ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2019
NUMBER 91 | ISSUED MAY 2019

ANZ BANK NEW ZEALAND LIMITEDREGISTERED BANK DISCLOSURE STATEMENTFOR THE SIX MONTHS ENDED 31 MARCH 2019

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

3Statement of Comprehensive Income

3

Balance Sheet

4

Cash Flow Statement

5

Statement of Changes in Equity

6

Notes to the Interim Financial Statements

7

Registered Bank Disclosures
General Disclosures

14

Additional Financial Disclosures

15

Asset Quality

19

Capital Adequacy under the Internal Models Based Approach, and Regulatory Liquidity Ratios

24

Concentration of Credit Risk to Individual Counterparties

31

Insurance Business31

Directors’ Statement

32

Independent Auditor’s Review Report

33

SUPPLEMENTARY INFORMATIONBank Financial Strength Dashboard

36

Other Information

38

GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it wereconducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
OnePath means OnePath Life (NZ) Limited.
Paymark means Paymark Limited.
UDC means UDC Finance Limited.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by the Order.

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
INCOME STATEMENT
3 months to
NoteInterest income
Interest expense
Net interest income
Other operating income2

Net income from insurance business12

6 months to

31 Mar 19
NZ$m

31 Mar 18
NZ$m

31 Mar 19
NZ$m

31 Mar 18
NZ$m

1,628
(820)

1,577
(806)

3,284
(1,652)

3,170(1,614)

808

771

1,632

1,556

221

233

395

505

-

32

27

81

4

-

4

1

Operating income

1,033

1,036

2,058

2,143

Operating expenses

(359)

(361)

(744)

(747)

674

675

1,314

1,396

(21)

(60)

(34)

(72)

Profit before income tax

653

615

1,280

1,324

Income tax expense

(171)

(167)

(331)

(366)

Profit for the period

482

448

949

958

Share of associates' profit

Profit before credit impairment and income tax
Credit impairment charge

5

STATEMENT OF COMPREHENSIVE INCOME
3 months toProfit for the period

6 months to

31 Mar 19
NZ$m

31 Mar 18
NZ$m

31 Mar 19
NZ$m

31 Mar 18
NZ$m

482

448

949

958

(16)

2

(16)

2

(4)

(8)

-

(6)

3

1

4

3

Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity
Realised losses transferred to the income statement

4

1

3

-

Other comprehensive income after tax

(13)

(4)

(9)

(1)

Total comprehensive income for the period

469

444

940

957

Income tax attributable to the above items

The notes appearing on pages 7 to 13 form an integral part of these financial statements

3

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
BALANCE SHEET
As at

Note

AssetsCash and cash equivalents
Settlement balances receivable

31 Mar 19
NZ$m

30 Sep 18
NZ$m

2,697

2,200

630

656

Collateral paid

2,370

1,919

Trading securities

7,543

8,024

Derivative financial instruments

9,204

8,086

Investment securities

6,348

6,502

Net loans and advances4

130,110

126,466

Assets held for sale

12

-

897

Investments in associates-

6

Current tax assets

45

-

3,279

3,289

Premises and equipment

340

325

Other assets

808

642

Total assets

163,374

159,012

2,619

2,161

519

845

110,965

108,008

9,821

8,095

Current tax liabilities-

161

Deferred tax liabilities

11

21

-

334

940

947

310

196

Goodwill and other intangible assets

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings

7

Derivative financial instruments

Liabilities held for sale

12

Payables and other liabilities
Provisions

8

Debt issuances

924,59825,135

Total liabilities

149,783

145,903

Net assets

13,591

13,109EquityShare capital

11,888

11,88836

33

Retained earnings

1,667

1,188

Total equity

13,591

13,109Reserves

The notes appearing on pages 7 to 13 form an integral part of these financial statements

4

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDCASH FLOW STATEMENT
For the six months ended 31 March

Note

Profit after income tax

2019
NZ$m

2018
NZ$m

949

958

41

41

Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation
Loss on sale and impairment of premises and equipment

5-

Net derivatives/foreign exchange adjustment

(13)

(375)

Proceeds from divestments net of intangibles disposed of, classified as investing activities

(646)

-

Other non-cash movements

(147)

(14)

Collateral paid

(451)

(219)

Trading securities

481

(753)

(3,644)(2,180)

611

(344)

Deposits and other borrowings

2,957

4,342

Settlement balances payable458

5Collateral received

(326)

147

Other liabilities

(398)

(62)

Total adjustments(1,072)

588

(123)

1,546

(1,054)(1,770)

1,288

1,530

747

-

Net (increase)/decrease in operating assets:

Net loans and advances
Other assets
Net increase/(decrease) in operating liabilities:

Net cash flows from operating activities1
Cash flows from investing activities
Investment securities:
Purchases
Proceeds from sale or maturity
Proceeds from divestments

12

Other assets

(51)

17

Net cash flows from investing activities

930

(223)

Cash flows from financing activities
Debt issuances2
Issue proceeds

3,240

2,885

Redemptions(3,145)(3,020)

Dividends paid

(405)

(805)

Net cash flows from financing activities

(310)

(940)

Net change in cash and cash equivalents

497

383

Cash and cash equivalents at beginning of period

2,200

2,439

Cash and cash equivalents at end of period

2,697

2,822

1
2

Net cash provided by operating activities includes income taxes paid of NZ$519 million (2018: NZ$387 million).
Movement in debt issuances (Note 9 Debt Issuances) also includes an NZ$883 million decrease (2018: NZ$155 million increase) from the effect of foreign exchange rates, a NZ$341 million
increase (2018: NZ$174 million decrease) from changes in fair value hedging instruments and a NZ$90 million decrease (2018: NZ$4 million increase) from other changes.

The notes appearing on pages 7 to 13 form an integral part of these financial statements

5

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDINTERIM FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY

NoteInvestment
securities
Share revaluation
capitalreserve
NZ$m
NZ$m

Cash flow
hedging
reserve
NZ$m

Retainedearnings
NZ$m

Total
equity
NZ$m

8,888

5

43

3,845

12,781

-

-

-

958

958

Unrealised gains / (losses) recognised directly in equity

-

9

(15)

-

(6)

Realised losses transferred to the income statement

-

-

3

-

3

Actuarial gain on defined benefit schemes

-

-

-

2

2

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

-

(2)

3

(1)

-

Total comprehensive income for the period

-

7

(9)

959

957

Ordinary dividends paid

-

-

-

(800)

(800)

Preference dividends paid

-

-

-

(5)

(5)

As at 1 October 2017
Profit or loss

Transactions with Immediate Parent Company in its capacity as owner:

Transactions with Immediate Parent Company in its capacity as owner
As at 31 March 2018

As at 1 October 2018
NZ IFRS 9 transition adjustment
As at 1 October 2018 (adjusted)

1

-

-

-

(805)

(805)

8,888

12

34

3,999

12,933

11,888

11

22

1,188

13,109

-

-

-

(53)

(53)

11,888

11

22

1,135

13,056

Profit or loss

-

-

-

949

949

Unrealised gains / (losses) recognised directly in equity

-

(7)

7

-

-

Realised losses transferred to the income statement

-

-

4

-

4

Actuarial loss on defined benefit schemes

-

-

-

(16)

(16)

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

-

2

(3)

4

3

Total comprehensive income for the period

-

(5)

8

937

940

Ordinary dividends paid

-

-

-

(400)

(400)

Preference dividends paid

-

-

-

(5)

(5)

Transactions with Immediate Parent Company in its capacity as owner

-

-

-

(405)

(405)

11,888

6

30

1,667

13,591

Transactions with Immediate Parent Company in its capacity as owner:

As at 31 March 2019

The notes appearing on pages 7 to 13 form an integral part of these financial statements

6

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
1.

SIGNIFICANT ACCOUNTING POLICIESStatement of compliance
These interim financial statements (financial statements) for the Banking Group were issued on 17 May 2019 and should be read in conjunction with
the Banking Group’s financial statements for the year ended 30 September 2018.
These financial statements comply with:• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and• IAS 34 Interim Financial Reporting.
Use of estimates, assumptions and judgements
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect reported amounts
and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective
decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an ongoingbasis.
Basis of measurement
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:• derivative financial instruments;• financial instruments measured at fair value through other comprehensive income;• financial instruments held for trading; and• financial instruments designated at fair value through profit and loss.
Changes in accounting policies
The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year financial statements,
except as disclosed below.
The following new standards relevant to the Banking Group have been adopted from 1 October 2018 and have been applied in the preparation ofthese financial statements:
NZ IFRS 9 Financial Instruments (NZ IFRS 9)NZ IFRS 9 was effective for the Banking Group from 1 October 2018. NZ IFRS 9 stipulates new requirements for the impairment of financial assets,
classification and measurement of financial assets and financial liabilities and general hedge accounting. Details of the key requirements andestimated impacts on the Banking Group are outlined below.
Impairment
NZ IFRS 9 replaced the incurred loss impairment model under NZ IAS 39: Financial Instruments: Recognition and Measurement (NZ IAS 39) with an
expected credit loss (ECL) model incorporating forward looking information. The ECL model has been applied to all financial assets measured atamortised cost, debt instruments measured at fair value through other comprehensive income, lease receivables, certain loan commitments andfinancial guarantees. Under the ECL model, the following three-stage approach is applied to measuring ECL based on credit migration between thestages since origination:• Stage 1: At the origination of a financial asset, a provision equivalent to 12 months ECL is recognised.
• Stage 2: Where there has been a significant increase in credit risk since origination, a provision equivalent to lifetime ECL is recognised.
• Stage 3: Similar to the previous NZ IAS 39 requirements for individual impairment provisions, lifetime ECL is recognised for loans where there is
objective evidence of impairment.
Expected credit losses are probability weighted and determined by evaluating a range of possible outcomes, taking into account the time value ofmoney, past events, current conditions and forecasts of future economic conditions.
Classification and measurement
There are three measurement classifications under NZ IFRS 9: Amortised cost, Fair Value through Profit or Loss and Fair Value through Other
Comprehensive Income. Financial assets are classified into these measurement classifications taking into account the business model within which
they are managed, and their contractual cash flow characteristics.
The classification and measurement requirements for financial liabilities under NZ IFRS 9 are largely consistent with NZ IAS 39 with the exception thatfor financial liabilities designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included in othercomprehensive income. This part of the standard was early adopted by the Banking Group on 1 October 2013.
General hedge accounting
NZ IFRS 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
hedging financial and non-financial risks.
NZ IFRS 9 provides the Banking Group with an accounting policy choice to continue to apply the NZ IAS 39 hedge accounting requirements until theInternational Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Banking Group has continued to apply
the hedge accounting requirements of NZ IAS 39.

7

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
Transition to NZ IFRS 9
Other than as noted above under classification and measurement of financial liabilities, NZ IFRS 9 had a date of initial application for the Banking
Group of 1 October 2018. The classification and measurement, and impairment requirements, are applied retrospectively by adjusting opening
retained earnings at 1 October 2018. The Banking Group has not restated comparatives.
ImpactImpairment
The application of NZ IFRS 9 as at 1 October 2018 resulted in higher aggregate impairment provisions of approximately NZ$72 million, with anassociated decrease in deferred tax liabilities of approximately NZ$19 million. The net impact on total equity is a reduction of approximately NZ$53
million. These remain subject to change until the Banking Group finalises its financial statements for the year ending 30 September 2019.
Classification and measurement of financial assets
There have been no changes in classification and measurement as a result of the application of the business model and contractual cash flow
characteristics tests.
NZ IFRS 15 Revenue from Contracts with Customers (NZ IFRS 15)
NZ IFRS 15 is effective for the Banking Group from 1 October 2018 and replaces existing guidance on the recognition of revenue from contracts withcustomers. The standard requires identification of distinct performance obligations within a contract, and allocation of the transaction price of thecontract to those performance obligations. Revenue is then recognised as each performance obligation is satisfied. The standard also provides
guidance on whether an entity is acting as a principal or an agent which impacts the presentation of revenue on a gross or net basis.
The Banking Group has assessed all revenue streams existing at the date of transition to the new standard and determined that the impact of NZ IFRS
15 is immaterial given the majority of the Banking Group revenues are outside the scope of the standard. The Banking Group has adopted NZ IFRS 15
retrospectively including restatement of prior period comparatives.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the Bank and its subsidiaries.

2.

OTHER OPERATING INCOME

Note(i) Fee and commission revenue
Lending fees
Non-lending fees
Commissions
Funds management income
Fee and commission income
Fee and commission expense
Net fee and commission income(ii) Other income
Net trading gains
Fair value gain / (loss) on hedging activities and financial liabilities
designated at fair value
Net foreign exchange earnings and other financial instruments income
Loss on sale of mortgages to NZ BranchGain on UDC terminated transaction
Insurance proceeds
Sale of OnePath
Sale of Paymark
Other
Other income
Other operating income

8

12
12

3 months to
31 Mar 19
31 Mar 18
NZ$m
NZ$m

6 months to
31 Mar 19
31 Mar 18
NZ$m
NZ$m

8
206
12
63
289
(117)
172

7
196
11
61
275
(114)
161

16
410
23
127
576
(241)
335

15
403
21
122
561
(230)
331

60

35

73

100

(57)

11

(121)

24

3
1
39
6
49
221

46
20
6
72
233

(48)
59
39
10
60
395

124
(1)
20
20
11
174
505

ANZ BANK NEW ZEALAND LIMITED3.

UNAUDITEDSEGMENT REPORTING

The Banking Group is organised into three major business segments for segment reporting purposes - Retail, Commercial and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
Comparative data has been adjusted to reflect a change in the methodology for allocating earnings on capital to each segment. While neutral at the
Banking Group level, this change has impacted net interest income and profit after income tax at the segment level.
RetailRetail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact
centres.
Commercial
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions throughdedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment.
Institutional
The Institutional division services global institutional and corporate customers across three product sets: Transaction Banking, Loans & Specialised
Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance,
debt structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to
managing the Banking Group’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
Operating segment analysis
RetailFor the six months ended 31 March
Net interest income
Fee and commission revenue- Lending fees
- Non-lending fees

Commercial

Institutional

2019

2018

2019

2018

2019

2018

2019

Other
2018

2019

Total
2018

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

926

897

517

495

169

157

20

7

1,632

1,556

8

8

-

-

8

7

-

-

16

15

371

358

9

9

30

36

-

-

410

403

- Commissions

23

21

-

-

-

-

-

-

23

21

- Funds management fees

127

122

-

-

-

-

-

-

127

122

- Fee and commission expense

(241)

(230)

-

-

-

-

-

-

(241)

(230)

Net fee and commission income

288

279

9

9

38

43

-

-

335

331

Other income

7

3

1

-

75

104

(23)

67

60

174

Net income from insurance business

19

67

-

-

-

-

8

14

27

81

Share of associates' profits

4

1

-

-

-

-

-

-

4

1

1,244

1,247

527

504

282

304

5

88

2,058

2,143

499

501

286

279

140

119

24

59

949

958

Operating income
Profit after income tax

Other segment
The Other segment profit after income tax comprises:
For the six months ended 31 MarchCentral functions1
Technology and Group Centre2, 3Economic hedges
Revaluation of insurance policies from changes in interest rates3
Total
1

2

3

2019
NZ$m
195
(90)
(81)
24

2018
NZ$m
14
19
16
10
59

Central functions’ other income for the six months ended 31 March 2018 includes the NZ$20 million insurance proceeds (Note 2 Other Operating Income) that were received from a memberof the Overseas Banking Group.
Technology and Group Centre’s other income for the six months ended 31 March 2019 includes the NZ$59 million gain on sale of OnePath and the NZ$39 million gain on sale of Paymark(Note 2 Other Operating Income).
Amounts for the six months ended 31 March 2019 include the transfer of NZ$86 million of accumulated after tax gains previously recognised in revaluation of insurance policies from changes
in interest rates to Technology and Group Centre. These gains were transferred upon the sale of OnePath.

9

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
4. NET LOANS AND ADVANCES
Note
Overdrafts
Credit cards
Term loans - housing
Term loans - non-housing
Finance lease and hire purchase receivables
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Gross loans and advances
Provision for credit impairment
Net loans and advances

5

31 Mar 19
NZ$m
1,085
1,620
81,19444,803
1,830
130,532(246)
308
130,594(484)
130,11030 Sep 18
NZ$m
905
1,644
78,39544,169
1,791
126,904(239)
313
126,978(512)
126,466

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$1,677 million as at 31 March 2019 (30 September 2018:
NZ$2,210 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

5.

PROVISION FOR CREDIT IMPAIRMENTPROVISION FOR CREDIT IMPAIRMENT – BALANCE SHEET

Provision for credit impairment
Individual provision2
Collective provision3
Total provision for credit impairment
1
2
3

Net loans andadvances
31 Mar 19
30 Sep 18
NZ$m
NZ$m
111
130
311
373
441
484

Off-balance sheet credit
related commitments1
31 Mar 19
30 Sep 18
NZ$m
NZ$m
71
82
71
82

Total
31 Mar 19
30 Sep 18
NZ$m
NZ$m
111
130
382
455
512
566

Collective provision relating to off-balance sheet credit related commitments is included in provisions from 1 October 2018.
Individual provision comprises Stage 3 ECL assessed individually from 1 October 2018.
Collective provision comprises Stage 1, 2 and 3 ECL assessed collectively from 1 October 2018.

Net loansandadvances
NZ$m

Off-balance
sheet credit
relatedcommitments
NZ$m

Total
NZ$m

As at 30 September 2018
NZ IFRS 9 transition adjustment

311
60

71
12

382
72

As at 1 October 2018

371

83

454

Collective provision reconciliation

Collective credit impairment charge / (release)
As at 31 March 2019

2

(1)

1

373

82

455

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
3 months to
Credit impairment charge
New and increased provisions
Write-backs
Recoveries of amounts previously written-off
Individual credit impairment charge
Collective credit impairment charge / (release)
Total credit impairment charge

1031 Mar 19
NZ$m
32
(10)
(5)
17
4
21

31 Mar 18
NZ$m
92
(18)
(12)
62
(2)
60

6 months to
31 Mar 19
NZ$m
64
(20)
(11)
33
1
34

31 Mar 18
NZ$m
132
(30)
(18)
84
(12)
72

ANZ BANK NEW ZEALAND LIMITED6.

UNAUDITEDIMPAIRED AND PAST DUE LOANS
31 Mar 19

30 Sep 18

NZ$m

NZ$m

Loans that are at least 90 days past due but not impaired

275

205

Impaired loans

291

321

31 Mar 19
NZ$m
53,10942,80010,836
783
107,528
912
256
2,240
29
110,965

30 Sep 18
NZ$m51,29841,602
10,224931
104,055
910
517
2,486
40
108,008

31 Mar 19

30 Sep 18

Note

NZ$m

NZ$m

5

123
82

120
-

Other1

105

76

Provisions

310

196

31 Mar 19
NZ$m
17,995
4,164
22,1592,439
24,59830 Sep 18
NZ$m
18,767
3,929
22,696
2,439
25,135

7.

DEPOSITS AND OTHER BORROWINGS

Term deposits
On demand and short term deposits
Deposits not bearing interest
UDC secured investments
Total customer deposits
Certificates of deposit
Deposits from banks and securities sold under repurchase agreements
Commercial paper
Deposits from Immediate Parent Company and NZ Branch
Deposits and other borrowings

8.

PROVISIONS

Employee entitlementsCollective provision on undrawn commitments

1

Other provisions include provisions relating to customer remediation, make-good of leased premises and restructuring (including OnePath separation).

9. DEBT ISSUANCES
Senior debt
Covered bonds
Total unsubordinated debt
Subordinated debt (Additional Tier 1 capital)
Total debt issued

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

11

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDNOTES TO THE INTERIM FINANCIAL STATEMENTS
10. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESFinancial assets and financial liabilities carried at fair value on the balance sheet
The Banking Group categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure fair value:•

Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical financial instruments;•

Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar financial asset or liability,
either directly or indirectly; and•Level 3 – valuations using inputs for the asset or liability that are not based on observable market date (unobservable inputs).

The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Using observable
Quoted market priceUsing unobservable
Total
inputsinputs (Level 3)(Level 1)(Level 2)
31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
AssetsTrading securities
Derivative financial instruments
Investment securities
Investments backing insurance contract liabilities1
Total
Liabilities
Deposits and other borrowings
Derivative financial instruments
Other financial liabilities
Total
1

7,204
11
6,347
13,562

6,795
7
6,457
13,259

339
9,188
9,527

1,229
8,076
44
127
9,476

5
1
6

3
1
4

7,543
9,204
6,348
23,095

8,024
8,086
6,502
127
22,739

15
159
174

10
110
120

2,240
9,803
12,043

2,486
8,084
10,570

3
3

1
1

2,240
9,821
159
12,220

2,486
8,095
110
10,691

Including items reclassified as held for sale.

Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories otherthan those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.
Carrying amount
31 Mar 19
30 Sep 18
NZ$m
NZ$m
Financial assets
Net loans and advances1
Total
Financial liabilities
Deposits and other borrowings2
Debt issuances1
Total
1
2

12

Fair value
31 Mar 19
30 Sep 18
NZ$m
NZ$m

130,110130,110

126,466
126,466

130,553
130,553

126,745
126,745

108,725
24,598133,323

105,522
25,135
130,657

108,826
24,862
133,688

105,592
25,462131,054

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

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

11. COMMITMENTS AND CONTINGENT LIABILITIESCredit related commitments and contingencies
Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total

31 Mar 19
NZ$m

30 Sep 18
NZ$m26,903
1,351
1,460
29,71427,245
1,531
1,329
30,105The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore thesetransactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As thefacilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
There are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have notdisclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice
the interests of the Banking Group.
In recent years there has been an increase in the number of matters on which the Banking Group engages with its regulators. There have beensignificant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement actions (whether by court action
or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions globally. The nature of these investigations andreviews can be wide ranging and, for example, may include a range of matters including responsible lending practices, product suitability anddistribution, interest and fees and the entitlement to charge them, wealth advice, insurance distribution, pricing, competition, conduct in financial
markets and capital market transactions, reporting and disclosure obligations and product disclosure documentation. The Banking Group has received
various notices and requests for information from its regulators as part of both industry-wide and Banking Group-specific reviews and has also madedisclosures to its regulators at its own instigation. There may be exposures to customers which are additional to any regulatory exposures. These could
include class actions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such
reviews and possible exposures remain uncertain.
Warranties and indemnities
The Banking Group has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments.

12. DIVESTMENTS
OnePath and Paymark
On 30 November 2018, the Banking Group sold OnePath to Cigna Corporation and on 11 January 2019, the Banking Group sold its 25% shareholding
in Paymark to Ingenico Group. The Banking Group recognised net gains on sale of NZ$59 million and NZ$39 million respectively, which are included
in other operating income.
Assets and liabilities sold
NZ$m
Investments backing insurance contract liabilities
Other assets, net of amounts payable to the Bank

101
6

Life insurance contract assets

675

Investments in associates - Paymark

7

Goodwill and other intangible assets

101

Total assets

890

Deposits and other borrowings (deposits with the Bank)(50)

Current tax liabilities

18

Deferred tax liabilities

178

Payables and other liabilities

146

Provisions

2

Total liabilities

294

Net assets sold

596

13

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES
Guarantees
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. Thisobligation is 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’s address for service is Level 9, 34 Shortland Street, Auckland, New Zealand. The Covered Bond Guarantor is
not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The covered bonds have been
assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 11 for further details, and topage 15 for the amount of assets of the ANZ Covered Bond Trust pledged as security for covered bonds.
No other material obligations of the Bank are guaranteed as at 17 May 2019.
Changes in the Bank’s Board of Directors
There have been no changes to the Directors of the Bank since 30 September 2018, the balance date of the last full year disclosure statement.
Conditions of registration
Changes between 30 September 2018 and 31 March 2019
The conditions of registration applying to the Bank were amended on 1 October 2018, to reflect changes in liquidity requirements, and again on 1
January 2019 to reflect changes to the loan-to-valuation (LVR) requirements applicable to residential mortgage lending. These amendments refer torevised versions of the RBNZ Banking Supervision Handbook documents Liquidity Policy Annex: Liquid Assets (BS13A) and Framework for Restrictions on
High-LVR Residential Mortgage Lending (BS19) respectively. The 1 January 2019 amendments also detailed specific sections of the RBNZ Banking
Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach) (BS2B) to be complied with.
Non-compliance
In April 2019, the Bank informed RBNZ that in the course of a self-review, the Bank discovered that it had not been using an approved model for the
calculation of the operational risk capital (ORC) requirement since December 2014.
ORC was calculated for the Bank by the Ultimate Parent Bank. A failure of systems and controls, as well as no verification being undertaken by the
Bank, meant that the Ultimate Parent Bank decommissioned the RBNZ approved model without the Bank ensuring that it had the necessary
regulatory approvals in place to move to a new model. Calculation of the ORC requirement since December 2014 was based on a previous RBNZ
approved ORC model output last run in September 2014, with an adjustment to reflect the growth of the Banking Group’s business. The Bank accepts
that this was not in compliance with condition of registration 1B.
The adoption of this calculation and decommissioning of the authorised ORC model occurred following development of a new ORC model in 2015 to
be used by the Overseas Banking Group that better reflected the risks in the business. This new ORC model was approved by APRA in September 2015
and subsequently submitted to RBNZ for approval in June 2016. In 2016, RBNZ suspended approval of capital models and, the new ORC model has
not been approved.
The RBNZ decided that the Banking Group’s ORC requirement will be calculated in accordance with the RBNZ Banking Supervision Handbook
document Capital Adequacy Framework (Standardised Approach) (BS2A). As a result, as at 31 March 2019, the Banking Group’s ORC requirement has
increased by NZ$277 million, and its capital ratios have decreased by 0.4% for common equity tier 1 capital and 0.6% for total capital. Restatement ofprior period comparatives is not required.
The Bank is working to provide the RBNZ with further information to show there are no other similar capital model compliance issues. A governanceframework including appropriate systems and controls has been put in place to ensure the Ultimate Parent Bank cannot decommission an RBNZ
approved model without required approvals.
Changes since 31 March 2019
Effective 15 May 2019, the Bank’s conditions of registration have been amended to require the Banking Group’s ORC requirement to be calculated inaccordance with BS2A.
Effective 30 June 2019, the Bank’s conditions of registration have been amended to include a supervisory adjustment to the Banking Group’s capital
adequacy calculations. This supervisory adjustment introduces minimum pre-scalar risk weightings for residential mortgage exposures and corporate
farm lending exposures and is expected to increase risk weighted assets by approximately NZ$10.1 billion, based on 31 March 2019 exposures.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effecton the Bank or the Banking Group is included in Note 11 Commitments and Contingent Liabilities.

14

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Credit rating
As at 17 May 2019 the Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.
The Bank’s credit ratings are:Rating Agency
S&P Global Ratings
Fitch Ratings
Moody’s Investors Service

Credit Rating
AAAAA1

Qualification
Outlook Negative
Outlook Stable
Outlook Stable

Directors’ statements
The Directors' statement is included on page 32.
Auditor’s review report
The auditor’s review report is included on page 33.

B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2019
Total interest earning and discount bearing assets
Total interest and discount bearing liabilities
Total amounts due from related entities
Total amounts due to related entities

NZ$m
149,092
126,189
4,288
6,298

Assets charged as security for liabilities
These amounts exclude the amounts disclosed as collateral paid on the balance sheet that relate to derivative liabilities. The terms and conditions of
the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association
Master Agreement.
Assets charged as security for liabilities include the following types of instruments:• Securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements.
• UDC secured investments are secured by a security interest granted under the trust deed over all of UDC’s present and future assets andundertakings, to Trustees Executors Limited, as supervisor. The assets subject to the security interest comprise mainly loans to UDC's customers
and certain plant and equipment. The security interest secures all amounts payable by UDC on the UDC secured investments and all othermoneys payable by UDC under the trust deed.
• Specified residential mortgages provided as security for notes and bonds issued to investors as part of the Bank’s covered bond programme.
The carrying amounts of assets pledged as security are as follows:
As at 31 March 2019
Securities sold under agreements to repurchase
Assets pledged as collateral for UDC secured investments
Residential mortgages pledged as security for covered bonds

NZ$m
151
3,374
10,330Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 Other Operating Income. The Banking Group does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, all other items of other income (all in Note 2 Other Operating Income), net income from insurance business and share of
associates’ profit (both shown on the income statement).

15

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

As at 31 March 2019
New Zealand residents
Agriculture
Forestry and fishing, agriculture services
Manufacturing
Electricity, gas, water and waste services
Construction
Wholesale trade
Retail trade and accommodation
Transport, postal and warehousing
Finance and insurance services
Public administration and safety1
Rental, hiring & real estate services
Professional, scientific, technical, administrative and support services
Households
All other New Zealand residents2

Loans andadvances3
NZ$m

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

Total
NZ$m

17,906
1,392
2,936
1,306
1,866
1,496
2,970
1,335
827
248
32,786
1,217
59,170
2,418

85
7
197
437
28
59
31
94
5,430
8,606
737
9
199
196

1,502
261
1,709
1,600
977
1,736
1,034
755
1,646
1,070
3,466
582
11,317
1,942

19,493
1,660
4,842
3,343
2,871
3,291
4,035
2,184
7,903
9,924
36,9891,808
70,686
4,556

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

127,873

16,11529,597

173,585

283
1,557
819

13,017
5
91

117-

13,417
1,562
910

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

2,659
130,532(484)
130,048(246)
308
130,110

13,11329,22829,22829,228117
29,714(82)
29,632
29,632

15,889189,474(566)
188,908(246)
308
188,970

1
2
3
4

16

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

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Additional information on concentrations of funding
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
As at 31 March 2019

Note

NZ$m

7

107,528

Funding composition
Customer deposits
Wholesale funding
Debt issuances

24,598

Certificates of deposit and commercial paper

3,152

Other borrowings

285

Total wholesale funding

28,035

Total funding

135,563

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

3,935

Manufacturing

2,128

Construction

2,128

Wholesale trade

1,573

Retail trade and accommodation

1,618

Financial and insurance services

12,136

Rental, hiring and real estate services

3,058

Professional, scientific, technical, administrative and support services

5,377

Public administration and safety

1,286

Arts, recreation and other services

1,966Households

57,902All other New Zealand residents1

4,043
97,150

Customer deposits by industry - overseas
Households
All other

9,821
557
10,378

Total customer deposits

107,528

Wholesale funding (financial and insurance services industry)
New Zealand

7,484

Overseas

20,551

Total wholesale funding

28,035

Total funding

135,563

Concentrations of funding by geography
New ZealandAustralia

104,634
824

United States

13,360Europe9,454

Other countries

7,291

Total funding

135,563

1

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

17

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

As at 31 March 2019
AssetsCash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Other financial assets
Total financial assets
Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Other financial liabilities
Total financial liabilities
Hedging instruments
Interest sensitivity gap

Total
NZ$m

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

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

2,697
630
2,370
7,543
9,204
6,348
130,110729
159,631

2,355
2,370
503
253
63,99369,474107
15
11,368
11,490388
149
24,96825,505928
1,210
22,36324,501

5,617
4,720
7,785
18,122

342
630
9,204
1
(367)
729
10,5392,619
519
110,965
9,821
24,598697
149,219
10,412784
519
71,5433,263
159
76,26821,217
14,423

14,102
1,739
15,841(8,059)(12,410)

10,602443
11,045(7,206)
7,254

2,469
4,969
7,438
(11,841)
5,222

1,413
14,184
15,597
5,889
8,414

1,835
10,836
9,821
538
23,030(12,491)

Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2019 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts represent principal
and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.

On demand
NZ$mLess than
3 months
NZ$m

3 to 12months
NZ$m

1 to 5
years
NZ$m

After
5 years
NZ$m

Total
NZ$m

Settlement balances payable
Collateral received

1,470
-

1,163
519

-

-

-

2,633
519

Deposits and other borrowings

53,84528,38626,0804,226-

112,537

Derivative financial liabilities (trading)

-

7,666

-

-

-

7,666

Debt issuances1

-

37

2,309

19,6604,165

26,171Other financial liabilities

-

95

6

138

22

261

As at 31 March 2019

Derivative financial instruments(balance sheet management)- gross inflows

-

1,049

2,389

8,731

795

12,964- gross outflows-(1,156)(2,739)(9,408)(832)(14,135)

1

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

At 31 March 2019, NZ$67 million of the Banking Group’s NZ$409 million of non-credit related commitments and all NZ$29,714 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which the Banking Group may be required to
pay.

18

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking
Group’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity scenario metrics.
As at 31 March 2019
Cash and balances with central banks
Certificates of deposit
Government, local body stock and bonds
Reserve Bank bills
Other bonds
Total liquidity portfolio

NZ$m
2,273
144
7,645
55
5,663
15,780

The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into repurchasetransactions with a value of NZ$7,434 million at 31 March 2019.
Reconciliation of mortgage related amounts
As at 31 March 2019
Term loans - housing1
Less: fair value hedging adjustment
Less: housing loans made to corporate customers
On-balance sheet residential mortgage exposures as per LVR analysis
Add: off-balance sheet residential mortgage exposures as per LVR analysis
Total residential mortgage exposures subject to the IRB approach and as per LVR analysis
1

Note
4

B4
B4
B4

NZ$m
81,194(5)(2,176)79,013
8,242
87,255

Corporate
exposures
NZ$m
182
88
270

Total
NZ$m
382
72
454

217
53
270

371
83
454

Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.

B3. ASSET QUALITY
Collectively assessed loss allowances

Collectively assessed loss allowances - Total
As at 30 September 2018 (NZ IAS 39)
NZ IFRS 9 transition adjustment
As at 1 October 2018 (NZ IFRS 9)
Collectively assessed loss allowances - recognised in:
Net loans and advances
Provisions
As at 1 October 2018 (NZ IFRS 9)

Note
1,5

Residential Other retailmortgages
exposures
NZ$m
NZ$m
82
118
(36)
20
46
138

46
46

108
30
138

19

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Movements in components of loss allowance - total

Net loans and advances - total
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019

Stage 1
NZ$m
160
19
(22)
(3)
157

Off-balance sheet credit related commitments - total
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019

59
3
(7)
(4)
55

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
171
40
130
(20)
2
(1)
21
2
65
(20)
(11)
1
4
33
(58)
11
(5)
172
44
111

22
(3)
6
3
25

2
2

Total
NZ$m
501
66
(20)
(11)
35
(58)
11
(5)
484

-

83
(1)
(1)
82

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
7,448
331
321
1,298
193
129
(500)
(69)
(100)
(58)
8,246
455
292
172
44
111

Total
NZ$m
126,978
13,105(9,431)(58)
130,594484

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

Gross loans and advances - total
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019

Stage 1
NZ$m
118,878
11,485(8,762)
121,601
157

Off-balance sheet credit related commitments - total
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019

28,882282(1,933)
27,231
55

1,198
1,284
(80)
2,402
25

11
60
(3)
68
2

14
7
(8)
13
-

30,105
1,633(2,024)29,71482

Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances on gross loans and advances have remained stable at approximately 0.4% of gross loans and advances. Loss allowances havedecreased by NZ$18 million (3%) driven by NZ$58 million of amounts written off. The remaining NZ$40 million increase in loss allowances is driven by
an increase in past due but not impaired assets, which have increased from 1.5% to 1.8% of gross exposures.

20

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Movements in components of loss allowance - residential mortgages

Net loans and advances - residential mortgages
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019

Stage 1
NZ$m
13
7
(7)
13

-

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
26
7
21
(8)
1
10
2
2
(2)
2
3
28
10
21

-

-

Total
NZ$m
67
7
(2)
5
72

-

-

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
1,948
203
25
303
150
18
(276)
(41)
(16)
1,975
312
27
28
10
21

Total
NZ$m
76,1688,307(5,462)79,01372

Impacts of changes in gross financial assets on loss allowances - residential mortgages

Gross loans and advances - residential mortgages
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019

Stage 1
NZ$m
73,992
7,836(5,129)76,699
13

8,206
18
(11)
8,213
-

26
3
29
-

-

-

8,232
21
(11)
8,242
-

Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$5 million (7.5%) increase in loss allowances on residential mortgage exposures is driven primarily by an increase in past due but not impaired
exposures, which have increased from 1.3% to 1.6% of gross exposures. Overall loss allowances and individually impaired exposures remain low,
reflecting that approximately 95% of on-balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80% (refer to page
28).

21

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Movements in components of loss allowance - other retail exposures

Net loans and advances - other retail exposures
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019

Stage 1
NZ$m
28
8
(9)
(1)
27

18
3
(3)
18

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
55
25
11
(8)
10
44
(5)
(10)
2
29
(38)
10
57
25
12

10
(3)
3
10

2
2

Total
NZ$m
119
45
(5)
(10)
30
(38)
10
121

-

30
30

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
315
48
25
32
16
53
(35)
(18)
(13)
(38)
312
46
27
57
25
12

Total
NZ$m
3,676
441
(358)
(38)
3,721
121

Impacts of changes in gross financial assets on loss allowances - other retail exposures

Gross loans and advances - other retail exposures
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019

Stage 1
NZ$m
3,288
340
(292)
3,336
27

4,859
(612)
4,247
18

54
175
229
10

4
59
63
2

-

4,917
234
(612)
4,539
30

Explanation of how changes in the gross carrying amounts of other retail mortgages contributed to changes in loss allowance
The NZ$2 million (1.7%) increase in loss allowances was primarily driven by Stage 2 and individually assessed exposures, reflecting the increase in past
due but not impaired assets and impaired assets respectively, offset by amounts written off.

22

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Movements in components of loss allowance - corporate exposures

Net loans and advances - corporate exposures
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2018
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 31 March 2019

Stage 1
NZ$m
119
4
(6)
(2)
117

41
(4)
(4)
37

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
90
8
98
(4)
1
(1)
1
19
(13)
(1)
(3)
1
4
(20)
1
(5)
87
9
78

12
3
3
15

-

Total
NZ$m
315
14
(13)
(1)
(20)
1
(5)
291

-

53
(1)
(1)
52

Total
NZ$m
47,134
4,357(3,611)(20)
47,860291

16,956
1,378(1,401)
16,93352

Impacts of changes in gross financial assets on loss allowances - corporate exposures

Gross loans and advances - corporate exposures
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 2019

Stage 1
NZ$m
41,5983,309(3,341)
41,566
117

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
5,185
80
271
963
27
58
(189)
(10)
(71)
(20)
5,959
97
238
87
9
78

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2018
Additions
Deletions
Amounts written off
As at 31 March 2019
Loss allowance as at 31 March 201915,817264(1,310)14,771
37

1,118
1,106
(80)
2,144
15

7
1
(3)
5
-

14
7
(8)
13
-

Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$25 million (6.8%) decrease in loss allowances on corporate exposures was primarily driven by the NZ$33 million reduction in individually
impaired assets, which includes NZ$20 million of amounts written off.

23

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Past due assets and other asset quality information
As at 31 March 2019
Past due assets
Less than 30 days past due
At least 30 days but less than 60 days past due
At least 60 days but less than 90 days past due
At least 90 days past due
Total past due but not impaired
Other asset quality information
Undrawn facilities with impaired customers
Other assets under administration

Residential
mortgages
NZ$m

Other retail
exposures
NZ$m

Corporate
exposures
NZ$m

Total
NZ$m

716
191
131
193
1,231

337
47
22
44
450

572
92
3
38
705

1,625
330
156
275
2,386

8

2

13
-

13
10

The Banking Group does not have any loans and advances designated at fair value.

B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND
REGULATORY LIQUIDITY RATIOSRBNZ Basel III capital ratios
As at 31 March
Common equity tier 1 capital
Tier 1 capital
Total capital
Buffer ratio

Banking Group
RBNZ minimum
2019
4.5%
11.4%
6.0%
14.6%
8.0%
14.6%
2.5%
6.6%

2018
11.0%
14.4%
14.4%
6.4%

Bank
(Solo Consolidated)
2019
2018
10.2%
9.5%
13.5%
13.0%
13.5%
13.0%
n/a
n/a

Capital of the Banking GroupAs at 31 March 2019Tier 1 capital
Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
Retained earnings (net of appropriations)
Accumulated other comprehensive income and other disclosed reserves
Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
Deferred tax assets less deferred tax liabilities relating to temporary differences
Cash flow hedge reserve
Expected losses to the extent greater than total eligible allowances for impairment
Common equity tier 1 capital
Additional tier 1 capitalPreference shares1
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)2
NZD 1,003m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)2NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)2
Retained earnings of the Bonus Bonds Scheme 3Less deductions from additional tier 1 capital
Surplus retained earnings of the Bonus Bonds Scheme 3
Additional tier 1 capital
Total tier 1 capital
Tier 2 capital
Total capital
1
2
3

24

Classified as equity on the balance sheet under NZ GAAP.
Classified as a liability on the balance sheet under NZ GAAP.
Bonus Bonds Scheme is not consolidated on the balance sheet under NZ GAAP but is classified as AT1 capital for capital adequacy purposes as set out in BS2B.

NZ$m

11,5881,667
36(3,279)
(23)
(30)
(276)
9,683
300
500
1,003
938
56
(20)
2,777
12,46012,460ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Capital requirements of the Banking GroupAs at 31 March 2019
Total credit risk
Operational risk
Market risk
Agri business supervisory adjustment
Total
1

Total
exposures
after credit
risk mitigation
NZ$m
186,426n/an/an/a
186,426

Risk weighted
exposure or
implied risk
weighted Total capital
exposure1 requirement
NZ$m
NZ$m
68,955
5,517
9,493
759
4,688
375
2,118
169
85,254
6,820

The calculation of capital requirements for total credit risk weighted includes a scalar of 1.06 in accordance with the Bank's Conditions of Registration.

Capital structure
Ordinary shares- common equity tier 1 capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On a show 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 shallhave one vote for each share held.
Preference shares – additional tier 1 capital
All preference shares were issued by the Bank to the Immediate Parent and do not carry any voting rights. The preference shares are wholly classified
as equity instruments as there is no contractual obligation for the Bank to either deliver cash or another financial instrument or to exchange financial
instruments on a potentially unfavourable basis. The key terms of the preference shares are as follows:
Dividends are payable at the discretion of the directors of the Bank and are non-cumulative. The Bank must not resolve to pay any dividend or makeany other distribution on its ordinary shares until the next preference dividend payment date if the dividend on the preference shares is not paid.
Should the Bank elect to pay a dividend, the dividend is based on a floating rate equal to the aggregate of the New Zealand 6 month bank bill rateplus a 325 basis point margin, multiplied by one minus the New Zealand company tax rate, with dividend payments due on 1 March and 1 September
each year.
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of thepreference shares:• on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of the preference shares or• on any dividend payment date on or after 2 September 2019 or• on any date if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.
The preference shares may be redeemed for nil consideration should a non-viability trigger event occur.
The preference shares qualify as AT1 capital for RBNZ’s capital adequacy purposes.
In the event of liquidation, holders of preference shares are entitled to available subscribed capital per share, pari passu with all holders of existing
preference shares and ANZ capital notes but in priority to all holders of ordinary shares. They have no entitlement to participate in further distributionof profits or assets.
Additional tier 1 (AT1) capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. The AT1 capital notes rank equally with each other and with
the Bank’s preference shares. Holders of AT1 capital notes do not have any right to vote in general meetings of the Bank.
As at 31 March 2019, ANZ NZ CN carried a BB+ credit rating from S&P Global Ratings.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) or the Ultimate Parent Bank (ANZ NZ CN).
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions(including regulatory requirements).
Where specified, AT1 capital notes provide the Bank with an early redemption or conversion option on a specified date and in certain othercircumstances (such as a tax or regulatory event). This option is subject to RBNZ’s and, in respect of the ANZ NZ CN, APRA’s prior written approval.

25

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Each of the AT1 capital notes will immediately convert into a variable number of ordinary shares of the:• Bank based on the net assets per share in the Bank’s most recently published Disclosure Statement (ANZ NZ ICN and ANZ NZ ICN2); or• Ultimate Parent Bank based on the average market price of the Ultimate Parent Bank’s ordinary shares immediately prior to conversion less a 1%
discount, subject to a maximum conversion number (ANZ NZ CN)
if:• the Banking Group’s, or in the case of the ANZ NZ CN the Overseas Banking Group’s Level 2, common equity tier 1 capital ratio is equal to or lessthan 5.125% - known as a Common Equity Capital Trigger Event; or• RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert or
write-off the notes, or in the case of the ANZ NZ CN, APRA notifies the Ultimate Parent bank that, without the conversion or write-off of certain
securities or a public injection of capital (or equivalent support), it considers that the Ultimate Parent Bank would become non-viable – known as a
Non-Viability Trigger Event.
Where specified, AT1 capital notes mandatorily convert into a variable number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) (basedon the net assets per share in the Bank’s recently published Disclosure Statement) or Ultimate Parent Bank (ANZ NZ CN) (based on the average market
value of the shares immediately prior to conversion less a 1% discount):• on a specified mandatory conversion date; or• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
The table below show the key details of the AT1 capital notes on issue at 31 March 2019:
IssuerIssue dateIssue amount
Face value
Interest frequency
Interest rate

ANZ NZ CN
The Bank
31 March 2015
NZ$500 million
NZ$1
Quarterly in arrears
Fixed at 7.2% p.a. until 25
May 2020. Resets in May
2020 to a floating rate: (New
Zealand 3 month Bank Billrate + 3.5%)

Issuer's early redemption or conversion option
Mandatory conversion dateCommon equity capital trigger event
Non-viability trigger event
Carrying value as at 31 March 2019 (net of issue costs)

ANZ NZ ICN
The Bank
5 March 2015
NZ$1,003 million
NZ$100Semi-annually in arrears

ANZ NZ ICN2The Bank
15 June 2016
NZ$938 million
NZ$100Semi-annually in arrears

Floating rate: (New Zealand Floating rate: (New Zealand 6
6 month Bank Billmonth Bank Billrate + 3.8%)
rate + 6.29%)

25 May 2020

24 March 2023

25 May 2022
Yes
Yes
NZ$498 million

24 March 2025
Yes
Yes
NZ$1,003 million

15 June 2026 and each 5th
anniversary
n/a
Yes
Yes
NZ$938 million

Reserves – common equity tier 1 capital
Common equity tier 1 capital includes the investment securities revaluation reserve of NZ$6 million as at 31 March 2019.
Retained earnings of the Bonus Bonds Scheme– additional tier 1 capital
The Bonus Bonds Scheme is consolidated for capital adequacy purposes, and its retained earnings are included in additional tier 1 capital less 8.5% of
the consolidated risk-weighted assets that relate to the Bonus Bonds Scheme.

26

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating

As at 31 March 2019
Corporate
0-2
3-4
5
6
7-8
Default
Total corporate exposures
Sovereign0
1-8
Total sovereign exposures
Bank
0
1
2-4
5-8
Total bank exposures
Residential mortgages
0-3
4
5
6
7-8
Default
Total residential mortgages exposures
Other retail
0-2
3-4
5
6
7-8
Default
Total other retail exposures
Total credit risk exposures subject
to the IRB approach

Probabilityof default%

Exposure at
Total valuedefault
NZ$m
NZ$m

Exposureweighted
LGD used
for thecapitalcalculation%

Exposureweighted
risk weight%

Risk
Minimum
weighted
capitalassets requirement
NZ$m
NZ$m

0.06
0.32
1.00
2.23
11.63
100.001.77

71,68744,491
14,886
4,379
2,404
326
138,173

4,950
23,596
12,979
3,998
1,999
320
47,842

60
36
33
34
39
45
38

32
41
58
78
155
183
53

1,697
10,196
8,036
3,287
3,278
619
27,113

136
816
643
263
262
49
2,169

0.01
0.01
0.01

24,406860
25,266

11,053842
11,895

5
5
5

1
1
1

136
11
147

11
1
12

0.03
0.03
0.12
8.35
0.04

30
1,332,653
70,5942
1,403,279

30
9,446
744
2
10,222

65
57
65
26
57

15
25
39
106
26

5
2,509
306
2
2,822

201
25
226

0.20
0.46
0.92
1.98
4.85
100.000.90

25,60535,595
21,136
4,318
324
277
87,25525,96935,74821,246
4,324
324
276
87,887

12
18
23
26
27
19
18

5
15
31
60
94
18
18

1,478
5,637
6,994
2,730
323
53
17,215

118
451
560
218
26
4
1,377

0.10
0.27
1.05
2.32
8.85
100.00
2.69

537
4,724
1,988
2,006
1,352
87
10,694

540
4,810
1,936
2,045
1,390
87
10,808

77
78
72
69
85
76
76

50
55
74
88
133
56
74

284
2,786
1,527
1,915
1,965
51
8,528

23
223
122
153
157
4
682

1.15

1,664,667

168,65429

31

55,8254,466

27

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURESIRB credit exposures include the following undrawn commitments and other off-balance sheet amounts:

As at 31 March 2019
Undrawn commitments and other off-balance sheet amounts excluding market related contracts
Corporate
SovereignBank
Residential mortgages
Other retailMarket related contracts
Corporate
SovereignBank
Residential mortgages
Other retail

Total value
NZ$m

Exposure atdefault
NZ$m

12,066
341
1,670
8,242
5,431

11,166
325
1,347
8,657
5,459

90,753
13,307
1,395,538
-

1,736
128
3,915
-

Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn residential mortgage loans as wellas commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance Off-balance
sheet
sheet
NZ$m
NZ$m

As at 31 March 2019
LVR range
Does not exceed 60%
Exceeds 60% and not 70%
Exceeds 70% and not 80%
Does not exceed 80%
Exceeds 80% and not 90%
Exceeds 90%
Total

39,406
17,926
17,53374,8652,913
1,235
79,013

5,623
1,339
969
7,931
139
172
8,242

Total
NZ$m
45,02919,26518,502
82,796
3,052
1,407
87,255Specialised lending subject to the slotting approach

As at 31 March 2019On-balance sheet exposures
StrongGood
Satisfactory
Weak
Default

As at 31 March 2019Off-balance sheet exposures
Undrawn commitments and other off-balance sheet exposures

Total
exposures
after
credit risk
mitigation
NZ$m

Risk weight
%

4,957
5,808
393
154
37

70
90
115
250
-

3,678
5,541
480
409
-

294
443
38
34
-

Exposure atdefault
NZ$m

Averagerisk weight%Riskweighted
assetsNZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

1,435

91

1,378

110

Minimum
Risk
Pillar 1
weighted
capitalassets requirement
NZ$m
NZ$m

The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to thefollowing external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.

28

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

Credit risk exposures subject to the standardised approach

Total
exposure
after credit
risk Average risk
mitigation
weight
NZ$m%

As at 31 March 2019On-balance sheet exposures
Cash and gold bullion
Sovereign and central banks
Multilateral development banks and other international organisations
Public sector entities
Banks
Corporate
Residential mortgages
Past due assets
Other assets

As at 31 March 2019Off-balance sheet exposures
Undrawn commitments and other off-balance sheet
exposuresMarket related contracts
Foreign exchange contracts
Interest rate contracts
Other - OTC etc

Risk
weighted
exposure
NZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

10
150
100

119
1
1,070

10
86

Creditequivalent Average risk
amountweightNZ$m%

Risk
weighted
exposure
NZ$m

Minimum
Pillar 1
capitalrequirement
NZ$m

293
1,891
1,085
1
1,009

Total
exposure or
principal
amount
NZ$m

Averagecreditconversion
factor
%

605

70

421

97

434

35

6
245,396
-

n/a
n/a
n/a

286
-

138
5
-

15
-

1
-

Risk weight
%
300
400

Risk
weighted
exposure
NZ$m
5

Minimum
Pillar 1
capitalrequirement
NZ$m-

Equity exposures

As at 31 March 2019
Equity holdings (not deducted from capital) that are publicly traded
All other equity holdings (not deducted from capital)

Total
exposure
NZ$m
1

Credit risk mitigation
As at 31 March 2019, the Banking Group had NZ$876 million of Corporate exposures covered by guarantees where the presence of the guarantees
was judged to reduce the underlying credit risk of the exposures. Information on the total value of exposures covered by financial guarantees andeligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk exposures is not considered tobe material.
Operational risk
The Banking Group is accredited by the Bank’s conditions of registration to use the Advanced Measurement Approach (AMA) for its ORC requirement.
However, as explained in Note B1, due to the Banking Group not having an approved internal model, RBNZ has decided that the Banking Group’s ORC
requirement will be calculated in accordance with BS2A. As at 31 March 2019, the Banking Group had an implied risk weighted exposure of NZ$9,493
million for operational risk and an operational risk capital requirement of NZ$759 million.

29

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDREGISTERED BANK DISCLOSURES
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures are for the six
months ended 31 March 2019.

As at 31 March 2019
Interest rate risk
Foreign currency risk
Equity risk

Implied risk weighted
exposure
Period end
Peak
NZ$m
NZ$m
4,577
6,593
110
156
1
1

Aggregate capital charge
Period end
Peak
NZ$m
NZ$m
366
527
9
12
-

Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions ofRegistration. Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group include
pension risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk and software risk. The Banking Group's internal capital allocation forthese other material risks is NZ$282 million. (March 2018: NZ$399 million). Insurance, value in-force and business retention risks are no longer included
following the sale of OnePath.
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
As at 31 March
Common equity tier 1 capital
Tier 1 capital
Total capital

Ultimate Parent Bank
Overseas Banking Group (Extended Licensed Entity)
2019
2018
2019
2018
11.0%
10.9%
11.5%
11.2%
12.9%
12.9%
13.4%
13.2%
14.9%
15.1%
15.3%
15.3%

The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal tothat specified under the Basel III capital framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets. There are however small portfolios(mainly retail and local corporates in Asia Pacific) where the Overseas Banking Group applies the standardised approach.
• the AMA for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 31 March 2019 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2019. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2019, 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.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risks. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. The minimum amount of core funding is currently
set at 75% of a bank’s total loans. The Banking Group must maintain its core funding ratio above 75% on a daily basis. This measure of the core funding
ratio is averaged over the quarter.
For the three months ended
Quarterly average 1-week mismatch ratio
Quarterly average 1-month mismatch ratio
Quarterly average core funding ratio

30

31 Mar 19
5.6%
4.7%
88.8%

31 Dec 18
5.0%
4.8%
88.3%

ANZ BANK NEW ZEALAND LIMITEDUNAUDITED

B5. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit risk to individual counterparties at the reporting date on the basis of actual exposures. Peakend-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting date forthe previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:• connected persons (ie other members of the Overseas Banking Group and Directors of the Bank);• the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and• any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.

Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capitalwith a long-term credit rating of A- or A3 or above, or its equivalent- 10% to less than 15% of CET1 capital- 15% to less than 20% of CET1 capital- 20% to less than 25% of CET1 capitalwith a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1
with a long-term credit rating of A- or A3 or above, or its equivalent- 10% to less than 15% of CET1 capital- 15% to less than 20% of CET1 capitalwith a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent

As at
31 Mar 19

Peak end of
day over 6
months to
31 Mar 19

3
3
3
-

3
3
1
1
1
-

2
2
1
1
-

3
3
3
-

B6. INSURANCE BUSINESSThe Banking Group previously conducted insurance business through its subsidiary OnePath. OnePath was sold to Cigna Corporation on 30
November 2018, and as at 31 March 2019, the Banking Group does not conduct any insurance business. The Banking Group continues to market anddistribute life insurance products provided by OnePath.

31

ANZ BANK NEW ZEALAND LIMITED

DIRECTORS' STATEMENT
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:•

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

Over the six months ended 31 March 2019, after due enquiry, each Director believes that:•

ANZ Bank New Zealand Limited has complied with all Conditions of Registration that applied during that period except as noted on page 14;•

Credit exposures to connected persons were not contrary to the interests of the Banking Group; and•ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that thosesystems were being properly applied.

This Disclosure Statement is dated, and has been signed by all Directors of the Bank on, 17 May 2019.

Antony Carter

Shayne ElliottDavid Hisco

Michelle Jablko

Rt Hon Sir John Key, GNZM ACMark Verbiest

Joan Withers

32

ANZ BANK NEW ZEALAND LIMITEDINDEPENDENT AUDITOR’S REVIEW REPORTTO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITEDREPORT ON THE HALF YEAR DISCLOSURE STATEMENTCONCLUSION
Based on our review of the interim financial statements and the registered bank disclosures (together referred to as ‘the disclosure statement’) of
ANZ Bank New Zealand Limited and its subsidiaries (the Banking Group) on pages 3 to 31, nothing has come to our attention that causes us tobelieve that:•the interim financial statements on pages 3 to 13 do not present fairly in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34
Interim Financial Reporting, in all material respects, the Banking Group’s financial position as at 31 March 2019 and its financial performanceand cash flows for the 6 month period ended on that date;•

the registered bank disclosures in Sections B2, B3, B5 and B6 disclosed in accordance with schedules 5, 7, 13, 16 and 18 of the Registered
Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly
state, in all material respects, the matters to which they relate in accordance with those schedules; and•the registered bank disclosures relating to capital adequacy and liquidity requirements in section B4 are not, in all material respects,
disclosed in accordance with the applicable clauses of schedule 9 and 11 of the Order.

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

the interim financial statements formed of:•the consolidated balance sheet as at 31 March 2019;•the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the 6 month period
then ended; and•notes, including a summary of significant accounting policies and other explanatory information.

the registered bank disclosures prescribed in Schedules 5, 7, 9, 11, 13, 16 and 18 of the Order.

BASIS FOR CONCLUSION
A review of the half year disclosure statement in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of ANZ Bank New Zealand Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of theannual financial statements.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These mattershave not impaired our independence as reviewer of the Banking Group. The firm has no other relationship with, or interest in, the Banking Group.
EMPHASIS OF MATTER
We draw attention to sections B1 and B4 of the disclosure statement which describe the Banking Group’s identification of historic non-compliancewith the Operational Risk Capital calculation requirements of its Conditions of Registration, and the steps that have been agreed between the Banking
Group and the Reserve Bank of New Zealand to calculate and report Operational Risk Capital using a standardised approach under RBNZ Banking
Handbook document Capital Adequacy Framework (Standardised Approach) (BS2A) as at 31 March 2019. Our opinion is not modified in respect of thismatter.
USE OF THE INDEPENDENT REVIEW REPORTThis independent review report is made solely to the shareholder of the Banking Group. Our review work has been undertaken so that we might state
to the shareholder those matters we are required to state to them in the independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the shareholder for our review work, this independent review
report, or any of the opinions we have formed.

33

ANZ BANK NEW ZEALAND LIMITEDINDEPENDENT AUDITOR’S REVIEW REPORTRESPONSIBILITIES OF THE DIRECTORS FOR THE HALF YEAR DISCLOSURE STATEMENTThe Directors, on behalf of the Banking Group, are responsible for:

the preparation and fair presentation of the half year disclosure statement in accordance with IAS 34, NZ IAS 34 and Schedules 3, 5, 7, 13, 16 and
18 of the Order;the preparation and fair presentation of the registered bank disclosures in regards to capital adequacy and liquidity requirements in accordancewith the applicable clauses of Schedule 9 and 11 of the Order;

implementing necessary internal controls to enable the preparation of a half year disclosure statement that is fairly presented and free frommaterial misstatement, whether due to fraud or error; and

assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE HALF YEAR DISCLOSURE STATEMENT
Our responsibility is to express a conclusion on the half year disclosure statement based on our review. We conducted our review in accordance with
NZ SRE 2410. NZ 2410 requires us to conclude whether anything has come to attention that causes us to believe that:

the interim financial statements do not present fairly in all material respects the Banking Group’s financial position as at 31 March 2019 and its
financial performance and cash flows for the 6 month period ended on that date;

the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34;



the registered bank disclosures in sections B2, B3, B5 and B6 does not, fairly state, in all material respects, the matters to which it relates inaccordance with Schedules 5, 7, 13, 16 and 18 of the Order; andthe registered bank disclosures relating to capital adequacy and liquidity requirements in section B4 is not, in all material respects, disclosed inaccordance with the applicable clauses of Schedule 9 and 11 of the Order.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the half year disclosure statement. This description forms part of our
independent review report.

KPMG
Auckland
17 May 201934

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35

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDBANK FINANCIAL STRENGTH DASHBOARD
D1. CREDIT RATINGS

Background
This section does not form part of the Disclosure Statement. It
contains information in respect of the Banking Group included on the
Bank Financial Strength Dashboard (Dashboard) published on RBNZ’s
website. There is no requirement for the Directors to review orapprove this information. Amounts below may differ slightly fromthose published by RBNZ due to rounding differences. The tables
include reconciliations to amounts included in the DisclosureStatement where there are classification differences between thefinancial statements and the Dashboard.

As at 31 March 2019

Credit rating

S&P Global

AA-

Fitch

AA-

Moody's

A1

D2. CAPITAL ADEQUACY
Capital ratios

Capital

As at 31 March 2019

As at 31 March 2019

NZ$m

Total capital ratio

14.6%

CET1 capital

13,291

Common equity tier 1 (CET1) capital ratio

11.4%

CET1 deductions(3,608)Tier 1 capital ratio

14.6%

Net CET1 capital

9,683

Buffer ratio

6.6%

Total additional tier 1 capital

2,777

Total capital ratio regulatory minimum

8.0%

Total tier 1 capital

12,460Total capital

12,460

Risk weighted assets
As at 31 March 2019
Sovereign / quasi-sovereign

DisclosureStatement
NZ$m

Classification differences
Default Credit valuation
exposures
adjustments
NZ$m
NZ$m

Exposure
categories
NZ$m

Dashboard
NZ$m

147

-

(25)

-

122

-

-

(443)

809

366

Public sector entities
Registered banks

2,822

-

(371)

(809)

1,642

Corporates

27,113

(618)

(607)

11,41037,298Retail / Residential mortgages

17,215(53)--

17,162Other retail

8,528

(51)

-

(8,477)-

Specialised lending exposures subject to slotting approach

11,486-(76)(11,410)

-

569

-

-

(569)

-

Problem loans

-

722

-

-

722

Equity holdings

5

-

-

-

5

Credit risk supervisory adjustment

-

-

-

2,118

2,118

All other assets

1,070

-

1,522

9,046

11,638Credit risk

68,955

-

-

2,118

71,073Market risk

4,688

-

-

-

4,688

Operational risk

9,493

-

-

-

9,493

Agri business supervisory adjustment

2,118

-

-

(2,118)-

Total risk weighted assets

85,254---85,254

Exposures subject to standardised approach

D3. ASSET QUALITY
As at 31 March 2019

Housing
NZ$m

Consumer
NZ$mBusiness
NZ$m

Agriculture
NZ$m

All other
NZ$m

Total
NZ$m

78,7553,524

29,532

17,483

1,307

130,601

Impaired loans

35

12

44

156

44

291

Loans 90 days past due but not impaired

186

25

50

13

1

275

Total loans

Total non-performing loans

221

37

94

169

45

566

Non-performing loans ratio (%)

0.28%

1.05%

0.32%

0.97%

3.44%

0.43%

Individual provisions

11

6

29

31

35

112

Collective provisions

50

68

188

61

5

372

On-balance sheet residential mortgage exposures with LVRs that:
Exceeds 80% and not 90%

3.7%

Exceeds 90%

1.6%

The Supplementary Information does not form part of the Disclosure Statement

36

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDBANK FINANCIAL STRENGTH DASHBOARD
D4. PROFITABILITY / PERFORMANCE
Dashboard
NZ$m

3 months to 31 March 2019
Interest income

1,628Interest expense

820

Net interest income

808

Gains/losses on trading and hedging

3

Fee and commission income172

All other income

50

Operating expenses

359

Impaired asset expense

21

Profit before tax

653

Tax expense

171

Profit after tax

482

Return on assets (%)

1.2%

Return on equity (%)

14.4%

Net interest margin (%)

2.2%

D5. FINANCIAL POSITION

Financialstatements
NZ$m

As at 31 March 2019
Cash and bank deposits1
Debt securities held2

Net loans and advancesClassification differences
Securities
Other bank purchased underdeposits andagreements
other assets
to re-sell
NZ$m
NZ$m

Dashboard
NZ$m

5,067

(83)

(336)

4,648

13,891--

13,891130,110--130,110
9,204

Derivatives in an asset position

9,204

-

-

All other assets

5,102

83

336

5,521

Total assets

163,374--

163,374

107,528--

107,528

27,750--27,750

804

1,470

-

2,274

Derivatives in a liability position

9,821

-

-

9,821

All other liabilities

3,880(1,470)-2,410

Total liabilities

149,783--

149,783

Equity13,591--

13,591

Deposits
Debt securities issued

3

Other borrowings4

1
2
3
4

Comprises cash and cash equivalents and collateral paid
Comprises trading securities and investment securities
Comprises debt issuances plus certificates of deposit and commercial paper from deposits and other borrowings
Comprises collateral received and the remaining items of deposits and other borrowings

D6. LIQUIDITY

D7. LARGE EXPOSURES

3 months to 31 March 2019

As at 31 March 2019

Quarterly average core funding ratio

88.8%

Quarterly average 1-month mismatch ratio

4.7%

Quarterly average 1-week mismatch ratio

5.6%

Top 5 credit exposures to non-bank counterparties(ie corporates) as a ratio of CET1 capital
Credit exposures to non-bank counterparties(ie corporates) that are greater than 10% of CET1 capital
Top 5 credit exposures to banks as a ratio of
CET1 capital
Credit exposures to banks that are greater than
10% of CET1 capital

52.4%
2
43.8%
3

The Supplementary Information does not form part of the Disclosure Statement

37

ANZ BANK NEW ZEALAND LIMITEDUNAUDITEDOTHER INFORMATION
Reconciliation of total loans by industry and sector
The financial statements and Dashboard include amounts for total loans which are based on different definitions. The table below reconciles thevarious amounts. This information does not form part of the Disclosure Statement.
Housing loans and residential mortgage definitions
Housing loans comprise loans for owner occupier property use and residential investor property use. Owner occupiers are borrowers who own or arein the process of buying or building the house or flat they will live in as their principal place of residence. An owner can occupy more than one
property e.g. a family home and a holiday home. Only households can have owner occupier property use loans. Investors are entities or persons
borrowing for the purpose of building or purchasing residential property to rent. This includes ‘Mum and dad’ investor loans and any person(s) thathave a separate residential investor property use loan which is not for their normal business purpose.
Residential mortgage exposures used in the loan-to-valuation ratio analysis are based on the definition of residential mortgage loans as defined in the
Banking Supervision Handbook document Capital Adequacy Framework (internal models based approach) (BS2B). This metric is based on a collateraldefinition and may include some other lending that is not defined as Housing lending in the asset quality section of the Dashboard. See the Banking
Supervision Handbook for a more detailed definition.

As at 31 March 2019
Total loans per Balance Sheet

Note

Housing
NZ$m

Consumer
NZ$mBusiness
NZ$m

Agriculture
NZ$m

All other1
NZ$m

Total
NZ$m

4

81,194

n/a

n/a

n/a

49,338130,532

Fair value hedge adjustment

(5)

-

-

-

5

-

Business loans secured by residential property(2,434)

-

-

326

2,108

-

Residential investor property(21,552)--

51

21,501

-

-

3,524

-

17,529(21,053)

130,532

Other household and agriculture industry loans
Concentration of loans by industry2

B2

57,203

3,524-

17,90651,899Fair value hedge adjustments

-

-

-

-

(5)

(5)

Unearned income on finance leases

-

-

-

-

(203)

(203)

-

-

-

-

277

277

21,552--(51)(21,501)---

29,166(46)(29,120)-78,755

3,524

29,166

17,8091,347

130,601

Deposit components of overdraft productResidential investor property
Business lending
Loans by purpose (RBNZ series S31)
Other business loans secured by residential property
Total loans per Dashboard
1
2

D3

-

366

(326)

(40)

-

3,524

29,532

17,483

1,307

130,601

All other in RBNZ series S31 and the Dashboard comprises: Depository and other financial institutions, Central and Local Government, Non-profit institutions serving households.
Household exposures (resident and non-resident) in Note B2 comprise Housing and Consumer.

The Supplementary Information does not form part of the Disclosure Statement

38

78,755

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