Australia and New Zealand Banking Group Limited- New Zealand Branch
Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2013 | NUMBER 20 ISSUED NOVEMBER 2013

Australia and New Zealand Banking Group Limited - New Zealand Branch

Disclosure Statement
For the year ended 30 September 2013

Contents

General Disclosures

General Disclosures

1

General Matters

Summary of Financial Statements

4

Income Statement

5

The Disclosure Statement has been issued in accordancewith the Order.

Statement of Comprehensive Income

5Statement of Changes in Equity

6

Balance Sheet

7

Cash Flow Statement

8

Notes to the Financial Statements

9

Directorate and Auditors

66

Conditions of Registration

68

Directors’ Statement

69

Independent Auditor’s Report

70

Index

72

The address for service for the Ultimate Parent Bank is
ANZ Centre Melbourne, Level 9, 833 Collins Street,
Docklands, Victoria 3008, Australia.
Financial Statements of the Ultimate Parent Bankand Overseas Banking Group
Copies of the most recent publicly available financial
statements of the Ultimate Parent Bank and Overseas
Banking Group will be provided immediately, free ofcharge, to any person requesting a copy where request
is made at the Registered Office. The most recent
publicly available financial statements for the Ultimate
Parent Bank and Overseas Banking Group can also beaccessed at the internet address anz.com.

Credit Rating Information
As at 27 November 2013 the Ultimate Parent Bank has
three current credit ratings, which are applicable to its
long-term senior unsecured obligations which arepayable in New Zealand in New Zealand dollars.

Glossary of Terms
In this Disclosure Statement unless the context
otherwise requires:(a) “Bank” means ANZ Bank New Zealand Limited;(b) “Banking Group” means ANZ Bank New Zealand
Limited and all its subsidiaries;(c) “Immediate Parent Company” means ANZ Funds Pty
Limited, which is the immediate parent company of
ANZ Holdings (New Zealand) Limited;(d) “Ultimate Parent Bank” means Australia and New
Zealand Banking Group Limited;(e) “Overseas Banking Group” means the worldwide
operations of Australia and New Zealand Banking
Group Limited including its subsidiaries;(f) “New Zealand business” means all business,
operations, or undertakings conducted in or fromNew Zealand identified and treated as if it wereconducted by a company formed and registered in
New Zealand;(g) “NZ Branch” means the New Zealand business of
the Ultimate Parent Bank;(h) “ANZ New Zealand” means the New Zealandbusiness of the Overseas Banking Group;(i) “Registered Office” is, from 22 November 2013,
Ground Floor, ANZ Centre, 23-29 Albert Street,
Auckland, 1010, New Zealand, which is also ANZ
New Zealand’s address for Service;(j) “RBNZ” means the Reserve Bank of New Zealand;(k) “APRA” means the Australian Prudential Regulation
Authority;(l) “the Order” means the Registered Bank DisclosureStatements (Overseas Incorporated Registered
Banks) Order (No 2) 2013; and(m) Any term or expression which is defined in, or in themanner prescribed by, the Order shall have themeaning given in or prescribed by the Order.

The Ultimate Parent Bank’s credit ratings are:Rating Agency
Standard & Poor’s

Current Credit
Rating
Qualification
AAOutlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Changes in credit ratings over the last two years:
On 1 December 2011, Standard and Poor’s downgraded
the Ultimate Parent Bank’s long-term senior unsecured
debt and deposit ratings from AA outlook stable to AAoutlook stable.
This occurred simultaneously to asimilar downgrade of other major Australian banks.
On 30 January 2012, Fitch changed the Outlook on the
Ultimate Parent Bank’s long-term senior unsecured debt
and deposit ratings from positive to negative. Thisoccurred simultaneously to a similar change in theoutlook of ratings of other major Australian banks.
On 24 February 2012, Fitch changed the Outlook on the
Ultimate Parent Bank’s long-term senior unsecured debt
and deposit ratings from negative to stable.
There were no other changes to the Parent Bank’s credit
ratings or qualifications during the two years ended 30
September 2013.

Australia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures
The following table describes the credit rating grades
available:
Standard & Moody's
Poor'sInvestors
Service

Fitch
Ratings(d) fourth, the ADI’s debts (if any) to the Reserve Bank
of Australia;

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

AAA

Very strong ability to repay
principal and interest.

AA

Aa

AA

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

A

A

A

Adequate ability to repay
principal and interest. Morevulnerable to adversechanges.

Aaa(c) third, the ADI's liabilities (if any) in Australia in
relation to protected accounts that account-holders
keep with the ADI. Broadly, this includes, among
other things, certain deposit accounts with the
Ultimate Parent Bank that are situated in Australia;

AAA(e) fifth, the ADI’s liabilities (if any) under an industry
support contract that is certified by APRA; and(f) sixth, the ADI's other liabilities in the order of theirpriority (apart from section 13A(3)).

BBB

Baa

BBB

The following grades have predominantly
speculative characteristics:
Significant uncertainties
exist which could affect thepayment of principal andinterest on a timely basis.

BB

Ba

BB

Greater vulnerability andtherefore greater likelihoodof default.

B

B

B

Likelihood of default now
considered high. Timely
repayment of principal andinterest is dependent on
favourable financial
conditions.

CCC

Caa

CCC

Highest risk of default.

CC to CCa to CCC to C

Obligations currently indefault.

D-

RD & D

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

Ranking of Local Creditors in Liquidation
Certain claims on the Australian assets of the Ultimate
Parent Bank are given a statutory priority under
Australian law. Unsecured creditors of the NZ Branch
could be expected to rank behind such claims.
Specifically, pursuant to section 13A(3) of the Banking
Act of the Commonwealth of Australia (“Banking Act”), if
an Authorised Deposit-Taking Institution (“ADI”) (which
includes the Ultimate Parent Bank) becomes unable tomeet its obligations or suspends payment, the assets of
the ADI in Australia are to be available to meet the
ADI's liabilities in the following order:(a) first, the ADI's liabilities (if any) to APRA because of
the rights APRA has against the ADI because of
section 16AI of the Banking Act;(b) second, the ADI's debts (if any) to APRA under
section 16AO the Banking Act;

Unsecured creditors of the NZ Branch could be expected
to rank as a creditor pursuant to paragraph (f), together
with other unsecured creditors of the Ultimate Parent
Bank that do not otherwise have a priority claim underparagraphs (a) to (e) above.
Under section 13A(1) of the Banking Act, in certain
circumstances APRA may take control of an ADI’sbusiness or appoint an administrator (defined in the
Banking Act) to take control of the ADI’s business.
Section 16(1) and (2) of the Banking Act provide that,
despite anything contained in any law relating to thewinding-up of companies, but subject to section 13A(3)of the Banking Act, the debts of an ADI to APRA in
respect of APRA's costs (including costs in the nature of
remuneration and expenses) of being in control of the
ADI's business, or of having an administrator in controlof the ADI's business, are a debt due to APRA and havepriority in a winding-up of the ADI over all otherunsecured debts.
Section 86 of the Reserve Bank Act 1959 of theCommonwealthofAustralia
providesthat
notwithstanding anything contained in any law relating
to the winding-up of companies, but subject to section
13A(3) of the Banking Act, debts due to the Reserve
Bank of Australia by any ADI shall, in a winding-up,
have priority over all other debts.
Section 13A(3) of the Banking Act affects all of theunsecured liabilities of the NZ Branch, which as at 30
September 2013, amounted to $nil (30/09/2012 $nil).

Requirement to Hold Excess Assets overDeposit Liabilities
Section 13A(4) of the Banking Act states that it is anoffence for an ADI not to hold assets (other than
goodwill and any assets or other amount excluded by
the prudential standards for the purposes of that
subsection) in Australia of a value that is equal to or
greater than the total amount of its deposit liabilities inAustralia, unless APRA has authorised the ADI to holdassets of a lesser value. During the year ended 30
September 2013, the Ultimate Parent Bank has at all
times held assets (other than goodwill and any assets orother amounts prescribed by APRA) in Australia of notless than the value of the Ultimate Parent Bank's total
deposit liabilities in Australia.
Section 13E of the Banking Act states that APRA may
give the Ultimate Parent Bank a direction that requires it
to increase its level of capital.
The requirements of the Banking Act have the potential
to impact the management of the liquidity of ANZ New
Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

General Disclosures
Guarantors
No material obligations of the NZ Branch are guaranteed
as at 27 November 2013.
ANZNZ Covered Bond Trust
Certain debt securities (“Covered Bonds”) issued by the
Bank’s wholly owned subsidiary, ANZ New Zealand(Int’l) Limited, are guaranteed by ANZNZ Covered Bond
Trust Limited (the “Covered Bond Guarantor”), solely in
its capacity as trustee of ANZNZ Covered Bond Trust.
The Covered Bond Guarantor has guaranteed thepayment of interest and principal of Covered Bonds witha carrying value as at 30 September 2013 of $3,925
million, pursuant to a guarantee which is secured over apool of assets. The Covered Bond Guarantor’s addressfor service is Level 10, 141 Willis Street, Wellington,
New Zealand. The Covered Bond Guarantor is not amember of the Banking Group and has no credit ratings
applicable to its long term senior unsecured obligations
payable in New Zealand dollars. The Covered Bonds
have been assigned a long term rating of Aaa and AAA
by Moody’s Investors Service and Fitch Ratings
respectively. Details of the pool of assets that secure
this guarantee are provided in Note 36.

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

4

Summary of Financial Statements
ANZ New ZealandYear toYear toYear toYear toYear to30/09/2013

30/09/2012

30/09/2011

30/09/2010

30/09/2009

Interest income

6,461

6,568

6,757

6,447

7,578

Interest expense

3,820

3,859

4,157

3,952

5,181

Net interest income

2,641

2,709

2,600

2,495

2,397

Non-interest income

795

905

809

745

581

Operating income

3,436

3,614

3,409

3,240

2,978

Operating expenses

1,508

1,743

1,688

1,565

1,479

66

202

190

456

883

1,862

1,669

1,531

1,219

616

490

404

446

352

422

Profit after income tax

1,372

1,265

1,085

867

194

Dividends paid

(720)

(485)

(421)

(492)

(1,000)$ millions

Provision for credit impairment
Profit before income tax
Income tax expense$ millions

Total impaired assets

As at

As at

As at

As at

As at

30/09/2013

30/09/2012

30/09/2011

30/09/2010

30/09/2009

929

1,405

1,792

2,047

1,188

Total assets

129,847

130,975

131,511

127,029

126,314

Total liabilities

120,092

121,798

123,046

119,208

118,999

-

-

-

1

-

9,755

9,177

8,465

7,821

7,315

Non-controlling interests
Equity & head office account

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

5

Income Statement
ANZ New Zealand$ millions

Note

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

Interest income

4

6,461

6,568

509

546

Interest expense

5

3,820

3,859

398

422

Net interest income

2,641

2,709

111

124

Net trading gains

4

163

131

-

-

Net funds management and insurance income

4

234

298

-

-

Other operating income / (loss)

4

391

472

(12)

(19)

7

4

-

-

3,436

3,614

99

105

1,508

1,743

26

27

1,928

1,871

73

78

66

202

3

9

1,862

1,669

70

69

490

404

20

19

1,372

1,265

50

50

Share of associates' profit
Operating income
Operating expenses

5

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

14

Profit before income tax
Income tax expense

6

Profit after income tax

Statement of Comprehensive Income
ANZ New
ANZ New
NZ
NZ
Zealand4154 Zealand4118 Branch4154 Branch4118
7272ANZ New Zealand$ millions

Profit after income tax

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

1,372

1,265

50

50

Items that will not be reclassified to profit or loss
Actuarial gain / (loss) on defined benefit schemes

55

(25)

-

-

(15)

6

-

-

40

(19)

-

-

(138)

46

-

-

(21)

(95)

-

-

45

-

-

-

Total items that may be reclassified subsequently to profit or loss

(114)

(49)

-

-

Total comprehensive income for the year

1,298

1,197

50

50

Income tax credit / (expense) relating to items not reclassified
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Unrealised gains / (losses) recognised directly in equity
Realised gains transferred to the income statement
Income tax credit relating to items that may be reclassified

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

6

Statement of Changes in Equity
ANZ New ZealandShare capitaland initial head
office account

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

Retainedearnings

Total equity

As at 1 October 2011

6,424

46

141

1,854

8,465

Profit after income tax

-

-

-

1,265

1,265

Unrealised gains recognised directly in equity

-

34

12

-

46

Realised gains transferred to the income statement

-

(83)

(12)

-

(95)

Actuarial loss on defined benefit schemes
Income tax credit on items recognised directly inequity

-

-

-

(25)

(25)

-

-

-

6

6

Total comprehensive income for the year

-

(49)

-

1,246

1,197

Ordinary dividend paid

-

-

-

(400)

(400)

Preference dividend paid

-

-

-

(85)

(85)

6,424

(3)

141

2,615

9,177

Profit after income tax
Unrealised gains / (losses) recognised directly inequity

-

-

-

1,372

1,372

-

1

(139)

-

(138)

Realised gains transferred to the income statement

-

-

(21)

-

(21)

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

-

-

-

55

55

-

-

45

(15)

30

Total comprehensive income for the year

-

1

(115)

1,412

1,298

Ordinary dividend paid

-

-

-

(720)

(720)

6,424

(2)

26

3,307

9,755

Initial head
office account

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

Retainedearnings

Total equity

As at 1 October 2011

11

-

-

166

177

Profit after income tax

-

-

-

50

50

11

-

-

216

227

-

-

-

50

50

11

-

-

266

277

$ millions

As at 30 September 2012

As at 30 September 2013

NZ Branch$ millions

As at 30 September 2012
Profit after income tax
As at 30 September 2013

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

7

Balance Sheet
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

AssetsLiquid assets

8

2,496

2,831

-

-

Due from other financial institutions

9

1,711

1,760

141

38

Trading securities

10

10,32012,338--Derivative financial instruments

11

9,508

12,709

12

52

1

24

-

-

Available-for-sale assets

12

782

57

-

-

Net loans and advances

13

99,76596,094

9,256

9,396

Due from the Bank

25

Current tax assets

-

-

314

304

Investments backing insurance policy liabilities

172

142

-

-

Insurance policy assets

399

408

-

-

Investments in associates

16

98

99

-

Other assets

17

735

596

1

-

Deferred tax assets

6

36

92

6

8

376

323

-

-

18

3,448

3,502

-

-

Total assets

129,847

130,975

9,730

9,798

Interest earning and discount bearing assets

115,297

113,565

9,410

9,450

Premises and equipment
Goodwill and other intangible assets

Liabilities
Due to other financial institutions

19

9,871

11,012

8,372

9,273

Deposits and other borrowings

20

77,69673,652--

Due to Immediate Parent Company

25

1,766

1,766

-

-

Derivative financial instruments

11

11,20814,085

1,021

222

Payables and other liabilities

21

1,473

1,588

42

57

-

-

18

19

Current tax liabilities
Provisions

22

229

339

-

-

Bonds and notes

23

16,40718,188--

Loan capital

24

1,442

1,168

-

-

120,092

121,798

9,453

9,571

9,755

9,177

277

227

6,424

6,424

11

11

24

138

-

-

Retained earnings

3,307

2,615

266

216

Total equity & head office account

9,755

9,177

277

227

Interest and discount bearing liabilities

101,470

100,543

8,372

9,273

Total liabilities (excluding head office account)
Net assets (excluding head office account)
EquityShare capital and initial head office accountReserves

27

For and on behalf of the Board of Directors:

John MorschelChairmanAustralia and New Zealand Banking Group Limited
27 November 2013

Michael Smith
Executive Director
Australia and New Zealand Banking Group Limited
27 November 2013

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

8

Cash Flow Statement
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

6,432

6,549

516

553

4

4

-

-

Net funds management & insurance income

236

196

-

-

Fees and other income received

612

619

-

1

Interest paid

(3,859)(3,845)

(413)

(438)

Operating expenses paid

(1,551)(1,616)

(26)

(27)

(381)

(393)

(19)

(20)

1,493

1,514

58

69
-

$ millions

Note

Cash flows from operating activities
Interest received
Dividends received

Income taxes paid
Cash flows from operating profits before changes in operating
assets and liabilities

33

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

101

264

-

Change in trading securities

1,558(3,761)--

Change in derivative financial instruments

1,306

2,204

847

225

Change in available-for-sale assets

(714)

391

-

-

(30)

(44)

-

-

(3,830)(2,829)

3,253

2,896

Loans and advances purchased from the Bank--

(3,144)(2,397)

Change in due from the Bank

-

-

(10)

34

Change in due to the Bank

-

-

-

(51)

Change in insurance investment assets
Change in loans and advances

Change in other assets

12

87

-

-

Change in due to other financial institutions(1,141)(2,710)

(901)

(738)

Change in deposits and other borrowings

3,780

3,813

-

-

99

29

-

-

Net changes in operating assets and liabilities

1,141(2,556)45(31)

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

2,634(1,042)

103

38

Change in payables and other liabilities

Cash flows from investing activities
Proceeds from sale of shares in associates and joint venture

1

5

-

-

Proceeds from sale of intangible assets

-

11

-

-

68

-

-

-

(27)

(40)

-

-

(115)

(55)

-

-

(73)

(79)

-

-

2,167

5,678

-

-

312

-

-

-

(4,611)(5,445)

-

-

-

(816)

-

-

(720)

(485)

-

-

(2,852)(1,068)--Net increase / (decrease) in cash and cash equivalents(291)(2,189)103

38

Cash and cash equivalents at beginning of the year

3,293

5,482

38

-

3,002

3,293

141

38

Proceeds from sale of subsidiary
Purchase of intangible assets
Purchase of premises and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issue of bonds and notes
Proceeds from issue of loan capital
Redemptions of bonds and notes
Redemptions of loan capital
Dividends paid
Net cash flows used in financing activities

Cash and cash equivalents at end of the year

33

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

9

Notes to the Financial Statements
1. Significant Accounting Policies

in the notes to the financial statements relating tothese items have been reclassified accordingly.

(a) Basis of preparation

(vii)

(i)

Statement of compliance

These financial statements have been prepared inaccordance with the requirements of the Companies
Act 1993, the Financial Reporting Act 1993 and theOrder. The NZ Branch’s financial statements are forAustralia and New Zealand Banking Group Limited New Zealand Branch as a separate entity and ANZ
New Zealand’s financial statements are for the NZ
Branch’s
consolidated
group,
which
includessubsidiaries and associates.
These financial statements have been prepared inaccordance with New Zealand Generally Accepted
Accounting Practice. They comply with New Zealandequivalents to International Financial ReportingStandards (“NZ IFRS”) and other applicable Financial
Reporting Standards, as appropriate for profitoriented entities. The financial statements comply
with International Financial Reporting Standards(“IFRS”).
The principal accounting policies adopted in the
preparation of these financial statements are set out
below.
(ii)

Use of estimates and assumptions

Preparation of the financial statements requires theuse of management judgement, estimates andassumptions that affect reported amounts and theapplication of policies. Actual results may differ fromthese estimates.
Discussion of the critical accounting estimates, which
includecomplexor
subjective
decisionsorassessments, are covered in note 2. Such estimates
will require review in future periods.
(iii) Basis of measurement
The financial statements have been prepared inaccordance with the historical cost basis except thatthe following assets and liabilities are stated at theirfair value:•
derivative financial instruments, including in thecase of fair value hedging, the fair value
adjustment on the underlying hedged exposure;•available-for sale financial assets;•financial instruments held for trading;•financial instruments designated at fair value
through profit and loss.
(iv) Changes
inaccounting
policiesandapplication of new accounting standards
The accounting policies adopted by ANZ New Zealandare consistent with those adopted and disclosed in theprior period. ANZ New Zealand has applied, where
relevant, all new or revised NZ IFRSs and NZ IFRSInterpretations applicable to annual reporting periods
commencing on or before 1 October 2012. The initial
application of these standards and interpretations has
only resulted in changes to disclosures.
(v)

Rounding

The amounts in the financial statements have beenrounded to the nearest million dollars, except whereotherwise stated.
(vi) Comparatives
Certain amounts in the comparative information havebeen reclassified to ensure consistency with thecurrent year's presentation. The comparative figures

Principles of consolidation

Subsidiaries
The consolidated financial statements of ANZ New
Zealand comprise the financial statements of the NZ
Branch and all the New Zealand businesses of all thesubsidiaries of the Ultimate Parent Bank (thoseentities where it is determined that the Ultimate
Parent Bank has capacity to control).
Control means the power to govern, directly or
indirectly, the financial and operating policies of anentity so as to obtain benefits from its activities. All
the facts of a particular situation are considered when
determining whether control exists. Control is usuallypresent when an entity has:•power over more than one-half of the voting
rights of the other entity;•
power to govern the financial and operating
policies of the other entity;•
power to appoint or remove the majority of themembers of the board of directors or equivalent
governing body; or•
power to cast the majority of votes at meetingsof the board of directors or equivalent governing
body of the entity.
In addition, potential voting rights that are presently
exercisable or convertible are taken into account indetermining whether control exists.
In relation to special purpose entities control isdeemed to exist where:•in substance, the majority of the residual risks
and rewards from their activities accrue to ANZ
New Zealand; or•in substance, ANZ New Zealand controls
decision making powers so as to obtain the
majority of the risks and rewards from theiractivities.
The effect of all transactions between entities in ANZ
New Zealand is eliminated.
Where subsidiaries have been sold or acquired during
the year, their operating results have been included
to the date of disposal or from the date of acquisition.
Associates
ANZ New Zealand applies the equity method of
accounting for associates.
ANZ New Zealand’s share of results of associates is
included in the consolidated income statement.
Shares in associates are carried in the consolidatedbalance sheet at cost plus ANZ New Zealand’s shareof post acquisition net assets less accumulated
impairment. Interests in associates are reviewed forany indication of impairment at least at eachreporting date.
Where an indication of theimpairment exists, the recoverable amount of theassociate is determined as the higher of theassociate’s fair value less costs to sell and its value in
use. A discounted cash flow methodology and othermethodologies, such as the capitalisation of earnings
method, are used to determine the reasonableness ofthe valuation.
In the NZ Branch’s financial statements investments
in subsidiaries and associates are carried at cost lessaccumulated impairment losses.

Australia and New Zealand Banking Group Limited - New Zealand Branch

10

Notes to the Financial Statements(viii)

Foreign currency translation

Functional and presentation currency
Items included in the financial statements of each of
ANZ New Zealand’s entities are measured using thecurrency of the primary economic environment inwhich the entity operates (the functional currency).
ANZ New Zealand’s financial statements arepresented in New Zealand dollars, which is ANZ New
Zealand’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into thefunctional currency using the exchange rates
prevailing at the dates of the transactions. Monetary
assets and liabilities resulting from foreign currencytransactions are subsequently translated at the spot
rate at reporting date.
Exchange differences arising on the settlement ofmonetary items or on translating monetary items at
rates different to those at which they were initiallyrecognised or included in a previous financial report,
are recognised in the income statement in the period
in which they arise.
Translation differences on non-monetary items
measured at fair value through profit or loss arereported as part of the fair value gain or loss on these
items.
Translation differences on non-monetary items
measured at fair value through equity, such as
equities classified as available-for-sale financial
assets, are included in the available-for-salerevaluation reserve in equity.
(b) Income recognition
Income is recognised to the extent that it is probablethat economic benefits will flow to ANZ New Zealandand that revenue can be reliably measured.
(i)Interest income

Interest income is recognised as it accrues, using theeffective interest method.
The effective interest method calculates theamortised cost of a financial asset or financial liability
and allocates the interest income or interest expense,
including any fees and directly related transaction
costs that are an integral part of the effective interest
rate, over the expected life of the financial asset or
liability so as to achieve a constant yield on thefinancial asset or liability.
For assets subject to prepayment, expected life isdetermined on the basis of the historical behaviour ofthe particular asset portfolio, taking into accountcontractual obligations and prepayment experienceassessed on a regular basis.
(ii)

Fee and commission income

Fees and commissions received that are integral tothe effective interest rate of a financial asset arerecognised using the effective interest method. For
example, loan commitment fees, together withrelated direct costs, are deferred and recognised as
an adjustment to the effective interest rate on a loan
once drawn. Commitment fees to originate a loan
which is unlikely to be drawn down are recognised asfee income as the service is provided.
Fees and commissions that relate to the execution ofa significant act (for example, advisory or
arrangement
services,
placementfeesandunderwriting fees) are recognised
significant act has been completed.

when

the

Fees charged for providing ongoing services (forexample, maintaining and administering existing
facilities) are recognised as income over the period
the service is provided.
(iii) Dividend income
Dividends are recognised as revenue when the rightto receive payment is established.
(iv) Gain or loss on sale of assets
The gain or loss on the disposal of assets isdetermined as the difference between the carrying
amount of the assets at the time of disposal and theproceeds of disposal net of incremental disposal
costs. This is recognised as an item of other incomein the period in which the significant risks andrewards of ownership are transferred to the buyer.
(c) Expense recognition
Expenses are recognised in the income statement on
an accruals basis.
(i)Interest expense

Interest expense on financial liabilities measured atamortised cost is recognised in the income statement
as it accrues using the effective interest method.
(ii)

Loan origination expenses

Certain loan origination expenses are an integral partof the effective interest rate of a financial asset
measured at amortised cost. These loan origination
expenses include:•
fees and commissions payable to brokers andcertain customer incentive payments in respectof originating lending business; and•other expenses of originating lending business,such as external legal costs and valuation fees,
provided these are direct and incremental costs
related to the issue of a financial asset.
Such loan origination expenses are initially recognisedas part of the cost of acquiring the financial asset andamortised as part of the effective yield of the financial
asset over its expected life using the effective interest
method.
(iii) Lease payments
Leases entered into by ANZ New Zealand as lessee
are predominantly operating leases, and theoperating lease payments are recognised as an
expense on a straight-line basis over the lease term.
(d) Income tax(i)Income tax expense

Income tax on earnings for the year comprises
current and deferred tax and is based on theapplicable tax law. It is recognised in the income
statement as tax expense, except when it relates toitems credited directly to equity, in which case it isrecorded in equity, or where it arises from the initialaccounting for a business combination, in which case
it is included in the determination of goodwill.
(ii)

Current tax

Current tax is the expected tax payable on taxable
income for the year, based on tax rates (and taxlaws) which are enacted or substantively enacted by
the reporting date and including any adjustment for
tax payable in previous periods. Current tax for
current and prior periods is recognised as a liability

Australia and New Zealand Banking Group Limited - New Zealand Branch

11

Notes to the Financial Statements(or asset) to the extent that it is unpaid (orrefundable).
(iii) Deferred tax
Deferredtax
isaccounted
for
using
the
comprehensive tax balance sheet method.
It isgenerated by temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and their tax base.
Deferred tax assets, including those related to the tax
effects of income tax losses and credits available tobe carried forward, are recognised only to the extent
that it is probable that future taxable profits will beavailable against which the deductible temporary
differences or unused tax losses and credit can beutilised.
Deferred tax liabilities are recognised for all taxable
temporary differences, other than those relating totaxable temporary differences arising from goodwill.
They are also recognised for taxable temporary
differences arising on investments in subsidiaries,
branches, associates and joint ventures, except
where ANZ New Zealand is able to control thereversal of the temporary differences and it isprobable that temporary differences will not reversein the foreseeable future.
Deferred tax assets
associated with these interests are recognised only tothe extent that it is probable that the temporary
difference will reverse in the foreseeable future andthere will be sufficient taxable profits against which toutilise the benefits of the temporary difference.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)when the asset and liability giving rise to them arerealised or settled, based on tax rates and tax lawsthat have been enacted or substantively enacted by
the reporting date. The measurement reflects the tax
consequences that would follow from the manner inwhich ANZ New Zealand, at the reporting date,recovers or settles the carrying amount of its assets
and liabilities.
(iv) Offsetting
Current and deferred tax assets and liabilities areoffset only to the extent that they relate to income
taxes imposed by the same taxation authority, there
is a legal right and intention to settle on a net basis
and it is allowed under the tax law of the relevant
jurisdiction.
(e) Assets
Financial assets(i)Financial assets and liabilities at fair value
through profit or loss

Trading securities are financial instruments acquired
principally for the purpose of selling in the short-termor which are a part of a portfolio which is managed
for short-term profit-taking. Trading securities are
initially recognised and subsequently measured in thebalance sheet at their fair value.
Derivatives that are not effective accounting hedging
instruments are carried at fair value through profit orloss.
In addition, certain financial assets andliabilities are designated and measured at fair value
through profit or loss where the following applies:•
the asset represents investments backing
insurance policy liabilities;•
doing so eliminates or significantly reduces ameasurement or recognition inconsistency thatwould otherwise arise from measuring assets••

and liabilities, or recognising the gains or losses
thereon, on different bases;a group of financial assets or financial liabilities
or both is managed and its performance
evaluated on a fair value basis; orthe financial instrument contains an embedded
derivative, unless the embedded derivative does
not significantly modify the cash flows or it isclear, with little or no analysis, that it would not
be separately recorded.

Changes in the fair value (gains or losses) of thesefinancial instruments are recognised in the income
statement in the period in which they occur.
Purchases and sales ofrecognised on trade date.
(ii)

tradingsecurities

areDerivative financial instruments

Derivative financial instruments are contracts whose
value is derived from one or more underlying priceindex or other variables. They include swaps, forward
rate agreements, futures, options and combinationsof these instruments.
Derivative financial instruments are entered into for
trading
purposes(including
customer-related
reasons) or for hedging purposes (where thederivative instruments are used to hedge ANZ New
Zealand’s exposures to interest rate risk, currency
risk, price risk, credit risk and other exposuresrelating to non-trading positions).
Derivative financial instruments are recognised
initially at fair value with gains or losses from
subsequent measurement at fair value being
recognised in the income statement. Valuation
adjustments are integral in determining the fair valueof derivatives. This includes a credit valuation
adjustment (CVA) to reflect the credit worthiness ofthe counterparty and funding valuation adjustment(FVA) to account for the funding cost inherent in theportfolio.
Where the derivative is designated and is effective asa hedging instrument, the timing of the recognition of
any resultant gain or loss in the income statement isdependent on the hedging designation.
These
hedging designations and associated accounting are
as follows:
Fair value hedge
Where ANZ New Zealand hedges the fair value of arecognised asset or liability or firm commitment,changes in the fair value of the derivative designatedas a fair value hedge are recognised in the income
statement. Changes in the fair value of the hedged
item attributable to the hedged risk are reflected inadjustments to the carrying value of the hedged item,
which are also recognised in the income statement.
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercisedor no longer qualifies for hedge accounting. The
resulting adjustment to the carrying amount of thehedged item arising from the hedged risk is amortised
to the income statement over the period to maturityof the hedged item. If the hedged item is sold or
repaid, the unamortised fair value adjustment isrecognised immediately in the income statement.

Australia and New Zealand Banking Group Limited - New Zealand Branch

12

Notes to the Financial Statements
Cash flow hedge(iv) Net loans and advances

ANZ New Zealand designates derivatives as cash flow
hedges where the instrument hedges the variability incash flows of a recognised asset or liability, a foreignexchange component of a firm commitment, or ahighly probable forecast transaction. The effective
portion of changes in the fair value of derivatives
qualifying and designated as cash flow hedges isdeferred to the hedging reserve, which forms part ofshareholders’ equity.
Any ineffective portion isrecognised immediately in the income statement.
Amounts deferred in equity are recognised in theincome statement in the period during which thehedged forecast transactions take place.

Loans and advances are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They arise when ANZ
New Zealand provides money to a debtor with nointention of trading the loans and advances. The
loans and advances are initially recognised at fairvalue plus transaction costs that are directly
attributable to the issue of the loan or advance. They
are subsequently measured at amortised cost using
the effective interest method, unless specificallydesignated on initial recognition at fair value throughprofit or loss.

When the hedge expires, is sold, terminated,
exercised, or no longer qualifies for hedge accounting,the cumulative amount deferred in equity remains in
the hedging reserve, and is subsequently transferredto the income statement when the hedged item isrecognised in the income statement.
When a forecast hedged transaction is no longer
expected to occur, the amount deferred in equity isrecognised immediately in the income statement.
Derivatives
accounting

that

do

not

qualify

for

hedge

All gains and losses from changes in the fair value ofderivatives that are not designated in a hedging
relationship but are entered into to manage theinterest rate and foreign exchange risk of ANZ New
Zealand are recognised in the income statement.
Under certain circumstances, the component of thefair value change in the derivative which relates tocurrent period realised and accrued interest is
included in net interest income. The remainder of thefair value movement is included in other income.
(iii) Available-for-sale assets
Available-for-sale assets comprise non-derivative
financial assets which ANZ New Zealand designates
as available-for-sale but which are not deemed to beheld principally for trading purposes, and include
equity investments and quoted debt securities.
They are initially recognised at fair value plustransaction costs. Subsequent gains or losses arisingfrom changes in fair value are included as a separate
component of equity in the available-for-salerevaluation reserve. When the asset is sold, thecumulative gain or loss relating to the asset istransferred to the income statement.
Where there is objective evidence of impairment on
an available-for-sale asset, the cumulative loss
related to that asset is removed from equity andrecognised in the income statement, as an
impairment expense for debt instruments or as noninterest income for equity instruments.
If, in a
subsequent period, the amount of an impairment loss
relating to an available-for-sale debt instrument
decreases and the decrease can be linked objectively
to an event occurring after the impairment event, theloss is reversed through the income statement
through the impairment expense line.
Purchases and sales of available-for-sale financial
assets are recognised on trade date, being the dateon which ANZ New Zealand commits to purchase or
sell the asset.

All loans are graded according to the level of credit
risk.
Net loans and advances include direct financeprovided to customers such as bank overdrafts, credit
cards, term loans, finance lease receivables andcommercial bills.
Impairment of loans and advances
Loans and advances are reviewed at least at eachreporting date for impairment. Credit impairment
provisions are raised for exposures that are known to
be impaired. Exposures are impaired and impairment
losses are recorded if, and only if, there is objective
evidence of impairment as a result of one or more
loss events, that occurred after the initial recognitionof the loan and prior to the reporting date, and thatloss event, or events, has had an impact on theestimated future cash flows of the individual loan or
the collective portfolio of loans that can be reliably
estimated.
Impairment is assessed for assets that are
individually significant (or on a portfolio basis forsmall value loans) and then on a collective basis for
those exposures not individually known to be
impaired.
Exposures that are assessed collectively are placed inpools of similar assets with similar risk characteristics.
The required provision is estimated on the basis ofhistorical loss experience for assets with credit risk
characteristics similar to those in the collective pool.
The historical loss experience is adjusted based on
current observable data such as changed economic
conditions. The provision also takes account of the
impact of inherent risk of large concentrated losses
within the portfolio and an assessment of theeconomic cycle.
The estimated impairment losses are measured as thedifference between the asset’s carrying amount andthe estimated future cash flows discounted to theirpresent value. As this discount unwinds during theperiod between recognition of impairment andrecovery of the cash flow, it is recognised in interest
income. The process of estimating the amount andtiming
of
cash
flows
involvesconsiderable
management judgement.
These judgements arereviewed regularly to reduce any differences between
loss estimates and actual loss experience.
Impairment of capitalised acquisition expenses isassessed through comparing the actual behaviour ofthe portfolio against initial expected life assumptions.
The provision for impairment loss (individual andcollective) is deducted from loans and advances in thebalance sheet and the movement for the reporting
period is reflected in the income statement.
When a loan is uncollectible, either partially or in full,
it is written off against the related provision for loan

Australia and New Zealand Banking Group Limited - New Zealand Branch

13

Notes to the Financial Statements
impairment.
Unsecured facilities are normally
written-off when they become 180 days past due or
earlier in the event of the customer's bankruptcy orsimilar legal release from the obligation. However, acertain level of recoveries is expected after the writeoff, which is reflected in the amount of the provision
for credit losses. In the case of secured facilities,
remaining balances are written-off after proceedsfrom the realisation of collateral have been received,
if there is a shortfall.

Non-financial assets(viii) Goodwill
Goodwill represents the excess of the purchaseconsideration over the fair value of the identifiable
net assets of a controlled entity at the date of gaining
control. Goodwill is recognised as an asset and notamortised, but is assessed for impairment at least
annually or more frequently if there is an indicationthat the goodwill may be impaired.
Where theassessment results in the goodwill balance exceeding
the value of expected future benefits, the difference ischarged to the income statement. Any impairment of
goodwill is not subsequently reversed.

Where impairment losses recognised in previous
periods have subsequently decreased or no longer
exist, such impairment losses are reversed in theincome statement.
A provision is also raised for off-balance sheet items
such as commitments that are considered likely toresult in an expected loss.
(v)

Lease receivables

Contracts to lease assets and hire purchaseagreements are classified as finance leases if theytransfer substantially all the risks and rewards ofownership of the asset to the customer or an
unrelated third party. All other lease contracts areclassified as operating leases.
(vi) Repurchase agreements
Securities sold under repurchase agreements are
retainedinthefinancialstatements
wheresubstantially all the risks and rewards of ownership
remain with ANZ New Zealand, and a counterparty
liability is disclosed under the classifications of due toother financial institutions or payables and otherliabilities. The difference between the sale price andthe repurchase price is accrued over the life of the
repurchase agreement and charged to interest
expense in the income statement.
Securities purchased under agreements to resell,
where ANZ New Zealand does not acquire the risks
and rewards of ownership, are recorded asreceivables in liquid assets, net loans and advances,or due from other financial institutions, depending on
the term of the agreement and the counterparty. The
security is not included in the balance sheet. Interest
income is accrued on the underlying loan amount.
Securities borrowed are not recognised in the balance
sheet, unless these are sold to third parties, at which
point the obligation to repurchase is recorded as afinancial liability at fair value with fair value
movements included in the income statement.
(vii) Derecognition
ANZ New Zealand enters into transactions where it
transfers financial assets recognised on its balance
sheet yet retains either all the risks and rewards ofthe transferred assets or a portion of them. If all, or
substantially all, the risks and rewards are retained,
the transferred assets are not derecognised from thebalance sheet.
In transactions where substantially all the risks andrewards of ownership of a financial asset are neither
retained nor transferred, ANZ New Zealandderecognises the asset if control over the asset islost. In transfers where control over the asset isretained, ANZ New Zealand continues to recognise
the asset to the extent of its continuing involvement,
determined by the extent to which it is exposed tochanges in the value of the transferred asset. The
rights and obligations retained or created in thetransfer are recognised separately as assets andliabilities as appropriate.

(f)Liabilities
Financial liabilities(i)

Deposits and other borrowings

Deposits and other borrowings include certificates ofdeposit, interest bearing deposits, debentures,commercial paper and other related interest and noninterest bearing financial instruments. Deposits andother borrowings, excluding commercial paper, areinitially recognised at fair value plus transaction costs
and subsequently measured at amortised cost. Theinterest expense is recognised using the effective
interest method. Commercial paper is designated atfair value through profit or loss, with fair value
movements recorded directly in the income
statement, which reflects the basis on which it ismanaged.
(ii)

Bonds, notes and loan capital

Bonds, notes and loan capital are accounted for in thesame way as deposits and other borrowings, except
for those bonds and notes which are designated atfair value through profit or loss on initial recognition,with fair value movements recorded in the income
statement.
(iii) Financial guarantee contracts
Financial guarantee contracts are contracts that
require the issuer to make specified payments toreimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due.
Financial guarantees are issued in the ordinary courseof business, consisting of letters of credit, guarantees
and acceptances. Financial guarantees are initiallyrecognised in the financial statements at fair value on
the date the guarantee was given; typically this is thepremium received. Subsequent to initial recognition,
ANZ New Zealand's liabilities under such guarantees
are measured at the higher of their amortised amountand the best estimate of the expenditure required tosettle any financial obligation arising at the balance
sheet date. These estimates are determined basedon experience of similar transactions and history of
past losses.
(iv) Derecognition
Financial liabilities are derecognised when the
obligation specified in the contract is discharged,
cancelled or expires.
(g) Equity(i)

SharesIssued shares are recognised at the amount paid pershare net of directly attributable issue costs.

Australia and New Zealand Banking Group Limited - New Zealand Branch

14

Notes to the Financial Statements(ii)

Cash flows are included in the cash flow statement on
a net basis. The GST components of cash flows
arising from investing and financing activities, which
are recoverable from, or payable to, the IRD areclassified as operating cash flows.

Reserves

Available-for-sale revaluation reserve
This reserve includes changes in the fair value ofavailable-for-sale financial assets, net of tax. Thesechanges are transferred to the income statement (innon-interest income) when the asset is derecognised.
Where the asset is impaired, the changes aretransferred to the impairment expense line in theincome statement for debt instruments and in thecase of equity instruments to non-interest income.

(v)

Operating segments are distinguishable componentsof ANZ New Zealand that provide products or services
that are subject to risks and rewards that are
different to those of other operating segments. ANZ
New Zealand operates predominately in the banking
industry within New Zealand. ANZ New Zealand hasvery limited exposure to risk associated with
operating in different economic environments orpolitical conditions. On this basis no geographicalsegment information is provided.

Cash flow hedging reserve
This reserve includes the fair value gains and losses
associated with the effective portion of designatedcash flow hedging instruments.
(h) Presentation(i)

Offsetting of income and expenses

Segment reporting

(i)

Other

Income and expenses are not offset unless requiredor permitted by an accounting standard.
This
generally arises in the following circumstances:•where transaction costs form an integral part ofthe effective interest rate of a financial
instrument which is measured at amortisedcost, these are offset against the interest
income generated by the financial instrument;•
where gains and losses relating to fair value
hedges are assessed as being effective; or•where gains and losses arise from a group ofsimilar transactions, such as foreign exchange
gains and losses.

(i)

(ii)

The following standards and amendments wereavailable for early adoption but have not been applied
by ANZ New Zealand in these financial statements.
ANZ New Zealand currently does not intend to apply
any of these pronouncements until their effective
date.

Offsetting of financial assets and liabilities

Assets and liabilities are offset and the net amountreported in the balance sheet only where there is:•a current enforceable legal right to offset theasset and liability; and•an intention to settle on a net basis, or to
realise the asset and settle the liability
simultaneously.
(iii) Statement of cash flows
For cash flow statement presentation purposes, cash
and cash equivalents includes: cash on hand;deposits held at call with other financial institutions;and other short term, highly liquid, investments withoriginal terms of maturity of three months or less thatare readily convertible to cash and which are subject
to an insignificant risk of changes in value.
Certain cash flows have been netted in order toprovide more meaningful disclosure, as many of the
cash flows are received and disbursed on behalf ofcustomers and reflect the activities of the customers
rather than those of ANZ New Zealand. These include
customer loans and advances, customer deposits,
certificates of deposit, related party balances andtrading securities.
(iv) Goods and services tax
Income, expenses and assets are recognised net ofthe amount of goods and services tax (“GST”) except
where the amount of GST incurred is not recoverablefrom the Inland Revenue Department (“IRD”). In
these circumstances, the GST is recognised as part ofthe cost of acquisition of the asset or as part of theexpense.
Receivables and payables are stated with the amountof GST included. The net amount of GST recoverable
from, or payable to, the IRD is included as otherassets or other liabilities in the balance sheet.

Contingent liabilities

Contingent liabilities acquired in a businesscombination are individually measured at fair value atthe acquisition date. At subsequent reporting dates
the value of such contingent liabilities is reassessed
based on the estimate of expenditure required tosettle the contingent liability.
Other contingent liabilities are not recognised in thebalance sheet but disclosed in Note 35 unless it isconsidered remote that ANZ New Zealand will be
liable to settle the possible obligation.
(ii)

Accounting Standards not early adopted

Standards and amendments effective
periods commencing after 1 January 2013for

ANZ New Zealand does not expect any significant
impact on the financial statements from theapplication of the following standards.
NZ IFRS 10 Consolidated Financial Statements
Establishes a new approach to determining whichinvestees should be consolidated and provides asingle model to be applied in the control analysis for
all investors.
NZ IAS 27 (2011) Separate Financial Statements
Carries forward the existing accounting and disclosure
requirements for separate financial statements.
ANZ New Zealand is still assessing the impact of thefollowing standards on the financial statements.
Amendments to NZ IFRS 7: Disclosures – Offsetting
Financial Assets and Financial Liabilities
Requires additional disclosures for financial assets
and liabilities that are set off, and recognised financial
instruments that are subject to an enforceable masternetting agreement.
NZ IFRS 13 Fair Value Measurement
Provides a single source of guidance on fair value
measurement and requires certain disclosures
regarding fair value.

Australia and New Zealand Banking Group Limited - New Zealand Branch

15

Notes to the Financial Statements
NZ IFRS 12 Disclosure of Interests in Other Entities
Provides a single, consistent approach for disclosuresof all interests in subsidiaries, joint arrangements,
associates and structured entities.
Standards and amendments effective
periods commencing after 1 January 2015

Critical judgements in applying
Zealand’s accounting policies

ANZ

New

for

NZ IFRS 9 Financial Instruments
Specifies a simpler methodology for classifying andmeasuring financial assets, with two primarymeasurement categories: amortised cost and fairvalue. Requires the amount of change in the fairvalue attributable to changes in credit risk of certain
liabilities designated under the fair value option to bepresented in other comprehensive income. ANZ New
Zealand is assessing the impact on the financial
statements.

2.

Refer to Note 14 for details of credit impairment
provisions.

Critical Estimates and Judgement Usedin Applying Accounting Policies
There are a number of critical accounting treatments
which include complex or subjective judgements andestimates that may affect the reported amounts ofassets and liabilities in the financial statements.
Estimates and judgements are continually evaluatedand are based on historical experience and otherfactors, including expectations of future events thatarebelievedtobereasonable
under
the
circumstances.
An explanation of the judgements and estimates
made by ANZ New Zealand, in the process of applying
its accounting policies, that have the most significant
effect on the amounts recognised in the financial
statements are set out below.
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring theimpairment of loans and advances requires ANZ New
Zealand to assess impairment at least at eachreporting date.
The credit provisions raised(collective and individual) represent management's
best estimate of the losses incurred in the loan
portfolio at balance date based on their experienced
judgement.
The collective provision is estimated on the basis ofhistorical loss experience for assets with credit
characteristics similar to those in the collective pool.
The historical loss experience is adjusted based on
current observable data and events and anassessment of the impact of model risk.
Theprovision also takes into account the impact of large
concentrated losses within the portfolio and theeconomic cycle.
The use of such judgements and reasonableestimates is considered by management to be an
essential part of the process and does not impact on
the reliability of the provision.
Individual and collective provisioning involves the useof assumptions for estimating the amounts and timingof expected future cash flows.
The process of
estimating the amount and timing of cash flows
involvesconsiderable
management
judgement.
These judgements are revised regularly to reduce any
differences between loss estimates and actual loss
experience.

Financial instruments at fair value
ANZ New Zealand’s financial instruments measured atfair value are stated in note 1(a)(iii). In estimating
fair value ANZ New Zealand uses, wherever possible,
quoted market prices in an active market for thefinancial instrument.
In the event that there is no active market for the
instrument, fair value is based on present value
estimates or other market accepted valuation
techniques. The valuation models incorporate theimpact of bid/ask spread, counterparty credit spreads
and other factors that would influence the fair value
determined by a market participant. The selection of
appropriate valuation techniques, methodology andinputs requires judgement. These are reviewed andupdated as market practice evolves.
Derivatives and hedging
ANZ New Zealand buys and sells derivatives as partof its trading operations and to hedge its interest raterisk, currency risk, price risk, credit risk and otherexposures relating to non-trading positions.
A hedging instrument is a designated derivative
whose fair value or cash flows are expected to offset
changes in the fair value or cash flows of adesignated hedged item. A hedged item is an asset,
liability, firm commitment or highly probable forecast
transaction that: (a) exposes ANZ New Zealand to therisk of changes in fair value or future cash flows; and(b) is designated as being hedged.
Judgement is required in selecting and designating
hedging
relationships
andassessinghedge
effectiveness.
NZ IAS 39 Financial Instruments:
Recognition and Measurement does not specify asingle method for assessing hedge effectivenessprospectively or retrospectively. ANZ New Zealandadopts the hypothetical derivative approach todetermine hedge effectiveness in line with current
risk management strategies. Hedge ineffectivenesscan arise for a number of reasons and whilst a hedge
may pass the effectiveness tests above it may not be
perfectly effective, leaving some volatility in theincome statement.
The majority of outstanding derivative positions aretransacted over-the-counter and therefore need to bevalued using valuation techniques. Included in thedetermination of the fair value of derivatives is acredit valuation adjustment (CVA) to reflect thecreditworthiness of the counterparty. This is
influenced by the mark-to-market of the derivativetrades and by the movement in the market cost of
credit. Further adjustments are made to account for
the funding costs inherent in the derivative. Judgment
is required to determine the appropriate cost offunding and the future expected cashflows used inthis funding valuation adjustment (FVA).
Goodwill
Refer to Note 18 for details of goodwill held by ANZ
New Zealand.
The carrying value of goodwill is subject to an
impairment test to ensure that the current carrying
value does not exceed its recoverable value at thebalance sheet date. Any excess of carrying value

Australia and New Zealand Banking Group Limited - New Zealand Branch

16

Notes to the Financial Statements
over recoverable amount is taken to the income
statement as an impairment write down.
Goodwill has been allocated for impairment purposes
to the cash generating units at which the goodwill ismonitored
forinternal
reportingpurposes.
Impairment testing of purchased goodwill is
performed by comparing the recoverable value ofeach cash generating unit with the current carrying
amount of its net assets, including goodwill.
Judgement is required in identifying the cashgenerating units to which goodwill and other assets
are allocated for the purpose of impairment testing.
The recoverable amount is based on value-in-use
calculations.
These calculations use cash flow
projections based on a number of financial budgets
within each segment approved by management
covering a three year period. Cash flow projections
are based on a range of readily available economic
assumptions including GDP and CPI.
Cash flows
beyond the three year period are extrapolated using a
3% growth rate.
These cash flow projections are discounted using acapital asset pricing model. As at 28 February 2013
when the last valuation was prepared, a discount rateof 11.61% was applied to each cash generating unit.
The main variables in the calculation of the discountrate used are the risk free rate, the beta rate and themarket risk premium. The risk free rate is based on
the 10 year Government Bond Rate. The beta rate
and the market risk premium are consistent withobservable and comparative market rates applied in
the regional banking sector.
Market observable
information is not readily available at the segmentlevel therefore management performed stress tests
for key sensitivities in each segment.
Management believes any reasonable possible change
in the key assumptions on which the recoverable
amount is based would not cause ANZ New Zealand’s
carrying amount to exceed its recoverable amount.

3.

Risk Management Policies
ANZ New Zealand recognises the importance ofeffective risk management to its business success.
Management is committed to achieving strong control
and a distinctive risk management capability thatenables ANZ New Zealand business units to meettheir performance objectives.
ANZ New Zealand approaches risk through managing
the various elements of the system as a whole rather
than viewing them as independent and unrelatedparts.
The risk management division (“RiskManagement”) is independent of the business, withclear delegations from the Board of the Ultimate
Parent Bank and operates within a comprehensive
framework comprising:•
The Boards of the entities making up ANZ New
Zealand (“the Boards”) providing leadership,
setting risk appetite/strategy and monitoring
progress;•
A strong framework for development andmaintenance of ANZ New Zealand-wide risk
management policies, procedures and systems,
overseen by an independent team of risk
professionals;•
The use of sophisticated risk tools, applications
and processes to execute the global risk
management strategy as it is deemed to apply
to each entity across ANZ New Zealand;••Business unit level accountability, as the “firstline of defence”, for the management of risks inalignment with ANZ New Zealand’s strategy;
andIndependent oversight to ensure business unit
level compliance with policies, regulations andlaws, and to provide regular risk evaluation andreporting.

ANZ New Zealand manages risk through an approval,delegation and limits structure. Regular reviews of
the policies, systems and risk reports, including theeffectiveness of the risk management systems,
discussions covering ANZ New Zealand’s response to
emerging risk issues and trends, and that therequisite culture and practices are in place across ANZ
New Zealand, are conducted within ANZ New Zealandand also by the Ultimate Parent Bank. The Boards
have responsibility for reviewing all aspects of risk
management.
The
Boardshaveultimate
responsibility
foroverseeing the effective deployment of risk
management frameworks, policies and processes
within New Zealand. The Bank’s Risk Committee
assists the Boards in this function. The role of the
Risk Committee is to assist the Boards in the effective
discharge of its responsibilities for business, market,
credit, operational, compliance, liquidity, product andreputational risk management, and to liaise andconsult with the Ultimate Parent Bank Risk Committee
as required. Risk Management, via the Chief Risk
Officer, coordinates risk management activities
directly between Business Unit risk functions andUltimate Parent Bank Group Risk Management
functions.
ANZ New Zealand’s risk management policies are
essentially the same as the Ultimate Parent Bank, but
are tailored where required to suit the local New
Zealand regulatory and business environment.
The Bank’s Audit Committee, which is a subcommittee of the Board of the Bank, has
responsibility for reviewing for ensuring the integrityof ANZ New Zealand's financial controls, reporting
systems and internal audit standards. It meets atleast four times a year and reports directly to theBoard of the Bank. All members of the Bank’s Audit
Committee are non-executive directors.
Financial risk management
Refer to Note 29 for detailed disclosures on ANZ New
Zealand's financial risk management policies.
Operational Risk
Operational risk is the risk arising from day to day
operational activities which may result in direct orindirect loss. These losses may result from failure tocomplywithpolicies,
procedures,laws
andregulations, from fraud or forgery, from a breakdown
in the availability or integrity of services, systems andinformation, or damage to ANZ New Zealand’s
reputation.
Examples include failure to comply with policy andlegislation, human error, natural disasters, fraud andother malicious acts. Where appropriate, risks are
mitigated by insurance.
Risk Management is responsible for establishing ANZ
New Zealand’s operational risk framework andassociated ANZ New Zealand-wide policies. Business
units are responsible for the identification, analysis,
assessment and treatment of operational risks on a
day-to-day basis.

Australia and New Zealand Banking Group Limited - New Zealand Branch

Notes to the Financial Statements
Business units have primary responsibility for theidentification and management of operational risk
with executive oversight provided by the relevant
Retail and Wholesale Risk Forums.
The Bank’s
Operational Risk Executive Committee (“OREC”)
undertakes the governance function through the bimonthly monitoring of operational risk performanceacross ANZ New Zealand.
The Boards and Risk
Management conduct effective oversight through theapproval of operational risk policies and frameworks
and monitoring key operational risk metrics.
Compliance
ANZ New Zealand conducts its business in accordancewith all relevant compliance requirements. In order
to assist ANZ New Zealand identify, manage, monitor
and measure its compliance obligations, ANZ New
Zealand has a comprehensive regulatory complianceframework in place, which addresses both external(regulatory) and internal compliance.
Risk Management, in conjunction with business unit
staff ensure ANZ New Zealand operates within acompliance infrastructure and framework thatincorporates new and changing business obligations
and processes.
The compliance policies and their supporting
framework seek to minimise material risks to ANZ
New Zealand’s reputation and value that could arise
from non-compliance with laws, regulations, industry
codes and internal standards and policies. Business
units have primary responsibility for the identificationand management of compliance. Risk Management
provides policy and framework, measurement,
monitoring and reporting, as well as leadership inareas such as anti-money laundering procedures andmatters of prudential compliance. The Board and the
Risk Committee of the Ultimate Parent Bank Board
conduct Board and Executive oversight.
Global Internal Audit
Global Internal Audit is a function independent ofmanagement whose role is to provide the Board andmanagement with an effective and independent
appraisal of the internal controls established bymanagement. Operating under a Board approved
Charter, the reporting line for the outcomes of work
conducted by Global Internal Audit is direct to the
Chair of the Bank’s Audit Committee, with a directcommunication line to the Chief Executive Officer ofthe Bank and the external auditor.
The Global Internal Audit Plan is developed utilising arisk based approach and is refreshed on a quarterly
basis. The Bank’s Audit Committee approves the plan,
the associated budget and any changes thereto.
All audit activities are conducted in accordance withlocal and international auditing standards, and theresults thereof are reported to the Audit Committeesof the Ultimate Parent Bank and the Bank asappropriate, Risk Committee and management. These
results influence the performance assessment ofbusiness heads.
Furthermore, Global Internal Audit monitors theremediation of audit issues and highlights the current
status of any outstanding audits.

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

18

Notes to the Financial Statements
4. Income
ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

418

446

-

-

418

446

-

-

Liquid assets

71

67

-

-

Other financial institutions

26

38

-

-

Available-for-sale assets

12

8

-

-

Lending on productive loans

5,866

5,920

508

544

Lending on impaired assets

29

53

1

2

Other

39

36

-

-

6,043

6,122

509

546

6,461

6,568

509

546

Net gain on foreign exchange trading

154

144

-

-

Net gain / (loss) on trading securities

(197)

101

-

-

Net gain / (loss) on trading derivatives

206

(114)

-

-

Net trading gains

163

131

-

-

Net funds management income

124

115

-

-

Net insurance income

110

183

-

-

Total funds management and insurance income

234

298

-

-

57

52

-

1

557

564

-

-

$ millions

Note

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

Financial assets not at fair value through profit or loss

Total interest income
Net trading gains

Net funds management and insurance income

Other operating income
Lending and credit facility fee income
Other fee income
Total fee income

614

616

-

1

Direct fee expense

(200)

(186)

-

-

414

430

-

1

-

(1)

-

-

(1)

(4)

8

(1)

(75)

(69)

(20)

(19)

21

12

-

-

Net fee income
Net loss on financial liabilities designated at fair value
Net ineffectiveness on qualifying fair value hedges

11

Net loss on hedges not qualifying for hedge accounting
Net cash flow hedge gain transferred to income statement
Net gain on available for sale equity securities transferred toincome statement
Gain on sale of subsidiary, associates and joint venture
Other income
Total other operating income

16

-

83

-

-

16

4

-

-

16

17

-

-

391

472

(12)

(19)

Australia and New Zealand Banking Group Limited - New Zealand Branch

19

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

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

170

174

-

-

170

174

-

-

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

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

436

467

398

422

2,239

2,184

-

-

824

820

-

-

Immediate parent company

63

70

-

-

Loan capital

79

134

-

-

9

10

-

-

3,650

3,685

398

422

3,820

3,859

398

422

702

804

-

-

71

77

-

-

34

35

-

-

4

6

-

-

Share-based payments expense

22

20

-

-

Building occupancy costs

41

66

-

-

Depreciation of premises and equipment

46

55

-

-

Leasing and rental costs

84

85

-

-

Related parties (Note 25)

84

118

-

-

114

144

-

-

-

11

-

-

52

34

-

-

188

204

-

-

66

84

26

27

1,508

1,743

26

27

2,486

3,163

88

104

582

573

-

-

3,068

3,736

88

104

Deposits and other borrowings
Bonds and notes

Other

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

Technology expenses
Impairment of intangibles and other assets
Amortisation of software and other intangible assets
Administrative expenses
Other costs
Total operating expenses$ thousands

Fees paid to principal auditors (KPMG New Zealand)
Audit or review of financial statements
Other services
Total auditors' remuneration

It is ANZ New Zealand’s policy that, subject to the approval of the Ultimate Parent Bank’s Audit Committee, KPMG canprovide assurance and other audit-related services that, while outside the scope of the statutory audit, are consistent withthe role of auditor. KPMG may not provide services that are perceived to be in conflict with the role of auditor. Services
that are perceived to be in conflict with the role of auditor include consulting advice and subcontracting of operational
activities normally undertaken by management, and engagements where the auditor may ultimately be required toexpress an opinion on its own work.
Other services include taxation services and services for the audit or review of financial information other than financial
reports including prudential supervision reviews, prospectus reviews and other audits required for local regulatory
purposes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

20

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

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

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

1,862

1,669

70

69

Prima facie income tax at 28%

521

467

20

19

Imputed and non-assessable dividends

(5)

(6)

-

-

Change in tax provisions

(10)

(12)

-

-

Non assessable income and non deductible expenditure

(17)

(35)

-

-

1

(10)

-

-

490

404

20

19

26.3%

24.2%

28.0%

28.0%

Current tax

404

365

18

19

Deferred tax

86

39

2

-

490

404

20

19

1,852

1,457

-

-

Income tax under / (over) provided in prior years
Total income tax expense
Effective tax rate (%)
Amounts recognised in the income statement

Total income tax expense recognised in the income statement

Imputation credits available

A number of companies within ANZ New Zealand are members of an imputation group. The imputation credit balance for
ANZ New Zealand includes the imputation credit balance in relation to both the imputation group and other companies
within ANZ New Zealand that are not in the imputation group. The imputation credit balance available includes imputationcredits that will arise from the payment of the amount of provision for income tax as at the reporting date.

ANZ New Zealand$ millions

30/09/2013

NZ Branch

30/09/2012

30/09/2013

30/09/2012

238

303

6

8

8

(2)

-

-

71

108

-

-

(108)

(112)

-

-

Financial instruments

(10)

(55)

-

-

Carried forward losses

15

16

-

-

(179)

(165)

-

-

1

(1)

-

-

36

92

6

8

Deferred tax assets / (liabilities) comprise the following temporary differences:
Provision for credit impairment
Premises and equipment, software and intangibles
Provisions and accruals
Deferred acquisition costs and insurance policy assets

Lease finance
Other deferred tax assets and liabilities (including tax provisions)1

Net deferred tax assets

1

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

21

Notes to the Financial Statements
7. Segmental Analysis
For segment reporting purposes, ANZ New Zealand is organised into four major business segments - Retail, Commercial,
Wealth and Institutional. Centralised back office and corporate functions support these segments. These segments are
consistent with internal reporting provided to the chief operating decision maker, being the Bank’s Chief Executive Officer.
Segmental reporting has been updated to reflect minor changes to ANZ New Zealand’s structure. Comparative data has
been adjusted to be consistent with the current year’s segment definitions.
RetailRetail provides products and services to personal customers via the branch network, mortgage specialists, the contact
centre and a variety of self service channels (internet banking, phone banking, ATMs, website and mobile phone banking).
Core products include current and savings accounts, unsecured lending (credit cards, personal loans and overdrafts) andhome loans secured by mortgages over property. Retail distributes insurance and investment products on behalf of the
Wealth segment.
Commercial
Commercial provides services to Business Banking, Commercial & Agri, and UDC customers. Business Banking services
are offered to small enterprises (typically with annual revenues of less than $5 million). Commercial & Agri customers
consist of primarily privately owned medium to large enterprises. ANZ New Zealand's relationship with these businesses
ranges from simple banking requirements with revenue from deposit and transactional facilities, and cash flow lending, tomore complex funding arrangements with revenue sourced from a wider range of products. UDC is principally involved in
the financing and leasing of plant, vehicles and equipment, mainly for small and medium sized businesses, as well as
investment products.
WealthWealth includes private banking and investment services provided to high net worth individuals, the ANZ wealthmanagement and OnePath insurance businesses, and other investment products.
Institutional
Institutional provides financial services through a number of specialised units to large multi-banked corporations, often
global, who require sophisticated product and risk management solutions.
Those financial services include loan
structuring, foreign exchange, wholesale money market services and transaction banking.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

22

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

RetailCommercial

WealthExternal interest income

2,157

3,238

88

969

9

6,461

External interest expense(1,056)

(607)

(200)

(420)

(1,537)(3,820)Net intersegment interest(176)(1,316)

148

(197)

1,541

-

Net interest income

925

1,315

36

352

13

2,641

Other external operating income

310

126

157

253

(58)

788

-

-

-

-

7

7

Operating income

1,235

1,441

193

605

(38)

3,436

Operating expenses

650

488

136

199

35

1,508

Profit before provision for credit impairment

585

953

57

406

(73)

1,928

57

(11)

(1)

21

-

66

Profit before income tax

528

964

58

385

(73)

1,862

Income tax expense

148

265

4

104

(31)

490

Profit after income tax

380

699

54

281

(42)

1,372

Institutional

Other

Total

30/09/2013

Share of associates' profit

Provision for credit impairment

Other information
Depreciation and amortisation

19

4

4

-

71

98

547

1,434

180

1,072

-

3,233

Other intangible assets

27

2

130

-

56

215

Investment in associates

-

-

-

9

89

98

Total external assets

37,47556,932

1,864

31,637

1,939

129,847

Total external liabilities

32,395

20,3994,443

28,18034,675120,092

External interest income

2,264

3,249

79

960

16

6,568

External interest expense(1,033)

(581)

(196)

(419)

(1,630)(3,859)Net intersegment interest(295)(1,331)

143

(130)

1,613

-

Net interest income

936

1,337

26

411

(1)

2,709

Other external operating income

299

122

228

228

24

901

-

-

-

-

4

4

Operating income

1,235

1,459

254

639

27

3,614

Operating expenses

670

505

145

200

223

1,743

Profit before provision for credit impairment

565

954

109

439

(196)

1,871

Provision for credit impairment

62

128

1

11

-

202

Profit before income tax

503

826

108

428

(196)

1,669

Income tax expense

140

229

18

113

(96)

404

Profit after income tax

363

597

90

315

(100)

1,265

Goodwill

30/09/2012

Share of associates' profit

Other information
Depreciation and amortisation

19

8

12

-

50

89

Goodwill

547

1,463

180

1,072

-

3,262

Other intangible assets

38

3

136

1

62

240

Investment in associates

-

-

-

12

87

99

Total external assets

37,201

54,427

1,819

36,172

1,356

130,975

Total external liabilities

31,133

19,246

4,530

28,32538,564

121,798

1

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

23

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

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

1,907

2,177

-

-

55

325

-

-

Money at call

348

237

-

-

Bills receivable and remittances in transit

186

92

-

-

2,496

2,831

-

-

30/09/2013

30/09/2012

30/09/2013

30/09/2012

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

Total liquid assets

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

Securities purchased under agreement to resell

NZ Branch

254

228

-

-

Security settlements

94

42

-

-

Certificates of deposit

160

100

-

-

1,002

1,256

-

-

201

134

141

38

1,711

1,760

141

38

255

229

-

-

30/09/2013

30/09/2012

30/09/2013

30/09/2012

5,404

8,600

-

-

551

455

-

-

Promissory notes

36

41

-

-

Other bank bonds

4,300

3,202

-

-

29

40

-

-

10,32012,338--Cash collateral given on derivative financial instruments
Other
Total due from other financial institutions
Fair value of securities purchased under agreements to resell

10. Trading Securities
ANZ New Zealand$ millions

Government, local body stock and bonds
Certificates of deposit

Other
Total trading securities

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

24

Notes to the Financial Statements
11. Derivative Financial Instruments
The use of derivatives and their sale to customers as risk management products is an integral part of ANZ New Zealand’s
trading activities. Derivatives are also used to manage ANZ New Zealand’s own exposure to fluctuations in exchange andinterest rates as part of its own asset and liability management activities.
Derivatives are subject to the same types of credit and market risk as other financial instruments and ANZ New Zealandmanages these risks in a consistent manner.
Derivatives, except for those that are specifically designated as effective hedging instruments, are classified as held for
trading.
ANZ New Zealand

NZ Branch

Notional

Notional

30/09/2013

Principal

Fair values$ millions

AmountAssetsLiabilities

Principal

Fair values

AmountAssetsLiabilities

Derivatives held for trading
Spot and forward contracts

53,870

566

985

283

2

2

Swap agreements

139,110

3,187

5,090

8,233

-

991

Options purchased

2,982

52

-

-

-

-

Options sold

2,973

1

70

-

-

-

198,935

3,806

6,145

8,516

2

993

Foreign exchange derivatives
Forward rate agreements

15,442

-

2

435

-

-

Swap agreements

518,586

5,386

4,843

1,124

6

5

Futures contracts

24,857

2

6

-

-

-

Options purchased

1,098

4

-

-

-

-

Options sold

1,010

-

5

-

-

-

Interest rate derivatives

560,993

5,392

4,856

1,559

6

5

Commodity derivatives

366

32

32

-

-

-

760,294

9,230

11,033

10,0758

998

Total derivatives held for trading
Derivatives in hedging relationships
Foreign exchange swap agreements

55

2

-

-

-

-

Interest rate swap agreements

24,718

186

76

4,443

4

23

Total fair value hedges

24,773

188

76

4,443

4

23

Interest rate swap agreements

15,240

90

99

-

-

-

Total cash flow hedges

15,240

90

99

-

-

-

Total derivatives in hedging
relationships

40,013

278

175

4,443

4

23

800,307

9,508

11,20814,51812

1,021

Total derivative financial instruments

Australia and New Zealand Banking Group Limited - New Zealand Branch

25

Notes to the Financial Statements
ANZ New Zealand
30/09/2012$ millions

Notional
Principal
AmountNZ Branch

Fair values
AssetsLiabilities

Notional
Principal
AmountFair values
AssetsLiabilities

Derivatives held for trading
Spot and forward contracts

59,825

647

1,240

38

-

-

Swap agreements

132,963

2,811

4,446

9,273

39

168

Options purchased

1,798

22

-

-

-

-

Options sold

1,651

1

39

-

-

-

196,237

3,481

5,725

9,311

39

168

Foreign exchange derivatives
Forward rate agreements

45,071

3

2

1,580

-

-

Swap agreements

509,981

8,628

8,032

3,013

13

19

Futures contracts

29,818

2

4

-

-

-

Options purchased

2,237

15

-

-

-

-

Options sold

1,833

-

14

-

-

-

Interest rate derivatives

588,940

8,648

8,052

4,593

13

19

Commodity derivatives

281

44

42

-

-

-

785,458

12,173

13,81913,90452

187

Total derivatives held for trading
Derivatives in hedging relationships
Foreign exchange swap agreements

70

3

-

-

-

-

Interest rate swap agreements

22,534

293

194

3,535

-

35

Total fair value hedges

22,604

296

194

3,535

-

35

Interest rate swap agreements

13,524

240

72

-

-

-

Total cash flow hedges

13,524

240

72

-

-

-

Total derivatives in hedging
relationships

36,128

536

266

3,535

-

35

Total derivative financial instruments

821,586

12,70914,085

17,43952

222

Derivatives held for trading
The held for trading classification includes two categories of derivative instruments: those held as trading positions andthose used for ANZ New Zealand’s balance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include thestructuring and marketing of derivative products to customers which enable them to take or mitigate risks. Market
making activities consist of derivatives entered into principally for the purpose of generating profits from short-term
fluctuations in price or margins. Positions may be traded actively or held over a period of time to benefit from expectedchanges in market rates.
Balance sheet risk management
ANZ New Zealand designates certain balance sheet risk management derivatives into hedging relationships in order tominimise income statement volatility. This volatility is created by differences in the timing of recognition of gains andlosses between the derivative and the hedged item. Hedge accounting is not applied to all balance sheet risk
management positions as some balance sheet risk management derivatives are classified as held for trading.

Derivatives in hedging relationships
Fair value hedges
ANZ New Zealand’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in
the fair value of fixed-rate long-term financial instruments due to movements in market interest rates.
Gain / (loss) on fair value hedges attributable to the hedged risk
ANZ New Zealand$ millions

30/09/2013

NZ Branch

30/09/2012

30/09/2013

30/09/2012

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

80

5

(20)

(20)

(81)

(9)

28

19

(1)

(4)

8

(1)

Australia and New Zealand Banking Group Limited - New Zealand Branch

26

Notes to the Financial Statements
Cash flow hedges
ANZ New Zealand’s cash flow hedges comprise interest rate swaps that are used to protect against exposures tovariability in future interest cash flows on non-trading assets and liabilities which bear interest at variable rates or which
are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing bothprincipal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of their forecast
repricing profile. This forms the basis for identifying gains and losses on the effective portions of derivatives designatedas cash flow hedges.
Analysis of the cash flow hedging reserve

ANZ New Zealand

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Deferred gain / (loss) attributable to hedges of:
Variable rate loan assets

(18)

208

-

-

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

15

(29)

-

-

29

(38)

-

-

Total cash flow hedging reserve

26

141

-

-

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur,
which is anticipated to take place over the next 0-10 years (30/09/2012 0-10 years).

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

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

742

13

-

-

38

41

-

-

2

3

-

-

782

57

-

-

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Overdrafts

1,841

1,881

-

-

Credit card outstandings

1,458

1,395

-

-

Term loans - housing

58,84955,526

9,276

9,402

Term loans - non-housing

37,83237,749--Finance lease receivables

849

806

-

-

100,829

97,357

9,276

9,402

(849)

(1,081)

(23)

(27)

(278)

(258)

-

-

Fair value hedge adjustment

(35)

34

(3)

17

Deferred fee revenue and expenses

(64)

(60)

-

-

Capitalised brokerage / mortgage origination fees

162

102

6

4

99,76596,094

9,256

9,396

Government, local body stock and bonds
Other debt securities
Equity securities
Total available-for-sale assets

13. Net Loans and Advances
ANZ New Zealand$ millions

Note

Gross loans and advances
Provision for credit impairment
Unearned finance income

Total net loans and advances

14

NZ Branch

Australia and New Zealand Banking Group Limited - New Zealand Branch

27

Notes to the Financial Statements
14.

Provision for Credit Impairment

Provision movement analysis$ millions

ANZ New Zealand
Retail Other retailmortgages
exposures

Non-retail
exposures

NZ Branch
Total

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

30/09/2013

New and increased provisions

105

113

157

375

18

-

-

18

Write-backs
Recoveries of amounts written off
previously

(88)

(30)

(104)

(222)

(13)

-

-

(13)

(2)

(16)

(5)

(23)

-

-

-

-

Individual provision charge

15

67

48

130

5

-

-

5

Collective provision credit

(5)

(8)

(51)

(64)

(2)

-

-

(2)

Total charge / (credit) to income
statement

10

59

(3)

66

3

-

-

3

30/09/2012

New and increased provisions

130

87

267

484

20

-

-

20

Write-backs
Recoveries of amounts written off
previously

(90)

(15)

(100)

(205)

(17)

-

-

(17)

(1)

(17)

(7)

(25)

-

-

-

-

Individual provision charge

39

55

160

254

3

-

-

3

Collective provision charge / (credit)

(10)

(22)

(20)

(52)

6

-

-

6

Total charge to income statement

29

33

140

202

9

-

-

9

Non retail
exposures

Total

Movement in provision for credit impairment
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

Non retail
exposures

NZ Branch
Total

Retail Other retailmortgages
exposures

30/09/2013

Collective provision
Balance at beginning of the year

120

125

375

620

16

-

-

16

Credit to income statement

(5)

(8)

(51)

(64)

(2)

-

-

(2)

Balance at end of the year

115

117

324

556

14

-

-

14

Balance at beginning of the year
New and increased provisions net ofwrite-backs

130

26

305

461

11

-

-

11

17

83

53

153

5

-

-

5

Bad debts written off

(55)

(87)

(150)

(292)

(6)

-

-

(6)

Discount unwind1

(9)

-

(20)

(29)

(1)

-

-

(1)

Balance at end of the year

83

22

188

293

9

-

-

9

198

139

512

849

23

-

-

23

Balance at beginning of the year

130

147

395

672

10

-

-

10

Charge / (credit) to income statement

(10)

(22)

(20)

(52)

6

-

-

6

Balance at end of the year

120

125

375

620

16

-

-

16

Balance at beginning of the year
New and increased provisions net ofwrite-backs

165

37

309

511

17

-

-

17

40

72

167

279

3

-

-

3

Bad debts written off

(62)

(83)

(131)

(276)

(7)

-

-

(7)

Discount unwind1

(13)

-

(40)

(53)

(2)

-

-

(2)

Balance at end of the year

130

26

305

461

11

-

-

11

Total provision for credit impairment

250

151

680

1,081

27

-

-

27

Individual provision

Total provision for credit impairment
30/09/2012

Collective provision

Individual provision1

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

28

Notes to the Financial Statements
15. Impaired Assets
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

NZ BranchNon-retail
exposures

Total

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

39

30/09/2013

Balance at beginning of the year

352

44

1,009

1,405

39

-

-

Transfers from productive

315

134

401

850

47

-

-

47

Transfers to productive

(93)

(5)

(194)

(292)

(2)

-

-

(2)

Assets realised or loans repaid

(305)

(37)

(400)

(742)

(43)

-

-

(43)

Write offs

(55)

(87)

(150)

(292)

(6)

-

-

(6)

Total impaired assets

214

49

666

929

35

-

-

35

-

1

24

25

-

-

-

-

66

Undrawn facilities with impaired
customers
30/09/2012

Balance at beginning of the year

537

61

1,194

1,792

66

-

-

Transfers from productive

340

110

572

1,022

55

-

-

55

Transfers to productive

(73)

(1)

(111)

(185)

(12)

-

-

(12)

Assets realised or loans repaid

(390)

(43)

(515)

(948)

(63)

-

-

(63)

Write offs

(62)

(83)

(131)

(276)

(7)

-

-

(7)

Total impaired assets

352

44

1,009

1,405

39

-

-

39

-

-

24

24

-

-

-

-

Undrawn facilities with impaired
customers

Australia and New Zealand Banking Group Limited - New Zealand Branch

29

Notes to the Financial Statements
16. Subsidiaries and Associates
Subsidiaries

Ownership Balanceinterest % date

Nature of business

Members of the Banking GroupANZ Bank New Zealand Limited

100

30 September

Registered bank

ANZ Capital NZ Limited

100

30 September

Investment

ANZ Investment Services (New Zealand) Limited

100

30 September

Funds management

ANZ National Staff Superannuation Limited

100

30 September

Staff superannuation scheme trustee

ANZ New Zealand (Int'l) Limited

100

30 September

Finance

ANZ New Zealand Investments Limited 1

100

30 September

Funds management

ANZ New Zealand Investments Nominees Limited 2

100

30 September

Nominee

ANZ New Zealand Securities Limited

100

30 September

On-line share broker

ANZ Wealth New Zealand Limited 3

100

30 September

Holding company-

30 September

Securitisation entity

Arawata Assets Limited

100

30 September

Property

Arawata Finance Limited

100

30 September

Investment

Arawata Holdings Limited

100

30 September

Holding company

AUT Investments Limited

100

30 September

Investment

Control Nominees Limited

100

30 September

Non-operating

Direct Nominees Limited

100

30 September

NomineeEndeavour Finance Limited

100

30 September

Investment

Harcourt Corporation Limited

100

30 September

Investment

Karapiro Investments Limited

100

30 September

Investment

Kingfisher NZ Trust 2008-1-

30 September

Securitisation entity

Medical Properties Holding Company No.1 Limited

100

30 September

Non-operating

OneAnswer Nominees Limited

100

30 September

Nominee

OnePath Insurance Holdings (NZ) Limited

100

30 September

Holding company

OnePath Insurance Services (NZ) Limited

100

30 September

Insurance

OnePath Life (NZ) Limited

100

30 September

Insurance

Private Nominees Limited

100

30 September

Nominee

Rural Growth Fund Limited

100

30 September

Investment

South Pacific Merchant Finance Limited

100

30 September

Holding company

UDC Finance Limited

100

30 September

Asset finance

ANZNZ Covered Bond Trust

Other members of ANZ New Zealand (together with the NZ Branch, the "Relevant Members")
ANZ Capel Court Limited (New Zealand Branch)4100

30 September

Securitisation services

ANZ Holdings (New Zealand) Limited

100

30 September

Holding company

ANZ Nominees Limited (New Zealand Branch)4100

30 September

Nominee

ANZ Securities (NZ) Limited

100

30 September

Nominee

ANZMAC Securities (NZ) Nominees Limited

100

30 September

NomineeSamson Funding Limited

100

30 September

Finance

Cards NZ Limited

19

30 September

Card services

Paymark Limited

25

31 March

EFTPOS settlements

UCG Investments Limited

40

31 March

Rest home operator

Associates

1

Previously known as OnePath (NZ) Limited
Previously known as OnePath Nominees (NZ) Limited
3
Previously known as OnePath Holdings (NZ) Limited
4
Incorporated in Australia and registered in New Zealand as an Overseas ASIC Company
2

All subsidiaries and associates are incorporated in New Zealand, unless stated otherwise. The ownership interest
percentage equates to the voting power held for all companies. Control of Kingfisher NZ Trust 2008-1 and ANZNZ
Covered Bond Trust exists as ANZ New Zealand retains substantially all the risks and rewards of the operations.
Movements in subsidiaries and associates
In December 2012 ANZ Capital NZ Limited sold its interest in Wyma Engineering (NZ) Limited.
In January 2013 NBNZ Holdings Hong Kong Limited was wound up.
In May 2013 the Bank sold its interest in EFTPOS New Zealand Limited. Control Nominees Limited acquired 100% of theshare capital and subsequently amalgamated with Origin Mortgage Management Services (2011) Limited.
In July 2013 Silver Fern Life Brokers Limited amalgamated with Alos Holdings Limited.
In August 2013 Alos Holdings Limited amalgamated with National Bank of New Zealand Custodians Limited. Arawata
Trust Company, NBNZ Holdings Limited and National Bank of New Zealand Custodians Limited amalgamated with Control
Nominees Limited. Arawata Trust was wound up.
These transactions did not have a material impact on the financial statements of ANZ New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

30

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

Accrued interest and prepaid discounts

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

368

356

1

-

Accrued commission

25

25

-

-

Share-based payments asset

62

60

-

-

Prepaid expenses

15

23

-

-

Security settlements

160

29

-

-

Other assets

105

103

-

-

Total other assets

735

596

1

-

18. Goodwill and Other Intangible Assets
ANZ New Zealand

NZ Branch$ millions

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Goodwill

3,233

3,262

-

-

Software

84

103

-

-

131

137

-

-

3,448

3,502

-

-

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Securities sold under agreements to repurchase

107

246

-

-

Cash collateral received on derivative financial instruments

438

257

-

-

Other

9,326

10,509

8,372

9,273

Total due to other financial institutions

9,871

11,012

8,372

9,273

Other intangibles

Refer to note 2 for discussion of impairment testing for goodwill.

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

NZ Branch

20. Deposits and Other Borrowings
ANZ New Zealand$ millions

Note

Certificates of deposit

30/09/2013

NZ Branch

30/09/2012

30/09/2013

30/09/2012

2,364

2,156

-

-

Term deposits

33,86233,922--

Demand deposits bearing interest

29,68725,815

-

-

5,526

4,838

-

-

1,492

1,476

-

-

4,765

5,445

-

-

77,69673,652--

Deposits not bearing interest
Secured debenture stock
Commercial paper
Total deposits and other borrowings

30

Deposits from customers are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand. In theunlikely event that the Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in
the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.

Australia and New Zealand Banking Group Limited - New Zealand Branch

31

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

30/09/2013

Creditors

NZ Branch

30/09/2012

30/09/2013

30/09/2012

61

73

-

-

514

616

40

55

Defined benefit schemes deficit

41

103

-

-

Share-based payments liability

39

36

-

-

Accrued charges

254

259

2

2

Security settlements and short sales

218

290

-

-

Life insurance contract liabilities - reinsurance

100

107

-

-

Other liabilities

246

104

-

-

1,473

1,588

42

57

30/09/2013

30/09/2012

30/09/2013

30/09/2012

120

135

-

-

22

111

-

-

2

1

-

-

85

92

-

-

229

339

-

-

Accrued interest and unearned discounts

Total payables and other liabilities

22. Provisions
ANZ New Zealand$ millions

Employee entitlements1
Restructuring costs and surplus leased space2
Non-lending losses, frauds and forgeries
Other3
Total provisions

1
2

3

NZ Branch

The aggregate liability for employee entitlements largely comprises provisions for annual leave and long service leave.
Restructuring costs and surplus leased space provisions arise from activities related to material changes in the scope of business undertaken by ANZ New
Zealand or the manner in which that business is undertaken and includes termination benefits. Costs relating to on-going activities are not provided for.
Provision is made when ANZ New Zealand is demonstrably committed, it is probable that the costs will be incurred, though their timing is uncertain, and thecosts can be reliably estimated. The 2012 balance includes provisions related to the New Zealand Simplification programme, including implementation of acore banking system, a single bank brand and an optimised branch network.
Other provisions include provisions relating to make-good of leased premises, seismic obligations and the deferred settlement of obligations arising frommanaged funds.

23. Bonds and notes
ANZ New Zealand$ millions

Note

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Domestic bonds

2,635

2,535

-

-

U.S. medium term notes1

4,464

7,423

-

-

Euro medium term notes1

4,349

4,179

-

-

3,925

2,962

-

-

Trust securities2

905

898

-

-

Index linked notes

84

81

-

-

Total bonds and notes issued

16,362

18,078--Fair value hedge adjustment

77

226

-

-

(32)

(116)

-

-

16,40718,188--Covered bonds1

Less bonds and notes held by the Bank
Total bonds and notes

36

Bonds and notes, other than covered bonds, are unsecured and rank equally with other unsecured liabilities of ANZ New
Zealand.
1
2

These bonds and notes are issued by ANZ New Zealand (Int’l) Limited and are guaranteed by the Bank.
Trust Securities were issued by Samson Funding Limited on 26 November 2003. The notes are ‘stapled’ to preference shares issued by the Ultimate Parent Bank
and, prior to a conversion event, may not be traded separately from them. On 7 October 2013 the Ultimate Parent Bank announced that these securities will be
redeemed on the first call date being 16 December 2013.

Australia and New Zealand Banking Group Limited - New Zealand Branch

32

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

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

NZD 835,000,000 perpetual subordinated bond

835

835

-

-

AUD 265,740,000 perpetual subordinated floating rate loan

299

333

-

-

AUD 10,000,000 perpetual subordinated floating rate loan

11

-

-

-

298

-

-

-

1,443

1,168

-

-

(1)

-

-

-

1,442

1,168

-

-

AUD 265,017,668 subordinated floating rate loan
Total loan capital issued
Less loan capital instruments held by the Bank
Total loan capital

Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all
creditors of the Bank.
Loan capital instruments are classified as debt reflecting an assessment of the key terms and conditions of the
instruments, and an assessment of the ability, and likelihood of interest payments being deferred. Certain of these
instruments have interrelationships that have been considered in this assessment.
NZD 835,000,000 bondThis bond was issued by the Bank on 18 April 2008. The Bank did not elect to redeem the bond on 18 April 2013 (the“First Call Date”). The Bank may elect to redeem the bond on 18 April 2018 (the “Second Call Date”) or any interest
payment date subsequent to 18 April 2018. Interest is payable half yearly in arrears on 18 April and 18 October eachyear, up to and including the Second Call Date and then quarterly thereafter. Should the bond not be called at the Second
Call Date, the Coupon Rate from the Second Call Date onwards will be set on a quarterly basis to the three month FRA
rate plus 3.00%.
As at 30 September 2013, this bond carried a BBB+ rating by Standard and Poor's and an A3 rating by Moody’s.
The coupon interest on the bond was 9.66% until 18 April 2013 when it reset to 5.28% for the five year period to 18 April
2018.
This bond is listed on the New Zealand Exchange (“NZX”). The Market Surveillance Panel of the NZX granted the Bank awaiver from the requirements of Listing Rules 10.4 (relating to the provision of preliminary announcements of half yearly
and annual results to the NZX) and 10.5 (relating to preparing and providing a copy of half yearly and annual reports to
the NZX).
AUD 265,740,000 loan
This loan was drawn down by the Bank on 27 September 1996 and has no fixed maturity. Interest is payable half yearlyin arrears at BBSW + 0.95% p.a., with interest payments due on 15 March and 15 September each year.
AUD 10,000,000 loan
This loan was drawn down by the Bank on 27 March 2013 and has no fixed maturity. Interest is payable half yearly inarrears on 15 March and 15 September each year. The bank may repay the loan on any interest payment date after boththe NZD 835,000,000 bond and AUD 265,740,000 loan have been repaid in full.
Coupon interest is BBSW + 2.4% p.a., increasing to BBSW + 4.4% p.a. from 15 September 2018.
AUD 265,017,668 loan
This loan was drawn down by ANZ Holdings (New Zealand) Limited on 25 September 2013. The loan matures on 1 March
2024, but ANZ Holdings (New Zealand) Limited may elect to repay the loan on any interest payment date from 1 March
2019. Interest is payable half yearly in arrears at BBSW + 2.60% p.a., with interest payments due on 1 March and 1
September each year.

Australia and New Zealand Banking Group Limited - New Zealand Branch

33

Notes to the Financial Statements
25. Related Party Transactions
Key management personnel
Key management personnel are defined as the Directors and senior management of ANZ New Zealand - those persons
having the authority and responsibility for planning, directing and controlling the activities of the entity. The information
below includes transactions with those individuals, their close family members and their subsidiaries.
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal
commercial terms and conditions no more favourable than those given to other employees or customers. Loans are on
terms of repayment that range between fixed, variable and interest only, all of which have been made in accordance with
the Bank's lending policies.
All transactions with key management personnel (including personally related parties) are conducted on an arm's length
basis in the ordinary course of business and on commercial terms and conditions. These transactions principally consist of
the provision of financial and investment services.
ANZ New Zealand$ thousands

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

Key management personnel compensation
Salaries and short-term employee benefits

13,21011,605--

Post-employment benefits

258

201

-

-

Other long-term benefits

76

87

-

-

123

-

-

-

5,693

4,537

-

-

19,36016,430--Loans to key management personnel

5,741

2,726

-

-

Deposits from key management personnel

8,001

7,055

-

-

Termination benefits
Share-based payments expense
Total compensation of key management personnel
Loans to and deposits held by key management personnel

Transactions with other related parties
The NZ Branch and ANZ New Zealand undertake transactions with the Immediate Parent Company, Ultimate Parent Bank,other members of the Overseas Banking Group, associates and joint ventures.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment
services, technology and process support, and compensation for share based payments made to ANZ New Zealandemployees. Transactions with related parties outside of ANZ New Zealand are conducted on an arm’s length basis and on
normal commercial terms.
In addition the Bank undertakes similar transactions with subsidiaries, which are eliminated in the consolidated ANZ New
Zealand financial statements. Included within the Bank’s transactions with subsidiaries is the provision of administrative
functions to some subsidiaries for which no payments have been made.
Transactions with related parties$ millions

Interest income
Received from the Ultimate Parent Bank and subsidiaries not part of
ANZ New Zealand

ANZ New Zealand

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

2

5

-

-

63

70

-

-

544

530

398

422

2

2

-

-

16

51

-

-

7

4

-

-

-

-

25

26

84

118

-

-

Interest expense
Paid to the Immediate Parent Company
Paid to the Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand
Paid to associates
Other operating income
Received from the Ultimate Parent Bank and subsidiaries notpart of ANZ New ZealandShare of associates' profit
Operating expenses
Paid to the Bank
Paid to the Ultimate Parent Bank and subsidiaries not part of ANZ New
ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

34

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

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Liquid Assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

22

85

-

-

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

236

217

141

38

Derivative financial assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

1,903

2,659

-

39

-

-

12

13

Due from associates

-

4

-

-

Due from the Bank

-

-

314

304

Shares in subsidiaries and associates

98

99

-

-

Other assets
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

66

61

1

-

Total due from related parties

2,325

3,125

468

394

Due to other financial institutions
Due from Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

8,409

9,478

8,372

9,273

Due from the Bank
Net loans and advances

Deposits and other borrowings
Due to associates

85

85

-

-

Due to Immediate Parent Company

1,766

1,766

-

-

Derivative financial liabilities
Due to Ultimate Parent Bank and subsidiaries not part of ANZ New
Zealand

3,133

3,205

991

168

-

-

30

54

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

66

85

40

55

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

2,180

2,201

-

-

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

608

333

-

-

16,247

17,153

9,433

9,550

Due to the Bank

Total due to related parties

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

Financial guarantees provided to the Ultimate Parent BankNZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

181

256

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

35

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

30/09/2013

Noncurrent

Current

NZ Branch

30/09/2012

Current

30/09/2013

Non-current

30/09/2012

Noncurrent

Current

Current

Non-current

AssetsLiquid assets
Due from other financial institutions

2,496

-

2,831

-

-

-

-

-

1,711

-

1,760

-

141

-

38

-

10,320-12,338

-

-

-

-

-

9,508

-

12,709

-

12

-

52

-

1

-

24

-

-

-

-

-

Available-for-sale assets

407

375

16

41

-

-

-

-

Net loans and advances

29,32370,44228,45367,641

425

8,831

467

8,929

-

-

-

-

314

-

304

-

169

3

140

2

-

-

-

-

-

399

-

408

-

-

-

-

-

98

-

99

-

-

-

-

Trading securities
Derivative financial instruments
Current tax assets

Due from related entities
Investments backing insurance policy
liabilities
Insurance policy assets
Investments in subsidiaries andassociates
Other assets

673

62

536

60

1

-

-

-

Deferred tax assets

-

36

-

92

-

6

-

8

Premises and equipment

-

376

-

323

-

-

-

-

Goodwill and other intangible assets

-

3,448

-

3,502

-

-

-

-

54,60875,23958,807

72,168

893

8,837

861

8,937

Due to other financial institutions

3,772

6,099

3,991

7,021

2,273

6,099

2,407

6,866

Deposits and other borrowings
Due to the Immediate Parent
Company

75,142

2,554

70,793

2,859

-

-

-

-

1,766

-

1,766

-

-

-

-

-

Derivative financial instruments

11,208-14,085

-

1,021

-

222

-

1,393

80

1,342

246

42

-

57

-

-

-

-

-

18

-

19

-

137

92

240

99

-

-

-

-

4,251

12,156

4,089

14,099

-

-

-

-

-

1,442

-

1,168

-

-

-

-

97,66922,42396,30625,492

3,354

6,099

2,705

6,866

Total assets
Liabilities

Payables and other liabilities
Current tax liabilities
Provisions
Bonds and notes
Loan capital
Total liabilities

Assets and liabilities are classified as current if:•
it is expected they will be realised, consumed or settled in the normal operating cycle or within twelve months after
the end of the reporting date; or•they are held primarily for trading; or•they are assets that are cash or a cash equivalent; or•they are liabilities where there is no unconditional right to defer settlement for at least twelve months.
Non-current assets include premises and equipment and intangible assets as well as financial assets of a long-term
nature. Non-current liabilities include financial and non-financial liabilities which are expected to be settled after twelve
months from balance date.
For the purposes of this disclosure, the fair value of both trading and hedging derivatives has been classified as current.
For more information on the contractual timing of expected outflows and inflows in relation to hedging derivatives refer toNote 29.

Australia and New Zealand Banking Group Limited - New Zealand Branch

36

Notes to the Financial Statements
27. Share Capital and Initial Head Office Account
ANZ New Zealand
30/09/2013

NZ Branch

30/09/2012

30/09/2013

30/09/2012

Issued share capital
Number of shares

Ordinary shares at beginning and end of the year

381,655,112

381,655,112--

Redeemable preference shares at beginning and end of the year

4,005,295,229

4,005,295,229--

Total number of issued shares

4,386,950,341

4,386,950,341--

Ordinary share capital at beginning and end of the year
Redeemable preference share capital at beginning and end of the
year

1,453

1,453

-

-

4,960

4,960

-

-

Paid in share capital at end of the year

6,413

6,413

-

-

11

11

11

11

6,424

6,424

11

11

Share capital & initial head office account$ millions

Initial head office accountTotal share capital & initial head office account at end of the year

Ordinary shares
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. On ashow of hands every member who is present at a meeting in person or by proxy or by representative is entitled to one
vote, and upon a poll every member shall have one vote for each share held.
During the year ended 30 September 2013 ANZ Holdings (New Zealand) Limited (“ANZH”) paid an ordinary dividend of$720 million (30/09/2012 $400 million) to the Immediate Parent Company (equivalent to $1.89 (30/09/2012 $1.05) per
share).
Redeemable preference shares
All redeemable preference shares (“RPS”) were issued by ANZH to members of the Overseas Banking Group. RPS carry no
voting rights and are redeemable by ANZH providing notice in writing to holders of the RPS. Dividends are payable at thediscretion of the directors of ANZH and are non-cumulative.
There are five classes of RPS, relating to issues in 1988, 2005, 2007, 2008 and 2009. During the year ended 30
September 2013 ANZH did not pay any dividends on RPS. (30/09/2012 ANZH paid $85 million of dividends on the 2007
class of RPS (equivalent to $0.04 per share)).
In a liquidation, holders of RPS are entitled to available subscribed capital per share, pari passu with all holders of existing
RPS but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of
profits or assets.
Head office account
The head office account comprises funds provided by the Ultimate Parent Bank. It is non-interest bearing and there is no
fixed date of repayment.

Australia and New Zealand Banking Group Limited - New Zealand Branch

37

Notes to the Financial Statements
28. Capital Adequacy
Capital management policies
ANZ New Zealand’s core capital objectives are to:•Protect the interests of depositors, creditors and shareholders;•
Ensure the safety and soundness of ANZ New Zealand’s capital position; and•Ensure that the capital base supports ANZ New Zealand’s risk appetite, and strategic business objectives, in an
efficient and effective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting,monitoring and obtaining assurance for ANZ New Zealand’s Internal Capital Adequacy Assessment Process (“ICAAP”)
policy and framework; standardised risk definitions for all material risks; materiality thresholds; capital adequacy targets;internal economic risk capital principles; and risk appetite.
ANZ New Zealand has minimum and trigger levels for common equity tier one, tier one and total capital that ensuresufficient capital is maintained to:•
Meet minimum prudential requirements imposed by regulators;•
Ensure consistency with ANZ New Zealand’s overall risk profile and financial positions, taking into account its strategic
focus and business plan; and•Support the economic risk capital requirements of the business.
ANZ New Zealand’s Asset & Liability Committee and its related Capital Management Forum are responsible for developing,
implementing and maintaining ANZ New Zealand's ICAAP framework, including ongoing monitoring, reporting andcompliance. ANZ New Zealand’s ICAAP is subject to independent and periodic review conducted by Internal Audit.
ANZ New Zealand has complied with all externally imposed capital requirements to which it is subject during the current
and comparative periods.
Adoption of Basel III capital framework
Effective 1 January 2013, APRA has adopted the majority of Basel III capital reforms in Australia. The Basel III reforms
include: increased capital deductions from common equity tier one capital, an increase in capitalisation rates (including
prescribed minimum capital buffers, fully effective 1 January 2016), tighter requirements around new tier one and tier two
securities and transitional arrangements for existing tier one and tier two securities that do not conform to the new
regulations. Other changes include capital requirements for counterparty credit risk and an increase in the asset value
correlation with respect to exposures to large and unregulated financial institutions.

Common equity tier one capital

Overseas Banking Group

Ultimate Parent Bank
(Extended Licensed Entity)

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Basel III

Basel III

Basel III

Basel II

8.5%

8.0%

8.5%

n/a

Tier one capital

10.4%

9.7%

10.6%

11.4%

Total capital

12.2%

11.7%

12.5%

12.7%

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has
accredited the Overseas Banking Group to use the Advanced Internal Ratings Based methodology for calculation of credit
risk weighted assets and the Advanced Measurement Approach for the operational risk weighted asset equivalent.
Under prudential regulations, the Overseas Banking Group is required to maintain Prudential Capital Requirements("PCRs"), which are at least equal to that specified under Basel III (previously Basel II), as determined by APRA. The
Overseas Banking Group exceeded the PCRs set by APRA as at 30 September 2013 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2013. The
Overseas Banking Group’s Pillar 3 disclosure document for the year ended 30 September 2013, in accordance with APS
330: Public Disclosure of Prudential Information, discloses capital adequacy ratios and other prudential information. This
document can be accessed at the website anz.com.

Australia and New Zealand Banking Group Limited - New Zealand Branch

38

Notes to the Financial Statements
Market risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B. The peak
end-of-day market risk exposures are for the half-year ended 30 September 2013.
ANZ New Zealand
30/09/2013 (Unaudited)

Interest rate risk

Implied risk weighted exposure
Period end
Peak
$m
$m

Aggregate capital charge
Period end
Peak
$m
$m

Peak
occurred on

3,633

5,299

291

424

1/07/2013

37

98

3

8

16/08/2013

2

2

-

-

1/04/2013

Foreign currency risk
Equity risk

3,672

294

Retail mortgages by loan-to-valuation ratio (“LVR”)
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by ANZ
New Zealand's valuation of the security property at origination of the exposure. Off-balance sheet exposures include
undrawn and partially undrawn residential mortgage loans as well as commitments to lend. Commitments to lend areformal offers for housing lending which have been accepted by the customer.
Unaudited 30/09/2013

On-balancesheet

Off-balance
sheet

Total

0% - 59%

19,761

3,103

22,86460% - 69%

9,330

780

10,11070% - 79%

14,044975

15,019Less than 80%$ millions

LVR range

43,135

4,858

47,99380% - 89%

8,654

481

9,135

Over 90%

4,792

364

5,156

56,581

5,703

62,284

Total

Reconciliation of mortgage related amounts
ANZ New ZealandUnaudited$ millions

Note

30/09/2013

Term loans - housing

13

58,849Plus: short-term housing loans classified as overdrafts

499

Less: housing loans made to corporate customers
On-balance sheet retail mortgage exposures / Gross retail mortgage loans(2,767)29

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

56,581
5,703

28

62,284

Australia and New Zealand Banking Group Limited - New Zealand Branch

39

Notes to the Financial Statements
29. Financial Risk Management
Strategy in using financial instruments
Financial instruments are fundamental to ANZ New
Zealand’s business, constituting the core element of its
operations.
Accordingly, the risks associated withfinancial instruments are a significant component of therisks faced by ANZ New Zealand. Financial instruments
create, modify or reduce the credit, market and liquidity
risks of ANZ New Zealand’s balance sheet. ANZ New
Zealand’s overall risk management programme focuseson the unpredictability of financial markets and seeks tominimise potential adverse effects on the financial
performance of ANZ New Zealand.
The risk management and policy control framework
applicable to the entities comprising ANZ New Zealandhas been set by the Board and Risk Committee of the
Bank or the Ultimate Parent Bank, as appropriate.
Likewise oversight and monitoring of material risk
exposures of ANZ New Zealand is undertaken by the
Risk Management functions of the Bank and also the
Ultimate Parent Bank.
Throughout this document,
references to the Risk Management of the operations
within the entities comprising ANZ New Zealand,
implicitly involves oversight by both related entities.

Credit risk

principles and policies. The effectiveness of the credit
risk management framework is validated through thecompliance and monitoring processes.
Risk Management's responsibilities for credit risk policy
and management are executed through dedicateddepartments, which support the business units.
Allmajor business unit credit decisions require approval
from both business writers and independent risk
personnel.
Credit risk is controlled through a combination of
approvals, limits, reviews and monitoring proceduresthat are carried out on a regular basis, the frequency ofwhich is dependent upon the level of risk. For the key
operating entities within ANZ New Zealand, credit risk
policy and management is executed through the Chief
Risk Officer, who is responsible for various dedicatedareas within the Risk Management division. A formal
outsourcing agreement provides for credit risk functions
to be provided to a number of ANZ New Zealand entities
by staff of the Bank.
The credit risk review function within Global Internal
Audit also provides a further independent checkmechanism to ensure the quality of credit decisions.
This includes providing independent periodic checks on
asset quality and compliance with the agreed standards
and policies across ANZ New Zealand.

Credit risk is the risk of financial loss fromcounterparties being unable to fulfil their contractual
obligations. ANZ New Zealand assumes credit risk in awide range of lending and other activities in diverse
markets and many jurisdictions. Credit risks arise not
only from traditional lending to customers, but also frominter-bank, treasury, international trade and capital
market activities around the world.

Country risk management

ANZ New Zealand has an overall lending objective ofsound growth for appropriate returns. The credit risk
objectives of ANZ New Zealand are set by each Boardand are implemented and monitored within a tiered
structure of delegated authority, designed to oversee
multiple facets of credit risk, including business writing
strategies, credit policies/controls, single exposures,
portfolio monitoring and risk concentrations.

Country ratings are assigned to each country where ANZ
New Zealand incurs country risk and have a direct
bearing on ANZ New Zealand's risk appetite for eachcountry. The country rating is determined through adefined methodology based around external ratings
agencies’ ratings and internal specialist opinion. It isalso a key risk consideration in ANZ New Zealand's
capital pricing model for cross border flows.

Credit risk management

The recording of country limits provides ANZ New
Zealand with a means to identify and control countryrisk. Country limits ensure that there is a country-bycountry ceiling on exposures that involve country risk.
They are recorded by time to maturity and purpose of
exposure, e.g., trade, markets and project finance.
Country limits are managed centrally by the Ultimate
Parent Bank, through a global country risk exposure
management system managed by a specialist unit within
Institutional Risk.

A credit risk management framework is in place across
ANZ New Zealand with the aim of ensuring a structured
and disciplined approach is maintained in achieving theobjectives set by each Board. The framework focuses onpolicies, people, skills, controls, risk concentrations andportfolio balance. It is supported by portfolio analysis
and business-writing strategies, which guide lending
decisions and identify segments of the portfolio requiring
attention.
The effectiveness of the framework ismonitored through a series of compliance and reporting
processes.
An independent Risk Management function is staffed byrisk specialists. In regard to credit risk management,
the objective is for Risk Management to provide robust
credit policies, to make independent credit decisions,and to provide strong support to front line staff in theapplication of sound credit practices. In addition toproviding independent credit assessment on lending
decisions, Risk Management also performs key roles in
portfolio management by development and validation of
credit risk measurement systems, loan asset quality
reporting, and development of credit standards andpolicies.
The credit risk management framework is top down. The
framework is defined by ANZ New Zealand's credit

Some customer credit risks involve country risk,
whereby actions or events at a national or international
level could disrupt servicing of commitments. Country
risk arises when payment or discharge of an obligation
will, or could, involve the flow of funds from one country
to another or involve transactions in a currency otherthan the domestic currency of the relevant country.

Portfolio stress testing
Stress testing is integral to strengthening the predictive
approach to Risk Management and is a key component
to managing risk appetite and business writing
strategies. It creates greater understanding of impacts
on financial performance through modelling relationships
and sensitivities between geographic, industry andbusiness unit exposures under a range of macro
economic scenarios.
The Ultimate Parent Bank has a dedicated stress testingteam that assists business and risk executives in ANZ
New Zealand to model and report periodically to
management and the Board Risk Committee on a rangeof scenarios and stress tests.
Portfolio analysis and reportingAustralia and New Zealand Banking Group Limited - New Zealand Branch

40

Notes to the Financial Statements
Credit portfolios are actively monitored at each layer ofthe risk structure to ensure credit deterioration isquicklydetected
andmitigatedthroughtheimplementation of remediation strategies.
Businesses incurring credit risk undertake regular andcomprehensive analysis of their credit portfolios. Issue
identification
andadherence
toperformancebenchmarks are reported to Risk Management andbusiness executives through a series of reports including
monthly ‘asset quality’ reporting.
This process isundertaken by or overseen by Risk Management
ensuring an efficient and independent conduit exists to
identify and communicate emerging credit issues to ANZ
New Zealand executives and each Board.
Collateral management
ANZ New Zealand credit principles specify lending only
what the counterparty has the capacity and ability to
repay and ANZ New Zealand sets limits on theacceptable level of credit risk. Acceptance of credit risk
is firstly based on the counterparty’s assessed capacity
to meet contractual obligations (i.e., interest and capital
repayments).
Obtaining collateral is only used tomitigate credit risk. Procedures are designed to ensurecollateralismanaged,legally
enforceable,
conservatively valued and adequately insured whereappropriate. ANZ New Zealand policy sets out the typesof acceptable collateral, including:
•
Cash;
•
Mortgages over property;•
Charges over business assets, e.g., premises,
stock and debtors;•
Charges over financial instruments, e.g., debt
securities and equities in support of trading
facilities; and•Financial guarantees.
In the event of customer default, any loan security is
usually held as mortgagee in possession while action istaken to realise it. Therefore ANZ New Zealand does not
usually hold any real estate or other assets acquired
through the enforcement of security.
ANZ New Zealand uses ISDA Master Agreements to
document derivatives' activities to limit exposure tocredit losses. The credit risk is reduced by a masteragreement to the extent that, if an event of default
occurs, all contracts with the counterparty are
terminated and settled on a net basis. Further, it is ANZ
New Zealand's preferred practice to include all products
covered by the ISDA in the Credit Support Annex(“CSA”) in order to achieve further credit exposure
reduction. Under a CSA, collateral is passed between
the parties, depending on the aggregate mark-tomarket (positive or negative) of derivative trades
between the two entities, to mitigate the market
contingent counterparty risk inherent in the outstanding
positions.
Concentrations of credit risk
Concentrations of credit risk arise when a number ofcustomers are engaged in similar business activities or
activities within the same geographic region, or when
they have similar risk characteristics that would cause
their ability to meet contractual obligations to be
similarly affected by changes in economic or otherconditions.
ANZ New Zealand monitors its portfolios to identify andassess risk concentrations.
Concentration limits areused to guard against large single customer orcorrelated credit risks. Risk Management, Business Unit
executives and senior management monitor large
exposure concentrations through a monthly list of ANZ

New Zealand's top corporate exposures. The ANZ Credit
and Market Risk Committee and Board Risk Committee
regularly review a comprehensive list of single customer
concentration limits and customers’ adherence to theselimits.
Analyses of financial assets by industry sector are basedon Australian and New Zealand Standard Industrial
Classification (“ANZSIC”) codes.

Australia and New Zealand Banking Group Limited - New Zealand Branch

41

Notes to the Financial Statements
Concentrations of credit risk analysis
ANZ New Zealand$ millions
30/09/2013

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

Derivative
financial
instruments

Net loans andadvancesOtherfinancialassetsCredit related
commitments
3

Total

18,843

Industry
Agriculture

1

29

22

17,46993

1,229

Forestry, fishing and mining

14

-

11

926

5

894

1,850

Business and property services

23

1

24

8,881

47

2,363

11,339Construction

-

-

-

1,035

6

709

1,750

Entertainment, leisure and tourism

-

-

27

1,033

5

326

1,391

Finance and insurance

2,156

5,120

8,576

839

339

1,267

18,297

Government and local authority 1

9,912

1,533

5,872

248

1,230

7

1,022

Manufacturing

54

-

69

2,917

16

1,996

5,052

Personal lending

-

-

-

60,675274

11,86572,814Retail trade

102

-

40

1,719

9

991

2,861

Transport and storage

19

3

54

1,454

8

610

2,148

Wholesale trade

88

-

13

1,227

7

1,369

2,704

Other2

19

77

424

1,424

8

2,627

4,579

4,009

11,102

9,508

100,829

824

27,268

153,540

Provision for credit impairment

-

-

-

(849)

-

-

(849)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

(35)

-

-

(35)

-

-

-

(180)

-

-

(180)

4,009

11,102

9,508

99,765824

27,268152,476

3,998

7,683

2,491

97,393812

27,087

139,464

11

3,419

7,017

2,372

12

181

13,012

4,009

11,102

9,508

99,765824

27,268152,476

19,072

Total financial assets
Geography
New ZealandOverseas
Total financial assets

30/09/2012

Industry
Agriculture

-

-

60

17,343123

1,546

Forestry, fishing and mining

24

-

14

894

6

322

1,260

Business and property services

19

-

51

9,034

64

2,542

11,710Construction

-

-

2

1,017

7

1,035

2,061

Entertainment, leisure and tourism

-

-

41

1,166

8

483

1,698

Finance and insurance

2,383

3,696

11,278

501

36

1,099

18,993Government and local authority-

13,229

1,798

8,574

405

1,332

9

1,111

Manufacturing

43

6

98

2,915

21

2,509

5,592

Personal lending

-

-

-

56,729335

11,093

68,157Retail trade

28

6

43

1,774

13

1,102

2,966

Transport and storage

25

50

93

1,657

12

579

2,416

Wholesale trade

54

-

21

1,195

8

1,375

2,653

Other2

13

63

603

1,800

13

2,302

4,794

4,387

12,395

12,70997,357655

27,098

154,601

Provision for credit impairment

-

-

-

(1,081)--(1,081)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

34

-

-

34

-

-

-

(216)

-

-

(216)

4,387

12,395

12,70996,094655

27,098

153,338

3,871

10,524

3,440

94,154642

26,842

139,473

720

1,871

9,269

1,940

13

256

14,0694,591

12,395

12,70996,094655

27,098

153,542

Total financial assets
Geography
New ZealandOverseas
Total financial assets

Australia and New Zealand Banking Group Limited - New Zealand Branch

42

Notes to the Financial Statements
NZ Branch$ millions
30/09/2013

Liquid assets
and duefrom otherfinancial
institutions

Tradingsecurities
andavailableDerivative
for-salefinancialassets instruments

Net loansandadvances

Due from
relatedentities

Other Credit related
financial commitments
3
assets

Total

Industry
Agriculture

-

-

-

1

-

-

-

1

Business and property services

-

-

-

5

-

-

-

5

Construction

-

-

-

2

-

-

-

2

Entertainment, leisure and tourism

-

-

-

2

-

-

-

2

141

-

12

1

314

1

-

469

Government and local authority1

-

-

-

2

-

-

-

2

Manufacturing

-

-

-

1

-

-

-

1

Personal lending

-

-

-

9,257

-

-

54

9,311

Retail trade

-

-

-

2

-

-

-

2

Transport and storage

-

-

-

1

-

-

-

1

Other2

-

-

-

2

-

-

-

2

141

-

12

9,276

314

1

54

9,798

Provision for credit impairment

-

-

-

(23)

-

-

-

(23)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

(3)

-

-

-

(3)

-

-

-

6

-

-

-

6

141

-

12

9,256

314

1

54

9,778

Finance and insurance

Total financial assets
Geography
New Zealand

-

-

12

9,010

314

1

54

9,391

Overseas

141

-

-

246

-

-

-

387

Total financial assets

141

-

12

9,256

314

1

54

9,778

Agriculture

-

-

-

1

-

-

-

1

Business and property services

-

-

-

4

-

-

-

4

Construction

-

-

-

2

-

-

-

2

Entertainment, leisure and tourism

-

-

-

1

-

-

-

1

38

-

52

-

304

-

-

394

Government and local authority1

-

-

-

1

-

-

-

1

Personal lending

-

-

-

9,389

-

-

103

9,492

Retail trade

-

-

-

2

-

-

-

2

Other2

-

-

-

2

-

-

-

2

38

-

52

9,402

304

-

103

9,899

Provision for credit impairment

-

-

-

(27)

-

-

-

(27)

Fair value hedge adjustment
Unearned finance income anddeferred / capitalised fees

-

-

-

17

-

-

-

17

-

-

-

4

-

-

-

4

38

-

52

9,396

304

-

103

9,893

30/09/2012

Industry

Finance and insurance

Total financial assets
Geography
New Zealand

-

-

13

9,102

304

-

103

9,522

Overseas

38

-

39

294

-

-

-

371

Total financial assets

38

-

52

9,396

304

-

103

9,893

1
2
3

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications and personal services.
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.

Australia and New Zealand Banking Group Limited - New Zealand Branch

43

Notes to the Financial Statements
Maximum exposure to credit risk
The following table presents the maximum exposure to credit risk for on and off balance sheet financial instruments
before taking account of the financial effect of any collateral held or other credit enhancements, unless such collateralmeets the offsetting criteria in NZ IAS 32 Financial Instruments: Presentation.
The table also provides a quantification of the value of the financial charges ANZ New Zealand holds over a borrower’s
specific asset (or assets) where ANZ New Zealand is able to enforce the collateral in satisfying a debt in the event of theborrower failing to meet its contractual obligations. For the purposes of this disclosure, where the collateral held is valued
at more than the corresponding credit exposure, the financial effect is capped at the value of the credit exposure. In
respect of derivative financial instruments, the assessed collateral is the amount of cash collateral received and does notinclude the effect of any netting arrangements under ISDAs.
The most common types of collateral include:•
Security over real estate including residential, commercial, industrial and rural property;•
Cash deposits; and•Other security over business assets including specific plant and equipment, inventory and accounts receivables.
ANZ New Zealand also manages its credit risk by accepting other types of collateral such as guarantees and security
interests over the assets of a customer’s business. The assignable value of such credit mitigants is less certain and theirfinancial effect has not been quantified for disclosure purposes. Credit exposures shown as not fully secured may benefit
from such credit mitigants.
ANZ New Zealand$ millions
30/09/2013

Maximum
exposure tocredit risk

NZ Branch

UnsecuredFinancial effect portion of creditof collateralexposure

Maximum
exposure tocredit risk

UnsecuredFinancial effect portion of creditof collateralexposure

On and off-balance sheet positions
Liquid assets

2,298

55

2,243

-

-

-

Due from other financial institutions

1,711

348

1,363

141

-

141

10,320-

10,320

-

-

-

9,508

438

9,070

12

-

12

Trading securities
Derivative financial instruments
Available-for-sale assets

782

-

782

-

-

-

Net loans and advances

99,76590,612

9,153

9,256

9,227

29

Due from related entities

-

-

-

314

-

314

824

490

334

1

-

1

Credit related commitments

27,26812,824

14,44454

54-

Total exposure to credit risk

152,476

104,767

47,709

9,778

9,281

497

Liquid assets

2,627

325

2,302

-

-

-

Due from other financial institutions

1,760

270

1,490

38

-

38

Trading securities

12,338-12,338---Derivative financial instruments

12,709257

12,452

52-

52

Other financial assets

30/09/2012

On and off-balance sheet positions

Available-for-sale assets

54

-

54

-

-

-

Net loans and advances

96,09487,779

8,315

9,396

9,318

78

Due from related entities

-

-

-

304

-

304

655

351

304

-

-

-

Credit related commitments

27,09812,41014,688

103

103

-

Total exposure to credit risk

153,335

101,392

51,943

9,893

9,421

472

Other financial assets

Credit quality
A core component of ANZ New Zealand’s credit risk
management capability is the risk grading frameworkused across all major business units. A set of risk
grading principles and policies is supported by acomplementaryrisk
grading
methodology.
Pronouncements by the International Basel Committeeon Banking Supervision have been encapsulated in theseprinciples and policies including governance, validationand modelling requirements.
ANZ New Zealand’s risk grade profile changes
dynamically through new counterparty lending andexisting counterparty movements in either risk orvolume. All counterparty risk grades are subject tofrequent review, including statistical and behaviouralreviews in consumer and small business segments, andindividual counterparty reviews in segments with larger
single name borrowers.
Impairment and provisioning of financial assets
ANZ New Zealand's policy relating to the recognition andmeasurement of impaired assets conforms to the
RBNZ's guidelines.
Loans are classified as either performing or impaired.
Impaired assets are credit exposures where: there isdoubt as to whether the full contractual amount(including interest) will be received; a material credit
obligation is 90 days past due but not well secured; they
are portfolio managed and can be held for up to 180
days past due; or concessional terms have been
provided due to the financial difficulties of the customer.

Australia and New Zealand Banking Group Limited - New Zealand Branch

44

Notes to the Financial Statements
An exposure is classified as past due but not impaired(less than 90 days) where the value of collateral issufficient to repay both the principal debt and all otherpotential interest and there is no concern as to thecreditworthiness of the counterparty in question.

The provision for credit impairment represents
management’s best estimate of the losses incurred in
the loan portfolio at balance date based on its
experienced judgement.
Distribution of gross loans and advances assets bycredit quality

The past due but not impaired (over 90 days)
classification applies where contractual payments are
past due by 90 days or more, or where the facility
remains outside of contractual arrangements for 90 or
more consecutive days, but ANZ New Zealand believes
that impairment is not appropriate on the basis of thelevel of security/collateral available, or the facility is
portfolio managed.

The credit quality of the portfolio of loans and advances
is assessed by reference to ANZ New Zealand’s risk
grading principles and policies supported by acomplementary risk grading methodology.

Distribution by asset class of gross loans and advances by credit quality
ANZ New Zealand$ millions

Retail Other retailmortgages
exposures

NZ BranchNon-retail
exposures

Total

Retail Other retailmortgages
exposures

Non-retail
exposures

Total

30/09/2013

Strong risk rating

45,713

1,342

20,69767,752

7,614

-

-

7,614

8,866

2,519

15,757

27,142

1,316

-

-

1,316

873

326

1,792

2,991

152

-

-

152

55,452

4,187

38,246

97,885

9,082

-

-

9,082

1 to 5 days

356

138

477

971

29

-

-

29

6 to 29 days

246

94

148

488

69

-

-

69

1 to 29 days

602

232

625

1,459

98

-

-

98

30 to 59 days

141

38

57

236

30

-

-

30

60 to 89 days

64

19

13

96

15

-

-

15

108

40

76

224

16

-

-

16

Total past due but not impaired

915

329

771

2,015

159

-

-

159

Total impaired assets

214

49

666

929

35

-

-

35

56,581

4,565

39,683

100,829

9,276

-

-

9,276

Strong risk rating

40,4001,140

19,99461,534

7,141

-

-

7,141

Satisfactory risk rating
Substandard but not past due or
impaired

10,3352,466

15,59028,391

1,700

-

-

1,700

1,129

408

2,118

3,655

238

-

-

238

Total neither past due nor impaired

51,864

4,014

37,702

93,580

9,079

-

-

9,079

1 to 5 days

386

139

458

983

60

-

-

60

6 to 29 days

522

92

181

795

159

-

-

159

1 to 29 days

908

231

639

1,778

219

-

-

219

30 to 59 days

164

32

67

263

37

-

-

37

60 to 89 days

60

17

28

105

12

-

-

12

90 days and over

107

33

86

226

16

-

-

16

1,239

313

820

2,372

284

-

-

284

352

44

1,009

1,405

39

-

-

39

53,455

4,371

39,531

97,357

9,402

-

-

9,402

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

90 days and over

Gross loans and advances
30/09/2012

Past due but not impaired:

Total past due but not impaired
Total impaired assets
Gross loans and advances

Australia and New Zealand Banking Group Limited - New Zealand Branch

45

Notes to the Financial Statements
Credit quality of gross loans and advances neither
past due nor impaired
The credit quality of financial assets is assessed by ANZ
New Zealand using internal ratings which aim to reflect
the relative ability of counterparties to fulfil, on time,
their credit-related obligations, and is based on theircurrent probability of default.
Internal ratings
Strongrisk
rating
Corporate
customers
demonstrating superior stability in their operating andfinancial performance over the long-term, and whosedebt servicing capacity is not significantly vulnerable toforeseeable events. Retail customers with low expected
loss. This rating band broadly corresponds to ratings“Aaa” to “Ba1” and “AAA” to “BB+” of Moody's InvestorsService and Standard & Poor's respectively.
Satisfactory risk rating - Corporate customers
consistently demonstrating sound operational andfinancial stability over the medium to long term, eventhough some may be susceptible to cyclical trends orvariability in earnings. Retail customers with moderate
expected loss. This rating band broadly corresponds toratings “Ba2” to “B1” and “BB” to “B+” of Moody's
Investors Service and Standard & Poor's respectively.
Substandard but not past due or impaired Corporate customers demonstrating some operationaland financial instability, with variability and uncertainty
in profitability and liquidity projected to continue overthe short and possibly medium term. Retail customers
with higher expected loss. This rating band broadly
corresponds to ratings “B2” to “Caa” and “B” to “CCC” of
Moody's Investors Service and Standard & Poor's
respectively.
Movements in the rating categories between balancedates are due to both changes in the underlying internalratings applied to customers and to new loans written orloans rolling off.
Credit quality of financial assets that are past due
but not impaired
Ageing analysis of past due loans is used by ANZ New
Zealand to measure and manage credit quality. Financial
assets that are past due but not impaired include those:•
Assessed, approved and managed on a portfolio
basis within a centralised environment (forexample, credit cards and personal loans);•
Held on a productive basis until they are 180 days
past due; and•Managed on an individual basis.
A large portion of retail credit exposures, such as
residential mortgages, are generally well secured. Thatis, the fair value of associated security is sufficient toensure that ANZ New Zealand will recover the entire
amount owing over the life of the facility and there isreasonable assurance that collection efforts will result inpayment of the amounts due in a timely manner.

Market risk
Market risk is the risk to ANZ New Zealand’s earnings
arising from changes in interest rates, currency
exchange rates, credit spreads, or from fluctuations inbond, commodity or equity prices.
Market risk isgenerated through both trading activities and theinterest rate risk inherent in the banking book.
ANZ New Zealand conducts trading operations ininterest rates, foreign exchange, commodities and debt
securities.
Trading operations largely focus on

supporting customer hedging and investing activities,
rather than outright proprietary trading. A medium
market risk appetite has been set for ANZ New Zealand,
which is reflected in its low/moderate market risk limit
framework.
ANZ New Zealand has a detailed risk management andcontrol framework to support its trading and balance
sheet management activities.
The framework
incorporates a risk measurement approach to quantify
the magnitude of market risk within trading and balance
sheet portfolios. This approach, and related analysis,
identifies the range of possible outcomes that can be
expected over a given period of time, establishes therelative likelihood of those outcomes and allocates anappropriate amount of capital to support these activities.
Marketrisk
responsibilities

management

andcontrol

The Board Risk Committee has delegated responsibility
for the oversight of market risk to the Asset & Liability
Committee (“ALCO”), chaired by the Chief Financial
Officer of the Bank. ALCO are required to ensure thatmarket risk exposure across Traded and Non-Traded
portfolios remains within the risk appetite specified by
the Board Risk Committee.
ALCO receive regular
reporting on a range of trading and balance sheet
market risk exposures.
The Risk Management division of ANZ New Zealand,through the Chief Risk Officer, is responsible for the
day-to-day oversight of market risk. This includes theimplementation of a comprehensive limit and policy
framework to control the amount of risk that the
Banking Group will accept.
Market risk limits areallocated at various levels and are reported andmonitored on a daily basis.
The detailed limit
framework allocates individual limits to manage andcontrol asset classes (e.g., interest rates, foreignexchange), risk factors (e.g., interest rates, volatilities)
and profit and loss limits (to monitor and manage theperformance of the trading portfolios).
Additional oversight and monitoring of material risk
exposures of ANZ New Zealand is undertaken by the
Risk Management functions of the Ultimate Parent Bank.
Within overall strategies and policies, the control ofmarket risk is the joint responsibility of business units
and Risk Management, with the delegation of market
risk limits from the Board Risk Committee to both Risk
Management and the business units.
These risks are monitored daily against a comprehensive
limit framework that includes Value at Risk, aggregate
market position and sensitivity, product and geographic
thresholds.
To facilitate the management, control,
measurements and reporting of market risk, ANZ New
Zealand has grouped market risk into two broad
categories:a.

Traded market riskThis is the risk of loss from changes in the value offinancial instruments due to movements in price factors
for both physical and derivative trading positions. Theyarise in trading transactions where ANZ New Zealandacts as principal with clients or with the market. The
principal risk categories monitored are:•

Currency risk is the potential loss arising from thedecline in the value of a financial instrument due
to changes in foreign exchange rates or theirimplied volatilities.

•

Interest rate risk is the potential loss arising fromthe change in the value of a financial instrument

Australia and New Zealand Banking Group Limited - New Zealand Branch

46

Notes to the Financial Statements
due to changes in market interest rates or theirimplied volatilities.
•b.

Credit spread risk is the potential loss arising froma change in value of an instrument due to amovement of its margin or spread relative to abench mark.
Non-traded market risk (or balance sheet risk)This comprises the management of non-traded interest
rate risk, liquidity, and the risk to capital and earnings
as a result of movements in market rates.
Some instruments do not fall into either category but
also expose ANZ New Zealand to market risk. These
include equity securities classified as available-for-sale.
Regular reviews are performed to substantiate thevaluation of these types of instruments.
In all trading areas ANZ New Zealand has implemented
models that calculate Value at Risk (“VaR”) exposures,monitor risk exposures against defined limits on a daily
basis, and “stress test” trading portfolios.
VaR measure
A key measure of market risk is VaR. VaR is a statisticalestimate of the likely daily loss and is based on historicalmarket movements.

estimate on any given day. Conversely there is 1%
probability of the decrease in market value exceeding
the VaR estimate on any given day.
ANZ New Zealand’s standard VaR approach for bothtraded and non-traded risk is historical simulation. ANZ
New Zealand calculates VaR using historical changes inmarket rates and prices over the previous 500 businessdays. Traded and Non-Traded VaR is calculated using a
one-day holding period.
It should be noted that because VaR is driven by actual
historical observations, it is not an estimate of the
maximum loss that ANZ New Zealand could experiencefrom an extreme market event. As a result of thislimitation, ANZ New Zealand utilises a number of otherrisk measures (e.g. stress testing) and associateddetailed control limits to measure and manage market
risk.
During the 2012 financial year, ANZ New Zealand
moved to monitoring Traded and Non-Traded VaR at the
99% confidence level only, having previously also used
a 97.5% confidence level, as the 99% confidence levelencompasses a wider range of potential outcomes. NonTraded VaR at the 99% confidence level was notdisclosed previously, so the comparative figures havebeen restated accordingly.

The confidence level is such that there is a 99%
probability that the loss will not exceed the VaR
Traded market risks
ANZ New Zealand$ millions

Value at risk at 99% confidenceHigh forLow for
Period end
year
year

Average foryear

30/09/2013

Foreign exchange risk

0.3

1.4

-

0.3

Interest rate risk
Credit spread risk

2.1
0.4

3.7
1.0

1.1
0.2

2.3
0.4

(0.8)

n/a

n/a

(0.7)

2.0

4.1

1.2

2.3

Foreign exchange risk

0.2

1.4

0.2

0.4

Interest rate risk
Credit spread risk

2.7
0.4

6.4
1.2

1.6
0.2

3.6
0.7

Diversification benefit

(0.7)

n/a

n/a

(1.2)

Total VaR

2.6

6.3

1.5

3.5

Diversification benefit
Total VaR
30/09/2012

Traded market risk VaR is calculated separately for foreign exchange and for interest rate/debt markets businesses as well
as for ANZ New Zealand. The diversification benefit reflects the historical correlation between foreign exchange, interest
rate and debt markets.
To supplement the VaR methodology, ANZ New Zealand applies a wide range of stress tests, both on individual portfolios
and at ANZ New Zealand level. ANZ New Zealand's stress-testing regime provides senior management with anassessment of the financial impact of identified extreme events on market risk exposures of ANZ New Zealand.
Non-traded market risk (or balance sheet risk)
The principal objectives of balance sheet management are to manage net interest income sensitivity while maintaining
acceptable levels of interest rate and liquidity risk and to manage the market value of ANZ New Zealand’s capital.
Liquidity risk is dealt with in the next section.

Australia and New Zealand Banking Group Limited - New Zealand Branch

47

Notes to the Financial Statements
Interest rate risk
The objective of balance sheet interest rate risk management is to mitigate the negative impact of movements inwholesale interest rates on the earnings of ANZ New Zealand's banking book. Non-traded interest rate risk relates to thepotential adverse impact to earnings from changes in market interest rates. This risk arises from two principal sources:
mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital and othernon-interest bearing liabilities in interest bearing assets.
As part of normal business activity ANZ New Zealand has additional risks from fixed rate mortgage prepayments and basis
risk:•
Prepayment risk is the potential risk to earnings or market value from when a customer prepays all or part of a fixed
rate mortgage and where any customer fee charged is not sufficient to offset the loss in value to ANZ New Zealand of
this financial asset due to movements in interest rates and other pricing factors. As far as possible the true economic
cost is passed through to customers in line with their terms and conditions and relevant legislation.
•
Basis risk is the potential risk to earnings or market value from differences between customer pricing and wholesalemarket pricing. This is managed through active review of product margins.
Non-traded interest rate risk is managed to both value and earnings at risk limits. Interest rate risk is reported using
three measures: VaR; scenario analysis (to a 1% shock); and interest rate sensitivity gap. This treatment excludes theeffect of prepayment and basis risk.
a.

Non-traded interest rate risk VaR
ANZ New Zealand$ millions

High forLow for

Average for

Period end

year

year

year

9.1

14.2

7.7

11.1

10.7

15.5

8.8

11.2

30/09/2013

Value at risk at 99% confidence
30/09/2012

Value at risk at 99% confidenceb.

Scenario analysis – A 1% shock on the next 12 months’ net interest income

A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest
income over the succeeding 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and comparative periods –expressed as a percentage of reported net interest income. The sign indicates the nature of the rate sensitivity with apositive number signifying that a rate increase is positive for net interest income over the next 12 months. Conversely, anegative number signifies that a rate increase is negative for the next 12 months’ net interest income.
ANZ New Zealand
30/09/2013

30/09/2012

Period end

1.0%

1.0%

Maximum exposure

2.1%

2.3%

Minimum exposure

0.5%

0.8%

Average exposure (in absolute terms)

1.3%

1.7%

Impact of 1% rate shock

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities at any
point has implications for future net interest income.
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about ANZ New Zealand's exposure to interest rate risk.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding
liability funding. These mismatches are managed within policy guidelines for mismatch positions.
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet
instruments by showing the periods in which these instruments may reprice (that is, when interest rates applicable toeach asset or liability can be changed).
The repricing gaps are based upon contractual repricing.

Australia and New Zealand Banking Group Limited - New Zealand Branch

48

Notes to the Financial Statements
ANZ New Zealand$ millions
30/09/2013

Total

Less than
3 months

3 to 6months6 to 12months1 to 2years

Beyond2 years

Not bearing
interest

Liquid assets

2,496

2,136

-

-

-

-

360

Due from other financial institutions

1,711

1,567

-

-

-

-

144

10,320

1,235

455

606

3,105

4,919

-

9,508

-

-

-

-

-

9,508

AssetsTrading securities
Derivative financial instruments
Available-for-sale assets

782

177

234

23

250

96

2

Net loans and advances

99,76563,666

5,945

12,41012,221

6,079

(556)

Other financial assets

824

104

30

36

3

-

651

Total financial assets

125,406

68,885

6,664

13,075

15,579

11,094

10,109Liabilities
Due to other financial institutions

9,871

9,515

-

-

-

-

356

Deposits and other borrowings

77,696

51,966

9,419

8,231

1,437

1,117

5,526

Due to Immediate Parent Company

1,766

1,766

-

-

-

-

-

Derivative financial instruments

11,208

-

-

-

-

-

11,208

Bonds and notes

16,407

5,780

47

266

2,933

7,381

-

1,442

-

607

-

-

835

-

Other financial liabilities

996

44

-

-

-

126

826

Total financial liabilities

119,386

69,071

10,073

8,497

4,370

9,459

17,916

Hedging instruments-(1,881)

14,330(4,714)(10,828)

3,093-

Interest sensitivity gap

6,020(2,067)

10,921

(136)

381

4,728

(7,807)

Liquid assets

2,831

2,626

-

-

-

-

205

Due from other financial institutions

1,760

1,691

-

-

-

-

69

Trading securities

12,338

1,465

161

3,042

1,121

6,549

-

Derivative financial instruments

12,709

-

-

-

-

-

12,709Loan capital

30/09/2012

AssetsAvailable-for-sale assets

57

46

5

3

-

-

3

Net loans and advances

96,09470,228

3,651

7,847

10,242

4,746

(620)

Other financial assets

655

104

11

27

-

-

513

Total financial assets

126,444

76,1603,828

10,91911,363

11,295

12,879Due to other financial institutions

11,012

10,347

-

-

-

154

511

Deposits and other borrowings

73,65247,398

11,939

6,694

1,641

1,142

4,838

Due to Immediate Parent Company

1,766

1,766

-

-

-

-

-

Derivative financial instruments

14,085

-

-

-

-

-

14,085

Bonds and notes

18,188

6,311

-

2,495

1,152

8,230

-

Loan capital

1,168

-

333

835

-

-

-

Other financial liabilities

1,040

14

3

1

-

88

934

Total financial liabilities

120,91165,836

12,275

10,025

2,793

9,614

20,368

Hedging instruments

-

3,023

3,865

(10,360)

2,169

1,303

-

Interest sensitivity gap

5,533

13,347(4,582)(9,466)

10,7392,984(7,489)Liabilities

Australia and New Zealand Banking Group Limited - New Zealand Branch

49

Notes to the Financial Statements
NZ Branch
30/09/2013$ millions

Total

Less than
3 months

3 to 6months6 to 12months1 to 2years

Beyond2 years

Not bearing
interest

141

141

-

-

-

-

-

12

-

-

-

-

-

12

Net loans and advances

9,256

5,229

830

1,584

1,305

321

(13)

Due from related entities

314

-

-

-

-

-

314

Other financial assets

1

-

-

-

-

-

1

Total financial assets

9,724

5,370

830

1,584

1,305

321

314

Due to other financial institutions

8,372

8,372

-

-

-

-

-

Derivative financial instruments

1,021

-

-

-

-

-

1,021

Other financial liabilities

40

-

-

-

-

-

40

Total financial liabilities

9,433

8,372

-

-

-

-

1,061

Hedging instruments

-

3,811

(573)

(1,656)(1,261)(321)-

Interest sensitivity gap

291

809

257

(72)

44

-

(747)

Due from other financial institutions

38

38

-

-

-

-

-

Derivative financial instruments

52

-

-

-

-

-

52

Net loans and advances

9,396

6,285

507

1,029

1,275

316

(16)

Due from subsidiaries

304

-

-

-

-

-

304

Total financial assets

9,790

6,323

507

1,029

1,275

316

340

Due to other financial institutions

9,273

9,273

-

-

-

-

-

Derivative financial instruments

222

-

-

-

-

-

222

Other financial liabilities

55

-

-

-

-

-

55

Total financial liabilities

9,550

9,273

-

-

-

-

277

Hedging instruments

-

1,713

999

(1,183)(1,219)(310)-

Interest sensitivity gap

240(1,237)

1,506

(154)

56

6

63

AssetsDue from other financial institutions
Derivative financial instruments

Liabilities

30/09/2012

AssetsLiabilities

Equity price risk
The portfolio of financial assets classified as available-for-sale contains equity investment holdings held for longer term
strategic intentions. These equity investments are also subject to market risk which is not captured by the VaR measures
for traded and non-traded market risks. The fair value of these securities as at 30 September 2013 was $2 million(30/09/2012 $3 million). A 10 per cent reduction in the value of the available-for-sale equity securities would not bematerial.

Australia and New Zealand Banking Group Limited - New Zealand Branch

50

Notes to the Financial Statements
Foreign currency related risksThis risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes inforeign exchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk
arising from individual funding and other transactions is actively managed. The total amounts of unmatched foreign
currency assets and liabilities, and consequent foreign currency exposures arising from each class of financial asset andliability, whether recognised or unrecognised, within each currency are not material.
The net open position in each foreign currency represents the net on-balance sheet assets and liabilities in that foreign
currency aggregated with the net expected future cash flows from off-balance sheet purchases and sales from foreignexchange transactions in that foreign currency. The amounts are stated in New Zealand dollar equivalents translatedusing the spot exchange rates as at balance sheet date.
ANZ New Zealand$ millions

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

32

1

-

-

1

1

-

-

Japanese yen

(1)

1

-

-

Pound sterling

-

1

-

-

(1)

1

-

-

1

1

-

-

32

6

-

-

Net open position
Australian dollar
Euro

US dollar
Other
Total net open position

Australia and New Zealand Banking Group Limited - New Zealand Branch

51

Notes to the Financial Statements
Liquidity risk
Liquidity risk is the risk that ANZ New Zealand is unable
to meet its payment obligations as they fall due. The
timing mismatch of cash flows and the related liquidity
risk is inherent in all banking operations and is closely
monitored by ANZ New Zealand.
ANZ New Zealand’s liquidity and funding risks aregoverned by a detailed policy framework which isapproved by the Risk Committees of the Bank’s andUltimate Parent Bank’s Boards. The core objective of
ANZ New Zealand’s framework is to manage liquidity tomeet obligations as they fall due, without incurring
unacceptable losses.
Central to ANZ New Zealand’s liquidity risk management
approach is the establishment of a liquidity risk appetite
framework to which ANZ New Zealand must conform at
all times. The risk appetite for liquidity has been set as
low, and this objective is achieved by ANZ New Zealandmanaging liquidity risks within the boundaries of thefollowing requirements and principles:•
Maintaining the ability to meet all payment
obligations in the immediate term.
•
Ensuring the ability to meet “survival horizons”
under a range of ANZ New Zealand specific andgeneral market liquidity stress scenarios.
•
Maintaining strength in ANZ New Zealand’s balance
sheet structure to ensure long term resilience in
ANZ New Zealand’s liquidity and funding risk profile.
•
Limiting the potential earnings at risk associatedwith unexpected increases in funding costs or theliquidation of assets under stress.
•
Ensuring the liquidity management framework is
compatible with regulatory requirements.
•
Daily liquidity reporting and scenario analysis,
quantifying ANZ New Zealand’s positions.
•Targeting a diversified funding base, avoiding undue
concentrations by investor type, maturity, market
source and currency.
•
Holding a portfolio of high quality liquid assets toprotect against adverse funding conditions and tosupport day-to-day operations.
•
Establishing detailed contingency plans to coverdifferent liquidity crisis events.
Management of liquidity and funding risks are overseen
by ALCO.
Supervision and Regulation
The RBNZ requires the Bank to have a comprehensive
Board approved liquidity strategy defining: policy,
systems and procedures for measuring, assessing,reporting and managing domestic and foreign currency
liquidity. This also includes a formal contingency planfor dealing with a liquidity crisis. The Banking Group isrequired to meet one week and one month liquidity
mismatch ratios and a one year core funding ratio eachday.
Scenario Modelling
A key component of ANZ New Zealand’s liquidity
management framework is scenario modelling. Liquidity
is assessed under different scenarios, including “goingconcern”, “name-crisis” and various “survival horizons”.
“Going-concern”: reflects the normal behaviour ofcash flows in the ordinary course of business. ANZ New
Zealand must be able to meet all commitments andobligations under a going concern scenario, within ANZ
New Zealand’s normal funding capacity (‘available tofund’ limit), over at least the following 30 calendar days.
In estimating the funding requirement, ANZ New
Zealand models expected cash flows by reference tohistorical behaviour and contractual maturity data.

“Name-crisis”: refers to a potential name-specificliquidity crisis scenario which models the behaviour ofcash flows where there is a problem (real or perceived)
which may include, but is not limited to, operational
issues, doubts about the solvency of ANZ New Zealand,or adverse rating changes.
Under this scenario ANZ
New Zealand may have significant difficulty rolling overor replacing funding. Under the liquidity policy ANZ New
Zealand must be cash flow positive over an eight
calendar day period.
“Survival horizons”: The global financial crisis has
highlighted the importance of differentiating between
stressed and normal market conditions in a namespecific crisis and the different behaviour that offshoreand domestic wholesale funding markets can exhibit
during market stress events.
ANZ New Zealand has
linked its liquidity risk appetite to defined liquidity“survival horizons” (i.e. the time period under which
ANZ New Zealand must maintain a positive cash flow
position).
The following stressed scenarios aremodelled:•
Extreme Short Term Crisis Scenario: A namespecific stress during a period of market stress.
•
Short Term Crisis Scenario: A name-specific stressduring a period of normal markets conditions.
•Global Funding Market Disruption: Stressed global
wholesale funding markets leading to a closure ofdomestic and offshore markets.
•
Offshore Funding Market Disruption: Stressed global
wholesale funding markets leading to a closure ofoffshore markets only.
As of 30 September 2013 ANZ New Zealand was incompliance with all of the above scenarios.
Wholesale funding
ANZ New Zealand’s wholesale funding strategy isdesigned to deliver a sustainable portfolio of wholesale
funds that balances cost efficiency while targeting
diversification by markets, investors, currencies,
maturities and funding structures.
Short-term
wholesale funding requirements, with a contractual
maturity of less than one year, are managed throughthe Treasury and Markets operations.
Long-termwholesale funding is managed and executed throughTreasury operations.
ANZ New Zealand also uses maturity concentration
limits under the wholesale funding and liquidity
management framework. Maturity concentration limits
ensure that ANZ New Zealand does not become reliant
on issuing large volumes of new wholesale funding
within a short time period. Funding instruments used tomeet the wholesale borrowing requirement must be on apre-established list of approved products.
Funding capacity and debt issuance planning
ANZ New Zealand adopts a conservative approach todetermine its funding capacity. Funding capacity limits
are determined at the Ultimate Parent Bank level andallocated to individual sites based on their requirements.
Annually, a funding plan is approved by the Bank’s
Board. The plan is supplemented by monthly updates
and is linked to ANZ New Zealand’s three year strategicplanning cycle.

Australia and New Zealand Banking Group Limited - New Zealand Branch

52

Notes to the Financial Statements
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealandemploys funding metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including
customer liabilities, longer-dated wholesale debt (with remaining term exceeding one year) and equity. This approach
recognises that long-term wholesale debt and other sticky liabilities have favourable liquidity characteristics.
ANZ New Zealand$ millions

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

62,30958,383

-

-

8,258

7,668

-

-

70,567

66,051--

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

16,40718,188--

Loan capital

1,442

1,168

-

-

Certificates of deposit

2,364

2,156

-

-

Commercial paper

4,765

5,445

-

-

Due to Immediate Parent Company

1,766

1,766

-

-

Due to other financial institutions

9,871

11,012

8,372

9,273

36,61539,735

8,372

9,273

107,182

105,786

8,372

9,273

Households

44,972

42,761--Agriculture

2,439

2,259

-

-

617

488

-

-

1,413

1,595

-

-

601

585

-

-

46,20848,456

8,372

9,273

Total wholesale funding
Total funding
Concentrations of funding by industry

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

955

718

-

-

Wholesale trade

1,085

975

-

-

Business and property services

3,785

3,616

-

-

Transport and storage

637

672

-

-

Construction

882

753

-

-

Government and local authority

2,168

1,754

-

-

Other2

1,420

1,154

-

-

107,182

105,786

8,372

9,273

New Zealand

68,39964,175--Australia

12,542

13,268

8,287

9,189

United States-

Total funding
Concentrations of funding by geography3

10,122

13,231-

Europe

9,918

9,291

-

-

Other countries

6,201

5,821

85

84

107,182

105,786

8,372

9,273

Total funding

1
2
3

Represents term deposits, demand deposits bearing interest, deposits not bearing interest and secured debenture stock.
Other includes exposures to electricity, gas and water, communications and personal services.
ANZ New Zealand classifies funding via ANZ New Zealand (Int’l) as either from the United States or Europe based on the respective programmes.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

53

Notes to the Financial Statements
Liquidity portfolio management
ANZ New Zealand holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity risk
management. The size of ANZ New Zealand’s liquidity portfolio is based on the amount required to meet its internal andregulatory liquidity scenario metrics.
Total liquidity portfolio$ millions

Balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government, local body stock and bonds
Government treasury bills
Other bonds
Total liquidity portfolio

ANZ New Zealand

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

1,709

1,973

-

-

41

105

-

-

159

100

-

-

5,522

8,220

-

-

387

17

-

-

5,069

3,768

-

-

12,887

14,183--

Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand Government securities,
securities issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned
Enterprises, Local Authorities and highly rated NZ domestic corporates. These assets would be accepted as collateral by
the RBNZ in repurchase transactions. At 30 September 2013 ANZ New Zealand would be eligible to enter into repurchasetransactions with a value of $10,759 million. The Banking Group also held unencumbered internal residential mortgage
backed securities (“RMBS”) which would entitle ANZ New Zealand to enter into repurchase transactions with a value of$4,200 million at 30 September 2013 (the RBNZ has imposed a cap limiting the amount of RMBS deemed as eligible in theliquidity portfolio to 4% of total assets).
Liquidity crisis contingency planning
ANZ New Zealand maintains liquidity crisis contingency plans defining an approach for analysing and responding to aliquidity-threatening event on a group wide basis. The framework includes:•
the establishment of crisis severity/stress levels;•
clearly assigned crisis roles and responsibilities;•
early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;•
outlined action plans, and courses of action for altering asset and liability behaviour;•
procedures for crisis management reporting, and covering cash-flow shortfalls;•
guidelines determining the priority of customer relationships in the event of liquidity problems; and•assigned responsibilities for internal and external communications.

Australia and New Zealand Banking Group Limited - New Zealand Branch

54

Notes to the Financial Statements
Contractual maturity analysis of financial assets and liabilities
The following tables present ANZ New Zealand's financial assets and liabilities within relevant contractual maturity
groupings, based on the earliest date on which the NZ Branch or ANZ New Zealand may be required to realise an asset or
settle a liability. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows,
except for derivatives held for trading where the full mart-to-market amount has been included in the less than threemonths category. As a result, the amounts in the tables below may differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using
the earliest date at which ANZ New Zealand or the NZ Branch can be called upon to pay. The liquidity risk of credit
related commitments and contingent liabilities may be less than the contract amount, and does not necessarily represent
future cash requirements as many of these facilities are expected to be only partially used or to expire unused.
ANZ New Zealand does not manage its liquidity risk on this basis.
ANZ New Zealand$ millions
30/09/2013

Less than
3 months

3 to 12months1 to 5 years

Beyond5 years

No maturity
specifiedTotal

At callLiquid assets

2,497

2,442

55

-

-

-

-

Due from other financial institutions

1,712

155

1,557

-

-

-

-

11,528

-

412

1,617

8,429

1,070

-

8,536

-

8,536

-

-

-

-

Available-for-sale assets

824

-

137

271

324

90

2

Net loans and advances

Financial assets

Trading securities
Derivative financial assets (trading)

138,415-

15,743

18,38541,94062,347-

Other financial assets

457

-

388

66

3

-

-

Total financial assets

163,969

2,597

26,82820,33950,696

63,5072

Financial liabilities
Due to other financial institutions

10,516

853

1,641

1,533

6,485

4

-

Deposits and other borrowings
Derivative financial liabilities(trading)

79,01234,81921,516

19,825

2,846

6

-

9,526

-

9,526

-

-

-

-

Bonds and notes

17,359

-

2,531

1,979

11,3591,490-

Term funding

1,817

-

16

1,801

-

-

-

Loan capital

1,885

-

15

48

317

63

1,442

Other financial liabilities

565

-

384

4

32

145

-

Total financial liabilities

120,680

35,67235,62925,19021,039

1,708

1,442

43,289(33,075)(8,801)(4,851)

29,657

61,799(1,440)Net financial assets / (liabilities)

Derivative financial instruments used for balance sheet management- gross inflows

23,054

-

2,356

4,459

14,975

1,264-- gross outflows(23,409)-(2,379)(4,458)(15,323)(1,249)-42,934(33,075)(8,824)(4,850)29,30961,814(1,440)Net financial assets / (liabilities)
after balance sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New Zealand$ millions
30/09/2013

Non-credit related commitments
Credit related commitments
Contingent liabilities
Total

Total

Less than
1 yearBeyond1 year

429

97

332

25,06725,067

-

2,201

2,201

-

27,69727,365332

Australia and New Zealand Banking Group Limited - New Zealand Branch

55

Notes to the Financial Statements
ANZ New Zealand$ millions
30/09/2012

Less than
3 months

3 to 12months1 to 5 years

Beyond5 years

No maturity
specifiedTotal

At callLiquid assets

2,834

2,506

328

-

-

-

-

Due from other financial institutions

1,761

177

1,584

-

-

-

-

Trading securities

13,353

-

152

3,667

6,969

2,565

-

Derivative financial assets (trading)

11,304-

11,304----

Available-for-sale assets

65

-

1

13

48

-

3

Net loans and advances

Financial assets

133,338-

15,18017,852

39,77460,532-Other financial assets

298

-

220

76

2

-

-

Total financial assets

162,953

2,683

28,76921,60846,79363,097

3

Financial liabilities
Due to other financial institutions

11,976

932

1,296

2,101

7,458

189

-

Deposits and other borrowings

74,97730,272

22,682

18,840

3,183

-

-

Due to Immediate Parent Company
Derivative financial liabilities(trading)

1,840

-

18

1,822

-

-

-

13,104-

13,104----

Bonds and notes

19,403

-

1,648

2,908

12,687

2,160-

Loan capital

1,829

-

24

71

472

94

1,168

Other financial liabilities

497

-

374

10

65

48

-

Total financial liabilities

123,626

31,204

39,14625,752

23,865

2,491

1,168

Net financial assets / (liabilities)

39,327(28,521)(10,377)(4,144)22,92860,606(1,165)Derivative financial instruments used for balance sheet management- gross inflows

26,499

-

2,037

5,665

17,182

1,615-- gross outflows(25,671)-(1,929)(5,364)(16,773)(1,605)-

Net financial assets / (liabilities)
after balance sheet management

40,155(28,521)(10,269)(3,843)23,33760,616(1,165)Contractual maturity of off-balance sheet commitments and contingent liabilities
ANZ New Zealand$ millions
30/09/2012

Non-credit related commitments

Total

Less than
1 yearBeyond1 year

355

124

231

Credit related commitments

25,29325,293-

Contingent liabilities

1,805

1,805

-

Total

27,45327,222231

Australia and New Zealand Banking Group Limited - New Zealand Branch

56

Notes to the Financial Statements
NZ Branch$ millions
30/09/2013

Total

At callLess than
3 months

3 to 12months1 to 5 years

Beyond5 years

No maturity
specifiedFinancial assets
Due from other financial institutions

141

-

141

-

-

-

-

Net loans and advances

15,282

-

220

701

3,670

10,691-

Due from related entities

314

-

314

-

-

-

-

Other financial assets

1

-

1

-

-

-

-

Total financial assets

15,738

-

676

701

3,670

10,691-

Financial liabilities
Due to other financial institutions

9,004

-

999

1,531

6,474

-

-

Other financial liabilities

40

-

40

-

-

-

-

Total financial liabilities

9,044

-

1,039

1,531

6,474

-

-

Net financial assets / (liabilities)

6,694

-

(363)

(830)

(2,804)

10,691-

Derivative financial instruments used for balance sheet management- gross inflows

9,062

-

1,174

1,520

6,368

-

-

- gross outflows(10,091)-(1,282)(1,691)(7,118)

-

-

5,665

-

(471)

(1,001)(3,554)

10,691-

1 to 5 years

Beyond5 years

No maturity
specified

Net financial assets / (liabilities)
after balance sheet management

Contractual maturity of off-balance sheet commitments and contingent liabilities
Bank$ millions
30/09/2013

Total

Less than
1 yearBeyond1 yearCredit related commitments

54

54

-

Total

54

54

-

Total

At callLess than
3 months

NZ Branch$ millions
30/09/2012

3 to 12monthsFinancial assets
Due from other financial institutions

38

-

38

-

-

-

-

Net loans and advances

16,021

-

361

667

3,517

11,476-Due from related entities

304

-

304

-

-

-

-

16,363

-

703

667

3,517

11,476-

Total financial assets
Financial liabilities
Due to other financial institutions

10,205

-

688

2,096

7,421

-

-

Other financial liabilities

55

-

55

-

-

-

-

Total financial liabilities

10,260

-

743

2,096

7,421

-

-

Net financial assets / (liabilities)

6,103

-

(40)

(1,429)(3,904)

11,476-

Derivative financial instruments used for balance sheet management- gross inflows

9,944

-

831

1,989

7,124

-

-

- gross outflows(9,916)-(824)(1,951)(7,141)--

Net financial assets / (liabilities)
after balance sheet management

6,131

-

(33)

(1,391)(3,921)

11,476-

Contractual maturity of off-balance sheet commitments and contingent liabilities
NZ Branch$ millions
30/09/2012

Total

Less than
1 yearBeyond1 yearCredit related commitments

103

103

-

Total

103

103

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

57

Notes to the Financial Statements
30. Financial Assets Pledged as Collateral
ANZ New Zealand$ millions

Cash collateral given on derivative financial instruments

Note

30/09/2012

30/09/2013

30/09/2012

1,002

1,256

-

-

108

252

-

-

23, 36

5,857

4,977

-

-

20

2,162

2,103

-

-

9,129

8,588

-

-

9

Trading securities encumbered through repurchase agreements
Residential mortgages pledged as security for covered bonds
Total tangible assets of UDC Finance Limited pledged ascollateral for secured stock
Total financial assets pledged as collateral

NZ Branch

30/09/2013

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

31. Concentrations of Credit Risk to Individual Counterparties
ANZ New Zealand measures its concentration of credit risk in respect to bank counterparties on the basis of approved
exposures and in respect to non-bank counterparties on the basis of limits.
For the three month period ended 30 September 2013 there were no individual counterparties (excluding connectedparties, governments and banks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or
peak end-of-day credit exposure equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of theperiod).
This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

Australia and New Zealand Banking Group Limited - New Zealand Branch

58

Notes to the Financial Statements
32. Fair Value of Financial Assets and Financial Liabilities
ANZ New Zealand$ millions

At amortised
cost

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

Hedging

Available-forsale assets

Total

Fair value

30/09/2013

Liquid assets

2,496

-

-

-

-

2,496

Due from other financial institutions

1,551

-

-

-

160

1,711

2,496
1,711

Trading securities--

10,320--

10,320

10,320Derivative financial instruments1

-

-

9,230

278

-

9,508

9,508

Available-for-sale assets

-

-

-

-

782

782

782

Net loans and advances2

99,765----99,76599,861Other financial assets

648

172

-

-

-

820

820

Total financial assets

104,460

172

19,550278

942

125,402125,498

Due to other financial institutions

9,868

-

3

-

-

9,871

9,999

Deposits and other borrowings

72,931

4,765

-

-

-

77,69677,753

1,766

-

-

-

-

1,766

1,766

-

-

11,033

175-

11,208

11,208Due to Immediate Parent Company
Derivative financial instruments1
Bonds and notes2

16,407----

16,407

16,627

Loan capital

1,442

-

-

-

-

1,442

1,342

Other financial liabilities

1,093

-

139

-

-

1,232

1,232

Total financial liabilities

103,507

4,765

11,175

175-

119,622

119,927

Liquid assets

2,831

-

-

-

-

2,831

2,831

Due from other financial institutions

1,660

-

-

-

100

1,760

1,760

Trading securities--

12,338--12,33812,338Derivative financial instruments1--

12,173536-

12,70912,709Available-for-sale assets

-

-

-

-

57

57

57

Net loans and advances2

96,094----96,09496,279Other financial assets

513

142

-

-

-

655

655

Total financial assets

101,098

142

24,511

536

157

126,444

126,629

Due to other financial institutions

10,957

-

55

-

-

11,012

11,184

Deposits and other borrowings

68,207

5,445

-

-

-

73,65273,744Due to Immediate Parent Company

1,766

-

-

-

-

1,766

1,766

-

-

13,819266-

14,085

14,085

Bonds and notes2

18,188----18,18818,447

Loan capital

1,168

-

-

-

-

1,168

1,030

Other financial liabilities

933

-

107

-

-

1,040

1,040

Total financial liabilities

101,219

5,445

13,981

266-

120,911

121,296

30/09/2012

Derivative financial instruments1

Australia and New Zealand Banking Group Limited - New Zealand Branch59

Notes to the Financial Statements
NZ Branch$ millions

At amortisedcost

At fair value through profit or
loss
Designated on
initialrecognition

Carrying amountHedging

Available-forsale assets

Total

Fair Value141

Held fortrading

30/09/2013

Due from other financial institutions
Derivative financial instruments1
Net loans and advances2
Due from the Bank

141

-

-

-

-

141

-

-

8

4

-

12

12

9,256

-

-

-

-

9,256

9,273

314

-

-

-

-

314

314

Other financial assets

1

-

-

-

-

1

1

Total financial assets

9,712

-

8

4

-

9,724

9,741

Due to other financial institutions

8,372

-

-

-

-

8,372

8,500

Derivative financial instruments1

-

-

998

23

-

1,021

1,021

Other financial liabilities

40

-

-

-

-

40

40

Total financial liabilities

8,412

-

998

23

-

9,433

9,561

38

-

-

-

-

38

38

9,396

-

52
-

-

-

52
9,396

52
9,408

Due from the Bank

304

-

-

-

-

304

304

Total financial assets

9,738

-

52

-

-

9,790

9,802

Due to other financial institutions

9,273

-

-

-

-

9,273

9,445

Derivative financial instruments1

-

-

187

35

-

222

222

Other financial liabilities

55

-

-

-

-

55

55

Total financial liabilities

9,328

-

187

35

-

9,550

9,722

30/09/2012

Due from other financial institutions
Derivative financial instruments1
Net loans and advances212

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

60

Notes to the Financial Statements
Estimation of fair value
Liquid assets, due from / to other financial institutions and balances with related parties
Where these financial instruments are short-term in nature, defined as those that reprice or mature in 90 days or less, or
are receivable on demand, the carrying values are considered to approximate the fair values. When longer term innature, fair value is based on quoted market prices, or for those debt issues where quoted market prices are notavailable, a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of that debt
instrument.
Trading securities, derivative financial instruments and available for sale assets
Fair value is based on quoted market prices, or broker or dealer price quotations. If this information is not available, fairvalue is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics, ormarket accepted valuation models as appropriate (including discounted cash flow models) based on current market yields
for similar types of instruments and the maturity of each instrument.
Net loans and advances
Fair value has been estimated through discounting future cash flows. For fixed rate loans and advances, the discount rateapplied incorporates changes in wholesale market rates, ANZ New Zealand’s cost of wholesale funding and movements incustomer margin. For floating rate loans, only changes in wholesale market rates and ANZ New Zealand’s cost ofwholesale funding are incorporated in the discount rate. For variable rate loans where ANZ New Zealand sets theapplicable rate at its discretion, the carrying value is considered to approximate the fair value.
Other financial assets / liabilities
Included in this category are accrued interest and fees receivable / payable. For these balances the carrying value isconsidered to approximate the fair values, as they are short term in nature or are receivable / payable on demand.
Deposits and other borrowings
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates
of interest for debt with a similar maturity are used to discount contractual cash flows. The fair value of a deposit liability
without a specified maturity or at call is deemed to be the amount payable on demand at the reporting date. The fairvalue is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
Certain items included in deposits and other borrowings have been designated as financial liabilities at fair value throughprofit or loss and are carried at fair value.
Bonds and notes and loan capital
The aggregate fair value of bonds and notes and loan capital is calculated based on quoted market prices. For those debt
issues where quoted market prices are not available, a discounted cash flow model using a yield curve appropriate for theremaining term to maturity of the debt instrument is used.

Valuation hierarchy
In determining the carrying amount of financial instruments held at fair value ANZ New Zealand uses a valuation method
within the following hierarchy:“Level 1” - Quoted market price
Where an active market exists fair value is based on quoted market prices for identical financial instruments. The quoted
market price is not adjusted for any potential impact that may be attributed to a large holding of the financial instrument.
“Level 2” - Valuation technique using observable inputs
In the event that there is no quoted market price for the instruments, fair values are based on present value estimates orother market accepted valuation techniques which include data from observable markets wherever possible.
“Level 3” - Valuation technique with significant non observable inputs
The majority of valuation techniques employ only observable market data. However, ANZ New Zealand holds someinvestments in unlisted funds or other investments which do not trade in an active market. For these instruments the fairvalue cannot be determined in whole with reference to current market transactions or valuation techniques whose
variables only include data from observable markets. Where observable market data is not available, the fair value isdetermined using broker quotes or valuation techniques, including discounted cash flow analysis, using data derived andextrapolated from market data and tested against historic transactions and observed market trends.

Australia and New Zealand Banking Group Limited - New Zealand Branch

61

Notes to the Financial Statements
Valuation hierarchy$millions

ANZ New Zealand
Level 1NZ Branch

Level 2

Level 3

Total

Level 1

Level 2

Level 3Total-

30/09/2013

Due from other financial institutions
Trading securities
Derivative financial instruments

160

-

-

160

-

-

-

10,208112-

10,320

-

-

-

-

2

9,506

-

9,508

-

12

-

12

Available-for-sale assets

780

-

2

782

-

-

-

-

Other financial assets

140

32

-

172

-

-

-

-

Total financial assets held at fairvalue

11,2909,650

220,942

-

12

-

12

Due to other financial institutions

3

-

-

3

-

-

-

-

Deposits and other borrowings

-

4,765

-

4,765

-

-

-

-

Derivative financial instruments

6

11,202-

11,208

-

1,021

-

1,021

Other financial liabilities

139

-

-

139

-

-

-

-

Total financial liabilities held at fair
value

148

15,967-

16,115

-

1,021

-

1,021

-

30/09/2012

Due from other financial institutions1

100

-

-

100

-

-

-

12,228110-

12,338----Derivative financial instruments

2

12,707-

12,709

-

52

-

52

Available-for-sale assets

13

42

2

57

-

-

-

-

Other financial assets1

83

58

1

142

-

-

-

-

Total financial assets held at fairvalue

12,426

12,917

3

25,346

-

52

-

52

Due to other financial institutions

55

-

-

55

-

-

-

-

Deposits and other borrowings

-

5,445

-

5,445

-

-

-

-

Derivative financial instruments

4

14,081-

14,085

-

222

-

222

Other financial liabilities

107

-

-

107

-

-

-

-

Total financial liabilities held at fair
value

166

19,526-

19,692

-

222

-

222

Trading securities1

1

Due from other financial institutions of $100 million, Trading securities of $4,629 million and Other financial assets of $80 million have been reclassified fromLevel 2 to Level 1 because they were valued using quoted market prices.

Movements in level 3 valuations
ANZ New Zealand

NZ Branch

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Opening balance

3

6

-

-

Revaluations

-

(3)

-

-

(1)

-

-

-

2

3

-

-

$ millions

Sales
Closing balance

Australia and New Zealand Banking Group Limited - New Zealand Branch

62

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

NZ Branch

Year toYear toYear toYear to30/09/2013

30/09/2012

30/09/2013

30/09/2012

1,372

1,265

50

50

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

98

89

-

-

Provision for credit impairment

66

202

3

9

4

14

-

-

51

32

8

7

Deferred fee revenue and expenses
Amortisation of capitalised brokerage / mortgage origination fees
Amortisation of premiums and discounts

186

235

-

-

Fair value gains and losses
Loss on disposal and impairment of premises and equipment andintangibles
Deferrals or accruals of past or future operating cash receipts or
payments:

(108)

(178)

12

20

6

13

-

-

Change in net operating assets less liabilities

(31)

1,141

(2,556)45

Change in interest receivable

(12)

(13)

(1)

-

Change in interest payable

(102)

(63)

(15)

(16)

Change in accrued income

-

(3)

-

-

Change in accrued expenses

(5)

4

-

-

(110)

20

-

-

2

(101)

-

-

Change in other receivables and payables

(33)

(9)

-

-

Change in net income tax assets / liabilities

109

11

1

(1)

Change in provisions
Change in insurance policy assets

Items classified as investing / financing:
Gain on disposal of associates

-

(4)

-

-

(31)

-

-

-

2,634

(1,042)103

38

30/09/2013

30/09/2012

30/09/2013

2,496

2,831

-

-

506

462

141

38

3,002

3,293

141

38

30/09/2013

30/09/2012

30/09/2013

30/09/2012

Not later than 1 year

24

43

-

-

Total capital expenditure commitments

24

43

-

-

Gain on disposal of subsidiaries (excluding disposal costs)
Net cash flows provided by / (used in) operating activities

ANZ New Zealand$ millions

NZ Branch
30/09/2012

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

34. Commitments
ANZ New Zealand$ millions

NZ Branch

Contracts for outstanding capital expenditure

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

73

81

-

-

Later than 1 year but not later than 5 years

167

139

-

-

Later than 5 years

165

92

-

-

Total lease rental commitments

405

312

-

-

Total commitments

429

355

-

-

Australia and New Zealand Banking Group Limited - New Zealand Branch

63

Notes to the Financial Statements
35. Credit Related Commitments, Guarantees and Contingent Liabilities$ millions

ANZ New Zealand

NZ Branch

Face or contract value

Face or contract value

30/09/2013

30/09/2013

30/09/2012

30/09/2012

Credit related commitments
Commitments with certain drawdown due within one year

817

742

-

-

Commitments to provide financial services

24,25024,551

54

103

Total credit related commitments

25,06725,293

54

103

997

731

-

-

32

44

-

-

Transaction related contingent items

1,059

913

-

-

Trade related contingent liabilities

113

117

-

-

2,201

1,805

-

-

Guarantees and contingent liabilities
Financial guarantees
Standby letters of credit

Total guarantees and contingent liabilities

ANZ New Zealand guarantees the performance of customers by issuing standby letters of credit and guarantees to third
parties, including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved inextending loan facilities to customers, therefore these transactions are subjected to the same credit origination, portfolio
management and collateral requirements for customers applying for loans. As the facilities may expire without being
drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
In October 2012, the Commerce Commission commenced an investigation, under the Fair Trading Act 1986, into thepromotion and sale of interest rate swaps by certain banks (including the Bank) to rural customers. The investigation is
ongoing and the possible outcome of the investigation cannot be determined with any certainty at this stage.
On 11 March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action
against banks in New Zealand for certain fees charged to New Zealand customers over the past six years. Proceedings
were filed against the Bank on 25 June 2013. The potential outcome of this litigation cannot be determined with any
certainty at this stage.
ANZ New Zealand has other contingent liabilities in respect of actual and possible claims and court proceedings. An
assessment of ANZ New Zealand’s likely loss in respect of these matters has been made on a case-by-case basis andprovision made where deemed necessary.

36. Securitisation, Funds Management, Other Fiduciary Activities and Insurance
Securitisation
Kingfisher NZ Trust 2008-1 (“the Kingfisher Trust”)
ANZ New Zealand has established the Kingfisher Trust as an in-house residential mortgage backed securities facility that
can issue securities meeting the RBNZ criteria to use as collateral in repurchase transactions with the RBNZ.
These assets do not qualify for derecognition as the Bank retains substantially all of the risks and rewards of thetransferred assets.
As at 30 September 2013 and 30 September 2012 ANZ New Zealand had not entered into any repurchase agreementswith the RBNZ for residential mortgage backed securities and therefore no collateral had been accepted by the RBNZ
under this facility.
ANZNZ Covered Bond Trust (“the Covered Bond Trust”)
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities
originated by the Bank which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of the
Covered Bond Trust of issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ New Zealand (Int’l)Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of the Bank, although the
Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (ifany) after all prior ranking creditors of the Covered Bond Trust have been satisfied.
ANZ New Zealand continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they arepledged as security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.
Assets transferred to the Kingfisher Trust and the Covered Bond Trust
The Bank has purchased securities issued by both the Kingfisher Trust and the Covered Bond Trust in exchange for thetransfer of the rights to the cash flows associated with the identified residential mortgages. As at 30 September 2013,$11,689 million of assets were held in the Kingfisher Trust and the Covered Bond Trust (30/09/2012 $10,079 million).

Australia and New Zealand Banking Group Limited - New Zealand Branch

64

Notes to the Financial Statements
Funds management and other fiduciary activities
Funds management
Certain entities that form part of ANZ New Zealand act as trustee and/or manager for a number of unit trusts andinvestment and superannuation funds. ANZ New Zealand provides private banking services to a number of clients,
including investment advice and portfolio management. ANZ New Zealand is not responsible for any decline inperformance of the underlying assets of the investors due to market forces.
As funds under management are not controlled by ANZ New Zealand, they are not included in these financial statements.
ANZ New Zealand derives fee and commission income from the sale and management of investment funds andsuperannuation bonds, unit trusts and the provision of private banking services to a number of clients. ANZ New Zealandderives commission income from the sale of third party funds management products.
Some funds under management are invested in products owned or securities issued by ANZ New Zealand and arerecorded as liabilities in the balance sheet. At 30 September 2013, $3,054 million of funds under management were
invested in ANZ New Zealand's own products or securities (30/09/2012 $3,114 million).
Custodial services
ANZ New Zealand provides custodial services to customers in respect of assets that are beneficially owned by thosecustomers.
Funds managed and held in custody by ANZ New Zealand$ millions

ANZ New Zealand
30/09/2013

30/09/2012

Funds managed by ANZ New Zealand Investments Limited (formerly OnePath (NZ) Limited)

8,242

7,324

The Bonus Bonds Trust

3,259

3,188

Other discretionary funds

5,451

5,173

16,952

15,685

6,365

5,784

Total funds under management
Funds held in custody on behalf of customers

Insurance business
ANZ New Zealand conducts an insurance business through its subsidiaries OnePath Life (NZ) Limited and its subsidiary
OnePath Insurance Services (NZ) Limited (together “OnePath Insurance”), the assets, liabilities and operations of which
are fully consolidated into ANZ New Zealand. OnePath Insurance provides a range of risk transfer insurance products,
including life, lump sum trauma/disablement, income protection and medical cover. In addition, other entities within ANZ
New Zealand market and distribute a range of insurance products which are underwritten by OnePath Insurance, or by
third party insurance companies.
The aggregate insurance business conducted by OnePath Insurance comprises assets totalling $779 million (30/09/2012:$766 million), which is 0.6% (30/09/2012: 0.6%) of the total consolidated assets of ANZ New Zealand.

Risk management
The Bank and entities that form part of ANZ New Zealand participating in the activities identified above have in placepolicies and procedures to ensure that those activities are conducted in an appropriate manner. Should adverse
conditions arise, it is considered that these policies and procedures will minimise the possibility that these conditions will
adversely impact the Bank or ANZ New Zealand. The policies and procedures include comprehensive and prominent
disclosure of information regarding products, and formal and regular review of operations and policies by management.

Australia and New Zealand Banking Group Limited - New Zealand Branch

65

Notes to the Financial Statements
37. Additional Disclosures
Overseas Banking Group profitability and size
AUD millions

30/09/2013

Net profit after tax for the year1

6,282

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

0.93%

Total assets
Percentage change in total assets over the preceding year

1702,991
9.5%

Net profit after tax for the year includes $10m of profit attributable to non-controlling interests.

Overseas Banking Group asset quality
AUD millions

30/09/2013

Gross impaired assets

4,264

Gross impaired assets as a percentage of total assets

0.61%

Total individually assessed provisions for impairment

1,467

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

34.4%

Collective provision for credit impairment

2,887

Australia and New Zealand Banking Group Limited - New Zealand Branch

66

Directorate and Auditors
Any document or communication may be sent to any
Director or the Chief Executive Officer – NZ Branch at
the Registered Office. The document or communication
should be marked for the attention of that Director or
the Chief Executive Officer.
Directors’ Interests
The Board of the Ultimate Parent Bank has adopted
procedures to ensure that conflicts and potential
conflicts of interest between a Director’s duties to the
Ultimate Parent Bank and their own interests are
avoided or dealt with. Pursuant to these procedures:a.

b.

each Director should disclose to all Directors any
material personal interest they have in any matter
which relates to the affairs of the Ultimate Parent
Bank and any other interest which the Director
believes is appropriate to disclose in order to avoid
an actual conflict of interest or the perception of aconflict of interest. This disclosure should be madeas soon as practicable after the Director becomesaware of their interest or the need to make adisclosure; anda Director who has an interest of the type referred
to in a. above in a matter that is to be considered at
a Directors' meeting, must not vote on the matternor be present while the matter is considered at themeeting, unless a majority of Directors who do nothave such an interest in the matter agree that theinterest should not disqualify such Director frombeing present while the matter is being considered
and from voting on the matter. The minutes of themeeting should record the decision taken by the
Directors who do not have an interest in the matter.

In addition, Standing Notices about Interests aremaintained for each Director. If the Director's interestschange, the Director shall disclose the change as soon
as practicable and an updated Standing Notice shall betabled at the next Board meeting and recorded in theminutes of that meeting.
Transactions with Directors
Executive Officer, NZ Branch

and

the

Chief

There are no transactions entered into by any Director,
the Chief Executive Officer – NZ Branch, or any
immediate relative or close business associate of any
Director or the Chief Executive Officer – NZ Branch, withany part of ANZ New Zealand which has been either
entered into on terms other than those which would in
the ordinary course of business be given to any otherperson of like circumstances or means or which could
otherwise be reasonably likely to influence materiallythe exercise of the Directors' or Chief Executive Officer –NZ Branch duties in respect of the NZ Branch and ANZ
New Zealand.

Board Members as at 27 November 2013
The names, qualifications, occupation, country ofresidence and material external directorships of eachdirector of the Ultimate Parent Bank as at the date thisDisclosure Statement was signed were:

ChairmanJohn Powell Morschel
DipQS, FAICD
Company Director
Sydney, Australia
Mr Morschel is an ex-officio member of all Board
Committees.
External Directorships: CapitaLand Limited, Tenix
Group Pty Limited and Gifford Communications Pty
Limited.

Chief Executive Officer – Australia and New
Zealand Banking Group Limited
Michael Roger Pearson Smith, OBE
BSc (Hons) (City Lond), Hon LLD (Monash)
Chief Executive Officer and Executive Director
Melbourne, Australia
External Directorships
Chairman: Australian Bankers’ Association Incorporated
Executive Chairman: Chongqing Mayor's International
Economic Advisory Council
Director: the Financial Markets Foundation for Children,
Financial Literacy Australia Limited, the International
Monetary Conference and the Institute of International
Finance.
Member: Asia Business Council, Australian Government
Financial Literacy Advisory Board, Shanghai
International Financial Advisory Council, and theBusiness Council of Australia.
Fellow: The Hong Kong Management Association

Non-Executive Directors
Dr Gregory John Clark
BSc (Hons), PhD, FAPS, FTSE
Company Director
Based in New York, United States of America and also
resides in Sydney, Australia
Dr Clark is Chair of the Technology Committee and amember of the Risk Committee and Human Resources
Committee.
External Directorships
Chairman: KaComm Communications Pty Limited and
CUDOS Advisory Board.
Member: The Royal Institution of Australia and Councilof the University of Sydney Physics Foundation.

Australia and New Zealand Banking Group Limited - New Zealand Branch

67

Directorate and Auditors
Paula Jane Dwyer

Ian John Macfarlane, AC

BCom, FCA, SF Fin, FAICD
Company Director
Melbourne, Australia

BEc (Hons), MEc, Hon DSc (Syd), Hon DSc (UNSW), Hon
DCom (Melb), Hon DLitt (Macq), Hon LLD (Monash)
Company Director
Sydney, Australia

Ms Dwyer is a member of the Audit Committee, Risk
Committee and Human Resources Committee.
External Directorships
Chairman: Tabcorp Holdings Limited
Deputy Chairman: Leighton Holdings Limited
Director: Lion Pty Ltd
Member: Australian Government Takeovers Panel,
Kirin International Advisory Board, and ASIC External
Advisory Panel.
Peter Algernon Franc Hay
LLB (Melb), FAICD
Company Director
Melbourne, Australia
Mr Hay is Chair of the Governance Committee and amember of the Audit Committee and Human Resources
Committee.
External Directorships
Director: Alumina Limited, Landcare Australia Limited,
GUD Holdings Limited, Myer Holdings Limited, AustralianInstitute of Company Directors, and Newcrest Mining
Limited.
Member: Australian Government Takeovers Panel

Mr Macfarlane is Chair of the Risk Committee and amember of the Governance Committee and Audit
Committee.
External Directorships
Director: Woolworths Limited and the Lowy Institute forInternational Policy.
Member: Council of International Advisors to the China
Banking Regulatory Commission, International Advisory
Board of Goldman Sachs JB Were, and International
Advisory Board of CHAMP Private Equity.
David Edward Meiklejohn, AM
BCom, Dip Ed, FCPA, FAICD, FAIM
Company Director
Melbourne, Australia
Mr Meiklejohn is Chair of the Audit Committee and amember of the Technology Committee and Risk
Committee.
External Directorships
Chairman: Manningham Centre Association Board ofGovernanceDirector: Coca Cola Amatil Limited and Mirrabooka
Investments Limited.

Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is a member of the Human Resources
Committee, Risk Committee and Technology Committee.

Alison Mary Watkins
BCom, FCA, SF Fin, FAICD
Chief Executive Officer and Managing Director –GrainCorp Limited.
Melbourne, Australia
Ms Watkins is Chair of the Human Resources Committee
and a member of the Audit Committee and GovernanceCommittee.

External Directorships
Chairman: Civil Aviation Authority of Singapore, The
Islamic Bank of Asia Limited, and General Atlantic
Singapore Fund Pte Ltd.
Director: Singapore Exchange Limited, Caldecott Inc.,and Kwa Geok Choo Pte Ltd.
Member: Governing Board of Lee Kuan Yew School of
Public Policy and Rolls Royce International Advisory
Council.
Special Advisor: General Atlantic
Consultant: Capital International Inc Advisory Board
President: INSEAD South East Asia Council

External Directorships
Chairman: Allied Mills Australia Pty Limited
Director: The Centre for Independent Studies
Chief Executive Officer and Managing Director:
GrainCorp Limited
Member: Australian Government Takeovers Panel

Graeme Richard Liebelt

Chief Executive Officer, Australia and New
Zealand Banking Group – New Zealand
BranchBEc (Hons), FAICD, FTSE, FAIM
Company Director
Melbourne, Australia
Mr Liebelt is a member of the Human Resources
Committee, Risk Committee and Technology Committee.
External Directorships
Deputy Chairman: The Global Foundation andMelbourne Business School.
Director: Amcor Limited, The Australian Foundation
Investment Company Limited, and Carey Baptist
Grammar School.

Anthony John Bradshaw
BCA, CA
Chief Executive Officer– NZ Branch
Wellington, New ZealandAuditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandAustralia and New Zealand Banking Group Limited - New Zealand Branch

68

Conditions of Registration
Conditions of Registration, applicable as at 30
September 2013. These Conditions of Registration
have applied from 1 January 2013.

5.

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

The registration of Australia and New Zealand Banking
Group Limited (the registered bank) in New Zealand issubject to the following conditions:

6.

That Australia and New Zealand Banking Group
Limited complies with the following minimum capital
adequacy requirements, as administered by theAustralian Prudential Regulation Authority:

1.

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

2.

That the banking group’s insurance business is not
greater than 1% of its total consolidated assets.
For the purposes of this condition of registration, thebanking group’s insurance business is the sum of thefollowing amounts for entities in the banking group:
a)

b)

7.

If the business of an entity predominately consistsof insurance business and the entity is not a
subsidiary of another entity in the banking groupwhose business predominantly consists of
insurance business, the amount of the insurance
business to sum is the total consolidated assets ofthe group headed by the entity; andIf the entity conducts insurance business and its
business does not predominantly consist of
insurance business and the entity is not a
subsidiary of another entity in the banking groupwhose business predominantly consists of
insurance business, the amount of the insurance
business to sum is the total liabilities relating to
the entity’s insurance business plus the equity
retained by the entity to meet the solvency or
financial soundness needs of its insurance
business.

In determining the total amount of the banking
group’s insurance business:a)b)

all amounts must relate to on balance sheet
items only, and must comply with generally
accepted accounting practice; andif products or assets of which an insurance
business is comprised also contain a noninsurance component, the whole of suchproducts or assets must be considered part ofthe insurance business.

For the purpose of this condition of registration:“insurance business” means the undertaking orassumption of liability as an insurer under acontract of insurance;“insurer” and “contract of insurance” have thesame meaning as provided in sections 6 and 7 of
the Insurance (Prudential Supervision) Act 2010.
3.

That the business of the registered bank in New
Zealand does not constitute a predominant proportionof the business of the registered bank.

4.

That no appointment to the position of the New
Zealand chief executive officer of the registered bankshall be made unless:a)the Reserve Bank has been supplied with a copyof the curriculum vitae of the proposed appointee;
andb)

the Reserve Bank has advised that it has no
objection to that appointment.

a)Common Equity Tier 1 capital of the Australia and
New Zealand Banking Group Limited is not lessthan 4.5 percent of risk weighted exposures;b)

Tier 1 capital of the Australia and New Zealand
Banking Group Limited is not less than 6 percent
of risk weighted exposures;c)

Total capital of Australia and New Zealand
Banking Group Limited is not less than 8 percent
of risk weighted exposures.

That the business of the registered bank in New
Zealand is restricted to:a)acquiring for fair value, and holding, mortgages
originated by ANZ Bank New Zealand Limited; andb)

any other business for which the prior written
approval of the Reserve Bank of New Zealand has
been obtained; andc)activities that are necessarily incidental to thebusiness specified in paragraphs (a) and (b).

8.

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

9.

That the registered bank in New Zealand may notincur any liabilities except:a)to the government of New Zealand in respect oftaxation and other charges; andb)to other branches or the head office of theregistered bank; andc)to trade creditors and staff; andd)to ANZ Bank New Zealand Bank Limited in respectof activities, other than borrowing, that arenecessarily incidental to the business specified inparagraphs (a) and (b) of condition 7; ande)any other liabilities for which the prior written
approval of the Reserve Bank has been obtained.

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

69

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

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements(Overseas Incorporated Registered Banks) Order (No 2) 2013;

ii.

The Disclosure Statement is not false or misleading.

Over the year ended 30 September 2013, after due enquiry, each Director of the Ultimate Parent Bank and the Chief
Executive Officer – NZ Branch believes that:i.

the Ultimate Parent Bank has complied with all the conditions of registration;ii.

The NZ Branch and ANZ Bank New Zealand Limited had systems in place to monitor and control adequately thematerial risks of Relevant Members of ANZ New Zealand including credit risk, concentration of credit risk, interest
rate risk, currency risk, equity risk, liquidity risk and other business risks, and that those systems were being properly
applied.

This Disclosure Statement is dated 27 November 2013, and has been signed by the Chairman of the Ultimate
Parent Bank, on behalf of all Directors, and by the Chief Executive Officer – NZ Branch.

John MorschelChairman
On behalf of the Directors:
Dr Gregory Clark
Paula Dwyer
Peter Hay
Lee Hsien Yang
Graeme Liebelt
Ian Macfarlane, ACDavid Meiklejohn, AM
Michael Smith, OBE
Alison Watkins

Anthony Bradshaw
Chief Executive Officer – NZ BranchAustralia and New Zealand Banking Group Limited - New Zealand Branch

70

Independent Auditor’s Report
To the Directors of Australia and New Zealand Banking Group Limited
Report on the NZ Branch and ANZ New Zealand Disclosure Statement
We have audited the accompanying financial statements and supplementary information of Australia and New Zealand
Banking Group Limited – New Zealand Branch (the “NZ Branch”) and its related entities (“ANZ New Zealand”) on pages 5
to 65 of the Disclosure Statement. The financial statements comprise the balance sheets as at 30 September 2013, thestatements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summaryof significant accounting policies and other explanatory information of the NZ Branch and ANZ New Zealand. The
supplementary information comprises the information that is required to be disclosed under the Registered Bank
Disclosure Statements (Overseas Incorporated Registered Banks) Order (No 2) 2013 (the “Order”).
Directors' Responsibility for the Disclosure Statement
The Directors are responsible for the preparation of the NZ Branch and ANZ New Zealand Disclosure Statement, including
financial statements prepared in accordance with Clause 25 of the Order and generally accepted accounting practice in
New Zealand, and that give a true and fair view of the matters to which they relate. The Directors are also responsible forsuch internal controls as they determine are necessary to enable the preparation of the NZ Branch and ANZ New Zealandfinancial statements that are free from material misstatement whether due to fraud or error.
The Directors are responsible for the preparation and fair presentation of supplementary information, in accordance with
Schedules 2, 4, 7, 10, 11 and 13 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Disclosure Statement, including the financial statements prepared inaccordance with Clause 25 of the Order and the supplementary information disclosed in accordance with Schedules 4, 7,
10, 11 and 13 of the Order. We conducted our audit in accordance with International Standards on Auditing (New
Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the NZ Branch and ANZ New Zealand financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the NZ Branch and
ANZ New Zealand financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the NZ Branch and ANZ New Zealand’s
preparation of the financial statements that gives a true and fair view of the matters to which they relate in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the NZ Branch and ANZ New Zealand’s internal controls. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating thepresentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Our firm has provided other services to the NZ Branch and ANZ New Zealand in relation to audit related services.
Partners and employees of our firm may also deal with the NZ Branch and ANZ New Zealand on within the ordinary courseof the business of the NZ Branch and ANZ New Zealand. There are, however, certain restrictions on dealings which thepartners and employees of our firm can have with the NZ Branch and ANZ New Zealand. These matters have not
impaired our independence as auditors of the NZ Branch and ANZ New Zealand. The firm has no other relationship with,or interest in, the NZ Branch or ANZ New Zealand.
Opinion on the Disclosure Statement
In our opinion the Disclosure Statement of (“the NZ Branch”) and its related entities (“ANZ New Zealand”) on pages 5 to
65 (excluding the supplemental information):•complies with generally accepted accounting practice in New Zealand;•
complies with International Financial Reporting Standards; and•gives a true and fair view of the financial position as at 30 September 2013 and of their financial performance andcash flows for the year ended on that date.

Australia and New Zealand Banking Group Limited - New Zealand Branch

71

Opinion on Supplementary Information
In our opinion, the supplementary information that is required to be disclosed in accordance with Schedules 4, 7, 10, 11
and 13 of the Order, and is included within notes 14,15, 28, 29, 31, 36 and 37 of the Disclosure Statement:•
has been prepared, in all material respects, in accordance with the guidelines issued pursuant to section 78(3) of theReserve Bank of New Zealand Act 1989 and any Conditions of Registration;•is in accordance with the books and records of the NZ Branch and ANZ New Zealand; and•fairly states the matters to which it relates in accordance with those Schedules.
Report on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
We have reviewed the Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy, as
disclosed in note 28 of the Disclosure Statement for the year ended 30 September 2013.
Directors’ Responsibility for the Supplementary Information Relating to Credit and Market Risk Exposures
and Capital Adequacy
The Directors are responsible for the preparation of supplementary information relating to Credit and Market Risk
Exposures and Capital Adequacy that is required to be disclosed under Schedule 9 of the Order.
Auditor’s Responsibility
Our responsibility is to express an opinion on the supplementary information relating to Credit and Market Risk Exposures
and Capital Adequacy based on our review. We conducted our review in accordance with the Review Engagement
Standards issued by the New Zealand Institute of Chartered Accountants. Those standards require that we comply withethical requirements and plan and perform the review to obtain limited assurance about whether the supplementary
information relating to Credit and Market Risk Exposures and Capital Adequacy is, in all material respects:•
prepared in accordance with Capital Adequacy Framework (Standardised Approach) (BS2A); and•disclosed in accordance with Schedule 9 of the Order.
A review is limited primarily to enquiries of NZ Branch and ANZ New Zealand personnel and analytical review procedures
applied to the financial data, and thus provides less assurance than an audit. We have not performed an audit in respectof the Credit and Market Risk Exposures and Capital Adequacy disclosures, and accordingly, we do not express an audit
opinion on these disclosures.
Opinion on Supplementary Information relating to Credit and Market Risk Exposures and Capital Adequacy
Based on our review, nothing has come to our attention that causes us to believe that the supplementary information
relating to Credit and Market Risk Exposures and Capital Adequacy prescribed by Schedule 9 of the Order, and disclosed
in note 28 of the Disclosure Statement, is not, in all material respects:•
prepared in accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A); and•disclosed in accordance with Schedule 9 of the Order.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, and clauses2(1)(d) and 2(1)(e) of Schedule 1 of the Order, we report that:•
we have obtained all the information and explanations we have required; and•in our opinion, proper accounting records have been kept by the NZ Branch and ANZ New Zealand, as far as appears
from our examination of those records.

Wellington
27 November 2013

Australia and New Zealand Banking Group Limited - New Zealand Branch

72

Index
Contents and Glossary of Terms

1

General Disclosures

1

Summary of Financial Statements

4

Income Statement

5

Statement of Comprehensive Income

5Statement of Changes in Equity

6

Balance Sheet

7

Cash Flow Statement8

1. Significant Accounting Policies

9

2. Critical Estimates and Judgement Used in Applying Accounting Policies

15

3. Risk Management Policies

16

4. Income18

5. Expenses

19

6. Income Tax

20

7. Segmental Analysis

21

8. Liquid Assets

23

9. Due from Other Financial Institutions

23

10. Trading Securities

23

11. Derivative Financial Instruments

24

12. Available-for-sale Assets

26

13. Net Loans and Advances

26

14. Provision for Credit Impairment27

15. Impaired Assets

28

16. Subsidiaries and Associates

29

17. Other Assets

30

18. Goodwill and Other Intangible Assets

30

19. Due to Other Financial Institutions

30

20. Deposits and Other Borrowings

30

21. Payables and Other Liabilities

31

22. Provisions

31

23. Bonds and Notes

31

24. Loan Capital

32

25. Related Party Transactions

33

26. Current and Non-current Assets and Liabilities

35

27. Share Capital36

28. Capital Adequacy

37

29. Financial Risk Management39

30. Financial Assets Pledged as Collateral57

31. Concentrations of Credit Risk to Individual Counterparties

57

32. Fair Value of Financial Assets and Financial Liabilities

58

33. Notes to the Cash Flow Statements

62

34. Commitments

62

35. Credit Related Commitments and Contingent Liabilities

63

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

63

37. Additional Disclosures

65

Directorate and Auditors

66

Conditions of Registration

68

Directors’ Statement

69

Independent Auditor’s Report

70

Index

72