A
Australia and New
N
Zea
aland Banking
B
Group Limitedd
ABN 11 005 35
57 522

H
Half Year
31 March 2016

Consolidatted Finanncial Rep
port
d Announcementt
Dividendand Appendiix 4D

The
e Consolidated Financial Report and Dividend Announcemen t contains inform
mation required by Appendix 4D
D of the Australlian Securities
Excchange (ASX) L
Listing Rules. It should be read in conjunction w
with ANZ’s 2015
5 Annual Reporrt, and is lodgedd with the ASX underulisting rulee
4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Name of Company:

APPENDIX 4D

Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Report for the half year ended 31 March 2016

Operating Results1

Operating income



0%

to

10,265Net statutory profit attributable to shareholders



-22%

to

2,738



-24%

to

2,782

2

Cash profit

Dividends3

Proposed interim dividend

AUD million

CentsFrankedperamountshare

per share

80

4

100%

Record date for determining entitlements to the proposed 2016 interim dividend

10 May 2016

Payment date for the proposed 2016 interim dividend

1 July 2016

Dividend Reinvestment Plan and Bonus Option Plan
Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate inrespect of the 2016 interim dividend. For the 2016 interim dividend, ANZ intends to provide shares under the DRP and BOP through the issue of newshares. The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference tothe arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the
ASX during the ten trading days commencing on 13 May 2016, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP
will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their
participation in the DRP or BOP for the 2016 interim dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time)on 11 May 2016. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in
the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars
respectively at an exchange rate calculated on 13 May 2016.

1
2

3
4

Unless otherwise noted, all comparisons are to the half year ended 31 March 2015.
Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. The non-core
items are calculated consistently period on period so as not to discriminate between positive and negative adjustments and fall into one of the three categories: gains or losses included inearnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with ongoing operations of the Group; treasury shares, revaluation of policy
liabilities, economic hedging and similar accounting items that represent timing differences that will reverse through earnings in the future; and accounting reclassifications between
individual line items that do not impact reported results, such as policy holder gross up. Cash profit is not a measure of cash flow or profit determined on a cash basis. The net after tax
adjustment was an addition to statutory profit of $44 million made up of several items. Refer pages 91 to 96 for further details.
There is no foreign conduit income attributed to the dividends.
It is proposed that the interim dividend will be fully franked for Australian tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 10 cents per ordinary share.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D
Half year ended 31 March 2016

CONTENTS

PAGE

Section 1 – News Release5

Section 2 – Summary

9

Section 3 – Strategic Review

19

Section 4 – Group Results

21

Section 5 – Divisional Results

49

Section 6 – Geographic Results

83

Section 7 – Profit Reconciliation

91

Section 8 – Condensed Consolidated Financial Statements

97

Section 9 – Supplementary Information

129

Definitions

148

ASX Appendix 4D Cross Reference Index

151

Alphabetical Index

152

This Consolidated Financial Report, Dividend Announcement and Appendix 4D has been prepared for Australia and New Zealand Banking Group Limited(the “Company” or “Parent Entity”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “the consolidated entity”“the Bank”, “us”, “we” or “our”.
All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based
have been reviewed by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors. The signing of
the Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 2 May 2016.
When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as
they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions
to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDThis page has been left blank intentionally

ABN 11 005 357 522

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

News Release1

ANZ reports 2016 Half Year Result

ANZ today announced a statutory profit after tax for the half year ended 31 March 2016 of$2.7 billion down 22% and a cash profit2 of $2.8 billion down 24%, following a $717 million net
charge primarily related to initiatives to reposition the Group for stronger profit before provisions
growth in the future.
Excluding these Specified Items (see page 3), allowing for better comparison with previous periods,
adjusted pro-forma cash profit3 was $3.5 billion down 4% and profit before provisions was up 5%.
The Interim Dividend of 80 cents per share fully franked is down 7% reflecting a move to graduallyconsolidate ANZ’s dividend payout ratio within its historic range of 60-65% of annual cash profit4
which provides a conservative, sustainable and fully franked dividend base for the future. The Final
Dividend for FY16 is expected to be at least the same as the Interim Dividend in cents per share.
The result reflects a strong performance in ANZ’s Australian and New Zealand consumer and small
business franchises and challenging market conditions in Institutional Banking including higher
provisions in the resources sector and in related industries.
Significant progress was also made in streamlining and simplifying ANZ to ensure the bank is future
ready. This included a particularly strong expense management outcome, improved capitalefficiency and initiatives to accelerate momentum and deliver future benefits including a
restructuring charge and a change to the application of accounting policy to accelerate softwareamortisation.
Selected Group Financial Information
Earnings ($m)

1H15

2H15

1H16

Profit before credit impairment and tax

5,637

6,075

4,786

Statutory Profit

3,506

3,987

2,738

Statutory basis

Cash basis
Profit before credit impairment and tax

5,592

5,567

4,837

Cash Profit

3,676

3,540

2,782

Earnings Per Share (cents)

134

127

96

Return on Equity (%)

14.7

13.3

9.7

Profit before credit impairment and tax

5,468

5,459

5,737

Adjusted Pro-forma Profit

3,638

3,507

3,499

Operating expenses to income (CTI, %)

45.5

46.4

45.0

Net Interest Margin (%)

2.02

2.02

2.01

Adjusted Pro-forma3

Earnings Per Share (cents)

132

126

121

Return on Equity (%)

14.5

13.2

12.2

Balance sheet ($b)

1H15

2H15

1H16

Gross Loans and Advances (GLAs)

562

574

566

Total Risk Weighted Assets

387

402

388

Customer Deposits

436

445

447

Leverage Ratio (%)

5

NA

5.1

5.1

Common Equity Tier 1 Ratio (%)

8.7

9.6

9.8

Common Equity Tier 1 Ratio Internationally Comparable Basel 3 (%)
Asset Quality

12.1

13.2

14.0

1H15

2H15

1H16

Total Credit Impairment Charge as a % of avg GLAs (%)

0.19

0.24

0.32

Collective Provision as a % of Credit RWAs (%)

0.86

0.85

0.86

Gross impaired assets as a % of GLAs (%)

0.48

0.47

0.51

Other

1H15

2H15

1H16

Full time equivalent staff (FTE)

51,24350,152

48,896

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

ANZ Chief Executive Officer Shayne Elliott said: “This result reflects a challenging period for banking
and we have taken the opportunity to move decisively and adapt to the changing environment bybuilding a simpler, better capitalised and more balanced bank.
“We have strong underlying drivers in our Australia and New Zealand consumer and small businessfranchise and we have seen good early progress in transforming Institutional Banking. This has
been supported by prudent capital management and tight control of costs with total expenses,
excluding the impact of Specified Items, being lower for the first time in seven halves.
“Banking is however continuing to experience rapid shifts in technology, customer expectations andregulation against a backdrop of low economic growth, volatile financial markets and rising credit
costs. Our priority is to take bold action to ensure ANZ is fit and ready for this future.
“This means for the immediate future we are in a period of consolidation, simplification andtransition. We have a clear plan and we have made significant progress this half through a focus onfour strategic priorities,” Mr Elliott said.
Strategic Priorities

1H16 Progress Highlights

1. Create a simpler, better capitalised, betterbalanced and more agile bank.



Reduce operating costs and risks by removing
product and management complexity, exiting low
return and non-core businesses and reducing ourreliance on low-return aspects of Institutionalbanking in particular. Further strengthen thebalance sheet by rebalancing our portfolio.









2. Focus our efforts on attractive areas where
we can carve out a winning position.



Make buying and owning a home or starting,running and growing a small business in Australia
and New Zealand easy. Be the best bank in theworld for customers driven by the movement ofgoods and capital in our region.






3. Drive a purpose and values led transformationof the Bank.

Creating a stronger sense of core purpose, ethics
and fairness, investing in leaders who can help
sense and navigate a rapidly changing
environment.



4. Build a superior everyday experience for ourpeople and customers in order to compete in
the digital age.



Build more convenient, engaging banking solutions
to simplify the lives of customers and our own
people.



6Reduced 1H16 dividend providing foundation for aconservative, sustainable, fully franked pay-out
ratio of 60-65% of cash profit4
Lower absolute operations costs (-2% pcp) andlower FTE (-5% pcp).
Reduced Risk Weighted Assets by 3% ($14 billion)- primarily low return Institutional Asia lending.
Sold Esanda dealer finance portfolio and Oasis.
Taken $138 million restructuring charge tounderpin further simplification and productivity.
Repositioned minority investments in Asia asGroup assets, valuation adjustments made.
Supported Bank of Tianjin listing and subsequent
dilution in holding to ~12%.
Merged Asia Wealth with Asia Retail andcommenced a strategic review.
New organisation structure and Executive
Committee aligned with focus areas.
Merged Wealth distribution activities with core
Retail to align priority segments.
Simplified and re-focused Institutional.
Established new Digital Banking Division to
support growth in priority areas.
Moved to #3 market share in Australian Home
Loans.
Signed up to ABA conduct review.
Launched review of recruitment andremuneration.
Invested in MIT Digital Leadership Program.
Uncompromising approach to enforcing ANZ’s
Code of Conduct.
Maile Carnegie appointed from Google to lead
Digital.
First Australian bank to launch Apple Pay,
augmenting existing Android Pay plans.
New software capitalisation treatment recognises
the nature and speed of digital change andsupports innovation.
Implementation of multi-channel digital platform
for Australian Retail banking to support improved
customer experience.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

Capital and Dividend. The actions being taken to simplify the business, rebalance our portfolio,divest non-core assets and increase capital efficiency in the Institutional loan book assisted theGroup to generate 76 basis points of capital during the half. Further benefits are expected in future
periods.
The Interim Dividend is 7% lower than the prior comparable period 1H15, reflecting actions
undertaken to reshape ANZ and a normalisation of the credit cycle. The dividend payout ratio
during the half of 84% primarily reflects the impact of specified items. On an adjusted pro-forma
basis the ratio is 67%.
Consistent with ANZ’s normal practice, it is expected the Final Dividend for FY16 will be at least thesame as the Interim Dividend in cents per share terms.
ANZ recognises the stability of the Group’s payout ratio and ability to fully frank dividends are
critical considerations for shareholders. Following a period of dividend payout ratio expansion in theAustralian banking sector, ANZ will gradually consolidate to its historic range of 60-65% of annual
cash profit. This setting better reflects the changed banking environment in which we operate andthe greater demands for capital.
Specified Items. During the half the Group sold the Esanda Dealer Finance portfolio and also
recognised the impact of a number of items collectively referred to as ‘Specified Items’ which form
part of the Group’s cash profit.
These specified items are (on an after tax basis): an accounting change to the application of theGroup’s software capitalisation policy ($441 million), impairment of the Group’s investment in
AmBank ($260 million), a net gain in relation to Bank of Tianjin ($29 million) and Group
restructuring expenses ($101 million), as well as the Esanda dealer finance sale ($56 million). An
information pack on these changes is on anz.com within the 1H16 results materials.
ANZ, by lifting the software capitalisation threshold and directly expensing more project related
costs, has introduced a greater level of discipline into the management of technology investment.
The change, effective from 1 October 2015, of itself does not impact the Group’s total spend on
technology but better aligns the application of ANZ’s policy with the rapidly changing technology
landscape, increased pace of innovation in financial services and the Group’s own evolving digitalstrategy. These changes bring forward the recognition of software expense resulting in lower
amortisation charges in future years.
A restructuring charge of $138 million (pre-tax) was recognised in the half which will underpin
further productivity in the second half and future years, through reducing complexity and aligning
the Group to the changing emphasis on Institutional and International businesses.
Credit Quality. The total provision charge of $918 million ($892 million individual provision charge$26 million collective provision charge) is consistent with ANZ’s ASX disclosure of 24 March andequates to a 32 basis point loss rate. The loss rate is trending towards the long term average from
historically low levels. Gross impaired assets were $2.9 billion up 6%, with new impaired assets flatcompared to the prior half.
While the overall credit environment remains broadly stable, ANZ has continued to see pockets ofweakness associated with low commodity prices in the resources sector and in related industries.
Increased provision charges in the first half include charges related to a small number of Australianand multi-national resources related exposures.
Video interviews with Shayne Elliott and Acting Chief Financial Officer Graham Hodges regarding
today’s 2016 Half Year result announcement are available at www.bluenotes.anz.com.
For media enquiries contact:
Paul Edwards + 61-434-070101
Stephen Ries +61-409-655551

For investor and analyst enquiries contact:
Jill Campbell, Tel: +61-412-047448
Cameron Davis, Tel: +61-421-613819

Footnotes:
1. All comparisons are First Half Financial Year 2016 compared to First Half Financial Year 2015.
2. Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the results of the ongoing business activities of
the Group. The net after tax adjustment was an addition to statutory profit of $44 million comprised of several items.
3. Pro-forma refers to Cash Profit adjusted to remove the impact of ‘Specified items’ including the impact of software capitalisation policy changes, Asia Partnership
impairment charge (AmBank) and gain of cessation of equity accounting (Bank of Tianjin), restructuring expenses, sale of Esanda Dealer Finance portfolio. Further
detail provided in the ANZ Half Year 2016 consolidated Financial Report p14.
4. Previously 65 to 70 per cent of cash profit.
5. APRA introduced amendments in May 2015 to enable calculation of the leverage ratio.

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

This page has been left blank intentionally

8

SUMMARYCONTENTS
Section 2 – Summary
Statutory Profit Results
Cash Profit Results
Key Balance Sheet Metrics
Cash Profit Results – FX Adjusted
Cash Profit Results – Adjusted Pro-forma, FX adjusted
Other Non-financial Information

9

SUMMARY
Statutory Profit Results
Half Year
Mar 16$M
7,568

Net interest income

Sep 15$M
7,478

Movement
Mar 15$M
7,138

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
6%

Other operating income

2,697

3,372

3,102

-20%

-13%

Operating income

10,265

10,850

10,240-5%0%Operating expenses(5,479)(4,775)(4,603)15%

19%

Profit before credit impairment and income tax

4,786

6,075

5,637

-21%

-15%

Credit impairment charge

(904)

(685)

(494)

32%

83%

Profit before income tax

3,882

5,390

5,143

-28%

-25%

Income tax expense(1,140)(1,397)(1,629)

-18%

-30%

(4)

(6)

(8)

-33%

-50%

2,738

3,987

3,506

-31%

-22%

Non-controlling interests
Profit attributable to shareholders of the Company

Earnings per ordinary share (cents)

Half Year

Movement

Basic

Reference
Page
109

Mar 1694.8

Sep 15
143.4

Mar 15
128.0

Mar 16v. Sep 15-34%

Mar 16v. Mar 15-26%

Diluted

109

89.7

134.9

124.6

-34%

-28%

Half Year
Reference
Page

Sep 15

Mar 15

80

-

86

-

95

-

108

80

95

86

108

85.2%

69.2%

67.9%

108

-

-

1

Ordinary share dividends (cents)
Interim - 100% franked1

108

Final - 100% franked1

108

Total - 100% franked1
Ordinary share dividend payout ratio2
Preference share dividend ($M)
Dividend paid3
Profitability ratios
Return on average ordinary shareholders' equity4

9.5%

15.0%

14.0%

Return on average assets

0.61%

0.91%

0.85%

Net interest margin

2.01%

2.04%

2.04%

53.4%

44.0%

45.0%

1.22%

1.09%

1.11%

878

645

439

26

40

55

Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Credit impairment charge/(release)
Individual credit impairment charge ($M)
Collective credit impairment charge/(release) ($M)

904

685

494

Individual credit impairment charge as a % of average gross loans & advances5

0.31%

0.23%

0.16%

Total credit impairment charge as a % of average gross loans & advances5

0.31%

0.24%

0.18%

Total credit impairment charge ($M)

1.

2.
3.

4.
5.

Mar 16113

Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZ 10 cents per ordinary share for the proposed 2016 interim dividend (2015 final dividend: NZ 11
cents, 2015 interim dividend: NZ 10 cents).
Dividend payout ratio is calculated using the proposed 2016 interim, 2015 final and 2015 interim dividends.
Represents dividends paid on Euro Trust Securities (preference shares) issued on 13 December 2004. The Euro Trust Securities were bought back by ANZ for cash at face value andcancelled on 15 December 2014.
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares.
Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

10

SUMMARY
1

Cash Profit Results

Half Year
Mar 16$M
7,568

Net interest income

Sep 15$M
7,478

Movement
Mar 15$M
7,138

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
6%-10%

Other operating income

2,748

2,864

3,057

-4%

Operating income

10,316

10,342

10,1950%

1%Operating expenses(5,479)(4,775)(4,603)15%

19%

Profit before credit impairment and income tax

4,837

5,567

5,592

-13%

-14%

Credit impairment charge

(918)

(695)

(510)

32%

80%

Profit before income tax

3,919

4,872

5,082

-20%

-23%

Income tax expense(1,133)(1,326)(1,398)

-15%

-19%

(4)

(6)

(8)

-33%

-50%

2,782

3,540

3,676

-21%

-24%

Non-controlling interests
Cash profit
Earnings per ordinary share (cents)

Half Year
Reference
Page

Basic
Diluted39
39

Movement

Mar 1695.9

Sep 15
126.8

Mar 15
133.6

Mar 16v. Sep 15-24%

Mar 16v. Mar 15
-28%

90.7

119.8

129.9

-24%

-30%

Half Year
Reference Page

Mar 16

Sep 15

Mar 15

40

83.9%

77.9%

64.7%

Ordinary share dividends
Ordinary share dividend payout ratio2
Profitability ratios
Return on average ordinary shareholders' equity3
Return on average assets
Net interest margin

24

Profit per average FTE ($)
Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Credit impairment charge/(release)
Individual credit impairment charge ($M)

9.7%

13.3%

14.7%

0.62%

0.81%

0.89%

2.01%

2.04%

2.04%

55,88969,21472,421

53.1%

46.2%

45.1%

1.22%

1.09%

1.11%

455

33

892

655

Collective credit impairment charge/(release) ($M)

34

26

40

55

Total credit impairment charge ($M)

33

918

695

510

0.31%

0.23%

0.17%

0.32%

0.24%

0.19%

Individual credit impairment charge as a % of average gross loans & advances4
Total credit impairment charge as a % of average gross loans & advances

4

Cash profit/(loss) by division/geography (in AUD)

Half Year

Movement

Australia

Mar 16$M
1,753

Sep 15$M
1,706

Mar 15$M
1,650

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
6%

Institutional

632

893

1,071

-29%

-41%

New Zealand

578

561

566

3%

2%

Wealth

261

346

263

-25%

-1%

Asia Retail & Pacific

53

45

99

18%

-46%

TSO and Group Centre

(495)

(11)

27

large

large

Cash profit by division

2,782

3,540

3,676

-21%

-24%

Australia

1,830

2,269

2,147

-19%

-15%

Asia Pacific, Europe & America

259

492

743

-47%

-65%

New Zealand

693

779

786

-11%

-12%

2,782

3,540

3,676

-21%

-24%

Cash profit by geography
1.

2.
3.
4.

Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. Refer to page
91 for the reconciliation between statutory and cash profit.
Dividend payout ratio is calculated using the proposed 2016 interim, 2015 final and 2015 interim dividends.
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares.
Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

11

SUMMARY
Key Balance Sheet Metrics
As at
Reference
Page

Mar 16

Movement

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15

Capital adequacy
Common Equity Tier 1- APRA Basel 3

44

9.8%

9.6%

8.7%

- Internationally Comparable Basel 31

44

14.0%

13.2%

12.1%

Credit risk weighted assets ($B)

132

334.3

349.8

339.7

-4%

-2%

Total risk weighted assets ($B)

132

388.3

401.9

386.9

-3%

0%

Balance Sheet: Key Items
Gross loans & advances ($B)2

565.9

574.3

562.2

-1%

1%

Net loans & advances ($B)2

561.8

570.2

558.2

-1%

1%

Total assets ($B)

895.3

889.9

860.1

1%

4%

Customer deposits ($B)

446.8

444.6

436.1

0%

2%

56.5

57.4

52.1

-2%

8%

5.1%

5.1%

n/a

0%

n/a

Total equity ($B)
Leverage Ratio

46

Half Year Average
Balance Sheet: Key Items
Liquidity Coverage Ratio

42

Mar 16126%

Sep 15124%

Movement
Mar 15118%

As at
Reference
Page
Impaired assets
Gross impaired assets ($M)

35

Gross impaired assets as a % of gross loans & advances2
Net impaired assets ($M)

35

Net impaired assets as a % of shareholders' equity
Individual provision ($M)

113

Individual provision as a % of gross impaired assets
Collective provision ($M)

113Collective provision as a % of credit risk weighted assets

Mar 16

Mar 16v. Sep 15
2%

Mar 16v. Mar 15
7%

Movement

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15

6%

6%

-1%

3%

17%

11%

-3%

-2%

2,883

2,719

2,708

0.51%

0.47%

0.48%

1,645

1,658

1,594

2.9%

2.9%

3.1%

1,238

1,061

1,114

42.9%

39.0%

41.1%

2,862

2,956

2,914

0.86%

0.85%

0.86%

Net Assets
Net tangible assets attributable to ordinary shareholders ($B)

48.8

48.9

43.6

0%

12%

Net tangible assets per ordinary share ($)

16.77

16.86

15.75

-1%

6%

1.
2.

See page 45 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.
Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

As at

Net loans and advances by division/geography

Movement

Australia

Mar 16$B
320.0

Sep 15$B
313.7

Mar 15$B
297.6

Mar 16v. Sep 15
2%

Mar 16v. Mar 15
8%

Institutional

125.6

142.2

144.9

-12%

-13%

New Zealand

97.2

95.2

97.7

2%

-1%

Wealth

7.3

7.1

6.9

3%

6%

Asia Retail & Pacific

11.9

12.5

11.6

-5%

3%

TSO and Group Centre

(0.2)

(0.5)

(0.5)

-60%

-60%

Net loans and advances by division3

561.8

570.2

558.2

-1%

1%

Australia

386.8

381.2

362.8

1%

7%

Asia Pacific, Europe & America

69.1

85.1

88.4

-19%

-22%

105.9

103.9

107.0

2%

-1%

561.8

570.2

558.2

-1%

1%

New Zealand3

Net loans and advances by geography
3.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

12

SUMMARY

Cash Profit Results – FX Adjusted
The following tables present the Group’s cash profit results neutralised for the impact of foreign currency translation. Comparative data has been adjusted
to remove the translation impact of foreign exchange movements by retranslating prior period comparatives at current period foreign exchange rates.
Refer to page 37 for further details on the impact of exchange rate movements.
Cash Profit - March 2016 Half Year vs March 2015 Half Year
Half YearNet interest income

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 16$M
7,568

Mar 15$M
7,138

Mar 15$M
77

Mar 15$M
7,215

Mar 16v. Mar 15
6%

Mar 16v. Mar 15
1%

Mar 16v. Mar 15
5%-14%

Other operating income

2,748

3,057

149

3,206

-10%

4%

Operating income

10,316

10,195226

10,421

1%

2%

-1%

Operating expenses(5,479)(4,603)(115)(4,718)

19%

3%

16%

Profit before credit impairment and income tax

4,837

5,592

111

5,703

-14%

1%

-15%

Credit impairment charge

(918)

(510)

(5)

(515)

80%

2%

78%

Profit before income tax

3,919

5,082

106

5,188

-23%

1%

-24%

Income tax expense(1,133)(1,398)(25)(1,423)

-19%

1%

-20%

(4)

(8)

(2)

(10)

-50%

10%

-60%

2,782

3,676

79

3,755

-24%

2%

-26%

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 16$M
7,568

Sep 15$M
7,478

Sep 15$M
32

Sep 15$M
7,510

Mar 16v. Sep 15
1%

Mar 16v. Sep 15
0%

Mar 16v. Sep 15
1%-7%

Non-controlling interests
Cash profit

Cash Profit - March 2016 Half Year vs September 2015 Half Year
Half YearNet interest income

Movement

Other operating income

2,748

2,864

103

2,967

-4%

3%

Operating income

10,316

10,342

135

10,477

0%

2%

-2%

Operating expenses(5,479)(4,775)(37)(4,812)

15%

1%

14%

Profit before credit impairment and income tax

4,837

5,567

98

5,665

-13%

2%

-15%

Credit impairment charge

(918)

(695)

(8)

(703)

32%

1%

31%

Profit before income tax

3,919

4,872

90

4,962

-20%

1%

-21%

Income tax expense(1,133)(1,326)(28)(1,354)

-15%

1%

-16%

(4)

(6)

1

(5)

-33%

-13%

-20%

2,782

3,540

63

3,603

-21%

2%

-23%

Non-controlling interests
Cash profit

13

SUMMARY
Cash Profit Results – Adjusted Pro-forma, FX adjusted
During the March 2016 half, the Group sold the Esanda Dealer Finance portfolio and recognised the impact of a number of items collectively referred toas ‘specified items’ which form part of the Group’s cash profit. The tables on the following pages present the Group’s FX adjusted cash profit adjusted forthese items to assist readers to understand the estimated growth rates of the ongoing business performance of the Group. The “Cash Profit Results Adjusted Pro-forma, FX adjusted” are not subject to review or audit by the external auditor.
Esanda Dealer Finance divestment
On 1 November 2015, the Group sold the Esanda Dealer Finance portfolio with the majority of the business transferred by 31 December 2015. Proforma results have been prepared on the assumption that the sale which occurred during the March 2016 half took effect from 1 October 2014,
effectively restating the Group’s cash profit for each of the March 2015, September 2015 and March 2016 halves.



Software capitalisation changes
During the March 2016 half, the Board resolved to amend the application of the Group’s software capitalisation policy by increasing the threshold forcapitalisation of software development costs to $20 million, reflecting the increasingly shorter useful life of smaller items of software, and directly
expensing more project related costs.
For software assets at 1 October 2015 with an original cost below the revised threshold, the carrying values were expensed through an accelerated
amortisation charge of $556 million (recognised in TSO & Group Centre). Of this, $88 million would otherwise have been amortised in the March
2016 half (i.e. the half year amortisation charge increased by $468 million).
In addition, application of the software capitalisation changes also increased other operating expenses by $161 million for the March 2016 half
relating to software development costs that would otherwise have been capitalised and amortised in future periods.
Going forward, these changes will result in higher project expenditure being expensed in the profit and loss which will be offset by lower amortisation
charges.
March 2016 Half Year
Accelerated
amortisation$M

Operating expense increase/(decrease) by division
Australia

Amortisation Application of policy tobenefit new project expenditure Total impact
$M
$M
$M

-

(13)

49

36

Institutional

-

(26)

30

4

New Zealand

-

(7)

17

10

Wealth

-

(14)

19

5

Asia Retail & Pacific

-

(4)

-

(4)

TSO and Group Centre

556

(24)

46

578

Total

556

(88)

161

629



Asian minority investment adjustments
During the March 2016 half, the Group recognised a $260 million impairment to its equity accounted investment in AMMB Holdings Berhad (Ambank)bringing the carrying value in line with value-in-use calculations (refer Note 1 (v) of the Condensed Consolidated Financial Statements).
On 30 March 2016, Bank of Tianjin (BoT), an equity accounted investment, completed a capital raising and listing on the Hong Kong Stock Exchange
through an Initial Public Offering (IPO). As the Group did not participate in the capital raising, its ownership interest decreased from 14% to 12%. As
a consequence, the Group ceased equity accounting the investment in BoT and commenced accounting for the investment as for as an available-forsale asset. A net gain of $29 million was recognised in relation to the remeasurement of the investment to fair value and recycling the associatedequity accounted reserves.



Restructuring
The Group is in the process of evolving its strategy, including reshaping of the workforce to reduce complexity and duplication, and to align with its
changing emphasis on Institutional and Wealth businesses, restructure of Retail Asia and Pacific and delayering and simplification in TSO and Group
Centre. A restructuring expense of $138 million was recognised in the March 2016 half.
Half Year
Mar 16$M

Sep 15$M

Mar 15$M

Australia

22

2

-

Institutional

51

6

2

New Zealand

2

1

2

Wealth13-1Asia Retail & Pacific

12

-

-

TSO and Group Centre

38

12

5

Total

138

21

10

Restructuring expense by division

14

629
(188)
-

4,837
(918)
3,919
(1,133)(4)

Profit before credit impairment and income tax

Credit impairment charge

Profit before income tax

Income tax expense

4
10
5
(4)

880
804
359
67

New Zealand

Wealth2,782

Income tax expense & non-controlling interests

Cash profit

1.

(188)

(1,137)

Profit before income tax

-

231

-

231

231

-

-

-

-

-

101

-

(37)

138

-

138

138

101

(37)

138

38

12

13

2

51

22

Restructuring

March 2016 Half Year

231

-

-

231

-

231

-

231

-

-

(56)

29

(85)

(66)

-

-

-

-

(19)

EsandaDealerFinance

(56)

-

29

(85)

13

(98)

11

(109)

(78)

(31)

EsandaDealerFinance

3,499(1,333)

4,832

85

75

3,676

(1,406)

5,082

(57)

128

368

787

816
377

1,497

2,359

Cash profit

3,676

935

2,544

Adjustedpro-forma

3,499

(8)

(4)

5,082
(1,398)

4,832(1,329)

(510)

5,592

(905)

5,737

(4,603)

10,195

10,438(4,701)

3,057

7,138

Cash profit

2,901

7,537

Adjustedpro-forma

(45)

-

20

(65)

69

(134)

21

(155)

(25)

(130)

EsandaDealerFinance

7

(3)

10

5

-

1

2

2

-

Restructuring

(45)

20

(65)

-

-

-

-

-

(65)

EsandaDealerFinance

15

3,717

(10)

(1,406)

5,133

(446)

5,579

(4,687)

10,266

3,181

7,085

79

(27)

106

59

8

(1)

(10)

50

-

3,717

(1,416)

5,133

7

136

368

779

1,549

2,294

Adjustedpro-forma,
FX impact
FX adj

79

(2)

(25)

106

(5)

111

(115)

226

149

77

Adjustedpro-forma,
FX impact
FX adjMarch 2015 Half Year

7

-

(3)

10

-

10

10

-

-

-

Restructuring

March 2015 Half Year

Cash profit for TSO and Group Centre in the March 2016 half includes the accelerated amortisation for all divisions resulting from the software capitalisation changes and the net gain on divestment of the Esanda Dealer Finance portfolio.

441

578
629

(696)
3,919

TSO and Group Centre1

Asia Retail & Pacific

36

2,505

Cash profit

231

SoftwareAsian
capitalminority
isation investmentchangesadjustInstitutional

Profit before income tax by division - March 2016 v March
2015
Australia

Cash profit
441

629

(5,479)Operating expenses

2,782

629

10,316

Operating income

Non-controlling interests

-

7,568
2,748

Other operating income

Cash profit

Restructuring

March 2016 Half Year
Asian
Softwareminority
capitalisation investment
adjustchangesCash Profit - March 2016 v March 2015
Net interest income

Cash Profit Results - Adjusted Pro-forma, FX adjusted

SUMMARY

6%

-6%

-60%

-5%

-6%

large

3%

0%

2%

-9%

-4%

-4%

-4%

large

-41%

2%

3%

-38%

11%

-6%

-6%

-6%

large

-45%

2%

5%

-40%

11%

Adjusted
Adjusted proforma, pro-forma,
FX adj
FX unadj

Mar 16 v. Mar 15

-4%

-50%

-4%

-4%

large

5%

3%

4%

-4%

8%

Adjusted
Adjusted proforma, pro-forma,
FX adj
FX unadj

Mar 16 v. Mar 15

SUMMARY

SoftwareAsian
capitalminority
isation investmentchangesadjust-Restructuring

(109)

(78)

(31)

EsandaDealerFinance

10,438

2,901

7,537

Adjustedpro-forma

10,342

2,864

7,478

Cash profit

-

-

-

Restructuring

(151)

(26)

(125)

EsandaDealerFinance

135

103

32

FX impact

10,326

2,941

7,385

Adjustedpro-forma,
FX adj

2%

2%

3%

1%

-1%

2%

Mar 16 v. Sep 15--

September 2015 Half Year

231

231

March 2016 Half Year

7,568
-

-

Cash Profit Results - Adjusted Pro-forma, FX adjusted

2,748

Credit impairment charge

Profit before credit impairment and income tax

Operating expenses

Operating income

3,919

(918)

4,837

(5,479)

629

-

629

629

231

-

231

-

138

-

138

138

(85)

13

(98)

11

4,832

(905)

5,737

(4,701)

4,872

(695)

5,567

(4,775)

-

(6)

21

-

21

21

-

20

(68)

61

(129)

22

1

(28)

90

(8)

98

(37)

(5)

(1,340)

4,915

(642)

5,557

(4,769)

-33%

1%

0%

43%

5%

-1%

-20%

-1%

-2%

41%

3%

-1%

Adjusted
Adjustedpro-forma, pro-forma,
FX adj
FX unadj

Cash Profit - March 2016 v September 2015
Net interest income
10,316

Cash profit

Other operating income

Profit before income tax(6)(1,326)

Mar 16 v. Sep 15

Restructuring(19)

EsandaDealerFinance

2,544

Adjustedpro-forma

2,427

Cash profit

1

6

2

Restructuring

-

-

(68)

EsandaDealerFinance41-

FX impact

784

1,263

2,361

Adjustedpro-forma,
FX adj

5%

-26%

8%

4%

-26%

8%

Adjusted
Adjustedpro-forma, pro-forma,
FX adj
FX unadj

22

779

1,256

-6%

935

12%

816

-6%

-

399

large

-

-

10%

2

-

large

51

September 2015 Half Year

-2%

(4)

Asian
Softwareminority
capitalisation investment
adjustchanges0%(1,329)

-

3,570

-

36

-

-

-

67

399

41

377

(1)

-

86

13

-

68

(57)

-

75

12

85

-1%

-2%

-

1%

0%

(66)

4,915

12

(1,345)

38

63

29

4

-

(48)

-

10

-

15

(37)

2,505

5

231

3,540

-

804

880

(4)

90

4,872

(27)

(1,332)

20

4,832

(68)
(1,333)

(6)

29

(85)

-2%

21
(37)

138

3,499

-

359

578

-

231

(56)

-

67

629

Asia Retail & Pacific

101

(188)
231

(4)
441

(1,133)
2,782

Income tax expense
Non-controlling interests
Cash profit

(696)

(188)

0%

3,570

15

63

3,540

(48)

3,499
101

(56)

March 2016 Half Year

New ZealandInstitutional

3,919

Cash profit

TSO and Group Centre1(1,137)

Profit before income tax by division - Mar 2016 v Sep 2015
Australia

Profit before income tax

441

WealthIncome tax expense & non-controlling interests

2,782

Cash profit for TSO and Group Centre in the March 2016 half includes the accelerated amortisation for all divisions resulting from the software capitalisation changes and the net gain on divestment of the Esanda Dealer Finance portfolio.

231

Cash profit
1.

16

SUMMARY
Other Non-financial Information
As at

Movement

Mar 16

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15

48,89650,152

51,243

-3%

-5%

18.3

17.7

16.8

3%

9%

Full time equivalent staff information
Full time equivalent staff (FTE)
Assets per FTE ($M)

Half Year

Movement

Mar 16

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15- high

29.17

37.25

37.19

-22%

-22%

- low

21.86

26.38

30.47

-17%

-28%

- closing

23.46

27.08

36.64

-13%

-36%

68.4

78.6

101.3

-13%

-32%

-10.2%-21.9%

19.9%

-53%

large

Shareholder value - ordinary shares
Share price ($)

Closing market capitalisation of ordinary shares ($B)
Total shareholder returns (TSR)

As at Mar 16
Credit Ratings

Short-Term Long-Term

Outlook

Moody's Investor Services

P-1

Aa2

StableStandard & Poor's

A-1+

AA-

StableFitch Ratings

F1+

AA-

Stable17

SUMMARYThis page has been left blank intentionally

18

STRATEGIC REVIEWStrategic Review

1

Our strategy is to use the strength of our Australian and New Zealand foundations, regional connectivity and a focus on providing market-leading service
and insights, to better meet the needs of our customers and capture opportunities linked to trade and capital flows.
The strategy has three key elements – creating the best bank in Australia and New Zealand for home owners and small businesses, building the bestbank in the world for clients driven by trade and capital flows between Australia and New Zealand and Asia, and establishing common, digital-readyinfrastructure to provide great customer experience, agility, scale and control. The strategy is underpinned by disciplined resource allocation, strong
leaders and an engaged workforce. ANZ is committed to maintaining high standards of ethics and conduct in the way it deals with customers,
stakeholders and its own staff.
ANZ's approach to sustainability supports the achievement of our business strategy by guiding the way we make decisions and conduct business in all of
the markets in which we operate. Our decision making processes take into account the social and environmental impacts of ANZ's operations andprioritise building trust and respect amongst all of our stakeholders. Details of ANZ's approach to sustainability, including the identification andmanagement of material issues and sustainability risks and opportunities, are available in the Corporate Sustainability review. The 2015 review was
published on anz.com in December 2015, and an update on our progress in 2016 will be released on 3 May 2016.
In the first half of financial year 2016 cash profit decreased by 24%. A number of items impacted the result this half, excluding these, Cash Profit Adjusted Pro-forma, FX adjusted2 decreased 6% to $3.5 billion, with income growth of 2% and flat expenses being offset by a $459 million increase in thecredit impairment charge. The increase in the credit impairment charge was mainly due to an increase in the individual provision charge resulting from asmall number of Australian and multi-national resources related exposures. The collective impairment charge remained low in absolute terms at $29
million. Loss rates increased from historic lows and are in line with the long term average.
The Common Equity Tier 1 (CET1) ratio on an APRA basis was 9.8% at 31 March, up 22 basis points (bps), which equates to 14.0% on an Internationally
Comparable Basel 3 basis, placing ANZ within the top quartile of international peer banks. We declared a fully franked dividend of 80 cents per share, 7%
lower than the March 2015 interim dividend. The resetting of the dividend better reflects the changing banking environment in which we operate and thegreater demands for capital.
Strategic Progress
Over the course of the half, ANZ delivered strong growth in retail banking in Australia and steady growth across most portfolios in New Zealand, while theInstitutional business was once again impacted by challenging market conditions.










1.

2.

Retail banking in Australia and New Zealand continued to deliver market share gains and strong earnings growth, with income up 15% and 5%(NZD) respectively and costs were well contained resulting in lower cost to income ratios (CTI). Provisions were up slightly in both markets. In
Australia, we continued to invest in NSW and our digital capabilities, with our Multi-Channel Platform program going live during the half.
With the exception of Small Business, conditions were more challenging for our Corporate & Commercial Banking segments in both key
geographies, with revenues falling 5% in Australia and 2% in New Zealand due to ongoing margin compression and the Esanda Dealer
Finance divestment in Australia. Costs were well contained in response, but increasing provisions saw cash profits fall in both markets.
We are the leading Institutional bank in Australia and New Zealand (Source: Peter Lee) and the number four Corporate bank in Asia (Source:
Greenwich Associates). However, challenging economic conditions saw lending margins fall a further 4 bps driven by margin compression in
Loans and Specialised Finance. Trade Finance revenues were down as a consequence of active risk weighted asset (RWA) management.
Credit impairment charges increased by $235 million, impacted by small number of Australian and multi-national resources related exposures.
In response, we have accelerated the restructure of the division, simplifying the business and prioritising the use of our balance sheet. FTE
reduced 6%, while RWAs reduced by $14 billion through targeted reduction of assets that were dilutive to returns. We anticipate this trend tocontinue into the second half.
Our in-house regional delivery network is a source of ongoing competitive advantage. The network is enabling the transformation of key
business activities and delivery of productivity improvements while driving a more consistent, higher quality experience for our customers. The
regional delivery centres provide full service regional coverage across our operating time zones helping to drive lower unit costs, improve
quality and lower risk.
Since the September 2015 half, ANZ’s generated $3.1 billion of net organic capital and paid out $3 billion (net of reinvestment) in dividends.
The Group CET1 ratio increased by 22 bps to 9.8% or 14% on an internationally comparable basis at 31 March, which is within the top-quartileof Basel Group 1 Banks. We expect our APRA CET1 ratio to remain around 9% post implementing the mortgage RWA change in July 2016.

Unless otherwise noted, the Strategic Review is reported on a cash profit basis. All comparisons are to the half year ended 31 March 2015 and not adjusted for the impact of foreign
currency translation.
Adjusted Pro-forma, FX adjusted includes the following specified items: software capitalisation changes, impairment of investment in Ambank, gain on cessation of equity accounting for
BoT, restructuring costs, and the Esanda Dealership Finance divestment. Comparative data is adjusted to remove the translation impacts of foreign exchange movements.

19

STRATEGIC REVIEWThis page has been left blank intentionally20

GROUP RESULTSCONTENTS
Section 4 – Group ResultsGroup performance
Net interest income
Other operating income
Operating expenses
Technology infrastructure spend
Software capitalisation
Credit risk
Income tax expense
Impact of foreign currency translation
Earnings related hedges
Earnings per share
Dividends
Economic profit
Condensed balance sheet
Liquidity risk
Capital management
Leverage ratio
Other regulatory developments

21

GROUP RESULTS
Non-IFRS information
The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis
other than in accordance with accounting standards. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory
Guide RG230 has been followed when presenting this information.

Cash profit
Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group andDivisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory
profit (refer to Definitions for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to review
within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review or audit by theexternal auditor, however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis
across each period presented.
The Group Results section is reported on a cash profit basis.
Half Year

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit1
Treasury shares adjustments

Mar 16$M
2,738

Sep 15$M
3,987

Mar 15$M
3,506

Mar 16v. Sep 15-31%

Mar 16v. Mar 15
-22%

(29)

(95)

79

-69%

large
-79%

Revaluation of policy liabilities

(14)

(6)

(67)

large

Economic hedges

128

(165)

(14)

large

large

Revenue and net investment hedges

(39)

(179)

176

-78%

large

Structured credit intermediation trades
Total adjustments between statutory profit and cash profit1
Cash Profit
1.

Movement

(2)

(2)

(4)

0%

-50%

44

(447)

170

large

-74%

2,782

3,540

3,676

-21%

-24%

Refer to pages 91 to 96 for analysis of the adjustments between statutory profit and cash profit.

Half Year

Group Performance
Mar 16$M
7,568

Net interest income

Sep 15$M
7,478

Movement
Mar 15$M
7,138

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
6%-10%

Other operating income

2,748

2,864

3,057

-4%

Operating income

10,316

10,342

10,1950%

1%Operating expenses(5,479)(4,775)(4,603)15%

19%

Profit before credit impairment and income tax

4,837

5,567

5,592

-13%

-14%

Credit impairment charge

(918)

(695)

(510)

32%

80%

Profit before income tax

3,919

4,872

5,082

-20%

-23%

Income tax expense(1,133)(1,326)(1,398)

-15%

-19%

(4)

(6)

(8)

-33%

-50%

2,782

3,540

3,676

-21%

-24%

Non-controlling interests
Cash profit

Half Year

Movement

Mar 16$M
1,753

Sep 15$M
1,706

Mar 15$M
1,650

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
6%

Institutional

632

893

1,071

-29%

-41%

New Zealand

578

561

566

3%

2%

Wealth

261

346

263

-25%

-1%

Asia Retail & Pacific

53

45

99

18%

-46%

Cash profit/(loss) by division
Australia

TSO and Group Centre

(495)

(11)

27

large

large

Cash profit

2,782

3,540

3,676

-21%

-24%

22

GROUP RESULTSGroup Cash Profit – March 2016 Half Year v March 2015 Half YearMarch 2016 v March 2015
Cash profit decreased 24% compared to the March 2015 half mainly due to a number of specified items: software capitalisation changes, Asianminority investment adjustments, restructuring expenses, and the Esanda Dealer Finance divestment. Excluding these items, and the impact offoreign currency translation, cash profit decreased 6%.
Net interest income increased $430 million (6%) with 7% growth in average interest earning assets, partly offset by a 3 basis point decrease in
net interest margin. $77 million of the increase in net interest income was due to foreign currency translation impact. The $52.2 billion increasein average interest earning assets reflected a $17.0 billion foreign currency translation impact and lending growth of $20.5 billion, primarily inAustralia and New Zealand home loans.



Other operating income decreased $309 million (10%) with foreign currency translation having a $149 million favourable impact. Adjusting for
this, other operating income decreased by $458 million. The decrease was mainly due to a $331 million reduction in Markets other operating
income and a $260 million impairment of the investment in Ambank, partially offset by $82 million increase in net foreign exchange earnings, the$66 million gain on Esanda Dealer Finance divestment, and $29 million gain on cessation of equity accounting for BoT.



Operating expenses increased $876 million (19%) mainly due to $629 million increase relating to the software capitalisation changes, $128
million increase in restructuring charges and a $115 million foreign currency translation impact. Adjusting for these items, operating expenses
were flat.

Credit impairment charges increased $408 million (80%) due to a $437 million (96%) increase in the individual credit impairment charge, mainly
from a small number of Australian and multinational resource related exposures, increases in Small Business Banking and Regional BusinessBanking together with lower recoveries, partially offset by a $29 million decrease in the collective impairment charge.

March 2016 v September 2015

Cash profit decreased 21% compared to the September 2015 half year mainly due to the specified items outlined above. Excluding these items, andthe impact of foreign currency translation, cash profit decreased 2%.
Net interest income increased $90 million (1%) with 3% growth in average interest earning assets, partly offset by a 3 basis point contraction in
net interest margin. $32 million of the increase in net interest income was due to foreign currency translation impact. The $22.7 billion increasein average interest earning assets reflected a $5.7 billion foreign currency translation impact and lending growth of $4.6 billion, primarily inAustralia and New Zealand home loans.



Other operating income decreased by $116 million (4%) with foreign currency translation having a $103 million favourable impact. Adjusting for
this, other operating income decreased by $219 million (7%). The decrease was mainly due to the $260 million impairment of the investment in
Ambank, partially offset by a $75 million increase in net foreign exchange earnings, $66 million gain on Esanda Dealer Finance divestment and$29 million gain on cessation of equity accounting for BoT.



Operating expenses increased $704 million (15%) mainly due to the $629 million increase relating to the software capitalisation changes, $117
million increase in restructuring charges and $37 million increase due to foreign currency translation impact. Adjusting for these items, operating
expenses decreased by $79 million (1%) reflecting the 3% decrease in FTE.



Credit impairment charges increased $223 million (32%) due to a $237 million (36%) increase in individual credit impairment charges mainly
from a small number of Australian and multinational resource related exposures, partially offset by a $14 million decrease in the collective credit
impairment charge.

23

GROUP RESULTS
Net interest income
Half Year

Movement

Mar 16$M
7,568

Sep 15$M
7,478

Mar 15$M
7,138

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
6%

Average interest earning assets

754,391

731,739702,203

3%

7%

Average deposits and other borrowings

587,235

567,709551,805

3%

6%

2.01

2.04

2.04

-3 bps-3 bpsGroup
Cash net interest income

Net interest margin (%) - cash

Group (excluding Markets)
Cash net interest income

7,006

6,878

6,631

2%

6%

Average interest earning assets

556,107546,007529,707

2%

5%

Average deposits and other borrowings

453,137

436,702420,878

4%

8%

2.52

2.51

2.51

1 bps

1 bps

Net interest margin (%) - cash

Half Year
Mar 16$M

Cash net interest margin by major division
Australia

Sep 15$M

Movement
Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

2.54

2.53

2.54

1 bps

0 bps

Average interest earning assets

317,540

306,816

294,368

3%

8%

Average deposits and other borrowings

172,779

164,732

162,688

5%

6%

Net interest margin (%)

Institutional
1.15

1.20

1.19

-5 bps-4 bpsAverage interest earning assets

312,961

305,902292,914

2%

7%

Average deposits and other borrowings

233,729

231,655

227,4601%

3%-15 bps

Net interest margin (%)

New Zealand
2.37

2.44

2.52

-7 bpsAverage interest earning assets

98,741

94,624

92,395

4%

7%

Average deposits and other borrowings

67,54063,99662,314

6%

8%

Net interest margin (%)

Group net interest margin – March 2016 Half Year v March 2015 Half YearMarch 2016 v March 2015
Net interest margin (-3 bps)Asset mix and funding mix (0 bp): favourable mix impact from a higher proportion of capital and run-off of lower margin trade loans offset by theadverse asset mix impact from the Esanda Dealer Finance divestment.



Funding costs (1 bp): favourable wholesale funding costs.



Deposit competition (2 bps): benefit from deposit repricing, particularly term deposits.



Asset competition and risk mix (0 bp): improved Australian Home Loan margins following repricing offset by lending margin compression in
New Zealand and lower spreads within Institutional and Commercial lending.

Markets and treasury (-6 bps): adverse impact of lower earnings on capital from lower interest rates and growth in lower margin liquidity
portfolios in Markets.

24

GROUP RESULTS
Average interest earning assets (+$52.2 billion or +7%)


Average gross loans and advances (+$29.0 billion or +5%): excluding the impact of foreign currency translation, growth was $20.5 billion or+4% driven by growth in Australia and New Zealand home loans as well as growth in New Zealand Commercial lending. This was slightly offset
by a decline in Trade loans due to active portfolio reduction and strategic repositioning of that business, as well as the Esanda Dealer Financedivestment.



Average trading and available-for-sale assets (+$10.9 billion or +12%): excluding the impact of foreign currency translation, growth was $8.4
billion or +9% driven by growth in the liquidity portfolio.



Average cash (+$5.6 billion or +12%): excluding the impact of foreign currency translation, growth was $2.0 billion or +4% driven bymanagement of liquidity requirements.



Average collateral paid (+$3.2 billion or +42%): excluding the impact of foreign currency translation, growth was $2.6 billion or +33%.

Average deposits and other borrowings (+$35.4 billion or +6%)


Average deposits and other borrowings (+$35.4 billion or +6%): excluding the impact of foreign currency translation, growth was $17.7 billion or+3% driven by growth in Retail and Commercial customer deposits across both Australia and New Zealand.

Group net interest margin – March 2016 Half Year v September 2015 Half YearMarch 2016 v September 2015
Net interest margin (-3 bps)Asset mix and funding mix (0 bp): favourable mix impact from higher proportion of capital and run-off of lower margin trade loans offset by theadverse asset mix impact from the Esanda Dealer Finance divestment.



Funding costs (-1 bps): adverse impact of increased wholesale funding costs.



Deposit competition (1 bp): benefit from deposit repricing, particularly in Australia and Asia.



Asset competition and risk mix (2 bps): improved margins, particularly in Home Loans following repricing, partly offset by lower Commercial andInstitutional lending spreads.

Markets and treasury (-5 bps): adverse impact of lower earnings on capital from lower interest rates and growth in lower margin liquidity
portfolio in Markets.

Average interest earning assets (+$22.7 billion or +3%)


Average gross loans and advances (+$7.3 billion or +1%): excluding the impact of foreign currency translation, growth was $4.6 billion or +1%
driven by growth in Australia and New Zealand home loans as well as growth in New Zealand Commercial lending. This was slightly offset by
the Esanda Dealer Finance divestment and a decline in Trade loans due to active portfolio reduction and strategic repositioning of thatbusiness.

Average trading and available-for-sale assets (+$6.9 billion or +8%): excluding the impact of foreign currency translation, growth was $6.1
billion or +7% driven by growth in the liquidity portfolio.



Average cash (+$4.6 billion or +10%): excluding the impact of foreign currency translation, growth was $3.7 billion or +8% driven bymanagement of liquidity requirements.



Average collateral paid (+$1.7 billion or +19%): excluding the impact of foreign currency translation, growth was $1.4 billion or +15%.

Average deposits and other borrowings (+$19.5 billion or +3%)


Average deposits and other borrowings (+$19.5 billion or +3%): excluding the impact of foreign currency translation, growth was $13.7 billion or+2% driven by growth in Retail and Commercial customer deposits across both Australia and New Zealand, partially offset by a small decline in
Institutional cash management deposits.

25

GROUP RESULTS
Other operating income
Half Year

Movement

Mar 16$M
1,194

Sep 15$M
1,232

Mar 15$M
1,212

Mar 16v. Sep 15-3%

Net funds management and insurance income

771

772

732

0%

5%

Markets other operating income

433

423

716

2%

-40%

Share of associates profit1

301

311

314

-3%

-4%

Net fee and commission income1

Net foreign exchange earnings

1

Other1,2
Cash other operating income1.
2.

Mar 16v. Mar 15
-1%

141

64

59

large

large

(92)

62

24

large

large

2,748

2,864

3,057

-4%

-10%

Excluding Markets.
Other income for the March 2016 half includes the $260 million impairment of investment in Ambank, $29 million gain on cessation of equity accounting of BoT and $66 million gain on
Esanda Dealer Finance divestment.

Half Year

Movement

Mar 16$M
562

Sep 15$M600

Mar 15$M
507

Mar 16v. Sep 15-6%

Mar 16v. Mar 15
11%

Other operating income

433

423

716

2%

-40%

Cash Markets income

995

1,023

1,223

-3%

-19%

Markets income
Net interest income

Half Year

Movement

Mar 16$M594

Sep 15$M
606

Mar 15$M
580

Mar 16v. Sep 15-2%

Mar 16v. Mar 15
2%

Institutional

911

948

1,229

-4%

-26%

New Zealand

201

185

183

9%

10%
2%

Other operating income by division
Australia

Wealth

779

790

762

-1%

Asia Retail & Pacific

231

236

221

-2%

5%

TSO and Group Centre1

32

99

82

-68%

-61%

2,748

2,864

3,057

-4%

-10%

Cash other operating income
1.

Other income for the March 2016 half includes the $260 million impairment of investment in Ambank, $29 million gain on cessation of equity accounting of BoT and $66 million gain on
Esanda Dealer Finance divestment.

Other operating income – March 2016 Half Year v March 2015 Half Year

Asian minority
investment
adjustments

March 2016 v March 2015

Other operating income decreased $309 million (10%). Excluding the specified items (impairment of investment in Ambank, gain on cessation of equity
accounting of BoT, and gain on Esanda Dealer Finance divestment) and the impact of foreign currency translation, other operating income decreased by
9%.
Net fee and commission income
Decreased by $18 million (1%). Key factors include:$21 million positive impact due to foreign currency translation.



Decrease in fee income of $35 million in Institutional due to lower customer demand and competitive pricing pressure.

26

GROUP RESULTS$5 million decrease in fees in Australia resulting from the Esanda Dealer Finance divestment, partially offset by growth in Small BusinessBanking lending fee income.

Net funds management and insurance income
Increased by $39 million (5%). Key factors include:$4 million positive impact of foreign currency translation.

Improved lapse experience in the life insurance business, partially offset by adverse claims experience and a shift in business towards lower
margin products.

Markets operating income
Decreased by $283 million (40%). Key factors include:$48 million positive impact of foreign currency translation.

Balance Sheet income decreased $116 million (45%) due to widening credit spreads.

Rates income decreased $85 million (27%) as a result of lower customer demand for interest rate hedging products.

Commodities income decreased $20 million (21%) due to declining demand for gold from Asian customers.

Refer to page 66 for further information.
Share of associates’ profit
Decreased by $13 million (4%) with foreign currency translation impact driving an increase of $19 million and the remaining movement driven by:

Ambank decreased $30 million due to margin contraction and subdued Malaysian economic conditions.



P.T. Bank Pan Indonesia decreased $19 million due to higher credit provisions.



BoT decreased $5 million mainly due to higher credit provisions and increased operating expenses.

Shanghai Rural Commercial Bank increased $20 million with higher investment income.

Net foreign exchange earnings
Increased by $82 million (large %). Key factors include:

Lower realised losses on earnings related hedges in TSO and Group Centre ($61 million) compared with the March 2015 half, these offset
translation gains elsewhere in the Group.

Higher unrealised gains on foreign currency balances held in Institutional ($6 million).

Other
Decreased by $116 million (large %). Key factors include:$3 million positive impact due to foreign currency translation.

$260 million impairment of investment in Ambank.

$66 million gain on Esanda Dealer Finance divestment.

$29 million gain on cessation of equity accounting for BoT.

March 2016 v September 2015

Other operating income decreased by $116 million (4%). Excluding the specified items (impairment of investment in Ambank, gain on cessation of equity
accounting of BoT, and gain on Esanda Dealer Finance divestment), and the impact of foreign currency translation, other operating income decreased by1%.
Net fee and commission income
Decreased by $38 million (3%). Key factors include:$6 million positive impact of foreign currency translation.



Decrease in fee income of $26 million in Institutional due to lower customer demand and competitive pricing pressure.

$13 million decrease in fees in Australia resulting from the Esanda Dealer Finance divestment, partially offset by growth in Deposits andPayments.

Net funds management and insurance income
Decreased by $1 million (0%). Key factors include:$2 million positive impact of foreign currency translation.



Decrease in funds management income partially offset by improved lapse experience and in-force premium growth.

27

GROUP RESULTS

Markets operating income
Increased by $10 million (2%). Key factors include:Foreign Exchange income increased $63 million (15%) due to increased customer demand as a depreciating Chinese Yuan resulted incustomers seeking to hedge their foreign exchange exposures.
 Commodities income decreased $19 million (20%) due to declining demand for gold from Asian customers.

Refer to page 66 for further information.
Share of associates’ profit
Decreased by $10 million (3%) with foreign currency translation impact driving a decrease of $1 million and the remaining movement driven by:

Ambank decreased $14 million due to margin contraction.



P.T. Bank Pan Indonesia decreased $28 million due to higher credit provisions.



Shanghai Rural Commercial Bank increased $24 million with higher investment income.



BoT increased $10 million due asset growth.

Net foreign exchange earnings
Increased by $77 million (large %). Key factors include:

Lower realised losses on earnings related hedges in TSO and Group Centre ($90 million) compared with the September 2015 half, these offset
translation gains elsewhere in the Group.

Higher unrealised losses on foreign currency balances held in Institutional ($7 million).

Other
Decreased by $154 million (large %). Key factors include:$2 million positive impact due to foreign currency translation

$260 million impairment of investment in Ambank.

$15 million decrease on credit default swaps hedging lending exposures in Loans and Specialised Finance.

$66 million gain on Esanda Dealer Finance divestment.

$29 million gain on cessation of equity accounting for BoT.

28

GROUP RESULTS
Operating Expenses
Half Year
Mar 16$M
2,801

Personnel expenses1

Sep 15$M
2,764

Movement
Mar 15$M
2,715

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
3%

Premises expenses

458

467

455

-2%

1%

Technology expenses1

1,324

761

701

74%

89%

Restructuring expenses

138

21

10

large

large

Other expenses1

758

762

722

-1%

5%

Total cash operating expenses

5,479

4,775

4,603

15%

19%

Total full time equivalent staff (FTE)

48,89650,152

51,243

-3%

-5%

1.

The $629 million charge associated with the software capitalisation changes included in the March 2016 half comprises $98 million of personnel expenses, $513 million technology
expenses, and $18 million other expenses. Refer to page 32 for further details.

Movement

Half Year
Expenses by division
Australia

Mar 16$M
1,665

Sep 15$M
1,618

Mar 15$M
1,556

Mar 16v. Sep 15
3%

Institutional

1,510

1,425

1,385

6%

9%

New Zealand

527

525

539

0%

-2%

Wealth

521

481

484

8%

8%

Asia Retail & Pacific

401

395

374

2%

7%

TSO and Group Centre

855

331

265

large

large

5,479

4,775

4,603

15%

19%

Total cash operating expenses

Mar 16v. Mar 15
7%

Operating expenses – March 2016 Half Year v March 2015 Half YearMarch 2016 v March 2015
Operating expenses increased 19% compared to the March 2015 half year due to the inclusion of specified items (software capitalisation changes
and restructuring). Excluding these and the impact of foreign currency translation, operating expenses were flat.
Personnel expenses increased $86 million (3%), with $81 million due to the impact of foreign currency translation and $98 million due to thesoftware capitalisation changes (personnel expenses that would otherwise have been capitalised). Excluding these, personnel expenses
decreased $93 million (3%) due to a 5% decrease in FTE, primarily managed through natural attrition, and lower incentive costs.

Premises expenses increased $3 million (1%) with a $10 million increase due to the impact of foreign currency translation. Adjusting for this,premises expense decreased $7 million (2%) due to premises consolidation benefits offsetting annual rent increases.

Technology expenses increased $623 million (89%). $513 million of the increase was due to the software capitalisation changes comprising$468 million of increased amortisation for software assets and $45 million due to software expenditure which would otherwise have been
capitalised. Excluding this, technology expenses increased $110 million (16%) from higher licensing, outsourced services and data
communication costs, along with $9 million due to the impact of foreign currency translation.

Restructuring expenses increased $128 million reflecting the reshaping of the workforce in response to the Group evolving its strategy,
including the simplification of the Institutional and Wealth businesses, restructure of Retail Asia and Pacific and delayering and simplification in
TSO and Group Centre.



Other expenses increased $36 million (5%), with $15 million due to the impact of foreign currency translation and $18 million due to thesoftware capitalisation changes. Excluding these, other expenses were flat with higher compliance and remediation spend being offset bydecreased travel, entertainment and advertising expenses.

29

GROUP RESULTS
March 2016 v September 2015
Operating expenses increased 15% compared to the September 2015 half year due to the inclusion of specified items (software capitalisation
changes and restructuring). Excluding these items and the impact of foreign currency translation expenses were down 1%.


Personnel expenses increased $37 million (1%), with $25 million due to the impact of foreign currency translation and $98 million due to thesoftware capitalisation changes (personnel expenses that would otherwise have been capitalised). Excluding these, personnel expenses
decreased $86 million (3%) due to a 3% decrease in FTE, primarily managed through natural attrition, and lower incentive costs.

Premises expenses decreased $9 million (2%), with a $3 million increase due to the impact of foreign currency translation and a $12 million
decrease driven by premises consolidation benefits which more than offset annual rent increases.

Technology expenses increased $563 million (74%). $513 million of the increase was due to the software capitalisation changes comprising$468 million of increased amortisation for software assets and $45 million due to software expenditure which would otherwise have been
capitalised. Excluding these, technology expenses increased $50 million (7%) driven by higher licensing costs and outsourced services, and$4 million due to the impact of foreign currency translation.

Restructuring expenses increased $117 million, reflecting the reshaping of the workforce in response to the Group evolving its strategy,
including the simplification of the Institutional and Wealth businesses, restructure of Retail Asia and Pacific and delayering and simplification in
TSO and Group Centre.



Other expenses decreased $4 million (1%), with a $5 million increase due to the impact of foreign currency translation and $18 million due tothe software capitalisation changes. Excluding these, other expenses decreased $28 million (4%) due to decreased travel and entertainment
expenses and lower advertising spend.

30

GROUP RESULTS
Technology infrastructure spend
Technology infrastructure spend includes expenditure that develops and enhances the Group's technology infrastructure to meet business and strategic
objectives and to improve capability and efficiency.
Movement

Half Year

Expensed investment spend

Mar 16$M272

Sep 15$M
135

Mar 15$M
123

Mar 16v. Sep 15
large

Mar 16v. Mar 15
large

Capitalised investment spend

197

425

314

-54%

-37%

Technology infrastructure spend

469

560

437

-16%

7%

Comprising

Half Year
Mar 16$M
190

GrowthMovement

Sep 15$M
242

Mar 15$M
204

Mar 16v. Sep 15-21%

Mar 16v. Mar 15-7%

Productivity

83

114

102

-27%

-19%

Risk and compliance

115

141

82

-18%

40%

Infrastructure and other

81

63

49

29%

65%

Technology infrastructure spend

469

560

437

-16%

7%

Technology infrastructure spend by division

Half Year

Movement

Mar 16$M
143

Sep 15$M
158

Mar 15$M
136

Mar 16v. Sep 15-9%Institutional

96

147

98

-35%

-2%

New Zealand

37

39

28

-5%

32%

Australia

Mar 16v. Mar 15
5%

Asia Retail & Pacific

4

4

3

0%

33%

Wealth

45

49

35

-8%

29%

TSO and Group Centre

144

163

137

-12%

5%

Technology infrastructure spend

469

560

437

-16%

7%

Digitisation is becoming central to ANZ’s business operations by reshaping how ANZ works and providing technology that enables better solutions forcustomers. The Group’s aim is to create a digital bank; one that allows us to streamline operations such that we deliver fast, easy and innovative
solutions for our customers while also reducing the operational complexity of the organisation and thereby improving productivity and reducing risk. ANZ
has invested in digital across the Group, delivering multichannel platforms that have globally extensible capabilities covering aspects like employee
mobility, products (goMoney™ and MobilePay), security systems and more intuitive internet banking.
Australia division has delivered key foundations with the go-live of multi-channel platforms during the March 2016 half to enable a consistent digital
experience and will now focus on continuous delivery of digital channels to improve both customer and banker experience. Investment is also continuingin simplification initiatives such as Banker Desktop which is simplifying key common branch processes through digitisation to enhance banker
productivity.
Institutional continues to invest in risk and compliance projects to meet increasing regulatory requirements across the region. Institutional investment
focused primarily on the Markets business globally; Transaction Banking in China; and on banking and data management systems in Singapore andIndonesia. The division recently concluded a number of projects aimed at establishing businesses in Thailand and Myanmar, with the condensed growth
agenda now focusing on key digital infrastructure in Markets and Payments Application Consolidation in Transaction Banking.
New Zealand has introduced new digital services for customers including goMoney™ Wallet for Android users and self-service funds transfers for
KiwiSavers on internet banking.
Wealth investment has focused on strategic growth initiatives to help customers better connect with, protect and grow their financial well-being. These
initiatives include digital platforms, such as Grow by ANZ™, that better connect customers to their wealth.
TSO and Group Centre is investing in common platforms to drive transformation of key business activities, improve customer experience and drive down
cost to serve. Investment continues in Payments Transformation to provide competitive payment services for our customers, and our Global Loan
Management System to further transform wholesale lending capabilities.


March 2016 v March 2015

During the March 2016 half, the Group continued to invest strongly with spend of $469 million. The $32 million (7%) increase compared to the March
2015 half was driven by Australia (Small Business Origination System and Global Asset Finance), New Zealand (RBNZ Payments Industry Compliance,
Deposits Remediation and Teradata Pan-bank Data Platform), Wealth (Superannuation Transition, Smart Choice, and E*Trade Rebranding) and TSO
and Group Centre (transforming wholesale lending capabilities).
March 2016 v September 2015

The $91 million decrease (16%) in March 2016 reflects the completion of a number of programs at the end of September 2015, such as Thailand
business mobilisation, over the counter (OTC) derivative reform program and China data centre expansion in Institutional, anz.com redesign and ANZ
Mobile Pay in Australia, and insurance on Grow™ in Wealth.

31

GROUP RESULTS
Software capitalisation
As at 31 March 2016, the Group’s intangible assets included $2,249 million in relation to costs incurred in acquiring and developing software. Details are
set out in the table below:
Movement

Half Year
Mar 16$M
2,893

Sep 15$M
2,689

Mar 15$M
2,533

Mar 16v. Sep 15
8%

Mar 16v. Mar 15
14%

209

457

350

-54%

-40%

- Current period amortisation

(245)

(275)

(267)

-11%

-8%

- Accelerated amortisation

(556)

-

-

n/a

n/a

(2)

(13)

(4)

-85%

-50%

Balance at start of period
Software capitalised during the period
Amortisation during the period

Software impaired/written-off
Foreign exchange differences

(50)

35

77

large

large

Total capitalised software

2,249

2,893

2,689

-22%

-16%

Capitalised cost analysis by Division

Half Year

Movement

Mar 16$M
56

Sep 15$M
121

Mar 15$M
93

Mar 16v. Sep 15-54%

Mar 16v. Mar 15-40%

Institutional

40

87

90

-54%

-56%

New Zealand

4

28

14

-86%

-71%

Wealth

-

35

21

-100%

-100%

Australia

Asia Retail & Pacific

9

4

10

large

-10%

TSO and Group Centre

100

182

122

-45%

-18%

Total

209

457

350

-54%

-40%

Net book value by Division

Half Year

Movement

Australia

Mar 16$M
514

Sep 15$M
628

Mar 15$M
580

Mar 16v. Sep 15-18%

Mar 16v. Mar 15-11%

Institutional

847

1,059

1,014

-20%

-16%

New Zealand

19

68

51

-72%

-63%

Wealth

28

121

101

-77%

-72%

Asia Retail & Pacific

62

74

77

-16%

-19%

TSO and Group Centre

779

943

866

-17%

-10%

2,249

2,893

2,689

-22%

-16%

Total

During the March 2016 half, the Group changed the application of its accounting policy for the capitalisation of expenditure on internally generated
software assets effective from 1 October 2015. The change aligns the accounting policy for software assets with the rapidly changing technology
landscape and the Group’s evolving digital strategy by increasing the threshold for capitalisation of software development costs reflecting the increasingly
shorter useful life of smaller items of software and directly expensing more project related costs.
The change does not affect the total investment in technology but does affect the timing of recognition of costs in the income statement. The impact of thechange on the March 2016 half was:

Accelerated amortisation of $556 million relating to software assets where the original cost was below the revised threshold at 1 October 2015. This
brings forward amortisation which otherwise would have been recognised in future periods, of which $88 million would have been recognised in the
March 2016 half (i.e. the half year amortisation charge increased by $468 million).

Higher operating expenses of $161 million relating to software development costs which otherwise would have been capitalised and amortised infuture periods.

The change in capitalised software treatment has no impact on regulatory capital ratios.
The table below shows the capitalised costs and net book values by division at 31 March 2016 had the changes not taken place:
Capitalised costs$M
105

Net book value$M
652

Institutional

70

983

New Zealand

21

81

Wealth19

119

Australia

Asia Retail & Pacific

970

TSO and Group Centre

146

973

Total

370

2,878

32

GROUP RESULTS
Credit risk
Half Year
Mar 16$M
892

Credit impairment charge/(release)
Individual credit impairment charge

Sep 15$M
655

Movement
Mar 15$M455

Mar 16v. Sep 15
36%

Mar 16v. Mar 15
96%

Collective credit impairment charge

26

40

55

-35%

-53%

Total credit impairment charge

918

695

510

32%

80%

Movement

Half Year
Mar 16$M
462

Sep 15$M
458

Mar 15$M
395

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
17%

Institutional

323

111

88

large

large

New Zealand

42

36

19

17%

large

-

1

(1)

-100%

-100%

Asia Retail & Pacific

91

87

10

5%

large

TSO and Group Centre

-

2

(1)

-100%

-100%

918

695

510

32%

80%

Credit impairment charge/(release)
Australia

WealthTotal credit impairment charge

Individual credit impairment charge
Half Year

Movement

Mar 16$M
429

Sep 15$M
427

Mar 15$M
334

Mar 16v. Sep 15
0%

Mar 16v. Mar 15
28%

Institutional

339

114

92

large

large

New Zealand

43

32

22

34%

95%

Wealth

(1)

1

(1)

large

0%

Asia Retail & Pacific

82

78

8

5%

large

Individual credit impairment charge by division
Australia

-

3

-

-100%

n/a

Total individual credit impairment charge

892

655

455

36%

96%

New and increased individual credit impairments
Australia

600

573

530

5%

13%

Institutional

354

187

127

89%

large

New Zealand

96

100

90

-4%

7%

-

1

-

-100%

n/a

Asia Retail & Pacific

101

99

75

2%

35%

TSO and Group Centre

-

1

-

-100%

n/a

20%

40%

TSO and Group Centre

WealthNew and increased individual credit impairments

1,151

961

822

Recoveries and write-backs
Australia

(171)

(146)

(196)

17%

-13%

Institutional

(15)

(73)

(35)

-79%

-57%

New Zealand

(53)

(68)

(68)

-22%

-22%

Wealth

(1)

-

(1)

n/a

0%

Asia Retail & Pacific

(19)

(22)

(67)

-14%

-72%

-

3

-

-100%

n/a

Recoveries and write-backs

(259)

(306)

(367)

-15%

-29%

Total individual credit impairment charge

892

655

455

36%

96%

TSO and Group Centre

March 2016 v March 2015

The individual credit impairment charge increased $437 million (96%) driven by increases in new and existing provisions of $329 million, combined with a$108 million reduction in write-backs. The main driver of the increase in new and existing provisions was in the Institutional division from a small numberof Australian and multi-national resource related exposures and continued commodity sector weakness. In Australia division, the increases were in Small
Business Banking, Cards & Personal Loans and Regional Business Banking, partially offset by the Esanda Dealer Finance divestment. Lower writebacks reflected a large write-back in Asia Retail & Pacific that occurred in the March 2015 half.
March 2016 v September 2015

The individual credit impairment charge increased by $237 million (36%) driven by an increase in new and existing provisions of $190 million combinedwith a $47 million reduction in write-backs. The main driver of the increase in new and existing provisions was in the Institutional division from a small
number of Australian and multi-national resource related exposures and continued commodity sector weakness.

33

GROUP RESULTS
Collective credit impairment charge
Half Year
Collective credit impairment charge/(release) by source
Lending growth

Mar 16$M
56

Sep 15$M
50

Movement
Mar 15$M
54

Mar 16v. Sep 15
12%

Mar 16v. Mar 15
4%

Risk profile

(30)

65

5

large

large

Portfolio mix

-

(3)

3

-100%

-100%

Economic cycle and concentration risk adjustment

-

(72)

(7)

-100%

-100%

26

40

55

-35%

-53%

Total collective credit impairment charge

Half Year

Movement

Mar 16$M
33

Sep 15$M
31

Mar 15$M
61

Mar 16v. Sep 15
6%

Institutional

(16)

(3)

(4)

large

large

New Zealand

(1)

4

(3)

large

-67%

Wealth

1

-

-

n/a

n/a

Asia Retail & Pacific

9

9

2

0%

large

TSO and Group Centre

-

(1)

(1)

-100%

-100%

26

40

55

-35%

-53%

Collective credit impairment charge/(release) by division
Australia

Total collective credit impairment chargeMar 16v. Mar 15-46%

March 2016 v March 2015

The collective credit impairment charge decreased $29 million (53%) driven by a number of customer downgrades in the Institutional division andsubsequent migration of provisioning from collective to individual provision.
March 2016 v September 2015

The collective credit impairment charge decreased $14 million (35%) driven by a number of customer downgrades in the Institutional division andsubsequent migration of provisioning from collective to individual provision, and releases from the economic cycle overlay in September 2015.

Provision for credit impairment balance
As at

Movement

Collective provision

Mar 16$M
2,862

Sep 15$M
2,956

Mar 15$M
2,914

Mar 16v. Sep 15-3%

Mar 16v. Mar 15-2%

Individual provision

1,238

1,061

1,114

17%

11%

Total provision for credit impairment

4,100

4,017

4,028

2%

2%

1

1.

The collective provision includes amounts for off-balance sheet credit exposures of $663 million at 31 Mar 2016 (Sep 2015: $677 million; Mar 2015: $646 million). The impact on theincome statement for the half year ended 31 March 2016 was a $3 million charge (Sep 2015 half: $20 million charge; Mar 2015 half: $7 million charge).

34

GROUP RESULTS
Gross Impaired Assets
As at

Movement

Mar 16$M
2,564

Sep 15$M
2,441

Mar 15$M
2,466

Mar 16v. Sep 15
5%

Mar 16v. Mar 15
4%

Restructured items

226

184

146

23%

55%

Non-performing commitments and contingencies

93

94

96

-1%

-3%

2,883

2,719

2,708

6%

6%

(1,209)(1,038)(1,081)

16%

12%

(29)

(23)

(33)

26%

-12%

Net impaired assets

1,645

1,658

1,594

-1%

3%

Gross impaired assets by division
Australia

1,093

1,193

1,245

-8%

-12%

Institutional

1,281

960

826

33%

55%

New Zealand

273

338

434

-19%

-37%

Impaired loans

Gross impaired assets
Individual provisions
Impaired loans
Non-performing commitments and contingencies

4

5

8

-20%

-50%

232

223

195

4%

19%

Gross impaired assets

2,883

2,719

2,708

6%

6%

Gross impaired assets by size of exposure
Less than $10 million

1,597

1,748

1,903

-9%

-16%

970

708

607

37%

60%

WealthAsia Retail & Pacific$10 million to $100 million
Greater than $100 million

316

263

198

20%

60%

Gross impaired assets

2,883

2,719

2,708

6%

6%



March 2016 v March 2015

Gross impaired assets increased $175 million (6%) driven by Institutional ($455 million), partially offset by decreases in Australia division ($152 million)
and New Zealand division ($161 million). The increase in Institutional relates to impairments on a small number of Australian and multi-national resource
related exposures due to continued weakness in the commodity sector. The Australia division decrease is driven by the Esanda Dealer Financedivestment. In the New Zealand division, the decrease is due to repayments and transfers out of the impaired category. The Group’s individual provision
coverage ratio on impaired assets was 42.9% at 31 March 2016, up from 41.1% at 31 March 2015.
March 2016 v September 2015

Gross impaired assets increased $164 million (6%) driven by Institutional ($321 million), partially offset by decreases in Australia division ($100 million)
and New Zealand division ($65 million). The increase in Institutional relates to impairments on a small number of Australian and multi-national resource
related exposures due to continued weakness in the commodity sector. The Australia division decrease is due to the Esanda Dealer Finance divestment.
In the New Zealand division, the decrease is due to repayments and transfers out of the impaired category. The Group’s individual provision coverage
ratio on impaired assets was 42.9% at 31 March 2016, up from 39.0% at 30 September 2015.

New Impaired Assets
Half Year

Impaired loans
Restructured items

Movement

Mar 16$M
1,657

Sep 15$M
1,707

Mar 15$M
1,141

Mar 16v. Sep 15-3%

Mar 16v. Mar 15
45%

81

4

26

large

large

46

72

30

-36%

53%

1,784

1,783

1,197

0%

49%

New impaired assets by division
Australia

777

840

778

-8%

0%

Institutional

652

614

146

6%

large

New Zealand

194

203

165

-4%

18%

-

-

18

n/a

-100%

Non-performing commitments and contingencies
Total new impaired assets

WealthAsia Retail & PacificTotal new impaired assets

35

161

126

90

28%

79%

1,784

1,783

1,197

0%

49%

GROUP RESULTS

March 2016 v March 2015

New impaired assets increased $587 million (49%) with increases in Institutional ($506 million). The increase in Institutional related to a small number ofAustralian and multi-national resource related exposures due to continued weakness in the commodity sector.
March 2016 v September 2015

New impaired assets increased $1 million (0%) with increases in Institutional ($38 million) and Asia Retail & Pacific ($36 million), offset by a decrease inAustralia division ($63 million). The increase in Institutional related to a small number of Australian and multi-national resource related exposures due tocontinued weakness in the commodity sector, offset by the Esanda Dealer Finance divestment in the Australia Division.

As at

Movement

Ageing analysis of net loans and advancesthat are past due but not impaired
1-5 days

Mar 16$M
2,926

Sep 15$M
2,621

Mar 15$M
3,323

Mar 16v. Sep 15
12%

Mar 16v. Mar 15-12%

6-29 days

5,942

5,235

5,271

14%

13%

30-59 days

2,222

1,674

2,069

33%

7%

60-89 days

1,263

1,050

1,160

20%

9%

>90 days

2,573

2,378

2,248

8%

14%

Total

14,926

12,95814,07115%

6%March 2016 v March 2015

The 90 days past due but not impaired increased by $325 million (14%) primarily within Australia division due to growth in the mortgage portfolio andportfolio deterioration mainly in Western Australia and Queensland.
March 2016 v September 2015

The 90 days past due but not impaired increased by $195 million (8%) primarily within Australia division due to growth in the mortgage portfolio andportfolio deterioration predominantly in Western Australia and Queensland.

Income tax expense
Half Year

Movement

Income tax expense on cash profit

Mar 16$M
1,133

Sep 15$M
1,326

Mar 15$M
1,398

Mar 16v. Sep 15-15%

Mar 16v. Mar 15-19%

Effective tax rate (cash profit)

28.9%

27.2%

27.5%

1.7%

1.4%



March 2016 v March 2015

The effective tax rate increased from 27.5% to 28.9%. The increase of 140 bps is primarily due to the impairment of our investment in Ambank and lower
average tax rate on decreased offshore earnings during the March 2016 half.
March 2016 v September 2015

The effective tax rate increased from 27.2% to 28.9%. The increase of 170 bps is primarily due to the impairment of our investment in Ambank and a one
off favourable Wealth tax consolidation benefit recognised in the September 2015 half, partially offset by a release of tax provisions.

36

GROUP RESULTS
Impact of foreign currency translation
The following tables present the Group’s cash profit results and net loans and advances neutralised for the impact of foreign currency translation.
Comparative data has been adjusted to remove the translation impact of foreign currency movements by retranslating prior period comparatives atcurrent period foreign exchange rates.
Cash Profit - March 2016 Half Year vs March 2015 Half Year
Half YearNet interest income

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 16$M
7,568

Mar 15$M
7,138

Mar 15$M
77

Mar 15$M
7,215

Mar 16v. Mar 15
6%

Mar 16v. Mar 15
1%

Mar 16v. Mar 15
5%-14%

Other operating income

2,748

3,057

149

3,206

-10%

4%

Operating income

10,316

10,195226

10,421

1%

2%

-1%

Operating expenses(5,479)(4,603)(115)(4,718)

19%

3%

16%

Profit before credit impairment and income tax

4,837

5,592

111

5,703

-14%

1%

-15%

Credit impairment charge

(918)

(510)

(5)

(515)

80%

2%

78%

Profit before income tax

3,919

5,082

106

5,188

-23%

1%

-24%

Income tax expense(1,133)(1,398)(25)(1,423)

-19%

1%

-20%

(4)

(8)

(2)

(10)

-50%

10%

-60%

2,782

3,676

79

3,755

-24%

2%

-26%

Non-controlling interests
Cash profit

Cash Profit by Division and Geography - March 2016 Half Year vs March 2015 Half Year
Half Year

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 16$M
1,753

Mar 15$M
1,650

Mar 15$M-

Mar 15$M
1,650

Mar 16v. Mar 15
6%

Mar 16v. Mar 15
0%

Mar 16v. Mar 15
6%

Institutional

632

1,071

36

1,107

-41%

2%

-43%

New Zealand

578

566

(7)

559

2%

-1%

3%

Wealth

261

263

(1)

262

-1%

-1%

0%

Asia Retail & Pacific

53

99

6

105

-46%

4%

-50%

TSO and Group Centre

(495)

27

45

72

large

large

large

Cash profit by division

2,782

3,676

79

3,755

-24%

2%

-26%

Australia

1,830

2,147

35

2,182

-15%

1%

-16%

Asia Pacific, Europe & America

259

743

54

797

-65%

3%

-68%

New Zealand

693

786

(10)

776

-12%

-1%

-11%

2,782

3,676

79

3,755

-24%

2%

-26%

Cash profit by geography

Net loans and advances by division and geography - March 2016 Half Year vs March 2015 Half YearAs at

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 16$B
320.0

Mar 15$B
297.6

Mar 15$B-

Mar 15$B
297.6

Mar 16v. Mar 15
8%

Mar 16v. Mar 15
0%

Mar 16v. Mar 15
8%

Institutional

125.6

144.9

(1.4)

143.5

-13%

-1%

-12%

New Zealand

97.2

97.7

(8.0)

89.7

-1%

-9%

8%

Wealth

7.3

6.9

(0.2)

6.7

6%

-3%

9%

Asia Retail & Pacific

11.9

11.6

(0.1)

11.5

3%

0%

3%

TSO and Group Centre

(0.2)

(0.5)

-

(0.5)

-60%

0%

-60%

Net loans and advances by division1

561.8

558.2

(9.7)

548.5

1%

-1%

2%

Australia

386.8

362.8

-

362.8

7%

0%

7%

Asia Pacific, Europe & America

69.1

88.4

(1.0)

87.3

-22%

-1%

-21%

New Zealand

105.9

107.0

(8.7)

98.3

-1%

-9%

8%

Net loans and advances by geography1

561.8

558.2

(9.7)

548.5

1%

-1%

2%

1.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

37

GROUP RESULTS
Cash Profit - March 2016 Half Year vs September 2015 Half Year
Half YearNet interest income

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 16$M
7,568

Sep 15$M
7,478

Sep 15$M
32

Sep 15$M
7,510

Mar 16v. Sep 15
1%

Mar 16v. Sep 15
0%

Mar 16v. Sep 15
1%-7%

Other operating income

2,748

2,864

103

2,967

-4%

3%

Operating income

10,316

10,342

135

10,477

0%

2%

-2%

Operating expenses(5,479)(4,775)(37)(4,812)

15%

1%

14%

Profit before credit impairment and income tax

4,837

5,567

98

5,665

-13%

2%

-15%

Credit impairment charge

(918)

(695)

(8)

(703)

32%

1%

31%

Profit before income tax

3,919

4,872

90

4,962

-20%

1%

-21%

Income tax expense(1,133)(1,326)(28)(1,354)

-15%

1%

-16%

(4)

(6)

1

(5)

-33%

-13%

-20%

2,782

3,540

63

3,603

-21%

2%

-23%

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 16$M
1,753

Sep 15$M
1,706

Sep 15$M-

Sep 15$M
1,706

Mar 16v. Sep 15
3%

Mar 16v. Sep 15
0%

Mar 16v. Sep 15
3%

Institutional

632

893

1

894

-29%

0%

-29%

New Zealand

578

561

3

564

3%

1%

2%
-25%

Non-controlling interests
Cash profit

Cash Profit by Division and Geography - March 2016 Half Year vs September 2015 Half Year
Half Year

Movement

Wealth

261

346

-

346

-25%

0%

Asia Retail & Pacific

53

45

(1)

44

18%

-2%

20%

TSO and Group Centre

(495)

(11)

60

49

large

large

large

Cash profit by division

2,782

3,540

63

3,603

-21%

2%

-23%

Australia

1,830

2,269

64

2,333

-19%

3%

-22%

259

492

(4)

488

-47%

0%

-47%

Asia Pacific, Europe & America
New Zealand
Cash profit by geography

693

779

3

782

-11%

0%

-11%

2,782

3,540

63

3,603

-21%

2%

-23%

Net loans and advances by division and geography - March 2016 Half Year vs September 2015 Half YearAs at

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 16$B
320.0

Sep 15$B
313.7

Sep 15$B-

Sep 15$B
313.7

Mar 16v. Sep 15
2%

Mar 16v. Sep 15
0%

Mar 16v. Sep 15
2%

Institutional

125.6

142.2

(5.5)

136.7

-12%

-4%

-8%

New Zealand

97.2

95.2

(0.8)

94.4

2%

-1%

3%
6%

Wealth

7.3

7.1

(0.2)

6.9

3%

-3%

Asia Retail & Pacific

11.9

12.5

(0.8)

11.7

-5%

-7%

2%

TSO and Group Centre

(0.2)

(0.5)

-

(0.5)

-60%

0%

-60%

Net loans and advances by division1

561.8

570.2

(7.3)

562.9

-1%

-1%

0%

Australia

386.8

381.2

-

381.2

1%

0%

1%

Asia Pacific, Europe & America

69.1

85.1

(6.4)

78.6

-19%

-7%

-12%

105.9

103.9

(0.9)

103.0

2%

-1%

3%

561.8

570.2

(7.3)

562.9

-1%

-1%

0%

New Zealand1

Net loans and advances by geography
1.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

38

GROUP RESULTS
Earnings related hedges
The Group has taken out economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar, US Dollar and
US Dollar correlated). New Zealand dollar exposure relates to the New Zealand geography and USD exposure relates to APEA. Details of these hedges
are set out below.
Half Year
Mar 16$M
3,119

Sep 15$M
3,567

Mar 15$M
2,375

Amount taken to income (pre-tax statutory basis)2

(2)

168

(220)

Amount taken to income (pre-tax cash basis)3

(2)

(34)

(51)

Net open USD position (notional principal)1

85

352

823

Amount taken to income (pre-tax statutory basis)2

24

(41)

(129)

Amount taken to income (pre-tax cash basis)3

(34)

(92)

(46)

NZD Economic hedges
Net open NZD position (notional principal)1

USD Economic hedges

1.
2.
3.

Value in AUD at contracted rate.
Unrealised valuation movement plus realised revenue from closed hedges.
Realised revenue from closed hedges.

As at 31 March 2016, the following hedges are in place to partially hedge future earnings against adverse movements in exchange rates:

NZD 3.4 billion at a forward rate of approximately NZD 1.09 / AUD.



USD 0.1 billion at a forward rate of approximately USD 0.95 / AUD.

During the March 2016 half:

NZD 1.0 billion of economic hedges matured and a realised loss of $2 million (pre-tax) was recorded in cash profit.



USD 0.1 billion of economic hedges matured and a realised loss of $34 million (pre-tax) was recorded in cash profit.

An unrealised gain of $58 million (pre-tax) on the outstanding NZD and USD economic hedges was recorded in the statutory income statement
during the half. This unrealised gain has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD
and USD revenues.

Earnings per share
Movement

Half Year
Mar 16

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15

95.9

126.8

133.6

-24%

-28%

90.7

119.8

129.9

-24%

-30%

Cash earnings per share (cents)
Basic
Diluted1

Cash weighted average number of ordinary shares (M)Basic

2,901.4

2,792.7

2,750.0

4%

6%

Diluted

3,229.5

3,077.4

2,926.8

5%

10%

Cash profit ($M)

2,782

3,540

3,676

-21%

-24%

-

-

(1)

n/a

-100%

Cash profit less preference share dividends ($M)

2,782

3,540

3,675

-21%

-24%

Diluted cash profit less preference share dividends ($M)

2,929

3,687

3,802

-21%

-23%

Preference share dividends ($M)

1.

Includes Treasury shares held in Wealth as the associated gains and losses are included in cash profit.

39

GROUP RESULTS
Dividends

Movement

Half Year
Dividend per ordinary share (cents)
Interim (fully franked)1

Mar 1680

Sep 15-

Mar 1586

Mar 16v. Sep 15
n/a

Mar 16v. Mar 15
-7%

-

95

-

n/a

n/a

80

95

86

-16%

-7%

Ordinary share dividends used in payout ratio ($M)2

2,334

2,758

2,379

-15%

-2%

Cash profit ($M)

2,782

3,540

3,676

-21%

-24%

n/a

-100%

Final (fully franked)
Total (fully franked)

Less: Preference share dividends paid
Ordinary share dividend payout ratio (cash basis)2
1.
2.

-

-

(1)

83.9%

77.9%

64.7%

2016 interim dividend is proposed.
Dividend payout ratio is calculated using proposed 2016 interim dividend of $2,334 million, which is based on the forecast number of ordinary shares on issue at the dividend record date.
Dividend payout ratios for the September 2015 half and March 2015 half year are calculated using actual dividend paid of $2,758 million and $2,379 million respectively. Dividend payout
ratio is calculated by adjusting profit attributable to shareholders of the company by the amount of preference share dividends paid.

The Directors propose that an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2016. The proposed 2016
interim dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZ 10 cents per ordinary share will also be
attached.
Economic profit
Half Year
Mar 16$M
2,738

Statutory profit attributable to shareholders of the Company

Sep 15$M
3,987

Movement
Mar 15$M
3,506

Mar 16v. Sep 15-31%

Mar 16v. Mar 15
-22%

44

(447)

170

large

-74%

2,782

3,540

3,676

-21%

-24%

Economic credit cost adjustment

(71)

(203)

(290)

-65%

-76%

Imputation credits

568

663

657

-14%

-14%

Economic return

3,279

4,000

4,043

-18%

-19%

Cost of capital(2,876)(2,660)(2,508)8%15%

Economic profit

403

1,340

1,535

-70%

-74%

Adjustments between statutory profit and cash profit
Cash Profit

Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is considered in determining the variable component of
remuneration packages. This is used for internal management purposes and is not subject to review or audit by the external auditor.
Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the actual credit loss charge withinternal expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits to ourshareholders is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, thisis calculated using average ordinary shareholders’ equity (excluding non-controlling interests), multiplied by a cost of capital rate (10% applied across allreporting periods) plus the dividend on preference shares. At a business unit level, capital is allocated based on economic capital, whereby higher riskbusinesses attract higher levels of capital. This method is designed to help drive appropriate risk management and ensure business returns align with therelevant risk. Key risks covered include credit risk, operating risk, market risk and other risks.
Economic profit decreased 74% on the March 2015 half due to a 24% decrease in cash profit and a 15% increase in cost of capital partially offset by alower economic credit cost adjustment reflecting higher credit impairment charges.
Economic profit decreased 70% on the September 2015 half due to a 21% decrease in cash profit and an 8% increase in cost of capital partially offset bya lower economic credit cost adjustment reflecting higher credit impairment charges.

40

GROUP RESULTS
Condensed balance sheet
As at

Movement

AssetsCash / Settlement balances owed to ANZ / Collateral paid

Mar 16$B
88.0

Trading and available-for-sale assets

100.5

92.7

89.7

8%

12%

Derivative financial instruments

88.7

85.6

73.6

4%

21%

Net loans and advances1

561.8

570.2

558.2

-1%

1%

Sep 15$B
82.5

Mar 15$B
79.3

Mar 16v. Sep 15
7%

Mar 16v. Mar 15
11%

Investment backing policy liabilities

34.5

34.8

36.5

-1%

-5%

Other

21.8

24.1

22.8

-10%

-4%

Total assets

895.3

889.9

860.1

1%

4%

Liabilities
Settlement balances owed by ANZ / Collateral received

20.2

19.1

12.6

6%

60%

Deposits and other borrowings

578.1

570.8

567.2

1%

2%

Derivative financial instruments

91.7

81.3

73.2

13%

25%

Debt issuances

81.9

93.7

85.7

-13%

-4%

Policy liabilities and external unit holder liabilities

38.4

38.7

40.3

-1%

-5%

Other

28.5

28.9

29.0

-1%

-2%

Total liabilities

838.8

832.5

808.0

1%

4%

Total equity

56.5

57.4

52.1

-2%

8%

1.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

March 2016 v March 2015

Cash, settlement balances and collateral paid increased by $9 billion primarily due to increased cash held by Markets ($3 billion), increased
settlement balances with central banks held by Treasury ($3 billion) and increased collateral paid by Markets on derivative transactions ($2billion).



Trading and available-for-sale assets increased $11 billion. Adjusting for foreign currency translation, the $12 billion increase is due to purchasesof government and semi government securities as part of the liquidity portfolio and the reclassification of the BoT investment as an available-forsale asset upon cessation of equity accounting.



Derivative financial assets and liabilities increased by $15 billion and $19 billion respectively as foreign exchange rate and interest rate
movements resulted in higher derivative fair values.

Net loans and advances increased $4 billion. Adjusting for a $10 billion decrease due to foreign currency translation, the $14 billion increase
comprised a $25 billion increase in Australia division home loans and a $7 billion increase in New Zealand term loans, partially offset by a $2
billion decrease in non-housing loans and a $16 billion decrease in Institutional lending given the strategic reorganisation of that business.

Deposits and other borrowings increased $11 billion. Adjusting for a $8 billion decrease due to foreign currency translation, the $19 billion
increase comprised a $25 billion increase in interest bearing deposits across all divisions (primarily $11 billion in Australia and $7 billion in
Institutional division), $6 billion growth in Group Treasury certificates of deposit, partially offset by a $10 billion decrease in term deposits mainly
in Institutional.

Total equity increased $4 billion primarily due to $7 billion of profits generated over the year, $3 billion from an institutional share placement andretail share purchase plan in the 2015 September half, offset by the payment (net of reinvestment) of the 2015 interim and 2015 final dividends
of $5 billion.

March 2016 v September 2015

Cash, settlement balances and collateral paid increased by $5 billion. Adjusting for a decrease of $4 billion from foreign currency translation, the$9 billion increase is primarily due to increased settlement balances with central banks held by Treasury ($8 billion) and increased collateral paid
held by Markets on derivative transactions ($3 billion), offset by reduced cash held by Markets ($2 billion).



Net loans and advances decreased $8 billion. Adjusting for a $7 billion decrease due to foreign currency translation, the net $1 billion decrease
comprised a $12 billion increase in Australia division home loans, a $2 billion increase in New Zealand, and a $15 billion decrease in Institutional
lending following a heightened focus on returns.



Deposits and other borrowings increased $7 billion. Adjusting for a $13 billion decrease due to foreign currency translation, the $20 billion
increased comprised a $7 billion increase in interest bearing deposits primarily in Australia and New Zealand, $2 billion growth in Group
Treasury certificates of deposit, $7 billion increase in deposits from banks in Institutional, a $5 billion increase in term deposits mainly inAustralia, partly offset by a $2 billion decrease in commercial paper.



Derivative financial assets and liabilities increased by $3 billion and $10 billion respectively as foreign exchange rate and interest rate
movements resulted in higher derivative fair values.



Debt issuances decreased $12 billion mainly due to a foreign currency translation impact of $9 billion and maturing debt rolling off.

Total equity decreased by $1 billion primarily due to $3 billion of profits generated over the half year, offset by the payment (net of reinvestment)of the 2015 final dividend of $3 billion and a reduction in foreign currency translation reserves of $1 billion.

41

GROUP RESULTS

Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesaledebt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent inall banking operations and is closely monitored by the Group and managed in accordance with the risk appetite set by the Board.
The Group’s approach to liquidity risk management incorporates two key components:


Scenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by the ability to meet a range of regulatory requirements and internal liquidity metrics mandated by the Board.
The metrics cover a range of scenarios of varying duration and level of severity. This framework:Provides protection against shorter-term extreme market dislocations and stresses.



Maintains structural strength in the balance sheet by ensuring an appropriate amount of longer-term assets are funded with longer-term funding.

Ensures no undue timing concentrations exist in the Group’s funding profile.

A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated under
APRA regulatory requirements. As part of meeting the LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank ofAustralia (RBA). The CLF has been established as a solution to a High Quality Liquid Asset (HQLA) shortfall in the Australian marketplace andprovides an alternative form of RBA-qualifying liquid assets. The total amount of the CLF available to a qualifying ADI is set annually by APRA.


Liquid assets
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High quality liquid assets comprise three categories, with the definitions consistent with
Basel 3 LCR:Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchasewith central banks to provide same-day liquidity.

High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities
and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.



Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and eligible securities listed by the Reserve Bank of New Zealand(RBNZ).

The Group monitors and manages the composition of liquid assets to ensure diversification by asset class, counterparty, currency and tenor.
Minimum levels of liquid assets held are set annually based on a range of ANZ specific and general market liquidity stress scenarios such that
potential cash flow obligations can be met over the short to medium term, and holdings are appropriate to existing and future business activities,
regulatory requirements and in line with the approved risk appetite.
Movement

Half Year Average

Market Values Post Discount2
HQLA13

Mar 16$B

Sep 15$B

Mar 15$B1

Mar 16v. Sep 15

Mar 16v. Mar 15
22%

117.2

98.2

95.7

19%

HQLA2

3.3

3.1

3.4

6%

-3%

Internal Residential Mortgage Backed Securities (Australia)3

35.1

37.9

40.6

-7%

-14%

15%

-58%

Internal Residential Mortgage Backed Securities (New Zealand)

1.5

1.3

3.6

Other ALA4

18.6

17.4

13.4

7%

39%

Total Liquid Assets

175.7

157.9

156.7

11%

12%

Cash flows modelled under stress scenario
Cash outflows

181.0

170.2

176.1

6%

3%

Cash inflows

42.1

42.6

43.4

-1%

-3%

Net cash outflows

138.9

127.6

132.7

9%

5%

Liquidity Coverage Ratio5

126%

124%

118%

2%

7%

1.
2.
3.
4.

5.

Based on Mar 2015 quarter given LCR implementation on 1 January 2015.
Half year average basis, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.
RBA open arrangement netted down from CLF, with corresponding HQLA inflow.
Comprised of assets qualifying as collateral for the CLF, excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the RBNZ's Liquidity Policy - Annex:
Liquidity Assets - Prudential Supervision Department Document BS13A12.
All currency Group LCR.

42

GROUP RESULTS
Funding
ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
$12.5 billion of term wholesale debt (with a remaining term greater than one year as at 31 March 2016) was issued during the half year ended 31 March2016. The weighted average tenor of new term debt was 5.0 years (Sep 15: 4.9 years).
The following tables show the Group’s total funding composition:

As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Customer deposits and other liabilities1
Australia

175,772

169,280

162,587

4%

8%

Institutional

176,126

183,040

183,345-4%-4%

New Zealand

62,32759,70360,2934%

3%

Wealth

18,945

18,467

17,3573%

9%

Asia Retail & Pacific

19,005

19,455

17,779-2%

7%

TSO and Group Centre1(5,397)(5,361)(5,214)

1%

4%

Customer deposits

446,778444,584

436,147

0%

2%

Other funding liabilities2

16,127

14,346

12,31512%31%

Total customer liabilities (funding)

462,905

458,930

448,4621%

3%

Wholesale funding3
Debt issuances481,947

93,34784,859-12%-3%

Subordinated debt

17,557

17,00916,463

3%

7%

Certificates of deposit

65,07763,446

59,6463%

9%

Commercial paper

21,06522,98922,729-8%-7%

Other wholesale borrowings5,6

56,391

44,55653,62527%

5%Total wholesale funding

242,037

241,347

237,322

0%

2%

Shareholders' Equity (excl. preference shares)

56,46457,35352,051-2%

8%

Total Funding

761,406

757,630

737,835

0%

3%

As at
Mar 16$M

Sep 15$M

Movement
Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Funded Assets
Other short term assets & trade finance assets7

68,01578,87987,755-14%-22%

Liquids6

147,419

135,496

123,835

9%

19%

Short term funded assets

215,434

214,375

211,5900%2%

Lending & fixed assets8

545,972

543,255

526,245

1%

4%

Total Funded Assets

761,406

757,630

737,835

0%

3%Other short term liabilities

40,36027,86330,85845%

31%

Short term funding

65,20459,85060,394

9%

8%

Term funding < 12 months

30,57941,54931,860-26%-4%Funding Liabilities3,4,6

Other customer and central bank deposits1,9

87,632

88,288101,223-1%-13%

Total short term funding liabilities

223,775

217,550

224,335

3%0%Stable customer deposits1,10392,150

387,988

370,331

1%

6%
-2%

Term funding > 12 months

81,58987,316

83,665-7%

Shareholders' equity and hybrid debt

63,89164,77659,504-1%

7%

Total Stable Funding

537,631

540,080

513,500

0%

5%

Total Funding

761,406

757,630

737,835

0%

3%

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Includes term deposits, other deposits and an adjustment recognised in Group Centre to eliminate Wealth investments in ANZ deposit products.
Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth.
Excludes liability for acceptances as they do not provide net funding.
Excludes term debt issued externally by Wealth which matured during the March 2016 half.
Includes borrowings from banks, net derivative balances, special purpose vehicles and other borrowings.
RBA open-repo arrangement netted down by the exchange settlement account cash balance.
Includes short-dated assets such as trading securities, available-for-sale securities, trade dated assets and trade finance loans.
Excludes trade finance loans.
Total customer liabilities (funding) plus Central Bank deposits less Stable customer deposits.
Stable customer deposits represent operational type deposits or those sourced from retail / business / corporate customers and the stable component of Other funding liabilities.

43

GROUP RESULTS

Capital Management
As at
Internationally Comparable Basel 31

APRA Basel 3
Mar 16

Sep 15

Mar 15

Mar 16

Sep 15

Mar 15

Capital Ratios
Common Equity Tier 1

9.8%

9.6%

8.7%

14.0%

13.2%

12.1%

Tier 1

11.6%

11.3%

10.6%

16.2%

15.3%

14.4%

Total capital

13.7%

13.3%

12.6%

18.7%

17.8%

16.8%

Risk weighted assets ($B)

388.3

401.9

386.9

317.8

332.1

319.3

1.

Internationally Comparable methodology aligns with APRA’s information paper entitled International Capital Comparison Study (13 July 2015).

APRA Basel 3 Common Equity Tier 1 (CET1) – March 2016 v September 2015

1.

Excludes the impact from the software capitalisation changes and impact from the Asian minority investment adjustments which have gone through Cash Profit as they are neutral on
CET1.

2.

Capital Deductions represents the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the threshold for capitalisinginternally generated software assets) and other intangibles in the period.

3.

9.7 million ordinary shares were issued under the Dividend Reinvestment Plan and Bonus Option Plan for the 2015 final dividend.

March 2016 v September 2015
ANZ’s CET1 ratio increased 22 bps to 9.8% in the March 2016 half. Key drivers of the CET1 ratio were:

Net organic capital generation is 76 bps or $3.1 billion. Cash profit and net RWA reduction during the half provided 88 bps to the CET1 ratio,
which was partially offset by capital usage and other business capital deductions. The net RWA reduction resulted from strong balance sheet
discipline and RWA reduction initiatives in the Institutional division.



Payment of the September 2015 Final Dividend (net of shares issued under the DRP) reduced the CET1 ratio by 62 bps.



Other impacts of 8 bps were mainly due to capital benefits arising from the divestment of the Esanda Dealer Finance portfolio (16 bps), partly
offset by the impact from repayment of the remaining tranche of debt ($400 million) issued by ANZ Wealth Australia Limited (ANZWA) in
March 2016 (-10 bps) and other net impacts from RWA measurement changes, restructuring costs, movement in non-cash earnings and net
foreign currency translation.

44

GROUP RESULTS

APRA to Internationally Comparable1 Common Equity Tier 1 (CET1) as at 31 March 20161.

ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel 3: A global regulatory framework for more resilient banks and banking systems” (June2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006). Also includes differences identified in APRA’s information paper entitledInternational Capital Comparison Study (13 July 2015).

The above provides a reconciliation of the CET1 ratio under APRA’s Basel 3 prudential capital standards to Internationally Comparable Basel 3
standards. APRA views the Basel 3 reforms as a minimum requirement and hence has not incorporated some of the concessions proposed in the
Basel 3 rules and has also set higher requirements in other areas. As a result, Australian banks’ Basel 3 reported capital ratios will not be directlycomparable with international peers. The International Comparable Basel 3 CET1 ratio incorporates differences between APRA and both the BaselCommittee Basel 3 framework (including differences identified in the March 2014 Basel Committee’s Regulatory Consistency Assessment
Programme (RCAP) on Basel 3 implementation in Australia) and its application in major offshore jurisdictions.
The material differences in APRA’s Basel 3 and Internationally Comparable Basel 3 ratios include:
Deductions

Investment in insurance and banking associates – APRA requires full deduction against CET1. On an Internationally Comparable basis,these investments are subject to a concessional threshold before a deduction is required.



Deferred tax assets – A full deduction is required from CET1 for deferred tax assets (DTA) relating to temporary differences. On an
Internationally Comparable basis, this is first subject to a concessional threshold before the deduction is required.

Risk Weighted Assets (RWA)IRRBB RWA – APRA requires inclusion of Interest Rate Risk in the Banking Book (IRRBB) within the RWA base for the CET1 ratio
calculation. This is not required on an Internationally Comparable basis.

Mortgages RWA – APRA imposes a floor of 20% on the downturn Loss Given Default (LGD) used in credit RWA calculations forresidential mortgages. The Internationally Comparable Basel 3 framework only requires downturn LGD floor of 10%.

Specialised Lending - APRA requires the supervisory slotting approach be used in determining credit RWA for specialised lending
exposures. The Internationally Comparable basis allows for the advanced internal ratings based approach to be used when calculating
RWA for these exposures.



Unsecured Corporate Lending LGD – Adjustment to align ANZ’s unsecured corporate lending LGD to 45% to be consistent with banks inother jurisdictions. The 45% LGD rate is also used in the Foundation Internal Ratings-Based approach (FIRB).



Undrawn Corporate Lending Exposure at Default (EAD) – To adjust ANZ’s credit conversion factors (CCF) for undrawn corporate loan
commitments to 75% (used in FIRB approach) to align with banks in other jurisdictions.

45

GROUP RESULTS

Leverage Ratio
At 31 March 2016, the Group’s APRA Leverage Ratio was 5.1% which is above the 3% minimum currently proposed by the BCBS. APRA has not
finalised a minimum leverage ratio requirement for Australians ADIs. The following table summarises the Group’s Leverage Ratio calculation:
As at

Movement
Sep 15$M
45,484

Mar 16v. Sep 15

Tier 1 Capital (net of capital deductions)

Mar 16$M
45,062On-balance sheet exposures (excluding derivatives and securities financing transaction exposures)

733,935

733,7560%Derivative exposures

30,542

38,115-20%

Securities financing transaction (SFT) exposures

21,42017,297

24%

Other off-balance sheet exposures

102,953

107,817-5%

Total exposure measure

888,850

896,985-1%

1

APRA Leverage Ratio

5.1%

5.1%

0%

Internationally Comparable Leverage Ratio1

5.7%

5.7%

0%

1.



-1%

Leverage ratios include Additional Tier 1 securities subject to Basel 3 transitional relief, net of any transitional adjustments.

March 2016 v September 2015
ANZ’s leverage ratio remained stable during the March 2016 half. An increase in the leverage ratio arising from capital generation from cash
earnings were offset by the impact from payment of the 2015 final dividend (net of DRP) and increased holdings of High Quality Liquid Assets(HQLA) which contributed to growth in the exposure measure.

Other regulatory developments
Financial System Inquiry (FSI)The FSI final report into Australia’s financial system was released on 7 December 2014. The contents of the final FSI report are wide-ranging and
key recommendations that may have an impact on regulatory capital levels include: Setting capital standards ensuring that capital ratios of Australian Authorised Deposit-taking Institutions (ADIs) are unquestionably strong; Raising the average internal ratings-based (IRB) mortgage risk weight to narrow the difference between average mortgage risk-weight for ADIs
using IRB models and those using standardised risk weights in order to increase competition in mortgage lending; Implementing a framework for minimum loss absorbing and recapitalisation capacity in line with emerging international practice; Developing a common reporting template that improves the transparency and comparability of capital ratios of ADIs; and Introducing a leverage ratio that acts as a backstop to ADI’s risk-based capital requirements, in line with Basel framework.
APRA responded to key recommendations of the FSI inquiry in July 2015 with the following announcements:
 APRA released an information paper entitled “International capital comparison study” (“APRA Study”) which supports the FSI’s
recommendation that the capital ratios of ADIs should be unquestionably strong. The APRA Study confirmed that the major ADIs are wellcapitalised and acknowledged the challenges and complexity of comparing capital ratios between ADIs and international peers given thevaried national discretions exercised by some jurisdictions when implementing the global capital adequacy framework (Basel framework). The
APRA Study did not confirm the definition of ‘unquestionably strong’ and stated that APRA does not intend to directly link Australian capitalrequirements to a continually moving benchmark. The results of the APRA Study will only inform but will not determine APRA’s approach forsetting capital adequacy requirements.
 Effective from 1 July 2016, APRA requires increased capital requirements for Australian residential mortgage exposures by ADIs accredited touse the internal ratings-based (IRB) approach to credit risk. These new requirements are expected to increase the average risk weighting for
mortgage portfolios to approximately 25%. The impact on ANZ is an approximate 60 bps reduction in CET1 on implementation of this change.
In response to this, ANZ raised $3.2 billion of ordinary share capital via a fully underwritten Institutional Placement in August 2015 ($2.5 billion
raised) and a Share Purchase Plan offer to eligible Australian and New Zealand shareholders in September 2015 ($0.7 billion raised). APRA
has indicated that further changes may be required once greater clarity on the deliberations of the Basel Committee is available, particularly in
relation to revisions to the standardised approach for credit risk and capital floors.
The Australian Government released its response to the FSI in October 2015 and it agrees with all of the above capital-related recommendations.
The Australian Government supports and endorses APRA to implement the recommendations, including the initial actions to raise the capitalrequirements for Australian residential mortgage exposures and to take additional steps to ensure that the major banks have unquestionably strong
capital ratios by the end of 2016.
Apart from the July 2015 announcements, APRA has not made any determination on the other key recommendations to date. Therefore, the final
outcomes from the FSI, including any impacts and the timing of these impacts on ANZ, remain uncertain.
In addition, there are several Government inquiries and proposals for new inquiries, the impact of which is indeterminate at this stage.

46

GROUP RESULTS

Liquidity Ratios
The Basel 3 Liquidity changes include the introduction of two liquidity ratios to measure liquidity risk: (i) the Liquidity Coverage Ratio (LCR) whichbecame effective on 1 January 2015 and (ii) the Net Stable Funding Ratio (NSFR).
The final Basel 3 revised NSFR standard was released in October 2014. APRA released a consultation paper in March 2016 which confirmed NSFR
will become a minimum requirement on 1 January 2018. As part of managing future liquidity requirements, ANZ monitors the NSFR in its internalreporting and believe the Group is well placed to meet this requirement by the implementation date.



Domestic Systemically Important Bank (D-SIB) Framework
APRA’s D-SIB requirements for ANZ and the other three major Australian banks deemed to be domestic systemically important banks (Australian
D-SIBs) came into effect on 1 January 2016. As a result, the Capital Conservation Buffer (CCB) requirements for the Australian D-SIBs haveincreased by 100 bps, further strengthening their capital position. ANZ’s current position as at 31 March 2016 is already in excess of APRA’s
requirements including the D-SIB overlay.

Composition of Level 2 ADI GroupIn May 2014, APRA provided further clarification to the definition of the Level 2 Authorised Deposit-Taking Institution (ADI) group, where subsidiaryintermediate holding companies are now considered part of the Level 2 Group.
The above clarification results in the phasing out, over time, of capital benefits arising from debt issued by its subsidiary, ANZ Wealth Australia
Limited (ANZWA). Following the repayment of the last tranche of the ANZWA debt ($400 million or approximately 10 bps on CET1) in March 2016,
ANZ had fully repaid all debt affected by this change as at 31 March 2016. APRA is still providing implementation guidance on certain aspects of thechanges with any impact on ANZ not expected to be material.



Level 3 Conglomerates (“Level 3”)
In March 2016, APRA announced a revised implementation timetable for the Level 3 framework taking into consideration the Australian Government
response to the FSI recommendations. The Level 3 framework is meant to supervise Conglomerates Groups (Level 3) and includes updated Level 3
capital adequacy standards which will regulate a bancassurance group such as ANZ as a single economic entity with minimum capital requirements
and additional monitoring on risk exposure levels.
APRA has deferred finalising the capital components of the Level 3 framework (minimum capital requirements for Conglomerates Group) until 2019at the earliest, to allow the final form of the capital requirements arising from FSI recommendations and international initiatives that are already inprogress to be determined.
The non-capital components of the Level 3 framework however, covering group governance, risk exposures, intragroup transactions and other risk
management and compliance requirements will become effective on 1 July 2017. As part of the March 2016 announcement, APRA has released
updated draft prudential standards in relation to these requirements and is currently consulting with the industry on the changes. ANZ is notexpecting any material impact on its operations based upon the current draft of these standards.

Current Proposals from the Basel Committee on Banking Supervision on Risk Weighted Assets (RWA)
As part of BCBS agenda to simplify RWA measurement and reduce their variability amongst banks, the BCBS has issued a number of consultation
documents associated with:
 Standardised approach to RWA for credit risk;
 Revisions to Standardised Measurement Approach to Operational Risk;
 Fundamental Review of the Trading Book;
 Interest Rate Risk in the Banking Book; Framework on imposition of capital floors based on standardised RWA approaches; and Additional constraints on the use of internal models in Credit RWA.
The impact of any changes arising from the above on ANZ cannot be accurately determined until BCBS and APRA finalise their proposals.

Basel 3 Securitisation Framework
In November 2015, APRA released a second consultation paper outlining proposed revisions to the prudential framework for securitisation (APS120). The release of this paper follows BCBS finalisation of the revised Basel 3 securitisation framework in December 2014. The revised framework
is proposed to take effect from January 2018. The impact of any changes on ANZ arising from a revised APS 120 standard cannot be determineduntil APRA finalises their proposal.

47

GROUP RESULTS
This page has been left blank intentionally48

DIVISIONAL RESULTSCONTENTS
Section 5 – Divisional Results
Divisional performance
Australia
Institutional
New Zealand
WealthAsia Retail & PacificTechnology, Services and Operations (TSO) and Group Centre

49

DIVISIONAL RESULTS
Divisional Performance
During the March 2016 half, the Group announced changes to the organisation’s structure to better meet the needs of our retail, commercial andinstitutional customers. As a result of these organisational changes there are six reported divisions: Australia, New Zealand, Institutional, Asia Retail &Pacific, Wealth and Technology, Services & Operations (“TSO”) and Group Centre. These divisions were created by removing the Asia Retail & Pacificbusiness from the former International & Institutional Banking (“IIB”) division, and repositioning minority investments in Asia from IIB to the Group Centre.
The residual IIB business has been renamed Institutional.
The Wealth changes announced during the March 2016 half will not take effect until 1 April 2016. For further information on the composition of thedivisions refer to the Definitions on page 150.
Other than those described above, there have been no significant structural changes. However, certain prior period comparatives have been restated toalign with current period presentation as a result of changes to customer segmentation and the continued realignment of support functions.
The Divisional Results section is reported on a cash profit basis.
March 2016 Half Year

AUD M
Net interest income
Other operating income

Australia
4,038

Institutional
1,802

New Zealand
1,172

Wealth101

Asia
Retail &Pacific
328

594

911

201

779

231

TSO &
Group
Centre
127

Group
7,568

32

2,748

Operating income

4,632

2,713

1,373

880

559

159

10,316

Operating expenses(1,665)(1,510)

(527)

(521)

(401)

(855)

(5,479)Profit before credit impair't and income tax

2,967

1,203

846

359

158

(696)

4,837

Credit impairment (charge)/release

(462)

(323)

(42)

-

(91)

-

(918)

Profit before income tax

2,505

880

804

359

67

(696)

3,919

Income tax expense and non-controllinginterests

(752)

(248)

(226)

(98)

(14)

201

(1,137)

Cash profit/(loss)

1,753

632

578

261

53

(495)

2,782

Wealth89

Asia
Retail &Pacific
291

TSO &
Group
Centre
125

Group
7,138

March 2015 Half Year

AUD M
Net interest income
Other operating income

Australia
3,730

Institutional
1,741

New Zealand
1,162

580

1,229

183

762

221

82

3,057

Operating income

4,310

2,970

1,345

851

512

207

10,195

Operating expenses(1,556)(1,385)

(539)

(484)

(374)

(265)

(4,603)

Profit before credit impair't and income tax

2,754

1,585

806

367

138

(58)

5,592

Credit impairment (charge)/release

(395)

(88)

(19)

1

(10)

1

(510)

Profit before income tax

2,359

1,497

787

368

128

(57)

5,082

Income tax expense and non-controllinginterests

(709)

(426)

(221)

(105)

(29)

84

(1,406)

Cash profit

1,650

1,071

566

263

99

27

3,676

Wealth13%

Asia
Retail &Pacific
13%

TSO &
Group
Centre
2%

Group
6%
-10%

March 2016 Half Year vs March 2015 Half Year

AUD M
Net interest income

Australia
8%

Institutional
4%

New Zealand
1%

Other operating income

2%

-26%

10%

2%

5%

-61%

Operating income

7%

-9%

2%

3%

9%

-23%

1%

Operating expenses

7%

9%

-2%

8%

7%

large

19%

Profit before credit impair't and income tax

8%

-24%

5%

-2%

14%

large

-14%

Credit impairment (charge)/release

17%

large

large

-100%

large

-100%

80%

Profit before income tax
Income tax expense and non-controllinginterests

6%

-41%

2%

-2%

-48%

large

-23%

6%

-42%

2%

-7%

-52%

large

-19%

Cash profit

6%

-41%

2%

-1%

-46%

large

-24%

50

DIVISIONAL RESULTS
Cash profit by division – March 2016 v March 2015

March 2016 Half Year

AUD M
Net interest income

Australia
4,038

Institutional
1,802

New Zealand
1,172

Wealth101

Asia
Retail &Pacific
328

TSO &
Group
Centre
127

Group
7,568

594

911

201

779

231

32

2,748

Operating income

4,632

2,713

1,373

880

559

159

10,316

Other operating income
Operating expenses(1,665)(1,510)

(527)

(521)

(401)

(855)

(5,479)Profit before credit impairment and income tax

2,967

1,203

846

359

158

(696)

4,837

Credit impairment (charge)/release

(462)

(323)

(42)

-

(91)

-

(918)

Profit before income tax

2,505

880

804

359

67

(696)

3,919

Income tax expense and non-controlling interests

(752)

(248)

(226)

(98)

(14)

201

(1,137)

Cash profit/(loss)

1,753

632

578

261

53

(495)

2,782

Wealth91

Asia
Retail &Pacific
314

TSO &
Group
Centre
177

Group
7,478

September 2015 Half Year

AUD M
Net interest income
Other operating income

Australia
3,897

Institutional
1,844

New Zealand
1,155

606

948

185

790

236

99

2,864

Operating income

4,503

2,792

1,340

881

550

276

10,342

Operating expenses(1,618)(1,425)

(525)

(481)

(395)

(331)

(4,775)

Profit before credit impairment and income tax

2,885

1,367

815

400

155

(55)

5,567

Credit impairment (charge)/release

(458)

(111)

(36)

(1)

(87)

(2)

(695)

Profit before income tax

2,427

1,256

779

399

68

(57)

4,872

Income tax expense and non-controlling interests

(721)

(363)

(218)

(53)

(23)

46

(1,332)

Cash profit/(loss)

1,706

893

561

346

45

(11)

3,540

TSO &
Group
Centre
-28%

Group
1%
-4%

March 2016 Half Year vs September 2015 Half Year

Australia
4%

Institutional-2%

New Zealand1%

Wealth11%

Asia
Retail &Pacific
4%

-2%

-4%

9%

-1%

-2%

-68%

Operating income

3%

-3%

2%

0%

2%

-42%

0%

Operating expenses

3%

6%

0%

8%

2%

large

15%
-13%

AUD M
Net interest income
Other operating income

Profit before credit impairment and income tax

3%

-12%

4%

-10%

2%

large

Credit impairment (charge)/release

1%

large

17%

-100%

5%

-100%

32%

Profit before income tax

3%

-30%

3%

-10%

-1%

large

-20%

Income tax expense and non-controlling interests

4%

-32%

4%

85%

-39%

large

-15%

Cash profit

3%

-29%

3%

-25%

18%

large

-21%

51

DIVISIONAL RESULTS
Australia
Fred Ohlsson
Cash profit – March 2016 Half Year v March 2015 Half Year1.

The Esanda Dealer Finance divestment had a negative impact of $46 million on Australia division’s profit before income tax. This amount is comprised of -$99 million of net interest
income, -$13 million of other operating income, $10 million of operating expenses and $56 million of credit impairment charges. Refer to page 58 for further details.

Divisional Strategy

increased 5% primarily due to growth in Small Business Banking
lending fee income and Deposits & Payments.

Australia Division’s strategy is focused on growing priority segments(Home Loans, Small Business and NSW) and building our digital
capabilities to improve customer experience while managing margins
and maintaining tight control over costs and asset quality.



Operating expenses increased $109 million (7%). Excluding
specified items1, operating expenses increased 4% withinvestments supporting our growth strategy (particularly in NSW
and Digital) and wage inflation being partially offset byproductivity initiatives.

In the March 2016 half, Australia divested the Esanda Dealer Financeportfolio and delivered a 6% increase in cash profit. Excluding specified
items1, Australia Division delivered a 11% increase in cash profit driven
by growth in Home Loans, Deposits, Small Business and our focus on
NSW. 59.3% of Retail customers hold multiple products with us (upfrom 58.4%) and C&CB cross-sell has increased 13% in the last 12
months. The cost to income ratio has improved from 36.1% to 35.9%
with investment continuing in key priority segments. Net interest
margins were stable and the total portfolio loss rate was 29 bps, in linewith the long term average.

Credit impairment charges increased $67 million (17%).
Excluding the Esanda Dealer Finance divestment, credit
impairment charges increased by 38%. Individual impairment
charges were predominantly driven by higher write-backs in
Corporate Banking in the March 2015 half and higher charges in
Small Business Banking, Personal Loans and Regional BusinessBanking. The lower collective impairment charge reflects lower
growth in Consumer Cards and first half 2015 methodology
changes (mainly impacting Esanda).

March 2016 v September 2015

In Retail, customer numbers grew 1% and revenue grew 15% fromlending volume growth of 11% and margin improvement across the
Retail portfolio. Home loan sales are up 19% nationally and we
delivered 6 consecutive years of above system growth2. Home loans in
NSW have grown 23% in the last 12 months.

Cash profit increased 3%. Excluding specified items1, cash profit
increased 7% driven by a 5% increase in operating income, partially
offset by a 13% increase in credit impairment charges. Key factors
affecting the result were:

Strategic Progress

C&CB continues to grow its business, targeting key sectors andsupporting customers across the region. Customer numbers grew 6%
and lending growth increased by 8%, with Small Business a highlight
growing at 12%. Cost growth was flat while investment has continued
in increasing our presence in NSW.
In the March 2016 half, we delivered the Multi-Channel Platform, a key
foundation to enable a consistent digital experience. The proportion of
Retail sales that are digital has increased to 18% of total sales and
59% of our Retail customers are now digitally active.
Net interest income increased $141 million (4%). Excluding theEsanda Dealer Finance divestment, net interest income
increased 6% primarily due to growth in Home Loans (5%), Small
Business lending (5%) and Deposits (4%). Net interest margin
improved 1 bp as a result of margin improvement across the
Retail portfolio, partly offset by business lending margin
contraction.

Other operating income decreased $12 million (-2%). Excluding
the Esanda Dealer Finance divestment, other operating income
was flat, primarily due to seasonality and lower interchange rate
in Cards offset by growth in Deposits & Payments.



Operating expenses increased $47 million (3%). Excluding
specified items1, operating expenses were flat with investment in
NSW and wage inflation being offset by productivity initiatives.



Credit impairment charges increased by $4 million (1%).
Excluding the Esanda Dealer Finance divestment, credit
impairment charges increased by 13%. Individual impairment
charges were predominantly driven by Small Business Banking,Regional Business Banking and Corporate Banking. The lower
collective impairment charge was driven by downgrades in
Corporate Banking in the September half offset by Cards due tomethodology changes in the September half.

March 2016 v March 2015

Cash profit increased 6%. Excluding specified items1, cash profit
increased 11% driven by a 10% increase in operating income, partially
offset by a 4% increase in operating expenses and a 38% increase incredit impairment charges. Key factors affecting the result were:

Net interest income increased $308 million (8%). Excluding theEsanda Dealer Finance divestment, net interest income
increased 11%, driven by growth in Home Loans (11%), Personal
Loans (8%), Small Business lending (12%) and Deposits (8%).
Net interest margin was stable from margin improvement acrossthe Retail portfolio offset by business lending margin contraction.

Other operating income increased $14 million (2%). Excluding theEsanda Dealer Finance divestment, other operating income

1
2

52

Specified items relevant to Australia division are Esanda Dealer Financedivestment, software capitalisation changes and restructuring.
Source: APRA Monthly Banking Statistics as at 29 February 2016.

DIVISIONAL RESULTS
Australia
Fred Ohlsson
Half Year
Mar 16$M
4,038

Net interest income

Sep 15$M
3,897

Movement
Mar 15$M
3,730

Mar 16v. Sep 15
4%

Mar 16v. Mar 15
8%

594

606

580

-2%

2%

Operating income

4,632

4,503

4,310

3%

7%

Operating expenses(1,665)(1,618)(1,556)

3%

7%

Profit before credit impairment and income tax

2,967

2,885

2,754

3%

8%

Other operating income

Credit impairment charge

(462)

(458)

(395)

1%

17%

Profit before income tax

2,505

2,427

2,359

3%

6%

Income tax expense and non-controlling interests

(752)

(721)

(709)

4%

6%

Cash profit

1,753

1,706

1,650

3%

6%

Consisting of:Retail

1,169

1,080

981

8%

19%

584

626

669

-7%

-13%

1,753

1,706

1,650

3%

6%

320,023

313,672

297,6422%

8%Corporate & Commercial Banking
Cash profit
Balance Sheet
Net loans & advances

3,060

2,911

2,885

5%

6%

External assets

323,083

316,583

300,527

2%

8%

Customer deposits

175,772

169,280

162,587

4%

8%

Other external liabilities

11,354

11,408

11,4220%-1%External liabilities

187,126

180,688

174,009

4%

8%

Risk weighted assets

129,168

128,428

116,386

1%

11%

Average gross loans and advances

317,542306,820294,357

3%

8%

Average deposits and other borrowings

172,779

164,732

162,688

5%

6%

RatiosReturn on assets

1.10%

1.11%

1.12%

Net interest margin

2.54%

2.53%

2.54%

Operating expenses to operating income

35.9%

35.9%

36.1%

Operating expenses to average assets

1.04%

1.05%

1.06%
0%

28%

6%

-46%

-8%

-12%

0%

-3%

Other external assets

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)Collective credit impairment charge/(release) as a % of average GLA

429

427

334

0.27%

0.28%

0.23%

33

31

61

0.02%

0.02%

0.04%

Gross impaired assets

1,093

1,193

1,245

Gross impaired assets as a % of GLA

0.34%

0.38%

0.42%

Total full time equivalent staff (FTE)

8,791

8,766

9,018

53

DIVISIONAL RESULTS
Australia
Fred Ohlsson
Individual credit impairment charge/(release)

Half Year
Mar 16$M
200

RetailMovement

Sep 15$M
196

Mar 15$M
158

Mar 16v. Sep 15
2%

Mar 16v. Mar 15
27%

Home Loans

17

10

6

70%

large

Cards and Personal Loans

172

174

144

-1%

19%

Deposits and Payments1

11

12

8

-8%

38%

229

231

176

-1%

30%

Corporate & Commercial Banking
Corporate Banking

19

-

(18)

n/a

large

Esanda

44

93

100

-53%

-56%

Regional Business Banking

53

35

20

51%

large

Business Banking

20

22

24

-9%

-17%

Small Business Banking
Individual credit impairment charge

93

81

50

15%

86%

429

427

334

0%

28%

Collective credit impairment charge/(release)

Half Year
Mar 16$M
23

RetailMovement

Sep 15$M
7

Mar 15$M
37

Mar 16v. Sep 15
large

Mar 16v. Mar 15-38%

Home Loans

15

15

11

0%

36%

Cards and Personal Loans

5

(12)

25

large

-80%

Deposits and Payments2
Corporate & Commercial Banking

3

4

1

-25%

large

10

24

24

-58%

-58%

Corporate Banking

-

17

(29)

-100%

-100%

Esanda

2

(6)

27

large

-93%

Regional Business Banking

(3)

(6)

12

-50%

large

Business Banking

3

9

(1)

-67%

large

8

10

15

-20%

-47%

Collective credit impairment charge

33

31

61

6%

-46%

Total credit impairment charge

462

458

395

1%

17%

Small Business Banking

1.
2.

Represents individual credit impairment charge/(release) on Overdraft balances.
Represents collective credit impairment charge/(release) on Overdraft balances.

54

DIVISIONAL RESULTS
Australia
Fred Ohlsson
Net loans and advances

Half Year
Mar 16$M
254,103

Sep 15$M242,333

Mar 15$M
229,211

Home Loans

242,861

231,206

Cards and Personal Loans

11,151

11,04991

Retail

Deposits and Payments1
Corporate & Commercial Banking

5%

11%

11,139

1%

0%

78

95

17%

-4%
-4%

71,33968,431-8%

12,996

12,024-2%

6%

Esanda2

8,802

15,917

15,776-45%-44%

Regional Business Banking

13,87913,827

13,1420%

6%

Business Banking

15,375

14,24914,0048%

10%

15,064

14,35013,4855%

12%

320,023

313,672

297,642

2%

8%

Half Year

RetailHome Loans3

Movement

Mar 16$M
123,085

Sep 15$M
118,433

Mar 15$M
112,906

Mar 16v. Sep 15
4%

Mar 16v. Mar 15
9%23,61921,861

19,211

8%

23%

Cards and Personal Loans

228

258

230

-12%

-1%

Deposits and Payments

99,23896,314

93,4653%

6%52,68750,847

49,681

4%

6%

Corporate Banking4

3,067

3,162

3,047

-3%

1%

Regional Business Banking

6,209

5,739

5,648

8%

10%

Business Banking

10,941

10,157

10,1348%

8%

Small Business Banking

32,47031,78930,852

2%

5%

175,772

169,280

162,5874%8%

Corporate & Commercial Banking

Customer deposits

4.

217,977

12,800

Customer deposits

3.

Mar 16v. Mar 15
11%

65,920

Small Business Banking

2.

Mar 16v. Sep 15
5%

Corporate Banking

Net loans and advances

1.

Movement

Net loans and advances for the Deposits and Payments business represent amounts in overdraft.
Includes $766 million of Esanda Dealer Finance bailment facilities which are due to migrate to Macquarie during the third quarter of 2016.
Customer deposit amounts for the Home Loans business represent balances in offset accounts.
Institutional division also holds $12 billion of Corporate Banking deposits.

55

DIVISIONAL RESULTS
Australia
Fred Ohlsson
March 2016 Half Year

AUD M
Net interest income

Retail
2,665

C&CB1
1,373

Australia
Total
4,038

381

213

594

Operating income

3,046

1,586

4,632

Operating expenses(1,154)(511)(1,665)
2,967

Other operating income

Profit before credit impairment and income tax

1,892

1,075

Credit impairment (charge)/release

(223)

(239)

(462)

Profit before income tax

1,669

836

2,505

Income tax expense and non-controlling interests

(500)

(252)

(752)

Cash profit

1,169

584

1,753

Individual credit impairment charge/(release)

200

229

429

Collective credit impairment charge/(release)

23

10

33

Net loans & advances

254,103

65,920320,023

Customer deposits

123,085

52,687

175,772

Risk weighted assets

64,54664,622

129,168

March 2015 Half YearNet interest income

2,278

1,452

3,730

Other operating income

364

216

580

Operating income

2,642

1,668

4,310

Operating expenses(1,046)(510)(1,556)
2,754

Profit before credit impairment and income tax

1,596

1,158

Credit impairment (charge)/release

(195)

(200)

(395)

Profit before income tax

1,401

958

2,359

Income tax expense and non-controlling interests

(420)

(289)

(709)

Cash profit

981

669

1,650

Individual credit impairment charge/(release)

158

176

334

37

24

61

Net loans & advances

229,211

68,431

297,642

Customer deposits

112,906

49,681

162,587

Risk weighted assets

57,31059,076116,386

March 2016 Half Year vs March 2015 Half YearNet interest income

17%

-5%

8%

Other operating income

5%

-1%

2%

Operating income

15%

-5%

7%

Operating expenses

10%

0%

7%

Collective credit impairment charge/(release)

Profit before credit impairment and income tax

19%

-7%

8%

Credit impairment (charge)/release

14%

20%

17%

Profit before income tax

19%

-13%

6%

Income tax expense and non-controlling interests

19%

-13%

6%

Cash profit

19%

-13%

6%

Individual credit impairment charge/(release)

27%

30%

28%

Collective credit impairment charge/(release)

-38%

-58%

-46%

Net loans & advances

11%

-4%

8%

Customer deposits

9%

6%

8%

Risk weighted assets

13%

9%

11%

1.

The March 2016 half includes the contribution from Esanda Dealer Finance portfolio to the date of divestment which was substantially completed by 31 December 2015.

56

DIVISIONAL RESULTS
Australia
Fred Ohlsson
March 2016 Half Year

AUD M
Net interest income

Retail
2,665

C&CB1
1,373

Australia
Total
4,038

381

213

594

Operating income

3,046

1,586

4,632

Operating expenses(1,154)(511)(1,665)
2,967

Other operating income

Profit before credit impairment and income tax

1,892

1,075

Credit impairment (charge)/release

(223)

(239)

(462)

Profit before income tax

1,669

836

2,505

Income tax expense and non-controlling interests

(500)

(252)

(752)

Cash profit

1,169

584

1,753

Individual credit impairment charge/(release)

200

229

429

Collective credit impairment charge/(release)

23

10

33

Net loans & advances

254,103

65,920320,023

Customer deposits

123,085

52,687

175,772

Risk weighted assets

64,54664,622

129,168

September 2015 Half YearNet interest income

2,439

1,458

3,897

382

224

606

Operating income

2,821

1,682

4,503

Operating expenses(1,088)(530)(1,618)2,885

Other operating income

Profit before credit impairment and income tax

1,733

1,152

Credit impairment (charge)/release

(203)

(255)

(458)

Profit before income tax

1,530

897

2,427

Income tax expense and non-controlling interests

(450)

(271)

(721)

Cash profit

1,080

626

1,706

196

231

427

Individual credit impairment charge/(release)

7

24

31

Net loans & advances

242,333

71,339313,672

Customer deposits

118,433

50,847

169,280

Risk weighted assets

61,87866,550128,428

March 2016 Half Year vs September 2015 Half YearNet interest income

9%

-6%

4%

Other operating income

0%

-5%

-2%

Collective credit impairment charge/(release)

Operating income

8%

-6%

3%

Operating expenses

6%

-4%

3%

Profit before credit impairment and income tax

9%

-7%

3%

Credit impairment (charge)/release

10%

-6%

1%

Profit before income tax

9%

-7%

3%

Income tax expense and non-controlling interests

11%

-7%

4%

Cash profit

8%

-7%

3%

Individual credit impairment charge/(release)

2%

-1%

0%

Collective credit impairment charge/(release)

large

-58%

6%

Net loans & advances

5%

-8%

2%

Customer deposits

4%

4%

4%

Risk weighted assets

4%

-3%

1%

1.

The March 2016 half includes the contribution from Esanda Dealer Finance portfolio to the date of divestment which was substantially completed by 31 December 2015.

57

DIVISIONAL RESULTS
Australia
Fred Ohlsson
Cash Profit Results – Esanda Dealer Finance divestment
During the March 2016 half, the Group sold the Esanda Dealer Finance portfolio to Macquarie Group Limited. The tables below show the Australia
division and C&CB excluding the contribution of the divested Esanda portfolio from current and prior period earnings. The divestment gain wasrecognised in TSO and Group Centre. $766 million of Esanda Dealer Finance bailment facilities remain on ANZ’s balance sheet at 31 March 2016 which
are scheduled to transition to Macquarie during the third quarter of 2016. As these assets were not subject to equitable assignment and ANZ continues toreceive profits prior to migration, the transfer of these residual facilities will not impact the divestment gain.

Australia division excluding Esanda Dealer Finance divestment
Half YearNet interest income
Other operating income

Movement

Mar 16$M
4,007

Sep 15$M
3,772

Mar 15$M
3,600

Mar 16v. Sep 15
6%

Mar 16v. Mar 15
11%

582

580

555

0%

5%
10%

Operating income

4,589

4,352

4,155

5%

Operating expenses(1,654)(1,596)(1,535)

4%

8%

Profit before credit impairment and income tax

2,935

2,756

2,620

6%

12%

Credit impairment charge

(449)

(397)

(326)

13%

38%

Profit before income tax

2,486

2,359

2,294

5%

8%

Income tax expense and non-controlling interests

(746)

(701)

(689)

6%

8%

Cash profit

1,740

1,658

1,605

5%

8%

415

367

274

13%

51%

Individual credit impairment charge/(release)Collective credit impairment charge/(release)
Net loans and advances

34

30

52

13%

-35%

319,257

305,607289,462

4%

10%

C&CB excluding Esanda Dealer Finance divestment
Half Year
Mar 16$M
1,342

Net interest income

Sep 15$M
1,333

Movement
Mar 15$M
1,322

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
2%

201

198

191

2%

5%

Operating income

1,543

1,531

1,513

1%

2%

Operating expenses

(500)

(508)

(489)

-2%

2%

Profit before credit impairment and income tax

1,043

1,023

1,024

2%

2%

Credit impairment charge

(226)

(194)

(131)

16%

73%

Other operating income

Profit before income tax

817

829

893

-1%

-9%

Income tax expense and non-controlling interests

(246)

(251)

(269)

-2%

-9%

Cash profit

571

578

624

-1%

-8%

Individual credit impairment charge/(release)

215

171

116

26%

85%

Collective credit impairment charge/(release)

11

23

15

-52%

-27%

65,154

63,27460,251

3%

8%

Net loans and advances

Esanda Dealer Finance divestment
Half Year
Mar 16$M
31

Net interest income

Sep 15$M
125

Movement
Mar 15$M
130

Mar 16v. Sep 15-75%

Mar 16v. Mar 15-76%

Other operating income

12

26

25

-54%

-52%

Operating income

43

151

155

-72%

-72%

Operating expenses

(11)

(22)

(21)

-50%

-48%

Profit before credit impairment and income tax

32

129

134

-75%

-76%

Credit impairment charge

(13)

(61)

(69)

-79%

-81%

Profit before income tax

19

68

65

-72%

-71%

Income tax expense and non-controlling interests

(6)

(20)

(20)

-70%

-70%

Cash profit

13

48

45

-73%

-71%

Individual credit impairment charge/(release)

14

60

60

-77%

-77%

Collective credit impairment charge/(release)

(1)

1

9

large

large

766

8,065

8,180

-91%

-91%

Net loans and advances1
1.

Includes $766 million of Esanda Dealer Finance bailment facilities which are due to migrate to Macquarie during the third quarter of 2016.

58

DIVISIONAL RESULTS
This page has been left blank intentionally

59

DIVISIONAL RESULTS
Institutional
Mark Whelan
Cash profit – March 16 Half Year v March 15 Half Year

benefit of this streamlining will extend beyond the current
reporting period.

Divisional Strategy

The Institutional division provides markets, transaction banking andlending solutions to our institutional clients across Australia, New
Zealand, Asia, Europe and America.
The Institutional division’s strategy is focussed on delivering improved
returns by: reducing costs through simplifying and streamlining thebusiness; improving capital efficiency through disciplined allocation ofcapital, including exiting low returning assets; and investing in ourhigher returning priority businesses, including Markets Sales and CashManagement.
Credit impairment charges increased by $235 million, with higher
individual credit impairment charges in Loans & Specialised
Finance and Trade reflecting weakness associated with low
commodity prices in the resources and commodity sectors andrelated industries. Collective credit impairment charges
decreased in Loans & Specialised Finance reflecting the
movement of collective provisions to individual provisions.

March 2016 v September 2015

Cash profit decreased by 29%. Excluding specified items1, cash profit
decreased 25% primarily driven by a 2% decrease in net interest
income, a 2% increase in operating expenses (increased 4% on an FX
adjusted basis) and higher credit impairment charges.

Strategic Progress

As part of our organisational streamlining, FTE reduced to 4,056, a 6%
reduction compared with the March 2015 half, while RWAs reduced by$14 billion driven by a targeted reduction of assets that were dilutive toreturns. This represents an overall RWA decrease of 7% net of
portfolio growth and regulatory requirements.


Key factors affecting the result were:

Net interest income decreased 2% driven by a 6% reduction inMarkets, and was broadly flat excluding Markets. Net interest
margin decreased 5 bps primarily due to growth in lower marginliquidity portfolios in Markets. Excluding Markets, net interest
margin increased 10 bps reflecting the impact of exiting low
returning assets.



Other operating income was down 4% primarily due to lower fee
revenue in Loans & Specialised Finance and lower Commodity
income in Markets, partially offset by stronger Foreign Exchange
income in Markets.

Operating expenses increased by 6%. Excluding specified items1,
operating expenses increased 3% (increased 4% on an FX
adjusted basis), with the significant reductions in FTE arising fromorganisational streamlining partially offsetting inflationary
impacts.

Credit impairment charges increased by $212 million, with higher
individual credit impairment charges on trade loans in Transaction
Banking and Loans & Specialised Finance reflecting the impact ofdeteriorating macro-economic conditions on resources andcommodity sectors and related industries. Collective credit
impairment charges decreased in Loans & Specialised Financereflecting the movement of collective provisions to individual
provisions.

March 2016 v March 2015

Cash profit decreased by 41%. Excluding specified items1, cash profit
decreased 37% driven by a 26% decrease in other operating income,
5% increase in operating expenses (flat on an FX adjusted basis) andhigher credit impairment charges.
Key factors affecting the result were:

Net interest income improved 4% driven by an 11% increase inMarkets and 2% increase in Loans & Specialised Finance. While
Transaction Banking was 2% lower, Cash Management delivered
an 8% increase offset by Trade which declined 23% largely due
to active portfolio reduction. Net interest margin fell 4 bps
primarily due to growth in lower margin liquidity portfolios inMarkets. Excluding Markets, net interest margin increased 10 bps
reflecting the impact of exiting low returning assets.



Other operating income decreased by 26%, driven by lower
Markets income as a result of widening credit spreads adversely
impacting revenue from Balance Sheet trading and lower
customer demand for hedging in a benign interest rateenvironment.



Operating expenses increased by 9%. Excluding specified items1
operating expenses increased by 5% (flat on an FX adjusted
basis), with the significant reductions in FTE arising fromorganisational streamlining offsetting inflationary impacts. The full

1

Specified items relevant to Institutional are software capitalisation changes andrestructuring.

60

DIVISIONAL RESULTS
Institutional
Mark Whelan
Half YearNet interest income
Other operating income

Movement

Mar 16$M
1,802

Sep 15$M
1,844

Mar 15$M
1,741

Mar 16v. Sep 15-2%

Mar 16v. Mar 15
4%

911

948

1,229

-4%

-26%
-9%

Operating income

2,713

2,792

2,970

-3%

Operating expenses(1,510)(1,425)(1,385)

6%

9%

Profit before credit impairment and income tax

1,203

1,367

1,585

-12%

-24%

Credit impairment charge

(323)

(111)

(88)

large

large

Profit before income tax

880

1,256

1,497

-30%

-41%

Income tax expense and non-controlling interests

(248)

(363)

(426)

-32%

-42%

Cash profit

632

893

1,071

-29%

-41%

Consisting of:Transaction Banking

184

290

296

-37%

-38%

Loans & Specialised Finance

252

379

390

-34%

-35%

Markets

202

255

398

-21%

-49%

(6)

(31)

(13)

-81%

-54%

632

893

1,071

-29%

-41%

Balance Sheet
Net loans & advances

125,610142,196

144,850

-12%

-13%

Other external assets

275,658

261,308

241,935

5%

14%

External assets

401,268

403,504

386,785-1%

4%

Customer deposits

176,126

183,040

183,345-4%-4%

Other deposits and borrowings

48,991

41,85551,67617%-5%

Deposits and other borrowings

225,117

224,895

235,021

0%-4%

Central Functions
Cash profit

Other external liabilities

121,768

109,584

93,79011%30%

External liabilities

346,885

334,479

328,811

4%

5%

Risk weighted assets

181,889

197,880

195,486-8%-7%

Average gross loans and advances

138,972

147,515

142,195-6%-2%

Average deposits and other borrowings

233,729

231,655

227,460

1%

3%

RatiosReturn on assets

0.31%

0.45%

0.58%

Net interest margin

1.15%

1.20%

1.19%

Net interest margin (excluding Markets)

2.16%

2.06%

2.06%

Operating expenses to operating income

55.7%

51.0%

46.6%

Operating expenses to average assets

0.74%

0.72%

0.75%

339

114

92

large

large

0.49%

0.15%

0.13%
large

large

33%

55%

-4%

-6%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)Collective credit impairment charge/(release) as a % of average GLA

(16)

(3)

(4)

(0.02%)(0.00%)(0.01%)

Gross impaired assets

1,281

960

826

Gross impaired assets as a % of GLA

1.01%

0.67%

0.56%

Total full time equivalent staff (FTE)

4,056

4,231

4,319

61

DIVISIONAL RESULTS
Institutional
Mark Whelan
Institutional by Geography
Half Year
Mar 16$M
987

Australia
Net interest income

Sep 15$M
1,020

Movement
Mar 15$M
967

Mar 16v. Sep 15-3%

Mar 16v. Mar 15
2%
-31%

308

331

445

-7%

Operating income

1,295

1,351

1,412

-4%

-8%

Operating expenses

(665)

(587)

(603)

13%

10%

Profit before credit impairment and income tax

630

764

809

-18%

-22%

Credit impairment (charge)/release

(112)

17

(34)

large

large

Other operating income

Profit before income tax

518

781

775

-34%

-33%

Income tax expense and non-controlling interests

(156)

(232)

(232)

-33%

-33%

Cash profit

362

549

543

-34%

-33%

Individual credit impairment charge/(release)

124

(1)

41

large

large

Collective credit impairment charge/(release)

(12)

(16)

(7)

-25%

71%

Net loans & advances

63,86764,78562,491-1%

2%

Customer deposits

66,63465,876

62,6101%

6%

Net interest income

657

670

644

-2%

2%

Other operating income

543

466

601

17%

-10%

Operating income

1,200

1,136

1,245

6%

-4%

Operating expenses

(756)

(750)

(695)

1%

9%
-19%

Asia Pacific, Europe, and America

Profit before credit impairment and income tax

444

386

550

15%

Credit impairment (charge)/release

(207)

(121)

(44)

71%

large

Profit before income tax

237

265

506

-11%

-53%

Income tax expense and non-controlling interests

(57)

(74)

(134)

-23%

-57%

Cash profit

180

191

372

-6%

-52%

Individual credit impairment charge/(release)

212

113

39

88%

large

Collective credit impairment charge/(release)

(5)

8

5

large

large

Net loans & advances

55,24470,48874,807-22%-26%

Customer deposits

96,168104,906

107,455

-8%

-11%

158

154

130

3%

22%

New Zealand
Net interest income
Other operating income

60

151

183

-60%

-67%

Operating income

218

305

313

-29%

-30%

Operating expenses

(89)

(88)

(87)

1%

2%

Profit before credit impairment and income tax

129

217

226

-41%

-43%

(4)

(7)

(10)

-43%

-60%

Credit impairment (charge)/release
Profit before income tax

125

210

216

-40%

-42%

Income tax expense and non-controlling interests

(35)

(57)

(60)

-39%

-42%

Cash profit

90

153

156

-41%

-42%

Individual credit impairment charge/(release)

3

2

12

50%

-75%

Collective credit impairment charge/(release)

1

5

(2)

-80%

large

Net loans & advances

6,499

6,923

7,552

-6%

-14%

Customer deposits

13,324

12,25813,2809%

0%62

DIVISIONAL RESULTS
Institutional
Mark Whelan
Half Year

Individual credit impairment charge/(release)

Movement

Mar 16$M
103

Sep 15$M
42

Mar 15$M
19

Mar 16v. Sep 15
large

Loans & Specialised Finance

223

63

34

large

large

Markets

11

9

38

22%

-71%

Central Functions

2

-

1

n/a

100%

339

114

92

large

large

Transaction Banking

Individual credit impairment charge

Half Year

Collective credit impairment charge/(release)

Transaction Banking

Mar 16v. Mar 15
large

Movement

Mar 16$M2

Sep 15$M(29)

Mar 15$M(1)

Mar 16v. Sep 15
large

Mar 16v. Mar 15
large
large

(19)

23

(5)

large

Markets

1

1

-

0%

n/a

Central Functions

-

2

2

-100%

-100%

Collective credit impairment charge

(16)

(3)

(4)

large

large

Total credit impairment charge

323

111

88

large

large

Loans & Specialised FinanceHalf YearNet loans and advances

Movement

Transaction Banking

Mar 16$M
17,036

Sep 15$M
26,175

Mar 15$M
32,683

Mar 16v. Sep 15-35%

Mar 16v. Mar 15-48%

Loans & Specialised Finance

86,84992,317

89,634-6%-3%

Markets

21,48723,36722,152

-8%

-3%

238

337

381

-29%

-38%

125,610142,196

144,850

-12%

-13%

Central Functions
Net loans and advances

Half Year

Customer deposits
Mar 16$M
90,231

Transaction Banking
Loans & Specialised FinanceMarkets
Central Functions
Customer deposits

63

Sep 15$M
94,188

Movement
Mar 15$M
91,066

Mar 16v. Sep 15-4%

Mar 16v. Mar 15
-1%

977

785

762

24%

28%

84,54087,621

91,064

-4%

-7%

378

446

453

-15%

-17%

176,126

183,040

183,345-4%-4%

DIVISIONAL RESULTS
Institutional
Mark Whelan
March 2016 Half Year
Loans &
Transaction Specialised
Banking
Finance
458
764

AUD M
Net interest income

Markets
562

Central
Functions18

Institutional
Total
1,802

Other operating income

394

58

433

26

911

Operating income

852

822

995

44

2,713

Operating expenses

(477)

(271)

(712)

(50)

(1,510)

Profit before credit impairment and income tax

375

551

283

(6)

1,203

Credit impairment (charge)/release

(105)

(204)

(12)

(2)

(323)

Profit before income tax

270

347

271

(8)

880

Income tax expense and non-controlling interests

(86)

(95)

(69)

2

(248)

Cash profit

184

252

202

(6)

632

Individual credit impairment charge/(release)

103

223

11

2

339

Collective credit impairment charge/(release)

2

(19)

1

-

(16)

Net loans & advances

17,036

86,84921,487

238

125,610

Customer deposits

90,231

977

84,540378

176,126

Risk weighted assets

28,88996,90254,584

1,514

181,889

March 2015 Half YearNet interest income

468

750

507

16

1,741

Other operating income

423

64

716

26

1,229

Operating income

891

814

1,223

42

2,970

Operating expenses

(460)

(254)

(647)

(24)

(1,385)

Profit before credit impairment and income tax

431

560

576

18

1,585

Credit impairment (charge)/release

(18)

(29)

(38)

(3)

(88)

Profit before income tax

413

531

538

15

1,497

Income tax expense and non-controlling interests

(117)

(141)

(140)

(28)

(426)

Cash profit

296

390

398

(13)

1,071

Individual credit impairment charge/(release)

19

34

38

1

92

Collective credit impairment charge/(release)

(1)

(5)

-

2

(4)

Net loans & advances

32,68389,634

22,152381

144,850

Customer deposits

91,066762

91,064453

183,345

Risk weighted assets

41,211

94,601

59,072

602

195,486

March 2016 Half Year vs March 2015 Half YearNet interest income

-2%

2%

11%

13%

4%

Other operating income

-7%

-9%

-40%

0%

-26%

Operating income

-4%

1%

-19%

5%

-9%

Operating expenses

4%

7%

10%

large

9%

-13%

-2%

-51%

large

-24%

Profit before credit impairment and income tax
Credit impairment (charge)/release

large

large

-68%

-33%

large

Profit before income tax

-35%

-35%

-50%

large

-41%

Income tax expense and non-controlling interests

-26%

-33%

-51%

large

-42%

Cash profit

-38%

-35%

-49%

-54%

-41%

Individual credit impairment charge/(release)

large

large

-71%

100%

large

Collective credit impairment charge/(release)

large

large

n/a

-100%

large

Net loans & advances

-48%

-3%

-3%

-38%

-13%

Customer deposits

-1%

28%

-7%

-17%

-4%

Risk weighted assets

-30%

2%

-8%

large

-7%

64

DIVISIONAL RESULTS
Institutional
Mark Whelan
March 2016 Half Year
Loans &
Transaction Specialised
Banking
Finance
458
764

AUD M
Net interest income

Markets
562

Central
Functions18

Institutional
Total
1,802

Other operating income

394

58

433

26

911

Operating income

852

822

995

44

2,713

Operating expenses

(477)

(271)

(712)

(50)

(1,510)

Profit before credit impairment and income tax

375

551

283

(6)

1,203

Credit impairment (charge)/release

(105)

(204)

(12)

(2)

(323)

Profit before income tax

270

347

271

(8)

880

Income tax expense and non-controlling interests

(86)

(95)

(69)

2

(248)

Cash profit

184

252

202

(6)

632

Individual credit impairment charge/(release)

103

223

11

2

339

Collective credit impairment charge/(release)

2

(19)

1

-

(16)

Net loans & advances

17,036

86,84921,487

238

125,610

Customer deposits

90,231

977

84,540378

176,126

Risk weighted assets

28,88996,90254,584

1,514

181,889

September 2015 Half YearNet interest income

467

769

600

8

1,844

Other operating income

411

90

423

24

948

Operating income

878

859

1,023

32

2,792

Operating expenses

(467)

(264)

(662)

(32)

(1,425)

Profit before credit impairment and income tax

411

595

361

-

1,367

Credit impairment (charge)/release

(13)

(86)

(10)

(2)

(111)

Profit before income tax

398

509

351

(2)

1,256

Income tax expense and non-controlling interests

(108)

(130)

(96)

(29)

(363)

Cash profit

290

379

255

(31)

893

Individual credit impairment charge/(release)

42

63

9

-

114

Collective credit impairment charge/(release)

(29)

23

1

2

(3)

Net loans & advances

26,17592,31723,367337

142,196

Customer deposits

94,188785

87,621446

183,040

Risk weighted assets

35,381

101,376

59,738

1,385

197,880

March 2016 Half Year vs September 2015 Half YearNet interest income

-2%

-1%

-6%

large

-2%

Other operating income

-4%

-36%

2%

8%

-4%

Operating income

-3%

-4%

-3%

38%

-3%

Operating expenses

2%

3%

8%

56%

6%

Profit before credit impairment and income tax

-9%

-7%

-22%

n/a

-12%

Credit impairment (charge)/release

large

large

20%

0%

large

Profit before income tax

-32%

-32%

-23%

large

-30%

Income tax expense and non-controlling interests

-20%

-27%

-28%

large

-32%

Cash profit

-37%

-34%

-21%

-81%

-29%
large

Individual credit impairment charge/(release)

large

large

22%

n/a

Collective credit impairment charge/(release)

large

large

0%

-100%

large

Net loans & advances

-35%

-6%

-8%

-29%

-12%

Customer deposits

-4%

24%

-4%

-15%

-4%

Risk weighted assets

-18%

-4%

-9%

9%

-8%

65

DIVISIONAL RESULTS
Institutional
Mark Whelan
Analysis of Markets operating income
Half Year

Movement

Mar 16$M
549

Sep 15$M
577

Mar 15$M
668

Mar 16v. Sep 15-5%

Trading2

303

307

296

-1%

2%

Balance sheet3

143

139

259

3%

-45%

Markets operating income

995

1,023

1,223

-3%

-19%

Composition of Markets
operating income by business activity
Sales1

1.
2.
3.

Mar 16v. Mar 15-18%

Sales represents direct client flow business on core products such as fixed income, foreign exchange, commodities and capital markets.
Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow.
Balance sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio.

Half Year

Movement

Composition of Markets
operating income by geography
Australia

Mar 16$M373

Sep 15$M405

Mar 15$M
461

Mar 16v. Sep 15-8%

Mar 16v. Mar 15-19%

Asia Pacific, Europe & America

549

458

594

20%

-8%

New Zealand

73

160

168

-54%

-57%

Markets operating income

995

1,023

1,223

-3%

-19%



The March 2016 half has been characterised by high volatility driven by
uncertainty around the US dollar, timing of US interest rateannouncements, falling commodity prices and growing uncertainty
surrounding the global economy. The resulting volatility, together with
low interest rates has resulted in challenging market conditions andreduced customer demand for hedging. The market continues to be
impacted by the widening of credit spreads which began late in the
September 2015 half.
Markets operating income decreased by $28 million (-3%). Key factors
affecting the results were:

March 2016 v March 2015

Sales income decreased by $28 million (-5%) with lower
commodity income due to declining demand for gold from Asiancustomers, partially offset by higher foreign exchange income
from increased customer demand as a depreciating Chinese
Yuan resulted in customers seeking to hedge their foreignexchange exposures.

Trading income decreased by $4 million (-1%) with increased
foreign exchange income being offset by lower income from rates
products.

Balance Sheet income increased by $4 million (3%) reflecting
growth in the liquidity portfolio, partially offset by a marginal
widening of credit spreads.

Markets operating income decreased by $228 million (-19%). Key
factors affecting the results were:

Sales income decreased by $119 million (-18%) due to lower
rates and foreign exchange income from reduced demand forhedging products, lower commodity income due to declining
demand for gold from Asian customers and lower Capital Markets
income as a result of reduced demand for structured funding.

Trading income increased by $7 million (2%) with higher income
from foreign exchange and credit trading, partially offset by lower
trading income from rates products.

Balance sheet income decreased by $116 million (-45%) driven
by the fall in market values of the liquidity portfolio due towidening credit spreads.

March 2016 v September 201566

DIVISIONAL RESULTS
Institutional
Mark Whelan
Market risk
Traded market risk
Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivative trading positions for ANZ’s principal
trading centres. All figures are in AUD.
99% confidence level (1 day holding period)

Value at Risk at 99% confidence

As at
Mar 16$M

High for
periodMar 16$M

Low forperiodMar 16$M

Avg forperiodMar 16$M

As at
Sep 15$M

High foryear
Sep 15$M

Low foryear
Sep 15$M

Avg foryear
Sep 15$M
7.9

Foreign exchange

5.9

11.4

2.6

5.6

5.0

18.2

2.8

Interest rate

9.0

20.1

6.9

11.3

10.1

20.2

4.8

9.3

Credit

2.7

4.6

2.4

3.0

3.5

5.4

2.9

3.8

Commodities

1.2

2.5

1.0

1.7

1.6

3.6

1.3

2.4

Equity

0.1

2.0

0.1

0.2

2.5

6.3

0.1

1.1

Diversification benefit

(8.0)

n/a

n/a

(6.2)

(6.0)

n/a

n/a

(13.2)

10.9

25.4

8.7

15.6

16.7

19.7

6.9

11.3

Total VaR

Non-traded interest rate risk
Non-traded interest rate risk is managed by Markets and relates to the potential adverse impact of changes in market interest rates on future net interest
income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis to a 1% rate shock.
99% confidence level (1 day holding period)

As at
Mar 16$M

High for
periodMar 16$M

Low forperiodMar 16$M

Avg forperiodMar 16$M

As at
Sep 15$M

Australia

31.9

31.9

28.0

29.7

New Zealand

8.8

11.0

8.8

9.6

Asia Pacific, Europe & America

16.1

17.3

15.1

Diversification benefit(23.0)

n/a

n/a

33.8

35.4

31.3

33.2

Value at Risk at 99% confidence

Total VaRHigh foryear
Sep 15$M

Low foryear
Sep 15$M

Avg foryear
Sep 15
$M

25.4

38.5

21.2

27.2

9.7

11.4

8.9

10.2

16.2

14.4

14.4

7.9

10.4

(22.3)(16.8)

n/a

n/a(14.8)

32.7

37.4

28.6

33.0

Impact of 1% rate shock on the next 12 months’ net interest income
As at
As at period end

Mar 16
0.27%

Sep 150.61%

Maximum exposure

0.48%

1.36%

Minimum exposure

0.00%

0.45%

Average exposure (in absolute terms)

0.28%

0.93%

67

DIVISIONAL RESULTS
New ZealandDavid Hisco
New Zealand’s result and commentary are reported in NZD. AUD results are shown on page 73.
Cash profit – March 2016 Half Year v March 2015 Half Year

margin fixed rate products, and the impact of capital notes issued in
March 2015.

Divisional Strategy

The division’s strategy is to help New Zealanders achieve more byoffering unrivalled connections across the region and the best
combination of convenience, service and price.
 Other operating income increased 11% driven by the gain on sale ofa fixed asset and volume driven growth in fee income.
 Operating expenses decreased 1%. Excluding software capitalisation
changes, operating expenses decreased 3% with productivity gains
more than offsetting inflationary and investment impacts.

Strategic Progress

We maintained our momentum and continued to see lending anddeposit growth in the half. Our gross impaired assets ratio has reduced
due to improved credit quality in the portfolio and our cost to income
ratio continued to trend downwards, underpinned by continued benefits
from our simplification strategy.

 Credit impairment charges increased NZD 26 million to NZD 46
million. The individual credit impairment charge increased NZD 24
million primarily driven by lower write-backs in Commercial. The
collective provision was NZD 2 million lower.

Retail has grown customer numbers in 2016 and continues to be thebiggest mortgage lender1 across all major cities. We have grownmarket share2 across key products including Home Loans andHousehold Deposits. We introduced new digital services for ourcustomers including goMoneyTM Wallet for Android users, self-service
password resets and self-service funds transfers for KiwiSaver on
Internet Banking. Combined with the new digital capabilities, the focus
on having the best people in the right locations is showing results, withgrowth in the key Auckland and Christchurch markets and the migrantand Small Business Banking customer segments.

Cash profit increased 3%. Excluding the software capitalisation
changes, cash profit increased 4% with lending driven growth inincome and disciplined expense management offsetting higher credit
impairment charges.
Key factors affecting the result were: Net interest income increased 1%, due to lending growth. Averagegross loans and advances grew 4%, with growth across both the
housing and non-housing portfolios. Net interest margin contracted 7
bps driven by lending competition and unfavourable lending mix, withcustomers continuing to favour lower margin fixed rate products.

Commercial has continued to see good lending and deposit growth intarget markets. Portfolio quality and supporting customers continues tobe the key focus in the agricultural market. Our network of frontline
specialists has played a leading role in delivering business and industry
specific insights. The focus on simplification continues to deliver
improved efficiency for staff and make banking easier for customers.
March 2016 v September 2015

 Other operating income increased 8% driven by gain on sale of a
fixed asset.
 Operating expenses remained flat. Excluding software capitalisation
changes, operating expenses decreased 2% due to disciplined costmanagement with productivity gains more than offsetting inflationary
and investment impacts.

March 2016 v March 2015

Cash profit increased 3%. Excluding the software capitalisation
changes, cash profit increased 5% primarily driven by lending anddeposit volume growth and disciplined expense management, partly
offset by higher credit impairment charges.

 Credit impairment charges increased NZD 7 million. The individual
credit impairment charge increased NZD 12 million due to lower
write-backs, partly offset by lower provisions raised in the mortgage
portfolio. The collective impairment charge was NZD 5 million lower
driven by portfolio improvement.

Key factors affecting the result were: Net interest income increased 2%, primarily due to growth in lending.
Average gross loans and advances grew 9%, with growth acrossboth the housing and non-housing portfolios. Net interest margin
contracted 15 bps driven by competition for lending assets,
unfavourable lending mix with customers continuing to favour lower

1.
2.

68

Source: Core Logic (mortgage registrations) February 2016.
Source: RBNZ March 2016.

DIVISIONAL RESULTS
New ZealandDavid Hisco
Table reflects NZD for New Zealand
AUD results shown on page 73
Half Year
Mar 16
NZD M
1,270

Net interest income

Sep 15
NZD M
1,257

Movement
Mar 15
NZD M
1,242

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
2%
11%

217

201

196

8%

Operating income

1,487

1,458

1,438

2%

3%

Operating expenses

(571)

(572)

(576)

0%

-1%

Profit before credit impairment and income tax

916

886

862

3%

6%

Credit impairment (charge)/release

(46)

(39)

(20)

18%

large

Other operating income

Profit before income tax

870

847

842

3%

3%

Income tax expense and non-controlling interests

(244)

(237)

(236)

3%

3%

Cash profit

626

610

606

3%

3%

Consisting of:Retail

395

369

365

7%

8%

Commercial

221

237

242

-7%

-9%

Central Functions

10

4

(1)

large

large

626

610

606

3%

3%

Balance Sheet
Net loans & advances

107,845

104,756

99,5183%

8%

Other external assets

3,536

3,514

3,699

1%

-4%

External assets

111,381108,270

103,217

3%

8%

Customer deposits

69,14065,68961,427

5%

13%

Other deposits and borrowings

5,451

4,963

6,273

10%

-13%

Deposits and other borrowings

74,591

70,652

67,700

6%

10%

Other external liabilities

19,356

21,503

19,749-10%-2%

External liabilities

93,947

92,15587,4492%

7%

Risk weighted assets

60,13459,02455,006

2%

9%

Average gross loans and advances

106,705

102,629

98,262

4%

9%

Average deposits and other borrowings

73,17069,602

66,622

5%

10%

RatiosReturn on assets

1.14%

1.15%

1.20%

Net interest margin

2.37%

2.44%

2.52%

Operating expenses to operating income

38.4%

39.2%

40.1%

Operating expenses to average assets

1.04%

1.08%

1.14%

47

35

23

34%

large

0.09%

0.07%

0.05%

(1)

4

(3)

large

-67%

(0.00%)

0.01%(0.01%)
-19%

-32%

-1%

-1%

Cash profit

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)Collective credit impairment charge/(release) as a % of average GLA

302

372

443

Gross impaired assets as a % of GLA

0.28%

0.35%

0.44%

Total full time equivalent staff (FTE)

5,022

5,074

5,096

Gross impaired assets

69

DIVISIONAL RESULTS
New ZealandDavid Hisco
Movement

Half Year

Individual credit impairment charge/(release)
Mar 16
NZD M
26

Sep 15NZD M
29Mar 15NZD M
25Mar 16v. Sep 15-10%

Mar 16v. Mar 15
4%

Home Loans

(2)

4

2

large

large

Retail
Other

28

25

23

12%

22%

Commercial

21

6

(2)

large

large

Individual credit impairment charge

47

35

23

34%

large

Half Year

Collective credit impairment charge/(release)
Mar 16NZD M
2Retail

Sep 15NZD M
7Movement
Mar 15NZD M(3)Mar 16v. Sep 15-71%

Mar 16v. Mar 15
large

Home Loans

(2)

(3)

(2)

-33%

0%

Other

4

10

(1)

-60%

large

Commercial

(3)

(3)

-

0%

n/a

Collective credit impairment charge/(release)

(1)

4

(3)

large

-67%

Total credit impairment charge

46

39

20

18%

large

As at

Net loans and advances

Movement

Mar 16
NZD M
67,708

Sep 15
NZD M
65,422

Mar 15
NZD M
61,917

Mar 16v. Sep 15
4%

Mar 16v. Mar 15
9%Home Loans

63,79461,50858,152

4%

10%

Other

3,914

3,914

3,765

0%

4%

Commercial

40,13739,33437,601

2%

7%

Net loans and advances

107,845

104,756

99,5183%

8%RetailAs at

Customer deposits

Movement

RetailMar 16
NZD M
55,994

Sep 15
NZD M
53,407

Mar 15
NZD M
49,834

Mar 16v. Sep 15
5%

Mar 16v. Mar 15
12%

Commercial

13,146

12,282

11,593

7%

13%

Customer deposits

69,14065,68961,427

5%

13%

70

DIVISIONAL RESULTS
New ZealandDavid Hisco
March 2016 Half Year

NZD M
Net interest income

Retail818

Commercial
445

Central
Functions
7

New
Zealand
Total
1,270

195

8

14

217

Operating income

1,013

453

21

1,487

Operating expenses

(436)

(128)

(7)

(571)

Profit before credit impairment and income tax

577

325

14

916

Credit impairment (charge)/release

(28)

(18)

-

(46)

Profit before income tax

549

307

14

870

Other operating income

Income tax expense and non-controlling interests

(154)

(86)

(4)

(244)

Cash profit

395

221

10

626

Individual credit impairment charge/(release)

26

21

-

47

Collective credit impairment charge/(release)

2

(3)

-

(1)

Net loans & advances

67,70840,137-

107,845

Customer deposits

55,994

13,146-

69,140

Risk weighted assets

29,11730,452565

60,134

March 2015 Half YearNet interest income

781

452

9

1,242

Other operating income

187

9

-

196

Operating income

968

461

9

1,438

Operating expenses

(440)

(126)

(10)

(576)

Profit before credit impairment and income tax

528

335

(1)

862

Credit impairment (charge)/release

(22)

2

-

(20)

Profit before income tax

506

337

(1)

842

Income tax expense and non-controlling interests

(141)

(95)

-

(236)

Cash profit

365

242

(1)

606

Individual credit impairment charge/(release)

25

(2)

-

23

(3)

-

-

(3)

Net loans & advances

61,91737,601-

99,518Customer deposits

49,834

11,593-

61,427

Risk weighted assets

27,914

26,403689

55,006

Collective credit impairment charge/(release)

March 2016 Half Year vs March 2015 Half YearNet interest income

5%

-2%

-22%

2%

Other operating income

4%

-11%

n/a

11%

Operating income

5%

-2%

large

3%

Operating expenses

-1%

2%

-30%

-1%

Profit before credit impairment and income tax

9%

-3%

large

6%

Credit impairment (charge)/release

27%

large

n/a

large

Profit before income tax

8%

-9%

large

3%

Income tax expense and non-controlling interests

9%

-9%

n/a

3%

Cash profit

8%

-9%

large

3%

Individual credit impairment charge/(release)

4%

large

n/a

large

Collective credit impairment charge/(release)

large

n/a

n/a

-67%

Net loans & advances

9%

7%

n/a

8%

Customer deposits

12%

13%

n/a

13%

Risk weighted assets

4%

15%

-18%

9%

71

DIVISIONAL RESULTS
New ZealandDavid Hisco
March 2016 Half Year

NZD M
Net interest income

Retail818

Commercial
445

Central
Functions
7

New
Zealand
Total
1,270

195

8

14

217

Operating income

1,013

453

21

1,487

Operating expenses

(436)

(128)

(7)

(571)

Profit before credit impairment and income tax

577

325

14

916

Credit impairment (charge)/release

(28)

(18)

-

(46)

Profit before income tax

549

307

14

870

Other operating income

Income tax expense and non-controlling interests

(154)

(86)

(4)

(244)

Cash profit

395

221

10

626

Individual credit impairment charge/(release)

26

21

-

47

Collective credit impairment charge/(release)

2

(3)

-

(1)

Net loans & advances

67,70840,137-

107,845

Customer deposits

55,994

13,146-

69,140

Risk weighted assets

29,11730,452565

60,134September 2015 Half YearNet interest income

794

453

10

1,257

Other operating income

195

8

(2)

201

Operating income

989

461

8

1,458

Operating expenses

(439)

(130)

(3)

(572)

Profit before credit impairment and income tax

550

331

5

886

Credit impairment (charge)/release

(36)

(3)

-

(39)

Profit before income tax

514

328

5

847

Income tax expense and non-controlling interests

(145)

(91)

(1)

(237)

Cash profit

369

237

4

610

Individual credit impairment charge/(release)

29

6

-

35

Collective credit impairment charge/(release)
Net loans & advances

7

(3)

-

4

65,42239,334-

104,756

Customer deposits

53,407

12,282-

65,689Risk weighted assets

29,02929,224771

59,024

March 2016 Half Year vs September 2015 Half YearNet interest income

3%

-2%

-30%

1%

Other operating income

0%

0%

large

8%

Operating income

2%

-2%

large

2%

Operating expenses

-1%

-2%

large

0%

5%

-2%

large

3%

-22%

large

n/a

18%

Profit before credit impairment and income tax
Credit impairment (charge)/release
Profit before income tax

7%

-6%

large

3%

Income tax expense and non-controlling interests

6%

-5%

large

3%

Cash profit

7%

-7%

large

3%

Individual credit impairment charge/(release)

-10%

large

n/a

34%

Collective credit impairment charge/(release)

-71%

0%

n/a

large

Net loans & advances

4%

2%

n/a

3%

Customer deposits

5%

7%

n/a

5%

Risk weighted assets

0%

4%

-27%

2%

72

DIVISIONAL RESULTS
New ZealandDavid Hisco
Table reflects AUD for New Zealand
NZD results shown on page 69
Half Year
Mar 16$M
1,172

Net interest income

Sep 15$M
1,155

Movement
Mar 15$M
1,162

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
1%
10%

201

185

183

9%

Operating income

1,373

1,340

1,345

2%

2%

Operating expenses

(527)

(525)

(539)

0%

-2%

Profit before credit impairment and income tax

846

815

806

4%

5%

Credit impairment (charge)/release

(42)

(36)

(19)

17%

large

Other operating income

Profit before income tax

804

779

787

3%

2%

Income tax expense and non-controlling interests

(226)

(218)

(221)

4%

2%

Cash profit

578

561

566

3%

2%

Consisting of:Retail

365

340

341

7%

7%

Commercial

204

217

226

-6%

-10%

Central Functions
Cash profit
Balance Sheet
Net loans & advances

9

4

(1)

large

large

578

561

566

3%

2%

97,217

95,211

97,679

2%

0%

3,187

3,194

3,631

0%

-12%

External assets

100,404

98,405

101,310

2%-1%

Customer deposits

62,32759,70360,293

4%

3%

Other deposits and borrowings

4,913

4,511

6,157

9%

-20%

Other external assets

Deposits and other borrowings

67,24064,21466,450

5%

1%

Other external liabilities

17,44919,545

19,384-11%-10%

External liabilities

84,68983,75985,834

1%-1%

Risk weighted assets

54,20853,64653,990

1%

0%

Average gross loans and advances

98,49594,362

91,908

4%

7%

Average deposits and other borrowings

67,54063,99662,314

6%

8%

RatiosReturn on assets

1.14%

1.15%

1.20%

Net interest margin

2.37%

2.44%

2.52%

Operating expenses to operating income

38.4%

39.2%

40.1%

Operating expenses to average assets

1.04%

1.08%

1.14%

43

32

22

34%

95%

0.09%

0.07%

0.05%
large

-67%

-19%

-37%

-1%

-1%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)Collective credit impairment charge/(release) as a % of average GLA

(1)

4

(3)

(0.00%)

0.01%(0.01%)

273

338

434

Gross impaired assets as a % of GLA

0.28%

0.35%

0.44%

Total full time equivalent staff (FTE)

5,022

5,074

5,096

Gross impaired assets

73

DIVISIONAL RESULTS
WealthAlexis George, David Hisco & Fred Ohlsson

Cash profit – March 2016 Half Year v March 2015 Half Year

Insurance operating income grew by 8%, reflecting favourable
direct and group lapse experience, partially offset by adverse
claims experience.

Divisional Strategy

Wealth provides a range of solutions to customers across Australia,
New Zealand and Asia to make it easier for them to connect with,protect and grow their wealth. Wealth serves over 2.5 million
customers and manages $67 billion in investment and retirementsavings. Wealth continues to deliver solutions that are aligned to ANZ’s
strategy to improve our customer experience.


Funds Management operating income decreased by 3%, primarily
driven by a shift in business towards lower margin products andmarket volatility.



Private Wealth operating income increased by 12%, driven by
growth in average customer deposits and average net loans andadvances.

Operating expenses increased 8%. Excluding specified items1,
operating expenses increased by 4%, due to inflationary growthand spend on strategic projects, partially offset by efficiency
initiatives.



March 2016 v September 2015

Strategic Progress

Wealth continues to invest in strategic growth initiatives to help ourcustomers better connect with, protect and grow their financial wellbeing. These initiatives include digital platforms that better connect
customers to their wealth; solutions for self-directed customers andprograms to leverage capabilities to deliver service and scaleefficiencies.

Cash profit decreased by 25%. Excluding specified items1, along with
the $56 million one-off tax consolidation benefit in the September 2015
half, cash profit decreased by 6% primarily driven by volatile
investment markets and increased spend on strategic projects.

Our offerings include ANZ Smart Choice Super, a simple and direct
retirement savings solution, and Grow by ANZTM, our award winning
digital app that brings banking, share investments, superannuation andinsurance, together in one place. Customers can access ANZ’s wealthsolutions through our team of qualified financial planners and advisers,
online and mobile platforms, ANZ Private Bankers and ANZ’s branch
network.

Key factors affecting the result were:The Insurance business’s momentum remained positive despite
growing challenges in the life insurance industry. Our presence isstrong across all areas of direct, group and retail insurance with an
ongoing focus on optimising the product mix. Funds Management hasembraced the changing regulatory environment to reshape thebusiness, simplifying operational processes and delivering solutions
like ANZ Smart Choice Super and ANZ KiwiSaver. We arestrengthening our Private Wealth offerings by building core investment
advice capabilities and developing a suite of investment solutions.
Excluding the one-off $9 million pre-tax loss on the sale of the New
Zealand medical business this half (nil on after tax basis),
Insurance operating income grew 3% driven by growth in life
insurance in-force premiums and improved group and retail lapse
experience. This performance contributed to a 6% uplift in theEmbedded Value (gross of transfers).



Funds Management operating income decreased by 5%, primarily
driven by a shift in business towards lower margin products andmarket volatility.



Private Wealth income increased by 10%, reflecting increased
volumes with average customer deposits and average gross loans
and advances growing by 7% and 8% respectively.

Operating expenses increased 8%. Excluding specified items1,
operating expenses increased by 5%, due to inflationary growthand spend on strategic projects, partially offset by efficiency
initiatives.

1

Specified items relevant to Wealth are software capitalisation changes andrestructuring.

March 2016 v March 2015

Cash profit decreased by 1%. Excluding specified items1, cash profit
increased by 4% primarily driven by favourable group lapse experienceand growth in average customer deposits and average net loans andadvances.
Key factors affecting the result were:Excluding the one-off $9 million pre-tax loss on the sale of the New
Zealand medical business this half (nil impact on after tax basis),74

DIVISIONAL RESULTS
WealthAlexis George, David Hisco & Fred Ohlsson
Half Year
Mar 16$M
101

Net interest income

Sep 15$M
91

Movement
Mar 15$M
89

Mar 16v. Sep 15
11%

Mar 16v. Mar 15
13%

Other operating income

52

60

63

-13%

-17%

Net funds management and insurance income

727

730

699

0%

4%

Operating income

880

881

851

0%

3%

Operating expenses

(521)

(481)

(484)

8%

8%

Profit before credit impairment and income tax

359

400

367

-10%

-2%

-

(1)

1

-100%

-100%

Profit before income tax

359

399

368

-10%

-2%

Income tax expense and non-controlling interests

(98)

(53)

(105)

85%

-7%

Cash profit

261

346

263

-25%

-1%

Business Units
Insurance

151

155

144

-3%

5%

Funds Management

58

79

79

-27%

-27%

Private Wealth

53

51

44

4%

20%

Corporate and Other1

(1)

61

(4)

large

-75%

Total Wealth

261

346

263

-25%

-1%

Australia

194

285

202

-32%

-4%

New Zealand

63

64

62

-2%

2%

Asia Pacific, Europe & America

4

(3)

(1)

large

large

Total Wealth

261

346

263

-25%

-1%

Income from invested capital2

65

59

55

10%

18%

Credit impairment (charge)/release

Consisting of:

Key metrics
In-force premiums3

2,071

2,217

2,154

-7%

-4%

Funds under management

66,52265,392

68,405

2%-3%

Average funds under management

66,81066,99364,6150%

3%
7%

Net loans and advances

6,573

6,468

6,163

2%

Customer deposits

18,945

18,467

17,357

3%

9%

Average gross loans and advances

6,654

6,157

5,725

8%

16%

Average customer deposits

19,096

17,922

15,6397%

22%

Risk weighted assets

4,391

4,291

4,174

2%

5%

RatiosOperating expenses to operating income

59.2%

54.6%

56.9%

Insurance expenses to in-force premiums
Australia

12.1%

9.9%

10.3%

New Zealand

35.2%

35.4%

32.1%

Australia4

13.0%

14.0%

12.6%

New Zealand

14.8%

16.8%

14.3%

Australia

0.58%

0.51%

0.51%

New Zealand

0.27%

0.28%

0.31%

Total full time equivalent staff (FTE)

2,385

2,481

2,530

-4%

-6%

Aligned adviser numbers6

1,785

1,819

1,823

-2%

-2%

Retail Insurance lapse rates

5

Funds Management expenses to average FUM

1.
2.

3.

4.

5.
6.

Corporate and Other includes a one-off tax consolidation benefit of $56 million in September 2015.
Income from invested capital represents after tax revenue generated from investing all Insurance and Funds Management business's capital balances held for regulatory purposes. The
invested capital as at 31 March 2016 was $3.7 billion (Sep 15 & Mar 15: $3.6 billion), which comprises fixed interest securities of 47% and cash deposits of 53% (Sep 15 & Mar 15: 49%
fixed interest securities and 51% cash deposits).
In-force premiums reflect the impact of ceasing the underwriting of new home, content, travel and motor insurance in the September 2015 half and the disposal of the New Zealandmedical business in the March 2016 half.
A definition change to the retail insurance lapse rate was implemented in the Sep 15 half to reflect the inclusion of partial premium reductions within the policy renewal period.
Comparatives have been restated to align with the revised methodology.
Funds Management expense and FUM only relates to Pensions & Investments business.
Includes corporate authorised representatives of dealer groups wholly or partially owned by ANZ Wealth Australia and ANZ employed financial planners.

75

DIVISIONAL RESULTS
WealthAlexis George, David Hisco & Fred Ohlsson
Major business units
Half Year
Mar 16$M
15

Insurance
Net interest income

Movement

Sep 15$M
15

Mar 15$M
17

Mar 16v. Sep 15
0%

Mar 16v. Mar 15
-12%

(9)

-

-

n/a

n/a

Insurance income

493

500

469

-1%

5%

Insurance volume related expenses

(150)

(167)

(154)

-10%

-3%

Operating income

349

348

332

0%

5%
9%

Other operating income

Operating expenses

(144)

(134)

(132)

7%

Profit before income tax

205

214

200

-4%

3%

Income tax expense and non-controlling interests

(54)

(59)

(56)

-8%

-4%

Cash profit

151

155

144

-3%

5%

Half Year
Mar 16$M
16

Funds Management
Net interest income

Sep 15$M
15

Movement
Mar 15$M
15

Mar 16v. Sep 15
7%

Mar 16v. Mar 15
7%

Other operating income

36

35

37

3%

-3%

Funds management income

409

437

431

-6%

-5%

Funds management volume related expenses

(185)

(197)

(199)

-6%

-7%

Operating income

276

290

284

-5%

-3%

Operating expenses

(194)

(181)

(171)

7%

13%

Profit before income tax

82

109

113

-25%

-27%

Income tax expense and non-controlling interests

(24)

(30)

(34)

-20%

-29%

Cash profit

58

79

79

-27%

-27%

Half Year

Movement

Mar 16$M90

Sep 15$M
81

Mar 15$M
79

Mar 16v. Sep 15
11%

Other operating income

20

17

19

18%

5%

Net funds management income

29

28

26

4%

12%

Operating income

139

126

124

10%

12%

Operating expenses

(64)

(52)

(63)

23%

2%

Profit before credit impairment and income tax

75

74

61

1%

23%

Private Wealth
Net interest income

Mar 16v. Mar 15
14%

Credit impairment charge

-

(1)

1

-100%

-100%

Profit before income tax

75

73

62

3%

21%

Income tax expense and non-controlling interests

(22)

(22)

(18)

0%

22%

Cash profit

53

51

44

4%

20%

76

DIVISIONAL RESULTS
WealthAlexis George, David Hisco & Fred Ohlsson
Half Year

Movement

Mar 16$M
144

Sep 15$M
134

Mar 15$M
132

Funds Management

194

181

Private Wealth64

52

Corporate and Other

119

Total

521

Operating expenses by business unit
Insurance

Mar 16v. Sep 15
7%

Mar 16v. Mar 15
9%

171

7%

13%

63

23%

2%

114

118

4%

1%

481

484

8%

8%

Half Year
Operating expenses by geographic region
Australia

Movement

Mar 16$M423

Sep 15$M
381

Mar 15$M
387

Mar 16v. Sep 15
11%

Mar 16v. Mar 15
9%

68

68

65

0%

5%

New Zealand
Asia Pacific, Europe & America

30

32

32

-6%

-6%

Total

521

481

484

8%

8%

Half Year
Insurance operating margin
Life Insurance Planned profit margin
Group & Individual
1

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

72

78

66

-8%

9%

4

1

4

large

0%

General Insurance operating profit margin

51

50

47

2%

9%

Australia

127

129

117

-2%

9%

20

23

24

-13%

-17%

4

3

3

33%

33%

Experience profit/(loss)

Life Insurance Planned profit margin
Individual
Experience profit/(loss)1
New Zealand

24

26

27

-8%

-11%

Total

151

155

144

-3%

5%

1.

Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan.

As at

Movement

Insurance annual in-force premiumsGroup

Mar 16$M
439

Sep 15$M423

Mar 15$M
390

Mar 16v. Sep 15
4%

Mar 16v. Mar 15
13%

Individual

1,297

1,284

1,246

1%

4%

335

510

518

-34%

-35%

Total

2,071

2,217

2,154

-7%

-4%

Insurance annual in-force premiums by region
Australia

1,904

2,026

1,955

-6%

-3%

General Insurance

167

191

199

-13%

-16%

2,071

2,217

2,154

-7%

-4%

Insurance in-force book movementGroup

Sep 15$M
423

New
business$M2
31

Lapses$M(15)

Mar 16$M
439

Individual3

1,284

108

(95)

1,297

510

53

(228)

335

Total

2,217

192

(338)

2,071

Insurance in-force book movement by region
Australia3

2,026

179

(301)

1,904

191

13

(37)

167

2,217

192

(338)

2,071

New Zealand
Total

General Insurance3

New Zealand3
Total
2.
3.

New business includes the impact of foreign currency gains/ (losses) on translation.
Lapses for General Insurance and Australia include the impact of ceasing the underwriting new home, content, travel and motor insurance in Sep 15 half. Lapses for Individual and New
Zealand include the impact of the disposal of the New Zealand medical business in the Mar 16 half.

77

DIVISIONAL RESULTS
WealthAlexis George, David Hisco & Fred Ohlsson
As at

Movement

Funds under management
Funds under management - average

Mar 16$M
66,810

Sep 15$M
66,993

Mar 15$M
64,615

Mar 16v. Sep 15
0%

Mar 16v. Mar 15
3%

Funds under management - end of period

66,52265,392

68,4052%-3%Composed of:Australian equities

15,955

16,12418,040-1%-12%International equities

17,001

17,596

18,533-3%-8%

Cash and fixed interest

29,13627,65327,583

5%

6%

Property and infrastructure

4,430

4,019

4,249

10%

4%

Total

66,52265,392

68,405

2%

-3%

As at

Movement

Funds under management by region
Australia

Mar 16$M
48,828

Sep 15$M
48,874

Mar 15$M
51,369Mar 16v. Sep 15
0%

Mar 16v. Mar 15-5%

New Zealand

17,694

16,51817,036

7%

4%

Total

66,52265,392

68,405

2%-3%

Other1

Mar 16$M

Funds Management cash flows by productSep 15$M

Inflows

Outflows

OneAnswer Frontier

8,677

818

(475)

146

9,166

ANZ Smart Choice

4,254

1,183

(489)

4,862

9,810

Oasis Voyage

1,708

205

(72)

51

1,892

Private Wealth - Australia

2,073

293

(133)

(35)

2,198

KiwiSaver

6,817

732

(260)

221

7,510

Private Wealth - New Zealand

4,976

529

(294)

68

5,279

Other New Zealand

4,725

833

(699)

46

4,905

Retail20,223430(1,317)(32)

19,304

Employer Super

11,939109(806)(4,784)

6,458

Total

65,392

5,132(4,545)543

66,522

1.

Other includes investment income net of taxes, fees and charges, distributions and the impact of foreign currency translations. It also includes the transition of funds under managementfrom Employer Super to ANZ Smart Choice of approximately $5 billion, as a result of regulatory changes in the industry.

Australia$M
4,012

New Zealand
$M
554

Total
$M
4,566

62

14

76

Expected return

162

24

186

Experience deviations and assumption changes4

29

-

29

4,265

592

4,857

Embedded value and value of new business (insurance and investments only)
Embedded value as at September 20151
Value of new business2
3

Embedded value before economic assumption changes and net transfer
Economic assumptions change
Net transfer5
Embedded value as at March 2016
1.

2.
3.
4.

5.

(4)

7

3

206

(91)

115

4,467

508

4,975

Embedded value represents the present value of future profits and releases of capital arising from the business in-force at the valuation date, and adjusted net assets. It is determinedusing best estimate assumptions with franking credits included at 70% of face value. Projected cash flows have been discounted using capital asset pricing model risk discount rates of
7.50%-9.25%. ANZ Lenders Mortgage Insurance business is not included in the valuation.
Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period.
Expected return represents the expected increase in value over the period.
Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Improvement in retention in
Insurance business has led to favourable results for the Australian business partially offset by adverse movement from the investment market.
Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends and value of franking credits. There was a $400 million capital
injection from the parent entity, partially offset by $238 million of cash dividends and $47 million of franking credits transferred to the parent entity.

78

DIVISIONAL RESULTS
This page has been left blank intentionally79

DIVISIONAL RESULTS
Asia Retail & PacificDavid Hisco
Cash Profit – March 2016 Half Year v March 2015 Half Year

Divisional Strategy

Cash profit increased 18%. Excluding specified items1, cash profit
decreased 31%. Key factors affecting the result were:Asia Retail provides banking and wealth management services toaffluent and emerging affluent retail customers across nine Asian
countries. Pacific provides a full range of banking products andservices to retail and commercial customers.


Net interest income increased 4% due to growth in lending.
Average gross loans and advances grew 3% with growth in nonhousing portfolios. Net interest margin increased 5 bps driven bydeposit repricing.



Other operating income decreased 2%, due to lower investment
and insurance income in Asia.



Operating expenses increased 2%. Excluding specified items1,
operating expenses decreased $2 million (1%) due to disciplined
cost management.

Credit impairment charges increased 5% driven by lending
growth in the credit cards and personal loans portfolios in Asia
partly offset by lower individual credit impairment charges in the
Pacific.

1

Specified items relevant to Asia Retail & Pacific are software capitalisation
changes and restructuring.

Strategic Progress

The division continues to work on improving profitability, throughsimplification, digitisation and process re-engineering. A strategic
review of Asia Retail is now underway.
March 2016 v March 2015

Cash profit decreased 46%. Excluding specified items1, cash profit
decreased 40%. Key factors affecting the result were:

Net interest income increased 13% due to growth in lending.
Average gross loans and advances grew 12% with growth in nonhousing portfolios. Deposit growth of 7% was driven bytransactional accounts. Net interest margin increased 2 bps
driven by deposit repricing.



Other operating income increased 5% due to increased Markets
revenue from customer sales in the Pacific.

Operating expenses increased 7%. Excluding specified items1,
operating expenses increased $19 million (5%) due toinfrastructure and compliance related projects in Asia.



Credit impairment charges increased $81 million due to increased
individual impairment charges in Asia this half, and a nonrecurring provision release of $53 million during the March 2015
half in Asia Retail.

March 2016 v September 201580

DIVISIONAL RESULTS
Asia Retail & PacificDavid Hisco
Half YearNet interest income

Movement

Mar 16$M
328

Sep 15$M
314

Mar 15$M
291

Mar 16v. Sep 15
4%

Mar 16v. Mar 15
13%

Other operating income

231

236

221

-2%

5%

Operating income

559

550

512

2%

9%

Operating expenses

(401)

(395)

(374)

2%

7%

Profit before credit impairment and income tax

158

155

138

2%

14%

Credit impairment (charge)/release

(91)

(87)

(10)

5%

large
-48%

Profit before income tax

67

68

128

-1%

Income tax expense and non-controlling interests

(14)

(23)

(29)

-39%

-52%

Cash profit/(loss)

53

45

99

18%

-46%

Balance Sheet
Net loans & advances

11,90912,545

11,667-5%

2%

Customer deposits

19,005

19,455

17,779-2%

7%

Risk weighted assets

11,617

11,945

10,767-3%

8%

RatiosReturn on assets

0.55%

0.48%

1.15%

Net interest margin

3.51%

3.46%

3.49%

Operating expenses to operating income

71.7%

71.8%

73.0%

Operating expenses to average assets

4.18%

4.20%

4.33%

82

78

8

5%

large

1.30%

1.27%

0.14%
0%

large

4%

19%

-4%

-7%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA

9

9

2

0.14%

0.15%

0.04%

232

223

195

Gross impaired assets as a % of GLA

1.92%

1.75%

1.64%

Total full time equivalent staff (FTE)

3,183

3,313

3,437

Collective credit impairment charge/(release)Collective credit impairment charge/(release) as a % of average GLA
Gross impaired assets

81

DIVISIONAL RESULTS
Technology, Services & Operations and Group Centre
Movement

Half Year
Mar 16$M
73

Operating income (minority investments in Asia)

Sep 15$M
304

Mar 15$M
311

Mar 16v. Sep 15-76%

Mar 16v. Mar 15-77%

Operating income (excluding minority investments in Asia)

86

(28)

(104)

large

large

Operating income

159

276

207

-42%

-23%

Operating expenses

(855)

(331)

(265)

large

large

Profit before credit impairment and income tax

(696)

(55)

(58)

large

large

-

(2)

1

-100%

-100%

Profit before income tax

(696)

(57)

(57)

large

large

Income tax expense and non-controlling interests

201

46

84

large

large

Cash profit/(loss)

(495)

(11)

27

large

large

Credit impairment (charge)/release

Risk weighted assets

6,264

4,739

4,979

32%

26%

Total full time equivalent staff (FTE)

25,45926,287

26,843

-3%

-5%



Remaining operating income (excluding minority investments inAsia) increased $190 million primarily due to lower realised
revenue hedge losses and higher income generated fromincreased capital held in Group Centre, and the $66 million gainfrom the Esanda Dealer Finance portfolio divestment.

Group Centre provides support to the operating divisions, including risk
management, financial management, human resources, legal services,
strategy, marketing, corporate affairs, treasury and shareholder
functions.



Operating expenses increased $590 million due to the $578
million impact of the software capitalisation changes, increased
Global Compliance function costs and increased restructuring,
partly offset by the benefit of reduced FTE.

Minority investments in Asia comprise strategic investments acrossAsia which provide the Bank with local business and relationshipaccess as well as country and regulatory insights.

The decrease in FTE is primarily due to productivity initiatives in
TSO and Finance partly offset by the build out of the Compliancefunction.

March 2016 v September 2015

Divisional Strategy

ANZ takes an enterprise approach to operations and technology whichshares common infrastructure, processes and technology acrossgeographies in order to deliver better control, lower unit costs andlower risk.

Strategic Progress

TSO has delivered a strong performance with successful progress on
productivity initiatives, whilst delivering a more consistent, higher
quality experience for the operating divisions. Our investment incommon platforms and the development of our regional delivery
network is helping us drive transformation of key business activities,
improving customer experience and driving down cost to serve. We areprocessing increased volumes of work with standardised and reengineered global processes while demonstrating increasing quality
improvements year-on-year. Our operations costs which form part of
TSO’s total operating expenses have declined compared to March
2015, whilst absorbing an increase in transaction volumes, resulting inoperations productivity improvement of 7%. The consumer andwholesale channels are handling greater peak daily transaction
volumes through increased automation and digitisation.

Key factors affecting the result were:

The Group Centre continues to support the operating divisions inmeeting their strategic objectives whilst identifying opportunities forfurther standardisation and simplification across the enterprise.
The Group continues to evaluate its minority investments in Asia toensure alignment to the Group Strategy.
March 2016 v March 2015

Key factors affecting the result were:

Operating income from minority investments in Asia decreased$238 million (76%) primarily due to the impairment of theinvestment in Ambank, partially offset by the gain on cessation ofequity accounting of BoT. Equity accounted earnings were flat
(refer to page 26 for further information on equity accounted
earnings).

82

Operating income from minority investments in Asia decreased$231 million (77%) primarily due to the impairment of theinvestment in Ambank, partially offset by the gain on cessation ofequity accounting of BoT. Equity accounted earnings fell $7
million (refer to page 26 for further information on equity
accounted earnings).

Remaining operating income (excluding minority investments inAsia) increased $114 million primarily due to lower realised
revenue hedge losses and higher income generated fromincreased capital held in Group Centre, and the $66 million gainfrom the Esanda Dealer Finance portfolio divestment.



Operating expenses increased $524 million mainly due to the$578 million impact of software capitalisation changes and higher
restructuring, partially offset by the benefit of reduced FTE andreduced spend on project consultants.

The decrease in FTE is primarily due to productivity initiatives in
TSO and Finance, partly offset by the build out of the Compliancefunction.

GEOGRAPHIC RESULTSCONTENTS
Section 6 – Geographic Results
Geographic performance
Australia geography
Asia Pacific, Europe & America geography
New Zealand geography83

GEOGRAPHIC RESULTS
Geographic Performance
The Group's divisions operate across multiple geographies with components of the following divisional results reflected in each geography:Australia - comprises the Australia division and the Australian operations of Institutional, Wealth and TSO & Group Centre divisions;

Asia, Pacific, Europe & America (APEA) - comprises the Asia Retail & Pacific division and the APEA components of Institutional, Wealth and TSO &Group Centre divisions; and

New Zealand - comprises the New Zealand division and the New Zealand components of Institutional, Wealth and TSO & Group Centre divisions.

Half Year

Movement

Mar 16$M
1,797

Sep 15$M
2,674

Mar 15$M
1,964

Mar 16v. Sep 15-33%

Mar 16v. Mar 15-9%

Asia Pacific, Europe & America

237

490

722

-52%

-67%

New Zealand

704

823

820

-14%

-14%

2,738

3,987

3,506

-31%

-22%

Statutory Profit
Australia

Total statutory profit

Half Year

Movement

Mar 16$M
1,830

Sep 15$M
2,269

Mar 15$M
2,147

Mar 16v. Sep 15-19%

Mar 16v. Mar 15-15%

Asia Pacific, Europe & America

259

492

743

-47%

-65%

New Zealand

693

779

786

-11%

-12%

2,782

3,540

3,676

-21%

-24%

Cash Profit
Australia

Total cash profit

Half Year
Mar 16$M
386,734

Net loans & advances
Australia

Sep 15$M
381,222

Movement
Mar 15$M
362,830

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
7%

Asia Pacific, Europe & America

69,14085,06288,356-19%-22%

New Zealand

105,894

103,954

107,0172%-1%

Total net loans & advances1

561,768

570,238

558,203-1%

1%

Movement

Half Year
Customer deposits
Australia

Mar 16$M
245,810

Sep 15$M
238,184

Mar 15$M
227,560

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
8%

Asia Pacific, Europe & America

119,704

129,263

129,733-7%-8%

New Zealand

81,264

77,13778,854

5%

3%

Total customer deposits

446,778444,584

436,147

0%2%Movement

Half Year
Risk weighted assets
Australia

Mar 16$M
225,273

Sep 15$M
224,830

Mar 15$M
209,981

Mar 16v. Sep 15
0%

Mar 16v. Mar 15
7%

Asia Pacific, Europe & America

95,870109,842

108,953

-13%

-12%

New Zealand

67,192

67,26567,9290%-1%

Total risk weighted assets

388,335

401,937

386,863

-3%

0%

1.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

84

GEOGRAPHIC RESULTS
Australia geography

Half Year

Movement

Net interest income

Mar 16$M
5,197

Sep 15$M
5,151

Mar 15$M
4,882

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
6%

Other operating income

1,514

1,393

1,454

9%

4%

Operating income

6,711

6,544

6,336

3%

6%

Operating expenses(3,490)(2,871)(2,792)

22%

25%

Profit before credit impairment and income tax

3,221

3,673

3,544

-12%

-9%

Credit impairment charge

(573)

(444)

(428)

29%

34%

Profit before income tax

2,648

3,229

3,116

-18%

-15%
-16%

Income tax expense and non-controlling interests

(818)

(960)

(969)

-15%

Cash profit

1,830

2,269

2,147

-19%

-15%

(33)

405

(183)

large

-82%

1,797

2,674

1,964

-33%

-9%

Balance Sheet
Net loans & advances1

386,734

381,222362,830

1%

7%

Other external assets

191,212

180,742

174,729

6%

9%

External assets

577,946

561,964

537,559

3%

8%

Customer deposits

245,810238,184

227,560

3%

8%

Other deposits and borrowings

96,805

92,771

87,6694%10%9%Adjustments between statutory profit and cash profit
Statutory profit

Deposits and other borrowings

342,615

330,955

315,229

4%

Other external liabilities

186,711

188,877

179,420-1%

4%

External liabilities

529,326

519,832

494,649

2%

7%

Risk weighted assets

225,273

224,830

209,981

0%

7%

Average gross loans and advances1

388,023

377,090358,774

3%

8%

Average deposits and other borrowings

341,850

327,871

318,382

4%

7%

Ratios
Net interest margin - cash

2.27%

2.30%

2.29%

Operating expenses to operating income - cash

52.0%

43.9%

44.1%

Operating expenses to average assets - cash

1.23%

1.04%

1.07%

552

430

375

28%

47%

0.28%

0.23%

0.21%

21

14

53

50%

-60%

0.01%

0.01%

0.03%
7%

3%

-2%

-6%

Individual credit impairment charge/(release) - cash
1

Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA1 - cash
Gross impaired assets

1,635

1,528

1,589

Gross impaired assets as a % of GLA1

0.42%

0.40%

0.43%

Total full time equivalent staff (FTE)

20,80821,13822,096

1.

Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

85

GEOGRAPHIC RESULTS
Asia Pacific, Europe & America geography
Table reflects AUD results for the APEA regions
Half Year

Movement

Mar 16$M
79

Sep 15$M
338

Mar 15$M
571

Mar 16v. Sep 15-77%

Mar 16v. Mar 15-86%

Europe & America

64

77

65

-17%

-2%

Pacific

94

75

86

25%

9%

Total statutory profit

237

490

722

-52%

-67%

Statutory Profit
Asia

Half Year

Movement

Mar 16$M
79

Sep 15$M
338

Mar 15$M
571

Europe & America

86

79

Pacific

94

75

Total cash profit

259

492

Cash Profit
Asia

Mar 16v. Sep 15-77%

Mar 16v. Mar 15
-86%

86

9%

0%

86

25%

9%

743

-47%

-65%

Half Year

Movement

Net loans & advances
Asia

Mar 16$M
57,532

Sep 15$M
73,236

Mar 15$M
76,459Europe & America

7,882

7,697

Pacific

3,726

4,129

Total net loans & advances

69,14085,062

Mar 16v. Sep 15-21%

Mar 16v. Mar 15
-25%

8,006

2%

-2%

3,891

-10%

-4%

88,356-19%-22%

Half Year

Movement

Customer deposits
Asia

Mar 16$M
64,412

Sep 15$M
73,495

Mar 15$M
72,335

Europe & America

49,88850,12951,936

0%-4%

Pacific

5,404

5,639

5,462

-4%

-1%

119,704

129,263

129,733-7%-8%

Total customer deposits

Half Year

Mar 16v. Sep 15-12%

Mar 16v. Mar 15-11%

Movement

Risk weighted assets
Asia

Mar 16$M
64,112

Sep 15$M
76,295

Mar 15$M
78,274

Europe & America

24,212

25,956

22,514-7%

8%

Pacific

7,546

7,591

8,165

-1%

-8%

Total risk weighted assets

95,870109,842

108,953

-13%

-12%

86

Mar 16v. Sep 15-16%

Mar 16v. Mar 15-18%

GEOGRAPHIC RESULTS
Asia Pacific, Europe & America geography
Table reflects AUD for the APEA region

Movement

Half Year
Mar 16$M
993

Net interest income

Sep 15$M
987

Mar 15$M926

Mar 16v. Sep 15
1%

Mar 16v. Mar 15
7%

862

1,016

1,127

-15%

-24%

Operating income

1,855

2,003

2,053

-7%

-10%

Operating expenses

Other operating income(1,236)(1,224)(1,120)1%

10%Profit before credit impairment and income tax

619

779

933

-21%

-34%

Credit impairment charge

(299)

(209)

(53)

43%

large

Profit before income tax

320

570

880

-44%

-64%

Income tax expense and non-controlling interests

(61)

(78)

(137)

-22%

-55%

Cash profit

259

492

743

-47%

-65%

Adjustments between statutory profit and cash profit

(22)

(2)

(21)

large

5%

Statutory profit

237

490

722

-52%

-67%

-22%

1

Balance Sheet
Net loans & advances

69,14085,06288,356-19%

Other external assets

105,526

105,781

96,5120%

9%External assets

174,666

190,843

184,868-8%-6%

Customer deposits

119,704

129,263

129,733-7%-8%

Other deposits and borrowings

27,772

28,20735,764-2%-22%

Deposits and other borrowings

147,476

157,470

165,497-6%-11%

Other external liabilities

37,267

37,69830,025-1%

24%

External liabilities

184,743

195,168

195,522-5%-6%

Risk weighted assets

95,870109,842

108,953

-13%

-12%

Average gross loans and advances

79,132

86,886

86,172-9%-8%

Average deposits and other borrowings

156,569

156,228

151,272

0%4%

Ratios
Net interest margin - cash

1.11%

1.12%

1.10%

Operating expenses to operating income - cash

66.6%

61.1%

54.6%

Operating expenses to average assets - cash

1.21%

1.23%

1.19%

294

191

46

54%

large

0.74%

0.44%

0.11%
-72%

-29%

16%

54%

-4%

-4%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash

5

18

7

0.01%

0.04%

0.02%

939

811

609

Gross impaired assets as a % of GLA

1.32%

0.94%

0.68%

Total full time equivalent staff (FTE)

20,025

20,91020,910Gross impaired assets

1.

Includes the Asia Retail & Pacific division (Mar 16 half: $53 million, Sep 15 half: $45 million; Mar 15 half: $99 million), and the APEA components of Institutional (Mar 16 half: $180 million,
Sep 15 half: $191 million; Mar 15 half: $372 million), Wealth (Mar 16 half: $4 million; Sep 15 half: -$3 million; Mar 15 half: -$1 million), and TSO & Group Centre (Mar 16 half: $22 million,
Sep 15 half: $259 million; Mar 15 half: $273 million).

87

GEOGRAPHIC RESULTS
Asia Pacific, Europe & America geography
Table reflects USD for the APEA region

Movement

Half Year
Mar 16
USD M
716

Net interest income

Sep 15
USD M
740

Mar 15
USD M
759

Mar 16v. Sep 15-3%

Mar 16v. Mar 15
-6%

621

755

924

-18%

-33%

Operating income

1,337

1,495

1,683

-11%

-21%

Other operating income
Operating expenses

(892)

(920)

(918)

-3%

-3%

Profit before credit impairment and income tax

445

575

765

-23%

-42%

Credit impairment charge

(216)

(161)

(44)

34%

large
-68%

Profit before income tax

229

414

721

-45%

Income tax expense and non-controlling interests

(43)

(55)

(112)

-22%

-62%

Cash profit

186

359

609

-48%

-69%

Adjustments between statutory profit and cash profit

(15)

(1)

(17)

large

-12%

Statutory profit

171

358

592

-52%

-71%

Balance Sheet
Net loans & advances

52,89959,65467,451-11%-22%

Other external assets

80,73874,18473,6779%

10%

External assets

133,637

133,838

141,128

0%-5%

Customer deposits

91,58590,65399,0381%-8%Other deposits and borrowings

21,24919,781

27,3037%-22%

Deposits and other borrowings

112,834

110,434

126,341

2%-11%

Other external liabilities

28,513

26,43722,9218%

24%

External liabilities

141,347

136,871

149,262

3%-5%

Risk weighted assets

73,35077,032

83,175-5%-12%

Average gross loans and advances

57,07065,01370,659-12%-19%

Average deposits and other borrowings

112,916

117,030

124,040-4%-9%

Ratios
Net interest margin - cash

1.11%

1.12%

1.10%

Operating expenses to operating income - cash

66.6%

61.5%

54.6%

Operating expenses to average assets - cash

1.21%

1.23%

1.19%
43%

large

-62%

-17%

25%

52%

-4%

-4%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

211

148

38

0.74%

0.44%

0.11%

5

13

6

0.01%

0.04%

0.02%

710

570

466

Gross impaired assets as a % of GLA

1.32%

0.94%

0.68%

Total full time equivalent staff (FTE)

20,025

20,91020,91088

GEOGRAPHIC RESULTS
New Zealand geography
Table reflects AUD results for the New Zealand geography

Movement

Half Year
Mar 16$M
1,378

Net interest income

Sep 15$M
1,341

Mar 15$M
1,330

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
4%

372

455

476

-18%

-22%

Operating income

1,750

1,796

1,806

-3%

-3%

Operating expenses

(753)

(680)

(691)

11%

9%

Profit before credit impairment and income tax

997

1,116

1,115

-11%

-11%

Credit impairment charge

(46)

(42)

(29)

10%

59%

Profit before income tax

951

1,074

1,086

-11%

-12%

Income tax expense and non-controlling interests

(258)

(295)

(300)

-13%

-14%

Cash profit

693

779

786

-11%

-12%

Adjustments between statutory profit and cash profit

11

44

34

-75%

-68%

Statutory profit

704

823

820

-14%

-14%

Balance Sheet
Net loans & advances

105,894

103,954

107,017

2%-1%

Other external assets

36,77133,13930,63711%

20%

External assets

142,665

137,093

137,654

4%

4%

Customer deposits

81,264

77,13778,854

5%

3%

Other deposits and borrowings

6,716

5,232

7,635

28%

-12%

Deposits and other borrowings

87,98082,36986,4897%

2%

Other external liabilities

36,76435,17831,3755%

17%

External liabilities

124,744

117,547

117,864

6%

6%

Risk weighted assets

67,192

67,26567,9290%-1%

Average gross loans and advances

107,761

103,633

100,920

4%

7%

Average deposits and other borrowings

88,816

83,61082,150

6%

8%

Ratios
Net interest margin - cash

2.19%

2.22%

2.27%

Operating expenses to operating income - cash

43.0%

37.8%

38.3%

Operating expenses to average assets - cash

1.03%

0.97%

1.05%
35%

35%

-100%

-100%

-18%

-39%

-1%

-2%

Other operating income

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash

46

34

34

0.09%

0.07%

0.07%

-

8

(5)

0.00%

0.02%

(0.01%)

309

379

510

Gross impaired assets as a % of GLA

0.29%

0.36%

0.48%

Total full time equivalent staff (FTE)

8,063

8,104

8,237

Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

89

GEOGRAPHIC RESULTS
New Zealand geography
Table reflects NZD results for the New Zealand geography

Movement

Half Year
Mar 16
NZD M
1,493

Net interest income

Sep 15
NZD M
1,458

Mar 15
NZD M
1,422

Mar 16v. Sep 15
2%

Mar 16v. Mar 15
5%
-21%

402

496

509

-19%

Operating income

1,895

1,954

1,931

-3%

-2%

Operating expenses

(815)

(739)

(739)

10%

10%

Profit before credit impairment and income tax

Other operating income

1,080

1,215

1,192

-11%

-9%

Credit impairment charge

(50)

(45)

(31)

11%

61%

Profit before income tax

1,030

1,170

1,161

-12%

-11%

Income tax expense and non-controlling interests

(279)

(324)

(320)

-14%

-13%

Cash profit

751

846

841

-11%

-11%

Adjustments between statutory profit and cash profit

12

48

36

-75%

-67%

Statutory profit

763

894

877

-15%

-13%

Balance Sheet
Net loans & advances

117,470

114,376

109,031

3%

8%

Other external assets

40,792

36,46031,21412%

31%

External assets

158,262

150,836

140,245

5%

13%

Customer deposits

90,14884,87080,338

6%

12%

Other deposits and borrowings

7,450

5,756

7,778

29%

-4%

Deposits and other borrowings

97,59890,626

88,116

8%

11%

Other external liabilities

40,78338,70531,966

5%

28%

External liabilities

138,381

129,331

120,082

7%

15%

Risk weighted assets

74,53774,00869,2081%

8%

Average gross loans and advances

116,743

112,712

107,898

4%

8%

Average deposits and other borrowings

96,21990,942

87,830

6%

10%

Ratios
Net interest margin - cash

2.19%

2.22%

2.27%

Operating expenses to operating income - cash

43.0%

37.8%

38.3%

Operating expenses to average assets - cash

1.03%

0.97%

1.05%
39%

35%

-100%

-100%

-18%

-34%

-1%

-2%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash

50

36

37

0.09%

0.07%

0.07%

-

9

(6)

0.00%

0.02%

(0.01%)

343

419

523

Gross impaired assets as a % of GLA

0.29%

0.36%

0.48%

Total full time equivalent staff (FTE)

8,063

8,104

8,237

Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

90

PROFIT RECONCILIATIONCONTENTS
Section 7 – Profit Reconciliation
Adjustments between statutory profit and cash profit
Explanation of adjustments between statutory profit and cash profit
Other reclassifications between statutory profit and cash profit
Reconciliation of statutory profit to cash profit91

PROFIT RECONCILIATION
Non-IFRS information
The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis
other than in accordance with accounting standards. The guidance provided in ASIC’s RG230 has been followed when presenting this information.

Adjustments between statutory profit and cash profit
Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group andDivisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory
profit (refer to Definitions for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to review
within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review or audit by theexternal auditor, however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis
across each period presented.
Half Year

Statutory profit attributable to shareholders of the Company

Adjustments between statutory profit and cash profit
Treasury shares adjustments

Movement

Mar 16$M
2,738

Sep 15$M
3,987

Mar 15$M
3,506

Mar 16v. Sep 15-31%

Mar 16v. Mar 15
-22%

(29)

(95)

79

-69%

large
-79%

Revaluation of policy liabilities

(14)

(6)

(67)

large

Economic hedges

128

(165)

(14)

large

large

Revenue and net investment hedges

(39)

(179)

176

-78%

large

Structured credit intermediation trades
Total adjustments between statutory profit and cash profit
Cash Profit

(2)

(2)

(4)

0%

-50%

44

(447)

170

large

-74%

2,782

3,540

3,676

-21%

-24%

Explanation of adjustments between statutory profit and cash profitTreasury shares adjustment
ANZ shares held by the Group in the Wealth business are deemed to be Treasury shares for accounting purposes. Dividends and realised andunrealised gains and losses from these shares are reversed as these are not permitted to be recognised as income for statutory reporting purposes.
In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares areheld to support policy liabilities which are revalued through the Income Statement. Accordingly, the half year loss of $29 million after tax ($34 million
pre-tax) reversed for statutory accounting purposes has been added back to cash profit.



Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation,with the impact of changes in the market discount rate each period being reflected in the income statement. ANZ includes the impact on the remeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.

92

PROFIT RECONCILIATION

Economic hedging and Revenue and net investment hedges
The Group enters into economic hedges to manage its interest rate and foreign exchange risk. The application of “AASB 139: Financial Instruments –Recognition and Measurement” results in fair value gains and losses being recognised within the income statement. ANZ removes the mark-tomarket adjustments from cash profit as the profit or loss resulting from the hedge transactions will reverse over time to match with the profit or loss
from the economically hedged item as part of cash profit. This includes gains and losses arising from approved classes of derivatives not designatedin accounting hedge relationships but which are considered to be economic hedges, including hedges of larger foreign exchange denominatedrevenue and expense streams, primarily NZD and USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.
Economic hedging comprises:–

Funding related swaps (primarily cross currency interest rate swaps) that are being used to convert the proceeds of foreign currency debt
issuances into floating rate Australian dollar and New Zealand dollar debt. As these swaps do not qualify for hedge accounting, movements inthe fair values are recorded in the income statement. The main drivers of these fair values are currency basis spreads and the Australian dollar
and New Zealand dollar fluctuations against other major funding currencies.

–

Economic hedges of select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers ofthese fair value adjustments are Australian and New Zealand yield curve movements.

–

Ineffectiveness from designated accounting hedge relationships.

The majority of the half year gain/loss in economic hedging is related to funding related swaps that were impacted by the significant strengthening in
the AUD across a number of major currencies, most notably the USD and EUR.
Gains/losses on revenue and net investment hedges in the March 2016 half were principally attributable to the recycling of the impact of prior period
losses on USD positions that settled during the half.
Half Year
Adjustments to the income statement
Timing differences where IFRS results in asymmetry between the hedge and hedged items
Economic hedging

Mar 16$M

Sep 15$M

Mar 15
$M

181

(236)

(20)

Revenue and net investment hedges

(55)

(256)

252

Increase/(decrease) to cash profit before tax

126

(492)

232

Increase/(decrease) to cash profit after tax

89

(344)

162

As at
Mar 16$M

Sep 15$M

Mar 15$M

Economic hedging1

443

294

530

Revenue and net investment hedges

(23)

32

288

420

326

818

Cumulative increase/(decrease) to cash profit pre-tax
Timing differences where IFRS results in asymmetry between the hedge and hedged items

1.

A reduction of $32 million was made to the cumulative economic hedging balance on 1 October 2015. The reduction related to balances not recycled into cash profit between 2008 and
2014.

93

PROFIT RECONCILIATIONStructured credit intermediation trades
ANZ entered into a series of structured credit intermediation trades with US financial guarantors from 2004 to 2007. The underlying structures
involved credit default swaps (CDSs) over synthetic collateralised debt obligations (CDOs), portfolios of external collateralised loan obligations(CLOs) or specific bonds/floating rate notes (FRNs). ANZ sold protection using CDSs over these structures and then to mitigate risk, purchased
protection via CDSs over the same structures from eight US financial guarantors.
Being derivatives, both the sold protection and purchased protection are measured at fair value and marked-to-model. Prior to the commencement of
the global financial crisis, movements in valuations of these positions were not significant and largely offset each other in income. Following the onsetof the global financial crisis, the purchased protection has provided only a partial offset against movements in valuation of the sold protection
because:–one of the counterparties to the purchased protection defaulted and many of the remaining counterparties were downgraded; and–a credit valuation adjustment is applied to the remaining counterparties to the purchased protection reflecting changes to their credit worthiness.

ANZ is actively monitoring this portfolio with a view to reducing the exposures via termination and restructuring of both the bought and sold protection
if and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. As at 31 March 2016, ANZ’sremaining exposure is against two financial guarantors.
The bought and sold protection trades are by nature largely offsetting, with the notional amount on the outstanding bought CDSs and outstanding
sold CDSs at 31 March 2016 each amounting to $0.7 billion (Sep 15: $0.7 billion; Mar 15: $0.8 billion).
The profit and loss impact of credit risk on structured credit derivatives is driven by market movements in credit spreads and AUD/USD and
NZD/USD rates.
The (gain)/loss on structured credit intermediation trades is included as an adjustment to cash profit as it relates to a legacy business where, unlessterminated early, the fair value movements are expected to reverse to zero in future periods.
Half Year

Movement

Mar 16$M(3)

Sep 15$M(3)

Mar 15$M(5)Mar 16v. Sep 15
0%

Mar 16v. Mar 15-40%

Income tax expense

1

1

1

0%

0%

Profit after income tax

(2)

(2)

(4)

0%

-50%

Increase/(decrease) to cash profit
Profit before income tax

As at
Mar 16$M
63

Financial impacts of credit intermediation trades
Mark-to-market exposure to financial guarantors

Movement

Sep 15$M
69

Mar 15$M
78

Mar 16v. Sep 15-9%

Mar 16v. Mar 15
-19%

-26%

Cumulative costs relating tofinancial guarantors1
CVA for outstanding transactions

14

17

19

-18%

Realised close out and hedge costs

372

372

373

0%

0%

Cumulative life to date charges

386

389

392

-1%

-2%

1.

The cumulative costs in managing the positions include realised losses relating to restructuring of trades in order to reduce risks and realised losses on termination of sold protection trades.
It also includes foreign exchange hedging losses.

Other reclassifications between statutory profit and cash profitCredit risk on impaired derivatives (nil profit after tax impact)
The charge to income for credit valuation adjustments of $14 million on defaulted and impaired derivative exposures has been reclassified to cash
credit impairment charges in the March 2016 half year (Sep 15 half: $10 million charge; Mar 15 half: $16 million charge). The reclassification has
been made to reflect the manner in which the defaulted and impaired derivatives are managed.



Policyholders tax gross up (nil profit after tax impact)
For statutory reporting purposes, policyholder income tax and other related taxes paid on behalf of policyholders are included in both net funds
management and insurance income and the Group’s income tax expense. The gross up of $32 million for the March 2016 half year (Sep 15 half: $91
million net down; Mar 15 half: $277 million gross up) has been excluded from the cash results as it does not reflect the underlying performance of thebusiness which is assessed on a net of policyholder tax basis.

94

(34)
(34)

602

(86)

857

56

2,697

Net foreign exchange earnings

Profit on trading instruments

Net funds management and insurance income

(34)
(34)
5
-

4,786

(904)

3,882

(1,140)(4)

Profit before credit impairment and tax

Credit impairment charge

Profit before income tax

6,075

(685)

5,390

(1,397)

Profit before credit impairment and tax

Credit impairment charge

Profit before income tax

Income tax expense

Profit3,987(6)(4,775)

Operating expenses

Non-controlling interests

10,850Operating income

3,372

795

721

Net funds management and insurance income

Other

Other operating income

747

(219)

Profit on trading instruments

Net fee and commission income

Net foreign exchange earnings

7,478

1,328

September 2015 Half YearNet interest income

2,738

ProfitNon-controlling interests

(95)

-

12

(107)

-

(107)

-

(107)

(107)

-

(107)

-

-

-

-

(29)

-

(5,479)Operating expenses

Income tax expense(34)

10,265

Operating income

Other operating income

Other

-

7,568

1,268

$M

Treasurysharesadjustment

Net fee and commission income$M

Statutory
profitMarch 2016 Half YearNet interest income

PROFIT RECONCILIATION

-

-

(91)

91

-

91

-

91

91

-

91

-

-

-

-

-

-

32

(32)

-

(32)

-

(32)

(32)

-

(32)

-

-

-

-

$M

Policy-holders
tax gross up

95

(6)

-

1

(7)

-

(7)

-

(7)

(7)

-

(7)

-

-

-

-

(14)

-

6

(20)

-

(20)

-

(20)

(20)

-

(20)

-

-

-

-

$M

Revaluationof policy
liabilities

(165)

-

71

(236)

-

(236)

-

(236)

(236)

(218)

-

(21)

3

-

-

128

-

(53)

181

-

181

-

181

181

136

-

50

(5)

-

-

$M

Economic
hedging

(179)

-

77

(256)

-

(256)

-

(256)

(256)

-

-

-

(256)

-

-

(39)

-

16

(55)

-

(55)

-

(55)

(55)

-

-

-

(55)

-

-

$M

Revenue andnet investment
hedgesAdjustments to statutory profit

(2)

-

1

(3)

-

(3)

-

(3)

(3)

-

-

(3)

-

-

-

(2)

-

1

(3)

-

(3)

-

(3)

(3)

-

-

(3)

-

-

-

$M

Structured
creditintermediation
trades

-

-

-

-

(10)

10

-

10

10

-

-

10

-

-

-

-

-

-

-

(14)

14

-

14

14

-

-

14

-

-

-

$M

Credit risk
on impaired
derivatives

(447)

-

71

(518)

(10)

(508)

-

(508)

(508)

(218)

(23)

(14)

(253)

-

-

44

-

7

37

(14)

51

-

51

51

136

(86)

61

(60)

-

-

$M

Total
adjustments tostatutory profit

3,540

(6)

(1,326)

4,872

(695)

5,567

(4,775)

10,342

2,864

503

772

(233)

494

1,328

7,478

2,782

(4)

(1,133)

3,919

(918)

4,837

(5,479)10,316

2,748

192

771

(25)

542

1,268

7,568

$M

Cash
profitAdjustments to statutory profit

-

-

16

-

-

-

(32)

(288)

23

252

-

-

3,057

390

732

122

510

1,303

7,138

$M

Cash
profit

-

-

-

(45)

PROFIT RECONCILIATION

Statutory
profit

-

(5)

-

$M
-

252

-

16

Total
adjustments tostatutory profit

-

-

-

$M

-

-

-

(5)

Credit risk
on impaired
derivatives

-

12

-

$M

-

-

252

Structured
creditintermediation
trades

-

(32)

$M

(97)

(20)

(4,603)

10,195

Revenue andnet investment
hedges

-

-

-

(45)

$M

7,138
(277)

(97)

-

16

Economic
hedging

1,303
-

-

(5)

$M

258
86
(277)

-

252

Revaluationof policy
liabilities

99
-

-

(20)

$M

1,020
86

-

(97)

Policy-holders
tax gross up

March 2015 Half YearNet interest income

422

-

(277)

$M

Net fee and commission income

3,102
-

86

Treasurysharesadjustment

Net foreign exchange earnings(4,603)

10,240$M

Operating income
5,637

86

(277)

(97)

(20)

252

(5)

16

(45)

(510)

5,592

Other operating income

Other

Net funds management and insurance income

Profit on trading instruments

Operating expenses
Profit before credit impairment and tax

5,082

(61)

(16)

(8)

(1,398)

-

231

(16)

-

-

-

170

(5)

-

-

1

-

252

-

-

(76)

(4)

(20)

-

-

6

176

(97)

-

-

30

(14)

(277)

-

-

277

(67)

86

-

(494)
(7)

-

5,143
-

Profit before income tax(1,629)79

Credit impairment charge
Income tax expense
(8)

3,676

3,506

ProfitNon-controlling interests

96

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTSCONTENTS

PAGE

Directors’ Report98

Condensed Consolidated Income Statement99

Condensed Consolidated Statement of Comprehensive Income

100

Condensed Consolidated Balance Sheet

101

Condensed Consolidated Cash Flow Statement102

Condensed Consolidated Statement of Changes in Equity

103

Notes to Condensed Consolidated Financial Statements

104

Directors’ Declaration and Responsibility Statement

127

Auditor’s Review Report and Independence Declaration

128

97

DIRECTORS’ REPORTThe Directors present their report on the Condensed Consolidated Financial Statements for the half year ended 31 March 2016.
Directors
The names of the Directors of the Company who held office during and since the end of the half year are:
Mr DM Gonski, AC

Chairman

Mr SC Elliott

Director and Chief Executive Officer, since 1 January 2016

Ms IR Atlas

Director

Ms PJ Dwyer

Director

Mr Lee Hsien Yang

Director

Mr GR Liebelt

Director

Mr IJ Macfarlane, AC

Director

Mr JT Macfarlane

Director

Mr MRP Smith, OBE

Director, retired on 31 December 2015

Result
The consolidated profit attributable to shareholders of the Company was $2,738 million. Further details are contained in Group Results on pages 21 to 47
which forms part of this report, and in the Condensed Consolidated Financial Statements.

Review of operations
A review of the operations of the Group during the half year and the results of those operations are contained in the Group Results on pages 21 to 47
which forms part of this report.

Lead auditor’s independence declaration
The lead auditor’s independence declaration given under section 307C of the Corporations Act 2001 (as amended) is set out on page 128 which forms
part of this report.

Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by ASIC Class Order 98/100.
Significant events since balance date
There have been no significant events from 31 March 2016 to the date of this report.
Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

2 May 201698

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited
Half Year
Note
Interest income

Movement

Mar 16$M
15,090

Sep 15$M
15,132

Mar 15$M
15,394

Mar 16v. Sep 15
0%

Mar 16v. Mar 15-2%-9%(7,522)(7,654)(8,256)-2%

Net interest income

2

7,568

7,478

7,138

1%

6%

Other operating income1

2

1,539

2,266

1,768

-32%

-13%

Net funds management and insurance income1

2

857

795

1,020

8%

-16%

Share of associates' profit

2,18

301

311

314

-3%

-4%

10,265

10,850

10,240-5%

0%(5,479)(4,775)(4,603)

15%

19%

4,786

6,075

5,637

-21%

-15%

(904)

(685)

(494)

32%

83%

3,882

5,390

5,143

-28%

-25%

(1,140)(1,397)(1,629)

-18%

-30%

2,742

3,993

3,514

-31%

-22%

Interest expense

Operating income
Operating expenses1

3

Profit before credit impairment and income tax
Credit impairment charge

10

Profit before income tax
Income tax expense

4

Profit for the period
Comprising:
Profit attributable to non-controlling interests
Profit attributable to shareholders of the Company

4

6

8

-33%

-50%

2,738

3,987

3,506

-31%

-22%

Earnings per ordinary share (cents)
Basic

6

94.8

143.4

128.0

-34%

-26%

Diluted

6

89.7

134.9

124.6

-34%

-28%

5

80

95

86

-16%

-7%

Dividend per ordinary share (cents)
1.

Comparatives have changed; refer Note 2 Income and Note 3 Operating expenses for further details.

The notes appearing on pages 104 to 126 form an integral part of the Condensed Consolidated Financial Statements.

99CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited
Movement

Half Year
Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

2,742

3,993

3,514

-31%

-22%

Remeasurement gain/(loss) on defined benefit plans

(4)

(4)

(2)

0%

100%

Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities
designated at fair value

11

39

13

-72%

-15%

Remeasurement gain/(loss) on defined benefit plans

1

1

3

0%

-67%

Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities
designated at fair value

(3)

(11)

(4)

-73%

-25%

(1,015)

(445)

2,181

large

large

(126)

(4)

-

large

n/a

Valuation gain/(loss) taken to equity

(11)

(157)

117

-93%

large

Transferred to income statement

(31)

(21)

(50)

48%

-38%

Valuation gain/(loss) taken to equity

(60)

(77)

237

-22%

large

Transferred to income statement

14

(3)

(12)

large

large

Profit for the period
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss

Income tax on items that will not be reclassified subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve
Exchange differences taken to equity1
Exchange differences transferred to income statement
Available-for-sale revaluation reserve

Cash flow hedge reserve

Income tax on items that may be reclassified subsequently to profit or loss
Available-for-sale assets revaluation reserve

16

53

(17)

-70%

large

Cash flow hedge reserve

16

24

(69)

-33%

large

Share of associates' other comprehensive income2

(6)

9

50

large

large

Other comprehensive income net of tax(1,198)

(596)

2,447

large

large

Total comprehensive income for the period

1,544

3,397

5,961

-55%

-74%

(4)

12

18

large

large

1,548

3,385

5,943

-54%

-74%

Comprising total comprehensive income attributable to:Non-controlling interests
Shareholders of the Company
1.
2.

Includes foreign currency translation differences attributable to non-controlling interests of $8 million loss (Sep 15 half: $6 million gain; Mar 15 half: $10 million gain).
Share of associates other comprehensive income includes the following items that may be reclassified subsequently to profit and loss: an Available-for-sale revaluation reserve loss of$11 million (Sep 15 half: $6 million gain; Mar 15 half: $47 million gain) and a Foreign currency translation reserve gain of $5 million (Sep 15 half: $5 million gain; Mar 15 half: $3 million
gain), as well as items that will not be reclassified subsequently to profit or loss comprised of the remeasurement gain or loss on defined benefit plans of nil (Sep 15 half: $2 million loss;
Mar 15 half: nil).

The notes appearing on pages 104 to 126 form an integral part of the Condensed Consolidated Financial Statements.

100

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited
As at

Movement

Mar 16$M
49,144

Sep 15$M
53,903

Mar 15$M
46,004

Mar 16v. Sep 15-9%

Mar 16v. Mar 15
7%

Settlement balances owed to ANZ

26,04818,596

22,57040%

15%Collateral paid

12,783

9,967

10,70728%

19%

Trading securities

50,07349,00051,3862%-3%

Derivative financial instruments

88,74785,62573,580

4%

21%

Available-for-sale assets

50,37743,66738,33615%31%561,768

562,173558,2030%1%Regulatory deposits

2,135

1,773

1,804

20%

18%

Investment in associates

4,213

5,440

5,315

-23%

-21%

289

90

38

large

large

AssetsCash

Note

Net loans and advances9

Current tax assets

578

402

162

44%

large

Goodwill and other intangible assets

7,585

8,312

8,384

-9%

-10%

Deferred tax assets
Investments backing policy liabilities

34,541

34,82036,495-1%-5%Premises and equipment

2,188

2,221

2,203

-1%

-1%

Other assets

4,809

5,846

4,900

-18%

-2%

-

8,065

-

-100%

n/a

895,278

889,900

860,087

1%

4%

Settlement balances owed by ANZ

13,626

11,250

7,759

21%

76%

Collateral received

6,615

7,829

4,844

-16%

37%

578,071570,794567,2151%

2%

91,706

81,27073,21013%

25%

Current tax liabilities

129

267

123

-52%

5%

Deferred tax liabilities

286

249

322

15%

-11%

Policy liabilities

35,15935,401

36,820-1%-5%External unit holder liabilities (life insurance funds)

3,265

3,291

3,489

-1%

-6%

Provisions

1,202

1,074

1,128

12%

7%

9

Esanda dealer finance assets held for sale
Total assets

Liabilities

Deposits and other borrowings

11

Derivative financial instruments

Payables and other liabilities

9,251

10,366

10,999-11%-16%

Debt issuances

81,94793,74785,664-13%-4%17,557

17,00916,463

3%

7%

Total liabilities

838,814

832,547

808,036

1%

4%

Net assets

56,46457,35352,051-2%

8%

28,62528,36724,152

1%

19%

377

1,571

2,188

-76%

-83%

27,361

27,30925,6160%

7%

1656,36357,24751,956

-2%

8%

101

106

95

-5%

6%

16

56,46457,35352,051-2%

8%

Subordinated debt

12

Shareholders' equity
Ordinary share capital
Reserves
Retained earnings
Share capital and reserves attributable toshareholders of the Company
Non-controlling interests
Total shareholders' equity

The notes appearing on pages 104 to 126 form an integral part of the Condensed Consolidated Financial Statements.

101CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

Note
Cash flows from operating activities
Interest received
Interest paid
Dividends received
Other operating income received
Other operating expenses paid
Income taxes paid
Net cash flows from funds management and insurance businessPremiums, other income and life investment deposits received
Investment income and policy deposits received
Claims and policy liability payments
Commission expense paid
Cash flows from operating activities before changes inoperating assets and liabilities
Changes in operating assets and liabilities arising fromcash flow movements(Increase)/decrease in operating assets
Collateral paid
Trading securities
Net loans and advances
Net cash flows from investments backing policy liabilities
Purchase of insurance assets
Proceeds from sale/maturity of insurance assets
Increase/(decrease) in operating liabilities
Deposits and other borrowings
Settlement balances owed by ANZ
Collateral received
Payables and other liabilities
Change in operating assets and liabilities arising fromcash flow movements
Net cash provided by operating activities

Inflows(Outflows)

Half Year
Inflows(Outflows)

Inflows(Outflows)

Mar 16$M

Sep 15$M

Mar 15$M

14,977(7,657)12
1,848(4,373)(1,555)

15,269(7,145)202
6,862(4,322)(1,433)

15,398(8,313)29
11,374(4,270)(1,649)3,396
107(2,800)
(281)

4,023
95
(2,949)
(308)

3,622
191
(3,006)
(303)

3,674

10,294

13,073(3,462)(2,160)(6,440)920
2,460(15,554)(4,505)
410(16,726)(7,255)
7,660(3,484)3,501(3,581)
3,738

20,283
2,517(744)(2,638)

(533)
3,476
2,437
(1,406)30,583(2,695)(1,364)432

7,761(8,183)

6,292

11,4352,111

19,365(21,486)
13,457(9,033)
5,384(15,203)
10,321

-

-

4

(186)
37
6,682
305
(1,191)

(202)
(781)
(4,632)

(119)
(147)
(5,144)

10,611(16,816)

8,040(6,834)

8,597(9,132)943(2,485)(7,747)
2,497
69,278(3,064)

186(1,453)
3,207
3,146
625
65,462
3,191

2,497(2,310)(755)(1,103)
13,11848,2294,115

68,711

69,27865,462

Cash flows from investing activities
Available-for-sale assets
Purchases
Proceeds from sale or maturity
Controlled entities and associates
Proceeds on sale of businesses
Premises and equipment
Purchases
Proceeds from sale
Esanda Dealer Finance divestment
Other assets
Net cash (used in) investing activities
Cash flows from financing activities
Debt issuances
Issue proceeds
Redemptions
Subordinated debt
Issue proceeds
Dividends paid
Share capital issues
Preference shares bought backNet cash (used in) / provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period8

The notes appearing on pages 104 to 126 form an integral part of the Condensed Consolidated Financial Statements.

102

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

Ordinaryshare Preference
capital share capital$M$M
As at 1 October 2014

1

Reserves$M

Share capital andreserves attributable
Retained to shareholders ofearnings
the Company$M$M

Noncontrollinginterests$M

Total
Shareholders'equity$M

24,031871(239)

24,54449,20777

49,284

Profit or loss
Other comprehensive income for the period

-

-

2,427

3,506
10

3,506
2,437

8
10

3,514
2,447

Total comprehensive income for the period
Transactions with equity holders intheir capacity as equity holders:
Dividends paid

-

-

2,427

3,516

5,943

18

5,961

-

-

-

(2,579)(2,579)-(2,579)

-

-

-

12

12

-

12

257
-

(871)

-

-

257
(871)

-

257
(871)

Dividend income on treasury shares held within
the Group's life insurance statutory funds
Dividend reinvestment plan
Preference shares bought back
Other equity movements:
Share based payments
Treasury shares Wealth adjustment
Group employee share acquisition
schemeTransfer of options/rights lapsed
Foreign exchange gains on preference sharecapital bought backAs at 31 March 2015

-

-

7

-

7

-

7

(39)

-

-

-

(39)

-

(39)

(97)

-

-

-

(97)

-

(97)

-

-

(7)

7

-

-

-

-

-

-

116

116

-

116

24,152-

2,188

25,616

51,95695

52,051
3,993

Profit or loss

-

-

-

3,987

3,987

6

Other comprehensive income for the period

-

-

(625)

23

(602)

6

(596)

Total comprehensive income for the period

-

-

(625)

4,010

3,385

12

3,397

Transactions with equity holders intheir capacity as equity holders:
Dividends paid

-

-

-

(2,328)(2,328)(1)(2,329)Dividend income on treasury shares held within
the Group's life insurance statutory funds

-

-

-

10

10

-

10

865

-

-

-

865

-

865

Dividend reinvestment plan
Other equity movements:

-

-

9

-

9

-

9

3,206

-

-

-

3,206

-

3,206

Group share option scheme

2

-

-

-

2

-

2

Treasury shares Wealth adjustment

44

-

-

-

44

-

44

Group employee share acquisition
scheme

98

-

-

-

98

-

98

Share based payments
Share Placement and Purchase Plan

Transfer of options/rights lapsed
As at 30 September 2015

-

-

(1)

1

-

-

-

28,367-

1,571

27,30957,247

106

57,353

Profit or loss

-

-

-

2,738

2,738

4

2,742

Other comprehensive income for the period--(1,195)

5(1,190)(8)(1,198)

Total comprehensive income for the period--(1,195)

2,743

1,548

(4)

1,544

Dividends paid

-

-

-

(2,711)(2,711)(1)(2,712)

Dividend income on treasury shares held within
the Group's life insurance statutory funds

-

-

-

12

12

-

12

215

-

-

-

215

-

215

-

9

Transactions with equity holders intheir capacity as equity holders:

Dividend reinvestment plan
Other equity movements:
Share based payments

-

-

9

-

9

Treasury shares Wealth adjustment

(13)

-

-

-

(13)

-

(13)

Group employee share acquisition
scheme

56

-

-

-

56

-

56

Transfer of options/rights lapsed

-

-

(8)

8

-

-

-

28,625-377

27,361

56,363

101

56,464As at 31 March 2016
1.

-

-

Further information on reserves is disclosed in Note 16.

The notes appearing on pages 104 to 126 form an integral part of the Condensed Consolidated Financial Statements.

103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
These Condensed Consolidated Financial Statements:

have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (“AASs”);

should be read in conjunction with ANZ’s Annual Financial Statements for the year ended 30 September 2015 and any public announcements madeby the Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2016 in accordance with the continuous disclosure
obligations under the Corporations Act 2001 and the ASX Listing Rules;

do not include all notes of the type normally included in ANZ’s Annual Financial Statements;are presented in Australian dollars unless otherwise stated; andwere approved by the Board of Directors on 2 May 2016.

i)Statement of Compliance

These Condensed Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001 and AASB 134 which ensurescompliance with IAS 34 Interim Financial Reporting.
ii) Accounting policies
These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods of computationconsistent with those applied in the 2015 ANZ Annual Financial Statements.
iii) Software
In the current period the Group made a number of changes to the way in which it applies its accounting policy relating to the capitalisation of internallygenerated software assets by increasing the threshold for capitalisation of software development spend, reflecting the increasingly shorter useful life ofsmaller items of software, and direct expensing of more project related costs. The impact of the change was an accelerated amortisation charge of $556
million relating to previously capitalised software balances (of this, $88 million would otherwise have been amortised during the March 2016 half) andhigher operating expenses during the period of $161 million relating to development costs that would otherwise have been capitalised. These costs would
otherwise have been amortised to the Income Statement in future periods of up to 5 years.
iv) Basis of measurement
The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are stated at theirfair value:

derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;available-for-sale financial assets;financial instruments held for trading; and

assets and liabilities designated at fair value through profit and loss.

In accordance with AASB 1038 Life Insurance Contracts, life insurance liabilities are measured using the Margin on Services model.
In accordance with AASB 119 Employee Benefits, defined benefit obligations are measured using the Projected Unit Credit method.
v)

Use of estimates, assumptions and judgments

The preparation of these Condensed Consolidated 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 covered in Note 2 of the 2015 Annual Financial Statements. Such estimates and judgements arereviewed on an ongoing basis.
At 31 March 2016, the impairment assessment of non-lending assets identified that two of the Group’s associate investments (AMMB Holdings Berhad(Ambank) and PT Bank Pan Indonesia (PT Panin)) had indicators of impairment; specifically their market value (based on share price) was below theircarrying value. The Group performed value in use (VIU) calculations to assess if the carrying value of the investments were impaired.
The VIU calculation is sensitive to a number of key assumptions, including discount rate, long term growth rates, future profitability and capital levels. The
key assumptions used in the value in use calculations are outlined below:

As at 31 Mar 16

Pre-tax discount rate

Ambank
10.1%

PT Panin
13.7%

Terminal growth rate

5.0%

5.7%

Expected NPAT growth (compound annual growth rate – 5 years)

3.4%

5.0%

10% to 12.2%

11.3%

Core equity tier 1 rate

The VIU calculation continued to support the carrying value of the investment in PT Panin, however the VIU did not support the carrying value of theGroup’s investment in Ambank. As a consequence the Group recorded an impairment charge of $260 million in the half year. The associate investment in
Ambank forms part of the TSO and Group Centre operating segment.

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSvi) Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by Australian Securities and Investments Commission Class Order 98/100.
vii) Comparatives
Certain amounts in the comparative information have been reclassified to conform to current period financial statement presentation.
vii) New accounting standards not yet effective
The following accounting standards relevant to the Group have been issued but are not yet effective and have not been applied in these Condensed
Consolidated Financial Statements:
AASB 9 Financial Instruments (‘AASB 9’)
The Australian Accounting Standards Board (AASB) issued the final version of AASB 9 in December 2014. When operative, this standard will replace
AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 addresses recognition and measurement requirements for financial assets andfinancial liabilities, impairment requirements that introduce an expected credit loss impairment model and general hedge accounting requirements whichmore closely align with risk management activities undertaken when hedging financial and non-financial risks.
AASB 9 is not mandatorily effective for the Group until 1 October 2018. The Group is in the process of assessing the impact of application of AASB 9 andis not yet able to reasonably estimate the impact on its financial statements.
The Group early adopted, in isolation, the part of AASB 9 relating to gains and losses attributable to changes in own credit risk of financial liabilities
designated as fair value through profit or loss in the financial year ended 30 September 2014.
AASB 15 Revenue from Contracts with Customers (‘AASB 15’)The AASB issued the final version of AASB 15 in December 2014. The standard is not mandatorily effective for the Group until 1 October 2018. AASB 15
contains new requirements for the recognition of revenue and additional disclosures about revenue.
While it is expected that a significant proportion of the Group’s revenue will be outside the scope of AASB 15, the Group is in the process of assessing
the impact of application of AASB 15 and is not yet able to reasonably estimate the impact on its financial statements.
AASB 16 Leases (‘AASB 16’)
The AASB issued the final version of AASB 16 in February 2016. The standard is not mandatorily effective for the Group until 1 October 2019. AASB 16
introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset
and a lease liability representing its obligation to make lease payments. AASB 16 substantially carries forward the lessor accounting requirements in
AASB 117 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types ofleases differently.
The Group is in the process of assessing the impact of AASB 16 and is not yet able to reasonably estimate the impact on its financial statements.

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. IncomeHalf Year

Movement

Interest income

Mar 16$M
15,090

Sep 15$M
15,132

Mar 15$M
15,394

Mar 16v. Sep 15
0%

Mar 16v. Mar 15-2%

Interest expense(7,522)(7,654)(8,256)-2%-9%

Net interest income

7,568

7,478

7,138

1%

6%

i) Fee and commission income
Lending fees1

391

411

422

-5%

-7%

Non-lending fees and commissions2

1,451

1,464

1,421

-1%

2%

Total fee and commission income2

1,842

1,875

1,843

-2%

0%

Fee and commission expense2,3

(574)

(547)

(540)

5%

6%

1,268

1,328

1,303

-5%

-3%

2,3

Net fee and commission incomeii) Net funds management and insurance income
Funds management income2

446

458

484

-3%

-8%

Investment income

470(1,301)

3,149

large

-85%

Insurance premium income2

780

865

768

-10%

2%

Commission (expense)

(192)

(213)

(239)

-10%

-20%

Claims2

(358)

(387)

(356)

-7%

1%

Changes in policy liabilities4

(323)

1,266

(2,700)

large

-88%

34

107

(86)

-68%

large

Total net funds management and insurance income

857

795

1,020

8%

-16%

iii) Share of associates' profit

301

311

314

-3%

-4%

602

747

258

-19%

large

(85)

(220)

95

-61%

large

3

3

5

0%

-40%

(155)

209

32

large

large

25

24

34

4%

-26%

Elimination of treasury share (gain)/loss
2iv) Other income
Net foreign exchange earnings2
2

Net gain/(loss) from trading securities and derivatives
Credit risk on credit intermediation trades
Movement on financial instruments measured at fairvalue through profit & loss5
Brokerage income

(260)

-

-

n/a

n/a

Gain on cessation of equity accounting of investment in Bank of Tianjin (BoT)

29

-

-

n/a

n/a

Gain on Esanda Dealer Finance divestment

66

-

-

n/a

n/a

Other2

46

175

41

-74%

12%

271

938

465

-71%

-42%

Impairment of Ambank

Total other income2,52,6

Total other operating income

2,697

3,372

3,102

-20%

-13%

Total income2

17,78718,504

18,496

-4%

-4%

1.
2.

3.
4.

5.

6.

Lending fees exclude fees treated as part of the effective yield calculation in interest income.
Certain insurance related income and card related fees have been reclassified within other operating income and operating expenses in the current period to better reflect the nature of
the items. Comparatives have been restated. For the Sep 15 half, insurance and other wealth related income of $38 million was reclassified from other operating income to net funds
management and insurance income (Mar 15: $41 million) and $9 million of card related fees were reclassified from other operating income to operating expenses (Mar 15: $10 million).
Includes interchange fees paid.
Includes policyholder tax gross up, which represents contribution tax (recovered at 15% on the super contributions made by members) debited to the policyholder account once a year in
July when the statement is issued to the members at the end of the 30 June financial year.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange
risk on funding instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss.
Total other operating income includes external dividend income of nil (Sep 15 half: $0.8 million; Mar 15 half: nil).

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Operating expenses
Half Year
Mar 16$M
Personnel
Employee entitlements and taxes

Sep 15$M

Movement
Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15
-14%

133

170

155

-22%

2,024

1,867

1,852

8%

9%

-

4

3

-100%

-100%

Superannuation costs - defined contribution plans

169

169

155

0%

9%

Equity-settled share-based payments

92

108

108

-15%

-15%

Salaries and wages
Superannuation costs - defined benefit plans

Other
Total personnel expenses

383

446

442

-14%

-13%

2,801

2,764

2,715

1%

3%

Premises
Depreciation and amortisation

97

95

97

2%

0%

Rent

245

241

238

2%

3%

Utilities and other outgoings

84

93

87

-10%

-3%

Other

32

38

33

-16%

-3%

458

467

455

-2%

1%

Total premises expenses
Technology
Data communications

68

65

50

5%

36%

Depreciation and amortisation1

870

343

332

large

large
32%

Licences and outsourced services

275

238

209

16%

Rentals and repairs

89

80

78

11%

14%

Software impairment

2

13

4

-85%

-50%

20

22

28

-9%

-29%

1,324

761

701

74%

89%

138

21

10

large

large

Advertising and public relations2

132

181

144

-27%

-8%

Audit and other fees

10

10

11

0%

-9%

Non-lending losses, frauds and forgeries

62

31

35

100%

77%

Professional fees

186

182

142

2%

31%

Travel and entertainment expenses

86

105

100

-18%

-14%

Amortisation and impairment of other intangible assets

43

44

44

-2%

-2%

Freight, stationery, postage and telephone

135

136

127

-1%

6%

Other2

104

73

119

42%

-13%

Other
Total technology expenses
Restructuring
Other

Total other expenses2
Total operating expenses2
1.
2.

758

762

722

-1%

5%

5,479

4,775

4,603

15%

19%

The March 2016 half includes a $556 million charge for accelerated amortisation associated with the software capitalisation changes.
Certain cards related fees that are integral to the generation of income were reclassified from operating expenses to other operating income to better reflect the nature of the items andcomparatives were restated. For the September 15 half $9 million of card related fees were reclassified from other operating income to operating expenses (Mar 15: $10 million).

107

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Income tax expense
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense charged in the Income Statement
Half Year

Movement

Profit before income tax

Mar 16$M
3,882

Sep 15$M
5,390

Mar 15$M
5,143

Mar 16v. Sep 15-28%

Mar 16v. Mar 15-25%

Prima facie income tax expense at 30%

1,165

1,617

1,543

-28%

-24%

(25)

(36)

(59)

-31%

-58%

-

(1)

(1)

-100%

-100%

(90)

(93)

(94)

-3%

-4%

Tax effect of permanent differences:
Overseas tax rate differential
Rebateable and non-assessable dividends
Share of associates' profit
Offshore Banking Unit
Wealth - Policyholder income and contributions tax

-

(1)

-

-100%

n/a

23

(64)

194

large

-88%

-

(56)

-

-100%

n/a

Impairment of Ambank

78

-

-

n/a

n/a

Gain on cessation of equity accounting for BoT

(9)

-

-

n/a

n/a

Tax provisions no longer required

(28)

-

(17)

n/a

65%

Interest on Convertible Instruments

35

35

37

0%

-5%

Other

1

(4)

26

large

-96%

1,150

1,397

1,629

-18%

-29%

(10)

-

-

n/a

n/a

1,140

1,397

1,629

-18%

-30%

Australia

799

972

1,171

-18%

-32%

Overseas

341

425

458

-20%

-26%

1,140

1,397

1,629

-18%

-30%

29.4%

25.9%

31.7%

Wealth - Tax consolidation benefit

Income tax under/(over) provided in previous years
Total income tax expense charged
in the income statement

Effective Tax Rate - Group

5. Dividends
Half Year
Dividend per ordinary share (cents)
Interim (fully franked)
Final (fully franked)
Total
Ordinary share dividend ($M)1
Interim dividend
Final dividend
Bonus option plan adjustment
Total2
Ordinary share dividend payout ratio (%)
1.

2.
3.

3

Movement

Mar 1680

Sep 15-

Mar 1586

Mar 16v. Sep 15
n/a

Mar 16v. Mar 15
-7%

-

95

-

n/a

n/a

80

95

86

-16%

-7%

-

2,379

-

n/a

n/a

2,758

-

2,619

n/a

5%

(47)

(51)

(41)

-8%

15%

2,711

2,328

2,578

16%

5%

85.2%

69.2%

67.9%

Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders of $1.4 million (Sep 15 half: $1 million;
Mar 15 half: nil).
Dividends payable are not accrued and are recorded when paid.
Dividend payout ratio is calculated using proposed 2016 interim dividend of $2,334 million (not shown in the above table). The proposed 2016 interim dividend of $2,334 million is basedon the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September 2015 half and March 2015 half are calculated using actual
dividends paid of $2,758 million and $2,379 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the Company by the amount ofpreference share dividends paid.

Ordinary Shares
The Directors propose that an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2016. The proposed 2016
interim dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZ 10 cents per ordinary share will also be
attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2016 interim dividend. For the2016 interim dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used indetermining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume
weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days
commencing on 13 May 2016, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects withexisting fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for
the 2016 interim dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time) on 11 May 2016.

108

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United
Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at
an exchange rate calculated on 13 May 2016.
Preference Shares
The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014. During the period from 1 October 2014
to 15 December 2014, $1 million of preference share dividends were paid to security holders (€1.88 per preference share).

6. Earnings per share
Half Year

Number of fully paid ordinary shares on issue (M)1

Basic
Profit attributable to shareholders of the Company ($M)

Movement

Mar 16

Sep 15

Mar 15

Mar 16v. Sep 15

Mar 16v. Mar 15

2,917.6

2,902.7

2,766.0

1%

5%

2,738

3,987

3,506

-31%

-22%

-

-

(1)

n/a

-100%

2,738

3,987

3,505

-31%

-22%

2,889.3

2,780.6

2,737.3

4%

6%

Basic earnings per share (cents)3

94.8

143.4

128.0

-34%

-26%

DilutedProfit less preference share dividends ($M)-22%

Less Preference share dividends ($M)
Profit less preference share dividends ($M)
Weighted average number of ordinary shares (M)2

2,738

3,987

3,505

-31%

Interest on ANZ Convertible Preference Shares ($M)4

62

61

67

2%

-7%

Interest on ANZ Capital Notes ($M)5

73

74

60

-1%

22%

Interest on ANZ NZ Capital Notes ($M)6

12

12

-

0%

n/a

2,885

4,134

3,632

-30%

-21%

2,889.3

2,780.6

2,737.3

4%

6%

6.9

6.3

6.2

10%

11%

Weighted average number of ANZ Convertible Preference Shares (M)4

142.5

123.4

91.2

15%

56%

Weighted average number of convertible ANZ Capital Notes (M)5

159.3

138.0

79.3

15%

large

Weighted average number of convertible ANZ NZ Capital Notes (M)6

19.4

17.0

0.1

14%

large

3,217.4

3,065.3

2,914.1

5%

10%

89.7

134.9

124.6

-34%

-28%

Profit less preference share dividends and interest on ANZ Convertible Preference Shares,
ANZ Capital Notes and ANZ NZ Capital Notes ($M)
Weighted average number of shares on issue (M)2
Weighted average number of convertible options (M)Adjusted weighted average number of shares - diluted (M)Diluted earnings per share (cents)3
1.

2.

3.

4.

5.

6.

Number of fully paid ordinary shares on issue includes Treasury shares of 23.0 million at 31 March 2016 (Sep 15: 23.0 million; Mar 15: 24.6 million), comprised of 11.0 million in ANZEST
Pty Ltd (Sep 15: 11.4 million; Mar 15: 11.5 million) and 12.0 million held in Wealth (Sep 15: 11.6 million; Mar 15: 13.1 million). Number of fully paid ordinary shares also includes 80.8
million resulting from the Institutional share placement on 13 August 2015 and 27.3 million resulting from the Retail share purchase plan on 17 September 2015.
Weighted average number of ordinary shares excludes 10.7 million weighted average number of ordinary Treasury shares for the half year ended 31 March 2016 held in ANZEST Pty Ltd
for the group employee share acquisition scheme (Sep 15: 11.4 million; Mar 15: 12.3 million) and excludes 12.1 million weighted average number of ordinary Treasury shares for the halfyear ended 31 March 2016 held in Wealth (Sep 15: 12.1 million; Mar 15: 12.7 million).
Basic earnings per share was reduced by 3.6 cents for the half year ended 31 March 2016 (Sep 15: 1.2 cents per share) and Diluted earnings per share was reduced by 3.1 cents (Sep
15: 1.0 cents per share) as a result of the Institutional share placement and the Retail share purchase plan which increased the weighted average number of ordinary shares by 108.0
million for the half year ended 31 March 2016 (Sep 15: 23.7 million).
There are two “tranches” of convertible preference shares. The first are convertible preference shares (CPS2) issued on 17 December 2009 that convert to ordinary shares on 15
December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The second are convertible preference shares (CPS3) issued on 28
September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).
There are three “tranches” of ANZ Capital Notes. The first are ANZ Capital Notes 1 (CN1) issued on 7 August 2013 which convert to ANZ ordinary shares on 1 September 2023 at themarket price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The second are ANZ Capital Notes 2 (CN2) issued on 31 March 2014 which convert to ANZ
ordinary shares on 24 March 2024 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The third are ANZ Capital Notes 3 (CN3) issued on 5
March 2015 which convert to ANZ ordinary shares on 24 March 2025 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).
ANZ Bank New Zealand Limited issued ANZ NZ Capital Notes on 31 March 2015 which convert to ANZ ordinary shares on 25 May 2022 at the market price of ANZ ordinary shares less
1.0% (subject to certain conversion conditions).

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.

Segment analysis(i) Description of segments
During the March 2016 half, the Group announced changes to the organisation’s structure to better meet the needs of our retail, commercial andinstitutional customers. As a result of these organisational changes there are six reported divisions; Australia, New Zealand, Institutional, Asia Retail &Pacific, Wealth and Technology, Services & Operations (“TSO”) and Group Centre. These divisions were created by removing the Asia Retail & Pacificbusiness from the former International & Institutional Banking (“IIB”) division, and repositioning minority investments in Asia from IIB to the Group Centre.
The residual IIB business has been renamed Institutional.
The Wealth changes designed to simplify the approach to the wealth management business will not take effect until 1 April 2016. For further informationon the composition of the divisions refer to the Definitions on page 150.
Other than those described above, there have been no other significant structural change. However, certain prior period comparatives have been
restated to align with current period presentation as a result of changes to customer segmentation and the continued realignment of support functions.
The divisions reported below are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.
(ii) Operating segments
Half Year

Movement

Operating Income
Australia

Mar 16$M
4,632

Sep 15$M
4,503

Mar 15$M
4,310

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
7%

Institutional

2,713

2,792

2,970

-3%

-9%

New Zealand

1,373

1,340

1,345

2%

2%

Wealth

880

881

851

0%

3%

Asia Retail & Pacific

559

550

512

2%

9%

TSO and Group Centre1

159

276

207

-42%

-23%

10,316

10,342

10,195

0%

1%

(51)

508

45

large

large

10,265

10,850

10,240-5%0%Subtotal
Other2
Group total
1.
2.

Includes $260 million impairment of our investment in Ambank, $66 million gain arising from the Esanda Dealer Finance divestment, and the $29 million gain on cessation of equity
accounting of BoT.
In evaluating the performance of the operating divisions, certain items are removed from the operating division results where they are not considered integral to the ongoing performanceof the segment and are evaluated separately.

Half Year

Movement

ProfitAustralia

Mar 16$M
1,753

Sep 15$M
1,706

Mar 15$M
1,650

Mar 16v. Sep 15
3%

Mar 16v. Mar 15
6%

Institutional

632

893

1,071

-29%

-41%

New Zealand

578

561

566

3%

2%

Wealth

261

346

263

-25%

-1%

Asia Retail & Pacific

53

45

99

18%

-46%

TSO and Group Centre

(495)

(11)

27

large

large

Subtotal

2,782

3,540

3,676

-21%

-24%

Other1

(44)

447

(170)

large

-74%

2,738

3,987

3,506

-31%

-22%

Group total
1.

In evaluating the performance of the operating divisions, certain items are removed from the operating division results where they are not considered integral to the ongoing performanceof the division and are evaluated separately. These items are set out in part (iii) of this note (refer pages 91 to 96 for further analysis).

(iii) Other items
The table below sets out the profit after tax impact of other items.
Half Year
Item gains/(losses)
Treasury shares adjustment

Mar 16$M
29

Related segment
WealthMovement

Sep 15$M
95

Mar 15$M(79)

Mar 16v. Sep 15-69%

Mar 16v. Mar 15
large

14

6

67

large

-79%

(128)

165

14

large

large

TSO and Group Centre

39

179

(176)

-78%

large

Institutional

2

2

4

0%

-50%

(44)

447

(170)

large

-74%

Revaluation of policy liabilities

WealthEconomic hedging

Institutional

Revenue and net investment hedges
Structured credit intermediation trades
Total profit after tax

110

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.

Note to the Cash Flow Statement(i) Reconciliation of profit after income tax to net cash provided by/(used in) operating activities

Profit after income tax

Half Year
Inflows(Outflows)

Inflows(Outflows)

Inflows(Outflows)

Mar 16$M

Sep 15$M

Mar 15
$M

2,738

3,987

3,506

Adjustments to reconcile to net cash provided by/(used in) operating activities
Provision for credit impairment

904

685

494

Depreciation and amortisation

1,010

482

473
-

Profit on Esanda Dealer Finance divestment

(66)

-

(Profit)/loss on sale of premises and equipment

(10)

6

-

Net derivatives/foreign exchange adjustment

257

4,711

9,684

Equity-settled share-based payments expense1

65

107

(89)

Impairment of investment in AmBank

260

-

-

Other non-cash movements

(297)

(199)

(300)

Net (increase)/decrease in operating assets:
Trading securities(2,160)

2,460

410

Collateral paid

(3,462)920(4,505)Net loans and advances(6,440)(15,554)(16,726)

Investments backing policy liabilities

(384)

1,335

(3,122)

Interest receivable

(113)

137

(31)

Accrued income

(128)

-

(44)

Net tax assets

(415)

(36)

(20)

Net increase/(decrease) in operating liabilities:
Deposits and other borrowings

20,283(533)

30,583

Settlement balances owed by ANZ

2,517

3,476

(2,695)Collateral received

(744)

2,437

(1,364)

Life insurance contract policy liabilities

355(1,253)

2,760(2,638)(1,406)432

Interest payable

(122)

507

(55)

Accrued expenses

(109)

(116)

(32)

Provisions including employee entitlements

134

(42)

6

Total adjustments

8,697(1,876)15,859Net cash provided by/(used in) operating activities

11,4352,111

19,365

Payables and other liabilities

1.

The equity settled share-based payments expense is net of on-market share purchases of $34 million (Sep 15 half: nil; Mar 15 half: $197 million) used to satisfy the obligation.

(ii) Reconciliation of cash and cash equivalents
Cash and cash equivalents at the end of the period as shown in the Cash Flow Statement are reflected in the related items in the Balance Sheet as
follows:
As at

Mar 16$M

Sep 15$M

Mar 15$M

Cash49,14453,90346,004

Settlement balances owed to ANZ

19,567

15,375

19,45868,711

69,27865,462(iii) Non-cash financing and investing activities

Half Year
Mar 16$M

Sep 15$M

Mar 15$M

Dividends satisfied by share issue

215

865

257

Dividends satisfied by bonus share issue

47

51

41

262

916

298

Share capital issues(iv) Esanda Dealer Finance divestment
During the period, the Group received $6,682 million proceeds on the Esanda Dealer Finance divestment. The net assets sold of $6,540 million primarily
included net loans and advances in the retail portfolio. This does not include the Esanda Dealer Finance bailment facilities that are progressively beingtransferred. No cash was included in the net assets sold.

111

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Net loans and advances

As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Overdrafts

6,175

6,284

5,998

-2%

3%

Credit card outstandings

8,872

8,950

9,134

-1%

-3%

Commercial bills outstanding

10,43910,42010,8590%-4%

Term loans - housing

242,426

230,879

217,756

5%

11%

Term loans - non-housing1

118,456

124,051

118,027

-5%

0%

1,255

1,346

1,345

-7%

-7%

Hire purchase

957

1,111

1,293

-14%

-26%

Other

255

114

489

large

-48%

388,835

383,155364,901

1%

7%

Overdrafts

1,175

1,616

1,643

-27%

-28%

Credit card outstandings

1,446

1,445

1,370

0%

6%
-18%

Mar 16v. Mar 15

Australia

Lease receivables

Asia Pacific, Europe & America

Commercial bills outstanding

2,692

3,781

3,286

-29%

Term loans - housing

7,226

7,846

7,430

-8%

-3%

Term loans - non-housing

56,42969,66974,041-19%-24%

Lease receivables

254

341

222

-26%

14%

Other

341

137

31

large

large

69,56384,83588,023-18%-21%

Overdrafts

1,017

1,055

1,147

-4%

-11%

Credit card outstandings

1,517

1,535

1,609

-1%

-6%

Term loans - housing

63,64961,74363,311

3%

1%

Term loans - non-housing

39,00338,97340,2590%-3%

Lease receivables

206

214

250

-4%

-18%

Hire purchase

901

860

862

5%

5%

-

-

123

n/a

-100%

106,293

104,380

107,5612%-1%564,691

572,370

560,485-1%

1%

New ZealandOther

Sub-total
Unearned income

(596)

(739)

(803)

-19%

-26%

Capitalised brokerage/mortgage origination fees2

1,013

1,253

1,127

-19%

-10%

Customers' liabilities for acceptances
Gross loans and advances (including assets classified as held for sale)
Provision for credit impairment (refer Note 10)
Net loans and advances (including assets classified as held for sale)
Assets classified as held for sale1
Net loans and advances
1.

2.

760

1,371

1,422

-45%

-47%

565,868

574,255

562,231-1%

1%(4,100)(4,017)(4,028)2%

2%561,768

570,238

558,203

-1%

1%

-

(8,065)

-

-100%

n/a

561,768

562,173558,203

0%1%

Includes $766 million of Esanda Dealer Finance bailment facilities which are due to migrate to Macquarie Group Limited during the third quarter of 2016. These assets formed part of the$8,065 million classified as held for sale as at 30 September 2015.
Capitalised brokerage/mortgage origination fees are amortised over the expected life of the loan.

112

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Provision for credit impairment
Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15-10%

Individual provision
Balance at start of period

1,061

1,114

1,176

-5%

New and increased provisions

1,137

951

806

20%

41%

Write-backs

(160)

(174)

(260)

-8%

-38%

Adjustment for exchange rate fluctuations

(26)

7

33

large

large

Discount unwind

(26)

(22)

(32)

18%

-19%

Bad debts written-off

(656)

(815)

(609)

-20%

8%

Esanda Dealer Finance divestment

(92)

-

-

n/a

n/a

Total individual provision

1,238

1,061

1,114

17%

11%

Collective provision
Balance at start of period

2,956

2,914

2,757

1%

7%

Charge/(release) to income statement

26

40

55

-35%

-53%

Adjustment for exchange rate fluctuations

(47)

2

102

large

large

Esanda Dealer Finance divestment

(73)

-

-

n/a

n/a

Total collective provision

2,862

2,956

2,914

-3%

-2%

Total provision for credit impairment

4,100

4,017

4,028

2%

2%

1

1.

The collective provision includes amounts for off-balance sheet credit exposures of $663 million at March 2016 (Sep 15: $677 million; Mar 2015: $646 million). The impact on the income
statement for the half year ended 31 March 2016 was a $3 million charge (Sep 2015 half: $20 million charge; Mar 2015 half: $7 million charge).

Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

New and increased individual provisions
Australia

738

616

587

20%

26%

Asia Pacific, Europe & America

299

227

116

32%

large

Provision movement analysis

Mar 16v. Mar 15

100

108

103

-7%

-3%

1,137

951

806

20%

41%

(160)

(174)

(260)

-8%

-38%

977

777

546

26%

79%

Recoveries of amounts previously written-off

(99)

(132)

(107)

-25%

-7%

Individual credit impairment charge

878

645

439

36%

100%

Collective credit impairment charge

26

40

55

-35%

-53%

Credit impairment charge

904

685

494

32%

83%

New ZealandWrite-backs

Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Australia

762

698

698

9%

9%

Asia Pacific, Europe & America

353

216

219

63%

61%

New Zealand

123

147

197

-16%

-38%

1,238

1,061

1,114

17%

11%

-2%

Individual provision balance

Total individual provisionCollective provision balance

1,844

1,895

1,882

-3%

Asia Pacific, Europe & America

597

636

582

-6%

3%

New Zealand

421

425

450

-1%

-6%

2,862

2,956

2,914

-3%

-2%

Australia

Total collective provision

113

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Deposits and other borrowings

As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Australia
Certificates of deposit

56,51357,39055,857-2%

1%

Term deposits

68,427

66,39469,5953%-2%

On demand and short term deposits

Mar 16v. Mar 15

169,268

164,009150,8323%

12%

Deposits not bearing interest

8,116

7,782

7,133

4%

14%

Deposits from banks

24,532

19,692

19,761

25%

24%

Commercial paper

15,106

15,511

11,446

-3%

32%

653

177

605

large

8%

342,615

330,955

315,229

4%

9%

Securities sold under repurchase agreements

Asia Pacific, Europe & America
Certificates of deposit

6,888

5,379

2,354

28%

large

Term deposits

90,112

96,487101,087-7%-11%

On demand and short term deposits

25,01027,66323,966-10%

4%Deposits not bearing interest

4,586

5,126

4,684

-11%

-2%

Deposits from banks

19,34019,24927,7160%-30%

Commercial paper

1,045

2,965

5,125

-65%

-80%

495

601

565

-18%

-12%

147,476

157,470

165,497-6%-11%

Securities sold under repurchase agreements

New ZealandCertificates of deposit

1,675

677

1,435

large

17%

Term deposits

33,871

31,79534,2117%-1%On demand and short term deposits

39,276

37,66236,8964%

6%Deposits not bearing interest

6,552

6,103

6,148

7%

7%

Deposits from banks

127

43

43

large

large

Commercial paper

4,913

4,511

6,157

9%

-20%

Borrowing corporations' debt

1,566

1,578

1,599

-1%

-2%

Total deposits and other borrowings

114

87,98082,36986,4897%

2%578,071570,794567,215

1%

2%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. Subordinated debt
Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

ANZ CPS22

1,969

1,969

1,969

0%

0%

ANZ CPS33

1,338

1,336

1,335

0%

0%

ANZ CN14

1,113

1,112

1,110

0%

0%

5

1,600

1,598

1,597

0%

0%

ANZ CN36

961

959

958

0%

0%

446

449

484

-1%

-8%

1,145

1,188

1,211

-4%

-5%

Additional Tier 1 Capital1
Convertible Preference Shares (ANZ CPS)ANZ Capital Notes (ANZ CN)
ANZ CN2

ANZ NZ Capital Notes7
Tier 2 Capital8
Perpetual subordinated notes
Term subordinated notes
Total subordinated debt
1.
2.

3.

4.

5.

6.

7.

8.

8,985

8,398

7,799

7%

15%

17,557

17,00916,463

3%

7%

ANZ Capital Notes and the ANZ NZ Capital Notes are Basel 3 compliant. APRA has granted transitional capital treatment for ANZ CPS2 and CPS3 until their first conversion date.
On 17 December 2009, ANZ issued convertible preference shares (CPS2) which will convert into ANZ ordinary shares on 15 December 2016 at a 1% discount (subject to certain
conditions being satisfied).
On 28 September 2011, ANZ issued convertible preference shares (CPS3) which will convert into ANZ ordinary shares on 1 September 2019 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% then the convertible preference shares will immediately convert into ANZ ordinary
shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on and from 1 September 2017 the convertible preference shares are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 7 August 2013, ANZ issued convertible notes (ANZ Capital Notes 1 or CN1) which will convert into ANZ ordinary shares on 1 September 2023 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will
immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 1 September 2021 the notes are redeemableor convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 31 March 2014, ANZ issued convertible notes (ANZ Capital Notes 2 or CN2) which will convert into ANZ ordinary shares on 24 March 2024 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will
immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2022 the notes are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 5 March 2015, ANZ acting through its New Zealand Branch issued convertible notes (ANZ Capital Notes 3 or CN3) which will convert into ANZ ordinary shares on 24 March 2025 at a
1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from
APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2023 thenotes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 31 March 2015, ANZ Bank New Zealand Limited (ANZ Bank NZ) issued convertible notes (ANZ NZ Capital Notes) which will convert into ANZ ordinary shares on 25 May 2022 at a
1% discount (subject to certain conditions being satisfied). If ANZ or ANZ Bank NZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, ANZ receives a notice of nonviability from APRA, ANZ Bank NZ receives a direction from RBNZ or a statutory manager is appointed to ANZ Bank NZ and makes a determination, then the notes will immediately
convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 25 May 2020 the notes are redeemable or convertible into
ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ Bank NZ.
The convertible subordinated notes are Basel 3 compliant. APRA has granted transitional capital treatment for all other outstanding subordinated notes until their first call date or, in thecase of the perpetual subordinated notes the earlier of the end of the transitional period (December 2021) and the first call date when a step-up event occurs. If ANZ receives a notice of
non-viability from APRA, then the convertible subordinated notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number.

115

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. Credit risk
Financial assets maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances, there may bedifferences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences
arise in respect of financial assets that are subject to risks other than credit risk, such as equity investments which are primarily subject to market risk. For
contingent exposures, the maximum exposure to credit risk is the maximum amount the Group would have to pay if the instrument is called upon. For
undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
The following tables present the maximum exposure to credit risk of on-balance sheet and off-balance sheet financial assets before taking account of any
collateral held or other credit enhancements.
As at

Movement

Mar 16$M
561,768

Sep 15$M1
570,238

Other financial assets3

280,101

On-balance sheet sub total

841,869

Undrawn facilities
Contingent facilities

Maximum exposure to credit risk
Net loans and advances2

Mar 15$M
558,203

Mar 16v. Sep 15-1%

Mar 16v. Mar 15
1%

265,167

246,1316%

14%835,405

804,3341%

5%

219,086

230,794

213,303-5%

3%

38,75040,33541,018-4%-6%

Off-balance sheet sub total

257,836

271,129

254,321-5%

1%

Total exposure to credit risk

1,099,705

1,106,534

1,058,655

-1%

4%

1.
2.
3.

The September 2015 half include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.
Includes individual and collective provisions for credit impairment held in respect of credit related commitments.
Certain other financial assets totalling $37.1 billion (Sep 15 half: $36.6 billion; Mar 15 half: $38.2 billion) have been excluded. These are comprised of bank notes and coins within cash,
equity instruments within available-for-sale financial assets and investments relating to the insurance business where the credit risk is passed onto the policy holder.

Distribution of financial assets by credit quality
Net loans and advances1

Other financial assets

Credit related commitments1,2

As at

As at

As at

Neither past due nor impaired

Mar 16$M
545,953

Sep 15$M3
556,393

Mar 15$M543,280

Mar 16$M
280,082

Sep 15$M
265,130

Mar 15$M
246,104

Mar 16$M
257,099

Sep 15$M
270,395

Mar 15$M
253,606

Past due but not impaired

14,926

12,95814,071

-

-

-

-

-

-

226

184

146

-

-

-

-

-

-

Restructured
Net impaired
Total
1.
2.
3.

1,355

1,403

1,385

19

37

27

45

34

36

562,460

570,938

558,882

280,101

265,167

246,131

257,144

270,429

253,642

Individual and collective provisions for credit impairment held in respect of credit related commitments have been reallocated to credit related commitments in this table.
Comprises undrawn commitments and customer contingent liabilities net of collective and individual provisions.
The September 2015 half include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

Credit quality of financial assets neither past due nor impaired
The credit quality of financial assets is managed by the Group using internal customer credit ratings (CCRs) based on their current probability of default.
The Group’s masterscales are mapped to external rating agency scales, to enable wider comparisons.
Net loans and advances

Other financial assets

Credit related commitments1

As at

As at

As at

Strong credit profile3

Mar 16$M
419,296

Sep 15$M2423,572

Mar 15$M
412,909

Mar 16$M
275,339

Sep 15$M
260,041

Mar 15$M
241,170

Mar 16$M
211,147

Sep 15$M
220,815

Mar 15$M
211,380

Satisfactory risk4

109,110

112,822112,049

4,525

4,729

4,574

42,913

46,681

39,773Sub-standard but not past due or
impaired5

17,547

19,99918,322

218

360

360

3,039

2,899

2,453

Total

545,953

556,393543,280

280,082

265,130

246,104

257,099

270,395

253,606

1.
2.
3.

4.

5.

Comprises undrawn commitments and customer contingent liabilities net of collective provisions.
The September 2015 half include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.
Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable toforeseeable events. This rating broadly corresponds to ratings “Aaa” to “Baa3” and “AAA” to “BBB-” of Moody’s and Standard & Poor’s respectively.
Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends orvariability in earnings. This rating broadly corresponds to ratings “Ba2” to “Ba3” and “BB” to “BB-” of Moody’s and Standard & Poor’s respectively.
Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly
medium term. This rating broadly corresponds to ratings “B1” to “Caa” and “B+” to “CCC” of Moody’s and Standard & Poor’s respectively.

116

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. Credit Risk, cont’dAgeing analysis of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not
impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards andpersonal loans) that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of supporting collateral is sufficient
to cover amounts outstanding.

As at

Movement

Ageing analysis of net loans and advancesthat are past due but not impaired
1-5 days

Mar 16$M
2,926

Sep 15$M
2,621

Mar 15$M
3,323

Mar 16v. Sep 15
12%

Mar 16v. Mar 15-12%

6-29 days

5,942

5,235

5,271

14%

13%

30-59 days

2,222

1,674

2,069

33%

7%

60-89 days

1,263

1,050

1,160

20%

9%

>90 days

2,573

2,378

2,248

8%

14%

Total

14,926

12,95814,071

15%

6%

Financial assets that are individually impaired
ANZ regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectability of a credit facility, the financial
instrument (or ‘the facility’) is classified and reported as individually impaired and an individual provision is allocated against it.
As described in the summary of significant accounting policies in the 2015 Annual Financial Statements, impairment provisions are created for financial
instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated as part ofoverall change in fair value and directly reduce the reported carrying amounts.
Impaired instruments

Individual provision balances

As at

As at

Derivative financial instruments1

Mar 16$M
19

Sep 15$M
37

Mar 15$M
27

Mar 16$M-

Sep 15$M-

Mar 15$M-

Net loans and advances

2,564

2,441

2,466

1,209

1,038

1,081

74

57

69

29

23

33

2,657

2,535

2,562

1,238

1,061

1,114

Credit related commitments2
Total
1.
2.

Derivative financial instruments are net of credit valuation adjustments.
Comprises undrawn commitments and customer contingent liabilities.

As at

Movement

Mar 16$M
1,597

Sep 15$M
1,748

Mar 15$M
1,903

Mar 16v. Sep 15-9%

Mar 16v. Mar 15-16%$10 million to $100 million

970

708

607

37%

60%

Greater than $100 million

316

263

198

20%

60%

Less than $10 million

Gross impaired assets

1

2,883

2,719

2,708

6%

6%

Less: Individual provision for credit impairment(1,238)(1,061)(1,114)

17%

11%

Net impaired assets

1,645

1,658

1,594

-1%

3%

1.

Includes $226 million of restructured items (Sep 15: $184 million; Mar 15: $146 million).

117

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair Value Measurement
A significant number of financial instruments are carried on the balance sheet at fair value. The following disclosures set out the classification of financial
assets and financial liabilities and, in respect of the fair value either recognised or disclosed, the various levels within which fair value measurements are
categorised, and the valuation methodologies and techniques used. The fair value disclosure does not cover those instruments that are not consideredfinancial instruments from an accounting perspective, such as intangible assets.
(i) Financial assets and financial liabilities measured at fair value in the balance sheet(a) Valuation methodologies
ANZ has an established control framework that ensures fair value is either determined or validated by a function independent of the party that undertakes
the transaction. The control framework ensures that all models are calibrated periodically to test that outputs reflect prices from observable current market
transactions in the same instrument or other available observable market data.
Where quoted market prices are used, prices are independently verified from other sources. For fair values determined using a valuation model, thecontrol framework may include, as applicable, independent development or validation of valuation models, any inputs to those models, any adjustments
required outside the valuation model and, where possible, independent validation of model outputs. In this way, continued appropriateness of thevaluations is ensured.
In instances where the Group holds offsetting risk positions, the Group uses the portfolio exemption in AASB 13 to measure the fair value of such groupsof financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (that is, an asset) for a particular risk
exposure or to transfer a net short position (that is, a liability) for a particular risk exposure.
The Group categorises its fair value measurements on the basis of inputs used in measuring fair value using the fair value hierarchy below:Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices in active markets for identical financial instruments.
This category includes financial instruments valued using quoted yields where available for specific debt securities.



Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted prices within Level 1 thatare observable for a similar financial asset or liability, either directly or indirectly.

Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are not based on
observable market data (unobservable inputs).

(b) Valuation techniques and inputs used
In the event that there is no quoted market price for the instrument, fair value is based on valuation techniques. The valuation models incorporate theimpact of bid/ask spreads, counterparty credit spreads, funding costs and other factors that would influence the fair value determined by market
participants.
The majority of valuation techniques employ only observable market data. However, for certain financial instruments the valuation technique may employ
some data (valuation inputs or components) which is not readily observable in the current market. In these cases valuation inputs (or components of theoverall value) are derived and extrapolated from other relevant market data and tested against historic transactions and observed market trends. To theextent that valuation is based on models or inputs that are not observable in the market, the determination of fair value can be more subjective,
dependent on the significance of the unobservable input to the overall valuation.
The following valuation techniques have been applied to determine the fair values of financial instruments where there is no quoted price for the
instrument:

For instruments classified as Trading security assets and Securities short sold, Derivative financial assets and liabilities, Available-for-sale assets,
and Investments backing policy liabilities, fair value measurements are derived by using modelled valuation techniques (including discounted cash
flow models) that incorporate market prices/yields for securities with similar credit risk, maturity and yield characteristics; and/or current market yields
for similar instruments.



For Net loans and advances, Deposits and other borrowings and Debt issuances, discounted cash flow techniques are used 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.



The fair value of external unit holder liabilities (life insurance funds) represents the external unit holder’s share of the net assets of the consolidated
investment funds, which are carried at fair value. The fair value of policy liabilities, being liabilities of the insurance business is directly linked to theperformance and value of the assets backing the liabilities. These liabilities are carried at fair value using observable inputs.

Further details of valuation techniques and significant unobservable inputs used in measuring fair values are described in (ii)(a) below.
There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during the current half-year
period.
(c) Fair value measurements
The following table provides an analysis of financial instruments carried at fair value at reporting date categorised according to the lowest level input intoa valuation model or a valuation component that is significant to the reported fair value. The significance of the input is assessed against the reported fairvalue of the financial instrument and considers various factors specific to the financial instrument. The fair value has been allocated in full to the category
in the fair value hierarchy which most appropriately reflects the determination of the fair value.

118

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair value measurements
Level 1$M

As at March 2016
Financial assets

Level 2
$M

Level 3
$M

Total
$M

46,9883,080

550,073519

88,14385

88,74743,2626,819

296

50,377

-

574

14

588

Investments backing policy liabilities1

17,55016,473518

34,541

Total

108,319

115,089918

224,326

-

4,986

-

4,986

Trading securities
Derivative financial instruments
Available-for-sale assets1
Net loans and advances (measured at fair value)

Financial liabilities
Deposits and other borrowings (designated at fair value)

635

90,98883

91,706

Policy liabilities2-

34,854-34,854External unit holder liabilities (life insurance funds)

-

3,265

-

3,265

2,761

201

-

2,962

-

2,823

-

2,823

3,396

137,11783

140,596

Derivative financial instruments

Payables and other liabilities3
Debt issuances (designated at fair value)
Total

As at September 2015
Financial assets
Trading securities

45,2273,769

449,000388

85,15582

85,62537,086

6,347

234

43,667

-

683

16

699

Investments backing policy liabilities

17,983

16,298539

34,820Total

100,684

112,252875

213,811

Derivative financial instruments
Available-for-sale assets
Net loans and advances (measured at fair value)

Financial liabilities
Deposits and other borrowings (designated at fair value)
Derivative financial instruments
Policy liabilities2
External unit holder liabilities (life insurance funds)
Payables and other liabilities3
Debt issuances (designated at fair value)
Total

-

4,576

-

4,576

782

80,387

101

81,270-35,029-35,029

-

3,291

-

3,291

2,443

125

-

2,568

-

3,165

-

3,165

3,225

126,573101

129,899

As at March 2015
Financial assets
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances (designated at fair value)

48,091

3,295-

51,386432

73,027

121

73,58031,502

6,514

320

38,336

-

695

-

695

Investments backing policy liabilities

19,141

16,615739

36,495

Total

99,166100,146

1,180

200,492

Financial liabilities
Deposits and other borrowings (designated at fair value)

-

6,278

-

6,278

688

72,397

125

73,210

Policy liabilities2-

36,449-36,449External unit holder liabilities (life insurance funds)

-

3,489

-

3,489

3,905

158

-

4,063

-

3,501

-

3,501

4,593

122,272

125

126,990

Derivative financial instruments

3

Payables and other liabilities

Debt issuances (designated at fair value)
Total
1.

2.
3.

During the period there were transfers from Level 1 to Level 2 of $599 million (Sep 2015: $190 million, Mar 2015: $114 million) following a reassessment of available pricing information.
Of the total transfers of $599 million in the current period, $486 million relates to Available-for-sale assets and $113 million relates to Investments backing policy liabilities. During theperiod there were also transfers from Level 2 to Level 1 of $14 million (Sep 2015: $114 million, Mar 2015: $127 million) following increased trading activity to support the quoted prices
relating to Investments backing policy liabilities. Transfers into and out of Level 1 and Level 2 are deemed to have occurred as of the beginning of the reporting period in which the transfer
occurred.
Policy liabilities relate to life investment contract liabilities only as these are designated at fair value through profit or loss.
Represents securities short sold.

119

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(ii) Details of fair value measurements that incorporate unobservable market data(a)Composition of Level 3 fair value measurements

The following table presents the composition of financial instruments measured at fair value with significant unobservable inputs (Level 3 fair value
measurements).
Financialliabilities

Financial assets
Available-forDerivatives
sale
$M
$M
1

Net loansandadvances$M-

Investmentsbacking policy
liabilities$M
192

As at March 2016
Asset backed securities

Tradingsecurities$M-

Illiquid corporate bonds

5

-

260

14

6

-

Structured credit products

-

49

-

-

-

(62)

Alternative assets

-

-

35

-

320

-

Other derivatives

-

36

-

-

-

(21)

Total

5

85

296

14

518

(83)

As at September 2015
Asset backed securities

-

-

2

-

188

-

Illiquid corporate bonds

4

-

198

16

-

-

Structured credit products

-

52

-

-

-

(67)

Derivatives$M-

Alternative assets

-

-

34

-

351

-

Other derivatives

-

30

-

-

-

(34)

Total

4

82

234

16

539

(101)

-

As at March 2015
Asset backed securities

-

-

1

-

191

Illiquid corporate bonds

-

-

289

-

5

-

Structured credit products

-

59

-

-

-

(77)

Managed funds (suspended)

-

-

-

-

5

-

Alternative assets

-

-

30

-

538

-

Other derivatives

-

62

-

-

-

(48)

Total

-

121

320

-

739

(125)

Structured credit products comprise the structured credit intermediation trades that the Group entered into from 2004 to 2007 whereby it sold protection
using credit default swaps over certain structures, and mitigated risk by purchasing protection via credit default swaps from US financial guarantors overthe same structures. These trades are valued using complex models with certain inputs relating to the reference assets and derivative counterparties not
being observable in the market. Such unobservable inputs include credit spreads and default probabilities contributing from 16% to 25% of the valuation.
The assets underlying the structured credit products are diverse instruments with a wide range of credit spreads and default probabilities relevant to thevaluation.
The remaining Level 3 balances include Asset backed securities and Illiquid corporate bonds where the effect on fair value of issuer credit cannot bedirectly or indirectly observed in the market; managed funds (suspended) comprising fixed income and mortgage investments in managed funds that are
illiquid and are not currently redeemable; Alternative assets that largely comprise investments in funds which are illiquid and are not currently
redeemable, as well as various investments in unlisted equity securities for which no active market exists; and Other derivatives which predominantly
include reverse mortgage swaps where the mortality rate cannot be observed and options over emissions certificates where the volatility input cannot be
observed.

120

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(b)

Movements in Level 3 fair value measurements

The following table sets out movements in Level 3 fair value measurements. Derivatives are categorised on a portfolio basis and classified as either financial assets
or financial liabilities based on whether the closing balance is an unrealised gain or loss. This could be different to the opening balance.
Financialliabilities

Financial assets

As at March 2016
Opening balance

Tradingsecurities$M
4

Derivatives$M
82

Availablefor-sale$M
234

Net loansandadvances$M
16

Investmentsbacking policy
liabilities$M
539

Derivatives
$M
(101)
-

New purchases and issues

1

1

1

-

87

Disposals / (sales)

-

(1)

(4)

-

(98)

-

Cash settlements

-

-

-

-

-

1

Transfers into Level 3 category1

-

1

77

-

61

(1)

Transfers out of Level 3 category1

-

-

-

-

(20)

9

Fair value gain/(loss) recorded in other operating income in
the income statement2

-

2

(1)

(2)

(51)

9

Fair value gain/(loss) recognised in reserves in equity

-

-

(11)

-

-

-

Closing balance

5

85

296

14

518

(83)

As at September 2015
Opening balance

-

121

320

-

739

(125)

New purchases and issues

-

-

4

21

56

-

Transfers:

Disposals / (sales)

-

-

(14)

-

(60)

-

Cash settlements

-

-

-

-

-

3

Transfers:
Transfers into Level 3 category

10

2

-

-

7

(2)

Transfers out of Level 3 category

-

(17)

(69)

-

(246)

8

(6)

(24)

1

(5)

43

15

Fair value gain/(loss) recorded in other operating income in
the income statement2
Fair value gain/(loss) recognised in reserves in equity

-

-

(8)

-

-

-

Closing balance

4

82

234

16

539

(101)

As at March 2015
Opening balance

-

106

40

-

545

(105)

New purchases and issues

-

-

4

-

241

(1)

Disposals / (sales)

-

(8)

(6)

-

(293)

-

Cash settlements

-

-

-

-

-

5

-

-

267

-

172

-

-

-

-

-

1

23

4

-

74

(25)

Transfers:
Transfers into Level 3 category
Transfers out of Level 3 category
Fair value gain/(loss) recorded in other operating income in
the income statement2-

Fair value gain/(loss) recognised in reserves in equity

-

-

11

-

Closing balance

-

121

320

-

1.

2.

(c)

739

(125)

Transfers into Level 3 for the Group relate principally to illiquid corporate bonds and asset backed securities where market activity has reduced resulting in pricing to no longer beobservable. Transfers out of Level 3 for the Group relate principally to asset backed securities following an increase in trading activity to support observable pricing as well as derivative
liabilities were the current valuation is now deemed to only include observable inputs which are significant to the valuation. Transfers into and out of Level 3 are deemed to have occurred
as of the beginning of the reporting period in which the transfer occurred.
Relating to assets and liabilities held at the end of the period.

Sensitivity to Level 3 data inputs

Where valuation techniques are employed and assumptions are required due to significant data inputs not being directly observed in the market place(Level 3 inputs), changing these assumptions changes the resultant estimate of fair value. The majority of transactions in this category are ‘back-to-back’in nature where ANZ either acts as a financial intermediary or hedges the market risks. Similarly, the valuation of Investments backing policy liabilities
directly impacts the associated life investment contracts they relate to. In these circumstances, changes in the assumptions generally have minimal
impact on the income statement and net assets of ANZ. An exception to this is the ‘back-to-back’ structured credit intermediation trades which create
significant exposure to credit risk.
Principal inputs used in the determination of fair value of financial instruments included in the structured credit portfolio include counterparty credit
spreads, market-quoted CDS prices, recovery rates, default probabilities, correlation curves and other inputs, some of which may not be directly
observable in the market. The potential effect of changing prevailing unobservable inputs to reasonably possible alternative assumptions for valuing thosefinancial instruments could result in less than a (+/-) $3 million (Sep 2015 & Mar 2015: (+/-) $5 million) impact on profit. The ranges of reasonably possible
alternative assumptions are established by application of professional judgement and analysis of the data available to support each assumption.

121

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(d)Deferred fair value gains and losses

Where the fair value of a financial instrument at initial recognition is determined using unobservable data that is significant to the valuation of the
instrument, the difference between the transaction price and the amount determined based on the valuation technique (day one gain or loss) is not
immediately recognised in the income statement. Subsequently, the day one gain or loss is recognised in the income statement over the life of thetransaction on a straight line basis or over the period until all inputs become observable.
The table below summarises the aggregate amount of day-one gains not yet recognised in the income statement and amounts which have beensubsequently recognised.
Half Year
Mar 16$M2

Sep 15$M
2

Mar 15$M
3

Deferral on new transactions

1

-

-

Amounts recognised in income statement during the period

(1)

-

(1)

Closing balance1

2

2

2

Opening balance1.

The closing balance of unrecognised gains predominantly relates to derivative financial instruments.

(iii) Financial assets and financial liabilities not measured at fair value
The table below reflects the carrying amounts of financial instruments not measured at fair value on the Group’s balance sheet and where the carrying
amount is not considered a close approximation of fair value. The table also provides comparison of the carrying amount of these financial instruments to
the Group’s estimate of their fair value.

Carrying amount in the balance sheet

Fair ValueAt amortisedcost$M

At fair
value
$M

Total
$M

$M

561,180588

561,768

562,545

Deposits and other borrowings

573,085

4,986

578,071

578,432

Debt issuances1

79,124

2,823

81,947

81,842

Subordinated debt1

17,557-

17,557

17,545

669,766

7,809

677,575

677,819569,539699

570,238

571,639

Deposits and other borrowings

566,218

4,576

570,794571,212

Debt issuances1

90,5823,165

93,747

93,871

Subordinated debt1

17,009-17,00917,083

673,809

7,741

681,550

682,166

557,508695

558,203559,400

Deposits and other borrowings

560,937

6,278

567,215567,711

Debt issuances1

82,1633,501

85,664

86,405Subordinated debt1

16,463-

16,463

16,657

659,563

9,779

669,342

670,773

As at March 2016
Financial assets
Net loans and advances1
Financial liabilities

As at September 2015
Financial assets
Net loans and advances1
Financial liabilities

As at March 2015
Financial assets
Net loans and advances1
Financial liabilities

1.

Fair value hedging is applied to certain financial instruments within the amortised cost categories. The resulting fair value adjustments mean that the carrying value differs from the original
amortised cost.

122

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. Share capital
Half Year

Issued and quoted securities
Mar 16No.

Sep 15
No.

Mar 15
No.

2,917,560,098

2,902,714,361

2,765,980,222

14,845,737

136,734,139

9,352,451--

500,000

Ordinary share capital
Closing balanceIssued during the period

1,2Preference share capital
Bought back during the period3
1.

2.

3.

The company issued 9.7 million shares under the Dividend Reinvestment Plan and Bonus Option Plan for the 2015 final dividend (28.6 million shares for the 2015 interim dividend; 9.3
million shares for the 2014 final dividend) and 5.1 million shares to satisfy obligations under the Group’s Employee share acquisition plans (nil in prior periods).
The company issued 80.8 million ordinary shares under the Institutional Share Placement and 27.3 million ordinary shares under the Retail Share Purchase Plan in the September half2015.
All 500,000 Euro Trust Securities on issue were bought back by ANZ for cash at face value (€1,000 per security) and cancelled on 15 December 2014.

16. Shareholders’ equity
Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

28,36724,152

24,902

17%

14%

215

865

257

-75%

-16%

-

3,206

-

-100%

n/a

Group employee share acquisition scheme1

56

98

(97)

-43%

large

Treasury shares in Wealth2

(13)

44

(39)

large

-67%

Group share option scheme

-

2

-

-100%

n/a

Group share buyback

-

-

-

n/a

n/a

Share capital
Balance at start of period
Ordinary share capital movements
Dividend reinvestment plan
Share Placement and Purchase Plan

Preference share capital movements
Preference shares bought back3
Total share capital
1.

2.

3.

-

-

(871)

n/a

-100%

28,62528,36724,1521%

19%

As at 31 March 2016, there were 11.0 million ANZEST Treasury shares outstanding (Sep 15: 11.4 million; Mar 15: 11.5 million). Shares in the Company which are purchased on-market
by ANZEST Pty Ltd (trustee of ANZ employee share and option plans) or issued by the Company to ANZEST Pty Ltd are classified as Treasury shares (to the extent that they relate tounvested employee share-based awards).
As at 31 March 2016, there were 12.0 million Wealth Treasury shares outstanding (Sep 15: 11.6 million; Mar 15: 13.1 million). Wealth purchases and holds shares in the Company to backpolicy liabilities. These shares are classified as Treasury shares.
All 500,000 Euro Trust Securities on issue were bought back by ANZ for cash at face value (€1,000 per security) and cancelled on 15 December 2014.

123

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. Shareholders’ equity, cont’d
Half Year

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Balance at start of period

1,119

1,569

(605)

-29%

large

Transfer to the income statement

(126)

(4)

-

large

n/a

(1,002)

(446)

2,174

large

large

(9)

1,119

1,569

large

large

Balance at start of period

68

60

60

13%

13%

Share based payments/(exercises)

9

9

7

0%

29%

Foreign currency translation reserve

Currency translation adjustments net of hedges
Total foreign currency translation reserve
Share option reserve4

Transfer of options/rights lapsed to retained earnings

(8)

(1)

(7)

large

14%

Total share option reserve

69

68

60

1%

15%

138

257

160

-46%

-14%

Gain /(loss) recognised

(9)

(105)

132

-91%

large

Transferred to income statement

(28)

(14)

(35)

100%

-20%

Total available-for-sale revaluation reserve

101

138

257

-27%

-61%

Balance at start of period

269

325

169

-17%

59%

Gain /(loss) recognised

(40)

(53)

164

-25%

large

Transferred to income statement

10

(3)

(8)

large

large

Total hedging reserve

239

269

325

-11%

-26%

(23)

(23)

(23)

0%

0%

-

-

-

n/a

n/a

Total transactions with non-controlling interests reserve

(23)

(23)

(23)

0%

0%

Total reserves

377

1,571

2,188

-76%

-83%

Balance at start of period

27,30925,61624,544

7%

11%

Profit attributable to shareholders of the Company

2,738

3,987

3,506

-31%

-22%

8

1

7

large

14%

Available-for-sale revaluation reserve5
Balance at start of period

Cash flow hedge reserve6

Transactions with non-controlling interests reserve
Balance at start of period
Transfer to the income statement

Retained earnings

Transfer of options/rights lapsed from share option reserve

30,05529,60428,0572%

7%Remeasurement gain/(loss) on defined benefit plans

(3)

(5)

1

-40%

large

Fair value gain/(loss) attributable to changes in
own credit risk of financial liabilities designated at fair value

8

28

9

-71%

-11%

(2,711)(2,328)(2,578)

16%

5%

12

10

12

20%

0%

Preference share dividend paid

-

-

(1)

n/a

-100%

Foreign exchange gains on preference shares bought back7

-

-

116

n/a

-100%

Retained earnings at end of period

27,361

27,30925,6160%

7%

Share capital and reserves attributable toshareholders of the Company

56,36357,24751,956-2%

8%

Total available for appropriation

Ordinary share dividend paid
Dividend income on Treasury shares held within theGroup's life insurance statutory funds

Non-controlling interests
Total shareholders' equity
4.

5.

6.

7.

101

106

95

-5%

6%

56,46457,35352,051-2%

8%

The share option reserve arises on the grant of share options/deferred share rights/performance rights (“options and rights”) to selected employees under the ANZ Share Option Plan.
Amounts are transferred from the share option reserve to other equity accounts when the options and rights are exercised and to retained earnings when lapsed or forfeited after vesting.
Forfeited options and rights due to termination prior to vesting are credited to the income statement.
The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold or impaired, that portion of the reserve
which relates to that financial asset is recognised in the income statement.
The cash flow hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge isrecognised in the income statement when the hedged transaction impacts profit or loss.
The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014. The foreign exchange gain between the issue date and 15 December
2014 was recognised directly in retained earnings.

124

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

17. Changes in composition of the Group
There were no material controlled entities incorporated, acquired, or disposed of during the half year ended 31 March 2016.

18. Investments in Associates
Half Year

Share of associates' profit
Contributions to profit1

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

301

311

314

-3%

-4%

Contribution toGroup profit after tax

Ownership interest
held by Group

Half Year

As at

Associates
Mar 16$M
17

P.T. Bank Pan Indonesia

Movement

Sep 15$M
43

Mar 15$M
35

Mar 16%39

Sep 15%39

Mar 15%39

AMMB Holdings Berhad

43

61

77

24

24

24

Shanghai Rural Commercial Bank

137

112

106

20

20

20

Bank of Tianjin (up to 30 March 2016)2

86

75

80

12

14

14

Other associates

18

20

16

n/a

n/a

n/a

Share of associates' profit

301

311

314

1.

2.

Contributions to profit reflect the IFRS equivalent results adjusted to align with the Group’s financial year end which may differ from the published results of these entities. Excludes gains
or losses on disposal or valuation adjustments.
On 30 March 2016, the Bank of Tianjin (BoT) completed a capital raising and initial public offering (IPO) on the Hong Kong Stock Exchange. As a result, the Group’s equity interest
reduced from 14% to 12% and the Group ceased equity accounting the investment due to losing the ability to appoint directors to the Board of BoT at this date. At 31 March 2016, theinvestment is classified as an available-for-sale asset on the balance sheet.

19. Related party disclosure
There have been no significant changes to the arrangements with related parties.

20. Contingent liabilities and contingent assets
There are outstanding court proceedings, claims and possible claims for and against the Group. Where relevant, expert legal advice has been obtained
and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have not disclosed theestimated 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 Group. Refer to Note 43 of the 2015 ANZ Annual Financial Statements for a description of contingent liabilities and contingent assets as at 30
September 2015.
A summary of some of those contingent liabilities is set out below.
–

Bank fees litigation
Litigation funder IMF Bentham Limited commenced a class action against ANZ in 2010, followed by a second similar class action in March
2013. Together the class actions are claimed to be on behalf of more than 40,000 ANZ customers. The customers currently involved in theseclass actions are only part of ANZ’s customer base for credit cards and transaction accounts.
The applicants contended that the relevant exception fees (honour, dishonour and non-payment fees on transaction accounts and latepayment and overlimit fees on credit cards) were unenforceable penalties (at law and in equity) and that various of the fees were also
unenforceable under statutory provisions governing unconscionable conduct, unfair contract terms and unjust transactions.
In April 2015, the Full Federal Court delivered judgment in respect of appeals by both parties in the second class action. The Full Federal
Court found in ANZ’s favour in respect of all fees subject to appeal (in relation to both the penalty and statutory claims).
IMF Bentham Limited appealed the Full Federal Court’s decision to the High Court of Australia in respect of credit card late payment fees. It did
not appeal the findings in relation to the other fees.
The High Court appeal on late payment fees was heard on 4 and 5 February 2016. We are waiting for the Court’s decision.
The first class action is on hold.
In August 2014, IMF Bentham Limited commenced a separate class action against ANZ for late payment fees charged to ANZ customers in
respect of commercial credit cards and other ANZ products (at this stage not specified). The action is expressed to apply to all relevant
customers, rather than being limited to those who have signed up with IMF Bentham Limited. The action is at an early stage and has been put
on hold.

125

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In June 2013, litigation funder Litigation Lending Services (NZ) commenced a representative action against ANZ for certain fees charged to
New Zealand customers since 2007. This action is currently on hold.
There is a risk that further claims could emerge in Australia, New Zealand or elsewhere.
–

ASIC proceedings in relation to Bank Bill Swap Rate (BBSW)
On 4 March 2016, ASIC initiated proceedings against ANZ seeking declarations and civil penalties for alleged market manipulation,
unconscionable conduct, and alleged breaches by ANZ of certain statutory obligations as a financial services licensee. ASIC has subsequently
initiated similar proceedings against another Australian bank. ASIC’s case against ANZ concerns transactions in the Australian interbank
BBSW market in the period from March 2010 to May 2012. ANZ is defending the proceedings. The potential civil penalty or other financial
impact is uncertain.

–

Regulator investigations into foreign exchange trading
Since 2014, each of ASIC and the Australian Competition and Consumer Commission (ACCC) have been investigating foreign exchange
trading conduct of various banks including ANZ. ASIC’s and the ACCC’s investigations are ongoing and the range of potential outcomes
include civil penalties and other actions under the relevant legislation.

–

Security recovery actions
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets over recent years.
ANZ will defend these claims.

21. Subsequent events since balance date
There have been no subsequent events from 31 March 2016 to the date of this report.

126

DIRECTORS’ DECLARATION AND RESPONSIBILITY STATEMENT

Directors’ Declaration
The Directors of Australia and New Zealand Banking Group Limited declare that:1.

2.

in the Directors’ opinion the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements are inaccordance with the Corporations Act 2001, including:

section 304, that they comply with the Australian Accounting Standards and any further requirements in the Corporations Regulations 2001;and

section 305, that they give a true and fair view of the financial position of the Group as at 31 March 2016 and of its performance for the halfyear ended on that date; andin the Directors’ opinion as at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

2 May 2016

Responsibility statement of the Directors in accordance with the Disclosure and Transparency Rule 4.2.10(3)(b) of the United Kingdom
Financial Conduct Authority
The Directors of Australia and New Zealand Banking Group Limited confirm to the best of their knowledge that:
the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements for the half year ended 31 March
2016, Directors’ Report (including matters included by reference) and Directors’ Declaration as set out on pages 98 to 127 as well as the additional
information on pages 139 to 147 includes a fair review of:(i)an indication of the important events that have occurred during the first six months of the financial year, and their impact on the Condensed
Consolidated Financial Statements; and(ii)

a description of the principal risks and uncertainties for the remaining six months of the financial year.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

2 May 2016127

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION

Independent auditor’s review report to the members of Australia and New Zealand Banking Group Limited

Report on the condensed consolidated financial statements
We have reviewed the accompanying half year condensed consolidated financial statements of Australia and New Zealand Banking Group Limited (the“Company”) which comprises the Group’s condensed consolidated balance sheet as at 31 March 2016, condensed consolidated income statement andcondensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated cash
flow statement for the half year ended on that date, notes 1 to 21 comprising a basis of preparation and other explanatory notes, and the directors’
declaration. The Group comprised the Company and the entities it controlled at the half year’s end or from time to time during the half year.
Directors’ responsibility for the half year condensed consolidated financial statements
The directors of the Company are responsible for the preparation of the half year condensed consolidated financial statements that give a true and fairview in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine isnecessary to enable the preparation of the half year condensed consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
Auditors’ responsibility
Our responsibility is to express a conclusion on the half year condensed consolidated financial statements based on our review. We conducted ourreview in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditorof the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that thehalf year condensed consolidated financial statements are not in accordance with the Corporations Act 2001 including: giving a true and fair view of theGroup’s financial position as at 31 March 2016 and its performance for the half year ended on that date; and complying with Australian AccountingStandard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Australia and New Zealand Banking Group
Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual report.
A review of a half year condensed consolidated financial statements consists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordancewith Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year condensed consolidated
financial statements of Australia and New Zealand Banking Group Limited is not in accordance with the Corporations Act 2001, including:(a)giving a true and fair view of the Group’s financial position as at 31 March 2016 and of its performance for thehalf year ended on that date; and(b)complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Melbourne, Australia
2 May 2016

Andrew Yates
Partner

Lead Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
To: the directors of Australia and New Zealand Banking Group Limited
I declare that, to the best of my knowledge and belief, in relation to the review for the half year ended 31 March 2016, there have been:(i)no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and(ii)

no contraventions of any applicable code of professional conduct in relation to the review.

Melbourne, Australia
2 May 2016

Andrew Yates
Partner

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.

128

SUPPLEMENTARY INFORMATIONCONTENTS
Section 9 – Supplementary information
Capital management
Average balance sheet and related interest
Full time equivalent staff
Funds management and insurance income reconciliation
Exchange rates
Derivative financial instruments
Principal risks and uncertainties
Definitions

129

SUPPLEMENTARY INFORMATION
Capital management

ANZ provides information as required under APRA’s prudential standard APS 330: Public Disclosure. This information is located in the Regulatory
Disclosures section of ANZ’s website: shareholder.anz.com/pages/regulatory-disclosure.
This information includes disclosures detailed in the following sections of the standard, Attachment A: Capital disclosure template, Attachment B: Mainfeatures of Capital instruments, Attachment E: Leverage ratio disclosure requirements and Attachment F: Liquidity Coverage Ratio disclosure template.
As at
Qualifying Capital
Tier 1
Shareholders' equity and non-controlling interests
Prudential adjustments to shareholders' equity

Table 1Gross Common Equity Tier 1 capital
Deductions

Table 2

Common Equity Tier 1 capital
Additional Tier 1 capital

Table 3Tier 1 capital
Tier 2 capital

Table 4

Total qualifying capital

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

56,46457,35352,051

-2%

8%
13%

(584)

(387)

(519)

51%

55,88056,966

51,532-2%

8%(17,778)(18,440)(17,796)-4%

0%38,102

38,52633,736

-1%

13%

6,960

6,958

7,352

0%

-5%

45,06245,48441,088

-1%

10%

8,076

7,951

7,716

2%

5%

53,13853,43548,804

-1%

9%

-3%

0%

Capital adequacy ratios
Common Equity Tier 1

9.8%

9.6%

8.7%

Tier 1

11.6%

11.3%

10.6%

Tier 2

2.1%

2.0%

2.0%

Total

13.7%

13.3%

12.6%

388,335

401,937

386,863

Risk weighted assets

Table 5130

SUPPLEMENTARY INFORMATION
Capital management, cont’d
As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to ANZ Wealth policy holders

254

242

287

5%

-11%

Accumulated retained profits and reserves of insurance and funds management
entities

(931)

(791)

(951)

18%

-2%

Deferred fee revenue including fees deferred as part of loan yields

290

380

397

-24%

-27%

Available-for-sale reserve attributable to deconsolidated subsidiaries

(98)

(113)

(150)

-13%

-35%

Other

(99)

(105)

(102)

-6%

-3%

Total

(584)

(387)

(519)

51%

13%

Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and
New Zealand)(3,767)(4,109)(4,369)-8%-14%Intangible component of investments in ANZ Wealth Australia and New Zealand(2,091)(2,093)(2,117)0%-1%

Capitalised software(2,190)(2,832)(2,631)

-23%

-17%

Capitalised expenses including loan and lease origination fees

(1,078)(1,320)(1,197)

-18%

-10%

(793)

(694)

(610)

14%

30%

(600)

(479)

(374)

25%

60%

(297)

(297)

(401)

0%

-26%

Investment in ANZ Wealth Australia and New Zealand(1,749)(1,349)

(990)

30%

77%

Investment in banking associates and minority interests(4,708)(4,734)(4,499)

-1%

5%

(505)

(533)

(608)

-5%

-17%

(17,778)(18,440)(17,796)-4%

0%

ANZ CPS2

1,969

1,969

1,969

0%

0%

ANZ CPS3

1,338

1,336

1,335

0%

0%

ANZ Capital Notes 1

1,113

1,112

1,110

0%

0%

ANZ Capital Notes 2

1,600

1,598

1,597

0%

0%

ANZ Capital Notes 3

961

959

958

0%

0%

ANZ Bank NZ Capital Notes

446

449

484

-1%

-8%

Regulatory adjustments and deductions

(467)

(465)

(101)

1%

large

Total

6,960

6,958

7,352

0%

-5%

Table 2: Deductions from Common Equity Tier 1 capital

Applicable deferred net tax assets
Expected losses in excess of eligible provisions

Table 8Investment in other insurance and funds management subsidiaries

Other deductions
Total

Table 3: Additional Tier 1 capital
Convertible Preference Shares

Table 4: Tier 2 capital
255

252

249

1%

2%

Perpetual subordinated notes

1,145

1,188

1,211

-4%

-5%

Subordinated debt

8,985

8,398

7,799

7%

15%

General reserve for impairment of financial assets

(660)

(717)

(336)

-8%

96%

Transitional adjustments(1,649)(1,170)(1,207)

41%

37%

Total

8,076

7,951

7,716

2%

5%

Regulatory adjustments and deductions

131

SUPPLEMENTARY INFORMATION
Capital management, cont’d
As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Table 5: Risk weighted assets
On balance sheet

235,875

245,542

241,807-4%-2%

Commitments

62,223

61,96556,6830%

10%

Contingents

14,48915,92916,212-9%-11%

Derivatives

21,721

26,31524,995-17%-13%334,308

349,751

339,697-4%-2%

Market risk - Traded

6,059

6,868

6,042

-12%

0%

Market risk - IRRBB

10,280

7,433

7,690

38%

34%

Total credit risk

Table 6

Operational risk

37,68837,88533,434-1%

13%

Total risk weighted assets

388,335

401,937

386,863

-3%

0%

As at

Movement

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate

139,643

150,165

140,451-7%-1%

Sovereign

6,185

6,664

5,385

-7%

15%

Bank

15,061

17,44522,078-14%-32%

Residential mortgage

57,21854,99653,501

4%

7%

Qualifying revolving retail (credit cards)

7,744

7,546

7,775

3%

0%

Other retail

30,681

32,99031,664-7%-3%

Credit risk weighted assets subject to Advanced IRB approach

256,532

269,806

260,854-5%-2%

Credit risk specialised lending exposures subject to slotting criteria

35,06632,24031,4429%12%

Subject to Standardised approach
Corporate

22,941

26,21727,033-12%-15%

Residential mortgage

2,616

2,882

2,603

-9%

0%

Other retail (includes credit cards)

3,550

3,625

3,271

-2%

9%

Credit risk weighted assets subject to Standardised approach

29,10732,72432,907-11%-12%

Credit Valuation Adjustment and Qualifying Central Counterparties

8,355

10,170

9,630

-18%

-13%

Credit risk weighted assets relating to securitisation exposures

1,194

1,156

1,067

3%

12%

Other assets

4,054

3,655

3,797

11%

7%

334,308

349,751

339,697-4%-2%

Total credit risk weighted assets

132

SUPPLEMENTARY INFORMATION
Capital management, cont’dCollective Provision and Individual
Provision

Table 7: Total provision for credit impairment and expected loss bydivision

Basel Expected Loss1

Australia

Mar 16$M
1,746

Sep 15$M
1,828

Mar 15$M
1,796

Mar 16$M
2,600

Sep 15$M
2,635

Mar 15$M
2,563

Institutional

1,681

1,480

1,488

1,410

1,299

1,452

New Zealand

448

476

536

712

718

779

Asia Retail & Pacific

210

217

193

5

1

4

Wealth

12

13

12

13

12

12

TSO and Group Centre

3

3

3

-

-

-

4,100

4,017

4,028

4,740

4,665

4,810

Total provision for credit impairment and expected loss
1.

Only applicable to Advanced Internal Ratings based portfolios.

As at

Movement

Table 8: APRA Expected loss in excess of eligible provisions

Mar 16$M

Sep 15$M

Mar 15$M

APRA Basel 3 expected loss: non-defaulted

2,894

2,850

2,735

2%

6%
-2%

Mar 16 March 16
v. Sep 15 v. March 15

Less: Qualifying collective provision(2,862)(2,956)(2,914)-3%

Non-qualifying collective provision

313

333

304

-6%

3%

Standardised collective provision

255

252

249

1%

2%

Non-defaulted excess included in deduction

600

479

374

25%

60%

1,846

1,815

2,075

2%

-11%

(1,238)(1,061)(1,114)

17%

11%

(528)

(633)

(859)

-17%

-39%
66%

Collective provision

APRA Basel 3 expected loss: defaulted
Less: Qualifying individual provision
Individual provision
Additional individual provision for partial write offs
Standardised individual provision

171

107

103

60%

Collective provision on advanced defaulted

(265)

(286)

(271)

-7%

-2%

(14)

(58)

(66)

-76%

-79%

14

58

66

-76%

-79%

-

-

-

n/a

n/a

600

479

374

25%

60%

Shortfall in expected loss not included in deduction
Defaulted excess included in deduction
Gross deduction

Table 9: APRA Basel 3 Common Equity Tier 1
Half Year
Mar 16 vs Sep 15
APRA Basel 3 Common Equity Tier 1
Adjusted pro-forma Cash profit1+87bpsRisk weighted assets
Portfolio growth and mix+5bp

Risk migration and expected losses in excess of eligible provisions-3bps

Non-credit risk

-1bps

Capital retention in insurance businesses and associates1-10bpsCapitalised software and intangibles1-2bps

Organic capital generation+76bpsOrdinary share dividends (net of dividend reinvestment plan)-62bps

Other

+8bps

Total Common Equity Tier 1 movement+22bpsAPRA Basel 3 Common Equity Tier 1 ratio

9.8%

1.

Excludes the impact from the software capitalisation changes and impact from the Asian minority investment adjustments which have gone through Cash Profit as they are neutral on
CET1.

133

SUPPLEMENTARY INFORMATION
1

Average balance sheet and related interest

Half Year Mar 16

Loans and advances2

Half Year Sep 15

Half Year Mar 15

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%
10.2%

Overdrafts and credit cards

20,539

1,062

10.3%

22,203

1,072

9.6%

20,9011,060

Commercial bills outstanding

13,237112

1.7%

13,781135

2.0%

14,168137

1.9%

Term loans - housing

308,808

7,203

4.7%

292,206

6,934

4.7%

279,757

7,023

5.0%

Term loans - non-housing

221,728

4,890

4.4%

224,208

5,108

4.5%

219,047

5,243

4.8%

Lease financing

8,365

279

6.7%

9,374

343

7.3%

9,438

365

7.8%

Other loans and advances

2,239

26

2.3%

5,837

51

1.7%

2,555

45

3.5%

Individual provision for credit impairment

(988)

-

n/a

(1,104)-n/a(1,166)-n/a

573,928

13,572

4.7%

566,505

13,643

4.8%

544,700

13,873

5.1%

Cash51,054247

1.0%

46,484209

0.9%

45,498276

1.2%

Settlement Balances owed to ANZ

18,52134

0.4%

16,56246

0.6%

15,26821

0.3%

Collateral Paid

10,737

26

0.5%

9,033

29

0.6%

7,548

31

0.8%

Trading and available-for-sale assets

98,884

1,134

2.3%

91,971

1,166

2.5%

87,995

1,187

2.7%

Regulatory Deposits

1,259

7

1.1%

1,173

4

0.7%

1,183

4

0.7%

Other interest earning assets

Other assets
Total interest earning assets3

8

70

n/a

11

35

n/a

11

2

n/a

180,463

1,518

1.7%

165,234

1,489

1.8%

157,503

1,521

1.9%

754,391

15,0904.0%

731,739

15,132

4.1%

702,203

15,3944.4%

Non-interest earning assets
Derivatives

79,804

71,572

65,114

Premises and equipment

2,222

2,182

2,180

Insurance assets

34,84636,38034,092Other assets

32,39932,68329,559Collective provision for credit impairment(2,914)(2,951)(2,795)

146,357

139,866

128,150

900,748871,605

830,353

Total average assets
Interest bearing deposits andother borrowings
Certificates of deposit

63,722781

2.5%

64,616806

2.5%

60,740884

2.9%

Term deposits

197,297

1,942

2.0%

192,790

1,951

2.0%

196,891

2,259

2.3%

On demand and short term deposits

227,027

2,193

1.9%

215,001

2,216

2.1%

199,826

2,358

2.4%

Deposits from banks

51,307327

1.3%

53,188327

1.2%

54,063356

1.3%

Commercial paper

25,783288

2.2%

21,322253

2.4%

21,135262

2.5%

Securities sold under agreements torepurchase

1,191

4

0.7%

1,064

7

1.3%

675

5

1.5%

Borrowing corporations' debt

1,576

33

4.2%

1,535

36

4.7%

1,474

34

4.6%

567,903

5,568

2.0%

549,516

5,596

2.0%

534,804

6,158

2.3%

Settlement Balances owed by ANZ

4,478

15

0.7%

3,647

17

0.9%

3,134

18

1.2%

Collateral Received

5,806

14

0.5%

5,581

20

0.7%

5,339

9

0.3%

101,507

1,819

3.6%

95,591

1,847

3.9%

95,815

1,901

4.0%

5,109

106

4.1%

9,782

174

3.5%

6,606

170

5.2%

116,900

1,954

3.3%

114,601

2,058

3.6%

110,894

2,098

3.8%

684,803

7,522

2.2%

664,117

7,654

2.3%

645,698

8,256

2.6%

Other interest bearing liabilities

Debt issuances & subordinated debt
Other liabilities
Total interest bearing liabilities
Non-interest bearing liabilities
Deposits

19,332

18,19317,001

Derivatives

85,66678,37464,382

Insurance Liabilities

35,45636,654

34,974External unit holder liabilities (life insurance
funds)

3,291

3,491

3,181

Other liabilities
Total average liabilities
1.
2.
3.

14,735

17,811

14,620158,480

154,523

134,158

843,283

818,640

779,856

Averages used are predominantly daily averages.
Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.
During the period individual provisions for credit impairment were moved from non-interest earning assets to interest earning assets to more accurately reflect the yield on impaired loans
and advances. Comparatives have been restated but there was no impact on the net interest margin ratios.

134

SUPPLEMENTARY INFORMATION
1

Average balance sheet and related interest (cont’d)Half Year Mar 16

Half Year Sep 15

Avg bal
$M

Int
$M

Rate
%

Avg bal$M

Australia

387,035

9,429

4.9%

375,986

Asia Pacific, Europe & America

79,132

1,296

3.3%

86,886

New Zealand

107,761

2,847

5.3%

103,633

573,928

13,572

4.7%

566,505

Australia

56,200661

2.4%

53,152

Asia Pacific, Europe & America

29,199233

1.6%

26,392

New Zealand

13,485240

3.6%

98,884

1,134

Australia

466,032

Asia Pacific, Europe & America

162,505

New ZealandLoans and advances2

Int$M

Half Year Mar 15
Rate%

Avg bal
$M

Int
$M

Rate
%

9,257

4.9%

357,608

9,480

5.3%

1,317

3.0%

86,172

1,238

2.9%

3,069

5.9%

100,920

3,155

6.3%

13,643

4.8%

544,700

13,873

5.1%

720

2.7%

50,278

725

2.9%

211

1.6%

25,134212

1.7%

12,427235

3.8%

12,583

250

4.0%

2.3%

91,971

1,166

2.5%

87,995

1,187

2.7%

10,2924.4%

450,919

10,143

4.5%

427,470

10,422

4.9%

1,612

2.0%

160,210

1,584

2.0%

157,469

1,512

1.9%

125,854

3,186

5.1%

120,610

3,405

5.6%

117,264

3,460

5.9%

754,391

15,0904.0%

731,739

15,132

4.1%

702,203

15,394

4.4%

4,243

2.7%

Trading and available-for-sale assets

Total interest earning assets3

Total average assets
Australia

569,243551,794

524,435

Asia Pacific, Europe & America

188,923

183,650

176,849

New Zealand

142,582

136,161

129,069

Total average assets

900,748871,605

830,353

36.8%

36.7%

36.8%

% of total average assets attributable tooverseas activities
Interest bearing deposits andother borrowings
Australia

333,740

3,789

2.3%

320,247

Asia Pacific, Europe & America
New Zealand

151,696547

0.7%

151,508

82,467

1,232

3.0%

77,761

567,903

5,568

2.0%

549,516Australia

409,816

5,138

2.5%

Asia Pacific, Europe & America

172,261714

0.8%

New Zealand

102,726

1,670

684,803

7,522

3,696

2.3%

311,454507

0.7%

146,851

488

0.7%

1,393

3.6%

76,499

1,427

3.7%

5,596

2.0%

534,804

6,158

2.3%

396,971

5,111

2.6%

387,583

5,706

3.0%

168,686628

0.7%

163,031

604

0.7%

3.3%

98,460

1,915

3.9%

95,084

1,946

4.1%

2.2%

664,117

7,654

2.3%

645,698

8,256

2.6%

Total interest bearing liabilities3

Total average liabilities
Australia

526,500

513,643

491,356

Asia Pacific, Europe & America

193,380

187,679

179,210New Zealand

123,403117,318

109,290843,283

818,640

779,856

37.6%

37.3%

37.0%

57,46552,96550,131--366

57,46552,96550,497900,748871,605

830,353% of total average liabilities attributable
to overseas activities

Total average shareholder's equity
Ordinary share capital, reserves andretained earnings4
Preference share capital

Total average liabilities andshareholder's equity
1.
2.
3.
4.

Averages used are predominantly daily averages.
Loans & advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.
Average shareholders’ equity at 31 March 2016 includes $254 million of Wealth shares that are eliminated from the statutory shareholders’ equity balance (Sep 15: $242 million; Mar 15:$287 million).

135

SUPPLEMENTARY INFORMATION
Average balance sheet and related interest (cont’d)Half Year
Mar 16%

Sep 15%

Mar 15%Australia

4.51

4.58

4.98

Asia Pacific, Europe & America

1.91

1.84

1.82

New Zealand

5.06

5.63

5.92

Group

4.00

4.12

4.39

Gross earnings rate1

Interest spread and net interest margin may be analysed as follows:
Half Year
Mar 16%

Sep 15%

Mar 15%Australia1
Net interest spread

1.99

2.01

2.03

Interest attributable to net non-interest bearing items

0.28

0.29

0.26

Net interest margin - Australia

2.27

2.30

2.29

Net interest spread

1.08

1.09

1.07

Interest attributable to net non-interest bearing items

0.03

0.03

0.03

Net interest margin - Asia Pacific, Europe & America

1.11

1.12

1.10

Net interest spread

1.81

1.81

1.82

Interest attributable to net non-interest bearing items

0.38

0.41

0.45

Net interest margin - New Zealand

2.19

2.22

2.27

Net interest spread

1.80

1.82

1.82

Interest attributable to net non-interest bearing items

0.21

0.22

0.22

Net interest margin

2.01

2.04

2.04

Net interest margin (excluding Markets)

2.52

2.51

2.51

Asia Pacific, Europe & America1

New Zealand1

Group

1.

Geographic gross earnings rate, net interest spread and net interest margin are calculated gross of intra group items (Intra-group interest earning assets and associated interest income
and intra-group interest bearing liabilities and associated interest expense).

136

SUPPLEMENTARY INFORMATION
Full Time Equivalent Staff
At 31 March 2016, ANZ employed 48,896 people worldwide (Sep 15: 50,152; Mar 15: 51,243) on a full-time equivalent basis ("FTEs").

As at

Division

Movement

Australia

Mar 16
8,791

Sep 15
8,766

Mar 15
9,018

Mar 16v Sep 150%

Mar 16v Mar 15-3%

Institutional

4,056

4,231

4,319

-4%

-6%

New Zealand

5,022

5,074

5,096

-1%

-1%

Wealth

2,385

2,481

2,530

-4%

-6%

Asia Retail & Pacific

3,183

3,313

3,437

-4%

-7%

TSO and Group Centre

25,45926,287

26,843

-3%

-5%

Total

48,89650,152

51,243-3%-5%

Average FTE

49,77751,14650,759

-3%

-2%

As at

Geography

Movement

Australia

Mar 1620,808

Sep 15
21,138Mar 1522,096

Mar 16v Sep 15-2%

Mar 16v Mar 15
-6%

Asia Pacific, Europe & America

20,025

20,91020,910-4%-4%

New Zealand

8,063

8,104

8,237

-1%

-2%

Total

48,89650,152

51,243-3%-5%

Funds Management and Insurance Income Reconciliation
Half Year

Movement

Reference
Page

Mar 16$M

Sep 15$M

Mar 15$M

Mar 16v. Sep 15

Mar 16v. Mar 15

95

857

795

1,020

8%

-16%

Treasury shares adjustment

95

(34)

(107)

86

-68%

large

Policyholders tax gross up

95

(32)

91

(277)

large

-88%

Revaluation of policy liabilities

95

(20)

(7)

(97)

large

-79%

Net funds management and insurance income - cash basis

95

771

772

732

0%

5%

Wealth - Net funds management and insurance income

74

727

730

699

0%

4%

Australia - Funds management and insurance income

19

19

20

0%

-5%

Asia Retail & Pacific - Funds management and insurance income

55

50

55

10%

0%

New Zealand - Funds management and insurance income

42

44

42

-5%

0%

Inter-divisional eliminations

(72)

(71)

(84)

1%

-14%

771

772

732

0%

5%

Net funds management and insurance income - statutory basis
Adjustments between cash and statutory profit

Net funds management and insurance income - cash basis

26

137

SUPPLEMENTARY INFORMATION
Exchange rates
Major exchange rates used in the translation of foreign subsidiaries, branches, investments in associates and issued debt are as follows:
Balance Sheet

Profit & Loss Average

As atHalf Year

Chinese Renminbi

Mar 16
4.9471

Sep 154.4573

Mar 154.7365

Mar 164.6622

Sep 154.6831

Mar 155.0786Euro

0.67600.62290.70570.65580.67670.6909Pound Sterling

0.53350.46250.51630.48860.48530.5295

Indian Rupee

50.74146.14247.75948.10148.14150.911Indonesian Rupiah

10,164

10,281

9,987

9,835

10,127

10,271

Japanese Yen

85.95184.07291.71585.32891.33095.713

Malaysian Ringgit

3.0015

3.1176

2.8372

3.05652.88982.8623

New Taiwan Dollar

24.64023.06623.88723.70823.51125.580

New Zealand Dollar

1.10931.10031.01881.08341.08781.0691

Papua New Guinean Kina

2.37242.01232.04392.15652.06492.1233

United States Dollar

0.76510.70130.76340.72120.74800.8200Derivative financial instruments
Derivative financial instruments are contracts whose value is derived from one or more underlying variables or indices defined in the contract, require little
or no initial net investment and are settled at a future date. Derivatives include contracts traded on registered exchanges and contracts agreed between
counterparties. The use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading and sales
activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in foreign exchange and interest rates as part of its asset andliability management activities.
The following table provides an overview of the Group’s foreign exchange, interest rate, commodity and credit derivatives. They include all trading andbalance sheet risk management contracts. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations inmarket rates relative to the terms of the derivative.
AssetsLiabilities

AssetsMar 16$M

Mar 16$M

As at
Fair Values

Liabilities

AssetsSep 15$M

Sep 15$M

Mar 15$M

Mar 15$M

As at

Liabilities

As atForeign exchange contracts
Spot and forward contracts

17,145(16,911)

15,208(13,964)

11,972(10,515)

Swap agreements

18,000(23,473)

20,967(20,270)

15,369(19,220)

Options purchased

1,388

-

2,441

-

2,539

-

-

(1,087)-(2,081)-(2,333)36,533(41,471)

38,616(36,315)

29,880(32,068)

2,424(1,950)2,750(2,207)2,232(1,668)

35

(46)

37

(51)

10

(21)

Swap agreements

48,490(46,127)

42,967(40,747)

39,878(37,062)

Futures contracts

31

(213)

28

(96)

49

(255)

Options purchased

907

-

944

-

1,140

-

-

(1,557)-(1,573)-(1,722)

49,463(47,943)

43,976(42,467)

41,077(39,060)

Options soldCommodity contracts
Derivative contracts
Interest rate contracts
Forward rate agreements

Options sold

Credit default swaps
Structured credit derivatives purchased

49

-

52

-

59

-

Other credit derivatives purchased

256

(268)

205

(194)

277

(323)

Total credit derivatives purchased

305

(268)

257

(194)

336

(323)

Structured credit derivatives sold

-

(62)

-

(67)

-

(77)

Other credit derivatives sold

22

(12)

26

(20)

55

(14)

Total credit derivatives sold

22

(74)

26

(87)

55

(91)

88,747(91,706)

85,625(81,270)

73,580(73,210)

Total fair value

138

SUPPLEMENTARY INFORMATION
Principal risks and uncertainties
1.

Introduction
The Group’s activities are subject to risks that can adversely impact its business, operations and financial condition. The risks and uncertainties
described below are not the only ones that the Group may face. Additional risks and uncertainties that the Group is unaware of, or that the Groupcurrently deems to be immaterial, may also become important factors that affect it. If any of the listed or unlisted risks actually occur, the Group’sbusiness, operations, financial condition, or reputation could be materially and adversely affected, with the result that the trading price of the Group’s
equity or debt securities could decline, and investors could lose all or part of their investment.

2.

Changes in general business and economic conditions, including disruption in regional or global credit and capital markets, may
adversely affect the Group’s business, operations and financial condition
The Group’s financial performance is primarily influenced by the economic conditions and the level of business activity in the major countries andregions in which it operates or trades, i.e. Australia, New Zealand, Asia Pacific, Europe and the United States. The Group’s business, operations, andfinancial condition can be negatively affected by changes in economic and business conditions in these markets.
The economic and business conditions that prevail in the Group’s major operating and trading markets are affected by domestic and international
economic events, political events and natural disasters, and by movements and events that occur in global financial markets.
For example, the global financial crisis saw a sudden and prolonged dislocation in credit and equity capital markets, a contraction in global economic
activity and the emergence of many challenges for financial services institutions worldwide that still persist to some extent in many regions.
Sovereign risk and its potential impact on financial institutions in Europe and globally subsequently emerged as a significant risk (see risk factor 5“Sovereign risk may destabilise global financial markets adversely affecting all participants, including the Group”). The impact of the global financial
crisis and its aftermath continue to affect regional and global economic activity, confidence and capital markets. Prudential authorities have
implemented and continue to implement increased regulations to mitigate the risk of such events recurring, although there can be no assurance thatsuch regulations will be effective.
Economic effects of the global financial crisis and European sovereign debt crisis have been widespread and far-reaching with unfavourable ongoing
impacts on retail spending, personal and business credit growth, housing credit, and business and consumer confidence. While some of these
economic factors have since improved, lasting impacts from the global financial crisis and the subsequent volatility in financial markets, the European
sovereign debt crisis and the potential for escalation in geopolitical risks suggest ongoing vulnerability and potential adjustment of consumer andbusiness behaviour.
Other current economic conditions impacting the Group and its customers include changes in the real estate markets in Australia and New Zealand(see risk factor 6 “Weakening of the real estate markets in Australia, New Zealand or other markets where the Group does business may adversely
affect its business, operations and financial condition”) and a decline in natural resources demand and prices (see risk factor 20 “An increase in the
failure of third parties to honour their commitments in connection with the Group’s trading, lending, derivatives and other activities may adversely
affect its business, operations and financial condition”).
Should difficult economic conditions in the Group’s markets eventuate, asset values in the housing, commercial or rural property markets could
decline, unemployment could rise and corporate and personal incomes could suffer. Also, deterioration in global markets, including equity, property,
currency and other asset markets, could impact the Group’s customers and the security the Group holds against loans and other credit exposures,
which may impact its ability to recover some loans and other credit exposures.
All or any of the negative economic and business impacts described above could cause a reduction in demand for the Group’s products and services
and/or an increase in loan and other credit defaults and bad debts, which could adversely affect the Group’s business, operations, and financial
condition.
The Group’s financial performance could also be adversely affected if it were unable to adapt cost structures, products, pricing or activities in
response to a drop in demand or lower than expected revenues. Similarly, higher than expected costs (including credit and funding costs) could beincurred because of adverse changes in the economy, general business conditions or the operating environment in the countries in which it operates.
Geopolitical instability, such as threats of, potential for, or actual conflict, occurring around the world, such as the ongoing unrest and conflicts in the
Ukraine, North Korea, Syria, Egypt, Afghanistan, Iraq and elsewhere, as well as the current high threat of terrorist activities, may also adversely affectglobal financial markets, general economic and business conditions and the Group’s ability to continue operating or trading in a country, which in turn
may adversely affect the Group’s business, operations, and financial condition.
Natural and biological disasters such as, but not restricted to, cyclones, floods, droughts, earthquakes and pandemics, and the economic andfinancial market implications of such disasters on domestic and global conditions can adversely impact the Group’s ability to continue operating or
trading in the country or countries directly or indirectly affected, which in turn may adversely affect the Group’s business, operations and financial
condition. For more risks in relation to natural and biological disasters, refer to risk factor 22 “The Group may be exposed to the impact of futureclimate change, geological events, plant and animal diseases, and other extrinsic events which may adversely affect its business, operations andfinancial condition”.
Other economic and financial factors or events that may adversely affect the Group’s performance, and give rise to operational and markets risk arecovered in risk factors 13 (“The Group is exposed to market risk, which may adversely affect its business, operations and financial condition”) and 14(“Changes in exchange rates may adversely affect the Group’s business, operations and financial condition”).

3.

Competition may adversely affect the Group’s business, operations and financial conditions, in the markets in which it operates
The markets in which the Group operates are highly competitive and could become even more so. Factors that contribute to competition risk include
industry regulation, mergers and acquisitions, changes in customers’ needs and preferences, entry of new participants, development of new
distribution and service methods, increased diversification of products by competitors, and regulatory changes in the rules governing the operationsof banks and non-bank competitors. For example, changes in the financial services sector in Australia and New Zealand have made it possible fornon-banks to offer products and services traditionally provided by banks, such as payments, home loans, and credit cards. In addition, it is possiblethat existing companies from outside of the traditional financial services sector may seek to obtain banking licences to directly compete with theGroup by offering products and services traditionally provided by banks. In addition, banks organised in jurisdictions outside Australia and139

SUPPLEMENTARY INFORMATIONNew Zealand are subject to different levels of regulation and consequently some may have lower cost structures. Increasing competition forcustomers could also potentially lead to a compression in the Group’s net interest margins or increased advertising and related expenses to attract
and retain customers.
Furthermore, increased competition for deposits could also increase the Group’s cost of funding and lead the Group to access other types of fundingor reduce lending. The Group relies on bank deposits to fund a significant portion of its balance sheet and deposits have been a relatively stablesource of funding. The group competes with banks and other financial services firms for such deposits. To the extent that the Group is not able tosuccessfully compete for deposits, the Group would be forced to rely more heavily on other, potentially less stable or more expensive forms offunding, or reduce lending. This could adversely affect the Group’s business, prospects, financial performance or financial condition.
The impact on ANZ of an increase in competitive market conditions, especially in the Group’s main markets and products, would potentially lead to amaterial reduction in the market share and/or margins of the relevant Group business(es), which would adversely affect the Group’s financial
performance and position.
4.

Changes in monetary policies may adversely affect the Group’s business, operations and financial condition
Central monetary authorities (including the RBA, the RBNZ, the United States Federal Reserve, the Bank of England and the monetary authorities in
the Asian jurisdictions in which the Group operates) set official interest rates or take other measures to affect the demand for money and credit intheir relevant jurisdictions. In some Asian jurisdictions, currency policy is also used to influence general business conditions and the demand formoney and credit. These policies can significantly affect the Group’s cost of funds for lending and investing and the return that the Group will earn on
those loans and investments. These factors impact the Group’s net interest margin and can affect the value of financial instruments it holds, such as
debt securities and hedging instruments. The policies of the central monetary authorities can also affect the Group’s borrowers, potentially increasing
the risk that they may fail to repay loans. Changes in such policies are difficult to predict.

5.

Sovereign risk may destabilise global financial markets adversely affecting all participants, including the Group
Sovereign risk is the risk that foreign governments will default on their debt obligations, be unable to refinance their debts as and when they fall due
or nationalise parts of their economy. Sovereign risk remains in many economies, including the United States and Australia. Should one sovereigndefault, there could be a cascading effect to other markets and countries, the consequences of which, while difficult to predict, may be similar to or
worse than those experienced during the global financial crisis and subsequent sovereign debt crises. Such events could destabilise global financial
markets, adversely affecting all participants, including adversely affecting the Group’s liquidity, financial performance or financial condition.

6.

Weakening of the real estate markets in Australia, New Zealand or other markets where the Group does business may adversely affect its
business, operations and financial condition
Residential and commercial property lending, together with real estate development and investment property finance, constitute importantbusinesses to the Group. Major sub-segments within the Group's lending portfolio include:

Residential housing loans, owner occupier and investment; andCommercial real estate loans.

Declining asset prices could impact customers and counterparties and the value of the security (including residential and commercial property) we
hold against loans which may impair our ability to recover amounts owing to us if customers or counterparties were to default.
A significant decrease in Australian and New Zealand housing valuations could adversely impact our home lending activities because borrowers withloans in excess of their property value show a higher propensity to default and, in the event of such defaults our security values would be eroded,
causing us to incur higher credit losses which could adversely affect the Group’s financial performance and condition. The demand for our homelending products may also decline due to buyer concerns about decreases in values or concerns about rising interest rates, which could make ourlending products less attractive to potential homeowners and investors.
A significant decrease in commercial property valuations or a significant slowdown in Australia, New Zealand or other commercial real estate markets
where the Group does business could result in a decrease in the amount of new lending the Group is able to write and/or increase the losses that theGroup may experience from existing loans, which, in either case, could materially and adversely impact the Group’s financial condition andoperations. The Group's portfolio of commercial property interest only loans, may be particularly susceptible to losses in the event of a decline inproperty prices as a result of refinance risk and deteriorating security values. A material decline in residential housing prices could also cause losses
in our residential build to sell portfolio if customers who are pre-committed to purchase these dwellings are unable or unwilling to complete theircontracts and we are forced to re-sell these dwellings at a loss.
7.

The Group is exposed to liquidity and funding risk, which may adversely affect its business, operations and financial condition
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due (including repaying depositors or maturing wholesaledebt) or that the Group has insufficient capacity to fund increases in assets. Liquidity risk is inherent in all banking operations due to the timing
mismatch between cash inflows and cash outflows.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings and constrain the volume of new lending, which could adversely
affect the Group’s profitability. A deterioration in investor confidence in the Group could materially impact the Group’s cost of borrowing, and theGroup’s ongoing operations and funding.
The Group raises funding from a variety of sources, including customer deposits and wholesale funding in Australia and offshore markets to meet its
funding obligations and to maintain or grow its business generally. In times of liquidity stress, if there is damage to market confidence in the Group or
if funding inside or outside of Australia is not available or constrained, the Group’s ability to access sources of funding and liquidity may beconstrained and it will be exposed to liquidity risk. In any such cases, the Group may be forced to seek alternative funding. The availability of suchalternative funding, and the terms on which it may be available, will depend on a variety of factors, including prevailing market conditions and theGroup’s credit ratings (which are strongly influenced by Australia’s sovereign credit rating). Even if available, the cost of these funding alternatives
may be more expensive or on unfavourable terms, which could adversely affect the Group’s financial performance, liquidity, capital resources andfinancial condition.
Since the advent of the global financial crisis in 2008, developments in the United States, European and Chinese markets have adversely affected
the liquidity in global capital markets and increased funding costs compared with the period immediately preceding the global financial crisis.

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More recently, the provision of significant amounts of liquidity by major central banks globally has helped mitigate near term liquidity concerns,
although no assurance can be given that such liquidity concerns will not return, particularly when the extraordinary liquidity is withdrawn by central
banks. Future deterioration in market conditions may limit the Group’s ability to replace maturing liabilities and access funding in a timely and costeffective manner necessary to fund and grow the Group’s businesses.
8.

Regulatory changes or a failure to comply with regulatory standards, law or policies may adversely affect the Group’s business,
operations or financial condition
As a financial institution, the Group is subject to detailed laws and regulations in each of the jurisdictions in which it operates or obtains funding,including Australia, New Zealand, the United States, Europe and Asia Pacific. The Group is also supervised by a number of different regulatory andsupervisory authorities.
The Group is responsible for ensuring that it complies with all applicable legal and regulatory requirements (including accounting standards) andindustry codes of practice in the jurisdictions in which it operates or obtains funding.
Compliance risk arises from these legal, regulatory and internal- compliance requirements. If the Group, or an employee of the Group, fails tocomply, the Group may be subject to fines, penalties or restrictions on its ability to do business and it may lose customer confidence and business,
which could have a material adverse impact on the Group. In Australia, an example of the broad administrative power available to regulatory
authorities is the power available to APRA under the Banking Act in certain circumstances to investigate the Group’s affairs and/or issue a direction
to the Group (such as direction to comply with a prudential requirement, to conduct an audit, to remove a director, executive officer or employee or
not to undertake a transaction). Other regulators also have the power to investigate the Group. In recent years, there have been significant increases
in the nature and scale of regulatory investigations, enforcement actions (whether by court action or otherwise) and the quantum of fines issued byregulators. Recent public scrutiny of banking culture has also led to a proposal by the Opposition Australian Labor Party for a Royal Commission toinvestigate Australian banks. Regulatory investigations, fines, penalties or regulator imposed conditions could adversely affect the Group’s business,
reputation, prospects, financial performance or financial condition.
As with other financial services providers, the Group faces increasing supervision and regulation in most of the jurisdictions in which the Group
operates or obtains funding, particularly in the areas of funding, liquidity, product design and pricing, capital adequacy, conduct and prudential
regulation, cyber-security, anti-bribery and corruption, anti-money laundering and counter-terrorism financing and trade sanctions.
In December 2010, the Basel Committee (BCBS) released capital reform packages known as Basel 3 to strengthen the resilience of the banking andinsurance sectors, including proposals to strengthen capital and liquidity requirements for the banking sector. APRA released prudential standards
implementing Basel 3 capital reforms with effect from 1 January 2013. With regards to Basel 3 liquidity reforms, APRA requires the Group to comply
with the Liquidity Coverage Ratio (LCR) requirements with effect from 1 January 2015 and is currently consulting on the implementation of the Net
Stable Funding Ratio (NSFR) requirements, which are expected to be implemented by 1 January 2018. Certain regulators in jurisdictions where theGroup has a presence have also either implemented or are in the process of implementing Basel 3 and equivalent reforms.
Separately, since 2014, the BCBS has also released a number of consultation documents as part of its reforms aimed at simplifying themeasurement of risk-weighted assets and reducing their variability across banks and jurisdictions. Consultation and finalisation of these reforms are
current and on-going. Any impacts on the Group resulting from these reforms cannot be determined as final calibration is still to be finalised by the
BCBS and they are also subject to the form of these proposals that APRA will implement in Australia.
In addition, there have also been a series of other regulatory releases from authorities in the various jurisdictions in which we operate or obtainfunding proposing significant regulatory change for financial institutions. This includes new accounting and reporting standards, or implementing
global OTC derivatives reform and the United States Dodd-Frank legislation, including the Volcker Rule promulgated thereunder.
In 2015, the Australian Government announced its response to the Financial System Inquiry (FSI). The response tasks APRA with implementation of
a number of resilience-related FSI recommendations in line with emerging international regulatory practice. These FSI recommendations areintended to increase the strength of the financial system and may result in requirements to hold additional capital (such as Additional Tier 1 Capital,
Tier 2 Capital or other forms of subordinated capital or senior debt that may be available to absorb loss) or additional liquid assets. The AustralianGovernment response also endorses FSI recommendations relating to Australia’s superannuation system and retirement incomes, innovation-related
issues, reforms to improve consumer outcomes when purchasing financial products, and the overall regulation of the financial sector. These are likely
to result in changes to laws, regulations, codes of practice and policies that will impact the Group. The implementation of any recommendations could
also result in changes to laws, regulations, codes of practice or policies which could adversely affect the Group in substantial and unpredictable
ways.
Regulation is becoming increasingly extensive and complex. Some areas of potential regulatory change involve multiple jurisdictions seeking to
adopt a coordinated approach. This may result in conflicts with specific requirements of the jurisdictions in which the Group operates and, in addition,such changes may be inconsistently introduced across jurisdictions. Changes may also occur in the oversight approach of regulators. It is possible
for example that governments in jurisdictions in which we operate or obtain funding might revise their application of existing regulatory policies that
apply to, or impact, the Group’s business, including for reasons relating to national interest and systemic stability.
Regulatory changes and the timing of their introduction continue to evolve. The nature and impact of future changes are not predictable and are
beyond the Group’s control. Regulatory change may impact the Group in a range of ways, such as by requiring the Group to change its business mix,
incur additional costs as a result of increased management attention, raise additional amounts of higher-quality capital (such as ordinary shares,
Additional Tier 1 capital or Tier 2 capital instruments) or retain capital (through lower dividends), and hold significant levels of additional liquid assets
and undertake further lengthening of the funding base. Further examples of ways in which regulatory change may impact the Group include: limiting
the types, amount and composition of financial services and products the Group can offer, limiting the fees and interest that the Group may charge,
increasing the ability of other banks or of non-banks to offer competing financial services or products and changes to accounting standards, taxation
laws and prudential regulatory requirements. Regulatory change could adversely affect one or more of the Group’s businesses, restrict its flexibility,
require it to incur substantial costs and impact the profitability of one or more business lines. Any such costs or restrictions could adversely affect theGroup’s business, prospects, financial performance or financial condition.

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9.

The Group is exposed to the risk of receiving significant regulatory fines and sanctions in the event of breaches of regulation and law
relating to anti-money laundering, counter-terrorism financing and sanctions
Anti-money laundering, counter-terrorist financing and sanctions compliance have been the subject of increasing regulatory change and enforcement
in recent years. The increasingly complicated environment in which the Group operates across the Asia Pacific region has heightened these
operational and compliance risks. Furthermore, the upward trend in compliance breaches by global banks and the related fines and settlement sumsmeans that these risks continue to be an area of focus for the Group.
The Group maintains appropriate policies, and has invested in procedures and internal controls aimed to detect, prevent and report money
laundering, terrorist financing, and sanctions breaches. The risk of non-compliance remains high given the scale and complexity of the Group. A
failure to operate a robust program to combat money laundering, bribery and terrorist financing or to ensure compliance with economic sanctions
could have serious legal and reputational consequences for the Group and its employees. Consequences can include fines, criminal and civil
penalties, civil claims, reputational harm and limitations on doing business in certain jurisdictions. The Group’s foreign operations may place theGroup under increased scrutiny by regulatory authorities, and may increase the risk of a member of the Group breaching applicable rules, regulations
or laws.

10. The Group may experience challenges in managing its capital base, which could give rise to greater volatility in capital ratios
The Group’s capital base is critical to the management of its businesses and access to funding. Prudential regulators of the Group include, but are
not limited to, APRA, RBNZ and various regulators in the Asia Pacific, U.S. and U.K. The Group is required to maintain adequate regulatory capital.
Under current regulatory requirements, risk-weighted assets and expected loan losses increase as a counterparty’s risk grade worsens. These
additional regulatory capital requirements compound any reduction in capital resulting from lower profits in times of stress. As a result, greater
volatility in capital ratios may arise and may require the Group to raise additional capital. There can be no certainty that any additional capitalrequired would be available or could be raised on reasonable terms.
The Group’s capital ratios may be affected by a number of factors, such as (i) lower earnings (including lower dividends from its deconsolidated
subsidiaries such as those in the insurance and funds management businesses as well as from its investment in associates), (ii) increased asset
growth, (iii) changes in the value of the Australian dollar against other currencies in which the Group operates (particularly the New Zealand dollar
and United States dollar) that impact risk weighted assets or the foreign currency translation reserve and (iv) changes in business strategy (including
acquisitions, divestments and investments or an increase in capital intensive businesses).
APRA’s Prudential Standards implementing Basel 3 are now in effect. Certain other regulators have either implemented or are in the process of
implementing regulations, including Basel 3, which seek to strengthen, among other things, the liquidity and capital requirements of banks, funds
management entities and insurance entities, though there can be no assurance that these regulations will have their intended effect. Some of theseregulations, together with any risks arising from any regulatory changes (including those arising from the requirements of the BCBS or the AustralianGovernment’s response to the FSI), are described in risk factor 8 “Regulatory changes or a failure to comply with regulatory standards, law orpolicies may adversely affect the Group’s business, operations or financial condition”.
11. The Group is exposed to credit risk, which may adversely affect its business, operations and financial condition
As a financial institution, the Group is exposed to the risks associated with extending credit to other parties. Less favourable business or economic
conditions, whether generally or in a specific industry sector or geographic region, or natural disasters, could cause customers or counterparties tofail to meet their obligations in accordance with agreed terms. For example, the Group’s customers and counterparties in the natural resources sector
and the New Zealand dairy industry could be adversely impacted by a prolonged slowdown in the Chinese economy and current decline incommodity prices. Also, the Group’s customers and counterparties may be adversely impacted by more expensive imports due to the reduced
strength of the Australian and New Zealand dollars relative to other currencies.
In addition, in assessing whether to extend credit or enter into other transactions with customers and/or counterparties, the Group relies on
information provided by or on behalf of customers and/or counterparties, including financial statements and other financial information. The Group
may also rely on representations of customers and independent consultants as to the accuracy and completeness of that information. The Group’s
financial performance could be negatively impacted to the extent that it relies on information that is inaccurate or materially misleading.
The Group holds provisions for credit impairment. The amount of these provisions is determined by assessing the extent of impairment inherent
within the current lending portfolio, based on current information. This process, which is critical to the Group’s financial condition and results, requires
subjective and complex judgements, including forecasts of how current and future economic conditions might impair the ability of borrowers to repay
their loans. However, if the information upon which the assessment is made proves to be inaccurate or if the Group fails to analyse the information
correctly, the provisions made for credit impairment may be insufficient, which could have a material adverse effect on the Group’s business,
operations and financial condition.
12. The Group is exposed to the risk that its credit ratings could change, which could adversely affect its ability to raise capital andwholesale funding
The Group’s credit ratings have a significant impact on both its access to, and cost of, capital and wholesale funding. Credit ratings may be
withdrawn, qualified, revised or suspended by credit rating agencies at any time. The methodologies by which they are determined may also be
revised in response to legal or regulatory changes, market developments or for any other reason. A downgrade or potential downgrade to theGroup’s credit rating may reduce access to capital and wholesale debt markets, leading to an increase in funding costs, as well as affecting thewillingness of counterparties to transact with the Group.
In addition, the ratings of individual securities (including, but not limited to, certain Tier 1 capital and Tier 2 capital securities and covered bonds)
issued by the Group (and other banks globally) could be impacted from time to time by changes in the regulatory requirements for those instruments
as well as the ratings methodologies used by rating agencies. Further, the Group’s credit ratings could be revised at any time in response to achange in the credit rating of the Commonwealth of Australia.
Credit ratings are not a recommendation by the relevant rating agency to invest in securities offered by the Group.

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13. The Group is exposed to market risk, which may adversely affect its business, operations and financial condition
The Group is subject to market risk, which is the risk to the Group’s earnings arising from changes in interest rates, foreign exchange rates, credit
spreads, equity prices and indices, prices of commodities, debt securities and other financial contracts, such as derivatives. Losses arising fromthese risks may have a material adverse effect on the Group.
As the Group conducts business in several different currencies, its businesses may be affected by a change in currency exchange rates. Additionally,as the Group’s annual and interim reports are prepared and stated in Australian dollars, any appreciation in the Australian dollar against othercurrencies in which the Group earns revenues (particularly to the New Zealand dollar and United States dollar) may adversely affect the reported
earnings.
The profitability of the Group’s funds management and insurance businesses is also affected by changes in investment markets and weaknesses in
global securities markets.
14. Changes in exchange rates may adversely affect the Group’s business, operations and financial condition
Movements in the Australian and New Zealand dollars in recent times illustrate the potential volatility in, and significance of global economic events
to, the value of these currencies relative to other currencies. Depreciation of the Australian or New Zealand dollars relative to other currencies would
increase the debt service obligations in the Group’s unhedged exposures denominated in Australian or New Zealand dollars. In contrast, any upward
pressure on the Australian or New Zealand dollar could cause business conditions to deteriorate for certain portions of the Australian and
New Zealand economies, including some agricultural exports, tourism, manufacturing, retailing subject to internet competition, and import-competingproducers. In addition, appreciation of the Australian dollar against the New Zealand dollar, United States dollar and other currencies has a potential
negative earnings translation effect on non-hedged exposures, and future appreciation could have a greater negative impact on the Group’s resultsfrom its other non-Australian businesses, particularly its New Zealand and Asian businesses, which are largely based on non-Australian dollar
revenues. The relationship between exchange rates and commodity prices is volatile. The Group has put in place hedges to partially mitigate theimpact of currency changes, but there can be no assurance that the Group’s hedges will be sufficient or effective, and any further appreciation could
have an adverse impact upon the Group’s earnings.
15. The Group is exposed to operational risk and reputational risk, which may adversely affect its business, operations and financial condition
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition
includes legal risk, and the risk of loss of reputation or damage arising from inadequate or failed internal processes, people and systems, but
excludes strategic risk.
Loss from operational risk events could adversely affect the Group’s financial results. Such losses can include fines, penalties, loss or theft of funds
or assets, legal costs, customer compensation, loss of shareholder value, reputation loss, loss of life or injury to people, and loss of property and/or
information.
Operational risk is typically classified into the risk event type categories to measure and compare risks on a consistent basis. Examples ofoperational risk events according to category are as follows:Internal Fraud: is associated with ANZ employees acting outside their normal employment conditions/procedures to create a financial advantage
for themselves or others;External Fraud: fraudulent acts or attempts which originate from outside the Group, more commonly associated with digital banking, lending, andcards products. Specific threats include ATM skimming, malware and phishing attacks and fraudulent applications, where financial advantage is
obtained;Employment Practices and Workplace Safety: employee relations, diversity and discrimination, and health and safety risks to the Group
employees;



Clients, Products and Business Practices: risk of market manipulation, product defects, incorrect advice, money laundering and misuse or
unauthorised disclosure of customer information;

Technology: the risk of loss resulting from inadequate or failed information technology;Business Disruption (including systems failures): risk that the Group’s banking operating systems are disrupted or fail;Damage to physical assets: risk that a natural disaster or terrorist or vandalism attack damages the Group’s buildings or property; and

Execution, Delivery and Process Management: is associated with losses resulting from, among other things, process errors made by ANZ
employees caused by inadequate or poorly designed internal processes, or the poor execution of standard processes, vendor, supplier oroutsource provider errors or failed mandatory reporting errors.

Direct or indirect losses that occur as a result of operational failures, breakdowns, omissions or unplanned events could adversely affect the Group’s
financial results.
Reputation risk may arise as a result of an external event or the Group’s own actions, and adversely affect perceptions about the Group held by the
public (including the Group’s customers), shareholders, investors, regulators or rating agencies. The impact of a risk event on the Group’s reputation
may exceed any direct cost of the risk event itself and may adversely impact the Group’s business, operations and financial condition.
Damage to the Group’s reputation may also have wide-ranging impacts, including adverse effects on the Group’s profitability, capacity and cost ofsourcing funding and availability of new business opportunities. The Group’s ability to attract and retain customers could also be adversely affected if
the Group’s reputation is damaged, which could adversely affect the Group’s business prospects, financial performance or financial condition.
16. The Group may be exposed to risks relating to the provision of advice, recommendations or guidance about financial products andservices, or behaviours which do not appropriately consider the interests of consumers, the integrity of financial markets and the
expectations of the community, in the course of its business activities
Such risks can include:the provision of unsuitable or inappropriate advice (e.g., commensurate with a customer’s objectives and appetite for risk);

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SUPPLEMENTARY INFORMATIONthe representation of, or disclosure about, a product or service which is inaccurate, or does not provide adequate information about risks andbenefits to customers;

a failure to deliver product features and benefits in accordance with terms, disclosures, recommendations and/or advice;a failure to appropriately avoid or manage conflicts of interest;sales and/or promotion processes (including incentives and remuneration for staff engaged in promotion, sales and/or the provision of advice);the provision of credit, outside of ANZ policies and standards; and

trading activities in financial markets, outside of ANZ policies and standards e.g., BBSW, LIBOR, rate fixing.

Exposure to such risks may increase during periods of declining investment asset values (such as during a period of economic downturn orinvestment market volatility), leading to sub-optimal performance of investment products and/or portfolios that were not aligned with the customer’s
objectives and risk appetite.
The Group is regulated under various legislative mechanisms in the countries in which it operates that provide for consumer protection aroundadvisory, marketing and sales practices. These may include, but are not limited to, appropriate management of conflicts of interest, appropriate
accreditation standards for staff authorised to provide advice about financial products and services, disclosure standards, standards for ensuring
adequate assessment of client/product suitability, quality assurance activities, adequate record keeping, and procedures for the management ofcomplaints and disputes.
Inappropriate advice about financial products and services may result in material litigation (and associated financial costs) and together with failure to
avoid or manage conflicts of interest, may expose the Group to regulatory actions, and/or reputational consequences.
17. Disruption of information technology systems or failure to successfully implement new technology systems could significantly interrupt
the Group’s business, which may adversely affect its business, operations and financial condition
The Group is highly dependent on information systems and technology. Therefore, there is a risk that these, or the services the Group uses or isdependent upon, might fail, including because of unauthorised access or use.
Most of the Group’s daily operations are computer-based and information technology systems are essential to maintaining effective communications
with customers. The Group is also conscious that threats to information systems and technology are continuously evolving and that cyber threats andrisk of attacks are increasing. The Group may not be able to anticipate or implement effective measures to prevent or minimise disruptions that may
be caused by all cyber threats because the techniques used can be highly sophisticated and those perpetuating the attacks may be well resourced.
The exposure to systems risks includes the complete or partial failure of information technology systems or data centre infrastructure, the inadequacyof internal and third-party information technology systems due to, among other things, failure to keep pace with industry developments and thecapacity of the existing systems to effectively accommodate growth, prevent unauthorised access and integrate existing and future acquisitions andalliances.
To manage these risks, the Group has disaster recovery and information technology governance in place. However, there can be no guarantee thatthe steps the Group is taking in this regard will be effective and any failure of these systems could result in business interruption, customer
dissatisfaction and ultimately loss of customers, financial compensation, damage to reputation and/or a weakening of the Group’s competitive
position, which could adversely impact the Group’s business and have a material adverse effect on the Group’s financial condition and operations.
In addition, the Group has an ongoing need to update and implement new information technology systems, in part to assist it to satisfy regulatory
demands, ensure information security, enhance computer-based banking services for the Group’s customers and integrate the various segments of
its business. The Group may not implement these projects effectively or execute them efficiently, which could lead to increased project costs, delaysin the ability to comply with regulatory requirements, failure of the Group’s information security controls or a decrease in the Group’s ability to service
its customers. ANZ New Zealand relies on ANZBGL to provide a number of information technology systems, and any failure of ANZBGL systems
could directly affect ANZ New Zealand.
18. The Group is exposed to risks associated with information security, which may adversely affect its financial results and reputation
Information security means protecting information and information systems from unauthorised access, use, disclosure, disruption, modification,
perusal, inspection, recording or destruction. As a bank, the Group handles a considerable amount of personal and confidential information about its
customers and its own internal operations, including in Australia, New Zealand and India. The Group employs a team of information security experts
who are responsible for the development and implementation of the Group’s Information Security Policy. The Group also uses third parties to process
and manage information on its behalf, and any failure on their part could adversely affect its business. The Group is conscious that threats to
information systems are continuously evolving and that cyber threats and risk of attacks are increasing, and as such the Group may be unable todevelop policies and procedures to adequately address or mitigate such risks. Accordingly, information about the Group and/or our clients may be
inadvertently accessed, inappropriately distributed or illegally accessed or stolen. The Group may not be able to anticipate or to implement effective
measures to prevent or minimise damage that may be caused by all information security threats because the techniques used can be highlysophisticated and those perpetuating the attacks may be well resourced. Any unauthorised access of the Group’s information systems or
unauthorised use of its confidential information could potentially result in disruption of the Group’s operations, breaches of privacy laws, regulatory
sanctions, legal action, and claims for compensation or erosion to the Group’s competitive market position, which could adversely affect the Group’s
financial position and reputation.
19. Unexpected changes to the Group’s licence to operate in any jurisdiction may adversely affect its business, operations
and financial condition
The Group is licenced to operate in various countries, states and territories. Unexpected changes in the conditions of the licences to operate bygovernments, administrations or regulatory agencies which prohibit or restrict the Group from trading in a manner that was previously permitted may
adversely impact the Group’s operations and subsequent financial results.

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20. An increase in the failure of third parties to honour their commitments in connection with the Group’s trading, lending, derivatives andother activities may adversely affect its business, operations and financial condition
The Group is exposed to the potential risk of credit-related losses that can occur as a result of a counterparty being unable or unwilling to honour its
contractual obligations. As with any financial services organisation, the Group assumes counterparty risk in connection with its lending, trading,derivatives, insurance and other businesses where it relies on the ability of a third party (including reinsurers) to satisfy its financial obligations to theGroup on a timely basis. The Group is also subject to the risk that its rights against third parties may not be enforceable in certain circumstances.
The risk of credit-related losses may also be increased by a number of factors, including deterioration in the financial condition of the economy, asustained high level of unemployment, a deterioration of the financial condition of the Group’s counterparties, a reduction in the value of assets theGroup holds as collateral, and a reduction in the market value of the counterparty instruments and obligations it holds.
The Group is directly and indirectly exposed to the natural resources sector, including contractors and related industries. Lower commodity prices,mining activity, demand for resources, or corporate investment in the natural resources sector may adversely affect the amount of new lending theGroup is able to write, or lead to an increase in lending losses from this sector. Recently, crude oil prices have reached a 12 year low and aprolonged period of low oil prices, beyond 12 months, is likely to result in reduced investment and increased asset write downs. The suddenness andmagnitude of oil price decline and the shift in sentiment towards this sector introduces challenges across the energy supply chain. Upstream
exploration and production firms and related services operators are currently the most directly exposed as new project investment is wound back andoperations rationalised. Services to mining customers are also subject to heightened oversight given the cautious outlook for the services sector. This
industry-specific revenue decline may lead to a broader regional economic downturn with a long recovery period.
Credit losses can and have resulted in financial services organisations realising significant losses and in some cases failing altogether. Shouldmaterial unexpected credit losses occur to the Group’s credit exposures, it could have an adverse effect on the Group’s business, operations andfinancial condition.
21. The unexpected loss of key staff or inadequate management of human resources may adversely affect the Group’s business, operations
and financial condition
The Group’s ability to attract and retain suitably qualified and skilled employees is an important factor in achieving its strategic objectives. The Chief
Executive Officer and the management team of the Chief Executive Officer have skills and reputation that are critical to setting the strategic direction,
successful management and growth of the Group, and whose unexpected loss due to resignation, retirement, death or illness may adversely affectits operations and financial condition. If the Group had difficulty retaining or attracting highly qualified people for important roles, this also could
adversely affect its business, operations and financial condition.
22. The Group may be exposed to the impact of future climate change, geological events, plant, animal and human diseases, and otherextrinsic events which may adversely affect its business, operations and financial condition
The Group and its customers are exposed to climate related events, including climate change. These events include severe storms, drought, fires,
cyclones, hurricanes, floods and rising sea levels. The Group and its customers may also be exposed to other events such as geological events(including volcanic seismic activity or tsunamis), plant and animal diseases or a pandemic.
Depending on their severity, events such as these may temporarily interrupt or restrict the provision of some local or Group services, and may also
adversely affect the Group’s financial condition or collateral position in relation to credit facilities extended to customers.
23. The Group is exposed to insurance risk, which may adversely affect its business, operations and financial condition
Insurance risk is the risk of loss due to unexpected changes in current and future insurance claim rates. In the Group’s life insurance business,insurance risk arises primarily through mortality (death) and morbidity (illness and injury) risks being greater than expected and, in the case of annuity
business, should annuitants live longer than expected. In August 2015, ANZ ceased to issue home, car and travel insurance and became a
distributer only of these products. The general insurance business now solely comprises a small amount of unemployment benefit. The Group has
exposure to insurance risk in both its life insurance and general insurance business, which may adversely affect its businesses, operations andfinancial condition.
24. The Group is exposed to increased compliance costs and the risk of penalties and regulatory scrutiny with respect to the significant
obligations imposed by global tax reporting regimes which are still evolving
In 2010, the U.S. enacted the Foreign Account Tax Compliance Act (“FATCA”) that requires non-U.S. banks and other financial institutions toundertake specific customer due diligence and provide information on account holders who are U.S. citizens or residents to the United States Federal
tax authority, the Internal Revenue Service ("IRS"). The United States has entered into intergovernmental agreements ("IGAs") with a number ofjurisdictions (including Australia and New Zealand) which generally require such jurisdictions to enact legislation or other binding rules pursuant towhich local financial institutions and branches provide such information to their local revenue authority to then forward to the IRS. In countries thathave not entered into such an agreement, the financial institution must enter into an agreement directly with the IRS to complete similar obligations
and provide similar information directly to the United States. If the aforementioned customer due diligence and provision of account holder
information is not undertaken and provided in a manner and form meeting the applicable requirements, the Group and/or persons owning assets inaccounts with Group members may be subjected to a 30 percent withholding tax on certain amounts. While such withholding tax may currently apply
only to certain payments derived from sources within the United States (and, beginning on 1 January 2019, certain gross proceeds from thedisposition of assets that can give rise to such U.S. source payments), no such withholding tax will be imposed on any payments derived fromsources outside the United States that are made prior to 1 January 2019, at the earliest. Australia and New Zealand have each signed an IGA with
the United States and have enacted legislation to implement the respective IGAs. Local guidance in relation to the enacted legislation is still evolving.
In addition to FATCA, the U.S. may require the Group in certain circumstances to provide certain information to U.S. payors (withholding agents,
custodians, etc.), and the Group may face adverse consequences in case it does not provide such information in compliance with the applicable rules
and regulations.
The Organisation for Economic Co-operation and Development (“OECD”) has finalised a global Common Reporting Standard (“CRS”) for theAutomatic Exchange Of (financial account) Information (“AEOI”) in tax matters. Over 90 jurisdictions have committed to implement the CRS in 2016or 2017, with the first exchange of information to take place in 2017 or 2018. Countries with a start date of 1 January, 2016 include Cayman Islands,
France, Germany, India, the United Kingdom and South Korea. On 3 June 2015, Australia signed the Multilateral Competent Authority Agreement

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SUPPLEMENTARY INFORMATION(“MCAA”) that enables Common Reporting Standard information to be exchanged between countries’ tax authorities. Several countries, including
Canada, New Zealand and India, also signed the MCAA on 3 June 2015. Australia has legislated for the CRS to apply from 1 July 2017 (with thegovernment to government exchange of information to take place by September 2018). Australian financial institutions that do not fully comply with all
the requirements of the CRS (as modified by the implementing legislation), will be subject to administrative penalties.
To date, no legislation has been introduced in the New Zealand Parliament to support implementation of the CRS although the New Zealand
Government has recently released a media statement announcing that it intends for the CRS to apply from 1 July 2017 (with exchange of information
to take place in September 2018) and preliminary consultation activities on an approach to CRS have commenced.
In countries where an entity of the Group (including certain trusts and branches) operates and which maintains financial accounts, there may be arequirement to collect customer information including customers’ tax residence and report it to local tax authorities. Even if an entity of the Group
does not operate in a country that has adopted CRS, it will still be required to capture information on residents of that country who have an accountwith the Group. CRS requirements, though generally similar to FATCA, have significant differences and a higher standard of compliance in many
aspects, including penalties for non-collection of prescribed customer information.
In addition to FATCA and CRS, there are an increasing number of tax reporting initiatives that require financial institutions to undertake due diligenceand report customer information including the Annual Investment Income Report (Australia), UK Crown Dependency and Overseas Territory(“CDOT”) automatic exchange of information regime and many others that will require due diligence and reporting to the in-country revenue authority.
In line with other global financial institutions, ANZ has made and is expected to make significant investments in order to comply with, in all thecountries that it operates in, the extensive requirements of FATCA, the CRS and the various other in-country tax reporting initiatives.
25. The Group may experience changes in the valuation of some of its assets and liabilities that may have a material adverse effect on its
earnings and/or equity
Under AASs, the Group recognises the following instruments at fair value with changes in fair value recognised in earnings or equity:derivative instruments, including in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure with changes infair value recognised in earnings with the exception of derivatives designated in qualifying cash flow or net investment hedges where the change
is recognised in equity and released to earnings together with the underlying hedged exposure;

assets and liabilities held for trading;

available-for-sale assets with changes in fair value recognised in equity unless the asset is impaired, in which case, the decline in fair value isrecognised in earnings; and

assets and liabilities designated at fair value through profit and loss with changes recognised in earnings with the exception of changes in fairvalue attributable to the own credit component of liabilities that is recognised in equity.

Generally, in order to establish the fair value of these instruments, the Group relies on quoted market prices or, where the market for a financial
instrument is not sufficiently active, fair values are based on present value estimates or other accepted valuation techniques which incorporate theimpact of factors that would influence the fair value as determined by a market participant. The fair value of these instruments is impacted bychanges in market prices or valuation inputs which could have a material adverse effect on the Group’s earnings.
In addition, the Group may be exposed to a reduction in the value of non-lending related assets as a result of impairments loss which is recognised inearnings. The Group is required to assess the recoverability of the goodwill balances at least annually and other non-financial assets including
Premises and Equipment, investment in associates, capitalised software and other intangible assets (including acquired portfolio of insurance andinvestment business and deferred acquisition costs) where there are indictors of impairment.
For the purpose of assessing the recoverability of the goodwill balances, the Group uses either a discounted cash flow or a multiple of earnings
calculation. Changes in the assumptions upon which the calculation is based, together with expected changes in future cash flows, could materially
impact this assessment, resulting in the potential write-off of a part or all of the goodwill balances.
In respect of other non-financial assets, in the event that an asset is no longer in use, or that the cash flows generated by the asset do not support
the carrying value, impairment may be recorded.
26. Changes to accounting policies may adversely affect the Group’s financial position or performance
The accounting policies and methods that the Group applies are fundamental to how it records and reports its financial position and results ofoperations. Management must exercise judgment in selecting and applying many of these accounting policies and methods so that they not only
comply with generally accepted accounting principles but they also reflect the most appropriate manner in which to record and report on the Group’s
financial position and results of operations. However, these accounting policies may be applied inaccurately, resulting in a misstatement of theGroup’s financial position and results of operations. In addition, the application of new or revised generally accepted accounting principles could havea material adverse effect on the Group’s financial position and results of operations.
In some cases, management must select an accounting policy or method from two or more alternatives, any of which might comply with the generally
accepted accounting principles applicable to the Group and be reasonable under the circumstances, yet might result in reporting materially different
outcomes than would have been reported under another alternative.
27. Litigation and contingent liabilities may adversely affect the Group’s business, operations and financial condition
From time to time, the Group may be subject to material litigation, regulatory actions, legal or arbitration proceedings and other contingent liabilities
which, if they crystallise, may adversely affect the Group’s results.
The Group had contingent liabilities as at 31 March 2016 in respect of the matters outlined in Note 20 to the Condensed Consolidated Financial
Statements for the half year ended 31 March 2016.
There is a risk that contingent liabilities may be larger than anticipated or that additional litigation or other contingent liabilities may arise.

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SUPPLEMENTARY INFORMATION
28. The Group regularly considers acquisition and divestment opportunities, and there is a risk that the Group may undertake an acquisition
or divestment that could result in a material adverse effect on its business, operations and financial condition
The Group regularly examines a range of corporate opportunities, including material acquisitions and disposals, with a view to determining whether
those opportunities will enhance the Group’s strategic position and financial performance.
There can be no assurance that any acquisition (or divestment) would have the anticipated positive results, including results relating to the total costof integration (or separation), the time required to complete the integration (or separation), the amount of longer-term cost savings, the overall
performance of the combined (or remaining) entity, or an improved price for the Group’s securities. The Group’s operating performance, risk profileand capital structure may be affected by these corporate opportunities and there is a risk that the Group’s credit ratings may be placed on credit
watch or downgraded if these opportunities are pursued.
Integration (or separation) of an acquired (or divested) business can be complex and costly, sometimes including combining (or separating) relevant
accounting and data processing systems, and management controls, as well as managing relevant relationships with employees, customers,
regulators, counterparties, suppliers and other business partners. Integration (or separation) efforts could create inconsistencies in standards,
controls, procedures and policies, as well as diverting management attention and resources. This could adversely affect the Group’s ability to
conduct its business successfully and impact the Group’s operations or results. Additionally, there can be no assurance that employees, customers,
counterparties, suppliers and other business partners of newly acquired (or retained) businesses will remain post-acquisition (or post-divestment),
and the loss of employees, customers, counterparties, suppliers and other business partners could adversely affect the Group’s operations or results.

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DEFINITIONSAASB – Australian Accounting Standards Board. The term “AASB” is commonly used when identifying Australian Accounting Standards issued by the
AASB.
ADI – Authorised Deposit-taking Institution.
APRA – Australian Prudential Regulation Authority.
APS – ADI Prudential Standard.
BCBS – Basel Committee on Banking Supervision.
Cash and cash equivalents comprise coins, notes, money at call, balances held with central banks, liquid settlement balances (readily convertible to
known amounts of cash which are subject to insignificant risk of changes in value) and securities purchased under agreements to resell (“reverse repos”)
in less than three months.
Cash profit is an additional measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents
ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performanceagainst prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit as noted below.
These items are calculated consistently period on period so as not to discriminate between positive and negative adjustments.
Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories:
1.

gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with theongoing operations of the Group;2.

treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences thatwill reverse through earnings in the future; and3.

accounting reclassifications between individual line items that do not impact reported results, such as policyholder tax gross up.

Cash profit is not a measure of cash flow or profit determined on a cash accounting basis.
Collective provision is the provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision is
only recognised when a loss event has occurred. Losses expected as a result of future events, no matter how likely, are not recognised.
Credit risk is the risk of financial loss resulting from the failure of ANZ’s customers and counterparties to honour or perform fully the terms of a loan orcontract.
Credit risk weighted assets represent assets which are weighted for credit risk according to a set formula (APS 112/113).
Credit valuation adjustment (CVA) – Over the life of a derivative instrument, ANZ uses a CVA model to adjust fair value to take into account the impact
of counterparty credit quality. The methodology calculates the present value of expected losses over the life of the financial instrument as a function ofprobability of default, loss given default, expected credit risk exposure and an asset correlation factor. Impaired derivatives are also subject to a CVA.
Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations’ debt excluding
securitisation deposits.
Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company, adjusted for the amount ofpreference share dividends paid.
Gross loans and advances (GLA) is made up of loans and advances, acceptances and capitalised brokerage/mortgage origination fees less unearned
income.
IFRS – International Financial Reporting Standards.
Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or whereconcessional terms have been provided because of the financial difficulties of the customer. Financial assets are impaired if there is objective evidence ofimpairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on
the expected future cash flows of the individual asset or portfolio of assets.
Impaired loans comprise drawn facilities where the customer’s status is defined as impaired.
Individual provision is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on
a collective basis). It takes into account expected cash flows over the lives of those financial instruments.
Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates on ANZ’s future net interest
income. The risk generally arises from:1.

Repricing and yield curve risk - the risk to earnings or market value as a result of changes in the overall level of interest rates and/or the
relativity of these rates across the yield curve;

2.

Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking book items; and3.

Optionality risk - the risk to earnings or market value arising from the existence of stand-alone or embedded options in banking book items.

Internationally comparable ratios are ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel 3: A global
regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and CapitalStandards” (June 2006). They also include differences identified in APRA’s information paper entitled International Capital Comparison Study (13 July2015).
Net interest margin (NIM) is net interest income as a percentage of average interest earning assets.
Net loans and advances represent gross loans and advances less provisions for credit impairment.
Net tangible assets equal share capital and reserves attributable to shareholders of the Company less preference share capital and unamortised
intangible assets (including goodwill and software).
Operating expenses include personnel expenses, premises expenses, technology expenses, restructuring expenses, and other operating expenses(excluding credit impairment charges).

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DEFINITIONS
Operating income includes net interest income, net fee and commission income, net funds management and insurance income, share of associates’
profit and other income.
Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of thecustomer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond thosetypically offered to new facilities with similar risk.
Return on average assets is the profit attributable to shareholders of the Company, adjusted for the amount of preference share dividends paid, divided
by average total assets.
Return on average ordinary shareholders’ equity is the profit attributable to shareholders of the Company, adjusted for the amount of preference
share dividends paid, divided by average ordinary shareholders’ equity.
Regulatory deposits are mandatory reserve deposits lodged with local central banks in accordance with statutory requirements.
Risk weighted assets (RWA) – Assets (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default andwhat the likely losses would be in the case of default. In the case of non asset backed risks (i.e. market and operational risk), RWA is determined bymultiplying the capital requirements for those risks by 12.5.
Settlement balances owed to / by ANZ represent financial assets and/or liabilities which are in the course of being settled. These may include trade
dated assets and liabilities, nostro / vostro accounts and securities settlement accounts.

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DEFINITIONS
Description of divisions
During the March 2016 half, the Group announced changes to the organisation’s structure to better meet the needs of our retail, commercial andinstitutional customers. As a result of these organisational changes there are six reported divisions; Australia, New Zealand, Institutional, Asia Retail &Pacific, Wealth and Technology, Services & Operations (“TSO”) and Group Centre. These divisions were created by removing the Asia Retail & Pacificbusiness from the former International & Institutional Banking (“IIB”) division, and repositioning minority investments in Asia from IIB to the Group Centre.
The residual IIB business has been renamed Institutional.
The Wealth changes designed to simplify the approach to the wealth management business will not take effect until 1 April 2016.

Australia
The Australia division comprises the Retail and Corporate & Commercial Banking (C&CB) business units.
Retail provides products and services to consumer customers via the branch network, mortgage specialists, the contact centre and a variety of selfservice channels (internet banking, phone banking, ATMs, website and mobile phone banking).



C&CB provides a full range of banking services including traditional relationship banking and sophisticated financial solutions; including asset
financing through dedicated managers focusing on privately owned small, medium and large enterprises as well as the agricultural businesssegment.

Institutional
The Institutional division services global institutional and business 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, structured trade finance aswell as cash management solutions, deposits, payments and clearing.



Loans & Specialised Finance provides specialised loan structuring and execution, loan syndication, project and export finance, debt structuring andacquisition finance, structured asset finance and corporate advisory.

Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets and wealth solutions inaddition to managing the Group’s interest rate exposure and liquidity position.

New Zealand
The New Zealand division comprises the Retail and Commercial business units.
Retail provides products and services to consumer and small business banking customers via the branch network, mortgage specialists, business
managers, the contact centre and a variety of self-service channels (internet banking, phone banking, ATMs, website and mobile phone banking).

Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions including asset
financing through dedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment.

WealthThe Wealth division comprises Insurance, Funds Management and Private Wealth business units which provide insurance, investment, superannuationand private banking solutions to customers in the Asia Pacific region to make it easier for them to connect with, protect and grow their wealth.
Insurance includes life insurance, general insurance and ANZ Lenders Mortgage Insurance.



Funds Management includes the Pensions and Investments business and E*TRADE.



Private Wealth includes private banking business which specialises in assisting individuals and families to manage, grow and preserve their wealth.

Asia Retail & Pacific
The Asia Retail & Pacific division comprises the Asia Retail and Pacific business units, connecting customers to specialists for their banking needs.


Asia Retail provides general banking and wealth management services to affluent and emerging affluent retail customers across nine Asian countries
via relationship managers, branches, contact centres and a variety of self-service digital channels (internet and mobile banking, phone and ATMs).
Core products offered include deposits, credit cards, loans, investments and insurance.

Pacific provides products and services to retail customers and small to medium sized enterprises located in the Pacific Islands (excluding Papua New
Guinea). Products and services include retail products provided to consumers, traditional relationship banking and sophisticated financial solutions
provided to business customers through dedicated managers.

Technology, Services & Operations and Group Centre
TSO and Group Centre provide support to the operating divisions, including technology, operations, shared services, property, risk management,
financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes Group Treasury, Shareholder Functions
and minority investments in Asia.

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ASX APPENDIX 4D – CROSS REFERENCE INDEX

Page
Details of the reporting period (4D Item 1) ...................................................................................................................................................... After front cover
Results for Announcement to the Market (4D Item 2) ..................................................................................................................................... After front cover
Net Tangible Assets per security (4D Item 3) ....................................................................................................................................................................... 12
Details of entities over which control has been gained or lost (4D Item 4) ......................................................................................................................... 125
Dividends and dividend dates (4D Item 5) ...................................................................................................................................................... After front cover
Dividend Reinvestment Plan (4D Item 6) ........................................................................................................................................................ After front cover
Details of associates and joint venture entities (4D Item 7) ................................................................................................................................................ 125

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ALPHABETICAL INDEXPAGEAppendix 4D Statement ......................................................................................................................................................................................................... 2
Appendix 4D Cross Reference Index ................................................................................................................................................................................. 151
Auditor’s Review Report and Independence Declaration ................................................................................................................................................... 128
Basis of Preparation ........................................................................................................................................................................................................... 104
Changes in Composition of the Group ............................................................................................................................................................................... 125
Condensed Consolidated Balance Sheet ........................................................................................................................................................................... 101
Condensed Consolidated Cash Flow Statement ................................................................................................................................................................ 102
Condensed Consolidated Income Statement ....................................................................................................................................................................... 99
Condensed Consolidated Statement of Comprehensive Income ....................................................................................................................................... 100
Condensed Statement of Changes in Equity...................................................................................................................................................................... 103
Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 125
Credit Risk.......................................................................................................................................................................................................................... 116
Definitions .......................................................................................................................................................................................................................... 148
Deposits and Other Borrowings ......................................................................................................................................................................................... 114
Directors’ Declaration and Responsibility Statement.......................................................................................................................................................... 127
Directors’ Report .................................................................................................................................................................................................................. 98
Dividends ........................................................................................................................................................................................................................... 108
Divisional Results ................................................................................................................................................................................................................. 49
Earnings Per Share ............................................................................................................................................................................................................ 109
Fair Value Measurement .................................................................................................................................................................................................... 118
Geographic Results.............................................................................................................................................................................................................. 83
Group Results ...................................................................................................................................................................................................................... 21
Income ............................................................................................................................................................................................................................... 106
Income Tax Expense ......................................................................................................................................................................................................... 108
Investments In Associates.................................................................................................................................................................................................. 125
Net Loans and Advances ................................................................................................................................................................................................... 112
News Release ........................................................................................................................................................................................................................ 5
Note to the Cash Flow Statement ...................................................................................................................................................................................... 111
Operating Expenses........................................................................................................................................................................................................... 107
Profit Reconciliation ............................................................................................................................................................................................................. 91
Provision for Credit Impairment .......................................................................................................................................................................................... 113
Related Party Disclosures .................................................................................................................................................................................................. 125
Segment Analysis .............................................................................................................................................................................................................. 110
Share Capital ..................................................................................................................................................................................................................... 123
Shareholders’ Equity .......................................................................................................................................................................................................... 123
Strategic Review .................................................................................................................................................................................................................. 19
Subordinated Debt ............................................................................................................................................................................................................. 115
Subsequent Events Since Balance Date ............................................................................................................................................................................ 126
Summary ................................................................................................................................................................................................................................ 9
Supplementary Information – Average Balance Sheet and Related Interest ..................................................................................................................... 134
Supplementary Information – Capital Management ........................................................................................................................................................... 130
Supplementary Information – Derivative Financial Instruments ......................................................................................................................................... 138
Supplementary Information – Exchange Rates .................................................................................................................................................................. 138
Supplementary Information – Full Time Equivalent Staff ................................................................................................................................................... 137
Supplementary Information – Funds Management and Insurance Income Reconciliation ................................................................................................. 137
Supplementary Information – Principal Risks and Uncertainties ........................................................................................................................................ 139

152