase) decrease in available-for-sale assets
Decrease (increase) in loans and advances
Decrease (increase) in other assets(Decrease) increase in due to other financial institutions(Decrease) increase in deposits
Increase (decrease) in other borrowings
Increase (decrease) in payables and other liabilities
Net cash flows from operating activities

22

Cash and cash equivalents at end of the period

1.

A reconciliation of cash and cash equivalents to the NZ Banking Group’s core liquidity portfolio is included in Note 22 Notes to the Cash Flow Statement.

The notes on pages 12 to 34 form part of and should be read in conjunction with these financial statements

11

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS
1.

ACCOUNTING POLICIES(i) Basis of preparation

These financial statements have been prepared in accordance with NZ IAS 34 Interim Financial Reporting
and the Registered Bank Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks)
Order 2008. These financial statements should be read in conjunction with the NZ Banking Group’s financial
statements for the year ended 30 September 2009.
(ii) Basis of measurement

The financial statements have been prepared on a going concern basis in accordance with historical cost
concepts except that the following assets and liabilities are stated at their fair value:• derivative financial instruments including in the case of fair value hedging the fair value of any
applicable underlying exposure,• financial instruments held for trading,• assets recognised as available-for-sale,• financial instruments designated at fair value through profit or loss, and• defined benefit scheme asset or liability.
(iii) Changes in accounting policies

NZ IFRS 8 Operating Segments (“NZ IFRS 8”), NZ IAS 1 Presentation of Financial Statements (revised) (“NZ
IAS 1”) and NZ IFRS 3 Business Combinations (revised) have been applied by the NZ Banking Group for thethree months ended 31 December 2009.
NZ IFRS 8 replaces NZ IAS 14 Segment Reporting and requires the use of a “management approach” tosegment reporting. Segment information is therefore presented on the same basis as that used for internalreporting purposes. Goodwill associated with the acquisition of NBNZ Holdings Limited Group is allocated to
the reportable segments in accordance with NZ IFRS 8.
The NZ Banking Group’s reportable operating
segments did not change on adoption of NZ IFRS 8.
In accordance with NZ IAS 1 a “statement of comprehensive income” has been disclosed showing net profit
or loss and revenues and expenses recognised directly in equity. In addition the revised “statement ofchanges in equity” shows all changes in equity.
The application of these standards has not resulted in a material impact on the financial results or positionof the NZ Banking Group.
There have been no other changes in accounting policies since the authorisation date of the previous
Disclosure Statement on 24 November 2009.

(iv) Presentation currency and rounding

The amounts contained in the financial statements are presented in millions of New Zealand dollars, unlessotherwise stated.
(v) Basis of aggregation

These financial statements aggregate the financial statements of the New Zealand geographic activities ofAustralia and New Zealand Banking Group Limited as conducted through the NZ Branch and its controlled
entities in New Zealand, the NZ Banking Group.

(vi) Comparatives

To ensure consistency with the current period, comparative figures have been reclassified whereappropriate.

2. RISK MANAGEMENT POLICIESA number of new and existing types of risk have been recognised following the consolidation of the ING (NZ)
Holdings Limited group (“ING NZ”) into the NZ Banking Group. The new risks relate to ING NZ’s insurance, realestate management and funds management business. The new risks identified are not considered material to
the NZ Banking Group. At 31 December 2009 the ING NZ risk management approaches have not been aligned
or integrated with the rest of the NZ Banking Group. However, ING NZ identifies, controls and monitors theserisks through a set of policies and a risk management framework which is broadly in line with that in placeacross the NZ Banking Group.

12

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAX EXPENSENZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008
30/09/2009$m$m$m
Income tax expense before tax provisions(Release of) / additional tax provisions

112
(48)

68
-

182
240

64

68

422

Effective tax rate (%) before release of tax provisions

35.3%

28.9%

29.5%

Effective tax rate (%)

20.2%

28.9%

68.5%

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

2,425
363
82

2,386
586
78

2,373
341
48

Total liquid assets

2,870

3,050

2,762

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

2,141

2,112

2,207

Income tax expense

4. LIQUID ASSETS

5. DUE FROM OTHER FINANCIAL INSTITUTIONS
Able to be withdrawn without prior notice
Securities purchased under agreement to resell
Security settlements
Certificates of deposit
Reserve Bank bills
Term loans and advances

164
339
128
1,122
100
2,709

254
592
4,891
1,390

172
1,083
370
2,338
398
153

Total due from other financial institutions

4,562

7,127

4,514

929

-

-

Included within due from other financial institutions
is the following related party balance:
Ultimate Parent Bank

6. TRADING SECURITIES
Government, Local Body stock and bonds
Certificates of deposit
Promissory notes
Other bank bonds
Other

2,599
587
56
2,592

430
392
177
1,369

1,389
191
28
2,475

76

116

83

Total trading securities

5,910

2,484

4,166

101

131

159

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

13

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7. AVAILABLE-FOR-SALE ASSETSNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Government, Local Body stock and bonds
Other debt securities
Equity securities

2,159
213
86

3
34
64

1,394
48
71

Total available-for-sale assets

2,458

101

1,513

Overdrafts
Credit card outstandings
1
Term loans - housing
Term loans - non-housing
Finance lease receivables

1,954
1,457
53,48039,069
690

1,855
1,488
53,49841,506
769

2,087
1,402
53,45840,231
683

Gross loans and advances
Provision for credit impairment (Note 10)
Unearned finance income
Fair value hedge adjustment
Deferred fee revenue and expenses
Capitalised brokerage/ mortgage origination fees

96,650(1,370)
(258)
480
(55)
72

99,116
(725)
(330)
1,163
(58)
102

97,861(1,281)
(262)
681
(53)
78

Total net loans and advances

95,51999,26897,024

8. NET LOANS AND ADVANCES

1.

The NZ Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $200 million(31/12/2008 $1,370 million; 30/09/2009 $1,806 million). The underlying collateral accepted by the RBNZ under this transaction are mortgages to the value of$246 million (31/12/2008 $1,711 million; 30/09/2009 $2,250 million).

14

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION
Individually impaired assets
Retailmortgages$mUnaudited 31/12/2009

NZ Banking Group
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

387
162
(7)
(99)
(16)

59
56
(11)
(31)

740
226
(28)
(98)
(11)

1,186
444
(35)
(208)
(58)

Individually impaired asset balance at end of the period

427

73

829

1,329

7

-

-

7

434

73

829

1,336

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

83
71
(5)
(17)
(2)

30
82
(14)
(22)
(33)

214
27
(15)
(12)
(4)

327
180
(34)
(51)
(39)

Individually impaired asset balance at end of the period

130

43

210

383

-

-

-

-

130

43

210

383

Balance at beginning of the year
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

83
586
(22)
(232)
(28)

30
243
(20)
(45)
(149)

214
882
(25)
(230)
(101)

327
1,711
(67)
(507)
(278)

Individually impaired asset balance at end of the year

387

59

740

1,186

-

2

-

2

387

61

740

1,188

Restructured assets
Total impaired assets
Unaudited 31/12/2008

Restructured assets
Total impaired assets
Audited 30/09/2009

Restructured assets
Total impaired assets

A restructured asset is an impaired asset for which the terms have been changed to grant the counterparty aconcession that would not otherwise have been available, due to the counterparty’s difficulty in complying withthe original terms, and where the yield on the asset following restructuring is still above the NZ Banking Group’s
cost of funds. An asset is classified as an other individually impaired asset if following the restructure the yieldon the asset is below the NZ Banking Group’s cost of funds.
At 31 December 2009, loans and advances of $606 million were renegotiated in the NZ Banking Group(31/12/2008 $45 million; 30/09/2009 $266 million).

15

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION(CONTINUED)
Retailmortgages$m

NZ Banking Group
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Unaudited 31/12/2009
Balance at end of period
Past due assets (90 days past due assets)1

223

57

106

386

Other assets under administration

1

-

8

9

Undrawn facilities with impaired customers

-

-

49

49

Interest not recognised on impaired assets

7

3

18

28

312

61

57

430

-

-

7

7

Unaudited 31/12/2008
Balance at end of period
Past due assets (90 days past due assets)1
Other assets under administration
Undrawn facilities with impaired customers

-

-

10

10

Interest not recognised on impaired assets

3

1

4

8

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

276

59

111

446

Other assets under administration

-

-

-

-

Undrawn facilities with impaired customers

-

-

32

32

Interest not recognised on impaired assets

18

3

35

56

There are no undrawn facilities with 90 day past due customers or customers within the other assets underadministration category as at 31 December 2009 (31/12/2008 $nil; 30/09/2009 $nil).

1.

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

16

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT
Retailmortgages$mUnaudited 31/12/2009

NZ Banking Group
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Collective provision
Balance at beginning of the period(Credit) charge to income statement

127
(3)

159
(1)

518
4

804
-

Balance at end of the period

124

158

522

804

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

156
59
1
(16)
(3)

40
28
4
(31)
(1)

281
65
(11)
(6)

477
152
5
(58)
(10)

Balance at end of the period

197

40

329

566

Total provision for credit impairment

321

198

851

1,370

Collective provision
Balance at beginning of the period
Charge (credit) to income statement

81
1

164
(1)

289
22

534
22

Balance at end of the period

82

163

311

556

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
1
Discount unwind

28
12
(4)
-

10
37
5
(32)
-

94
23
(3)
(1)

132
72
5
(39)
(1)

Balance at end of the period

36

20

113

169

Total provision for credit impairment

118

183

424

725

Collective provision
Balance at beginning of the year
Charge (credit) to income statement

81
46

164
(5)

289
229

534
270

Balance at end of the year

127

159

518

804

Individual provision (individually impaired assets)
Balance at beginning of the year
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

28
155
1
(28)
-

10
161
18
(149)
-

94
297
1
(101)
(10)

132
613
20
(278)
(10)

Balance at end of the year

156

40

281

477

Total provision for credit impairment

283

199

799

1,281

Unaudited 31/12/2008

Audited 30/09/2009

1.

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

17

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT (CONTINUED)
Provision movement analysis

Retailmortgages$m

NZ Banking Group
Other retail
Corporate
exposures
exposures
$m
$m

Total
$m

Unaudited 31/12/2009
New and increased provisions
Provision releases

66
(6)

32
-

93
(28)

191
(34)

Recoveries of amounts previously written off

60
(1)

32
(4)

65
-

157
(5)

Individual provision charge
Collective provision charge

59
(3)

28
(1)

65
4

152
-

Charge to income statement

56

27

69

152

Unaudited 31/12/2008
New and increased provisions
Provision releases

12
-

42
-

25
(2)

79
(2)

Recoveries of amounts previously written off

12
-

42
(5)

23
-

77
(5)

Individual provision charge
Collective provision charge

12
1

37
(1)

23
22

72
22

Charge to income statement

13

36

45

94

Audited 30/09/2009
New and increased provisions
Provision releases

165
(9)

182
(3)

316
(18)

663
(30)

Recoveries of amounts previously written off

156
(1)

179
(18)

298
(1)

633
(20)

Individual provision charge
Collective provision charge

155
46

161
(5)

297
229

613
270

Charge to income statement

201

156

526

883

11. DUE TO OTHER FINANCIAL INSTITUTIONSNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009

$m

$m

$m

10,161

3,125

9,286

101

31

159

200
885

1,720
1,519

1,806
1,263

11,347

6,395

12,514

Included within due to other financial institutions are the following balances:
Balances owing to the Ultimate Parent Bank by
ANZ National (Int'l) Limited guaranteed by the Bank
483
Australia and New Zealand Banking Group Limited - NZ Branch
9,678

3,125
-

485
8,801

Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)
Securities sold under agreements to repurchasefrom other financial institutions
Securities sold under agreements to repurchase1
from central banks
Other financial institutions
Total due to other financial institutions

1.

The NZ Banking Group has entered into repurchase agreements for residential mortgage-backed securities with the RBNZ with a book value of $200 million(31/12/2008 $1,370 million; 30/09/2009 $1,806 million). The underlying collateral accepted by the RBNZ under this transaction are mortgages to the value of$246 million (31/12/2008 $1,711 million; 30/09/2009 $2,250 million).
These assets do not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets, therefore the NZ Banking Group’s financial
statements do not change as a result of establishing these facilities. The net effect on the NZ Banking Group is to reflect additional cash or liquid assets and aliability being Securities sold under agreements to repurchase from central banks.

18

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. DEPOSITS AND OTHER BORROWINGSNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Amortised cost
Certificates of deposit
Term deposits
Demand deposits bearing interest
Deposits not bearing interest
Secured debenture stock

3,028
34,232
20,482
4,821
1,383

6,493
30,714
22,662
4,127
1,796

4,441
32,99721,024
4,373
1,537

Total deposits and other borrowings recognised at amortised cost

63,946

65,79264,372

Fair value through the profit or loss
Commercial paper

9,024

8,353

7,392

Total deposits and other borrowings recognised at fair value

9,024

8,353

7,392

72,97074,14571,764

Total deposits and other borrowings

The NZ Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed
funds during the three months ended 31 December 2009 (31/12/2008 $nil; 30/09/2009 $nil). Deposits from
customers are unsecured and rank equally with other unsecured liabilities of the NZ Banking Group. In theunlikely event that the Bank was put into liquidation or ceased to trade, secured creditors and those creditors
set out in the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured
creditors.
Included within deposits and other borrowings are the following balances:
Commercial paper issued by ANZ National (Int'l) Limited
guaranteed by the Bank at amortised cost

9,021

8,321

7,388

UDC Finance Limited secured debentures
Carrying value of total tangible assets

1,912

2,102

1,877

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

13. BONDS AND NOTESNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Total bonds and notes
Included within bonds and notes are the following related party balances:
Subsidiaries of the Australia and New Zealand Banking Group Limited
Bonds and notes issued by ANZ National (Int'l) Limited
guaranteed by the Bank

17,671

23,777

17,540

2,221

2,658

2,233

14,53920,222

14,401

Bonds and notes are unsecured and rank equally with other unsecured liabilities of the NZ Banking Group.

19

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14.

LOAN CAPITALNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009
$m
$m
$m

AUD 207,450,000 term subordinated floating rate loan
AUD 265,740,000 perpetual subordinated floating rate loan
AUD 186,100,000 term subordinated floating rate loan
AUD 43,767,507 term subordinated floating rate loan
AUD 169,520,000 term subordinated floating rate loan
Term subordinated fixed rate bonds
Perpetual subordinated bond

328
230
54
209
950
835

248
317
222
52
202
950
835

324
227
53
207
950
835

Total loan capital issued
Less loan capital instruments held by the NZ Banking Group

2,606
(1)

2,826
-

2,596
-

Total loan capital

2,605

2,826

2,596

821

1,041

811

Included within loan capital is the following related party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Bank)

AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and had an ultimate maturity date of 31 August 2014. On 31
August 2009 the Bank repaid the loan. All interest is payable half yearly in arrears, with interest payments due
28 February and 31 August. Interest was based on BBSW + 0.40% p.a. up until, and including, 31 August
2009.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly inarrears based on BBSW + 0.95% p.a., with interest payments due 15 March and 15 September.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. The NZ Banking
Group may elect to repay the loan on 19 April each year commencing from 2010 through to 2015. All interest is
payable half yearly in arrears, with interest payments due 19 April and 19 October. Interest is based on BBSW +
0.32% p.a. to 19 April 2010 and increases to BBSW + 0.82% p.a. thereafter.
AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The
Bank may elect to repay the loan on 15 September each year commencing from 2011 through to 2016. Allinterest is payable half yearly in arrears, with interest payments due 15 March and 15 September. Interest isbased on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW + 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The
NZ Banking Group may elect to repay the loan on 17 September each year commencing from 2012 through to2016. All interest is payable half yearly in arrears, with interest payments due 17 March and 17 September.
Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW + 1.18% p.a.
thereafter.

20

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. LOAN CAPITAL (CONTINUED)
NZD subordinated bonds
The terms and conditions of the term subordinated fixed rate bonds are as follows:
Term subordinated fixed rate bonds
Issue dateAmount $m
15 September 2006
350
2 March 2007
250
23 July 2007
350

Coupon rate
7.16%
7.60%
8.23%

Call date
15 September 2011
2 March 201223 July 2012

Maturity date
15 September 2016
2 March 201723 July 2017

As at 31 December 2009, these bonds carried an AA- rating by Standard & Poor's.
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to
pay interest to maturity at the five year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. forthe 15 September 2006; 2 March 2007 and 23 July 2007 bonds respectively. Interest is payable half yearly inarrears based on the fixed coupon rate.
The terms and conditions of the perpetual subordinated bond are as follows:
Perpetual subordinated bondIssue dateAmount $m
18 April 2008
835

Coupon rate
9.66%

1st Call date
18 April 2013

2nd Call date
18 April 2018

The Bank may elect to redeem the bonds on 18 April 2013, 18 April 2018 or any interest payment date
subsequent to 18 April 2018. Interest is payable half yearly in arrears on 18 April and 18 October each year,
beginning on 18 October 2008, up to and including the Second Call Date and then quarterly thereafter. If thebonds are not called at the First Call Date, the coupon rate will reset to the five year interest swap rate plus
2.00%. Should the bonds not be called at the Second Call Date, the Coupon Rate from the Second Call Dateonwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.
As at 31 December 2009, these bonds carried an A+ rating by Standard and Poor's.
Interest may not necessarily be paid on each interest payment date as under the terms of the Bonds the Bank
has a general right and in certain specified circumstances an obligation, to defer payment of interest on theBonds.
All of the NZD subordinated bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the
Bank a waiver from the requirements of Listing Rules 10.4 and 10.5. Rule 10.4 relates to the provision of
preliminary announcements of half yearly and annual results to the NZX. Rule 10.5 relates to preparing andproviding a copy of half yearly and annual reports to the NZX. The Bank has been granted a waiver from theserules on the conditions that the Bank's quarterly General Disclosure Statement ('GDS') is available on the NZ
Banking Group's website, at any branch and at the NZX; that bondholders are advised by letter that copies of
the GDS are available at the above locations; that all bondholders are notified on an ongoing basis, by way of asentence included on the notification of interest payments, that the latest GDS is available for review at theabove locations; and that a copy of the GDS is sent to the NZX on an ongoing basis.
Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors
and all creditors of the NZ Banking Group.
All subordinated debt qualifies as Lower Level Tier Two Capital for capital adequacy purposes except for theperpetual subordinated debt which qualifies as Upper Level Tier Two Capital.

21

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15. TERM FUNDING
NZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
ANZ Funds Pty Limited

1,766

1,766

1,766

ANZ Funds Pty Limited (Related Company)
This New Zealand dollar loan was made on 1 December 2003 and is repayable upon demand being made by the
ANZ Funds Pty Limited, where 12 months prior written notice is given, unless a shorter notice period is agreed
upon. Interest is payable quarterly in arrears with interest payments due 1 March, 1 June, 1 September and 1
December. As part of the annual review of terms and conditions of the loan, the margin was changed to BKBM
+ 1.16% p.a., effective from 1 December 2009.

16. ORDINARY SHARE CAPITAL & HEAD OFFICE ACCOUNTNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Ordinary share capital at beginning and end of the period

1,453

1,453

1,453

Redeemable preference shares at beginning of the period
Redeemable preference shares issued during the period

4,960
-

3,960
-

3,960
1,000

4,960

3,960

4,960

Paid in share capital at end of period
Head Office Account

6,413
11

5,413
-

6,413
11

Total Capital & Head Office Account at end of period

6,424

5,413

6,424

Voting rights
At a meeting: on a show of hands or vote by voice every member who is present in person or by proxy or byrepresentative shall have one vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote forevery share of which such member is the holder.

22

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17. CAPITAL ADEQUACYOVERSEAS BANKING GROUP CAPITAL ADEQUACY RATIO
Overseas Bank
(Extended Licensed Entity)

Overseas Banking Group
Unaudited
31/12/2009
Basel II

Unaudited
31/12/2008
Basel II

Unaudited
30/09/2009
Basel II

Unaudited
30/09/2009
Basel II

Unaudited
30/09/2008
Basel II

Tier One Capital

10.5%

8.3%

10.6%

11.6%

8.4%

Total Capital

13.4%

11.1%

13.7%

14.2%

11.6%

Basel II came into force on 1 January 2008. The Overseas Banking Group received accreditation from APRA to
apply the Advanced Internal Ratings Based (“Advanced IRB”) methodology for credit risk weighted assets andthe Advanced Measurement Approach (“AMA”) for operational risk weighted asset equivalent.
The Overseas Banking Group has Advanced IRB accreditation under Basel II rules. The Overseas Banking Groupmet the requirements imposed by APRA as at 31 December 2009.
Further details of the Overseas Banking Group's capital adequacy requirements and credit risk management
processes can be found in its 2009 Annual Report. This report can be accessed at the following website
address: www.anz.com.
RISK WEIGHTED CREDIT RISK EXPOSURES
Risk weighted exposures for the NZ Banking Group and NZ Branch have been derived in accordance with the
RBNZ document entitled 'Capital Adequacy Framework (Basel I Approach)' (BS2) dated March 2008.
Total Risk Weighted Exposures of the NZ Banking Group as at 31 December 2009 (unaudited) were:

On-balance sheet exposures

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non risk weighted assets

Principal
amountRiskweightRiskweighted
exposure

$m
4,533
2,779
7,595
725
53,81244,058
11,251

0%
10%
20%
20%
50%
100%
n/a

$m
278
1,519
145
26,90644,058-

124,753

Off-balance sheet exposures
Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

1.

100%
100%
50%
20%

Creditequivalentamount
$m
2,135
549
508
14

4,963

50%

2,482

2,481

17,0880%--Principal
amount
$m
2,135
549
1,015
70

Creditconversion
factor120,764
517,510
33

5,144
8,103
6

664,127

18,940The credit equivalent amounts for market related contracts are calculated using the current exposure method.

23

72,906
Averagerisk
weight
35%
60%
68%
71%

22%
23%
50%

Risk
weighted
exposure
$m
743
327
344
10

1,131
1,880
3
6,919

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17. CAPITAL ADEQUACY (CONTINUED)
Total Risk Weighted Exposures of the NZ Branch as at 31 December 2009 (unaudited) were:Principal
amount
$m
10
9,618
289
53

On-balance sheet exposures
Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non risk weighted assets

Risk
weight
0%
10%
20%
20%
50%
100%
n/a

Risk
weighted
exposure
$m
2
4,809
289
-

9,970
Averagerisk
weight

100%
100%
50%
20%

Creditequivalentamount
$m
-

n/a
n/a
n/a
n/a

Risk
weighted
exposure
$m
-

33

50%

17

100%

17

-

0%

-

n/a

-

9,683
19,223
-

48
73
-

20%
20%
n/a

10
15
-

28,939138

Principal
amount$m-

Off-balance sheet exposures
Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

Creditconversion
factor

5,100

42

RETAIL MORTGAGES BY LOAN-TO-VALUATION ("LVR") RATIOAs required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided
by the Bank’s valuation of the security property at origination of the exposure. The exposure amount used to
calculate LVR excludes commitments to lend.
Retail mortgages by LVR ratio for the NZ Banking Group as at 31 December 2009 (unaudited):
ExposureAmount$m
LVR range
0% - 80%
80% - 90%
Over 90%

42,222
6,529
5,641
54,392

1.

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

24

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. CONCENTRATIONS OF CREDIT RISKThe NZ Banking Group has no credit exposures, on the basis of limits, to individual counterparties or groups ofclosely related counterparties (whether bank or non-bank exposures) which equal or exceed 10% of theOverseas Banking Group's equity as at 31 December 2009, 31 December 2008 or 30 September 2009, or in
respect of peak end-of-day aggregate credit exposures for the three months ended 31 December 2009. The
peak end-of-day exposures have been calculated using the Overseas Banking Group equity as at 30 September
2009. These calculations exclude credit exposures to the central government of any country with a long term
credit rating of A- or A3 or above, or its equivalent.

19. MARKET RISK
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document
entitled “Market risk guidance notes” (BS6). The peak for all categories of exposure may not have occurred at
the same time.
The peak end-of-day market risk exposures for the quarter are measured as a percentage of the Overseas
Banking Group’s most recently publicly disclosed equity as at 30 September 2009 (31/12/2008: 30 September
2008; 30/09/2009: 30 September 2009) and are calculated separately for each category of exposure.
NZ Banking Group

Implied risk weighted
exposure

Aggregate capital charge

Aggregate capital charge asa percentage of theOverseas Banking Group's
Equity

As at
$m

Peak
$m

As at
$m

Peak
$m

As at

Peak

3,719
11
86

4,053
89
86

298
1
7

324
7
7

0.9%
0.0%
0.0%

1.0%
0.0%
0.0%

3,959
37
63

3,975
58
66

317
3
5

318
5
5

1.2%
0.0%
0.0%

1.2%
0.0%
0.0%

3,990
5
69

4,321
301
82

320
6

346
24
7

1.0%
0.0%
0.0%

1.1%
0.1%
0.0%

Unaudited 31/12/2009
Interest rate risk
Foreign currency risk
Equity risk
Unaudited 31/12/2008
Interest rate risk
Foreign currency risk
Equity risk
Audited 30/09/2009
Interest rate risk
Foreign currency risk
Equity risk

20. INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIESNZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Interest earning and discount bearing assets

113,251

112,010

109,699

Interest and discount bearing liabilities

101,477

105,048

101,741

25

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21. SEGMENTAL ANALYSIS
For segment reporting purposes, the NZ Banking Group is organised into three major business segments Retail, Commercial and Institutional. Centralised back office and corporate functions support these segments.
A summarised description of each business segment is provided below:
RetailProvides banking products and services to individuals and small businesses through separate ANZ and The
National Bank of New Zealand branded distribution channels. Personal banking customers have access to a wide
range of financial services and products. Small business banking services are offered to enterprises with annual
revenues of less than $5 million. Included in this segment is Private Banking, which offers a fully inclusivebanking and investment service to high net worth individuals. This segment also includes the ING NZ and otherprofit centres supporting the Retail Banking segment.
Commercial
This segment provides services to Rural, Corporate, Commercial and UDC customers. A full range of banking
products and services are provided to Rural customers. Corporate and Commercial customers consist of
primarily privately owned medium to large businesses with annual revenues of $2 million and greater. The
Banking Group's relationship with these businesses ranges from simple banking requirements with revenue from
deposit and transactional facilities, and cash flow lending, to more complex funding arrangements with revenue
sourced from a wider range of products. UDC is primarily involved in the financing and leasing of plant, vehicles
and equipment, primarily for small and medium sized businesses, as well as investment products.
Institutional
Comprises businesses that provide a full range of financial services to the NZ Banking Group's client base. The
Institutional business unit is made up of the following specialised units:•••

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

Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to beconsistent with the 31 December 2009 segment definitions.
BUSINESS SEGMENT ANALYSIS1,2
3

Retail$m

NZ Banking Group
Commercial Institutional
$m
$m

Other
$m

Total
$m

Unaudited 3 months to 31/12/20093
Net operating income
3
Profit before income tax

369
45

217
58

177
148

81
66

844
317

Unaudited 3 months to 31/12/2008
3
Net operating income
3
Profit before income tax

245
(55)

212
105

220
174

27
11

704
235

1,455
140

863
170

773
507

(113)
(201)

2,978
616

Audited year to 30/09/20093

Net operating income
3
Profit before income tax
1.
2.
3.

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Includes a loss of $82 million (30/09/2009 nil; 31/12/2008 nil) on acquisition of ING NZ and a charge of $nil (30/09/2009 $211 million; 31/12/2008 $161 million)
in relation to ING NZ funds.

26

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22. NOTES TO THE CASH FLOW STATEMENTNZ Banking Group
Unaudited
Unaudited
Audited
3 months to
3 months toYear to31/12/2009
31/12/2008
30/09/2009$m$m$m
Reconciliation of profit after income tax to net cash flows
used in operating activities
Profit after income tax

253

167

194

Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Deferred fee revenue and expenses
Share-based payments expense
Amortisation of capitalised brokerage/ mortgage origination fees

12
152
5
12

12
94
1
4
14

50
883
(8)
18
54

Deferrals or accruals of past or future operating
cash receipts or payments:
Decrease (increase) in net operating assets and liabilities(Increase) decrease in interest receivable
Decrease in interest payable(Increase) decrease in accrued income
Increase (decrease) in accrued expenses(Decrease) increase in provisions
Amortisation of premiums and discounts(Increase) decrease in net income tax assets and liabilities

1,527
(10)
(33)
(4)
2
(14)
3
(314)

53
1
(17)
(3)
(12)
165
13
76

(1,346)
138
(259)
1
41
100
76
183

Items classified as investing/financing:
Share of profit of equity accounted associates andjointly controlled entities
Loss on remeasuring existing equity interests to fair value
Loss (gain) on disposal of premises and equipment

(36)
82
5

(6)
(12)

(11)
(13)

1,642

550

101

Net cash flows from operating activities
Reconciliation of core liquidity portfolio to cash and cash equivalents

The NZ Banking Group's core liquidity portfolio held for managing liquidity risk comprises:
NZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Cash and balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government, Local Body stock and bonds
Available-for-sale assets
Other bank bonds

2,141
339
1,430
2,401
2,134
2,636

2,044
563
4,975
284
1,335

2,207
1,075
2,736
1,102
1,435
2,522

1

Total liquidity portfolio

11,0819,201

11,077

Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:
Liquid assets not with central banks
Due from other financial institutions - less than 90 days

729
2,964

1,004
897

556
550

Non-cash items included within liquidity portfolio
Trading securities
Available-for-sale assets
Due from other financial institutions - greater than 90 days

(5,345)(2,134)(737)(1,140)(3,372)(3,624)(1,435)(2,358)

Total cash and cash equivalents

6,558

6,590

4,766

Reconciliation of cash and cash equivalents to the balance sheets
Liquid assets
Due from other financial institutions - less than 90 days

2,870
3,688

3,050
3,540

2,763
2,003

Total cash and cash equivalents

6,558

6,590

4,766

1.

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

27

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23. ULTIMATE PARENT BANKThe Parent Company is Australia and New Zealand Banking Group Limited which is incorporated in Australia.

24. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS
Securitisation
The NZ Banking Group enters into transactions in the normal course of business by which it transfers financial
assets directly to third parties or to special purpose entities. These transfers may give rise to the full or partial
derecognition of those financial assets.
•

Full derecognition occurs when the NZ Banking Group transfers its contractual right to receive cash flows
from the financial assets, or retains the right but assumes an obligation to pass on the cash flows fromthe asset, and transfers substantially all the risks and rewards of ownership. These risks include credit,
interest rate, currency, prepayment and other price risks.

•Partial derecognition occurs when the NZ Banking Group sells or otherwise transfers financial assets insuch a way that some but not substantially all of the risks and rewards of ownership are transferred but
control is retained. These financial assets are recognised on the balance sheet to the extent of the NZ
Banking Group's continuing involvement.

In May 2008 the RBNZ expanded the range of acceptable collateral that banks can pledge and borrow against as
part of changes to its liquidity management arrangement designed to help ensure adequate liquidity for New
Zealand financial institutions in the event that global market disruption was to intensify. From 31 July 2008,
acceptable collateral includes residential mortgage backed securities ("RMBS") that satisfy RBNZ criteria.
On 10 October 2008, the NZ Banking Group established an in-house RMBS facility in order to issue securities
meeting the RBNZ criteria. The establishment of the facility resulted in the Bank financial statements
recognising a payable and a receivable of equal amount totalling $3,721 million to Kingfisher NZ Trust 2008-1("the Trust"), a newly established consolidated entity. On 12 December 2008, a further tranche totalling $5,521
million was also sold to the Trust, creating a second payable and receivable of equal amount. These assets andliabilities do not qualify for derecognition as the NZ Banking Group retains a continuing involvement in thetransferred assets, therefore the NZ Banking Group's financial statements do not change as a result of
establishing these facilities.
The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent thatany loans are found to be ineligible in terms of the RBNZ criteria, they are automatically removed from thefacility. Additional lending to existing RMBS customers is added into the facility on a quarterly basis.
The establishment of this facility increases the NZ Banking Group's contingent funding ability from the RBNZ.
Funds management
Certain entities in the NZ Banking Group act as trustee and/or manager for a number of unit trusts andinvestment and superannuation funds. The Bank provides private banking services and investment advisory
services to a number of clients, including investment advice and portfolio management. The NZ Banking Groupis not responsible for any decline in performance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by the NZ Banking Group, they are not included in thesefinancial statements. The NZ Banking Group derives fee and commission income from the sale and managementof investment funds and superannuation bonds, unit trusts and the provision of private banking services andinvestment advisory services to a number of clients. The NZ Banking Group derives commission income fromthe sale of third party funds management products.
Custodial services
The NZ Banking Group provides custodial services to customers in respect of assets that are beneficially ownedby those customers.

28

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
24. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS (CONTINUED)
Insurance business
The NZ Banking Group conducts insurance business through subsidiaries of ING NZ – the assets, liabilities andoperations of which are fully consolidated into the NZ Banking Group since its acquisition. Previously the NZ
Banking Group did not conduct any insurance business directly, although it held a 49% ownership share in ING
NZ. The NZ Banking Group also markets and distributes a range of insurance products which are underwritten
by subsidiaries of ING NZ, as well as, third party insurance companies.
The insurance business comprises risk transfer and investment contract life insurance products. The aggregate
insurance business conducted by companies in the NZ Banking Group comprises assets totalling $297 million(31/12/2008 $nil; 30/09/2009 $nil) which is 0.2% (31/12/2008 0.0%; 30/09/2009 0.0%) of the total
consolidated assets of the NZ Banking Group.
Provision of financial services
Financial services provided by the NZ Banking Group to entities which are involved in trust, custodial, funds
management and other fiduciary activities, and to affiliated insurance companies which conduct marketing or
distribution of insurance products, or on whose behalf the marketing or distribution of insurance products are
conducted, are provided on arm’s length terms and conditions and at fair value. Any assets purchased fromsuch entities have been purchased on an arm’s length basis and at fair value.
The NZ Banking Group has not provided any funding to entities except standard lending facilities provided in thenormal course of businesses on arms length terms which conduct any of the following activities: trust, custodial,funds management or other fiduciary activities established, marketed and/or sponsored by a member of the NZ
Banking Group (31/12/2008 $nil; 30/09/2009 $nil).
Risk management
The entities of the NZ Banking Group participating in the activities identified above have in place policies andprocedures to ensure that those activities are conducted in an appropriate manner. Should adverse conditions
arise, it is considered that these policies and procedures will minimise the possibility that these conditions will
adversely impact the Registered Bank. The policies and procedures include comprehensive and prominent
disclosure of information regarding products, and formal and regular review of operations and policies bymanagement.
In addition, the following measures have been taken to manage any risk to the NZ Banking Group of marketingand distributing insurance products provided by third party insurance companies:
Investment statements, prospectuses and brochures for insurance products include disclosures that theRegistered Bank nor any member of the NZ Banking Group does not guarantee the insurer, nor the
insurer’s subsidiaries, nor any of the products issued by the insurer or the insurer’s subsidiaries.
Where the insurance products are subject to the Securities Act 1978, investment statements,
prospectuses and brochures additionally include disclosures that:•••the policies do not represent deposits or other liabilities of the entities within the NZ Banking Group;
the policies are subject to investment risk, including possible loss of income and principal; andentities within the NZ Banking Group do not guarantee the capital value or performance of thepolicies.

Application forms for insurance products contain acknowledgements to be signed by a purchaser which
are consistent with the disclosures for insurance products noted above.

29

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
24. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS (CONTINUED)
In addition, the following measures have been taken to manage any risk to the entities within the NZ Banking
Group of marketing and distributing fund management products:
Prospectuses, investment statements and brochures for funds management products include disclosures
that:
•
•
•

the securities do not represent deposits or other liabilities of the entities within the NZ Banking
Group;
the securities are subject to investment risk including possible loss of income and principal invested;andthe entities within the NZ Banking Group do not guarantee the capital value or performance of the
securities.

Application forms for funds management products contain acknowledgements to be signed by apurchaser which are consistent with the disclosures for funds management products noted above.

25. COMMITMENTS
NZ Banking Group
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Capital expenditure
Contracts for outstanding capital expenditure:
Premises and equipment
Not later than 1 year

11

27

19

Total capital expenditure commitments

11

27

19

Premises and equipment
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years

88
166
40

85
168
34

82
155
31

Total lease rental commitments

294

287

268

Total commitments

305

314

287

Lease rentals
Future minimum lease payments under non-cancellable operating leases:

30

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
26. CONTINGENT LIABILITIES, CREDIT RELATED COMMITMENTS AND MARKET RELATED CONTRACTS
For contingent exposures, the maximum exposure to credit risk is the maximum amount that the NZ Banking
Group would have to pay if the contingent item is called upon. For undrawn facilities, the maximum exposure tocredit risk is the full amount of the committed facilities.
NZ Banking Group
Face or contract value
Unaudited
Unaudited
Audited31/12/2009
31/12/2008
30/09/2009$m$m$m
Credit related commitments
Commitments with certain drawdown due within one year
Commitments to provide financial services

549
22,051481
22,882735
22,128

Total credit related commitments

22,60023,363

22,863

Contingent liabilities
Financial guarantees
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,751
384
1,015
70

1,972
413
1,031
74

1,753
341
982
89

Total contingent liabilities

3,220

3,490

3,165

Foreign exchange, interest rate and commodity contracts
Exchange rate contracts
Interest rate contracts
Commodity contracts

120,764
517,51033

101,389
453,37376

108,375
476,674
36

Total foreign exchange, interest rate and commodity contracts

638,307554,838

585,085

The NZ Banking Group guarantees the performance of customers by issuing standby letters of credit andguarantees to third parties, including the Ultimate Parent Bank. The risk involved is essentially the same as thecredit risk involved in extending loan facilities to customers, therefore these transactions are subjected to thesame 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.
A summary of contingent liabilities is set out below.
Settlement with Inland Revenue Department
The New Zealand Inland Revenue Department ("IRD") has been reviewing a number of structured financetransactions as part of an audit of the 2000 to 2005 tax years.
On 23 December 2009, ANZ announced that it had reached a settlement with the IRD in respect of six of theseven transactions in dispute. As part of an industry-wide settlement, ANZ paid the IRD $414 million in primary
tax and interest, with the parties agreeing to discontinue relevant legal proceedings. The settlement includes anamount of $106 million related to three transactions for which ANZ holds an indemnity from Lloyds Banking
Group plc associated with The National Bank of New Zealand acquisition. This liability, net of amounts
receivable from Lloyds, was met from existing tax provisions.
Of seven transactions undertaken by ANZ and The National Bank of New Zealand which were in dispute, one
residual transaction involving $27 million in primary tax remains in dispute with the IRD. A provision is held forthis remaining transaction.

31

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
26. CONTINGENT LIABILITIES, CREDIT RELATED COMMITMENTS AND MARKET RELATED CONTRACTS(CONTINUED)
Commerce Commission
The Bank is aware that the Commerce Commission is looking at credit contract fees under the Credit Contracts
and Consumer Finance Act 2003 ("CCCFA"). In its 2009-2012 Statement of Intent the Commission stated that:"Compliance with the Credit Contracts and Consumer Finance Act is a priority area for the Commission,
given the deterioration in consumer confidence in the financial sector and the important role that acompetitive lending market can play in strengthening the New Zealand economy.”
In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged
on credit cards and the level of currency conversion charges on overseas transactions using credit cards under
the CCCFA. The Commission is also investigating early repayment charges on fixed rate mortgages. At thisstage the possible outcome of these investigations and any liability or impact on fees cannot be determined withany certainty.
ING NZ Funds
The Bank markets and distributes a range of wealth management products in New Zealand. The products are
manufactured and managed by ING NZ, which is a wholly owned subsidiary of the Bank following the purchaseof ING Groep’s 51% interest in ING NZ on 30 November 2009. Trading in two of the products, the ING
Diversified Yield Fund and the ING Regular Income Fund (together, "the Funds"), was suspended on 13 March
2008, due to deterioration in the liquidity and credit markets. Units in the Funds were sold by the Bank to its
customers.
On 5 June 2009, ING NZ AUT Investments Limited, a subsidiary of ING NZ, made an offer to investors in theFunds. The offer closed on 13 July 2009. Investors holding approximately 99% of the Funds accepted the offer
to purchase their units and have received a payment of 60 cents per unit in the ING Diversified Yield Fund or 62
cents per unit in the ING Regular Income Fund, as applicable, either (i) in cash, or (ii) by way of deposit in an
on-call account with the Bank, paying 8.30% per annum fixed for up to five years.
Although acceptance of this offer included a waiver of claims, Bank customers were offered an additional
opportunity to access the Bank customer complaints team (and, where still unsatisfied, the New Zealand
Banking Ombudsman) even where the investors had accepted the offer. This opportunity was available until 31
July 2009 and approximately 1,300 customers requested for their circumstances to be considered, and over halfof these requests have been resolved. As a result of the offer and transactions concluded as part of thepurchase of ING Groep’s interest in ING NZ, the Banking Group now owns over 99% of the units in the Funds.
The Commerce Commission is separately investigating both the Bank and ING NZ in respect of their roles inmanufacturing, managing and selling of the Funds. At this stage it is not possible to predict the outcome ofeither of the investigations.
The ultimate cost to the Bank will depend on the final value of units in the Funds, any recoveries underinsurance, the assessment and outcome of the customer complaints and the results of any litigation andregulatory investigations or proceedings that may be brought in connection with the Funds or their sale. The NZ
Banking Group considers it has adequately provided for these matters at this time.
Other contingent liabilities
The NZ Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings.
An assessment of the NZ Banking Group's likely loss in respect of these matters has been made on a case-bycase basis and provision made where appropriate. As at 31 December 2009, there were no other contingent
assets or liabilities required to be disclosed (31/12/2008 $nil; 30/09/2009 $nil).

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27. BUSINESS COMBINATIONS
On 30 November 2009, the NZ Banking Group purchased ING Groep’s 51% interest in ING NZ, which was theholding company for the ANZ-ING wealth management and life insurance joint venture in New Zealand. The
transaction was undertaken to strengthen the NZ Banking Group’s position in wealth management and moreclosely integrate its retail banking and wealth businesses. The acquisition takes the NZ Banking Group’s
ownership interest in ING NZ to 100%.
As part of the transaction the NZ Banking Group also purchased ING Groep’s 51% interests in two fixed income
unit trusts, the ING Diversified Yield Fund and the ING Regular Income Fund (“the Funds”), taking its ownershipinterest to over 99% of the Funds.
NZ Banking Group
Unaudited
31/12/2009$m
Fair values of assets acquired and liabilities assumed
as at acquisition date (provisional)
Due from financial institutions
Available-for-sale assets
Investments relating to insurance businessInsurance policy assets
Shares in associates
Other assets1
Deferred tax assets
Premises and equipment

142
173
40
81
1
25
28
4

Total assets

494

Due to financial institutions
Payables and other liabilities
Current tax liabilities
Provisions2

30
25
27
116

Total liabilities

198

Net assets

296

Minority interests in the Funds3

1

Net assets attributable to the NZ Banking Group295

Book value of existing equity interests
Loss on re-measuring existing equity interests to fair value4

351
(82)

Acquisition date fair value of existing equity interests
Cash consideration transferred

269
247

Total consideration

516

Provisional value of goodwill and intangible assets5

221

1.
2.

3.
4.
5.

Includes receivables with a fair value of $16m and a gross contractual amount receivable of $17m. The best estimate at the acquisition date of thecontractual cash flows not expected to be collected on these receivables is $1m.
Includes employee related provisions and the fair value of contingent liabilities, which relate to possible claims by investors in the Funds and investigations
by regulatory bodies and other actual and potential claims and proceedings (refer to Note 26). The expected timing and ultimate cost of contingent
liabilities to the NZ Banking Group will depend on the assessment and outcome of customer complaints, and the results of any litigation and regulatory
investigations or proceedings that may be brought.
Minority interests are measured as their proportionate share of the identifiable net assets of the Funds.
The loss on re-measuring equity interests has been recognised in Other Operating Income in the Income Statement.
Upon finalisation of fair value procedures, including recognition of intangible assets acquired, the remaining balance will be recognised as either goodwill ora discount on acquisition as appropriate. Goodwill, if recognised, is not is expected to be deductible for income tax purposes.

33

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27. BUSINESS COMBINATIONS (CONTINUED)
Included in the NZ Banking Group’s Income Statement and Statement of Comprehensive Income since 30
November 2009 is net operating income of $12 million and a loss before tax of $8 million, including integration
costs, contributed by ING NZ and the Funds. Had ING NZ and the Funds been consolidated from 1 October
2009, the NZ Banking Group’s Income Statement and Statement of Comprehensive Income would haveincluded, for the three months ended 31 December 2009, net operating income of $39 million and a loss before
tax of $3 million. Acquisition costs were paid by the Ultimate Parent Bank.
The initial accounting for the business combination, including the fair values of the assets acquired and liabilities
assumed and the calculation of goodwill, is provisional while valuations of the assets acquired and liabilities
assumed are finalised.

28. SUBSEQUENT EVENTSOn 20 January 2010 ANZ Holdings (New Zealand) Limited paid a dividend on preference shares of AUD 273
million.

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION
Conditions of Registration, applicable as at 24 February 2010.
The Conditions of Registration imposed on the NZ Branch, which apply from the date of registration are:1.

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

2.

That the New Zealand Banking Group’s insurance business is not greater than 1% of its total consolidated
assets. For the purposes of this condition:i.

Insurance business means any business of the nature referred to in section 4 of the Insurance
Companies (Ratings and Inspections) Act 1994 (including those to which the Act is disapplied bysections 4(1)(a) and (b) and 9 of that Act), or any business of the nature referred to in section 3(1) of
the Life Insurance Act 1908;

ii. In measuring the size of the New Zealand Banking Group’s insurance business:a.

where insurance business is conducted by any entity whose business predominantly consistsof insurance business, the size of that insurance business shall be:• The total consolidated assets of the group headed by that entity;• Or if the entity is a subsidiary of another entity whose business predominantly consistsof insurance business, the total consolidated assets of the group headed by the latterentity;b.

otherwise, the size of each insurance business conducted by any entity within the banking
group shall equal the total liabilities relating to that insurance business, plus the equity
retained by the entity to meet the solvency or financial soundness needs of the insurance
business;c.

the amounts measured in relation to parts (a) and (b) shall be summed and compared tothe total consolidated assets of the banking group. All amounts in parts (a) and (b) shallrelate to on balance sheet items only, and shall be determined in accordance with generally
accepted accounting practice, as defined in the Financial Reporting Act 1993;d.

where products or assets of which an insurance business is comprised also contain a noninsurance component, the whole of such products or assets shall be considered part of theinsurance business.

3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of
the business of the Australia and New Zealand Banking Group Limited.
4. That no appointment to the position of the New Zealand chief executive officer of the registered bank shallbe made unless:i. the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed
appointee; andii. the Reserve Bank has advised that it has no objection to that appointment.
5. That Australia and New Zealand Banking Group Limited complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.
6. That Australia and New Zealand Banking Group Limited complies with the following minimum capital
adequacy requirements, as administered by the Australian Prudential Regulation Authority:-tier one capital of the Australia and New Zealand Banking Group Limited is not less than 4
percent of risk weighted exposures;
capital of Australia and New Zealand Banking Group Limited is not less than 8 percent ofrisk weighted exposures.

35

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION (CONTINUED)
7. That the business of the registered bank in New Zealand is restricted to:i. acquiring for fair value, and holding, mortgages originated by ANZ National Bank Limited; andii. any other business for which the prior written approval of the Reserve Bank of New Zealand has
been obtained; andiii. activities that are necessarily incidental to the business specified in paragraphs (i) and (ii).
8. That the value of the mortgages held by the registered bank in New Zealand must not exceed $15 billion inaggregate.
9. That the registered bank in New Zealand may not incur any liabilities except:
i.
ii.
iii.
iv.
v.

to the government of New Zealand in respect of taxation and other charges; andto other branches or the head office of the registered bank; andto trade creditors and staff; andto ANZ National Bank Limited in respect of activities, other than borrowing, that are necessarily
incidental to the business specified in paragraphs (i) and (ii) of condition 7; andany other liabilities for which the prior written approval of the Reserve Bank has been obtained.

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

36

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCREDIT RATING INFORMATION
Credit Ratings applicable as at 24 February 2010
The Overseas Bank has three current credit ratings, which are applicable to its long-term senior unsecured
obligations, including obligations payable in New Zealand in New Zealand dollars. The credit ratings are:Rating Agency
Standard & Poor’s

Current Credit Rating

Qualification

AA

Outlook Stable

Moody’s Investors Service

Aa1

Outlook Negative

Fitch Ratings

AA-

Outlook Stable

During the two-year period ended 31 December 2009, the Standard and Poor's credit rating and qualification
remained at AA and Outlook Stable.
During the two-year period ended 31 December 2009, the Moody's Investors Service credit rating andqualification remained at Aa1. On 2 March 2009 the Outlook changed from Stable to Negative.
During the two-year period ended 31 December 2009, the Fitch Ratings credit rating and qualification remainedat AA- and Outlook Stable. Fitch Ratings were formally engaged by the Overseas Bank on 18 March 2008 toprovide credit rating services. Previously Fitch Ratings had rated the Overseas Bank on an unsolicited basis as
AA-.
Moody's
Standard Investors& Poor's
Service
The following grades display investment grade characteristics:
Ability to repay principal and interest is extremely strong. This is the highest investment
category.
Very strong ability to repay principal and interest.
Strong ability to repay principal and interest although somewhat susceptible to adversechanges in economic, business or financial conditions.
Adequate ability to repay principal and interest. More vulnerable to adverse changes.

Fitch
Ratings

AAA

Aaa

AAA

AA

Aa

AA

A

A

A

BBB

Baa

BBB

BB

Ba

BB

B

B

BB

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & DThe following grades have predominantly speculative characteristics:
Significant uncertainties exist which could affect the payment of principal and interest on atimely basis.
Greater vulnerability and therefore greater likelihood of default.
Likelihood of default now considered high. Timely repayment of principal and interest isdependent on favourable financial conditions.
Highest risk of default.
Obligations currently in default.

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

37