ANZ 2017 Full Year Results Documents
Australia and New Zealand Banking Group Limited
ABN 11 005 357 522
Full Year
30 September 2017
Consolidated Financial Report
Dividend Announcement
and Appendix 4E
The Consolidated Financial Report and Dividend Announcement contains information required by Appendix 4E of the Australian Securities
Exchange (ASX) Listing Rules. It should be read in conjunction with ANZ’s 2017 Annual Report, and is lodged with the ASX under listing rule
4.3A.
RESULTS FOR ANNOUNCEMENT TO THE MARKET APPENDIX 4E
Name of Company: Australia and New Zealand Banking Group Limited
ABN 11 005 357 522
Report for the year ended 30 September 2017
Operating Results
1
AUD million
Operating income
-1% to 20,273
Net statutory profit attributable to shareholders
12% to 6,406
Cash profit
2
18% to 6,938
Dividends
3
Cents
Franked
per
amount
4
share
per share
Proposed final dividend
80
100%
Interim dividend
80
100%
Record date for determining entitlements to the proposed 2017 final dividend 14 November 2017
Payment date for the proposed 2017 final dividend 18 December 2017
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 in
respect of the 2017 final dividend. For the 2017 final dividend, ANZ intends to provide shares under the DRP through an on-market purchase (as
approved by APRA) and BOP through the issue of new shares. 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 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 17 November 2017, 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 2017 final dividend must be received by
ANZ's Share Registrar by 5.00pm (Australian Eastern Daylight Time) on 15 November 2017. 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 17 November 2017.
1
Unless otherwise noted, all comparisons are to the year ended 30 September 2016.
2
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 in
earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the 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 policyholders
tax 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 $532 million made up of several items. Refer pages 75 to 79 for further details.
3
There is no conduit foreign income attributed to the dividends.
4
It is proposed that the final 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.
2
RESULTS FOR ANNOUNCEMENT TO THE MARKET APPENDIX 4E
The information on which the Condensed Consolidated Financial Statements is based is in the process of being audited by the Group’s external auditors,
KPMG. The financial information contained in the Condensed Consolidated Financial Statements section of this report includes financial information
extracted from the Annual Report together with financial information that has not been audited. The Group’s Annual Report will be available on 6
November 2017, and will include a copy of KPMG’s audit report.
Cash profit is not subject to review or audit by the external auditor. The external auditor has informed the Audit Committee that recurring adjustments
have been determined on a consistent basis across each period presented, and the additional adjustments for the impact of the reclassification of
Shanghai Rural Commercial Bank to held for sale in the March 2017 half, September 2017 half and September 2017 full year are appropriate.
David M Gonski, AC Shayne C Elliott
Chairman Director
25 October 2017
3
RESULTS FOR ANNOUNCEMENT TO THE MARKET APPENDIX 4E
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4
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ABN 11 005 357 522
CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4E
Year ended 30 September 2017
CONTENTS PAGE
Disclosure Summary 7
Summary 9
Group Results 19
Divisional Results 49
Profit Reconciliation 75
Condensed Consolidated Financial Statements 81
Supplementary Information 101
Definitions 115
ASX Appendix 4E Cross Reference Index 118
Alphabetical Index 119
This Consolidated Financial Report, Dividend Announcement and Appendix 4E 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 Company has a formally constituted Audit Committee of the Board of Directors. The
signing of the unaudited Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 25
October 2017.
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 these
forward-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.
5
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ABN 11 005 357 522
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6
DISCLOSURE SUMMARY
SUMMARY OF 2017 FULL YEAR RESULTS AND ASSOCIATED DISCLOSURE MATERIALS
The following disclosure items were lodged separately with the ASX and NZX and can be accessed via the ANZ Shareholder Centre on the Group
website http://www.shareholder.anz.com/ within the disclosures for 2017 Full Year Results.
Available 26 October 2017 – 2017 Full Year Results
• Consolidated Financial Report, Dividend Announcement & Appendix 4E
• Results Presentation and Investor Discussion Pack
• News Release
• Key Financial Data Summary
Available on or after 6 November 2017
• 2017 Annual Report
• 2017 ANZBGL Parent Entity Financial Statements
• 2017 Annual Review
• 2017 Corporate Governance Statement
• APS 330 Pillar III Disclosure at 30 September 2017
• 2017 Corporate Sustainability Review
• UK DTR Submission
7
DISCLOSURE SUMMARY
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8
SUMMARY
CONTENTS
Summary
Statutory Profit Results
Cash Profit Results
Key Balance Sheet Metrics
Cash Profit Results – FX Adjusted
Large/Notable Items
Full Time Equivalent Staff
Other Non-Financial Information
9
SUMMARY
Statutory Profit Results
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 7,456 7,416 1% 14,872 15,095 -1%
Other operating income
1
2,821 2,580 9% 5,401 5,451 -1%
Operating income 10,277 9,996 3% 20,273 20,546 -1%
Operating expenses
1
(4,717) (4,731) 0% (9,448) (10,439) -9%
Profit before credit impairment and income tax 5,560 5,265 6% 10,825 10,107 7%
Credit impairment charge (479) (719) -33% (1,198) (1,929) -38%
Profit before income tax 5,081 4,546 12% 9,627 8,178 18%
Income tax expense (1,579) (1,627) -3% (3,206) (2,458) 30%
Non-controlling interests (7) (8) -13% (15) (11) 36%
Profit attributable to shareholders of the Company 3,495 2,911 20% 6,406 5,709 12%
Earnings Per Ordinary Share (cents)
Half Year Full Year
Reference
Page
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Basic
92 119.9 100.2 20% 220.1 197.4 11%
Diluted 92 114.7 96.7 19% 210.8 189.3 11%
Half Year Full Year
Reference
Page
Sep 17 Mar 17 Sep 17 Sep 16
Ordinary Share Dividends (cents)
Interim - 100% franked
2
91 - 80 80 80
Final - 100% franked
2
91 80 - 80 80
Total - 100% franked
2
91 80 80 160 160
Ordinary share dividend payout ratio
3
91 67.2% 80.7% 73.4% 81.9%
Profitability Ratios
Return on average ordinary shareholders' equity
4
11.9% 10.1% 11.0% 10.0%
Return on average assets
5
0.76% 0.64% 0.70% 0.63%
Net interest margin
5,6
22 1.98% 2.00% 1.99% 2.07%
Efficiency Ratios
Operating expenses to operating income
1
45.9% 47.3% 46.6% 50.8%
Operating expenses to average assets
1,5
1.02% 1.03% 1.03% 1.15%
Credit Impairment Charge/(Release)
Individual credit impairment charge ($M) 554 786 1,340 1,912
Collective credit impairment charge/(release) ($M) (75) (67) (142) 17
Total credit impairment charge ($M) 94 479 719 1,198 1,929
Individual credit impairment charge as a % of average gross loans and advances
5
0.19% 0.27% 0.23% 0.33%
Total credit impairment charge as a % of average gross loans and advances
5
0.16% 0.25% 0.21% 0.34%
1.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to other operating expenses to
more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 full year: $17 million).
2.
Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 10 cents per ordinary share for the proposed 2017 final dividend (2017 interim dividend: NZD 9
cents; 2016 final dividend NZD 9 cents; 2016 interim dividend: NZD 10 cents).
3.
Dividend payout ratio is calculated using the proposed 2017 final, 2017 interim, 2016 final, and 2016 interim dividends.
4.
Average ordinary shareholders’ equity excludes non-controlling interests.
5.
Loans and advances and average assets as at 30 September 2017 and 31 March 2017 include assets held for sale.
6.
In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Refer to page 22 for further
details.
10
SUMMARY
Cash Profit Results
1
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 7,456 7,416 1% 14,872 15,095 -1%
Other operating income
2
2,730 2,887 -5% 5,617 5,499 2%
Operating income 10,186 10,303 -1% 20,489 20,594 -1%
Operating expenses
2
(4,717) (4,731) 0% (9,448) (10,439) -9%
Profit before credit impairment and income tax 5,469 5,572 -2% 11,041 10,155 9%
Credit impairment charge (479) (720) -33% (1,199) (1,956) -39%
Profit before income tax 4,990 4,852 3% 9,842 8,199 20%
Income tax expense (1,456) (1,433) 2% (2,889) (2,299) 26%
Non-controlling interests (7) (8) -13% (15) (11) 36%
Cash profit 3,527 3,411 3% 6,938 5,889 18%
Earnings Per Ordinary Share (cents)
Half Year Full Year
Reference
Page
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Basic 37
120.4 116.7 3% 237.1 202.6 17%
Diluted 37 115.2 111.9 3% 226.4 194.1 17%
Half Year Full Year
Reference
Page
Sep 17 Mar 17 Sep 17 Sep 16
Ordinary Share Dividends
Ordinary share dividend payout ratio
3
38 66.6% 68.9% 67.7% 79.4%
Profitability Ratios
Return on average ordinary shareholders' equity
4
12.0% 11.8% 11.9% 10.3%
Return on average assets
5
0.76% 0.75% 0.75% 0.65%
Net interest margin
5,6
22 1.98% 2.00% 1.99% 2.07%
Efficiency Ratios
Operating expenses to operating income
2
46.3% 45.9% 46.1% 50.7%
Operating expenses to average assets
2,5
1.02% 1.03% 1.03% 1.15%
Credit Impairment Charge/(Release)
Individual credit impairment charge ($M) 30 554 787 1,341 1,939
Collective credit impairment charge/(release) ($M) 30
(75) (67) (142) 17
Total credit impairment charge ($M) 30
479 720 1,199 1,956
Individual credit impairment charge as a % of average gross loans and advances
5
0.19% 0.27% 0.23% 0.34%
Total credit impairment charge as a % of average gross loans and advances
5
0.16% 0.25% 0.21% 0.34%
1.
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. Refer to pages
75 to 79 for the reconciliation between statutory and cash profit. Refer to pages 14 to 16 for information on large notable items included in cash profit.
2.
In the March 2017 half year, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to other operating expenses
to more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 full year: $17 million).
3.
Dividend payout ratio is calculated using the proposed 2017 final, 2017 interim, 2016 final, and 2016 interim dividends.
4.
Average ordinary shareholders’ equity excludes non-controlling interests.
5.
Loans and advances and average assets as at 30 September 2017 and 31 March 2017 include assets held for sale.
6.
In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Refer to page 22 for further
details.
11
SUMMARY
Key Balance Sheet Metrics
1
As at
Movement
Reference
Page
Sep 17 Mar 17 Sep 16
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Capital Management
Common Equity Tier 1
- APRA Basel 3 42 10.6% 10.1% 9.6%
- Internationally Comparable Basel 3
2
42 15.8% 15.2% 14.5%
Credit risk weighted assets ($B)
3
104 336.8 341.8 352.0 -1% -4%
Total risk weighted assets ($B)
3
42 391.1 397.0 408.6 -1% -4%
Leverage Ratio 46 5.4% 5.3% 5.3%
Balance Sheet: Key Items
Gross loans and advances ($B) 584.1 580.4 580.0 1% 1%
Net loans and advances ($B) 580.3 576.3 575.9 1% 1%
Total assets ($B) 897.3 896.5 914.9 0% -2%
Customer deposits ($B) 467.6 468.2 449.6 0% 4%
Total equity ($B) 59.1 57.9 57.9 2% 2%
Half Year Average
Movement
Liquidity Risk
Reference
Page
Sep 17 Mar 17 Sep 16
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Liquidity Coverage Ratio 40 135% 135% 125% 0% 10%
As at
Movement
Reference
Page
Sep 17 Mar 17 Sep 16
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Impaired Assets
Gross impaired assets ($M) 32 2,384 2,940 3,173 -19% -25%
Gross impaired assets as a % of gross loans and advances 0.41% 0.51% 0.55%
Net impaired assets ($M) 32 1,248 1,671 1,866 -25% -33%
Net impaired assets as a % of shareholders' equity 2.1% 2.9% 3.2%
Individual provision ($M) 31 1,136 1,269 1,307 -10% -13%
Individual provision as a % of gross impaired assets 47.7% 43.2% 41.2%
Collective provision ($M) 31 2,662 2,785 2,876 -4% -7%
Collective provision as a % of credit risk weighted assets 0.79% 0.81% 0.82%
Net Assets
Net tangible assets attributable to ordinary shareholders ($B)
4
51.9 50.6 50.1 3% 4%
Net tangible assets per ordinary share ($) 17.66 17.24 17.13 2% 3%
1.
Balance Sheet amounts and metrics as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
2.
See page 42 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.
3.
Includes $25.9 billion increase in credit risk weighted assets associated with increased capital requirements for Australian residential mortgages introduced in July 2016.
4.
Equals total shareholders’ equity less total preference share capital, non-controlling interests, goodwill and other intangible assets.
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 35 for further details on the impact of exchange rate movements.
Cash Profit - September 2017 Full Year vs September 2016 Full Year
Full Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Net interest income 14,872 15,095 (47) 15,048 -1% 0% -1%
Other operating income 5,617 5,499 (61) 5,438 2% -1% 3%
Operating income 20,489 20,594 (108) 20,486 -1% -1% 0%
Operating expenses (9,448) (10,439) 75 (10,364) -9% 0% -9%
Profit before credit impairment and income tax 11,041 10,155 (33) 10,122 9% 0% 9%
Credit impairment charge (1,199) (1,956) 17 (1,939) -39% -1% -38%
Profit before income tax 9,842 8,199 (16) 8,183 20% 0% 20%
Income tax expense (2,889) (2,299) (7) (2,306) 26% 1% 25%
Non-controlling interests (15) (11) - (11) 36% 0% 36%
Cash profit 6,938 5,889 (23) 5,866 18% 0% 18%
Cash Profit - September 2017 Half Year vs March 2017 Half Year
Half Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Mar 17
$M
Mar 17
$M
Mar 17
$M
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Net interest income 7,456 7,416 (34) 7,382 1% 0% 1%
Other operating income 2,730 2,887 (23) 2,864 -5% 0% -5%
Operating income 10,186 10,303 (57) 10,246 -1% 0% -1%
Operating expenses (4,717) (4,731) 23 (4,708) 0% 0% 0%
Profit before credit impairment and income tax 5,469 5,572 (34) 5,538 -2% -1% -1%
Credit impairment charge (479) (720) 2 (718) -33% 0% -33%
Profit before income tax 4,990 4,852 (32) 4,820 3% -1% 4%
Income tax expense (1,456) (1,433) 9 (1,424) 2% 0% 2%
Non-controlling interests (7) (8) - (8) -13% 0% -13%
Cash profit 3,527 3,411 (23) 3,388 3% -1% 4%
13
SUMMARY Large/notable items
Within cash profit, the Group has recognised some large/notable items. These items are shown in the tables below.
September 2017 Full Year
September 2016
Full Year
Large/notable items included in cash profit
Cash
profit
$M
Derivative
valuation
adjustments
$M
Sale of Asia
Retail and
Wealth
businesses
$M
Equity
accounted
earnings
SRCB
$M
Gain on sale
100 Queen
St,
Melbourne
$M
Cash
profit
$M
Derivative
valuation
adjustments
$M
Equity
accounted
earnings
SRCB &
BOT
$M
Software
capital
-
isation
changes
$M
Asian
minority
valuation
adjustments
$M
Restruct
-
uring
$M
Esanda
Dealer
Finance
divestment
$M
Derivative
CVA
methodolo-
gy change
$M
Cash Profit
Net interest income
14,872
-
-
-
-
15,095
-
-
-
-
-
31
-
Other operating income
5,617
229
(310)
58
114
5,499
(102)
345
-
(231)
-
78
(237)
Operating income
20,489
229
(310)
58
114
20,594
(102)
345
-
(231)
-
109
(237)
Operating expenses
(9,448)
-
-
-
-
(10,439)
-
-
(556)
-
(278)
(17)
-
Profit before credit impairment
and income tax
11,041
229
(310)
58
114
10,155
(102)
345
(556)
(231)
(278)
92
(237)
Credit impairment charge
(1,199)
-
-
-
-
(1,956)
-
-
-
-
-
(23)
-
Profit before income tax
9,842
229
(310)
58
114
8,199
(102)
345
(556)
(231)
(278)
69
(237)
Income tax expense
(2,889)
(69)
40
-
(2)
(2,299)
31
-
167
-
77
(24)
69
Non
-controlling interests
(15)
-
-
-
-
(11)
-
-
-
-
-
-
-
Cash profit
6,938
160
(270)
58
112
5,889
(71)
345
(389)
(231)
(201)
45
(168)
September 2017 Half Year
March 2017 Half Year
Large/notable items included in cash profit
Cash
profit
$M
Derivative
valuation
adjustments
$M
Sale of Asia
Retail and
Wealth
businesses
$M
Cash
profit
$M
Derivative
valuation
adjustments
$M
Equity
accounted
earnings
SRCB
$M
Sale of Asia
Retail and
Wealth
businesses
$M
Gain on sale
100 Queen
St,
Melbourne
$M
Cash
Profit
Net interest income
7,456
-
-
7,416
-
-
-
-
Other operating income
2,730
67
14
2,887
162
58
(324)
114
Operating income
10,186
67
14
10,303
162
58
(324)
114
Operating expenses
(4,717)
-
-
(4,731)
-
-
-
-
Profit before credit impairment
and income tax
5,469
67
14
5,572
162
58
(324)
114
Credit impairment charge
(479)
-
-
(720)
-
-
-
-
Profit before income tax
4,990
67
14
4,852
162
58
(324)
114
Income tax expense
(1,456)
(20)
-
(1,433)
(49)
-
40
(2)
Non
-co
ntrolling interests
(7)
-
-
(8)
-
-
-
-
Cash profit
3,527
47
14
3,411
113
58
(284)
112
14
SUMMARY
Large/notable items
Large/notable items included in cash profit are described below on a pre-tax basis.
Sales and investment related adjustments
• Asian minority investments
Valuation adjustments
• During the March 2016 half year, the Group recognised a $260 million impairment to its equity accounted investment in AMMB Holdings Berhad
(AmBank) bringing the carrying value in line with its value-in-use calculation.
• On 30 March 2016, Bank of Tianjin (BoT) 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 for its investment in BoT and recognised a net gain of $29 million in relation to the remeasurement of the
investment to fair value and recycling the associated equity accounted reserves.
The net impact of these valuation adjustments was $231 million in 2016.
Equity accounted earnings
• On 30 March 2016, the Group ceased equity accounting for its investment in BoT as outlined above.
• On 3 January 2017, the Group announced that it had agreed to sell
its 20% stake in Shanghai Rural Commercial Bank (SRCB). As a
consequence, the Group ceased equity accounting for its investment in SRCB from that date and commenced accounting for it as an asset held
for sale.
A summary of the large/notable valuation and equity accounted earnings associated with Asian minority investments is shown in the table below.
Equity accounted earnings for BoT and SRCB include equity accounted earnings from 1 October 2015 that will no longer form part of future cash
profit results.
Valuation adjustments Equity accounted earnings
AmBank
$M
BoT
$M Total
BoT
$M
SRCB
$M Total
Sep-17 Full Year - - - - 58 58
Mar-17 Half Year - - - - 58 58
Sep-16 Full Year (260) 29 (231) 86 259 345
• Sale of Asia Retail and Wealth businesses
The Group announced that it had agreed to sell Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to
Singapore’s DBS Bank on 31 October 2016. As a result of the sale agreement, the Group recognised a $324 million charge to impair software,
goodwill and fixed assets as well as providing for costs associated with the sale in the March 2017 half (refer Note 10). In the September 2017 half, a
$14 million gain was recognised in relation to the sale.
At balance date, Asia Retail and Wealth businesses in China, Singapore and Hong Kong have transitioned to DBS. The remaining businesses in
Taiwan and Indonesia will transition in early 2018. The transfer of Vietnam Retail to Shinhan Bank Vietnam will also be completed in early 2018.
• 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.
Large/notable items include the gain on sale of the Esanda Dealer divestment of $66 million and earnings and expenses recognised from 1 October
2015 that will no longer form part of future
cash profit results. The total pre-tax impact for the September 2016 full year is $69 million.
Derivative methodology change and valuation adjustments
• Derivative CVA methodology change
In determining the fair value of a derivative position, the Group recognises a CVA (credit valuation adjustment) to reflect the probability that the
counterparty may default and the Group may not receive the full market value of outstanding transactions. It represents an estimate of the credit
adjustment a market participant would include when deriving a purchase price to acquire the exposure. During the September 2016 half, the Group
revised its methodology for determining the derivative credit valuation adjustment to make greater use of market information and enhanced
modelling, and to align with leading market practice. The impact was a charge of $237 million in 2016.
• Derivative valuation adjustments
In determining the fair value of derivative positions, adjustments are made to the risk free value to include factors such as the impact of credit and
funding. The impact of valuation adjustments has increased significantly following the derivative CVA methodology change implemented in 2016 and
changes previously made to align funding valuation adjustments (FVA) with emerging market practice. In the September 2017
half, a $67 million gain
(Mar 17 half: $162 million gain) was recognised to reflect the impact of funding and credit valuation adjustments, net of associated hedges. A $229
million gain was recognised in the September 2017 full year. A $102 million loss was recognised in the September 2016 full year excluding the
impact of the derivative CVA methodology change described above.
15
SUMMARY
Other large/notable items
• Gain on sale of 100 Queen Street, Melbourne
The Group sold the 100 Queen Street office tower and former head office in Melbourne, Australia in the March 2017 half. The transaction resulted in
a gain on sale of $114 million.
• Software capitalisation changes
During the March 2016 half, the Group amended the application of the Group’s software capitalisation policy by increasing the threshold for
capitalisation 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 in the September 2016 full year (recognised in TSO and Group Centre).
• Restructuring
The Group accelerated the process of reshaping its workforce in 2016 to build a simpler, more agile bank. A restructuring expense of $278 million
was recognised in the September 2016 full year and this is included as a large/notable item. Restructuring expenses of $62 million in the September
2017 full year (Sept 17 half: $26 million, Mar 17 half $36 million)
are not considered to be large/notable.
16
SUMMARY
Full Time Equivalent Staff
1
As at 30 September 2017, ANZ employed 44,896 people worldwide (Mar 17: 46,046; Sep 16: 46,554) on a full-time equivalent basis ("FTEs").
Division
Half Year Full Year
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Australia 11,387 11,447 -1% 11,387 11,563 -2%
Institutional 4,754 4,899 -3% 4,754 5,112 -7%
New Zealand 6,207 6,250 -1% 6,207 6,317 -2%
Wealth Australia 2,110 2,114 0% 2,110 2,174 -3%
Asia Retail & Pacific 3,981 4,719 -16% 3,981 4,894 -19%
TSO and Group Centre 16,457 16,617 -1% 16,457 16,494 0%
Total 44,896 46,046 -2% 44,896 46,554 -4%
Average FTE 45,675 46,462 -2% 46,068 48,633 -5%
Geography
Half Year Full Year
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Australia 19,667 19,722 0% 19,667 19,957 -1%
Asia Pacific, Europe & America 17,474 18,563 -6% 17,474 18,728 -7%
New Zealand 7,755 7,761 0% 7,755 7,869 -1%
Total 44,896 46,046 -2% 44,896 46,554 -4%
1.
Full time equivalent staff have been restated to reflect organisational changes. The net impact of these organisational changes was a decrease in TSO and Group Centre of 8,012 FTE as at
September 2016, offset by an FTE increase (reallocation) across other divisions. Nil impact to total Group FTE. Refer to page 50 for further details.
Other Non-Financial Information
Half Year
Full Year
Shareholder value - ordinary shares Sep 17 Mar 17 Movt
Sep 17 Sep 16 Movt
Share price ($)
- high 32.95 32.44 2% 32.95 29.17 13%
- low 27.18 25.78 5% 25.78 21.86 18%
- closing
29.60 31.82 -7% 29.60 27.63 7%
Closing market capitalisation of ordinary shares ($B) 86.9 93.4 -7% 86.9 80.9 7%
Total shareholder returns (TSR) -1.8% 22.4% large 13.1% 9.2% 42%
As at Sep 17
Credit Ratings
Short-Term Long-Term Outlook
Moody's Investor Services P-1 Aa3 Stable
Standard & Poor's A-1+ AA- Negative
Fitch Ratings F1+ AA- Stable
17
SUMMARY
This page has been left blank intentionally
18
GROUP RESULTS
CONTENTS
Group Results
Cash Profit
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
Funding
Capital Management
Leverage Ratio
Other Regulatory Developments
19
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 230 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 and
Divisional 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 in the process of
being audited within the context of the Group’s Annual Report. Cash profit is not subject to review or audit by the external auditor. The external auditor
has informed the Audit Committee that recurring adjustments have been determined on a consistent basis across each period presented, and the
additional adjustments for the impact of the reclassification of Shanghai Rural Commercial Bank to held for sale in the March 2017 half, September 2017
half and September 2017 full year is appropriate.
The Group Results section is reported on a cash profit basis.
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Statutory profit attributable to shareholders of the Company 3,495 2,911 20% 6,406 5,709 12%
Adjustments between statutory profit and cash profit
1
Treasury shares adjustment (18) 76 large 58 44 32%
Revaluation of policy liabilities (2) 36 large 34 (54) large
Economic hedges 31 178 -83% 209 102 large
Revenue hedges 6 (105) large (99) 92 large
Structured credit intermediation trades (2) (1) 100% (3) (4) -25%
Reclassification of SRCB to held for sale 17 316 -95% 333 - n/a
Total adjustments between statutory profit and cash profit 32 500 -94% 532 180 large
Cash Profit 3,527 3,411 3% 6,938 5,889 18%
1.
Refer to pages 75 to 79 for analysis of the adjustments between statutory profit and cash profit.
Group Performance - cash profit
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 7,456 7,416 1% 14,872 15,095 -1%
Other operating income 2,730 2,887 -5% 5,617 5,499 2%
Operating income 10,186 10,303 -1% 20,489 20,594 -1%
Operating expenses (4,717) (4,731) 0% (9,448) (10,439) -9%
Profit before credit impairment and income tax 5,469 5,572 -2% 11,041 10,155 9%
Credit impairment charge (479) (720) -33% (1,199) (1,956) -39%
Profit before income tax 4,990 4,852 3% 9,842 8,199 20%
Income tax expense (1,456) (1,433) 2% (2,889) (2,299) 26%
Non-controlling interests (7) (8) -13% (15) (11) 36%
Cash profit 3,527 3,411 3% 6,938 5,889 18%
Half Year Full Year
Cash Profit/(Loss) By Division
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 1,897 1,798 6% 3,695 3,547 4%
Institutional 815 1,021 -20% 1,836 1,041 76%
New Zealand 692 677 2% 1,369 1,268 8%
Wealth Australia 115 123 -7% 238 324 -27%
Asia Retail & Pacific 69 (217) large (148) 159 large
TSO and Group Centre (61) 9 large (52) (450) -88%
Cash profit 3,527 3,411 3% 6,938 5,889 18%
20
GROUP RESULTS
Group Cash Profit – September 2017 Full Year v September 2016 Full Year
• September 2017 v September 2016
Cash profit increased 18% partly reflecting the impact of a number of large/notable items taken in 2016 and rigorous cost management in 2017.
• Net interest income decreased $223 million (-1%) largely due to a 8 basis points decrease in the net interest margin, partially offset by 2%
growth in average interest earning assets. The growth in average interest earning assets reflects ANZ’s strategic focus on home loans, in
particular owner occupier, partially offset by reductions from Institutional portfolio rebalancing and the partial completion of the Asia Retail and
Wealth sale. The lower net interest margin reflects the combined impact of deposit competition, growth in the liquidity portfolio and lower
earnings on capital. This was partially offset by differentiated repricing in home loans across investor and owner occupier, principal and interest
and interest only loans which on a net basis benefited margins. The major bank levy was introduced in 1 July 2017 which also reduced net
interest income by $86 million.
• Other operating income increased $118 million (+2%) benefiting from a net year on year change in derivative valuation adjustments of $331
million (Sept 17: $229 million gain; Sept 16: $102 million loss), an improvement in Markets income of $102 million, and the $114 million gain on
sale of 100 Queen Street, Melbourne. Prior year comparatives include the adverse impact of Asian minority valuation adjustments of $231
million and the $237 million derivative CVA methodology change. Partly offsetting this, a number of sales related transactions had unfavourable
impacts including a $310 million net charge related to the Asia Retail and Wealth sale, and $365 million loss of income from SRCB, BoT and
Esanda Dealer Finance. There was a $186 million reduction in funds management and insurance income, and a $75 million decrease in net fee
and commission income.
• Operating expenses decreased $991 million (-9%) primarily due to the $556 million charge for software capitalisation policy changes and the
$278 million charge for restructuring taken in 2016. Personnel expenses reduced by $363 million reflecting a 5% reduction in average FTE.
Partly offsetting this are increases in underlying technology expenses of $55 million and increases in other expenses of $106 million as the
result of non-lending losses and higher technology related consulting expenses.
• Credit impairment charges decreased $757 million (-39%). Individual credit impairment charges decreased by $598 million (-31%) primarily the
result of a benign credit environment. Collective impairment charges decreased by $159 million due to an improvement in the Group’s overall
risk profile and portfolio rebalancing in Institutional, partially offset by economic overlay adjustments.
• September 2017 v March 2017
Cash profit increased 3% compared with the March 2017 half.
• Net interest income increased $40 million (+1%) as the result of a 1% increase in average interest earning assets, partially offset by a 2 basis
point decrease in net interest margin. Average interest earning assets growth reflects ANZ’s strategic focus on home loans, partially offset by a
reduction in Institutional due to portfolio rebalancing, and partial completion of the Asia Retail and Wealth sale. The net margin decrease was
driven by growth in the liquidity portfolio, lower earnings on capital, partially offset by improved asset and deposit margins. The major bank levy
was introduced in July 2017 which reduced net interest income by $86 million.
• Other operating income decreased $157 million (-5%) primarily the result of lower derivatives valuation adjustments of $95 million, a reduction in
Markets underlying income of $241 million and cessation of equity accounting for SRCB of $58 million. In the March 2017 half, the Group
recognised a $114 million gain on sale of 100 Queen Street, Melbourne, offset against by a net $310 million charge related to the Asia Retail
and Wealth sale.
• Operating expenses decreased $14 million (0%) driven by a $118 million reduction in personnel expenses resulting from a 2% reduction in
average FTE. Other expenses increased $113 million due to higher technology related consulting expenses.
• Credit impairment charges decreased $241 million (-33%). Individual credit impairment charges decreased by $233 million (-30%) due to a $243
million decrease in Institutional driven by lower provisions and higher write-backs. Collective impairment charges decreased $8 million driven by
an improvement in the Group’s overall risk profile, portfolio rebalancing in Institutional, and the net movement in the economic overlay
adjustment.
21
GROUP RESULTS
Net interest income
In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning
assets. The revised calculation is in line with other major banks. Originally reported net interest margin (Sep 16 full year: 2.00%) and total average
interest earning assets (Sep 16 full year: $754,160 million) have been restated accordingly.
Half Year
Full Year
Group
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Cash net interest income
1
7,456 7,416 1% 14,872 15,095 -1%
Average interest earning assets
2,3
752,073 743,906 1% 748,000 730,835 2%
Average deposits and other borrowings
3
603,019 597,337 1% 600,186 586,453 2%
Net interest margin (%) - cash
2
1.98 2.00 -2 bps 1.99 2.07 -8 bps
Group (excluding Markets)
Cash net interest income
1
7,014 6,938 1% 13,952 14,063 -1%
Average interest earning assets
2,3
536,939 538,598 0% 537,766 533,447 1%
Average deposits and other borrowings
3
454,934 452,671 0% 453,805 453,280 0%
Net interest margin (%) - cash
2
2.61 2.58 3 bps 2.59 2.64 -5 bps
Half Year
Full Year
Cash profit net interest margin by major division
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia
1
Net interest margin (%)
2
2.68 2.69 -1 bps 2.68 2.75 -7 bps
Average interest earning assets
2
316,412 308,391 3% 312,412 298,764 5%
Average deposits and other borrowings 198,826 193,671 3% 196,256 183,196 7%
Institutional
Net interest margin (%) 0.96 1.05 -9 bps 1.01 1.13 -12 bps
Average interest earning assets 306,863 302,578 1% 304,727 305,446 0%
Average deposits and other borrowings 247,128 242,402 2% 244,772 232,959 5%
New Zealand
1
Net interest margin (%) 2.31 2.30 1 bps 2.31 2.37 -6 bps
Average interest earning assets
3
108,763 109,664 -1% 109,212 103,166 6%
Average deposits and other borrowings
3
78,747 79,190 -1% 78,968 75,418 5%
1.
Cash net interest income includes income relating to assets held for sale and income earned on assets prior to divestment.
2.
In the March 2017 half, the Group changed its calculation of net interest margin to net Australian home loan deposit offset balances against total average interest earning assets (Mar 17
half: $24,979 million; Sep 16 full year: $23,325 million).
3.
Average Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
Group net interest margin – September 2017 Full Year v September 2016 Full Year
22
GROUP RESULTS
• September 2017 v September 2016
Net interest margin (-8 bps)
• Asset mix and funding mix (+1 bps): favourable mix impact from a lower proportion of wholesale funding and run-off of lower margin lending
products in Institutional, partially offset by the adverse mix impact from growth in Australia home loans.
• Funding costs (-2 bps): impact of higher hybrid and subordinated debt and the introduction of the major bank levy.
• Deposit competition (-3 bps): lower margin from increased competition in Australia and New Zealand, partially offset by improved margins in
Asia.
• Asset competition and risk mix (+4 bps): increase driven by Australian and New Zealand home loans repricing.
• Markets and treasury (-8 bps): adverse impact to earnings on capital as the result of lower interest rates, growth in the liquidity portfolio and
lower earnings from markets activities.
Average interest earning assets (+$17.2 billion or +2%)
• Average gross loans and advances (+$6.1 billion or +1%): excluding the impact of foreign currency translation, the increase was +$7.4 billion
(+1%) driven by growth in Australia and New Zealand home loans, partially offset by a decline in Institutional due to portfolio rebalancing, and the
partial completion of the Asia Retail and Wealth sale.
• Average trading and available-for-sale assets (+$5.7 billion or +6%): excluding the impact of foreign currency translation, the increase was +$6.5
billion (+7%) driven by growth in the liquidity portfolio.
• Average cash and other liquids (+$5.2 billion or +7%): excluding the impact of foreign currency translation, the increase was +$6.8 billion (+9%)
driven by liquidity management requirements, market volatility and volume of derivative transactions.
Average deposits and other borrowings (+$13.7 billion or +2%)
• Average deposits and other borrowings (+$13.7 billion or +2%): excluding the impact of foreign currency translation, the increase was +$18.0
billion (+3%) driven by growth in customer deposits across Australia, New Zealand and Institutional divisions, partially offset by a decline of
deposits and other borrowings in Treasury, as well as the partial completion of the Asia Retail and Wealth sale.
Group net interest margin – September 2017 Half Year v March 2017 Half Year
• September 2017 v March 2017
Net interest margin (-2 bps)
• Asset mix and funding mix (+1 bps): favourable mix impact from a higher proportion of capital, partially offset by the adverse mix impact from
growth in Australian home loans.
• Funding costs (-1 bps): adverse impact due to the introduction of the major bank levy.
• Deposit competition (+1 bps): improved deposit margins in Australia, partially offset by lower margins in New Zealand.
• Asset competition and risk mix (+1 bps): driven by Australian and New Zealand home loan repricing, partially offset by lower Institutional and
lending margins.
• Markets and treasury (-4 bps): adverse impact to earnings on capital as the result of lower interest rates, growth in the liquidity portfolio and
lower earnings from markets activities.
23
GROUP RESULTS
Average interest earning assets (+$8.2 billion or +1%)
• Average gross loans and advances (+$2.6 billion or +1%): excluding the impact of foreign currency translation, the increase was +$4.9 billion
(+1%), driven by growth in Australia and New Zealand home loans, partially offset by a decline in Institutional due to portfolio rebalancing, and
the partial completion of the Asia Retail and Wealth sale.
• Average trading and available for sale assets (+$1.7 billion or +2%): excluding the impact of foreign currency translation, the increase was +$2.4
billion (+2%) driven by growth in liquidity portfolio.
• Average cash and other liquids (+$3.9 billion or +5%): excluding the impact of foreign currency translation, the increase was +$4.9 billion (+6%)
driven by liquidity management requirements, market volatility and derivative transaction volumes.
Average deposits and other borrowings (+$5.7 billion or +1%)
• Average deposits and other borrowings (+$5.7 billion or +1%): excluding the impact of foreign currency translation, the increase was +$9.6 billion
(+2%) driven by growth in customer deposits across Australia and Institutional divisions, partially offset by the partial completion of the Asia
Retail and Wealth sale.
24
GROUP RESULTS
Other operating income
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net fee and commission income
1
1,185 1,177 1% 2,362 2,437 -3%
Net funds management and insurance income
1
664 668 -1% 1,332 1,518 -12%
Markets other operating income
2
550 886 -38% 1,436 766 87%
Share of associates' profit
1
127 173 -27% 300 544 -45%
Other
1, 3
204 (17) large 187 234 -20%
Cash other operating income 2,730 2,887 -5% 5,617 5,499 2%
Half Year Full Year
Markets income
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 442 478 -8% 920 1,032 -11%
Other operating income
2
550 886 -38% 1,436 766 87%
Cash Markets income 992 1,364 -27% 2,356 1,798 31%
Half Year Full Year
Other operating income by division
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 616 602 2% 1,218 1,206 1%
Institutional
2
989 1,357 -27% 2,346 1,733 35%
New Zealand 336 317 6% 653 644 1%
Wealth Australia 538 539 0% 1,077 1,244 -13%
Asia Retail & Pacific 176 (139) large 37 478 -92%
TSO and Group Centre
3
75 211 -64% 286 194 47%
Cash other operating income 2,730 2,887 -5% 5,617 5,499 2%
1.
Excluding Markets.
2.
Markets other operating income for the September 2016 full year includes a charge of $237 million related to the derivative CVA methodology change.
3.
Other income for the September 2017 full year includes the $324 million charge related to the sale of Asia Retail and Wealth businesses, and the $114 million gain on sale of 100 Queen
Street, Melbourne. The September 2016 full year includes the $260 million impairment of the investment in AmBank, the $29 million gain on cessation of equity accounting of BoT, and the
$66 million gain on the Esanda Dealer Finance divestment.
Other operating income – September 2017 Full Year v September 2016 Full Year
September 2017 v September 2016
Other operating income Increased by $118 million (+2%). Key drivers:
Net fee and commission income (-$75 million or -3%)
• $70 million decrease in the Asia Retail and Pacific division as the result of lower performance and partial sale completion.
• $56 million decrease in Institutional primarily due to portfolio rebalancing.
• $40 million increase in Australia division primarily due to growth in Small Business and Deposits.
Net funds management and insurance income (-$186 million or -12%)
• $163 million decrease in Wealth Australia primarily due to adverse retail life claims, reduced fee income as expected from ongoing rationalisation
of legacy investment platforms to SmartChoice, lower income on invested capital, partially offset by favourable Lenders Mortgage Insurance
experience.
• $37 million decrease in the Asia Retail and Pacific division as the result of lower performance and partial sale completion.
25
GROUP RESULTS
Cash Markets income (+$558 million or +31%)
• Excluding the $237 million charge relating to the derivative CVA methodology change in 2016, Cash Markets income increased $321 million:
• $244 million increase in Balance Sheet Trading driven by tighter credit spreads which generated mark to market gains in the March 2017 half,
as well as increased income from higher average liquidity portfolio holdings throughout 2017.
• $227 million increase in Franchise Trading primarily attributable to a $229 million gain associated with derivative credit and funding valuation
adjustments, net of associated hedges which benefitted from decreasing credit spreads and increasing yield curves. Favourable trading
conditions seen in 2016 continued in the March 2017 half post the US election, however became more subdued in the September 2017 half.
• $150 million decrease in Franchise Sales due to the impact of business transformational initiatives (client and product rationalisation to align to
Institutional strategy, reduce risk exposures and improve returns) and market conditions limiting client activity particularly for longer tenor
hedging as a result of low FX volatility and the low interest rate environment.
Share of associates’ profit (-$244 million or -45%)
• $287 million decrease due to cessation of equity accounting for BoT from March 2016 and SRCB from January 2017.
• $44 million net increase in profits from associates of which $38 million relates to P.T. Bank Pan Indonesia.
Other (-$47 million or -20%)
• $310 million decrease as a result of the reclassification to held for sale and partial completion of the Asia Retail and Wealth sale.
• $66 million decrease due to the Esanda Dealer Finance gain on divestment taken in the March 2016 half.
• $231 million increase due to the Asian minority valuations adjustments in the March 2016 half.
• $114 million increase due to the gain on sale of 100 Queen Street, Melbourne.
• September 2017 v March 2017
Other operating income decreased by $157 million (-5%). Key drivers:
Net fee and commission income (+$8 million or +1%)
• $19 million increase in the New Zealand division as the result of renewed card scheme incentives.
• $19 million decrease in Institutional primarily due to portfolio rebalancing.
Net funds management and insurance income (-$4 million or -1%)
Cash Markets income (-$372 million or -27%)
• $261 million decrease in Franchise Trading attributable to a $95 million reduction in derivative credit and funding valuation adjustments, net of
associated hedges, following significant gains in the March 2017 half and more challenging trading conditions compared to the previous eighteen
months.
• $78 million decrease in Balance Sheet Trading with lower mark to market gains associated with credit spreads movements.
• $33 million decrease in Franchise Sales as the impact of business transformational initiatives moderated in the September 2017 half, however
benign market conditions continued as the low interest rate environment persisted.
Share of associates’ profit (-$46 million or -27%)
• $58 million loss of income due to cessation of equity accounting for SRCB from January 2017.
• $12 million net increase in profits from associates of which $9 million relates to Metrobank Card Corporation.
Other (+$221 million)
• $324 million increase as the result of the reclassification of Asia Retail and Wealth businesses to held for sale in the March 2017 half, partially
offset by a $14 million gain recognised in relation to the sale in the September 2017 half.
• $26 million increase as the result of a dividend received from Bank of Tianjin.
• $114 million decrease as a result of the gain on sale of 100 Queen Street, Melbourne recognised in the March 2017 half.
26
GROUP RESULTS
Operating Expenses
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Personnel expenses 2,530 2,648 -4% 5,178 5,541 -7%
Premises expenses 454 457 -1% 911 928 -2%
Technology expenses
1
835 831 0% 1,666 2,167 -23%
Restructuring expenses 26 36 -28% 62 278 -78%
Other expenses 872 759 15% 1,631 1,525 7%
Total cash operating expenses 4,717 4,731 0% 9,448 10,439 -9%
Full time equivalent staff (FTE) 44,896 46,046 -2% 44,896 46,554 -4%
Average full time equivalent staff (FTE) 45,675 46,462 -2% 46,068 48,633 -5%
1.
Technology expenses include a $556 million charge associated with accelerated amortisation from the software capitalisation policy changes in the September 2016 full year. Refer to page
14 for further details.
Half Year Full Year
Expenses by division
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 1,730 1,693 2% 3,423 3,426 0%
Institutional 1,357 1,379 -2% 2,736 2,958 -8%
New Zealand 593 600 -1% 1,193 1,225 -3%
Wealth Australia 373 370 1% 743 801 -7%
Asia Retail & Pacific 298 353 -16% 651 808 -19%
TSO and Group Centre 366 336 9% 702 1,221 -43%
Total cash operating expenses 4,717 4,731 0% 9,448 10,439 -9%
Operating expenses – September 2017 Full Year v September 2016 Full Year
• September 2017 v September 2016
Operating expenses decreased by $991 million (-9%) reflecting a number of large/notable items taken in 2016.
• Personnel expenses decreased $363 million (-7%) due to a 5% reduction in average FTE partially offset by wage inflation.
• Technology expenses decreased $501 million (-23%) primarily as the result of the software capitalisation policy charge of $556 million
recognised in 2016. Excluding this, Technology expenses increased $55 million (+3%) due to investment in future growth and productivity
initiatives.
• Restructuring expenses decreased $216 million (-78%) with larger investment in 2016 at the reset of the Group’s strategy.
• Other expenses increased $106 million (+7%) due to non-lending losses and higher technology related consulting expenses.
• September 2017 v March 2017
Operating expenses decreased by $14 million.
• Personnel expenses decreased $118 million (-4%) mainly due to a 2% reduction in average FTE.
• Other expenses increased $113 million (+15%) due to higher technology related consulting expenses.
27
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. Investment is categorised based on primary objective but may contibute to multiple investment
categories. Digital and data spend has predominantly been classified as Productivity. The analysis below aggregates all projects over $1 million. Spend
on projects less than $1 million was $166 million in the September 2017 full year (Sep 17 half $82 million; Mar 17 half $84 million).
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Expensed investment spend 323 225 44% 548 526 4%
Capitalised investment spend 227 160 42% 387 400 -3%
Technology infrastructure spend 550 385 43% 935 926 1%
Comprising Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Growth 163 122 34% 285 333 -14%
Productivity 127 83 53% 210 171 23%
Risk and compliance 127 101 26% 228 229 0%
Infrastructure and other 133 79 68% 212 193 10%
Technology infrastructure spend 550 385 43% 935 926 1%
Technology infrastructure spend breakdown:
Sep-17 $M
• September 2017 v September 2016: Investment spend increased marginally, with a
23% increase in productivity spend offset by a 14% reduction in growth spend.
Investments included frontline and digital customer solutions to improve banker and
customer experience.
• September 2017 v March 2017: Investment spend increased significantly in the
September 2017 half due to increased investment in technology maintenance and
infrastructure projects, frontline and digital customer solutions to improve banker and
customer experience.
Technology infrastructure spend by division Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 197 130 52% 327 274 19%
Institutional 104 60 73% 164 175 -6%
New Zealand 35 31 13% 66 75 -12%
Asia Retail & Pacific 2 1 100% 3 7 -57%
Wealth Australia 22 25 -12% 47 69 -32%
TSO and Group Centre 190 138 38% 328 326 1%
Technology infrastructure spend 550 385 43% 935 926 1%
28
GROUP RESULTS
Software capitalisation
As at 30 September 2017, the Group’s intangible assets included $1,860 million of costs incurred to acquire and develop software. Details are set out in
the table below:
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Balance at start of period 1,922 2,202 -13% 2,202 2,893 -24%
Software capitalised during the period 232 172 35% 404 431 -6%
Amortisation during the period
- Current period amortisation (272) (295) -8% (567) (500) 13%
- Accelerated amortisation - - n/a - (556) -100%
Software impaired/written-off
- Reclassification of Asia Retail and Wealth to held for sale
1
- (154) -100% (154) (4) large
- Other (16) (1) large (17) (23) -26%
Foreign exchange differences (6) (2) large (8) (39) -79%
Total capitalised software 1,860 1,922 -3% 1,860 2,202 -16%
Net book value by Division Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 441 459 -4% 441 488 -10%
Institutional 559 608 -8% 559 782 -29%
New Zealand 24 26 -8% 24 27 -11%
Wealth Australia 17 19 -11% 17 20 -15%
Asia Retail & Pacific
1
- - n/a - 63 -100%
TSO and Group Centre 819 810 1% 819 822 0%
Total 1,860 1,922 -3% 1,860 2,202 -16%
1.
Reclassification of Asia Retail and Wealth to held for sale includes impairment of software supporting both the Institutional and Asia Retail and Wealth businesses. Only components relating
to the Asia Retail and Wealth businesses have been impaired which were recorded on the Institutional and Asia Retail and Pacific balance sheet. These impairment charges are recognised
as other operating income in the Condensed Consolidated Income Statement.
29
GROUP RESULTS
Credit risk
Full Year
Full Year
Movement
Sep 17
Sep 16
Sep 17 v. Sep 16
Division
Individual
charge
$M
Collective
charge
$M
Total
charge
$M
Individual
charge
$M
Collective
charge
$M
Total
charge
$M
Individual
charge
%
Collective
charge
%
Total
charge
%
Australia 883 14 897
898 22 920
-2% -36% -3%
Institutional 177 (97) 80
776 (33) 743
-77% large -89%
New Zealand 116 (38) 78
104 16 120
12% large -35%
Asia Retail & Pacific 165 (21) 144
161 11 172
2% large -16%
TSO and Group Centre - - -
- 1 1
n/a -100% -100%
Total 1,341 (142) 1,199
1,939 17 1,956
-31% large -39%
Half Year
Half Year
Movement
Sep 17
Mar 17
Sep 17 v. Mar 17
Division
Individual
charge
$M
Collective
charge
$M
Total
charge
$M
Individual
charge
$M
Collective
charge
$M
Total
charge
$M
Individual
charge
%
Collective
charge
%
Total
charge
%
Australia 453 (28) 425
430 42 472
5% large -10%
Institutional (33) (12) (45)
210 (85) 125
large -86% large
New Zealand 55 (14) 41
61 (24) 37
-10% -42% 11%
Asia Retail & Pacific 79 (10) 69
86 (11) 75
-8% -9% -8%
TSO and Group Centre - (11) (11)
- 11 11
n/a large large
Total 554 (75) 479
787 (67) 720
-30% 12% -33%
Individual credit impairment charge
Half Year Full Year
Sep 17
$M
Mar 17
$M
Movt
Sep 17
$M
Sep 16
$M
Movt
New and increased individual credit impairments
Australia 641 617 4% 1,258 1,223 3%
Institutional 101 299 -66% 400 846 -53%
New Zealand 109 102 7% 211 202 4%
Asia Retail & Pacific 97 104 -7% 201 201 0%
New and increased individual credit impairments 948 1,122 -16% 2,070 2,472 -16%
Recoveries and write-backs
Australia (188) (187) 1% (375) (325) 15%
Institutional (134) (89) 51% (223) (70) large
New Zealand (54) (41) 32% (95) (98) -3%
Asia Retail & Pacific (18) (18) 0% (36) (40) -10%
Recoveries and write-backs (394) (335) 18% (729) (533) 37%
Total individual credit impairment charge 554 787 -30% 1,341 1,939 -31%
• September 2017 v September 2016
The individual credit impairment charge decreased $598 million (-31%) driven by a $402 million (-16%) decrease in new and existing provisions
predominantly in Institutional largely arising from portfolio rebalancing, combined with a $196 million (+37%) increase in recoveries and write-backs in
Australia and Institutional divisions from better than expected outcomes in impaired asset workouts.
• September 2017 v March 2017
The individual credit impairment charge decreased $233 million (-30%) driven primarily by a $243 million decrease in Institutional due to lower new
individual provisions from portfolio rebalancing and higher write-backs and recoveries. This is partially offset by an increase of $23 million (+5%) in
the Australia division driven by Retail and Small Business portfolios.
30
GROUP RESULTS
Collective credit impairment charge
Half Year
Full Year
Collective credit impairment charge/(release) by source
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Lending growth (18) (30) -40% (48) (3) large
Risk profile (91) (78) 17% (169) 20 large
Economic cycle adjustment 34 41 -17% 75 - n/a
Total collective credit impairment charge/(release) (75) (67) 12% (142) 17 large
• September 2017 v September 2016
The collective credit impairment charge decreased $159 million driven by a reduction in Institutional due to portfolio rebalancing, and further
improvement in the Institutional and New Zealand divisional risk profile. This was partially offset by an economic overlay adjustment of $75 million.
• September 2017 v March 2017
The collective credit impairment release increased $8 million, driven by continued portfolio contraction in Institutional due to portfolio rebalancing,
further risk profile improvement across all divisions, and a net movement in the economic overlay adjustment.
Provision for credit impairment
As at
As at
Movement
Sep 17
Sep 16
Sep 17 v. Sep 16
Division
Individual
provision
$M
Collective
provision
$M
1
Total
provision
$M
Individual
provision
$M
Collective
provision
$M
1
Total
provision
$M
Individual
provision
%
Collective
provision
%
Total
provision
%
Australia 703 1,202 1,905
606 1,188 1,794
16% 1% 6%
Institutional 282 1,004 1,286
569 1,115 1,684
-50% -10% -24%
New Zealand 131 323 454
117 374 491
12% -14% -8%
Asia Retail & Pacific 20 130 150
15 196 211
33% -34% -29%
TSO and Group Centre - 3 3
- 3 3
n/a 0% 0%
Total 1,136 2,662 3,798
1,307 2,876 4,183
-13% -7% -9%
As at
As at
Movement
Sep 17
Mar 17
Sep 17 v. Mar 17
Division
Individual
provision
$M
Collective
provision
$M
1
Total
provision
$M
Individual
provision
$M
Collective
provision
$M
1
Total
provision
$M
Individual
provision
%
Collective
provision
%
Total
provision
%
Australia 703 1,202 1,905
647 1,230 1,877
9% -2% 1%
Institutional 282 1,004 1,286
470 1,024 1,494
-40% -2% -14%
New Zealand 131 323 454
135 335 470
-3% -4% -3%
Asia Retail & Pacific 20 130 150
17 182 199
18% -29% -25%
TSO and Group Centre - 3 3
- 14 14
n/a -79% -79%
Total 1,136 2,662 3,798
1,269 2,785 4,054
-10% -4% -6%
1.
The collective provision includes amounts for off-balance sheet credit exposures of $544 million as at 30 September 2017 (Mar 17 half : $574 million; Sep 16 full year: $631 million). The
impact on the Income Statement for the full year ended 30 September 2017 was a $66 million release (Mar 17 half: $46 million release; Sep 16 full year: $32 million release).
31
GROUP RESULTS
Group Expected Loss
Management believe that disclosure of modelled expected loss data for individual provisions assists in assessing the longer term expected loss rates of
the lending portfolio as it removes the volatility of reported earnings created by the use of accounting losses. The expected loss methodology is used
internally for return on equity analysis and economic profit reporting.
Asia Retail and Wealth
• ANZ announced the sale of six Asia Retail and Wealth businesses in 2017, of which three are now completed with the remainder to occur in first half
2018.
• The increase in Asia Retail and Wealth expected loss reflects the partial completion of the sale of those businesses with the countries to be
completed having proportionally higher unsecured lending (primarily credit cards).
As at
Expected loss as a % of gross lending assets
Sep 17
Sep 16
Australia
0.33% 0.33%
New Zealand
0.22% 0.26%
Institutional
0.30% 0.35%
Subtotal
0.31% 0.33%
Asia Retail
2.67% 1.51%
Total
0.32% 0.35%
Gross Impaired Assets
1
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Impaired loans 2,118 2,478 2,646 -15% -20%
Restructured items
2
167 367 403 -54% -59%
Non-performing commitments and contingencies 99 95 124 4% -20%
Gross impaired assets 2,384 2,940 3,173 -19% -25%
Individual provisions
Impaired loans (1,118) (1,253) (1,278) -11% -13%
Non-performing commitments and contingencies (18) (16) (29) 13% -38%
Net impaired assets 1,248 1,671 1,866 -25% -33%
Gross impaired assets by division
Australia 1,310 1,227 1,170 7% 12%
Institutional 624 1,061 1,405 -41% -56%
New Zealand 307 409 346 -25% -11%
Asia Retail & Pacific 143 243 252 -41% -43%
Gross impaired assets 2,384 2,940 3,173 -19% -25%
Gross impaired assets by size of exposure
Less than $10 million 1,622 1,724 1,784 -6% -9%
$10 million to $100 million 655 1,106 899 -41% -27%
Greater than $100 million 107 110 490 -3% -78%
Gross impaired assets 2,384 2,940 3,173 -19% -25%
1.
Loans and advances as at 30 September 2017 and 31 March 2017 include assets held for sale.
2.
Restructured items are facilities where the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of
reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.
• September 2017 v September 2016
Gross impaired assets decreased $789 million (-25%) driven by Institutional (-$781 million) and New Zealand (-$39 million) divisions due to higher
repayments and upgrades on a small number of large exposures, and Asia Retail and Pacific division (-$109 million) due to the partial completion of
the Asia Retail and Wealth sale. This was partially offset by an increase in the Australia division (+$140 million) driven by Corporate Banking, Small
Business Banking and home loan portfolios. The Group’s individual provision coverage ratio on impaired assets was 47.7% at 30 September 2017
(Sep 16: 41.2%).
• September 2017 v March 2017
Gross impaired assets decreased $556 million (-19%) driven by Institutional (-$437 million) and New Zealand (-$102 million) divisions with higher
repayments and upgrades on a small number of large exposures, combined with Asia Retail and Pacific division (-$100 million) due to the partial
completion of the Asia Retail and Wealth sale. This was partially offset by an increase in Australia (+$83 million) driven by Corporate Banking, Small
Business Banking and home loan portfolios. The Group’s individual provision coverage ratio on impaired assets was 47.7% at 30 September 2017
(Mar 17: 43.2%).
32
GROUP RESULTS
New Impaired Assets
1
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Impaired loans 1,315 1,637 -20% 2,952 3,267 -10%
Restructured items 21 88 -76% 109 274 -60%
Non-performing commitments and contingencies 89 62 44% 151 87 74%
Total new impaired assets 1,425 1,787 -20% 3,212 3,628 -11%
New impaired assets by division
Australia 844 816 3% 1,660 1,704 -3%
Institutional 269 547 -51% 816 1,151 -29%
New Zealand 216 296 -27% 512 484 6%
Asia Retail & Pacific 96 128 -25% 224 289 -22%
Total new impaired assets 1,425 1,787 -20% 3,212 3,628 -11%
• September 2017 v September 2016
New impaired assets decreased $416 million (-11%) primarily driven by Institutional as the result of an improved risk profile from portfolio
rebalancing.
• September 2017 v March 2017
New impaired assets decreased by $362 million (-20%) primarily driven by lower new impairments for Institutional as the result of an improved risk
profile from portfolio rebalancing, and New Zealand Commercial and Agri.
Ageing analysis of net loans and advances that are past due but not impaired
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
1-29 days 8,790 9,123 7,966 -4% 10%
30-59 days 2,143 2,355 1,910 -9% 12%
60-89 days 1,148 1,148 1,070 0% 7%
>90 days 2,953 2,771 2,703 7% 9%
Total 15,034 15,397 13,649 -2% 10%
1.
Loans and advances as at 30 September 2017 and 31 March 2017 include assets held for sale.
• September 2017 v September 2016
The 90 days past due but not impaired increased $250 million (+9%) primarily in Australia division due to growth in the home loan portfolio and
portfolio deterioration mainly in Western Australia.
• September 2017 v March 2017
The 90 days past due but not impaired increased $182 million (+7%) primarily in Australia division due to growth in the home loan portfolio and
portfolio deterioration mainly in Western Australia.
33
GROUP RESULTS
Income tax expense
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Income tax expense on cash profit 1,456 1,433 2% 2,889 2,299 26%
Effective tax rate (cash profit) 29.2% 29.5% 29.4% 28.0%
• September 2017 v September 2016
The effective tax rate has increased from 28.0% to 29.4%. The 140 basis point increase is primarily due to a reduction in equity accounted earnings
(+106 bps) and the non-recurrence of a tax provision release in the prior year (+87 bps). This is partially offset by the non-tax deductible impairment
of AmBank recognised in the March 2016 half (-95 bps).
• September 2017 v March 2017
The effective tax rate has decreased from 29.5% to 29.2%. The 30 basis point decrease is primarily due to increased offshore earnings in the
September 2017 half which attract a lower average tax rate. Offshore earnings in the March 2017 half are impacted by the reclassification of Asia
Retail and Wealth businesses to held for sale.
34
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 at
current period foreign exchange rates.
Cash Profit - September 2017 Full Year vs September 2016 Full Year
Full Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Net interest income 14,872 15,095 (47) 15,048 -1% 0% -1%
Other operating income 5,617 5,499 (61) 5,438 2% -1% 3%
Operating income 20,489 20,594 (108) 20,486 -1% -1% 0%
Operating expenses (9,448) (10,439) 75 (10,364) -9% 0% -9%
Profit before credit impairment and income tax 11,041 10,155 (33) 10,122 9% 0% 9%
Credit impairment charge (1,199) (1,956) 17 (1,939) -39% -1% -38%
Profit before income tax 9,842 8,199 (16) 8,183 20% 0% 20%
Income tax expense (2,889) (2,299) (7) (2,306) 26% 1% 25%
Non-controlling interests (15) (11) - (11) 36% 0% 36%
Cash profit 6,938 5,889 (23) 5,866 18% 0% 18%
Cash Profit by Division - September 2017 Full Year vs September 2016 Full Year
Full Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Australia 3,695 3,547 - 3,547 4% 0% 4%
Institutional 1,836 1,041 (12) 1,029 76% -2% 78%
New Zealand 1,369 1,268 9 1,277 8% 1% 7%
Wealth Australia 238 324 (1) 323 -27% -1% -26%
Asia Retail & Pacific (148) 159 (3) 156 large 2% large
TSO and Group Centre (52) (450) (16) (466) -88% 1% -89%
Cash profit by division 6,938 5,889 (23) 5,866 18% 0% 18%
Net loans and advances by Division - September 2017 vs September 2016
As at
Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$B
Sep 16
$B
Sep 16
$B
Sep 16
$B
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Sep 17
v. Sep 16
Australia 345.4 327.1 - 327.1 6% 0% 6%
Institutional 119.6 125.9 (1.9) 124.0 -5% -1% -4%
New Zealand
1
107.9 107.9 (3.8) 104.1 0% -4% 4%
Wealth Australia 1.7 2.0 - 2.0 -15% 0% -15%
Asia Retail & Pacific
1
5.7 13.4 (0.3) 13.1 -57% -1% -56%
TSO and Group Centre - (0.4) - (0.4) -100% 0% -100%
Net loans and advances by division
1
580.3 575.9 (6.0) 569.9 1% -1% 2%
1.
Net loans and advances as at 30 September 2017 and 31 March 2017 include net loans and advances held for sale.
35
GROUP RESULTS
Cash Profit - September 2017 Half Year vs March 2017 Half Year
Half Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Mar 17
$M
Mar 17
$M
Mar 17
$M
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Net interest income 7,456 7,416 (34) 7,382 1% 0% 1%
Other operating income 2,730 2,887 (23) 2,864 -5% 0% -5%
Operating income 10,186 10,303 (57) 10,246 -1% 0% -1%
Operating expenses (4,717) (4,731) 23 (4,708) 0% 0% 0%
Profit before credit impairment and income tax 5,469 5,572 (34) 5,538 -2% -1% -1%
Credit impairment charge (479) (720) 2 (718) -33% 0% -33%
Profit before income tax 4,990 4,852 (32) 4,820 3% -1% 4%
Income tax expense (1,456) (1,433) 9 (1,424) 2% 0% 2%
Non-controlling interests (7) (8) - (8) -13% 0% -13%
Cash profit 3,527 3,411 (23) 3,388 3% -1% 4%
Cash Profit by Division - September 2017 Half Year vs March 2017 Half Year
Half Year Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$M
Mar 17
$M
Mar 17
$M
Mar 17
$M
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Australia 1,897 1,798 - 1,798 6% 0% 6%
Institutional 815 1,021 (7) 1,014 -20% 0% -20%
New Zealand 692 677 (9) 668 2% -2% 4%
Wealth Australia 115 123 - 123 -7% 0% -7%
Asia Retail & Pacific 69 (217) 3 (214) large 0% large
TSO and Group Centre (61) 9 (10) (1) large large large
Cash profit by division 3,527 3,411 (23) 3,388 3% -1% 4%
Net loans and advances by Division - September 2017 vs March 2017
As at
Movement
Actual
FX
unadjusted
FX
impact
FX
adjusted
FX
unadjusted
FX
impact
FX
adjusted
Sep 17
$B
Mar 17
$B
Mar 17
$B
Mar 17
$B
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Sep 17
v. Mar 17
Australia 345.4 336.7 - 336.7 3% 0% 3%
Institutional 119.6 120.8 (1.0) 119.8 -1% -1% 0%
New Zealand
1
107.9 104.9 0.7 105.6 3% 1% 2%
Wealth Australia 1.7 1.8 - 1.8 -6% 0% -6%
Asia Retail & Pacific
1
5.7 12.5 (0.3) 12.2 -54% -1% -53%
TSO and Group Centre - (0.4) - (0.4) -100% 0% -100%
Net loans and advances by division
1
580.3 576.3 (0.6) 575.7 1% 0% 1%
1.
Net loans and advances as at 30 September 2017 and 31 March 2017 include net loans and advances held for sale.
36
GROUP RESULTS
Earnings related hedges
Where it is considered appropriate, the Group takes 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 exposures relate to
Asia Pacific, Europe & America. Details of these hedges are set out below.
Half Year Full Year
NZD Economic hedges
Sep 17
$M
Mar 17
$M
Sep 17
$M
Sep 16
$M
Net open NZD position (notional principal)
1
3,036 3,347 3,036 3,161
Amount taken to income (pre-tax statutory basis)
2
(34) 125 91 (174)
Amount taken to income (pre-tax cash basis)
3
(27) (19) (46) (8)
USD Economic hedges
Net open USD position (notional principal)
1
- - - -
Amount taken to income (pre-tax statutory basis)
2
- - - 21
Amount taken to income (pre-tax cash basis)
3
- - - (58)
1.
Value in AUD at contracted rate.
2.
Unrealised valuation movement plus realised revenue from matured or closed out hedges.
3.
Realised revenue from closed out hedges.
As at 30 September 2017, the following hedges were in place to partially hedge future earnings against adverse movements in exchange rates:
• NZD 3.3 billion at a forward rate of approximately NZD 1.08 / AUD.
There were no USD hedges in place or impacting income for the September 2017 full year.
During the September 2017 full year:
• NZD 1.8 billion of economic hedges matured and a realised loss of $46 million (pre-tax) was recorded in cash profit.
• An unrealised gain of $137 million (pre-tax) on the outstanding NZD economic hedges was recorded in the statutory Income Statement during the
year. This unrealised gain has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD
revenues.
Earnings per share
Half Year Full Year
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Cash earnings per share (cents)
Basic
120.4 116.7 3% 237.1 202.6 17%
Diluted 115.2 111.9 3% 226.4 194.1 17%
Cash weighted average number of ordinary shares (million)
1
Basic 2,929.2 2,923.7 0% 2,926.4 2,906.2 1%
Diluted 3,183.7 3,180.8 0% 3,191.7 3,187.0 0%
Cash profit ($M) 3,527 3,411 3% 6,938 5,889 18%
Cash profit used in calculating diluted cash earnings per share ($M) 3,667 3,559 3% 7,226 6,186 17%
1.
Cash weighted average number of ordinary shares includes treasury shares held in Wealth Australia as the associated gains and losses are included in cash profit.
37
GROUP RESULTS
Dividends
Half Year Full Year
Dividend per ordinary share (cents) Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Interim (fully franked) - 80 n/a 80 80 0%
Final (fully franked)
1
80 - n/a 80 80 0%
Total (fully franked) 80 80 0% 160 160 0%
Ordinary share dividends used in payout ratio ($M)
2
2,350 2,349 0% 4,699 4,676 0%
Cash profit ($M) 3,527 3,411 3% 6,938 5,889 18%
Ordinary share dividend payout ratio (cash basis)
2
66.6% 68.9% 67.7% 79.4%
1.
Final dividend for 2017 is proposed.
2.
Dividend payout ratio is calculated using proposed 2017 final dividend of $2,350 million, which is based on the forecast number of ordinary shares on issue at the dividend record date.
Dividend payout ratios for the March 2017 half and September 2016 full year were calculated using actual dividend paid of $2,349 million and $4,676 million respectively.
The Directors propose that a final dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 18 December 2017. The proposed 2017
final dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZD 10 cents per ordinary share will also be
attached.
Economic profit
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Statutory profit attributable to shareholders of the Company 3,495 2,911 20% 6,406 5,709 12%
Adjustments between statutory profit and cash profit 32 500 -94% 532 180 large
Cash Profit 3,527 3,411 3% 6,938 5,889 18%
Economic credit cost adjustment (353) (211) 67% (564) (48) large
Imputation credits 705 721 -2% 1,426 1,160 23%
Economic return 3,879 3,921 -1% 7,800 7,001 11%
Cost of capital (2,647) (2,610) 1% (5,257) (5,152) 2%
Economic profit 1,232 1,311 -6% 2,543 1,849 38%
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 audit.
Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the actual credit loss charge with
internal expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised,
measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At the ANZ Group level, this is calculated using average
ordinary shareholders’ equity (excluding non-controlling interests) multiplied by the cost of capital rate (currently 9% and applied across comparative
periods). At a business unit level, capital is allocated based on economic capital, whereby higher risk businesses attract higher levels of capital. This
method is designed to help drive appropriate risk management and ensure business returns align with the relevant credit, operational, market and other
risks.
Economic profit increased by $694 million (+38%) against the September 2016 full year due to a
18% increase in cash profit and 23% increase in
imputation credits, partially offset by higher economic credit costs.
Economic profit decreased by $79 million (-6%) against the March 2017 half due to higher economic credit costs, partially offset by a 3% increase in cash
profit.
38
GROUP RESULTS
Condensed balance sheet
As at
Movement
Assets
Sep 17
$B
Mar 17
$B
Sep 16
$B
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Cash / Settlement balances owed to ANZ / Collateral paid 82.5 89.3 83.3 -8% -1%
Trading and available for sale assets 113.0 108.8 110.3 4% 2%
Derivative financial instruments 62.5 63.9 87.5 -2% -29%
Net loans and advances
1
574.3 564.0 575.9 2% 0%
Investment backing policy liabilities 38.0 37.6 35.7 1% 6%
Assets held for sale 8.0 14.1 - -43% n/a
Other
1
19.1 18.8 22.2 2% -14%
Total assets 897.4 896.5 914.9 0% -2%
Liabilities
Settlement balances owed by ANZ / Collateral received 15.8 14.9 17.0 6% -7%
Deposits and other borrowings
1
595.6 581.4 588.2 2% 1%
Derivative financial instruments 62.3 65.1 88.7 -4% -30%
Debt issuances and subordinated debt 108.0 109.1 113.1 -1% -5%
Policy liabilities and external unit holder liabilities 41.9 41.3 39.5 1% 6%
Liabilities held for sale 4.7 17.2 - -73% n/a
Other
1
10.0 9.6 10.5 4% -5%
Total liabilities 838.3 838.6 857.0 0% -2%
Total equity 59.1 57.9 57.9 2% 2%
1.
Balance as at 30 September 2017 and 31 March 2017 exclude assets and liabilities reclassified to held for sale.
• September 2017 v September 2016
• Derivative financial assets and liabilities decreased $25.0 billion (-29%) and $26.4 billion (-30%) respectively as interest rate movements
resulted in lower derivative fair values.
• Net loans and advances decreased $1.6 billion. Adjusting for a $6.0 billion decrease due to foreign currency translation and a reclassification
of $6.0 billion to assets held for sale, the $10.5 billion increase was primarily driven by home loan growth across Australia (+$18.2 billion) and
New Zealand (+$3.8 billion) divisions, partially offset by a $7.4 billion reduction in Asia Retail & Pacific due to the partial completion of the Asia
Retail and Wealth sale and a $4.4 billion decrease in Institutional as a result of portfolio rebalancing.
• Deposits and other borrowings increased $7.4 billion (+1%). Adjusting for a $8.7 billion decrease due to foreign currency translation and a
reclassification of $4.6 billion to liabilities held for sale, the $20.7 billion increase was driven by growth in customer deposits across
Institutional, Australia and New Zealand divisions (+$38.6 billion), partially offset by reduction in customer deposits in Asia Retail & Pacific due
to the partial completion of the Asia Retail and Wealth sale (-$12.9 billion) and reduction in certificate of deposits, deposit from banks and
other borrowings (-$4.8 billion).
• Debt issuances and subordinated debt decreased $5.1 billion (-5%). Adjusting for a $1.2 billion decrease due to foreign currency translation,
the $3.9 billion decrease was primarily driven by a $4.1 billion reduction in subordinated debt.
• September 2017 v March 2017
• Cash / Settlement balances owed to ANZ / Collateral paid decreased by $6.8 billion (-8%). Adjusting for a $0.9 billion decrease due to foreign
currency translation, the $5.9 billion decrease was primarily driven by decreased cash and settlement balances held by Markets and Treasury.
• Trading and available-for-sale assets increased $4.2 billion (+4%). Adjusting for a $0.7 billion decrease due to foreign currency translation, the
$4.9 billion increase was primarily driven by driven by increased liquidity portfolio holdings due to balance sheet growth in Markets.
• Net loans and advances increased $10.3 billion (+2%). Adjusting for a $0.6 billion decrease due to foreign currency translation, the $10.9
billion increase was primarily driven by home loan growths across Australia (+$8.6 billion) and New Zealand (+$2.1 billion) divisions.
• Deposits and other borrowings increased by $14.2 billion (+2%). Adjusting for a $3.0 billion decrease due to foreign currency translation, the
$17.2 billion increase was primarily driven by increase in commercial paper issued (+$8.5 billion) and increase in customer deposits across
Institutional, Australia and New Zealand divisions (+$14.4 billion), partially offset by decrease in certificate of deposits, deposit from banks and
other borrowings (-$5.4 billion).
• Assets and liabilities held for sale decreased $6.1 billion (-43%) and $12.5 billion (-73%) respectively due to the partial completion of the Asia
Retail and Wealth sale.
Assets and liabilities held for sale as at 30 September 2017 and 31 March 2017 reflects the reclassification of Asia Retail and Wealth businesses,
UDC Finance, Shanghai Rural Commercial Bank and Metrobank Card Corporation assets and liabilities to held for sale. Refer to Note 10 to the
financial statements for further details.
39
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 wholesale
debt, 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 in
all 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. The objective of this framework is to:
• Provide protection against shorter-term extreme market dislocation and stress.
• Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.
• Ensure that 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 by banking
regulators including APRA. As part of meeting LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia
(RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative
form of contingent liquidity. The total amount of the CLF available to a qualifying ADI is set annually by APRA. From 1 January 2017, ANZ’s CLF is
$43.8 billion (2016 calendar year end: $50.3 billion).
• 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 repurchase
with 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 other eligible securities listed by the Reserve Bank of New
Zealand (RBNZ).
The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements and
the risk appetite set by the Board.
Half Year Average
1
Movement
Sep 17
$B
Mar 17
$B
Sep 16
$B
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Market Values Post Discount
HQLA1
2
128.7 127.1 119.7
1% 8%
HQLA2 4.7 4.3 4.1
9% 15%
Internal Residential Mortgage Backed Securities (Australia)
2
30.3 33.7 35.3
-10% -14%
Internal Residential Mortgage Backed Securities (New Zealand)
3
1.1 0.6 1.2
83% -8%
Other ALA
4
14.9 15.6 17.7
-4% -16%
Total Liquid Assets 179.7 181.3 178.0 -1% 1%
Cash flows modelled under stress scenario
Cash outflows 174.5 172.7 182.9 1% -5%
Cash inflows 41.3 38.2 40.2 8% 3%
Net cash outflows
133.2 134.5 142.7 -1% -7%
Liquidity Coverage Ratio
5
135% 135% 125% 0% 10%
1.
Half year average basis, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.
2.
RBA open repo arrangement netted down from CLF, with a corresponding increase in HQLA.
3.
New Zealand LCR surplus is excluded from NZ internal RMBS, consistent with APS 330 treatment.
4.
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.
5.
All currency Level 2 LCR.
40
GROUP RESULTS
Funding
ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
$22.0 billion of term wholesale debt with a remaining term greater than one year as at 30 September 2017 was issued during the year ended 30
September 2017. The weighted average tenor of new term debt was 5.3 years.
The following tables show the Group’s total funding composition:
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Customer deposits and other liabilities
1
Australia
201,365 197,632 187,667 2% 7%
Institutional
186,782 179,326 171,155 4% 9%
New Zealand
75,323 74,266 72,818 1% 3%
Wealth Australia
- 326 343 -100% -100%
Asia Retail & Pacific
9,157 21,867 22,782 -58% -60%
TSO and Group Centre
1
(4,997) (5,202) (5,142) -4% -3%
Customer deposits
467,630 468,215 449,623 0% 4%
Other funding liabilities
2,3
12,838 11,725 14,049 9% -9%
Total customer liabilities (funding)
480,468 479,940 463,672 0% 4%
Wholesale funding
4
Debt issuances
90,263 88,778 91,080 2% -1%
Subordinated debt
17,710 20,297 21,964 -13% -19%
Certificates of deposit
55,222 57,428 61,429 -4% -10%
Commercial paper
18,023 9,482 19,349 90% -7%
Other wholesale borrowings
2,5,6
65,441 70,070 65,924 -7% -1%
Total wholesale funding
246,659 246,055 259,746 0% -5%
Shareholders' equity
59,075 57,908 57,927 2% 2%
Total funding
786,202 783,903 781,345 0% 1%
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Funded assets
Other short term assets & trade finance assets
7
58,576 60,008 65,800 -2% -11%
Liquids
6
169,317 168,030 161,302 1% 5%
Short term funded assets 227,893 228,038 227,102 0% 0%
Lending & fixed assets
8
558,309 555,865 554,243 0% 1%
Total funded assets 786,202 783,903 781,345 0% 1%
Funding liabilities
4,6
Other short term liabilities
2
46,021 51,655 49,288 -11% -7%
Short term funding 62,119 53,495 69,028 16% -10%
Term funding < 12 months 18,872 20,968 23,668 -10% -20%
Other customer and central bank deposits
1,2,9
78,652 81,247 79,115 -3% -1%
Total short term funding liabilities 205,664 207,365 221,099 -1% -7%
Stable customer deposits
1,10
421,172 416,775 402,146 1% 5%
Term funding > 12 months 91,840 93,556 90,708 -2% 1%
Shareholders' equity and hybrid debt 67,526 66,207 67,392 2% 0%
Total stable funding 580,538 576,538 560,246 1% 4%
Total funding 786,202 783,903 781,345 0% 1%
1.
Includes term deposits, other deposits and an adjustment recognised in Group Centre to eliminate Wealth Australia investments in ANZ deposit products.
2.
Securities sold under repurchase agreements reclassified to align with current period presentation.
3.
Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth Australia.
4.
Excludes liability for acceptances as they do not provide net funding.
5.
Includes borrowings from banks, securities sold under repurchase agreements, net derivative balances, special purpose vehicles and other borrowings.
6.
Includes RBA open-repo arrangement netted down by the exchange settlement account cash balance.
7.
Includes short-dated assets such as trading securities, available for sale securities, trade dated assets and trade finance loans.
8.
Excludes trade finance loans.
9.
Total customer liabilities (funding) plus Central Bank deposits less stable customer deposits.
10.
Stable customer deposits represent operational type deposits or those sourced from retail / business / corporate customers and the stable component of other funding liabilities.
41
GROUP RESULTS
Capital Management
As at
APRA Basel 3 Internationally Comparable Basel 3
1
Sep 17 Mar 17 Sep 16 Sep 17 Mar 17 Sep 16
Capital Ratios
Common Equity Tier 1 10.6% 10.1% 9.6% 15.8% 15.2% 14.5%
Tier 1 12.6% 12.1% 11.8% 18.4% 18.2% 17.4%
Total capital 14.8% 14.5% 14.3% 21.2% 21.3% 20.7%
Risk weighted assets ($B) 391.1 397.0 408.6 306.5 309.4 316.4
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) – September 2017 v September 2016
1.
Excludes large/notable items for the purposes of Capital Management attribution. Refer to pages 14 to 16.
2.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the capitalisation of internally
generated software assets), EL versus EP shortfall and other intangibles in the period.
3.
9.9 million ordinary shares were provided/issued under the Dividend Reinvestment Plan and Bonus Option Plan for the final 2016 and 2017 interim dividend with neutralisation of the
Dividend Reinvestment Plan.
• September 2017 v September 2016
ANZ’s CET1 ratio increased 96 bps to 10.6% during the year. Key drivers of the movement in the CET1 ratio were:
• Net organic capital generation was 229 bps or $9.3 billion. This was primarily driven by cash profit and a net reduction in underlying RWA
growth (excluding foreign exchange impacts, regulatory changes and other one-offs) which collectively provided 223 bps to the CET1 ratio.
Throughout the September 2017 full year, RWA reduction was primarily driven by a $16.4 billion decrease in Institutional Credit RWAs
(CRWAs) from a reduction in lending, due to portfolio rebalancing.
• Payment of the March 2017 Interim and September 2016 Final Dividends (net of shares provided under the DRP, with March 2017 DRP
neutralisation) reduced the CET1 ratio by 108 bps.
• The transition of Asia Retail and Wealth businesses in China, Singapore and Hong Kong to DBS increased CET1 ratio by 9 bps.
• Other impacts are mainly driven by net impacts from RWA measurement changes (reduced CET1 ratio by 27 bps principally from changes to
ANZ’s new capital model for Australian Residential Mortgages), and a further 7bps reduction from other impacts associated with movements in
non-cash earnings and net foreign currency translation.
42
GROUP RESULTS
APRA Basel 3 Common Equity Tier 1 (CET1) – September 2017 v March 2017
1.
Excludes large/notable items for the purposes of Capital Management attribution. Refer to pages 14 to 16.
2.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the capitalisation of internally
generated software assets), EL versus EP shortfall and other intangibles in the period.
3.
1.4 million ordinary shares were issued under the Bonus Option Plan for the 2017 interim dividend with neutralisation of the Dividend Reinvestment Plan.
• September 2017 v March 2017
ANZ’s CET1 ratio increased 44 bps to 10.6% during the September 2017 half. Key drivers of the movement in the CET1 ratio were:
• Net organic capital generation was 118 bps or $4.7 billion. This was primarily driven by cash profit and a net reduction in underlying RWA
(excluding foreign exchange impacts, regulatory changes and other one-offs). The RWA reduction was mainly driven by a $7.6 billion decrease
in Institutional CRWAs from lower lending due to portfolio rebalancing.
• Payment of the March 2017 Interim Dividend (with DRP neutralisation) reduced the CET1 ratio by 58 bps.
• The transition of Asia Retail and Wealth businesses in China, Singapore and Hong Kong to DBS increased CET1 ratio by 9 bps.
• Other impacts are mainly driven by net impacts from RWA measurement changes (reduced CET1 ratio by 21 bps principally from changes to
ANZ’s new capital model for Australian Residential Mortgages), and a further 4 bps reduction from other impacts associated with movements in
non-cash earnings and net foreign currency translation.
Total Risk Weighted Assets (RWA) – September 2017 v September 2016
• September 2017 v September 2016
ANZ’s total RWA decreased by $17.5 billion. Excluding the impact of foreign currency exchange translation and other non-recurring CRWA
changes, CRWAs decreased by $14.2 billion, primarily driven by a decline in Institutional lending. Other CRWA changes mainly reflect the impact of
RWA modelling changes to the Australian Residential Mortgages portfolio, partially offset by the Asia Retail and Wealth business transition of China,
Singapore and Hong Kong to DBS. Non-CRWA decreased by $2.3bn mainly driven by lower Operational Risk, from reduced operation size
(following portfolio rebalancing in Institutional and the transition of Asia Retail and Wealth businesses) and simplification of portfolios across the
Group.
43
GROUP RESULTS
Total Risk Weighted Assets (RWA) – September 2017 v March 2017
• September 2017 v March 2017
ANZ’s total RWA decreased by $5.9 billion. Excluding the impact of foreign currency exchange translation and other non-recurring CRWA
changes, CRWAs decreased by $6.3 billion primarily driven by a decline in Institutional lending. Other CRWA changes mainly reflect the impact of
RWA modelling changes to the Australian Residential Mortgages portfolio, partially offset by the transition of Asia Retail and Wealth business in
China, Singapore and Hong Kong to DBS. Non-CRWA decreased by $0.9 billion mainly driven by lower operational risk RWA from reduced
operation size (following portfolio rebalancing in Institutional and the transition of Asia Retail and Wealth businesses) and simplification of portfolios
across the Group.
APRA to Internationally Comparable
1
Common Equity Tier 1 (CET1) as at 30 September 2017
1.
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 Capital Standards” (June 2006). Also includes differences identified in APRA’s information paper entitled
“International 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 directly comparable
with international peers. The International Comparable Basel 3 CET1 ratio incorporates differences between APRA and both the Basel Committee 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 between APRA Basel 3 and Internationally Comparable Basel 3 ratios include:
Deductions
• Investments 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.
44
GROUP RESULTS
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 for residential
mortgages. Additionally, from July 2016, APRA also requires a higher correlation factor above the Basel framework 15% .The Internationally
Comparable Basel 3 framework only requires a downturn LGD floor of 10% and a correlation factor of 15%.
• Specialised lending - APRA requires the supervisory slotting approach to 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 in other
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 30 September 2017, the Group’s APRA Leverage Ratio was 5.4% which is above the 3% minimum currently proposed by the Basel Committee on
Banking Supervision (BCBS). APRA has not finalised a minimum leverage ratio requirement for Australian ADIs. The following table summarises the
Group’s Leverage Ratio calculation:
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Tier 1 Capital (net of capital deductions) 49,324 48,091 48,285 3% 2%
On-balance sheet exposures (excluding derivatives and securities financing transaction
exposures)
752,347 747,708 744,359 1% 1%
Derivative exposures 31,469 30,968 30,600 2% 3%
Securities financing transaction (SFT) exposures 28,598 30,286 31,417 -6% -9%
Other off-balance sheet exposures 96,765 97,492 98,460 -1% -2%
Total exposure measure 909,179 906,454 904,836 0% 0%
APRA Leverage Ratio
1
5.4% 5.3% 5.3%
Internationally Comparable Leverage Ratio
1
6.2% 6.0% 6.0%
1.
Leverage ratio includes Additional Tier 1 securities subject to Basel 3 transitional relief, net of any transitional adjustments.
• September 2017 v September 2016
ANZ’s Leverage Ratio increased 9 bps during the year mainly driven by:
• Net organic capital generation (cash earnings) net of dividend payments increased the ratio by 30 bps.
• Lower net Additional Tier 1 capital reduced the ratio by 10 bps mainly from redemption of remaining $1.1 billion of transitional CPS2 on issue in
March 2017 half.
• Net growth in exposures reduced the ratio by 10 bps mainly driven by on balance sheet growth in Australia division (primarily from growth in
home loans) partially offset by the transition of Asia Retail and Wealth businesses to DBS. Other impacts lowered the ratio by 1 bp.
• September 2017 v March 2017
ANZ’s Leverage Ratio increased 12 bps in the September half mainly driven by:
• Net organic capital generation (cash earnings) net of dividend payments increased the ratio by 15 bps.
• The above were offset by net growth in exposures which reduced the ratio by 3 bps primarily driven by on balance sheet growth in Australian
division (primarily from growth in home loans) partially offset by the
transition of Asia Retail and Wealth businesses to DBS.
Other regulatory developments
• Financial System Inquiry (FSI)
The Australian Government completed a comprehensive inquiry into Australia’s financial system and the FSI final report was released on 7
December 2014. The contents of the report are wide-ranging and key recommendations that may have an impact on regulatory capital levels include:
• Setting capital standards such that Australian Authorised Deposit-taking Institutions’ (ADIs) capital ratios 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;
• 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 Australian ADIs; and
• Introducing a leverage ratio that acts as a backstop to ADIs risk-based capital requirements, in line with the Basel framework.
APRA supported the FSI’s recommendations and in response introduced the following:
• With effect from July 2016, APRA increased the capital requirements for Australian residential mortgage exposures for ADIs accredited to use
the IRB approach to credit risk (including ANZ) to at least 25% risk-weighting. APRA also required refinements to residential mortgages risk
models which ANZ implemented in June 2017. Collectively these changes have increased average credit risk weighting of ANZ’s residential
mortgages to approximately 28% as at September 2017.
• In July 2017, APRA released an information paper outlining its assessment on the additional capital required for the Australian banking sector to
be considered ‘unquestionably strong’. APRA indicated that “In the case of the four major Australian banks, APRA expects that the increased
capital requirements will translate into the need for an increase in CET1 capital ratios, on average, of around 100 basis points above their
December 2016 levels. In broad terms, that equates to a benchmark CET1 capital ratio, under the current capital adequacy framework, of at
least 10.5 per cent.” APRA also stated that “ADIs should, where necessary, initiate strategies to increase their capital strength to be able to meet
these capital benchmarks by 1 January 2020 at the latest.” In order to accommodate future changes to capital framework mainly from:
• Basel III changes in respect of credit risk, operational risk and the capital floor and;
• Additional changes to address mortgage concentration risk and to improve transparency, comparability and flexibility.
46
GROUP RESULTS
• Discussion papers covering the above are expected to be released in late 2017, with consultation on draft prudential standards taking place
throughout 2018. Final standards will then be issued in 2019 to take effect from early 2021. Importantly, APRA has indicated these changes to the
capital framework will be accommodated within the 10.5% CET1 benchmark that Australian ADIs are expected to have met, a year ahead of the
expected effective date of the new prudential standards.
• Net Stable Funding Ratio (NSFR)
APRA released its final standards on NSFR in 2017 confirming that the minimum NSFR of 100% will become a regulatory requirement from 1
January 2018.
As part of managing future liquidity requirements, ANZ monitors the NSFR in its internal reporting and the Group is well placed to meet this
requirement by the implementation date.
• Level 3 Conglomerates (Level 3)
APRA is extending its prudential supervision framework to Conglomerate Groups via the Level 3 framework which will regulate a bancassurance
group such as ANZ as a single economic entity with minimum capital requirements and additional monitoring of risk exposure levels.
In August 2016, APRA confirmed the deferral of capital requirements for Conglomerate Groups until 2019 at the earliest, to allow for the final capital
requirements arising from FSI recommendations as well as from international initiatives that are in progress.
The non-capital components of the Level 3 framework relating to group governance, risk exposures, intragroup transactions and other risk
management and compliance requirements came into effect on 1 July 2017. These have had no material impact on the Group’s capital position.
• RBNZ review of capital requirements
On May 1, 2017 the RBNZ published an issues paper announcing that it is undertaking a comprehensive review of the capital adequacy framework
applying to New Zealand locally incorporated registered banks over 2017 and 2018. The aim of the review is to identify the most appropriate
framework for setting capital requirements for New Zealand banks, taking into account how the current framework has operated and international
developments in bank capital requirements. The capital review will focus on the three key components of the current framework:
• The definition of eligible capital instruments;
• The measurement of risk; and
• The minimum capital ratios and buffers.
The RBNZ requested feedback about the topics covered by the issues paper for which responses were due on June 9, 2017. Detailed consultation
documents on policy proposals and options for each of the three components will be released during 2017, with a view to concluding the review by
the first quarter of 2018.
On July 14, 2017, the RBNZ released a consultation paper on what types of financial instruments should qualify as eligible regulatory capital. The
consultation paper sets out proposals for reform to the definition of eligible capital instruments for which responses were due September 8, 2017.
The impact on Group and our subsidiary bank in New Zealand (ANZ Bank New Zealand) arising from the above consultations will not be known until
the RBNZ finalises their review in 2018.
• Current Proposals from the Basel Committee on Banking Supervision (BCBS) on RWA
As part of the 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 the imposition of capital floors based on standardised RWA approaches; and
• Additional constraints on the use of internal models for credit RWA.
Apart from the review of the Trading Book standard which has been finalised, BCBS is currently deliberating on the other proposals. Once finalised,
APRA is expected to incorporate these issues as part of changes to the regulatory capital framework that APRA intends to implement by 2021, as
outlined in its July 2017 information paper ‘Strengthening banking system resilience – establishing unquestionably strong capital ratios’.
47
GROUP RESULTS
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48
DIVISIONAL RESULTS
CONTENTS
Divisional Results
Divisional performance
Australia
Institutional
New Zealand
Wealth Australia
Asia Retail & Pacific
Technology, Services & Operations (TSO) and Group Centre
49
DIVISIONAL RESULTS
Divisional Performance
During the March 2017 half, the Group made changes to the Group’s operating model for technology, operations and shared services to accelerate
delivery of its technology and digital roadmap, bring operations closer to its customers and continue operational efficiency gains. As a result of these
organisational changes, divisional operations from Technology, Services & Operations (“TSO”) and Group Centre have been realigned to divisions. The
residual TSO and Group Centre now contains Group Technology, Group Hubs, Enterprise Services and Group Property and the Group Centre. The
Group operates on a divisional structure with six divisions: Australia, New Zealand, Institutional, Asia Retail & Pacific, Wealth Australia, and Technology,
Services & Operations and Group Centre. For further information on the composition of divisions refer to the Definitions on page 117.
Other than the changes described above, there have been no other significant structural changes during the year. However, certain prior period
comparatives have been restated to align with current period presentation. The divisions reported below are consistent with internal reporting provided to
the chief operating decision maker, being the Chief Executive Officer.
The Divisional Results section is reported on a cash profit basis.
September 2017 Full Year
Australia
$M
Institutional
$M
New Zealand
$M
Wealth
Australia
$M
Asia Retail
& Pacific
$M
TSO and Group
Centre
$M
Group
$M
Net interest income 8,384 3,068 2,519 9 606 286 14,872
Other operating income 1,218 2,346 653 1,077 37 286 5,617
Operating income 9,602 5,414 3,172 1,086 643 572 20,489
Operating expenses (3,423) (2,736) (1,193) (743) (651) (702) (9,448)
Profit before credit impairment and income tax 6,179 2,678 1,979 343 (8) (130) 11,041
Credit impairment charge (897) (80) (78) - (144) - (1,199)
Profit before income tax 5,282 2,598 1,901 343 (152) (130) 9,842
Income tax expense and non-controlling
interests
(1,587) (762) (532) (105) 4 78 (2,904)
Cash profit/(loss) 3,695 1,836 1,369 238 (148) (52) 6,938
September 2016 Full Year
Australia
$M
Institutional
$M
New Zealand
$M
Wealth
Australia
$M
Asia Retail
& Pacific
$M
TSO and Group
Centre
$M
Group
$M
Net interest income 8,202 3,447 2,448 11 698 289 15,095
Other operating income 1,206 1,733 644 1,244 478 194 5,499
Operating income 9,408 5,180 3,092 1,255 1,176 483 20,594
Operating expenses (3,426) (2,958) (1,225) (801) (808) (1,221) (10,439)
Profit before credit impairment and income tax 5,982 2,222 1,867 454 368 (738) 10,155
Credit impairment charge (920) (743) (120) - (172) (1) (1,956)
Profit before income tax 5,062 1,479 1,747 454 196 (739) 8,199
Income tax expense and non-controlling
interests
(1,515) (438) (479) (130) (37) 289 (2,310)
Cash profit/(loss) 3,547 1,041 1,268 324 159 (450) 5,889
September 2017 Full Year vs September 2016 Full Year
Australia Institutional New Zealand
Wealth
Australia
Asia Retail
& Pacific
TSO and Group
Centre Group
Net interest income 2% -11% 3% -18% -13% -1% -1%
Other operating income 1% 35% 1% -13% -92% 47% 2%
Operating income 2% 5% 3% -13% -45% 18% -1%
Operating expenses 0% -8% -3% -7% -19% -43% -9%
Profit before credit impairment and income tax 3% 21% 6% -24% large -82% 9%
Credit impairment charge -3% -89% -35% n/a -16% -100% -39%
Profit before income tax 4% 76% 9% -24% large -82% 20%
Income tax expense and non-controlling
interests
5% 74% 11% -19% large -73% 26%
Cash profit/(loss) 4% 76% 8% -27% large -88% 18%
50
DIVISIONAL RESULTS
Cash profit by division – September 2017 Full year v September 2016 Full year
September 2017 Half Year
Australia
$M
Institutional
$M
New Zealand
$M
Wealth
Australia
$M
Asia Retail
& Pacific
$M
TSO and Group
Centre
$M
Group
$M
Net interest income 4,251 1,480 1,259 4 275 187 7,456
Other operating income 616 989 336 538 176 75 2,730
Operating income 4,867 2,469 1,595 542 451 262 10,186
Operating expenses (1,730) (1,357) (593) (373) (298) (366) (4,717)
Profit before credit impairment and income tax 3,137 1,112 1,002 169 153 (104) 5,469
Credit impairment charge (425) 45 (41) - (69) 11 (479)
Profit before income tax 2,712 1,157 961 169 84 (93) 4,990
Income tax expense and non-controlling
interests
(815) (342) (269) (54) (15) 32 (1,463)
Cash profit/(loss) 1,897 815 692 115 69 (61) 3,527
March 2017 Half Year
Australia
$M
Institutional
$M
New Zealand
$M
Wealth
Australia
$M
Asia Retail
& Pacific
$M
TSO and Group
Centre
$M
Group
$M
Net interest income 4,133 1,588 1,260 5 331 99 7,416
Other operating income 602 1,357 317 539 (139) 211 2,887
Operating income 4,735 2,945 1,577 544 192 310 10,303
Operating expenses (1,693) (1,379) (600) (370) (353) (336) (4,731)
Profit before credit impairment and income tax 3,042 1,566 977 174 (161) (26) 5,572
Credit impairment charge (472) (125) (37) - (75) (11) (720)
Profit before income tax 2,570 1,441 940 174 (236) (37) 4,852
Income tax expense and non-controlling
interests
(772) (420) (263) (51) 19 46 (1,441)
Cash profit/(loss) 1,798 1,021 677 123 (217) 9 3,411
September 2017 Half Year vs March 2017 Half Year
Australia Institutional New Zealand
Wealth
Australia
Asia Retail
& Pacific
TSO and Group
Centre Group
Net interest income 3% -7% 0% -20% -17% 89% 1%
Other operating income 2% -27% 6% 0% large -64% -5%
Operating income 3% -16% 1% 0% large -15% -1%
Operating expenses 2% -2% -1% 1% -16% 9% 0%
Profit before credit impairment and income tax 3% -29% 3% -3% large large -2%
Credit impairment charge -10% large 11% n/a -8% large -33%
Profit before income tax 6% -20% 2% -3% large large 3%
Income tax expense and non-controlling
interests
6% -19% 2% 6% large -30% 2%
Cash profit/(loss) 6% -20% 2% -7% large large 3%
51
DIVISIONAL RESULTS
Australia
Fred Ohlsson
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 4,251 4,133 3%
8,384 8,202 2%
Other operating income 616 602 2%
1,218 1,206 1%
Operating income 4,867 4,735 3%
9,602 9,408 2%
Operating expenses (1,730) (1,693) 2%
(3,423) (3,426) 0%
Profit before credit impairment and income tax 3,137 3,042 3%
6,179 5,982 3%
Credit impairment charge (425) (472) -10%
(897) (920) -3%
Profit before income tax 2,712 2,570 6%
5,282 5,062 4%
Income tax expense and non-controlling interests (815) (772) 6%
(1,587) (1,515) 5%
Cash profit 1,897 1,798 6%
3,695 3,547 4%
Balance Sheet
Net loans and advances 345,344 336,736 3%
345,344 327,109 6%
Other external assets 3,084 2,952 4%
3,084 2,921 6%
External assets 348,428 339,688 3%
348,428 330,030 6%
Customer deposits 201,365 197,632 2%
201,365 187,667 7%
Other external liabilities 10,847 11,117 -2%
10,847 11,842 -8%
External liabilities 212,212 208,749 2%
212,212 199,509 6%
Risk weighted assets
1
170,632 159,575 7%
170,632 157,410 8%
Average gross loans and advances 343,174 333,965 3%
338,582 322,614 5%
Average deposits and other borrowings 198,826 193,671 3%
196,256 183,196 7%
Ratios
Return on average assets 1.10% 1.08%
1.09% 1.10%
Net interest margin
2
2.68% 2.69%
2.68% 2.75%
Operating expenses to operating income 35.5% 35.8%
35.6% 36.4%
Operating expenses to average assets 1.00% 1.01%
1.01% 1.06%
Individual credit impairment charge/(release) 453 430 5%
883 898 -2%
Individual credit impairment charge/(release) as a % of average GLA 0.26% 0.26%
0.26% 0.28%
Collective credit impairment charge/(release) (28) 42 large
14 22 -36%
Collective credit impairment charge/(release) as a % of average GLA (0.02%) 0.03%
0.00% 0.01%
Gross impaired assets 1,310 1,227 7%
1,310 1,170 12%
Gross impaired assets as a % of GLA 0.38% 0.36%
0.38% 0.36%
Total full time equivalent staff (FTE) 11,387 11,447 -1%
11,387 11,563 -2%
1.
Risk weighted assets from 30 September 2016 includes APRA’s revised average mortgage risk weight targets.
2.
In the March 2017 half, the Group changed its calculation of net interest margin to net Australian home loan deposit offset balances against total interest earning assets (Mar 17 half:
$24,979 million; Sep 16 full year: $23,325 million).
Performance September 2017 v September 2016
• Retail lending volumes grew in home loans, particularly in New South
Wales. Corporate & Commercial banking volumes grew 1% with Corporate
Banking increasing 7%. Customer deposits grew across all portfolios.
• Net interest margin declined as the result of higher average funding costs,
lower earnings on deposits due to the lower interest rate environment and
the introduction of the major bank levy.
• Operating expenses were broadly flat due to a reduction in FTE driven by
productivity efforts focused on simplifying the business, partially offset by
inflation and increased investment in the business, particularly in the
second half.
• Credit impairment charges decreased primarily due to lower single name
charges in Corporate and Commercial Banking, partially offset by volume
growth and higher delinquency rates for home loans in Western Australia.
52
DIVISIONAL RESULTS
Australia
Fred Ohlsson
Individual credit impairment charge/(release) Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Retail 259 238 9% 497 435 14%
Home Loans 44 38 16% 82 53 55%
Cards and Personal Loans 202 187 8% 389 361 8%
Deposits and Payments
1
13 13 0% 26 21 24%
Private Bank - - n/a - - n/a
Corporate & Commercial Banking 194 192 1% 386 463 -17%
Corporate Banking 3 18 -83% 21 33 -36%
Asset Finance 19 21 -10% 40 86 -53%
Regional Business Banking 42 31 35% 73 104 -30%
Business Banking 19 20 -5% 39 45 -13%
Small Business Banking 111 102 9% 213 195 9%
Individual credit impairment charge/(release) 453 430 5% 883 898 -2%
Collective credit impairment charge/(release)
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Retail
(33) 26 large (7) 29 large
Home Loans 2 8 -75% 10 21 -52%
Cards and Personal Loans (33) 17 large (16) 8 large
Deposits and Payments
1
(2) 1 large (1) - n/a
Private Bank - - n/a - - n/a
Corporate & Commercial Banking 5 16 -69% 21 (7) large
Corporate Banking 19 7 large 26 3 large
Asset Finance (6) 4 large (2) 5 large
Regional Business Banking - 3 -100% 3 (10) large
Business Banking (7) - n/a (7) (8) -13%
Small Business Banking (1) 2 large 1 3 -67%
Collective credit impairment charge/(release) (28) 42 large 14 22 -36%
Total credit impairment charge/(release) 425 472 -10% 897 920 -3%
1.
Represents credit impairment charge/(release) on overdraft balances.
53
DIVISIONAL RESULTS
Australia
Fred Ohlsson
Net loans and advances
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Retail 276,775 268,695 259,330 3% 7%
Home Loans 264,612 256,174 246,743 3% 7%
Cards and Personal Loans 10,544 10,918 11,021 -3% -4%
Deposits and Payments
1
84 90 95 -7% -12%
Private Bank 1,535 1,513 1,471 1% 4%
Corporate & Commercial Banking 68,569 68,041 67,779 1% 1%
Corporate Banking 14,973 14,334 14,004 4% 7%
Asset Finance 8,676 8,592 8,384 1% 3%
Regional Business Banking 14,211 13,905 14,284 2% -1%
Business Banking 15,125 15,495 15,536 -2% -3%
Small Business Banking 15,584 15,715 15,571 -1% 0%
Net loans and advances 345,344 336,736 327,109 3% 6%
Customer deposits As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Retail 144,235 141,899 135,162 2% 7%
Home Loans
2
26,771 25,593 24,131 5% 11%
Cards and Personal Loans 299 266 273 12% 10%
Deposits and Payments 106,506 106,811 102,592 0% 4%
Private Bank 10,659 9,229 8,166 15% 31%
Corporate & Commercial Banking 57,130 55,733 52,505 3% 9%
Corporate Banking
3
3,573 3,477 2,915 3% 23%
Regional Business Banking 5,689 5,976 5,836 -5% -3%
Business Banking 11,580 11,129 10,416 4% 11%
Small Business Banking 36,288 35,151 33,338 3% 9%
Customer deposits 201,365 197,632 187,667 2% 7%
1.
Net loans and advances for the deposits and payments business represent amounts in overdraft.
2.
Customer deposit amounts for the home loans business represent balances in offset accounts.
3.
Some Corporate Banking deposits are included in Institutional division deposits.
54
DIVISIONAL RESULTS
Australia
Fred Ohlsson
September 2017 Full Year
Retail
$M
C&CB
$M
Australia
Total
$M
Net interest income 5,705 2,679 8,384
Other operating income 792 426 1,218
Operating income 6,497 3,105 9,602
Operating expenses (2,354) (1,069) (3,423)
Profit before credit impairment and income tax 4,143 2,036 6,179
Credit impairment (charge)/release (490) (407) (897)
Profit before income tax 3,653 1,629 5,282
Income tax expense and non-controlling interests (1,098) (489) (1,587)
Cash profit 2,555 1,140 3,695
Individual credit impairment charge/(release) 497 386 883
Collective credit impairment charge/(release) (7) 21 14
Net loans and advances 276,775 68,569 345,344
Customer deposits 144,235 57,130 201,365
Risk weighted assets
1
107,059 63,573 170,632
September 2016 Full Year
Net interest income 5,475 2,727 8,202
Other operating income 785 421 1,206
Operating income 6,260 3,148 9,408
Operating expenses (2,364) (1,062) (3,426)
Profit before credit impairment and income tax 3,896 2,086 5,982
Credit impairment (charge)/release (464) (456) (920)
Profit before income tax 3,432 1,630 5,062
Income tax expense and non-controlling interests (1,025) (490) (1,515)
Cash profit 2,407 1,140 3,547
Individual credit impairment charge/(release) 435 463 898
Collective credit impairment charge/(release) 29 (7) 22
Net loans and advances 259,330 67,779 327,109
Customer deposits 135,162 52,505 187,667
Risk weighted assets
1
93,308 64,102 157,410
September 2017 Full Year vs September 2016 Full Year
Net interest income 4% -2% 2%
Other operating income 1% 1% 1%
Operating income 4% -1% 2%
Operating expenses 0% 1% 0%
Profit before credit impairment and income tax 6% -2% 3%
Credit impairment (charge)/release 6% -11% -3%
Profit before income tax 6% 0% 4%
Income tax expense and non-controlling interests 7% 0% 5%
Cash profit 6% 0% 4%
Individual credit impairment charge/(release) 14% -17% -2%
Collective credit impairment charge/(release) large large -36%
Net loans and advances 7% 1% 6%
Customer deposits 7% 9% 7%
Risk weighted assets
1
15% -1% 8%
1.
Risk weighted assets from 30 September 2016 includes APRA’s revised average mortgage risk weight targets.
55
DIVISIONAL RESULTS
Australia
Fred Ohlsson
September 2017 Half Year
Retail
$M
C&CB
$M
Australia
Total
$M
Net interest income 2,914 1,337 4,251
Other operating income 400 216 616
Operating income 3,314 1,553 4,867
Operating expenses (1,187) (543) (1,730)
Profit before credit impairment and income tax 2,127 1,010 3,137
Credit impairment (charge)/release (226) (199) (425)
Profit before income tax 1,901 811 2,712
Income tax expense and non-controlling interests (572) (243) (815)
Cash profit 1,329 568 1,897
Individual credit impairment charge/(release) 259 194 453
Collective credit impairment charge/(release) (33) 5 (28)
Net loans and advances 276,775 68,569 345,344
Customer deposits 144,235 57,130 201,365
Risk weighted assets
1
107,059 63,573 170,632
March 2017 Half Year
Net interest income 2,791 1,342 4,133
Other operating income 392 210 602
Operating income 3,183 1,552 4,735
Operating expenses (1,167) (526) (1,693)
Profit before credit impairment and income tax 2,016 1,026 3,042
Credit impairment (charge)/release (264) (208) (472)
Profit before income tax 1,752 818 2,570
Income tax expense and non-controlling interests (526) (246) (772)
Cash profit 1,226 572 1,798
Individual credit impairment charge/(release) 238 192 430
Collective credit impairment charge/(release) 26 16 42
Net loans and advances 268,695 68,041 336,736
Customer deposits 141,899 55,733 197,632
Risk weighted assets
1
95,538 64,037 159,575
September 2017 Half Year vs March 2017 Half Year
Net interest income 4% 0% 3%
Other operating income 2% 3% 2%
Operating income 4% 0% 3%
Operating expenses 2% 3% 2%
Profit before credit impairment and income tax 6% -2% 3%
Credit impairment (charge)/release -14% -4% -10%
Profit before income tax 9% -1% 6%
Income tax expense and non-controlling interests 9% -1% 6%
Cash profit 8% -1% 6%
Individual credit impairment charge/(release) 9% 1% 5%
Collective credit impairment charge/(release) large -69% large
Net loans and advances 3% 1% 3%
Customer deposits 2% 3% 2%
Risk weighted assets
1
12% -1% 7%
1.
Risk weighted assets from 30 September 2016 includes APRA’s revised average mortgage risk weight targets.
56
DIVISIONAL RESULTS
Institutional
Mark Whelan
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 1,480 1,588 -7%
3,068 3,447 -11%
Other operating income
1
989 1,357 -27%
2,346 1,733 35%
Operating income 2,469 2,945 -16%
5,414 5,180 5%
Operating expenses
1
(1,357) (1,379) -2%
(2,736) (2,958) -8%
Profit before credit impairment and income tax 1,112 1,566 -29%
2,678 2,222 21%
Credit impairment (charge)/release 45 (125) large
(80) (743) -89%
Profit before income tax 1,157 1,441 -20%
2,598 1,479 76%
Income tax expense and non-controlling interests (342) (420) -19%
(762) (438) 74%
Cash profit 815 1,021 -20%
1,836 1,041 76%
Balance Sheet
Net loans and advances 119,636 120,791 -1%
119,636 125,955 -5%
Other external assets 254,653 258,119 -1%
254,653 281,705 -10%
External assets 374,289 378,910 -1%
374,289 407,660 -8%
Customer deposits 186,782 179,326 4%
186,782 171,155 9%
Other deposits and borrowings 57,297 61,207 -6%
57,297 56,341 2%
Deposits and other borrowings 244,079 240,533 1%
244,079 227,496 7%
Other external liabilities 94,676 94,971 0%
94,676 121,304 -22%
External liabilities 338,755 335,504 1%
338,755 348,800 -3%
Risk weighted assets 148,881 159,230 -6%
148,881 168,428 -12%
Average gross loans and advances 121,897 125,645 -3%
123,766 133,753 -7%
Average deposits and other borrowings 247,128 242,402 2%
244,772 232,959 5%
Ratios
Return on average assets 0.41% 0.51%
0.46% 0.25%
Net interest margin 0.96% 1.05%
1.01% 1.13%
Net interest margin (excluding Markets) 2.03% 2.17%
2.10% 2.20%
Operating expenses to operating income 55.0% 46.8%
50.5% 57.1%
Operating expenses to average assets 0.68% 0.69%
0.68% 0.72%
Individual credit impairment charge/(release) (33) 210 large
177 776 -77%
Individual credit impairment charge/(release) as a % of average GLA (0.05%) 0.34%
0.14% 0.58%
Collective credit impairment charge/(release) (12) (85) -86%
(97) (33) large
Collective credit impairment charge/(release) as a % of average GLA (0.02%) (0.14%)
(0.08%) (0.02%)
Gross impaired assets 624 1,061 -41%
624 1,405 -56%
Gross impaired assets as a % of GLA 0.52% 0.87%
0.52% 1.10%
Total full time equivalent staff (FTE) 4,754 4,899 -3%
4,754 5,112 -7%
1.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated (Sep16 full year: $17 million).
Performance
September 2017 v September 2016
• Lending volumes down due to portfolio rebalancing mainly in Loans &
Specialised Finance and Transaction Banking. Customer deposits grew
in Markets and Transaction Banking.
• Net interest margin ex-Markets decreased due to asset pricing
competition, the introduction of the major bank levy and the mix impact of
lower lending volumes and higher deposit volumes, partially offset by
margin improvements in Payments and Cash Management.
• Other operating income increased significantly due to positive derivative
valuation adjustments and higher Markets Balance Sheet income as a
result of tightening credit spreads.
• Operating expenses decreased due to a reduction in FTE as a result of
ongoing simplification of the business, partially offset by higher non-
lending losses, regulatory and compliance spend.
• Credit impairment charges decreased significantly due to a benign credit
environment, higher write-backs and an overall reduction in lending
assets driven by portfolio rebalancing.
57
DIVISIONAL RESULTS
Institutional
Mark Whelan
Institutional by Geography
Half Year Full Year
Australia
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 833 865 -4%
1,698 1,870 -9%
Other operating income
1
478 668 -28%
1,146 606 89%
Operating income 1,311 1,533 -14%
2,844 2,476 15%
Operating expenses
1
(652) (621) 5%
(1,273) (1,339) -5%
Profit before credit impairment and income tax 659 912 -28%
1,571 1,137 38%
Credit impairment (charge)/release 10 (119) large
(109) (293) -63%
Profit before income tax 669 793 -16%
1,462 844 73%
Income tax expense and non-controlling interests (222) (242) -8%
(464) (254) 83%
Cash profit 447 551 -19%
998 590 69%
Individual credit impairment charge/(release) (30) 164 large
134 330 -59%
Collective credit impairment charge/(release) 20 (45) large
(25) (37) -32%
Net loans and advances 64,224 65,175 -1%
64,224 65,938 -3%
Customer deposits 77,094 68,910 12%
77,094 65,361 18%
Risk weighted assets 74,043 78,512 -6%
74,043 80,618 -8%
Asia Pacific, Europe, and America
Net interest income 487 545 -11%
1,032 1,231 -16%
Other operating income 395 521 -24%
916 1,030 -11%
Operating income 882 1,066 -17%
1,948 2,261 -14%
Operating expenses (617) (674) -8%
(1,291) (1,452) -11%
Profit before credit impairment and income tax 265 392 -32%
657 809 -19%
Credit impairment (charge)/release 11 (4) large
7 (432) large
Profit before income tax 276 388 -29%
664 377 76%
Income tax expense and non-controlling interests (60) (105) -43%
(165) (111) 49%
Cash profit 216 283 -24%
499 266 88%
Individual credit impairment charge/(release) 19 41 -54%
60 422 -86%
Collective credit impairment charge/(release) (30) (37) -19%
(67) 10 large
Net loans and advances 48,428 48,148 1%
48,428 53,006 -9%
Customer deposits 95,910 96,684 -1%
95,910 91,481 5%
Risk weighted assets 64,622 69,719 -7%
64,622 75,014 -14%
New Zealand
Net interest income 160 178 -10%
338 346 -2%
Other operating income 116 168 -31%
284 97 large
Operating income 276 346 -20%
622 443 40%
Operating expenses (88) (84) 5%
(172) (167) 3%
Profit before credit impairment and income tax 188 262 -28%
450 276 63%
Credit impairment (charge)/release 24 (2) large
22 (18) large
Profit before income tax 212 260 -18%
472 258 83%
Income tax expense and non-controlling interests (60) (73) -18%
(133) (73) 82%
Cash profit 152 187 -19%
339 185 83%
Individual credit impairment charge/(release) (22) 5 large
(17) 24 large
Collective credit impairment charge/(release) (2) (3) -33%
(5) (6) -17%
Net loans and advances 6,984 7,468 -6%
6,984 7,011 0%
Customer deposits 13,778 13,732 0%
13,778 14,313 -4%
Risk weighted assets 10,216 10,999 -7%
10,216 12,796 -20%
1.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated (Sep16 full year: $17 million).
58
DIVISIONAL RESULTS
Institutional
Mark Whelan
Individual credit impairment charge/(release)
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Transaction Banking (1) 41 large
40 178 -78%
Loans & Specialised Finance (30) 165 large
135 565 -76%
Markets - - n/a
- 26 -100%
Central Functions (2) 4 large
2 7 -71%
Individual credit impairment charge/(release) (33) 210 large
177 776 -77%
Collective credit impairment charge/(release)
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Transaction Banking (1) (5) -80%
(6) (3) 100%
Loans & Specialised Finance (8) (80) -90%
(88) (28) large
Markets (4) 4 large
- (2) -100%
Central Functions 1 (4) large
(3) - n/a
Collective credit impairment charge/(release) (12) (85) -86%
(97) (33) large
Total credit impairment charge/(release) (45) 125 large
80 743 -89%
Net loans and advances
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Transaction Banking 13,020 12,083 13,810
8% -6%
Loans & Specialised Finance 77,094 79,895 83,537
-4% -8%
Markets 29,303 28,591 28,380
2% 3%
Central Functions 219 222 228
-1% -4%
Net loans and advances 119,636 120,791 125,955
-1% -5%
Customer deposits
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Transaction Banking 96,000 89,028 91,019
8% 5%
Loans & Specialised Finance 993 943 884
5% 12%
Markets 89,431 88,947 78,871
1% 13%
Central Functions 358 408 381
-12% -6%
Customer deposits 186,782 179,326 171,155
4% 9%
59
DIVISIONAL RESULTS
Institutional
Mark Whelan
September 2017 Full Year
Transaction
Banking
$M
Loans &
Specialised
Finance
$M
Markets
$M
Central
Functions
$M
Institutional
Total
$M
Net interest income 855 1,271 920 22 3,068
Other operating income 731 142 1,436 37 2,346
Operating income 1,586 1,413 2,356 59 5,414
Operating expenses (884) (523) (1,326) (3) (2,736)
Profit before credit impairment and income tax 702 890 1,030 56 2,678
Credit impairment (charge)/release (34) (47) - 1 (80)
Profit before income tax 668 843 1,030 57 2,598
Income tax expense and non-controlling interests (203) (233) (281) (45) (762)
Cash profit 465 610 749 12 1,836
Individual credit impairment charge/(release) 40 135 - 2 177
Collective credit impairment charge/(release) (6) (88) - (3) (97)
Net loans and advances 13,020 77,094 29,303 219 119,636
Customer deposits 96,000 993 89,431 358 186,782
Risk weighted assets 23,365 76,373 48,594 549 148,881
September 2016 Full Year
Net interest income 880 1,498 1,032 37 3,447
Other operating income
1
775 157 766 35 1,733
Operating income 1,655 1,655 1,798 72 5,180
Operating expenses
1
(921) (585) (1,285) (167) (2,958)
Profit before credit impairment and income tax 734 1,070 513 (95) 2,222
Credit impairment (charge)/release (175) (537) (24) (7) (743)
Profit before income tax 559 533 489 (102) 1,479
Income tax expense and non-controlling interests (177) (151) (110) - (438)
Cash profit 382 382 379 (102) 1,041
Individual credit impairment charge/(release) 178 565 26 7 776
Collective credit impairment charge/(release) (3) (28) (2) - (33)
Net loans and advances 13,810 83,537 28,380 228 125,955
Customer deposits 91,019 884 78,871 381 171,155
Risk weighted assets 24,918 89,619 52,285 1,606 168,428
September 2017 Full Year vs September 2016 Full Year
Net interest income -3% -15% -11% -41% -11%
Other operating income -6% -10% 87% 6% 35%
Operating income -4% -15% 31% -18% 5%
Operating expenses -4% -11% 3% -98% -8%
Profit before credit impairment and income tax -4% -17% large large 21%
Credit impairment (charge)/release -81% -91% -100% large -89%
Profit before income tax 19% 58% large large 76%
Income tax expense and non-controlling interests 15% 54% large n/a 74%
Cash profit 22% 60% 98% large 76%
Individual credit impairment charge/(release) -78% -76% -100% -71% -77%
Collective credit impairment charge/(release) 100% large -100% n/a large
Net loans and advances -6% -8% 3% -4% -5%
Customer deposits 5% 12% 13% -6% 9%
Risk weighted assets -6% -15% -7% -66% -12%
1.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated (Sep16 full year: $17 million).
60
DIVISIONAL RESULTS
Institutional
Mark Whelan
September 2017 Half Year
Transaction
Banking
$M
Loans &
Specialised
Finance
$M
Markets
$M
Central
Functions
$M
Institutional
Total
$M
Net interest income 423 601 442 14 1,480
Other operating income 366 58 550 15 989
Operating income 789 659 992 29 2,469
Operating expenses (437) (261) (680) 21 (1,357)
Profit before credit impairment and income tax 352 398 312 50 1,112
Credit impairment (charge)/release 2 38 4 1 45
Profit before income tax 354 436 316 51 1,157
Income tax expense and non-controlling interests (105) (123) (85) (29) (342)
Cash profit 249 313 231 22 815
Individual credit impairment charge/(release) (1) (30) - (2) (33)
Collective credit impairment charge/(release) (1) (8) (4) 1 (12)
Net loans and advances 13,020 77,094 29,303 219 119,636
Customer deposits 96,000 993 89,431 358 186,782
Risk weighted assets 23,365 76,373 48,594 549 148,881
March 2017 Half Year
Net interest income 432 670 478 8 1,588
Other operating income
1
365 84 886 22 1,357
Operating income 797 754 1,364 30 2,945
Operating expenses
1
(447) (262) (646) (24) (1,379)
Profit before credit impairment and income tax 350 492 718 6 1,566
Credit impairment (charge)/release (36) (85) (4) - (125)
Profit before income tax 314 407 714 6 1,441
Income tax expense and non-controlling interests (98) (110) (196) (16) (420)
Cash profit 216 297 518 (10) 1,021
Individual credit impairment charge/(release) 41 165 - 4 210
Collective credit impairment charge/(release) (5) (80) 4 (4) (85)
Net loans and advances 12,083 79,895 28,591 222 120,791
Customer deposits 89,028 943 88,947 408 179,326
Risk weighted assets 23,883 82,896 51,648 803 159,230
September 2017 Half Year vs March 2017 Half Year
Net interest income -2% -10% -8% 75% -7%
Other operating income 0% -31% -38% -32% -27%
Operating income -1% -13% -27% -3% -16%
Operating expenses -2% 0% 5% large -2%
Profit before credit impairment and income tax 1% -19% -57% large -29%
Credit impairment (charge)/release large large large n/a large
Profit before income tax 13% 7% -56% large -20%
Income tax expense and non-controlling interests 7% 12% -57% 81% -19%
Cash profit 15% 5% -55% large -20%
Individual credit impairment charge/(release) large large n/a large large
Collective credit impairment charge/(release) -80% -90% large large -86%
Net loans and advances 8% -4% 2% -1% -1%
Customer deposits 8% 5% 1% -12% 4%
Risk weighted assets -2% -8% -6% -32% -6%
61
DIVISIONAL RESULTS
Institutional
Mark Whelan
Analysis of Markets operating income
Half Year Full Year
Composition of Markets operating income by business activity
1
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Franchise Sales
2
451 483 -7%
934 1,084 -14%
Franchise Trading
3
263 525 -50%
788 561 40%
Balance Sheet
4
278 356 -22%
634 390 63%
Markets operating income pre-derivative CVA methodology change 992 1,364 -27%
2,356 2,035 16%
Derivative CVA methodology change
5
- - n/a
- (237) -100%
Markets operating income 992 1,364 -27%
2,356 1,798 31%
1.
In determining the fair value of derivative positions adjustments are made to the risk free value to include factors such as the impact of credit and funding and bid-offer spreads. In the March
2017 half, the impact of these adjustments and where relevant the hedging of the associated exposure were included as part of Franchise Trading Income to better align with how these are
overseen and risk managed and comparatives were restated. These adjustments were previously allocated between Franchise Sales, Franchise Trading and Balance Sheet.
2.
Franchise Sales represents direct client flow business on core products such as fixed income, foreign exchange, commodities and capital markets.
3.
Franchise Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow. Franchise Trading also includes the impact of the
derivative valuation adjustments which includes credit and funding adjustments, bid-offer adjustments and associated hedges. For the September 2017 full year, the impact of credit and
funding, net of associated hedges, contributed a gain of $229 million (Mar 17 half: $162 million gain: Sep 16 full year: loss of $102 million excluding the impact of the Derivative CVA
methodology changes).
4.
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.
5.
Refer to pages 14 to 16 for further details.
Half Year Full Year
Composition of Markets operating income by geography
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Australia 437 634 -31%
1,071 814 32%
Asia Pacific, Europe & America 415 535 -22%
950 1,024 -7%
New Zealand 140 195 -28%
335 197 70%
Markets operating income pre-derivative CVA methodology change 992 1,364 -27%
2,356 2,035 16%
Derivative CVA methodology change - - n/a
- (237) -100%
Markets operating income 992 1,364 -27%
2,356 1,798 31%
62
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 derivatives trading positions for the Bank’s
principal trading centres. All figures are in AUD.
99% confidence level (1 day holding period)
High for Low for Avg for
High for Low for Avg for
As at year year year
As at year year year
Sep 17
$M
Sep 17
$M
Sep 17
$M
Sep 17
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Value at Risk at 99% confidence
Foreign exchange 4.2 10.5 2.5 5.1 4.0 11.4 2.2 5.2
Interest rate
6.3 21.3 5.1 7.9 4.7 20.1 4.1 9.1
Credit
4.4 5.4 2.0 3.4 3.3 4.6 2.2 3.2
Commodities 2.2 3.8 1.4 2.1 2.5 2.8 1.1 1.7
Equity - 0.5 - 0.2 0.5 2.0 0.1 0.2
Diversification benefit
(7.6) n/a n/a (7.7) (6.8) n/a n/a (6.2)
Total VaR 9.5 24.9 6.9 11.0 8.2 25.4 6.1 13.2
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 based on a 1% shock.
99% confidence level (1 day holding period)
High for Low for Avg for
High for Low for Avg for
As at year year year As at year year year
Sep 17
$M
Sep 17
$M
Sep 17
$M
Sep 17
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Sep 16
$M
Value at Risk at 99% confidence
Australia 31.6 37.5 25.9 31.3 38.4 40.6 28.0 33.7
New Zealand 11.8 15.1 11.1 12.4 11.4 11.4 8.8 10.0
Asia Pacific, Europe & America 14.6 19.0 14.3 15.9 14.7 17.3 14.4 15.8
Diversification benefit (20.6) n/a n/a (19.7) (24.0) n/a n/a (22.9)
Total VaR 37.4 44.0 33.5 39.9 40.5 44.7 31.3 36.6
Impact of 1% rate shock on the next 12 months’ net interest income margin
As at
Sep 17 Sep 16
As at period end 0.52% 0.37%
Maximum exposure 0.65% 0.48%
Minimum exposure 0.01% 0.00%
Average exposure (in absolute terms) 0.28% 0.21%
63
DIVISIONAL RESULTS
New Zealand
David Hisco
Table reflects NZD for New Zealand (AUD results shown on page 68)
Half Year Full Year
Sep 17
NZD M
Mar 17
NZD M
Movt
Sep 17
NZD M
Sep 16
NZD M
Movt
Net interest income 1,352 1,334 1%
2,686 2,629 2%
Other operating income 177 153 16%
330 337 -2%
Net funds management and insurance income 182 183 -1%
365 354 3%
Operating income 1,711 1,670 2%
3,381 3,320 2%
Operating expenses (635) (636) 0%
(1,271) (1,316) -3%
Profit before credit impairment and income tax 1,076 1,034 4%
2,110 2,004 5%
Credit impairment (charge)/release (44) (39) 13%
(83) (129) -36%
Profit before income tax 1,032 995 4%
2,027 1,875 8%
Income tax expense and non-controlling interests (290) (278) 4%
(568) (514) 11%
Cash profit 742 717 3%
1,459 1,361 7%
Balance Sheet
1
Net loans and advances 117,242 114,731 2%
117,242 113,145 4%
Other external assets 3,869 7,032 -45%
3,869 4,723 -18%
External assets 121,111 121,763 -1%
121,111 117,868 3%
Customer deposits 81,855 81,238 1%
81,855 76,362 7%
Other deposits and borrowings 3,721 2,949 26%
3,721 5,358 -31%
Deposits and other borrowings 85,576 84,187 2%
85,576 81,720 5%
Other external liabilities 22,294 22,228 0%
22,294 21,494 4%
External liabilities 107,870 106,415 1%
107,870 103,214 5%
Risk weighted assets 60,971 62,421 -2%
60,971 62,523 -2%
Average gross loans and advances 116,671 114,087 2%
115,383 110,559 4%
Average deposits and other borrowings 84,490 83,884 1%
84,188 80,975 4%
Ratios
1
Return on average assets 1.23% 1.20%
1.22% 1.19%
Net interest margin 2.31% 2.30%
2.31% 2.37%
Operating expenses to operating income 37.1% 38.1%
37.6% 39.6%
Operating expenses to average assets 1.06% 1.07%
1.06% 1.15%
Individual credit impairment charge/(release) 59 64 -8%
123 112 10%
Individual credit impairment charge/(release) as a % of average GLA 0.10% 0.11%
0.11% 0.10%
Collective credit impairment charge/(release) (15) (25) -40%
(40) 17 large
Collective credit impairment charge/(release) as a % of average GLA (0.03%) (0.04%)
(0.03%) 0.02%
Gross impaired assets 334 448 -25%
334 363 -8%
Gross impaired assets as a % of GLA 0.28% 0.39%
0.28% 0.32%
Total full time equivalent staff (FTE) 6,207 6,250 -1%
6,207 6,317 -2%
1.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
1.
Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.
Performance September 2017 v September 2016
• Volumes grew in home loans in addition to higher balances in funds under
management. Customer deposits grew across all portfolios.
• Net interest margin declined as the result of a higher proportion of lower
margin fixed rate lending and term deposits, pricing competition and higher
average funding costs.
• Other operating income decreased, more than offset by an increase in Net
funds management and insurance income as the result of higher funds
under management balances.
• Operating expenses decreased as the result of a reduction in FTE driven
by automation and transaction migration to lower cost channels, partially
offset by inflation.
• Credit impairment charges decreased due to an increase in write-backs
and credit quality improvements across the Retail and Commercial and
Agri portfolios, partially offset by increases to new and existing provisions.
64
DIVISIONAL RESULTS
New Zealand
David Hisco
Individual credit impairment charge/(release)
Half Year Full Year
Sep 17
NZD M
Mar 17
NZD M Movt
Sep 17
NZD M
Sep 16
NZD M Movt
Retail 25 21 19%
46 52 -12%
Home Loans (1) (6) -83%
(7) (4) 75%
Other 26 27 -4%
53 56 -5%
Commercial 34 43 -21%
77 60 28%
Individual credit impairment charge/(release) 59 64 -8%
123 112 10%
Collective credit impairment charge/(release)
Half Year Full Year
Sep 17
NZD M
Mar 17
NZD M Movt
Sep 17
NZD M
Sep 16
NZD M Movt
Retail (6) (7) -14%
(13) 3 large
Home Loans (2) (3) -33%
(5) (1) large
Other (4) (4) 0%
(8) 4 large
Commercial (9) (18) -50%
(27) 14 large
Collective credit impairment charge/(release) (15) (25) -40%
(40) 17 large
Total credit impairment charge/(release) 44 39 13%
83 129 -36%
Net loans and advances
1
As at Movement
Sep 17
NZD M
Mar 17
NZD M
Sep 16
NZD M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Retail 76,279 74,379 72,730
3% 5%
Home Loans 72,353 70,439 68,706
3% 5%
Other 3,926 3,940 4,024
0% -2%
Commercial 40,963 40,352 40,415
2% 1%
Net loans and advances 117,242 114,731 113,145
2% 4%
Customer deposits
1
As at Movement
Sep 17
NZD M
Mar 17
NZD M
Sep 16
NZD M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Retail 67,797 66,292 63,111
2% 7%
Commercial 14,058 14,946 13,251
-6% 6%
Customer deposits 81,855 81,238 76,362
1% 7%
1.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
Net funds management and insurance income
Half Year Full Year
Sep 17
NZD M
Mar 17
NZD M Movt
Sep 17
NZD M
Sep 16
NZD M Movt
Insurance 81 85 -5%
166 167 -1%
Insurance income 86 91 -5%
177 180 -2%
Insurance volume related expenses (5) (6) -17%
(11) (13) -15%
Funds Management 101 98 3%
199 187 6%
Funds management income 116 109 6%
225 210 7%
Funds management volume related expenses (15) (11) 36%
(26) (23) 13%
Total net funds management and insurance income 182 183 -1%
365 354 3%
In-force premiums
1
194 192 1%
194 190 2%
Funds under management 28,490 27,146 5%
28,490 26,485 8%
Average funds under management 27,810 26,383 5%
27,096 24,775 9%
Life insurance expenses to Life in-force premiums 29.9% 30.1%
29.9% 33.4%
Retail Insurance lapse rates 14.6% 13.8%
14.2% 15.4%
Funds Management expenses to average FUM
2
0.29% 0.32% 0.30% 0.36%
1.
In-force premiums reflect the disposal of the New Zealand medical business in the September 2016 full year.
2.
Funds Management expense and FUM excludes Bonus Bonds and Private Bank.
65
DIVISIONAL RESULTS
New Zealand
David Hisco
September 2017 Full Year
Retail
NZD M
Commercial
NZD M
Central
Functions
NZD M
New Zealand
Total
NZD M
Net interest income 1,773 900 13 2,686
Other operating income 314 18 (2) 330
Net funds management and insurance income 367 1 (3) 365
Operating income 2,454 919 8 3,381
Operating expenses (1,007) (259) (5) (1,271)
Profit before credit impairment and income tax 1,447 660 3 2,110
Credit impairment (charge)/release (33) (50) - (83)
Profit before income tax 1,414 610 3 2,027
Income tax expense and non-controlling interests (395) (171) (2) (568)
Cash profit 1,019 439 1 1,459
Individual credit impairment charge/(release) 46 77 - 123
Collective credit impairment charge/(release) (13) (27) - (40)
Net loans and advances
1
76,279 40,963 - 117,242
Customer deposits
1
67,797 14,058 - 81,855
Risk weighted assets
1
28,757 31,004 1,210 60,971
September 2016 Full Year
Net interest income 1,730 889 10 2,629
Other operating income 309 20 8 337
Net funds management and insurance income 355 2 (3) 354
Operating income 2,394 911 15 3,320
Operating expenses (1,048) (257) (11) (1,316)
Profit before credit impairment and income tax 1,346 654 4 2,004
Credit impairment (charge)/release (55) (74) - (129)
Profit before income tax 1,291 580 4 1,875
Income tax expense and non-controlling interests (350) (163) (1) (514)
Cash profit 941 417 3 1,361
Individual credit impairment charge/(release) 52 60 - 112
Collective credit impairment charge/(release) 3 14 - 17
Net loans and advances 72,730 40,415 - 113,145
Customer deposits 63,111 13,251 - 76,362
Risk weighted assets 29,580 31,950 993 62,523
September 2017 Full Year vs September 2016 Full Year
Net interest income 2% 1% 30% 2%
Other operating income 2% -10% large -2%
Net funds management and insurance income 3% -50% 0% 3%
Operating income 3% 1% -47% 2%
Operating expenses -4% 1% -55% -3%
Profit before credit impairment and income tax 8% 1% -25% 5%
Credit impairment (charge)/release -40% -32% n/a -36%
Profit before income tax 10% 5% -25% 8%
Income tax expense and non-controlling interests 13% 5% 100% 11%
Cash profit 8% 5% -67% 7%
Individual credit impairment charge/(release) -12% 28% n/a 10%
Collective credit impairment charge/(release) large large n/a large
Net loans and advances 5% 1% n/a 4%
Customer deposits 7% 6% n/a 7%
Risk weighted assets -3% -3% 22% -2%
1.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
66
DIVISIONAL RESULTS
New Zealand
David Hisco
September 2017 Half Year
Retail
NZD M
Commercial
NZD M
Central
Functions
NZD M
New Zealand
Total
NZD M
Net interest income 896 454 2 1,352
Other operating income 169 9 (1) 177
Net funds management and insurance income 183 1 (2) 182
Operating income 1,248 464 (1) 1,711
Operating expenses (509) (132) 6 (635)
Profit before credit impairment and income tax 739 332 5 1,076
Credit impairment (charge)/release (19) (25) - (44)
Profit before income tax 720 307 5 1,032
Income tax expense and non-controlling interests (200) (87) (3) (290)
Cash profit 520 220 2 742
Individual credit impairment charge/(release) 25 34 - 59
Collective credit impairment charge/(release) (6) (9) - (15)
Net loans and advances
1
76,279 40,963 - 117,242
Customer deposits
1
67,797 14,058 - 81,855
Risk weighted assets
1
28,757 31,004 1,210 60,971
March 2017 Half Year
Net interest income 877 446 11 1,334
Other operating income 145 9 (1) 153
Net funds management and insurance income 184 - (1) 183
Operating income 1,206 455 9 1,670
Operating expenses (498) (127) (11) (636)
Profit before credit impairment and income tax 708 328 (2) 1,034
Credit impairment (charge)/release (14) (25) - (39)
Profit before income tax 694 303 (2) 995
Income tax expense and non-controlling interests (195) (84) 1 (278)
Cash profit 499 219 (1) 717
Individual credit impairment charge/(release) 21 43 - 64
Collective credit impairment charge/(release) (7) (18) - (25)
Net loans and advances
1
74,379 40,352 - 114,731
Customer deposits
1
66,292 14,946 - 81,238
Risk weighted assets
1
29,358 32,086 977 62,421
September 2017 Half Year vs March 2017 Half Year
Net interest income 2% 2% -82% 1%
Other operating income 17% 0% 0% 16%
Net funds management and insurance income -1% n/a 100% -1%
Operating income 3% 2% large 2%
Operating expenses 2% 4% large 0%
Profit before credit impairment and income tax 4% 1% large 4%
Credit impairment (charge)/release 36% 0% n/a 13%
Profit before income tax 4% 1% large 4%
Income tax expense and non-controlling interests 3% 4% large 4%
Cash profit 4% 0% large 3%
Individual credit impairment charge/(release) 19% -21% n/a -8%
Collective credit impairment charge/(release) -14% -50% n/a -40%
Net loans and advances 3% 2% n/a 2%
Customer deposits 2% -6% n/a 1%
Risk weighted assets -2% -3% 24% -2%
1.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
67
DIVISIONAL RESULTS
New Zealand
David Hisco
Table reflects AUD for New Zealand
NZD results shown on page 64
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 1,259 1,260 0%
2,519 2,448 3%
Other operating income 166 144 15%
310 314 -1%
Net funds management and insurance income 170 173 -2%
343 330 4%
Operating income 1,595 1,577 1%
3,172 3,092 3%
Operating expenses (593) (600) -1%
(1,193) (1,225) -3%
Profit before credit impairment and income tax 1,002 977 3%
1,979 1,867 6%
Credit impairment (charge)/release (41) (37) 11%
(78) (120) -35%
Profit before income tax 961 940 2%
1,901 1,747 9%
Income tax expense and non-controlling interests (269) (263) 2%
(532) (479) 11%
Cash profit 692 677 2%
1,369 1,268 8%
Consisting of:
Retail 484 472 3%
956 877 9%
Commercial 206 206 0%
412 389 6%
Central Functions 2 (1) large
1 2 -50%
Cash profit 692 677 2%
1,369 1,268 8%
Balance Sheet
1
Net loans and advances 107,886 104,884 3%
107,886 107,893 0%
Other external assets 3,560 6,429 -45%
3,560 4,505 -21%
External assets 111,446 111,313 0%
111,446 112,398 -1%
Customer deposits 75,323 74,266 1%
75,323 72,818 3%
Other deposits and borrowings 3,424 2,696 27%
3,424 5,109 -33%
Deposits and other borrowings 78,747 76,962 2%
78,747 77,927 1%
Other external liabilities 20,515 20,320 1%
20,515 20,496 0%
External liabilities 99,262 97,282 2%
99,262 98,423 1%
Risk weighted assets 56,106 57,064 -2%
56,106 59,621 -6%
Average gross loans and advances 108,751 107,704 1%
108,229 102,972 5%
Average deposits and other borrowings 78,747 79,190 -1%
78,968 75,418 5%
In-force premiums
2
179 175 2%
179 181 -1%
Funds under management 26,215 24,816 6%
26,215 25,256 4%
Average funds under management 25,922 24,912 4%
24,934 23,075 8%
Ratios
1
Return on average assets 1.23% 1.20%
1.22% 1.19%
Net interest margin 2.31% 2.30%
2.31% 2.37%
Operating expenses to operating income 37.1% 38.1%
37.6% 39.6%
Operating expenses to average assets 1.06% 1.07%
1.06% 1.15%
Individual credit impairment charge/(release) 55 61 -10%
116 104 12%
Individual credit impairment charge/(release) as a % of average GLA 0.10% 0.11%
0.11% 0.10%
Collective credit impairment charge/(release) (14) (24) -42%
(38) 16 large
Collective credit impairment charge/(release) as a % of average GLA (0.03%) (0.04%)
(0.03%) 0.02%
Gross impaired assets 307 409 -25%
307 346 -11%
Gross impaired assets as a % of GLA 0.28% 0.39%
0.28% 0.32%
Life insurance expenses to Life in-force premiums 29.9% 30.1%
29.9% 33.4%
Retail Insurance lapse rates 14.6% 13.8%
14.2% 15.4%
Funds Management expenses to average FUM
3
0.29% 0.32%
0.30% 0.36%
Total full time equivalent staff (FTE) 6,207 6,250 -1%
6,207 6,317 -2%
1.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
2.
In-force premiums reflect the disposal of the New Zealand medical business in the September 2016 full year.
3.
Funds Management expense and FUM excludes Bonus Bonds and Private Bank.
68
DIVISIONAL RESULTS
Wealth Australia
Alexis George
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 4 5 -20%
9 11 -18%
Other operating income 38 46 -17%
84 88 -5%
Net funds management and insurance income 500 493 1%
993 1,156 -14%
Operating income 542 544 0%
1,086 1,255 -13%
Operating expenses (373) (370) 1%
(743) (801) -7%
Profit before income tax 169 174 -3%
343 454 -24%
Income tax expense and non-controlling interests (54) (51) 6%
(105) (130) -19%
Cash profit 115 123 -7%
238 324 -27%
Consisting of:
Insurance 104 102 2%
206 253 -19%
Funds Management 42 41 2%
83 87 -5%
Corporate and Other (31) (20) 55%
(51) (16) large
Total Wealth Australia 115 123 -7%
238 324 -27%
Income from invested capital
1
37 41 -10%
78 110 -29%
Key metrics
In-force premiums
Life Insurance 1,614 1,600 1%
1,614 1,603 1%
General Insurance 231 226 2%
231 226 2%
Average in-force premiums
Life Insurance 1,607 1,602 0%
1,609 1,560 3%
General Insurance 228 225 1%
228 367 -38%
Funds under management 49,060 49,251 0%
49,060 48,251 2%
Average funds under management 49,248 48,375 2%
48,808 47,621 2%
Ratios
Operating expenses to operating income 68.8% 68.0%
68.4% 63.8%
Insurance expenses to In-force premiums 11.6% 11.9%
11.7% 12.1%
Retail Insurance lapse rates 14.4% 13.8%
14.1% 14.0%
Funds Management expenses to average FUM
2
0.46% 0.50%
0.48% 0.54%
Total full time equivalent staff (FTE) 2,110 2,114 0%
2,110 2,174 -3%
Aligned adviser numbers
3
1,432 1,511 -5%
1,432 1,545 -7%
1.
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 30 September 2017 was $3.3 billion (Mar 17: $3.4 billion; Sep 16: $3.4 billion), which comprises fixed interest securities of 49% and cash deposits of 51% (Mar 17:
48% fixed interest securities and 52% cash deposits, Sep 16: 48% fixed interest securities and 52% cash deposits).
2.
Funds Management expense and funds under management relates to the Pensions & Investments business and excludes ANZ Share Investing.
3.
Includes corporate authorised representatives of dealer groups wholly or partially owned by ANZ Wealth Australia and ANZ employed financial planners.
Performance September 2017 v September 2016
• Insurance income decreased as the result of adverse retail life claims
experience, a one-off experience loss due to the exit of a Group Life
insurance plan, partially offset by reinsurance profit share and favourable
claims experience in Lenders Mortgage Insurance.
• Funds Management income decreased in line with the planned strategy to
rationalise the legacy portfolio to SmartChoice, a simpler and lower risk
model, which is now complete.
• Corporate & Other income decreased due to realised gains in 2016 which
was not repeated and investment market volatility on the guaranteed
business.
• Operating expenses decreased due to productivity initiatives that resulted
in a reduction in FTE, partially offset by inflation and higher regulatory
compliance and remediation spend.
69
DIVISIONAL RESULTS
Wealth Australia
Alexis George
Major business units
Half Year Full Year
Insurance
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 11 11 0%
22 23 -4%
Insurance income 364 354 3%
718 828 -13%
Insurance volume related expenses (119) (110) 8%
(229) (270) -15%
Operating income 256 255 0%
511 581 -12%
Operating expenses (107) (109) -2%
(216) (222) -3%
Profit before income tax 149 146 2%
295 359 -18%
Income tax expense and non-controlling interests (45) (44) 2%
(89) (106) -16%
Cash profit 104 102 2%
206 253 -19%
Half Year Full Year
Funds Management
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 13 14 -7%
27 30 -10%
Other operating income 33 40 -18%
73 72 1%
Funds management income 330 314 5%
644 692 -7%
Funds management volume related expenses (175) (161) 9%
(336) (338) -1%
Operating income 201 207 -3%
408 456 -11%
Operating expenses (141) (151) -7%
(292) (331) -12%
Profit before income tax 60 56 7%
116 125 -7%
Income tax expense and non-controlling interests (18) (15) 20%
(33) (38) -13%
Cash profit 42 41 2%
83 87 -5%
Insurance metrics
Half Year Full Year
Insurance operating margin
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Life Insurance Planned profit margin
Group & Individual 72 64 13% 136 151 -10%
Experience profit/(loss)
1
(22) (26) -15% (48) (8) large
General Insurance operating profit margin 54 64 -16% 118 110 7%
Total 104 102 2% 206 253 -19%
1.
Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan, predominantly driven by lapses, claims and expenses.
As at
Movement
Insurance annual in-force premiums
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v Mar 17
Sep 17
v Sep 16
Group 431 427 445 1% -3%
Individual 1,183 1,173 1,158 1% 2%
General Insurance 231 226 226 2% 2%
Total 1,845 1,826 1,829 1% 1%
Insurance in-force book movement
Sep 16
$M
New
business
$M
Lapses
$M
Sep 17
$M
Group 445 38 (52) 431
Individual
1,158 137 (112) 1,183
General Insurance
226 165 (160) 231
Total
1,829 340 (324) 1,845
70
DIVISIONAL RESULTS
Wealth Australia
Alexis George
Funds Management metrics
As at
Movement
Funds under management
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v Mar 17
Sep 17
v Sep 16
Australian equities 14,091 15,393 15,248 -8% -8%
International equities 13,001 12,442 11,044 4% 18%
Cash and fixed interest 18,127 17,763 18,582 2% -2%
Property and infrastructure 3,841 3,653 3,377 5% 14%
Total 49,060 49,251 48,251 0% 2%
Sep 16 Inflows Outflows Other
1
Sep 17
Funds Management cash flows by product $M $M $M $M $M
Open solutions
OneAnswer Frontier 9,958 1,575 (1,346) 745 10,932
ANZ Smart Choice 11,190 2,363 (1,410) 3,729 15,872
Wrap (Voyage and Grow) 2,160 645 (378) 654 3,081
Closed solutions
Retail 19,028 739 (2,994) (170) 16,603
Employer 5,915 143 (587) (2,899) 2,572
Total 48,251 5,465 (6,715) 2,059 49,060
1.
Other includes investment income net of taxes, fees and charges and distributions. It also includes the transition of funds under management from Employer Super to ANZ Smart Choice of
approximately $2.9 billion as a result of regulatory changes in the industry.
Embedded value and value of new business (insurance and investments only)
1
$M
Embedded value as at September 2016
2
4,536
Value of new business
3
138
Expected return
4
304
Experience deviations and assumption changes
5
(85)
Embedded value before economic assumption changes and net transfer
4,893
Economic assumptions change
6
(110)
Net transfer
7
(291)
Embedded value as at September 2017
4,492
1.
The product lines used are on the same basis as prior periods. This is different to the product lines that are subject to a strategic review.
2.
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 determined using
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 7.75%-
9.50%. ANZ Lenders Mortgage Insurance, ANZ Financial Planning and ANZ Share Investing businesses are not included in the valuation.
3.
Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period.
4.
Expected return represents the expected increase in value over the period.
5.
Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Negative experience was
primarily driven by adverse claims experience during the year, strengthening of claims assumptions in Retail Insurance partially offset by implementation of various product initiatives.
6.
Interest rate movements have led to a negative value impact.
7.
Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends paid and value of franking credits. There was $225 million of cash
dividends paid, $12 million of dividends in AT1 preference shares paid and the value of $54 million of franking credits which is expected to be transferred to the parent entity.
71
DIVISIONAL RESULTS
Asia Retail & Pacific
David Hisco
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 275 331 -17%
606 698 -13%
Other operating income
1
176 (139) large
37 478 -92%
Operating income 451 192 large
643 1,176 -45%
Operating expenses
1
(298) (353) -16%
(651) (808) -19%
Profit before credit impairment and income tax 153 (161) large
(8) 368 large
Credit impairment (charge)/release (69) (75) -8%
(144) (172) -16%
Profit before income tax 84 (236) large
(152) 196 large
Income tax expense and non-controlling interests
1
(15) 19 large
4 (37) large
Cash profit/(loss)
1
69 (217) large
(148) 159 large
Balance Sheet
2
Net loans and advances 5,666 12,525 -55%
5,666 13,370 -58%
Customer deposits 9,157 21,867 -58%
9,157 22,782 -60%
Risk weighted assets 6,972 12,601 -45%
6,972 13,372 -48%
Ratios
2
Return on average assets 0.73% -1.89%
-0.71% 0.65%
Net interest margin 3.08% 3.00%
3.03% 2.96%
Operating expenses to operating income 66.1% 183.9%
101.2% 68.7%
Operating expenses to average assets 3.15% 3.08%
3.11% 3.30%
Individual credit impairment charge/(release) 79 86 -8%
165 161 2%
Individual credit impairment charge/(release) as a % of average GLA 1.51% 1.31%
1.40% 1.13%
Collective credit impairment charge/(release) (10) (11) -9%
(21) 11 large
Collective credit impairment charge/(release) as a % of average GLA -0.19% -0.17%
-0.18% 0.08%
Gross impaired assets 143 243 -41%
143 252 -43%
Gross impaired assets as a % of GLA 2.46% 1.91%
2.46% 1.86%
Total full time equivalent staff (FTE) 3,981 4,719 -16%
3,981 4,894 -19%
1.
Includes large/notable items related to restructuring, and the impact of the partial completion of the Asia Retail and Wealth sale. For large/notable items breakdown please refer to pages 14
to 16.
2.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
Asia Retail and Wealth
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Net interest income 208 264 -21%
472 561 -16%
Other operating income
1
126 (193) large
(67) 371 large
Operating income 334 71 large
405 932 -57%
Operating expenses
1
(234) (291) -20%
(525) (685) -23%
Profit before credit impairment and income tax 100 (220) large
(120) 247 large
Credit impairment (charge)/release (54) (71) -24%
(125) (162) -23%
Profit before income tax 46 (291) large
(245) 85 large
Income tax expense and non-controlling interests
1
(3) 32 large
29 (11) large
Cash profit/(loss)
1
43 (259) large
(216) 74 large
Balance Sheet
2
Net loans and advances 3,472 10,248 -66%
3,472 11,041 -69%
Customer deposits 5,805 18,727 -69%
5,805 19,580 -70%
Risk weighted assets 3,102 8,922 -65%
3,102 9,420 -67%
Total full time equivalent staff (FTE) 2,764 3,556 -22%
2,764 3,704 -25%
1.
Includes large/notable items related to restructuring, and the impact of the partial completion of the Asia Retail and Wealth sale. For large/notable items breakdown please refer to pages 14
to 15.
2.
Balance Sheet amounts as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
72
DIVISIONAL RESULTS
Technology, Services & Operations and Group Centre
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Operating income (minority investments in Asia)
1
150 170 -12%
320 335 -4%
Operating income (other)
2
112 140 -20%
252 148 70%
Operating income 262 310 -15%
572 483 18%
Operating expenses
3
(366) (336) 9%
(702) (1,221) -43%
Profit before credit impairment and income tax (104) (26) large
(130) (738) -82%
Credit impairment (charge)/release 11 (11) large
- (1) -100%
Profit before income tax (93) (37) large
(130) (739) -82%
Income tax expense and non-controlling interests 32 46 -30%
78 289 -73%
Cash profit/(loss) (61) 9 large
(52) (450) -88%
Risk weighted assets 7,291 7,588 -4%
7,291 8,460 -14%
Total full time equivalent staff (FTE) 16,457 16,617 -1%
16,457 16,494 0%
1.
Includes large/notable items related to Asian minority investment adjustments. For large/notable items breakdown please refer to pages 14 to 16.
2.
Includes large/notable item relating to the sale of 100 Queen Street, Melbourne. Refer pages 14 to 16.
3.
Includes large/notable items related to software capitalisation and restructuring. For large/notable items breakdown please refer to pages 14 to 16.
73
DIVISIONAL RESULTS
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74
PROFIT RECONCILIATION
CONTENTS
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 profit
75
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 Regulatory Guide 230 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 and
Divisional 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 in the process of
being audited within the context of the external auditor’s audit of the Group’s Annual Report. Cash profit is not subject to review or audit by the external
auditor. The external auditor has informed the Audit Committee that recurring adjustments have been determined on a consistent basis across each
period presented, and the additional adjustments for the impact of the reclassification of Shanghai Rural Commercial Bank to held for sale in 2017
reporting is appropriate.
Half Year
Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Statutory profit attributable to shareholders of the Company 3,495 2,911 20% 6,406 5,709 12%
Adjustments between statutory profit and cash profit
Treasury shares adjustment (18) 76 large 58 44 32%
Revaluation of policy liabilities (2) 36 large 34 (54) large
Economic hedges 31 178 -83% 209 102 large
Revenue hedges 6 (105) large (99) 92 large
Structured credit intermediation trades (2) (1) 100% (3) (4) -25%
Reclassification of SRCB to held for sale 17 316 -95% 333 - n/a
Total adjustments between statutory profit and cash profit 32 500 -94% 532 180 large
Cash Profit 3,527 3,411 3% 6,938 5,889 18%
Explanation of adjustments between statutory profit and cash profit
• Treasury shares adjustment
ANZ shares held by the Group in Wealth Australia (Sep 17: 15.4 million shares; Mar 17: 15.3 million shares; Sep 16: 17.7 million shares) are deemed
to be Treasury shares for accounting purposes. Dividends and realised and unrealised 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 are held to support policy liabilities which are revalued through the Income
Statement. Accordingly, the full year gain of $58 million after tax ($61 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 re-
measurement 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.
• Economic and revenue hedges
The Group enters into economic hedges to manage its interest rate and foreign exchange risk which in accordance with accounting standards, result
in fair value gains and losses being recognised within the income statement. ANZ removes the fair value adjustments from cash profit since 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 designated in accounting hedge relationships but which are
considered to be economic hedges, including hedges of larger foreign exchange denominated revenue and expense streams, primarily NZD and
USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.
Economic hedges comprises:
– Funding related swaps (primarily cross currency interest rate swaps) 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 in the 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 of
these fair value adjustments are movements in the Australian and New Zealand term structure of interest rates.
– Ineffectiveness from designated accounting hedge relationships.
In the September 2017 full year, the majority of the loss in economic hedges adjusted from cash profit relates to funding related swaps, principally
from tightening basis spreads on currency pairs most notably USD/EUR and USD/JPY.
Gains on revenue hedges adjusted from cash profit in the September 2017 full year are the result of the strengthening of the AUD against the NZD.
76
PROFIT RECONCILIATION
Half Year
Full Year
Sep 17
$M
Mar 17
$M
Sep 17
$M
Sep 16
$M
Economic hedges 42 254
296 180
Revenue hedges 8 (148)
(140) 93
Increase/(decrease) to cash profit before tax 50 106
156 273
Increase/(decrease) to cash profit after tax 37 73
110 194
• Structured credit intermediation trades
ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight US financial guarantors. This
involved selling credit default swaps (CDSs) as protection over specific debt structures and purchasing CDS protection over the same structures.
ANZ has subsequently exited its positions with six US financial guarantors and is monitoring the remaining two portfolios with a view to reducing the
exposures when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty.
The notional value of outstanding bought and sold CDSs at 30 September 2017 amounted to $0.7 billion (Mar 17: $0.7 billion: Sep 16: $0.7 billion).
Both the bought and sold CDSs are measured at fair value through profit and loss. However, the associated fair value movements do not fully offset
due to the impact of credit risk on the bought CDSs which is driven by market movements in credit spreads and AUD/USD and NZD/USD rates. The
fair value of the CDSs (excluding CVA) is $59 million (Mar 17: $65 million; Sep 16: $67 million) with CVA on the bought protection of $7 million (Mar
17: $9 million; Sep 16: $11 million).
The profit and loss associated with the bought and sold protection is included as an adjustment to cash profit as it relates to a legacy business where,
unless terminated early, the fair value movements are expected to reverse to zero in future periods.
• Reclassification of SRCB to held for sale
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB). On 18 September
2017, the Group announced a revision to the 3 January arrangement in which Baoshan Iron & Steel Co. Ltd. (Bao) replaced Shanghai Sino-Poland
Enterprise Management Development Corporation Limited to join China COSCO Shipping Corporation Limited (COSCO) to acquire ANZ’s 20%
stake in SRCB. Under the updated arrangement, COSCO and Bao will each acquire a 10% stake in SRCB. The key financial terms of the revised
sale agreement are unchanged from the transaction announced previously. The sale is subject to customary closing conditions and regulatory
approvals and is expected to be completed by late 2017.
In the September 2017 full year, the Group recognised a $219 million impairment to the investment (Mar 17 half: $219 million), $12 million of foreign
exchange losses (Mar 17 half: $11 million) and $102 million of tax expenses (Mar 17 half: $86 million), following the reclassification of the investment
to held for sale. This loss will be largely offset by the release of foreign currency translation and available for sale reserves of $289 million on sale
completion. In light of the timing difference (and that these amounts largely offset), the impact is excluded from the cash profit result.
Other reclassifications between statutory profit and cash profit
• Credit risk on impaired derivatives (nil profit after tax impact)
The charge to income for derivative credit valuation adjustments of $1 million on defaulted and impaired derivative exposures has been reclassified
to cash credit impairment charges in the September 2017 full year (Mar 17 half: $1 million; Sep 16 full year: $27 million). 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, policyholders 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 $277 million for the September 2017 full year (Mar 17
half: $161 million; Sep 16 full year: $217 million) has been excluded from the cash results as it does not reflect the underlying performance of the
business which is assessed on a net of policyholders tax basis.
77
PROFIT
RECONCILIATION
Statutory
Adjustments to statutory profit
Cash
profit
Treasury
shares
adjustment
Policyholders
tax gross up
Revaluation
of policy
liabilities
Economic
hedges
Revenue
hedges
Structured
credit
intermediation
trades
Credit risk
on impaired
derivatives
Reclassi
-
fication of
SRCB to held
for sale
Total
adjustments to
statutory profit
profit
$M
$M
$M
$M
$M
$M
$M
$M
$M
$M
$M
September 2017 Full Year
Net interest income
14,872
-
-
-
-
-
-
-
-
-
14,872
Net fee and commission income
2,453
-
-
-
-
-
-
-
-
-
2,453
Net funds management and insurance income
1,500
61
(277)
48
-
-
-
-
-
(168)
1,332
Other
1,448
-
-
-
296
(140)
(4)
1
231
384
1,832
Other operating income
5,401
61
(277)
48
296
(140)
(4)
1
231
216
5,617
Operating income
20,273
61
(277)
48
296
(140)
(4)
1
231
216
20,489
Operating expenses
(9,448)
-
-
-
-
-
-
-
-
-
(9,448)
Profit before credit impairment and tax
10,825
61
(277)
48
296
(140)
(4)
1
231
216
11,041
Credit impairment charge
(1,198)
-
-
-
-
-
-
(1)
-
(1)
(1,199)
Profit before income tax
9,627
61
(277)
48
296
(140)
(4)
-
231
215
9,842
Income tax expense
(3,206)
(3)
277
(14)
(87)
41
1
-
102
317
(2,889)
Non
-controlling interests
(15)
-
-
-
-
-
-
-
-
-
(15)
Profit
6,406
58
-
34
209
(99)
(3)
-
333
532
6,938
September 2016 Full Year
Net interest income
15,095
-
-
-
-
-
-
-
-
-
15,095
Net fee and commission income
2,545
-
-
-
-
-
-
-
-
-
2,545
Net funds
management and insurance income
1,764
46
(217)
(75)
-
-
-
-
-
(246)
1,518
Other
1,142
-
-
-
180
93
(6)
27
-
294
1,436
Other operating income
5,451
46
(217)
(75)
180
93
(6)
27
-
48
5,499
Operating income
20,546
46
(217)
(75)
180
93
(6)
27
-
48
20,594
Operating expenses
(10,439)
-
-
-
-
-
-
-
-
-
(10,439)
Profit before credit impairment and tax
10,107
46
(217)
(75)
180
93
(6)
27
-
48
10,155
Credit impairment charge
(1,929)
-
-
-
-
-
-
(27)
-
(27)
(1,956)
Profit before income tax
8,178
46
(217)
(75)
180
93
(6)
-
-
21
8,199
Income tax expense
(2,458)
(2)
217
21
(78)
(1)
2
-
-
159
(2,299)
Non
-controlling interests
(11)
-
-
-
-
-
-
-
-
-
(11)
Profit
5,709
44
-
(54)
102
92
(4)
-
-
180
5,889
78
PROFIT
RECONCILIATION
Statutory
Adjustments to statutory profit
Cash
profit
Treasury
shares
adjustment
Policyholders
tax gross up
Revaluation
of policy
liabilities
Economic
hedging
Revenue
hedges
Structured
credit
intermediation
trades
Credit risk
on impaired
derivatives
Reclassi
-
fication of
SRCB to held
for sale
Total
adjustments to
statutory profit
profit
$M
$M
$M
$M
$M
$M
$M
$M
$M
$M
$M
September 2017 Half Year
Net interest income
7,456
-
-
-
-
-
-
-
-
-
7,456
Net fee and commission income
1,227
-
-
-
-
-
-
-
-
-
1,227
Net funds management and insurance income
804
(21)
(116)
(3)
-
-
-
-
-
(140)
664
Other
790
-
-
-
42
8
(2)
-
1
49
839
Other operating income
2,821
(21)
(116)
(3)
42
8
(2)
-
1
(91)
2,730
Operating income
10,277
(21)
(116)
(3)
42
8
(2)
-
1
(91)
10,186
Operating expenses
(4,717)
-
-
-
-
-
-
-
-
-
(4,717)
Profit before credit impairment and tax
5,560
(21)
(116)
(3)
42
8
(2)
-
1
(91)
5,469
Credit impairment charge
(479)
-
-
-
-
-
-
-
-
-
(479)
Profit before income tax
5,081
(21)
(116)
(3)
42
8
(2)
-
1
(91)
4,990
Income tax expense
(1,579)
3
116
1
(11)
(2)
-
-
16
123
(1,456)
Non
-controlling interests
(7)
-
-
-
-
-
-
-
-
-
(7)
Profit
3,495
(18)
-
(2)
31
6
(2)
-
17
32
3,527
March 2017 Half Year
Net interest income
7,416
-
-
-
-
-
-
-
-
-
7,416
Net fee and commission income
1,226
-
-
-
-
-
-
-
-
-
1,226
Net funds management and insurance income
696
82
(161)
51
-
-
-
-
-
(28)
668
Other
658
-
-
-
254
(148)
(2)
1
230
335
993
Other operating income
2,580
82
(161)
51
254
(148)
(2)
1
230
307
2,887
Operating income
9,996
82
(161)
51
254
(148)
(2)
1
230
307
10,303
Operating expenses
(4,731)
-
-
-
-
-
-
-
-
-
(4,731)
Profit before credit impairment and tax
5,265
82
(161)
51
254
(148)
(2)
1
230
307
5,572
Credit impairment charge
(719)
-
-
-
-
-
-
(1)
-
(1)
(720)
Profit before income tax
4,546
82
(161)
51
254
(148)
(2)
-
230
306
4,852
Income tax expense
(1,627)
(6)
161
(15)
(76)
43
1
-
86
194
(1,433)
Non
-controlling interests
(8)
-
-
-
-
-
-
-
-
-
(8)
Profit
2,911
76
-
36
178
(105)
(1)
-
316
500
3,411
79
PROFIT RECONCILIATION
This page has been left blank intentionally
80
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS
CONTENTS PAGE
Condensed Consolidated Income Statement 82
Condensed Consolidated Statement of Comprehensive Income 83
Condensed Consolidated Balance Sheet 84
Condensed Consolidated Cash Flow Statement 85
Condensed Consolidated Statement of Changes in Equity 86
Notes to Condensed Consolidated Financial Statements 87
81
CONDENSED CONSOLIDATED INCOME STATEMENT
Australia and New Zealand Banking Group Limited
Half Year
Full Year
Note
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Interest income 14,694 14,426 2% 29,120 29,951 -3%
Interest expense (7,238) (7,010) 3% (14,248) (14,856) -4%
Net interest income 2 7,456 7,416 1% 14,872 15,095 -1%
Other operating income
1
2 1,890 1,711 10% 3,601 3,146 14%
Net funds management and insurance income 2 804 696 16% 1,500 1,764 -15%
Share of associates' profit 2,13 127 173 -27% 300 541 -45%
Operating income 10,277 9,996 3% 20,273 20,546 -1%
Operating expenses
1
3 (4,717) (4,731) 0% (9,448) (10,439) -9%
Profit before credit impairment and income tax 5,560 5,265 6% 10,825 10,107 7%
Credit impairment charge 8 (479) (719) -33% (1,198) (1,929) -38%
Profit before income tax 5,081 4,546 12% 9,627 8,178 18%
Income tax expense 4 (1,579) (1,627) -3% (3,206) (2,458) 30%
Profit for the period 3,502 2,919 20% 6,421 5,720 12%
Comprising:
Profit attributable to non-controlling interests 7 8 -13% 15 11 36%
Profit attributable to shareholders of the Company 3,495 2,911 20% 6,406 5,709 12%
Earnings per ordinary share (cents)
Basic 6 119.9 100.2 20% 220.1 197.4 11%
Diluted 6 114.7 96.7 19% 210.8 189.3 11%
Dividend per ordinary share (cents) 5 80 80 0% 160 160 0%
1.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated (Sep16 full year: $17 million).
The notes appearing on pages 87 to 100 form an integral part of the Condensed Consolidated Financial Statements.
82
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Australia and New Zealand Banking Group Limited
Full Year
Sep 17
$M
Sep 16
$M Movt
Profit for the period 6,421 5,720 12%
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss 26 (82) large
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve:
Exchange differences taken to equity
1
(748) (456) 64%
Exchange differences transferred to Income Statement - (126) -100%
Other reserve movements (339) 75 large
Income tax attributable to the above items 20 - n/a
Share of associates' other comprehensive income
2
1 4 -75%
Other comprehensive income net of tax (1,040) (585) 78%
Total comprehensive income for the period 5,381 5,135 5%
Comprising total comprehensive income attributable to:
Non-controlling interests 9 4 large
Shareholders of the Company 5,372 5,131 5%
1.
Includes foreign currency translation differences attributable to non-controlling interests of $6 million loss (Sep 16 full year: $7 million loss).
2.
Share of associates’ other comprehensive income includes an available for sale revaluation reserve loss of $1 million (Sep 16 full year: $10 million gain) and a foreign currency translation
reserve gain of $2 million (Sep 16 full year: $nil) that may be reclassified subsequently to profit or loss, and the remeasurement of defined benefit plans of $nil (Sep 16 full year: $6 million
loss) that will not be reclassified subsequently to profit or loss.
The notes appearing on pages 87 to 100 form an integral part of the Condensed Consolidated Financial Statements.
83
CONDENSED CONSOLIDATED BALANCE SHEET
Australia and New Zealand Banking Group Limited
As at
Movement
Assets Note
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Cash and cash equivalents
1
68,048 75,185 66,220 -9% 3%
Settlement balances owed to ANZ 5,504 2,930 4,406 88% 25%
Collateral paid 8,987 11,179 12,723 -20% -29%
Trading securities 43,605 44,085 47,188 -1% -8%
Derivative financial instruments 62,518 63,882 87,496 -2% -29%
Available for sale assets 69,384 64,685 63,113 7% 10%
Net loans and advances 7 574,331 564,035 575,852 2% 0%
Regulatory deposits 2,015 2,154 2,296 -6% -12%
Assets held for sale 10 7,970 14,145 - -44% n/a
Investment in associates 2,248 2,286 4,272 -2% -47%
Current tax assets 30 242 126 -88% -76%
Deferred tax assets 675 572 623 18% 8%
Goodwill and other intangible assets 6,970 7,053 7,672 -1% -9%
Investments backing policy liabilities 37,964 37,602 35,656 1% 6%
Premises and equipment 1,965 1,979 2,205 -1% -11%
Other assets 5,112 4,497 5,021 14% 2%
Total assets 897,326 896,511 914,869 0% -2%
Liabilities
Settlement balances owed by ANZ 9,914 9,736 10,625 2% -7%
Collateral received 5,919 5,189 6,386 14% -7%
Deposits and other borrowings 9 595,611 581,407 588,195 2% 1%
Derivative financial instruments 62,252 65,050 88,725 -4% -30%
Current tax liabilities 241 185 188 30% 28%
Deferred tax liabilities 257 224 227 15% 13%
Liabilities held for sale 10 4,693 17,166 - -73% n/a
Policy liabilities 37,448 37,111 36,145 1% 4%
External unit holder liabilities (life insurance funds) 4,435 4,227 3,333 5% 33%
Payables and other liabilities 8,350 8,054 8,865 4% -6%
Provisions 1,158 1,179 1,209 -2% -4%
Debt issuances 90,263 88,778 91,080 2% -1%
Subordinated debt 17,710 20,297 21,964 -13% -19%
Total liabilities 838,251 838,603 856,942 0% -2%
Net assets 59,075 57,908 57,927 2% 2%
Shareholders' equity
Ordinary share capital 29,088 29,036 28,765 0% 1%
Reserves 37 115 1,078 -68% -97%
Retained earnings 29,834 28,640 27,975 4% 7%
Share capital and reserves attributable to
shareholders of the Company
11
58,959 57,791 57,818 2% 2%
Non-controlling interests 11 116 117 109 -1% 6%
Total shareholders' equity 11 59,075 57,908 57,927 2% 2%
1.
Includes settlement balances owed to ANZ that meet the definition of cash and cash equivalents.
The notes appearing on pages 87 to 100 form an integral part of the Condensed Consolidated Financial Statements.
84
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Australia and New Zealand Banking Group Limited
Full Year
Inflows Inflows
(Outflows) (Outflows)
Sep 17
$M
Sep 16
$M
Profit after income tax 6,406 5,709
Adjustments to reconcile to net cash provided by/(used in) operating activities:
Provision for credit impairment 1,198 1,929
Depreciation and amortisation
972 1,475
(Profit)/loss on sale of premises and equipment
(114) (4)
Net derivatives/foreign exchange adjustment (3,409) (1,434)
Profit on Esanda Dealer Finance divestment - (66)
Impairment of investment in AmBank - 260
Reclassification of SRCB to held for sale
231 -
Sale of Asia Retail and Wealth businesses
338 -
Other non-cash movements
(242) (338)
Net (increase)/decrease in operating assets:
Collateral paid 3,533 (3,183)
Trading securities 2,081 332
Net loans and advances
(17,838) (14,797)
Investments backing policy liabilities (2,122) (2,062)
Other assets 509 (441)
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings 30,904 23,128
Settlement balances owed by ANZ
(627) (589)
Collateral received (310) (1,027)
Life insurance contract policy liabilities 2,260 1,921
Other liabilities
202 28
Total adjustments 17,566 5,132
Net cash provided by/(used in) operating activities
1
23,972 10,841
Cash flows from investing activities
Available for sale assets:
Purchases (27,220) (44,182)
Proceeds from sale or maturity 19,751 23,745
Esanda Dealer Finance divestment
- 6,682
Sale of Asia Retail and Wealth businesses
(5,213) -
Other assets
(148) (655)
Net cash (used in) investing activities (12,830) (14,410)
Cash flows from financing activities
Debt issuances:
Issue proceeds 23,973 29,204
Redemptions
(22,578) (27,959)
Subordinated debt:
Issue proceeds 1,155 6,177
Redemptions
(4,831) (900)
Dividends paid (4,210) (4,564)
Share buyback (176) -
Net cash (used in)/provided by financing activities
(6,667) 1,958
Net increase in cash and cash equivalents 4,475 (1,611)
Cash and cash equivalents at beginning of period 66,220 69,278
Effects of exchange rate changes on cash and cash equivalents
(2,647) (1,447)
Cash and cash equivalents at end of period 68,048 66,220
1.
Net cash provided by/(used in) operating activities includes income taxes paid of $2,864 million (Mar 17 half year: $1,497 million; Sep 16 full year: $2,840 million).
The notes appearing on pages 87 to 100 form an integral part of the Condensed Consolidated Financial Statements.
85
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Australia and New Zealand Banking Group Limited
Ordinary
share
capital Reserves
Retained
earnings
Shareholders'
equity
attributable to
Equity holders
of the Bank
Non-
controlling
interests
Total
Shareholders'
equity
$M $M $M $M $M $M
As at 1 October 2015 28,367 1,571 27,309 57,247 106 57,353
Profit or loss - -
5,709 5,709 11 5,720
Other comprehensive income for the period - (504) (74) (578) (7) (585)
Total comprehensive income for the period - (504) 5,635 5,131 4 5,135
Transactions with equity holders in
their capacity as equity holders:
Dividends paid - - (5,001) (5,001) (1) (5,002)
Dividend income on treasury shares
held within the Group's
life insurance statutory funds
- - 24 24 - 24
Dividend reinvestment plan 413 - - 413 - 413
Other equity movements:
Treasury shares Wealth Australia adjustment (153) - - (153) - (153)
Group employee share acquisition scheme 138 - - 138 - 138
Other items - 11 8 19 - 19
As at 30 September 2016 28,765 1,078 27,975 57,818 109 57,927
Profit or loss - -
6,406 6,406
15
6,421
Other comprehensive income for the period - (1,049) 15 (1,034) (6) (1,040)
Total comprehensive income for the period - (1,049) 6,421 5,372 9 5,381
Transactions with equity holders in
their capacity as equity holders:
Dividends paid - - (4,609) (4,609) (1) (4,610)
Dividend income on treasury shares
held within the Group's
life insurance statutory funds
- - 26 26 - 26
Dividend reinvestment plan 374 - - 374 - 374
Group share buy-back
1
(176) - - (176) - (176)
Other equity movements:
Treasury shares Wealth Australia adjustment 69 - - 69 - 69
Group employee share acquisition scheme 56 - - 56 - 56
Other items - 8 21
29 (1) 28
As at 30 September 2017 29,088 37 29,834 58,959 116 59,075
1.
Following the issue of $176 million shares under the Dividend Reinvestment Plan for the 2017 interim dividend, the Company repurchased $176 million of shares via an on-market share
buy-back.
The notes appearing on pages 87 to 100 form an integral part of the Condensed Consolidated Financial Statements.
86
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 2017 and any public announcements made
by the Parent Entity and its controlled entities (the Group) for the year ended 30 September 2017 (when released) 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 25 October 2017.
i) Accounting policies
Except as outlined below, these Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using
methods of computation consistent with those applied in the 2016 ANZ Annual Financial Statements.
Assets and liabilities held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except
for assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this
requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any
subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss
not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.
Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted
investee is no longer equity accounted.
ii) 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 their
fair 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;
• other financial assets and liabilities designated at fair value through profit and loss; and
• assets and liabilities held for sale (except those at carrying value as per note (i)).
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.
iii) Use of estimates, assumptions and judgements
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 provided in Note 1 of the 2017 ANZ Annual Financial Statements (when released). Such estimates
and judgements are reviewed on an ongoing basis.
At 30 September 2017, 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. Although their market value (based on share price) was below
their carrying value, no impairment was recognised as the carrying value was supported by their value in use (VIU).
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 30 Sep 17
AmBank PT Panin
Post-tax discount rate
9.6% 13.3%
Terminal growth rate
4.8% 5.4%
Expected NPAT growth (compound annual growth rate – 5 years)
4.5% 9.9%
Core equity tier 1 ratio
10.5% to 13.3% 11.3%
iv) Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except where
otherwise indicated, as permitted by Australian Securities and Investments Commission Corporations Instrument 2016/191.
87
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Income
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Interest income 14,694 14,426 2% 29,120 29,951 -3%
Interest expense (7,152) (7,010) 2% (14,162) (14,856) -5%
Major bank levy (86) - n/a (86) - n/a
Net interest income 7,456 7,416 1% 14,872 15,095 -1%
i) Fee and commission income
Lending fees
1
363 369 -2% 732 779 -6%
Non-lending fees and commissions
2
1,475 1,518 -3% 2,993 2,928 2%
Fee and commission income 1,838 1,887 -3% 3,725 3,707 0%
Fee and commission expense (611) (661) -8% (1,272) (1,162) 9%
Net fee and commission income 1,227 1,226 0% 2,453 2,545 -4%
ii) Other income
Net foreign exchange earnings and other financial instruments income
3
511 705 -28% 1,216 969 25%
Impairment of AmBank - - n/a - (260) -100%
Gain on cessation of equity accounting of investment in Bank of Tianjin (BoT)
- - n/a - 29 -100%
Gain on the Esanda Dealer Finance divestment - - n/a - 66 -100%
Derivative CVA methodology change - - n/a - (237) -100%
Derivative valuation adjustments 67 162 -59% 229 (102) large
Gain on sale of 100 Queen Street, Melbourne - 114 -100% 114 - n/a
Sale of Asia Retail and Wealth businesses 14 (324) large (310) - n/a
Reclassification of SRCB to held for sale (1) (230) -100% (231) - n/a
Other 72 58 24% 130 136 -4%
Other income 663 485 37% 1,148 601 91%
Other operating income
4
1,890 1,711 10% 3,601 3,146 14%
iii) Net funds management and insurance income
Funds management income 492 472 4% 964 932 3%
Investment income 863 1,608 -46% 2,471 2,350 5%
Insurance premium income 891 812 10% 1,703 1,562 9%
Commission expense (294) (260) 13% (554) (457) 21%
Claims (383) (380) 1% (763) (734) 4%
Changes in policy liabilities
5
(786) (1,474) -47% (2,260) (1,843) 23%
Elimination of treasury share (gain)/loss 21 (82) large (61) (46) 33%
Net funds management and insurance income 804 696 16% 1,500 1,764 -15%
iv) Share of associates' profit 127 173 -27% 300 541 -45%
Operating income 10,277 9,996 3% 20,273 20,546 -1%
1.
Lending fees exclude fees treated as part of the effective yield calculation in interest income.
2.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 full year: $17 million).
3.
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.
4.
Total other operating income includes external dividend income of $27.3 million (Mar 17 half year nil; Sep 16 full year: $27.3 million).
5.
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.
88
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Operating expenses
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Personnel
Salaries and related costs 2,227 2,329 -4% 4,556 4,879 -7%
Superannuation costs 159 163 -2% 322 337 -4%
Other 144 156 -8% 300 325 -8%
Total personnel expenses 2,530 2,648 -4% 5,178 5,541 -7%
Premises
Rent 252 248 2% 500 485 3%
Other 202 209 -3% 411 443 -7%
Total premises expenses 454 457 -1% 911 928 -2%
Technology
Depreciation and amortisation
1
351 376 -7% 727 1,198 -39%
Licences and outsourced services
2
334 303 10% 637 614 4%
Other 150 152 -1% 302 355 -15%
Total technology expenses 835 831 0% 1,666 2,167 -23%
Restructuring 26 36 -28% 62 278 -78%
Other
Advertising and public relations 131 123 7% 254 261 -3%
Professional fees 264 189 40% 453 413 10%
Freight, stationery, postage and telephone 134 132 2% 266 277 -4%
Other 343 315 9% 658 574 15%
Total other expenses 872 759 15% 1,631 1,525 7%
Total operating expenses 4,717 4,731 0% 9,448 10,439 -9%
1.
The September 2016 full year includes a $556 million charge for accelerated amortisation associated with software capitalisation policy changes.
2.
In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from operating income to other operating expenses to more
accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 full year: $17 million).
89
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 recognised in the profit and loss.
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Profit before income tax 5,081 4,546 12% 9,627 8,178 18%
Prima facie income tax expense at 30% 1,524 1,364 12% 2,888 2,453 18%
Tax effect of permanent differences:
Wealth Australia - policyholders income and contributions tax 81 113 -28% 194 152 28%
Share of associates' profit (38) (52) -27% (90) (162) -44%
Write down of investment in AmBank - - n/a - 78 -100%
Reclassification of SRCB to held for sale 16 156 -90% 172 - n/a
Tax provisions no longer required - - n/a - (71) -100%
Interest on Convertible Instruments 34 35 -3% 69 70 -1%
Overseas tax rate differential (32) (5) large (37) (45) -18%
Gain on cessation of equity accounting for BoT - - n/a - (9) -100%
Other 12 17 -29% 29 15 93%
1,597 1,628 -2% 3,225 2,481 30%
Income tax over provided in previous years (18) (1) large (19) (23) -17%
Total income tax expense 1,579 1,627 -3% 3,206 2,458 30%
Australia 1,159 1,190 -3% 2,349 1,752 34%
Overseas 420 437 -4% 857 706 21%
1,579 1,627 -3% 3,206 2,458 30%
Effective Tax Rate - Group 31.1% 35.8% 33.3% 30.1%
90
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Dividends
Half Year Full Year
Dividend per ordinary share (cents) Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Interim (fully franked) - 80 n/a 80 80 0%
Final (fully franked) 80 - n/a 80 80 0%
Total 80 80 0% 160 160 0%
Ordinary share dividend ($M)
1
Interim dividend 2,349 - n/a 2,349 2,334 1%
Final dividend - 2,342 n/a 2,342 2,758 -15%
Bonus option plan adjustment (40) (42) -5% (82) (91) -10%
Total 2,309 2,300 0% 4,609 5,001 -8%
Ordinary share dividend payout ratio
(%)
2
67.2% 80.7% 73.4% 81.9%
1.
Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders for the September 2017 full year of $1.3
million (Mar 17 half: $1.3 million; Sep 16 full year: $1.4 million).
2.
Dividend payout ratio is calculated using the proposed 2017 final dividend of $2,350 million (not shown in the above table). The proposed 2017 final dividend of $2,350 million is based on
the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2017 half year and September 2016 full year are calculated using actual
dividends paid of $2,349 million and $4,676 million respectively.
Ordinary Shares
The Directors propose that a final dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 18 December 2017. The proposed 2017
final dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZ 10 cents per ordinary share will also be
attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2017 final dividend. For the
2017 final dividend, ANZ intends to provide shares under the DRP through an on-market purchase (as approved by APRA) and BOP through the issue of
new shares. The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by
reference to the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of
trading on the ASX during the ten trading days commencing on 17 November 2017, and then rounded to the nearest whole cent. Shares provided under
the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence,
cease or vary their participation in the DRP or BOP for the 2017 final dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern
Daylight Time) on 15 November 2017.
Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United
Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted
to Pounds Sterling or New Zealand Dollars respectively at
an exchange rate calculated on 17 November 2017.
91
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings per share
Half Year Full Year
Sep 17 Mar 17 Movt Sep 17 Sep 16 Movt
Earnings reconciliation
Profit for the period ($M) 3,502 2,919 20% 6,421 5,720 12%
Less: profit attributable to non-controlling interests ($M) (7) (8) -13% (15) (11) 36%
Earnings used in calculating basic earnings per share ($M) 3,495 2,911 20% 6,406 5,709 12%
Weighted average number of ordinary shares (M)
1
2,914.0 2,906.6 0% 2,910.3 2,891.7 1%
Basic earnings per share (cents) 119.9 100.2 20% 220.1 197.4 11%
Earnings reconciliation
Earnings used in calculating basic earnings per share ($M) 3,495 2,911 20% 6,406 5,709 12%
Add: interest on convertible subordinated debt ($M) 140 148 -5% 288 297 -3%
Earnings used in calculating diluted earnings per share ($M) 3,635 3,059 19% 6,694 6,006 11%
Weighted average number of shares on issue
1
Shares used in calculating basic earnings per share (M) 2,914.0 2,906.6 0% 2,910.3 2,891.7 1%
Add: Weighted average dilutive potential ordinary shares (M)
Convertible subordinated debt (M) 243.0 247.1 -2% 253.3 273.9 -8%
Share based payments (options, rights and deferred shares) (M) 11.5 10.0 15% 11.9 6.8 75%
Adjusted weighted average number of shares - diluted (M) 3,168.5 3,163.7 0% 3,175.5 3,172.4 0%
Diluted earnings per share (cents) 114.7 96.7 19% 210.8 189.3 11%
1.
Weighted average number of shares excludes the weighted average number of treasury shares held in ANZEST and Wealth Australia as summarised in the table below:
Sep 17 half
(Million)
Mar 17 half
(Million)
Sep 17 full year
(Million)
Sep 16 full year
(Million)
ANZEST Pty Ltd 7.5 8.8 8.1 11.1
Wealth Australia 15.2 17.1 16.2 14.5
Total treasury shares 22.7 25.9 24.3 25.6
92
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Net loans and advances
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Australia
Overdrafts 5,939 5,786 6,248 3% -5%
Credit cards outstanding 8,632 8,846 8,864 -2% -3%
Commercial bills outstanding 8,471 9,232 9,868 -8% -14%
Term loans - housing 264,105 255,721 246,351 3% 7%
Term loans - non-housing 124,307 123,464 123,006 1% 1%
Lease receivables 1,153 1,084 1,158 6% 0%
Hire purchase contracts 634 641 829 -1% -24%
Other 15 415 81 -96% -81%
Total Australia 413,256 405,189 396,405 2% 4%
Asia Pacific, Europe & America
Overdrafts 449 743 825 -40% -46%
Credit cards outstanding 869 1,351 1,396 -36% -38%
Commercial bills outstanding 2,597 2,065 2,724 26% -5%
Term loans - housing 2,469 6,501 6,866 -62% -64%
Term loans - non-housing 48,304 50,066 54,567 -4% -11%
Lease receivables 117 163 232 -28% -50%
Other 34 320 448 -89% -92%
Total Asia Pacific, Europe & America 54,839 61,209 67,058 -10% -18%
New Zealand
Overdrafts 957 1,158 1,080 -17% -11%
Credit cards outstanding 1,508 1,503 1,586 0% -5%
Term loans - housing 70,735 68,592 69,927 3% 1%
Term loans - non-housing 40,697 40,247 41,625 1% -2%
Lease receivables 189 198 215 -5% -12%
Hire purchase contracts 1,263 1,115 1,048 13% 21%
Total New Zealand 115,349 112,813 115,481 2% 0%
Sub-total 583,444 579,211 578,944 1% 1%
Unearned income (411) (458) (544) -10% -24%
Capitalised brokerage/mortgage origination fees
1
1,058 1,040 1,064 2% -1%
Customer liability for acceptances
2
- 565 571
-100% -100%
Gross loans and advances (including assets classified as held for sale) 584,091 580,358 580,035 1% 1%
Provision for credit impairment (refer to Note 8) (3,798) (4,054) (4,183) -6% -9%
Net loans and advances (including assets classified as held for sale) 580,293 576,304 575,852 1% 1%
Net loans and advances held for sale (refer to Note 10)
(5,962) (12,269) - -51% n/a
Net loans and advances 574,331 564,035 575,852 2% 0%
1.
Capitalised brokerage/mortgage origination fees are amortised over the expected life of the loan.
2.
Customer liability for acceptances has been recognised as Other assets from 30 September 2017.
93
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Provision for credit impairment
Half Year Full Year
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Individual provision
Balance at start of period 1,269 1,307 -3% 1,307 1,061 23%
New and increased provisions 948 1,121 -15% 2,069 2,445 -15%
Write-backs (280) (221) 27% (501) (311) 61%
Adjustment for exchange rate fluctuations and transfers (2) (12) -83% (14) (9) 56%
Discount unwind (8) (24) -67% (32) (65) -51%
Bad debts written-off (791) (902) -12% (1,693) (1,722) -2%
Esanda Dealer Finance divestment - - n/a - (92) -100%
Total individual provision 1,136 1,269 -10% 1,136 1,307 -13%
Collective provision
Balance at start of period 2,785 2,876 -3% 2,876 2,956 -3%
Charge/(release) to Income Statement (75) (67) 12% (142) 17 large
Adjustment for exchange rate fluctuations and transfers (9) (24) -63% (33) (19) 74%
Esanda Dealer Finance divestment - - n/a - (78) -100%
Asia Retail and Wealth divestment (39) - n/a (39) - n/a
Total collective provision
1
2,662 2,785 -4% 2,662 2,876 -7%
Total provision for credit impairment 3,798 4,054 -6% 3,798 4,183 -9%
1.
The collective provision includes amounts for off-balance sheet credit exposures of $544 million as at 30 September 2017 (Mar 17: $574 million; Sep 16: $631 million). The impact on the
Income Statement for full year ended 30 September 2017 was a $66 million release (Mar 17 half: $46 million release; Sep 16 ful l year: $32 million release) .
Half Year Full Year
Provision movement analysis
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
New and increased individual provisions
948 1,121 -15% 2,069 2,445 -15%
Write-backs (280) (221) 27% (501) (311) 61%
668 900 -26% 1,568 2,134 -27%
Recoveries of amounts previously written-off (114) (114) 0% (228) (222) 3%
Individual credit impairment charge 554 786 -30% 1,340 1,912 -30%
Collective credit impairment charge/(release) (75) (67) 12% (142) 17 large
Credit impairment charge 479 719 -33% 1,198 1,929 -38%
94
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Deposits and other borrowings
As at
Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Australia
Certificates of deposit 50,565 51,875 52,295 -3% -3%
Term deposits 72,679 72,471 69,740 0% 4%
On demand and short term deposits 190,480 179,928 169,773 6% 12%
Deposits not bearing interest 10,221 9,268 8,729 10% 17%
Deposits from banks and securities sold under repurchase agreements 35,896 37,824 34,519 -5% 4%
Commercial paper 14,599 6,786 13,842 large 5%
Total Australia 374,440 358,152 348,898 5% 7%
Asia Pacific, Europe & America
Certificates of deposit 2,894 4,629 7,001 -37% -59%
Term deposits 78,863 90,449 84,583 -13% -7%
On demand and short term deposits 21,769 23,468 24,968 -7% -13%
Deposits not bearing interest 4,519 4,650 4,745 -3% -5%
Deposits from banks and securities sold under repurchase agreements 23,251 24,765 23,167 -6% 0%
Commercial paper - - 393 n/a -100%
Total Asia Pacific, Europe & America 131,296 147,961 144,857 -11% -9%
New Zealand
Certificates of deposit 1,763 924 2,133 91% -17%
Term deposits 41,829 40,236 37,824 4% 11%
On demand and short term deposits 38,143 38,762 40,360 -2% -5%
Deposits not bearing interest 8,173 7,832 7,418 4% 10%
Deposits from banks and securities sold under repurchase agreements 145 662 73 -78% 99%
Commercial paper & other borrowings 4,380 3,888 6,632 13% -34%
Total New Zealand 94,433 92,304 94,440 2% 0%
Total deposits and other borrowings (including liabilities classified as held
for sale)
600,169 598,417 588,195 0% 2%
Deposits and other borrowings held for sale (refer to Note 10) (4,558) (17,010) - -73% n/a
Total deposits and other borrowings 595,611 581,407 588,195 2% 1%
95
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Assets and liabilities held for sale
The Group announced the following strategic divestments in line with the Group’s strategy to simplify the businesses and improve capital efficiency.
Accordingly, they are presented as assets and liabilities held for sale.
• Asia Retail and Wealth Businesses
The Group announced that it had agreed to sell Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to
Singapore’s DBS Bank on 31 October 2016, and its Retail business in Vietnam to Shinhan Bank Vietnam on 21 April 2017. During the September
2017 half, the Group successfully completed the sales in China, Singapore and Hong Kong. Subject to regulatory approval, the sales in Vietnam,
Taiwan, and Indonesia are expected to complete in late 2017 and early 2018 and these remaining countries form the assets and liabilities held for
sale. These businesses are part of the Asia Retail & Pacific division.
• UDC Finance
On 11 January 2017, the Group announced it had agreed to sell UDC Finance to HNA Group. The sale is subject to certain conditions (including
regulatory approvals) and we are working with HNA Group towards completion of the sale. This business is part of the New Zealand division.
• Shanghai Rural Commercial Bank
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB). On 18 September
2017 the Group announced a revision to the 3 January arrangement in which Baoshan Iron & Steel Co. Ltd. (Bao) replaced Shanghai Sino-Poland
Enterprise Management Development Corporation Limited to join China COSCO Shipping Corporation Limited (COSCO) to acquire ANZ’s 20%
stake in SRCB. Under the updated arrangement, COSCO and Bao will each acquire a 10% stake in SRCB. The key financial terms of the revised
sale agreement are unchanged from the transaction announced previously. The sale is subject to customary closing conditions and regulatory
approvals and is expected to complete late 2017. This asset is part of the TSO and Group Centre Division.
• Metrobank Card Corporation
On 18 October 2017, the Group announced it had entered into an agreement with its joint venture partner Metropolitan Bank & Trust Company
(Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group has agreed to sell 20% of its stake,
and entered into a put option to sell the remaining 20% stake
, exercisable in the fourth quarter of 2018 on the same terms for the same
consideration. The asset has been classified as held for sale at 30 September 2017 as sale negotiations were well progressed at that time, and it
was highly probable the sale transaction would complete within12 months. The sale is subject to customary closing conditions and regulatory
approvals. This asset is part of the TSO and Group Centre Division.
Income Statement impact relating to assets and liabilities held for sale
During the September 2017 full year, the Group recognised the following impacts in relation to assets and liabilities held for sale:
• $310 million loss relating to the reclassification and partial completion of the Asia Retail and Wealth sale comprising of $222 million of software,
goodwill and other assets impairment charges and $88 million of various other charges net of recoveries and sale premium.
• $333 million loss relating to the Group’s investment in SRCB comprising of a $219 million impairment to the investment, $12 million of foreign
exchange losses, and $102 million of tax expenses.
During the March 2017 half year, the Group recognised the following impacts in-relation to the assets and liabilities:
• $
324 million loss relating to the reclassification of the Group’s Asia Retail and Wealth businesses to held for sale comprising of $225 million of
software, goodwill and other assets impairment charges and $99 million of costs associated with the sale.
• $316 million loss relating to the Group’s investment in SRCB comprising of a $219 million impairment to the investment, $11 million of foreign
exchange losses, and $86 million of tax expenses.
The net result of these impacts is included in ‘Other income’ and ‘Income tax expense’ (refer Note 2 and 4).
Assets and liabilities held for sale
At 30 September 2017, assets and liabilities held for sale are measured at the lower of their carrying amount and fair value less costs to sell, except for
assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this
requirement.
96
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Asia Retail
and Wealth
businesses
$M
UDC Finance
$M
Shanghai
Rural
Commercial
Bank
$M
Metrobank
Card
Corporation
$M
Total
$M
As at 30 September 2017
Net loans and advances 3,283 2,679 - - 5,962
Investment in associates - - 1,748 120 1,868
Goodwill and other intangible assets - 122 - - 122
Other assets - 18 - - 18
Total assets held for sale 3,283 2,819 1,748 120 7,970
Deposits and other borrowings 3,602 956 - - 4,558
Current tax liabilities - 22 - - 22
Deferred tax liabilities -
(8)
- - (8)
Payables and other liabilities 47 30 - - 77
Provisions 43 1 - - 44
Total liabilities held for sale 3,692 1,001 - - 4,693
Asia Retail
and Wealth
businesses
$M
UDC Finance
$M
Shanghai
Rural
Commercial
Bank
$M
Metrobank
Card
Corporation
$M
Total
$M
As at 31 March 2017
Net loans and advances 9,776 2,493 - - 12,269
Investment in associates - - 1,735 - 1,735
Goodwill and other intangible assets - 118 - - 118
Other assets - 23 - - 23
Total assets held for sale 9,776 2,634 1,735 - 14,145
Deposits and other borrowings 15,818 1,192 - - 17,010
Current tax liabilities - 31 - - 31
Payables and other liabilities 44 30 - - 74
Provisions 50 1 - - 51
Total liabilities held for sale 15,912 1,254 - - 17,166
97
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Shareholders’ equity
Issued and quoted securities
Half Year
Full Year
Ordinary share capital
Sep 17
No.
Mar 17
No.
Sep 17
No.
Sep 16
No.
Closing balance 2,937,415,327 2,936,037,009 2,937,415,327 2,927,476,660
Issued during the period
1
1,378,318 8,560,349 9,938,667 24,762,299
1.
The Company issued 7.5 million shares under the Dividend Reinvestment Plan and Bonus Option Plan for the 2017 interim dividend (8.6 million shares for the 2016 final dividend; 9.7
million shares for the 2016 interim dividend) and nil shares to satisfy obligations under the Group’s Employee share acquisition plans during the September 2017 half (Mar 17 half: nil ; Sep
16 full year: 5.3 million shares). Following the provision of 7.5 million shares under the Dividend Reinvestment Plan and Bonus Option Plan for the 2017 interim dividend, the Company
repurchased 6.1 million of shares via an on-market share buy-back resulting in 6.1 million shares being cancelled.
As at
Shareholders' equity
Sep 17
$M
Mar 17
$M
Sep 16
$M
Ordinary share capital
29,088 29,036 28,765
Reserves
Foreign currency translation reserve
(196) (140) 544
Share option reserve
87 67 79
Available for sale revaluation reserve
38 31 149
Cash flow hedge reserve
131 180 329
Transactions with non-controlling interests reserve
(23) (23) (23)
Total reserves
37 115 1,078
Retained earnings
29,834 28,640 27,975
Share capital and reserves attributable to shareholders of the Company
58,959 57,791 57,818
Non-controlling interests
116 117 109
Total shareholders' equity
59,075 57,908 57,927
98
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. Changes in composition of the Group
There were no acquisitions or disposals of material controlled entities for the year ended 30 September 2017.
13. Investments in Associates
Half Year
Full Year
Sep 17
$M
Mar 17
$M
Sep 17
v. Mar 17
Sep 17
$M
Sep 16
$M
Sep 17
v. Sep 16
Share of associates' profit 127 173 -27% 300 541 -45%
Contributions to profit
1
Contribution to
Group post-tax profit
Ownership interest
held by Group
Associates Half Year Full Year
As at
Sep 17
$M
Mar 17
$M
Sep 17
$M
Sep 16
$M
Sep 17
%
Mar 17
%
Sep 16
%
P.T. Bank Pan Indonesia 51 50 101 64 39 39 39
AMMB Holdings Berhad 48 48 96 94 24 24 24
Shanghai Rural Commercial Bank
2
- 58 58 259 20 20 20
Bank of Tianjin (up to 30 March 2016)
3
- - - 86 12 12 12
Other associates
4
28 17 45 38 n/a n/a n/a
Share of associates' profit 127 173 300 541
1.
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.
2.
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB). On 18th September the Group announced a revision to the
3 January arrangement in which Baoshan Iron & Steel Co. Ltd. (Bao) replaced Shanghai SinoPoland Enterprise Management Development Corporation Limited to join China COSCO
Shipping Corporation Limited (COSCO) to acquire ANZ’s 20% stake in SRCB. Under the updated arrangement, COSCO and Bao will each acquire a 10% stake in SRCB. The key financial
terms of the revised sale agreement are unchanged from the transaction announced previously. The sale is subject to customary closing conditions and regulatory approvals and is
expected to be completed by late 2017. As a consequence, the Group ceased equity accounting for the investment in SRCB and commenced accounting for it as an asset held for sale.
3.
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. From 31 March 2016, the investment
was classified as an available for sale asset.
4.
Includes Metrobank Card Corporation (MCC).On 18 October 2017, the Group announced it had entered into an agreement with its joint venture partner Metropolitan Bank & Trust Company
(Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group has agreed to sell 20% of its stake, and entered into a put option to sell the
remaining 20% stake, exercisable in the fourth quarter of 2018 on the same terms for the same consideration. As the sale was announced after balance date, equity accounted earnings are
included for the September 2017 full year.
99
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. 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 the
estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice the interests of
the Group.
Note 33 of the 2017 ANZ Annual Financial Statements (when released) will contain a description of contingent liabilities and contingent assets as at 30
September 2017. A summary of some of those contingent liabilities is set out below.
• Bank fees litigation
A litigation funder commenced a class action against the Company in 2010, followed by a second similar class action in March 2013. The applicants
contended that certain exception fees (honour, dishonour and non-payment fees on transaction accounts and late payment and over-limit fees on
credit cards) were unenforceable penalties and that various of the fees were also unenforceable under statutory provisions governing unconscionable
conduct, unfair contract terms and unjust transactions. A further action, limited to late payment fees only, commenced in August 2014.
The penalty and statutory claims in the March 2013 class action failed and the claims have been dismissed. The August 2014 action was
discontinued in October 2016.
The original claims in the 2010 class action have been dismissed. A new claim has been added to the 2010 class action, in relation to the Company’s
entitlement to charge certain periodical payment non-payment fees.
• Benchmark/rate actions
In July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including the
Company – one action relating to the bank bill swap rate (BBSW), and one action relating to the Singapore Interbank Offered Rate (SIBOR) and the
Singapore Swap Offer Rate (SOR). The class actions are expressed to apply to persons and entities that engaged in US-based transactions in
financial instruments that were priced, benchmarked, and/or settled based on BBSW, SIBOR, or SOR. The claimants seek damages or
compensation in amounts not specified, and allege that the defendant banks, including the Company, violated US anti-trust laws, anti-racketeering
laws, the Commodity Exchange Act, and (in the BBSW case only) unjust enrichment principles. The Company is defending the proceedings. The
matters are at an early stage.
In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company
alleging breaches of the cartel provisions of the South African Competition Act in respect of trading in the South African rand. The potential civil
penalty or other financial impact is uncertain. The matter is at an early stage.
• Regulatory reviews and customer exposures
In recent years there have been significant increases in the nature and scale of regulatory investigations and reviews, enforcement actions (whether
by court action or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions both in Australia and globally.
The nature of these investigations and reviews can be wide ranging and, for example, currently include a range of matters including responsible
lending practices, product suitability, wealth advice, pricing and competition, conduct in financial markets and capital market transactions. During the
year, ANZ has received various notices and requests for information from its regulators as part of both industry-wide and ANZ-specific reviews. There
may be exposures to customers which are additional to any regulatory exposures. These could include class actions, individual claims or customer
remediation or compensation activities. The outcomes and total costs associated with such reviews and possible exposures remain uncertain.
• 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.
15. Subsequent events since balance date
On 17 October 2017, the Group announced it had agreed to sell OnePath pensions and investments (OnePath P&I) and aligned dealer groups (ADG)
business to IOOF Holdings Limited (IOOF) for $975 million. Completion is expected in March 2019 half subject to certain conditions including regulatory
approvals and the completion of the extraction of the OnePath P&I business from OnePath Life Insurance. The expected accounting loss on sale of
~$120 million is anticipated as a result of the sale, however the final gain/loss on sale will be determined at completion and will be impacted by
transaction and separation costs, final determination of goodwill to be disposed, other balances and final taxation impacts.
On 18 October 2017, the Group announced it had entered into an agreement with its joint venture partner Metropolitan Bank & Trust Company
(Metrobank) regarding the sale of its
40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group has agreed to sell one half its
40% stake in MCC to Metrobank, for US$144 million (A$184 million) expected to settle in late 2017. The Group also entered into a put option to sell its
remaining 20% stake to Metrobank, exercisable in the September 2018 half on the same terms and for the same consideration. If exercised, this would
deliver a total sale price of US$288 million (A$368 million). The sale is subject to customary regulatory approvals.
On 23 October 2017, the Group announced it had reached a confidential in-principle agreement with the Australian Securities and Investments
Commission (ASIC) to settle court action in respect of interbank trading and the bank bill swap rate (BBSW). A final resolution had not been agreed at the
date of this report. Based on the in-principle agreement, the financial impact to ANZ has been reflected in the financial statements.
Other than the matters above, there have been no significant events from 30 September 2017 to the date of signing this report.
100
SUPPLEMENTARY INFORMATION
CONTENTS
Supplementary Information
Capital management
Average balance sheet and related interest
Funds management and insurance income analysis (Group)
Select geographical disclosures
Exchange rates
101
SUPPLEMENTARY INFORMATION
Capital management
As at
Movement
Qualifying Capital
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Tier 1
Shareholders' equity and non-controlling interests 59,075 57,908 57,927
2% 2%
Prudential adjustments to shareholders' equity Table 1 (481) (509) (481)
-6% 0%
Gross Common Equity Tier 1 capital 58,594 57,399 57,446
2% 2%
Deductions Table 2 (17,258) (17,182) (18,179)
0% -5%
Common Equity Tier 1 capital 41,336 40,217 39,267
3% 5%
Additional Tier 1 capital Table 3 7,988 7,874 9,018
1% -11%
Tier 1 capital 49,324 48,091 48,285
3% 2%
Tier 2 capital Table 4 8,669 9,648 10,328
-10% -16%
Total qualifying capital
57,993 57,739 58,613
0% -1%
Capital adequacy ratios
Common Equity Tier 1 10.6% 10.1% 9.6%
Tier 1 12.6% 12.1% 11.8%
Tier 2 2.2% 2.4% 2.5%
Total 14.8% 14.5% 14.3%
Risk weighted assets Table 5 391,113 397,040 408,582 -1% -4%
102
SUPPLEMENTARY INFORMATION
Capital management, cont’d
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to ANZ Wealth Australia policyholders 326 324 395 1% -17%
Accumulated retained profits and reserves of insurance and funds management
entities
(711) (811) (875) -12% -19%
Deferred fee revenue including fees deferred as part of loan yields 131 175 238 -25% -45%
Available for sale reserve attributable to deconsolidated subsidiaries (83) (82) (110) 1% -25%
Other (144) (115) (129) 25% 12%
Total (481) (509) (481) -6% 0%
Table 2: Deductions from Common Equity Tier 1 capital
Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and
New Zealand)
(3,553) (3,532) (3,913) 1% -9%
Intangible component of investments in ANZ Wealth Australia and New Zealand (2,100) (2,099) (2,103) 0% 0%
Capitalised software (1,826) (1,887) (2,139) -3% -15%
Capitalised expenses including loan and lease origination fees (1,149) (1,129) (1,148) 2% 0%
Applicable deferred net tax assets (946) (902) (899) 5% 5%
Expected losses in excess of eligible provisions Table 8 (719) (696) (700) 3% 3%
Investment in other insurance and funds management subsidiaries (274) (274) (297) 0% -8%
Investment in ANZ Wealth Australia and New Zealand (1,750) (1,749) (1,752) 0% 0%
Investment in banking associates and minority interests (3,919) (3,826) (4,674) 2% -16%
Other deductions (1,022) (1,088) (554) -6% 84%
Total (17,258) (17,182) (18,179) 0% -5%
Table 3: Additional Tier 1 capital
Convertible Preference Shares
ANZ CPS2 - - 1,068 n/a -100%
ANZ CPS3 573 1,340 1,340 -57% -57%
ANZ Capital Notes 1 1,116 1,116 1,115 0% 0%
ANZ Capital Notes 2 1,604 1,603 1,602 0% 0%
ANZ Capital Notes 3 963 962 962 0% 0%
ANZ Capital Notes 4 1,608 1,607 1,604 0% 0%
ANZ Capital Notes 5 925 - - n/a n/a
ANZ Bank NZ Capital Notes 457 454 473 1% -3%
ANZ Capital Securities 1,206 1,218 1,329 -1% -9%
Regulatory adjustments and deductions (464) (426) (475) 9% -2%
Total 7,988 7,874 9,018 1% -11%
Table 4: Tier 2 capital
General reserve for impairment of financial assets 200 257 267 -22% -25%
Perpetual subordinated notes 1,150 1,156 1,190 -1% -3%
Term subordinated debt notes 8,108 10,841 11,281 -25% -28%
Regulatory adjustments and deductions (789) (518) (936) 52% -16%
Transitional adjustments - (2,088) (1,474) -100% -100%
Total 8,669 9,648 10,328 -10% -16%
103
SUPPLEMENTARY INFORMATION
Capital management, cont’d
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Table 5: Risk weighted assets
On balance sheet 254,534 253,532 259,356 0% -2%
Commitments 53,546 56,279 58,167 -5% -8%
Contingents 11,704 12,648 13,295 -7% -12%
Derivatives 17,050 19,350 21,215 -12% -20%
Total credit risk Table 6 336,834 341,809 352,033 -1% -4%
Market risk - Traded 5,363 6,323 6,188 -15% -13%
Market risk - IRRBB 11,611 10,332 11,700 12% -1%
Operational risk 37,305 38,576 38,661 -3% -4%
Total risk weighted assets 391,113 397,040 408,582 -1% -4%
As at Movement
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate
121,915 127,544 130,799
-4% -7%
Sovereign
7,555 6,718 6,634
12% 14%
Bank
13,080 14,267 14,884
-8% -12%
Residential mortgage
96,267 86,218 84,275
12% 14%
Qualifying revolving retail (credit cards)
7,059 7,513 7,334
-6% -4%
Other retail
31,077 31,004 31,360
0% -1%
Credit risk weighted assets subject to Advanced IRB approach
276,953 273,264 275,286
1% 1%
Credit risk specialised lending exposures subject to slotting criteria
31,845 33,896 36,100
-6% -12%
Subject to Standardised approach
Corporate
13,365 16,264 20,459
-18% -35%
Residential mortgage
950 2,354 2,493
-60% -62%
Other retail (includes credit cards)
2,000 3,131 3,277
-36% -39%
Credit risk weighted assets subject to Standardised approach
16,315 21,749 26,229
-25% -38%
Credit Valuation Adjustment and Qualifying Central Counterparties
7,269 8,168 9,371
-11% -22%
Credit risk weighted assets relating to securitisation exposures
1,083 1,171 1,203
-8% -10%
Other assets
3,369 3,561 3,844
-5% -12%
Total credit risk weighted assets
336,834 341,809 352,033
-1% -4%
104
SUPPLEMENTARY INFORMATION
Capital management, cont’d
Collective Provision and Individual
Provision
Basel Expected Loss
1
Table 7: Total provision for credit impairment and expected loss by
division
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
$M
Mar 17
$M
Sep 16
$M
Australia 1,905 1,877 1,794
2,835 2,735 2,654
Institutional 1,286 1,494 1,683
866 1,337 1,404
New Zealand 454 470 491
754 766 802
Asia Retail & Pacific 150 199 211
8 5 7
TSO and Group Centre 3 14 4
- - 1
Total provision for credit impairment and expected loss 3,798 4,054 4,183
4,463 4,843 4,868
1.
Only applicable to Advanced Internal Ratings based portfolios.
As at
Movement
Table 8: APRA Expected loss in excess of eligible provisions
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
APRA Basel 3 expected loss: non-defaulted 2,829 2,866 2,959 -1% -4%
Less: Qualifying collective provision
Collective provision (2,662) (2,785) (2,876) -4% -7%
Non-qualifying collective provision 352 349 350 1% 1%
Standardised collective provision 200 257 267 -22% -25%
Non-defaulted excess included in deduction 719 687 700 5% 3%
APRA Basel 3 expected loss: defaulted 1,634 1,977 1,909 -17% -14%
Less: Qualifying individual provision
Individual provision (1,136) (1,269) (1,307) -10% -13%
Additional individual provision for partial write offs (300) (540) (509) -44% -41%
Standardised individual provision 117 149 195 -21% -40%
Collective provision on advanced defaulted (320) (308) (304) 4% 5%
(5) 9 (16) large -69%
Shortfall in expected loss not included in deduction 5 - 16 n/a -69%
Defaulted excess included in deduction - 9 - -100% n/a
Gross deduction 719 696 700 3% 3%
105
SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
1, 2, 3
Full Year Sep 17 Full Year Sep 16
Avg bal Int Rate Avg bal Int Rate
$M $M % $M $M %
Loans and advances
Home loans 307,312 14,193 4.6% 291,551 14,379 4.9%
Consumer finance 23,319 2,357 10.1% 24,659 2,457 10.0%
Business lending 227,732 9,388 4.1% 235,911 10,006 4.2%
Individual provisions for credit impairment (1,291) - n/a (1,113) - n/a
Total 557,072 25,938 4.7% 551,008 26,842 4.9%
Non-lending interest earning assets
Cash and other liquid assets 84,161 654 0.8% 78,916 623 0.8%
Trading and available for sale assets 105,398 2,322 2.2% 99,676 2,316 2.3%
Other assets 1,369 206 n/a 1,235 170 n/a
Total 190,928 3,182 1.7% 179,827 3,109 1.7%
Total interest earning assets
4
748,000 29,120 3.9% 730,835 29,951 4.1%
Non-interest earning assets 171,084 177,074
Total average assets 919,084 907,909
Deposits and other borrowings
Certificates of deposit 58,553 1,267 2.2% 62,717 1,505 2.4%
Term deposits 199,651 4,041 2.0% 198,440 3,837 1.9%
On demand and short term deposits 219,979 3,607 1.6% 205,673 4,163 2.0%
Deposits from banks and securities sold under agreement to repurchase 63,464 821 1.3% 52,034 647 1.2%
Commercial paper and other borrowings 10,875 265 2.4% 24,492 635 2.6%
Total 552,522 10,001 1.8% 543,356 10,787 2.0%
Non-deposit interest bearing liabilities
Collateral received and settlement balances owed by ANZ 10,910 67 0.6% 11,337 71 0.6%
Debt issuances & subordinated debt 113,297 3,885 3.4% 103,596 3,773 3.6%
Other liabilities 2,779 295 n/a 5,195 225 n/a
Total 126,986 4,247 3.3% 120,128 4,069 3.4%
Total interest bearing liabilities
4
679,508 14,248 2.1% 663,484 14,856 2.2%
Non-interest bearing liabilities 181,312 187,284
Total average liabilities 860,820 850,768
Total average shareholders' equity 58,264 57,141
1.
Averages used are predominantly daily averages.
2.
In the March 2017 half, the Group changed its calculation of net interest margin to net Australian home loan deposit offset balances against total average interest earning assets (Sep 16
half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 22 for further details.
3.
Balance sheet amounts and metrics as at 30 September 2017 include assets and liabilities held for sale.
4.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.
106
SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
1, 2, 3
(cont’d)
Full Year Sep 17 Full Year Sep 16
Avg bal Int Rate Avg bal Int Rate
$M $M % $M $M %
Loans and advances
Australia
379,137 18,324 4.8% 366,603 18,786 5.1%
Asia Pacific, Europe & America
62,278 2,141 3.4% 74,244 2,437 3.3%
New Zealand
115,657 5,474 4.7% 110,161 5,619 5.1%
Total
557,072 25,939 4.7% 551,008 26,842 4.9%
Trading and available for sale assets
Australia
59,650 1,332 2.2% 57,448 1,371 2.4%
Asia Pacific, Europe & America
31,330 560 1.8% 28,041 462 1.6%
New Zealand
14,418 429 3.0% 14,187 483 3.4%
Total
105,398 2,321 2.2% 99,676 2,316 2.3%
Total interest earning assets
4
Australia
470,056 20,074 4.3% 449,446 20,569 4.6%
Asia Pacific, Europe & America
144,049 3,013 2.1% 152,508 3,085 2.0%
New Zealand
133,895 6,033 4.5% 128,881 6,297 4.9%
Total
748,000 29,120 3.9% 730,835 29,951 4.1%
Total average assets
Australia
596,514 576,893
Asia Pacific, Europe & America
169,630 179,431
New Zealand
152,940 151,585
Total average assets
919,084 907,909
Interest bearing deposits and
other borrowings
Australia
322,837 6,595 2.0% 309,714 7,350 2.4%
Asia Pacific, Europe & America
141,543 1,330 0.9% 148,751 1,077 0.7%
New Zealand
88,142 2,076 2.4% 84,891 2,360 2.8%
Total
552,522 10,001 1.8% 543,356 10,787 2.0%
Total interest bearing liabilities
4
Australia
403,650 9,425 2.3% 387,780 10,224 2.6%
Asia Pacific, Europe & America
165,464 1,901 1.1% 170,146 1,439 0.8%
New Zealand
110,394 2,922 2.6% 105,558 3,193 3.0%
Total
679,508 14,248 2.1% 663,484 14,856 2.2%
Total average liabilities
Australia
537,791 525,213
Asia Pacific, Europe & America
188,154 193,029
New Zealand
134,875 132,526
Total average liabilities
860,820 850,768
Total average shareholders' equity
Ordinary share capital, reserves, retained earnings and non-controlling
interests
58,264 57,141
Total average shareholders' equity
58,264 57,141
Total average liabilities and shareholder's equity
919,084 907,909
1.
Averages used are predominantly daily averages.
2.
In the March 2017 half, the Group changed its calculation of net interest margin to net Australian home loan deposit offset balances against total average interest earning assets (Sep 16
half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 22 for further details.
3.
Balance sheet amounts and metrics as at 30 September 2017 include assets and liabilities held for sale.
4.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.
107
SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
1, 2
(cont’d)
Half Year Sep 17 Half Year Mar 17
Avg bal Int Rate Avg bal Int Rate
$M $M % $M $M %
Loans and advances
Home Loans 311,138 7,232 4.6% 303,459 6,961 4.6%
Consumer Finance 22,556 1,143 10.1% 24,089 1,214 10.1%
Business Lending 225,924 4,724 4.2% 229,553 4,664 4.1%
Individual provision for credit impairment (1,262) - n/a (1,320) - n/a
Total 558,356 13,099 4.7% 555,781 12,839 4.6%
Non-lending interest earning assets
Cash and other liquid assets 86,130 325 0.8% 82,182 329 0.8%
Trading and available-for-sale assets 106,245 1,172 2.2% 104,548 1,150 2.2%
Other assets 1,342 98 n/a 1,395 108 n/a
Total 193,717 1,595 1.6% 188,125 1,587 1.7%
Total interest earning assets
3
752,073 14,694 3.9% 743,906 14,426 3.9%
Non-interest earning assets
168,196 173,988
Total average assets 920,269 917,894
Deposits and other borrowings
Certificates of deposit 57,610 603 2.1% 59,500 664 2.2%
Term deposits 194,258 2,090 2.1% 205,073 1,951 1.9%
On demand and short term deposits 230,143 1,830 1.6% 209,759 1,777 1.7%
Deposits from banks and securities sold under agreements to repurchase 62,668 442 1.4% 64,267 379 1.2%
Commercial paper and other borrowings 9,721 116 2.4% 12,035 149 2.5%
Total 554,400 5,081 1.8% 550,634 4,920 1.8%
Non-deposit interest bearing liabilities
Collateral received and settlement balances owed by ANZ 10,839 36 0.7% 10,982 31 0.6%
Debt issuances & subordinated debt 114,902 1,945 3.4% 111,683 1,940 3.5%
Other liabilities 2,657 176 n/a 2,902 119 n/a
Total 128,398 2,157 3.3% 125,567 2,090 3.3%
Total interest bearing liabilities
3
682,798 7,238 2.1% 676,201 7,010 2.1%
Non-interest bearing liabilities 178,745 183,894
Total average liabilities 861,543 860,095
Total average shareholders' equity 58,726 57,799
1.
Averages used are predominantly daily averages.
2.
Balance sheet amounts and metrics as at 30 September 2017 and 31 March 2017 include assets and liabilities held for sale.
3.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.
108
SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
1, 2
(cont’d)
Half Year Sep 17
Half Year Mar 17
Avg bal Int Rate
Avg bal Int Rate
$M $M %
$M $M %
Loans and advances
Australia 382,613 9,299 4.8%
375,642 9,024 4.8%
Asia Pacific, Europe & America 59,871 1,048 3.5%
64,699 1,093 3.4%
New Zealand 115,872 2,752 4.7%
115,440 2,722 4.7%
Total 558,356 13,099 4.7%
555,781 12,839 4.6%
Trading and available-for-sale assets
Australia 58,974 671 2.3%
60,330 662 2.2%
Asia Pacific, Europe & America 33,162 296 1.8%
29,489 264 1.8%
New Zealand 14,109 205 2.9%
14,729 224 3.0%
Total 106,245 1,172 2.2%
104,548 1,150 2.2%
Total interest earning assets
3
Australia 473,945 10,162 4.3%
466,147 9,912 4.3%
Asia Pacific, Europe & America 144,345 1,522 2.1%
143,750 1,491 2.1%
New Zealand 133,783 3,010 4.5%
134,009 3,023 4.5%
Total 752,073 14,694 3.9%
743,906 14,426 3.9%
Total average assets
Australia 599,342
593,672
Asia Pacific, Europe & America 168,967
170,297
New Zealand 151,960
153,925
Total average assets 920,269
917,894
Interest bearing deposits and
other borrowings
Australia 327,013 3,296 2.0%
318,638 3,299 2.1%
Asia Pacific, Europe & America 139,591 740 1.1%
143,505 590 0.8%
New Zealand 87,796 1,045 2.4%
88,491 1,031 2.3%
Total 554,400 5,081 1.8%
550,634 4,920 1.8%
Total interest bearing liabilities
3
Australia 408,615 4,744 2.3%
398,657 4,681 2.4%
Asia Pacific, Europe & America 163,644 1,030 1.3%
167,295 871 1.0%
New Zealand 110,539 1,464 2.6%
110,249 1,458 2.7%
Total 682,798 7,238 2.1%
676,201 7,010 2.1%
Total average liabilities
Australia 541,175
534,389
Asia Pacific, Europe & America 186,034
190,287
New Zealand 134,334
135,419
Total average liabilities 861,543
860,095
Total average shareholders' equity
Ordinary share capital, reserves, retained earnings and non-controlling interests 58,726 57,799
Total average shareholders' equity 58,726
57,799
Total average liabilities and shareholder's equity 920,269
917,894
109
SUPPLEMENTARY INFORMATION
Average balance sheet and related interest
1
(cont’d)
Half Year
Full Year
Sep 17
%
Mar 17
%
Sep 17
%
Sep 16
%
Gross earnings rate
2
Australia 4.46 4.49 4.48 4.76
Asia Pacific, Europe & America 2.08 1.99 2.03 1.89
New Zealand 4.49 4.52 4.51 4.89
Group 3.90 3.89 3.89 4.10
Net interest spread and net interest margin may be analysed as follows:
Half Year
Full Year
Sep 17
%
Mar 17
%
Sep 17
%
Sep 16
%
Australia
2
Net interest spread 2.08 2.07 2.07 2.12
Interest attributable to net non-interest bearing items 0.23 0.24 0.24 0.28
Net interest margin - Australia 2.31 2.31 2.31 2.40
Asia Pacific, Europe & America
2
Net interest spread 0.82 0.95 0.89 1.04
Interest attributable to net non-interest bearing items 0.05 0.04 0.05 0.03
Net interest margin - Asia Pacific, Europe & America 0.87 0.99 0.94 1.07
New Zealand
2
Net interest spread 1.81 1.84 1.82 1.83
Interest attributable to net non-interest bearing items 0.34 0.33 0.33 0.36
Net interest margin - New Zealand 2.15 2.17 2.15 2.19
Group
Net interest spread 1.79 1.81 1.80 1.86
Interest attributable to net non-interest bearing items 0.19 0.19 0.19 0.21
Net interest margin 1.98 2.00 1.99 2.07
Net interest margin (excluding Markets) 2.61 2.58 2.59 2.64
1.
In the March 2017 half, the Group changed its calculation of net interest margin to net Australian home loan deposit offset balances against total average interest earning assets (Sep 16
half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 22 for further details.
2.
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).
110
SUPPLEMENTARY INFORMATION
Funds management and insurance income analysis (Group)
The tables below supplement the Wealth Australia disclosures provided on pages 69 to 71 to present the Group’s overall funds management and
insurance businesses by incorporating the relevant Australia division, New Zealand division and Asia Retail & Pacific division funds management and
insurance businesses.
Half Year
Full Year
Reference
Page
Sep 17
$M
Mar 17
$M
Sep 17
v. Mar 17
Sep 17
$M
Sep 16
$M
Sep 17
v. Sep 16
Net funds management and insurance income - statutory basis 82 804 696 16% 1,500 1,764 -15%
Adjustments between cash and statutory profit (pre-tax)
Treasury shares adjustment 78 (21) 82 large 61 46 33%
Policyholders tax gross up 78 (116) (161) -28% (277) (217) 28%
Revaluation of policy liabilities 78 (3) 51 large 48 (75) large
Net funds management and insurance income - cash basis 78 664 668 -1% 1,332 1,518 -12%
Wealth Australia - Funds management and insurance income 500 493 1% 993 1,156 -14%
Australia - Funds management and insurance income
10 13 -23% 23 47 -51%
New Zealand - Funds management and insurance income
170 173 -2% 343 330 4%
Asia Retail & Pacific - Funds management and insurance income
35 47 -26% 82 119 -31%
Inter-divisional eliminations
(51) (58) -12% (109) (134) -19%
Net funds management and insurance income - cash basis 25 664 668 -1% 1,332 1,518 -12%
Half Year Full Year
Insurance operating margin
Sep 17
$M
Mar 17
$M Movt
Sep 17
$M
Sep 16
$M Movt
Life Insurance Planned profit margin
Group & Individual 72 64 13% 136 151 -10%
Experience profit/(loss)
1
(22) (26) -15% (48) (8) large
General Insurance operating profit margin 54 64 -16% 118 110 7%
Wealth Australia 104 102 2% 206 253 -19%
Life Insurance Planned profit margin
Individual 23 36 -36% 59 40 48%
Experience profit/(loss)
1
(1) 3 large 2 13 -85%
New Zealand 22 39 -44% 61 53 15%
Total 126 141 -11% 267 306 -13%
1.
Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan, predominantly driven by lapses, claims and expenses.
As at
Movement
Insurance annual in-force premiums
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Group 431 427 445 1% -3%
Individual 1,362 1,348 1,339 1% 2%
General Insurance 231 226 226 2% 2%
Total 2,024 2,001 2,010 1% 1%
Insurance in-force book movement
Sep 16
$M
New
business
$M
1
Lapses
$M
Sep 17
$M
Group 445 38 (52) 431
Individual
1,339 156 (133) 1,362
General Insurance
226 165 (160) 231
Total
2,010 359 (345) 2,024
1.
New business includes the impact of foreign currency gains/(losses) on translation.
111
SUPPLEMENTARY INFORMATION
Funds management and insurance income analysis (Group) (cont’d)
As at
Movement
Funds under management
Sep 17
$M
Mar 17
$M
Sep 16
$M
Sep 17
v. Mar 17
Sep 17
v. Sep 16
Funds under management - average 77,746 75,714 74,347 3% 5%
Funds under management - end of period 77,985 76,509 75,918 2% 3%
Composed of:
Australian equities 15,755 17,104 16,963 -8% -7%
International equities 21,812 20,207 18,422 8% 18%
Cash and fixed interest 34,961 34,203 35,800 2% -2%
Property and infrastructure 5,457 4,995 4,733 9% 15%
Total 77,985 76,509 75,918 2% 3%
Sep 16 Inflows Outflows Other
1
Sep 17
Funds Management cash flows by product $M $M $M $M $M
Wealth Australia Division
Open Solutions
OneAnswer Frontier 9,958 1,575 (1,346) 745 10,932
ANZ Smart Choice 11,190 2,363 (1,410) 3,729 15,872
Wrap (Voyage and Grow) 2,160 645 (378) 654 3,081
Closed Solutions
Retail 19,028 739 (2,994) (170) 16,603
Employer 5,915 143 (587) (2,899) 2,572
Australia Division
Private Bank 2,411 530 (378) 147 2,710
New Zealand Division
KiwiSaver 8,864 792 (383) 892 10,165
Retail 2,741 3,262 (2,925) 18 3,096
Private Bank 6,682 1,040 (1,038) (65) 6,619
Bonus Bonds 3,397 935 (1,071) (128) 3,133
Other New Zealand 3,572 334 (632) (72) 3,202
Total 75,918 12,358 (13,142) 2,851 77,985
1.
Other includes investment income net of taxes, fees and charges, distributions and the impact of foreign currency translations. In Wealth Australia it also includes the transition of funds
under management from Employer Super to ANZ Smart Choice of approximately $2.9 billion, as a result of regulatory changes in the industry.
Embedded value and value of new business (insurance and investments only)
Wealth
Australia
$M
1
New
Zealand
$M
Total
$M
Embedded value as at September 2016
2
4,536 616 5,152
Value of new business
3
138 14 152
Expected return
4
304 50 354
Experience deviations and assumption changes
5
(85) 47 (38)
Embedded value before economic assumption changes and net transfer 4,893 727 5,620
Economic assumptions change
6
(110) (56) (166)
Net transfer
7
(291) (48) (339)
Embedded value as at September 2017 4,492 623 5,115
1.
The product lines used are on the same basis as prior periods. This is different to the product lines that are subject to the strategic review in Wealth Australia.
2.
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 determined using
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 7.75%-
9.50%. ANZ Lenders Mortgage Insurance, ANZ Financial Planning and ANZ Share Investing businesses are 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.
3.
Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period.
4.
Expected return represents the expected increase in value over the period.
5.
Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Negative experience in
Wealth Australia was primarily driven by adverse claims experience during the year, strengthening of claims assumptions in Retail Insurance partially offset by implementation of various
product initiatives.
6.
Interest rate movements have led to a negative value impact.
7.
Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends paid and value of franking credits. For Wealth Australia there was
$225 million of cash dividends paid, $12 million of dividends in AT1 preference shares paid and the value of $54 million of franking credits which is expected to be transferred to the parent
entity. For New Zealand there were NZD $50m of cash dividends paid.
112
SUPPLEMENTARY INFORMATION
Select geographical disclosures
The following divisions operate across the geographic locations illustrated below:
• Institutional division – Asia, Europe & America, Pacific and New Zealand
• Asia Retail & Pacific division – Asia and Pacific
• New Zealand division – New Zealand
Asia Pacific, Europe & America geography
Asia
$M
Europe &
America
$M
Pacific
$M
APEA Total
$M
September 2017 Full Year
Statutory profit 245 210 168 623
Cash profit 244 169 168 581
Net loans and advances 42,047 8,825 3,208 54,080
Customer deposits 49,616 50,054 5,477 105,147
Risk weighted assets 45,353 18,796 7,578 71,727
September 2016 Full Year
Statutory profit 290 183 161 634
Cash profit 291 206 161 658
Net loans and advances 54,303 8,441 3,636 66,380
Customer deposits 60,635 48,138 5,491 114,264
Risk weighted assets 59,132 21,698 7,725 88,555
September 2017 Half Year
Statutory profit 253 59 73 385
Cash profit 254 62 73 389
Net loans and advances 42,047 8,825 3,208 54,080
Customer deposits 49,616 50,054 5,477 105,147
Risk weighted assets 45,353 18,796 7,578 71,727
March 2017 Half Year
Statutory profit (8) 151 95 238
Cash profit (10) 107 95 192
Net loans and advances 49,568 7,695 3,412 60,675
Customer deposits 60,656 52,521 5,374 118,551
Risk weighted assets 55,062 19,852 7,555 82,469
113
SUPPLEMENTARY INFORMATION
New Zealand geography (in NZD)
Half Year Full Year
Sep 17
NZD M
Mar 17
NZD M Movt
Sep 17
NZD M
Sep 16
NZD M Movt
Net interest income 1,544 1,534 1%
3,078 3,029 2%
Other operating income 485 514 -6%
999 795 26%
Operating income 2,029 2,048 -1%
4,077 3,824 7%
Operating expenses (728) (718) 1%
(1,446) (1,580) -8%
Profit before credit impairment and income tax 1,301 1,330 -2%
2,631 2,244 17%
Credit impairment (charge)/release (19) (40) -53%
(59) (149) -60%
Profit before income tax 1,282 1,290 -1%
2,572 2,095 23%
Income tax expense and non-controlling interests (355) (362) -2%
(717) (566) 27%
Cash profit 927 928 0%
1,855 1,529 21%
Adjustments between statutory profit and cash profit (16) (59) -73%
(75) 13 large
Statutory profit 911 869 5%
1,780 1,542 15%
Individual credit impairment charge/(release) - cash 36 69 -48%
105 138 -24%
Collective credit impairment charge/(release) - cash (17) (29) -41%
(46) 11 large
Net loans and advances 124,880 122,954 2%
124,880 120,651 4%
Customer deposits 96,829 96,259 1%
96,829 91,360 6%
Risk weighted assets 72,162 74,511 -3%
72,162 76,005 -5%
Total full time equivalent staff (FTE) 7,755 7,761 0%
7,755 7,869 -1%
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 at Half Year Full Year
Sep 17 Mar 17 Sep 16
Sep 17 Mar 17 Sep 17 Sep 16
Chinese Renminbi 5.2297 5.2716 5.0809 5.1781 5.1672 5.1868 4.8064
Euro 0.6655 0.7160 0.6789 0.6729 0.7025 0.6896 0.6626
Pound Sterling 0.5848 0.6122 0.5874 0.5916 0.6071 0.6010 0.5159
Indian Rupee 51.289 49.557 50.764 49.236 50.639 50.074 49.179
Indonesian Rupiah 10,565 10,184 9,900 10,191 10,018 10,132 9,887
Japanese Yen
88.404 85.565 76.844 84.942 83.904 84.655 82.039
Malaysian Ringgit 3.3155 3.3834 3.1576 3.2884 3.3021 3.3043 3.0430
New Taiwan Dollar 23.795 23.216 23.895 23.148 23.681 23.479 23.904
New Zealand Dollar 1.0867 1.0939 1.0487 1.0671 1.0593 1.0661 1.0737
Papua New Guinean Kina 2.5102 2.4304 2.4143 2.4348 2.3906 2.4193 2.2606
United States Dollar 0.7845 0.7644 0.7617 0.7650 0.7533 0.7612 0.7361
114
DEFINITIONS
AASB – 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 performance
against 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 the
ongoing operations of the Group;
2. treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences that
will reverse through earnings in the future; and
3. accounting reclassifications between individual line items that do not impact reported results, such as policyholders 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.
Covered bonds are bonds issued by an ADI to external investors secured against a pool of the ADI’s assets (the cover pool) assigned to a bankruptcy
remote special purpose entity. The primary assets forming the cover pool are mortgage loans. The mortgages remain on the issuer’s balance sheet. The
covered bond holders have dual recourse to the issuer and the cover pool assets. The mortgages included in the cover pool cannot be otherwise pledged
or disposed of but may be repurchased and substituted in order to maintain the credit quality of the pool. The Group issues covered bonds as part of its
funding activities.
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 or
contract.
Credit risk weighted assets represent assets which are weighted for credit risk according to a set formula as prescribed in APS 112/113.
Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations’ debt excluding
securitisation deposits.
Derivative 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 of probability of default, loss given default, expected credit risk exposure and an asset correlation factor. Impaired derivatives are also subject to
a CVA.
Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company, adjusted for the amount of
preference 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 where
concessional terms have been provided because of the financial difficulties of the customer. Financial assets are impaired if there is objective evidence of
impairment 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; and
3. 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 Capital
Standards” (June 2006). They also include differences identified in APRA’s information paper entitled International Capital Comparison Study (13 July
2015).
Net interest margin 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.
115
DEFINITIONS
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).
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 the
customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those
typically 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 and
what 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 by
multiplying 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.
116
DEFINITIONS
Description of divisions
During the March 2017 half, the Group made changes to the Group’s operating model for technology, operations and shared services to accelerate
delivery of its technology and digital roadmap, bring operations closer to its customers and continue operational efficiency gains. As a result of these
organisational changes, divisional operations from Technology, Services & Operations (“TSO”) and Group Centre have been realigned to divisions. The
residual TSO and Group Centre now contains Group Technology, Group Hubs, Enterprise Services and Group Property and the Group Centre. The
Group operates on a divisional structure with six divisions: Australia, New Zealand, Institutional, Asia Retail & Pacific, Wealth Australia and Technology,
Services & Operations and Group Centre.
Other than those described above, there have been no other significant structural changes in 2017. However, certain prior period comparatives have
been restated to align with current period presentation. The divisions reported below are consistent with internal reporting provided to the chief operating
decision maker, being the Chief Executive Officer.
Australia
The Australia division comprises the Retail and Corporate & Commercial Banking (C&CB) business units.
• Retail provides products and services to consumer and private banking customers in Australia via the branch network, mortgage specialists, the
contact centre and a variety of self-service channels (internet banking, phone banking, ATMs, website and digital banking) and third party brokers.
• 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 business
segment.
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 as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance, debt
structuring and acquisition finance, structured trade and asset finance, and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets and wealth solutions in
addition 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 a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and
contact centres.
• Commercial 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.
Wealth Australia
The Wealth Australia division comprises the Insurance and Funds Management business units, which provide insurance, investment and superannuation
solutions intended to make it easier for customers 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 ANZ Share Investing.
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 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. Refer to Note 10 for details on the sale of Asia Retail and Wealth businesses.
• Pacific provides products and services to retail customers, small to medium-sized enterprises, institutional customers and Governments located in
the Pacific Islands. 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, group 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.
117
ASX APPENDIX 4E – CROSS REFERENCE INDEX
Page
Details of the reporting period and the previous corresponding period (4E Item 1) ................................................................................................................ 2
Results for Announcement to the Market (4E Item 2) ............................................................................................................................................................ 2
Statement of Comprehensive Income (4E Item 3) ......................................................................................................................................................... 82, 83
Statement of Financial Position (4E Item 4) ......................................................................................................................................................................... 84
Statement of Cash Flows (4E Item 5) .................................................................................................................................................................................. 85
Statement of Changes in Equity (4E Item 6) ........................................................................................................................................................................ 86
Dividends and dividend dates (4E Item 7) .............................................................................................................................................................................. 2
Dividend Reinvestment Plan (4E Item 8) ............................................................................................................................................................................... 2
Net Tangible Assets per security (4E Item 9) ....................................................................................................................................................................... 12
Details of entities over which control has been gained or lost (4E Item 10) ......................................................................................................................... 99
Details of associates and joint venture entities (4E Item 11) ................................................................................................................................................ 99
Other significant information (4E Item 12) .......................................................................................................................................................................... 100
Accounting standards used by foreign entities (4E Item 13) .............................................................................................................................. Not applicable
Commentary on results (4E Item 14) ................................................................................................................................................................................... 19
Statement that accounts are being audited (4E Item 15) ....................................................................................................................................................... 3
118
ALPHABETICAL INDEX
PAGE
Appendix 4E Cross Reference Index ................................................................................................................................................................................. 118
Appendix 4E Statement ......................................................................................................................................................................................................... 2
Average Balance Sheet and Related Interest .................................................................................................................................................................... 106
Basis of Preparation ............................................................................................................................................................................................................. 87
Capital Management .......................................................................................................................................................................................................... 102
Changes in Composition of the Group ................................................................................................................................................................................. 99
Condensed Consolidated Balance Sheet ............................................................................................................................................................................. 84
Condensed Consolidated Cash Flow Statement .................................................................................................................................................................. 85
Condensed Consolidated Income Statement ....................................................................................................................................................................... 82
Condensed Consolidated Statement of Changes in Equity .................................................................................................................................................. 86
Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 83
Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 100
Definitions .......................................................................................................................................................................................................................... 115
Deposits and Other Borrowings ........................................................................................................................................................................................... 95
Dividends ............................................................................................................................................................................................................................. 91
Divisional Results ................................................................................................................................................................................................................. 49
Earnings Per Share .............................................................................................................................................................................................................. 92
Exchange Rates ................................................................................................................................................................................................................. 114
Full Time Equivalent Staff .................................................................................................................................................................................................... 17
Funds Management and Insurance Income Analysis (Group) ........................................................................................................................................... 111
Group Results ...................................................................................................................................................................................................................... 19
Income Tax Expense ........................................................................................................................................................................................................... 90
Income ................................................................................................................................................................................................................................. 88
Investments In Associates.................................................................................................................................................................................................... 99
Net Loans and Advances ..................................................................................................................................................................................................... 93
Operating Expenses ............................................................................................................................................................................................................. 89
Profit Reconciliation ............................................................................................................................................................................................................. 75
Provision for Credit Impairment ............................................................................................................................................................................................ 94
Select Geographical Disclosures ....................................................................................................................................................................................... 113
Shareholders’ Equity ............................................................................................................................................................................................................ 98
Subsequent Events since Balance Date ............................................................................................................................................................................ 100
Summary ................................................................................................................................................................................................................................ 9
119
ALPHABETICAL INDEX
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
120
---
26 OCTOBER 2017
NEWS RELEASE
ANZ 2017 FULL YEAR RESULT
ANZ today announced a Statutory Profit after tax for the Full Year ended 30 September 2017 of
$6.41 billion up 12% and a Cash Profit
1
of $6.94 billion up 18% on the prior comparable period. ANZ’s
Common Equity Tier 1 Capital Ratio was 10.6% up 96 basis points (bps). Return on Equity increased
159 bps to 11.9% with Cash Earnings per Share up 17% to 237.1 cents.
The 2017 result demonstrates the emerging benefits for
customers and shareholders arising from
ANZ’s strategy to create a simpler, better capitalised and better balanced bank.
The Final Dividend is 80 cents per share, fully franked, reflecting a payout ratio of 68% of Cash
Profit, moving closer to ANZ’s target fully franked full year payout ratio of 60‐65%.
Group
Financial Information
Earnings ($M) FY17 FY16 Movement
Statutory Profit 6,406 5,709 +12%
Cash Profit basis
Cash Profit 6,938 5,889 +18%
Profit before credit impairment & tax 11,041 10,155 +9%
Earnings Per Share (cents) 237.1 202.6 +17%
Return on Equity (%) 11.9 10.3 +159bps
Net Interest Margin (%) 1.99 2.07 ‐ 8 bps
Credit Quality Sept ‘17 Sept ‘16
Total credit impairment charge as a % of average GLAs 0.21% 0.34%
Balance Sheet ($B) Sept ‘17 Sept ‘16
Gross Loans and Advances (GLAs) 584 580
Total Risk Weighted Assets (RWAs) 391 409
Customer Deposits 468 450
Leverage Ratio (%) 5.4% 5.3%
Common Equity Tier 1 Ratio (%) 10.6% 9.6%
Common Equity Tier 1 Ratio Internationally Comparable
Basel 3
2
(%)
15.8% 14.5%
Other Sept ‘17 Sept ‘16
Full time equivalent staff (FTE) 44,896 46,554
1
Cash Profit excludes non‐core items from 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 $532 million comprised of several items including the loss on the
reclassification of the SRCB
investment as a held for sale asset. All comparisons are year ended 30 September 2017 compared to the year ended 30 September 2016 unless otherwise noted.
2
CET1 Internationally Comparable Basel 3 aligns with APRA’s Information Paper: International Capital Comparison Study, 13 July 2015
CEO COMMENTARY
ANZ Chief Executive Officer Shayne Elliott said : “This is a good result which demonstrates further
progress in becoming a better balanced, better capitalised, more efficient bank.
“Two years ago it was clear we needed to reshape ANZ’s future. Although we had a strong business,
the external environment was changing faster
than we were and our customers, the community and
our shareholders expected much more from us.
“We have made some difficult calls in that time and the new shape of ANZ is now emerging. We’ve
shifted our capital base to give greater emphasis to the Retail and Commercial businesses in
Australia and New Zealand which now accounts for 53% of our capital, up from 44% two years ago.
We have generated strong organic capital growth and our APRA CET1 capital ratio now stands at
10.6%, up from 9.6%, so we already meet APRA’s ‘unquestionably strong’ 2020 capital target.
“Today, we are
at the mid‐point of executing a multi‐year transformation of ANZ. What’s most
pleasing about 2017 is we have not only delivered better outcomes for shareholders, we are also
making genuine progress in delivering better outcomes for customers and in rebuilding community
trust.
“For customers this includes initiatives to
make banking fairer and simpler; we significantly lowered
the interest rate on our low rate credit card, easy‐to‐understand contracts for small business,
removed ATM fees and reduced home loan interest rates for owner occupier principal and interest
borrowers. Innovation is also helping to make banking more convenient. For example,
we extended
our leadership position in mobile payments with the introduction of FitBit Pay, Samsung Pay and
instant card replacement for customers with a digital wallet. We also made the experience for first
home buyers easier with the introduction of First Home Buyer Coaches.
“Our financial performance is also continuing
to improve. Our cost base has reduced and is down
year on year in absolute terms for the first time in 18 years. We are improving the speed to market
for our Retail business through the adoption of Agile work practices via the introduction of New
Ways of Working, initially focused
on the Australia Division.
“Credit quality is stronger as a result of strategic decisions to de‐risk the business mix. We have
significantly reduced Credit Risk Weighted Assets (CRWA), particularly in Asia, and increased risk
adjusted returns in our Institutional business. At the same time, we have grown our Retail
businesses
in Australia and New Zealand with an emphasis on owner‐occupied home lending.
“We have produced strong outcomes for our shareholders this year with our Total Shareholder
Return 13%. Economic Profit increased 38% reflecting improved profitability, Earnings per Share
grew 27% and Return on Equity increased 159 bps. Our Core
Equity Tier 1 capital ratio of 10.6%
together with strong organic capital generation means that, in 2018, as we receive the proceeds
from the announced sales of non‐core businesses we will have the flexibility to consider capital
management initiatives
“We still have much to do however we are now
building a track record based on a consistent strategy
and disciplined execution at pace. ANZ is becoming a simpler, more focussed bank with the capacity
to quickly adapt to the changing environment and invest in the significant organic growth
opportunities that exist in our core businesses,” Mr Elliott said.
STRATEGIC PRIORITIES
Create a simpler, better capitalised, better balanced and more agile bank
Aim ‐ Reduce operating costs and risks by removing complexity and exiting low return and non‐
core businesses.
ANZ’s Institutional business has reduced CRWA by $46 billion (27%) over two years,
including an $18 billion (13%) reduction year on year.
Group CRWA decreased $15.2 billion (4%) in 2017, with an $8 billion (4%) increase in Retail
and Commercial CRWA offsetting a reduction in Institutional CRWA.
53% of Group Capital is now allocated to the Retail and Commercial businesses in Australia
and New Zealand up from 44% in FY15.
The Group CET1 ratio was 10.6% at 30 September 2017; net organic capital generation of
229 bps was primarily driven by earnings growth along with RWA reduction.
Completion of announced asset disposals will deliver an estimated additional 80 bps of
capital by the end of FY18.
Group costs have reduced in absolute terms, down year on year for the first time since 1999.
Focus our efforts on areas where we can carve out a winning position
Aim ‐ 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 the world for customers driven by the
movement of goods and capital in our region.
In Australia we have introduced First Home Buyer Coaches to help customers navigate the
home buying process.
In New Zealand we hold a leading position in overall brand consideration (51%), the Retail
Net Promoter Score has increased and we are the market leader in the migrant banking
sector.
Small business lending in Australia was steady year on year with deposits up 9%. In New
Zealand lending increased 5% with deposits up 7%.
The higher return Institutional Payments and Cash Management business is now 21% of
Institutional income, up from 19% in FY15.
ANZ has strengthened its leadership position in Australia and New Zealand Lead
Institutional Bank Penetration and was a Top 4 Corporate Bank in Asia for the fifth
successive year
3
.
Drive a purpose and values‐led transformation of the Bank
Aim ‐ Create a stronger sense of core purpose, ethics and fairness, investing in leaders who can
help sense and navigate a rapidly changing environment.
Established CEO‐led Responsible Business Committee and revised Charter of Environment,
Sustainability and Governance Board Committee to advance ANZ’s purpose and increase
focus on ESG issues.
Contributed $131 million in community investment supported by 113,127 community
volunteering hours by employees.
3
No 1 rank for overall market and lead penetration as well as overall relationship strength in the 2017 Peter Lee Associates Large Corporate and Institutional Relationship
Banking Survey, Australia. Top 4 Corporate Bank in Asia – Greenwich Associates Survey 2017.
We engaged employees on ANZ’s direction through ‘The ANZ Way’, focusing on ANZ’s
purpose, strategy, refreshed values and Code of Conduct, and held a company‐wide online
conversation about our purpose.
Introduced a new ‘balanced scorecard’ incentive plan in our branches and retail banking
contact centres in Australia as part of our commitment to implementing recommendations
from the Sedgwick Review and established a new role of Customer Fairness Advisor.
Implemented key priorities of our revised Human Rights Standards, including strengthened
customer due diligence and employee training.
Build a superior everyday experience for our customers and our people to
compete in the digital age
Aim ‐ Build more convenient, engaging banking solutions to simplify the lives of customers and
our people.
ANZ is the only bank to offer payment options across Apple Pay, Android Pay, Samsung Pay
and FitBit Pay – backed by the ability to make high value transactions easier with the
introduction of voice biometrics.
Expanded accessibility features for ANZ Visa Debit cards including features to assist
customers with visual impairment and reading difficulties.
Acquired online property site RealAs to bolster our digital offering in Australia’s property
market.
Added to our small business product offering through our employment hero partnership
while adding to our payments capability with BladePay and FastPay Next Generation.
CAPITAL AND DIVIDEND
The APRA CET1 capital ratio at 30 September 2017 was 10.6% (15.8% on an Internationally
Comparable basis). This places ANZ at the APRA prescribed “unquestionably strong” threshold well
ahead of the 2020 deadline.
Organic capital generation of 229 bps over the year was over 50% greater than the average (140 bps)
of the past five years. As with the 1H17 DRP, we intend to neutralise the impact of shares allocated
under the DRP by acquiring an equivalent number of shares on market.
The Group has a strong funding and liquidity position with the Liquidity Coverage Ratio at 135% and
Net Stable
Funding Ratio at 114%.
ASSET DISPOSAL
In FY17 ANZ announced agreements to sell a number of assets including its stake in Shanghai Rural
Commercial Bank. The transactions, which remain subject to regulatory approvals, will in aggregate
release 80 bps of capital. In the second half ANZ successfully completed the transfer of three Asian
Retail and Wealth businesses
to DBS on schedule and within budget.
In October 2017, ANZ has announced the sale of its OnePath Pensions and Investments and Aligned
Dealer Group businesses to IOOF. Completion is expected in the first half of FY19.
Also in October, ANZ announced the sale of the Group’s 40% stake in
Metrobank Card Corporation
to its joint venture partner Metropolitan Bank & Trust Company (Metrobank). The sale is subject to
customary regulatory approvals.
CREDIT QUALITY
The total provision charge of $1.2 billion equates to a loss rate of 21 bps, a decline of 13 bps over the
year. Gross impaired assets over the same period decreased 25% to $2.38 billion with new impaired
assets down 11%.
The corporate credit environment is broadly stable with infrastructure spending
and commodity
prices providing some support. Since March, Australia has seen reasonable employment growth
however underemployment remains a concern. Household debt and savings have both increased,
however the ability for households to withstand economic shocks has diminished a little and is
something we are monitoring.
SETTLEMENT IN RELATION TO BBSW
During 2016 the Australian Securities and Investments Commission (ASIC) commenced court
proceedings against ANZ in respect of interbank trading in the bank bill swap (BBSW) market during
the period 2010 to 2012. On 23 October 2017 ANZ announced it had reached a confidential in‐
principle agreement with ASIC to settle this
action. Based on the in‐principle agreement, the
financial impact to ANZ has been reflected in the 2017 Financial Year results and was largely covered
by the provision held as at 31 March 2017.
OUTLOOK
Commenting on the outlook Mr Elliott said: “In 2018 we expect the revenue growth environment for
banking will continue to be constrained as a result of intense competition and the effect of
regulation including a full year of impact of the Australian bank tax.
“These conditions aren’t new to us and
in this environment, our strategy remains to be ahead of the
game by focussing on only those areas where we can deliver exceptional customer outcomes, solve
real customer needs and in doing so make a decent return for our shareholders.
“In Australia and New Zealand, our aim is to be
the best bank for people who want to buy and own a
home, and for people who want to start, run and grow a business. In Institutional Banking, we want
to be the best bank in the world for customers who move goods and money around the Asia‐Pacific
region.
“As
we continue to extract the benefits of our strategy, we are well positioned to continue delivering
tangible benefits to our customers, the community and our shareholders in 2018.
Video interviews with CEO Shayne Elliott and CFO Michelle Jablko discussing the 2017 Full
Year result are available at www.bluenotes.anz.com.
---
RES ULTS PRES ENTATION
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G ROUP L IMITED
26 OCTOBER 2017
2017 FUL L Y EAR
RESULT S
ANZ staff v olunt eers helping out on Daffodil Day to raise vital funds f or
Cancer C ouncil A ustralia. V olunt eers used ANZ BladePay™ devices powered
by the Shout app to facilitate cashless purchases and donations.
CONTENTS
2017 FULL YEAR RESULTS
2
All figures within this investor discussion pack are presented on Cash basis in Australian Dollars unless otherwise noted. In arriving at Cash Profit, Statutory Profit has
been adjusted to exclude non-core items,
further information is set out on page 75 of the 2017 Full Year Consolidated Financial Report.
FY17 RESULTS
CEO and CFO FY17 Results Presentations 3
CEO Presentation 3
CFO Presentation 16
FY17 Group Financial Performance 33
Corporate Profile, Strategy and Sustainability 47
Business Performance 61
Australia Division Performance 63
Institutional Division Performance 70
New Zealand Division & Geography Performance 78
Wealth Australia Division Performance 87
Group Treasury 91
Risk Management 100
Housing Portfolio Trends 115
Economics 125
SHAYNE ELLIOTT
CHIEF EXECUTIVE OFFICER
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G ROUP L IMITED
2017 FUL L Y EAR
RESULT S
HEADLINE FINANCIAL PERFORMANCE
4
FY17
($m)
Change
(FY17 vs FY16)
Statutory Profit
6,406
12%
Cash Profit
6,938
18%
Operating Income
20,489
-1%
Operating Expenses
9,448
-9%
Profit Before Provisions
11,041
9%
Provisions
1,199
-39%
Cash EPS
(cents)
237
17%
Dividend per share
(cents)
160
Stable
Cash ROE
(%)
11.9
159 bp
CET1
(%)
10.6
96 bp
CET1 Internationally Comparable Basel 3
(%)
15.8
126 bp
ASSUMPTIONS UNDERLYING NEW STRATEGY
OPERATING ENVIRONMENT
5
1. Constrained sector growth (High household debt, subdued business investment)
2. Changing customer preferences (More digital, more third party advice)
3. Industry transformation (Open data, new technologies)
4. Growing regulation (Capital, liquidity, compliance)
5. Intensifying competition (Incumbents, new technology entrants)
6. Changing community expectations (Greater accountability and regulation)
DRIVERS OF PERFORMANCE
6
COST DISCIPLINE
INSTITUTIONAL CREDIT RWAs
LEANER ORGANISATION
Full time equivalent staff #s
$m
$b
44,896
46,554
50,152
Sep 17 Sep 16 Sep 15
4,7174,731
4,951
5,488
2H17 1H16 1H17 2H16
123
142
169
Sep 16 Sep 17 Sep 15
A BETTER BALANCED BANK
7
NOTE: Allocation based on Regulatory Capital.
1.Institutional show
n under 2015 IIB Structure, including Global Institutional and Asia Retail & Pacific
2.
Pro-Forma adjusted for all announced Asset disposals (Remaining Retail Asia and Wealth, SRCB, MCC, UDC Finance and OnePath Pension & Investment and aligned dealer groups
(OP P&I/ADG))
(%)
SEPTEMBER 2015
SEPTEMBER 2016
SEPTEMBER 2017
Includes announced
asset disposals
2
Retail & Commercial Institutional
1
Wealth
RORWA
(Pre provision)
2.93% 2.55% 2.75%
RORWA
(Post provisions)
1.90% 1.48% 1.73%
CAPITAL ALLOCATION
BETTER PLACED TO WIN
GETTING FIT FOR PURPOSE
8
DRIVERS OF SUSTAINABLE GROWTH
1. Focus
• A few things done
ex
tremely well
2. Speed
• Listen to customers,
tes
t, develop, launch
• Learn & repeat
3.
Digital
• Balances digital
cap
ability
• Human design &
se
rvice
4. Culture
• Stronger sense of core
purpose, ethics & fairness
• Investing in people for a
rapidly changing world
FY16
FY17
FY18
Rebalancing
New operating model
Sustainable growth
FY19 onward
WHERE WE CAN WIN
9
1.Peter Lee Associates 2017 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand (issued in June and August 2017 respectively)
2.Greenwich As
sociates 2016 Asian Large Corporate Banking Study (issued in March 2017): ANZ ranked =No.4
STRATEGIC FOCUS
1.By being the best bank for people
who want to buy and own a
home, or start, run and grow a
small business in Australia and
New Zealand
2.Being the best bank for
customers who move goods and
capital around Asia Pacific
•~250,000 net new retail customers
•Bought and leveraging Rea
lAs property ready
•For the first time >1m home loan accounts in Aus.
•Held #1 Market share in NZ Home Loans
•Strengthened #3 Market Share Aus. Home Loans
•Introduced First Home Buyer coaches in Aus
•S
mall Business deposits up 9% in Australia
•Commercial deposits up 6% in NZ
•#1 Institutional lead bank in Aus &
NZ
1
•#4 Institutional Bank in Asia
2
HOW WE WILL WIN
COST PLUS CUSTOMER EXPERIENCE
10
CONVENIENT, ENGAGING CUSTOMER SOLUTIONS
Samsung Pay
Voice Biometrics
Expanded digital channels
•Digital Branches
•Smart ATMs
•Digital sales
Leadin
g the payment revolution
(the only major bank supporting all mobile wallets)
•Android Pay
TM
•Apple Pay
TM
•Apple Watch Pay
•FitBit
TM
Pay
•Samsung Pay
Making business easy
•ANZ Be Business Ready (Honcho)
•ANZ Be Trade Ready
•Employment Hero
•BladePay
TM
HOW WE WILL WIN
CULTURE
11
• Clarified ANZ Purpose, Values, Expectations
• Long term focus on engaging our people
• Rebalancing performance scorecards
• Changing what we expect from leaders
• Protecting social licence
• Engaging with community and regulators
CAPITAL
12
1.Cash profit for FY17 excludes ‘large/notable items’.
2.Represents mov
ement in retained earnings in deconsolidated entities, capitalised software, EL v EP shortfall and other intangibles.
COMMON EQUITY TIER 1 CAPITAL GENERATION
CET1 bps FY12 – FY16 avg. FY17
Change FY17 vs
FY12 – FY16 avg.
Cash Profit
1
195 169 (26)
RWA impact
(31) 54 85
Capital deductions
2
(24) 6 30
Net capital generation
140 229 89
FOUR PRIORITIES
13
1. Creating a simpler,
better balanced bank
2. Focusing on areas
where we can win
3. Building a superior everyday
experience to compete in the
digital age
4.
Driving a purpose and
values led transformation
OUR FOCUS
14
1. Capital efficiency
2. Absolute cost discipline
3. Customer experience & innovation
4. Transitioning to New Ways of Working (NWoW)
5. Consolidating improvements in Asia business
6. Engaging with community
7. Final reshaping of non core assets
KEY INDICATORS
15
FY15 FY16 FY17
Return on equity
(%)
14.0 10.3 11.9
Cash earnings per share
(cents) 260 203 237
Economic profit
(% growth year on year) -13 -56 +38
CET1 ratio
(%) 9.6 9.6 10.6
NTA / Avg share
($) 16.9 17.1 17.7
Operating Expenses
(% growth year on year) +6.8 +11.1 -9.5
Profit Before Provisions / Avg Share $4.03 $3.49 $3.77
Full Time Equivalent staff 50,152 46,554 44,896
Loss Rate
(%) 0.22 0.34 0.21
Total Shareholder Return
(% growth year on year) -7.5 +9.2 +13.1
MICHELLE JABLKO
CHIEF FINANCIAL OFFICER
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G ROUP L IMITED
2017 FUL L Y EAR
RESULT S
OVERVIEW
17
RETURN ON EQUITY
CASH EARNINGS PER SHARE
COMMON EQUITY TIER 1 RATIO
%
%
cents
11.9
10.3
14.0
2017 2015 2016
•Benefited from portfolio rebalancing
•Maintained strong cost discipline
•Improved credit quality
•S
trengthened capital
•Continued exit of non core businesses
10.6
9.69.6
2017 2016 2015
237.1
202.6
260.3
2017 2015 2016
1% increase
in CET1
= ~$4bn of
capital
AGENDA
18
1.FULL YEAR 2017 FINANCIAL PERFORMANCE
2.KEY DRIVERS OF THE BUSINESS
3.BALANCE SHEET STRENGTH
4.BASELINE FOR 2018
FINANCIAL PERFORMANCE DRIVERS
CASH PROFIT – FULL YEAR 2017
BUSINESS PERFORMANCE – FULL YEAR 2017
$m
$m
19
6,938
550
599
5,889
FY16 Cash
Profit
-100
FY16 large
items
FY17 SRCB,
Asia Retail &
Queen St
impacts
Business
performance
FY17 Cash
Profit
550
231
331
86
102
0
100
200
300
400
500
600
700
800
FY17
total
divisional
growth
Other Asia
Retail &
Pacific
-52
Australia NZ Insti.
ex
derivative
valuation
adj.
-100
Derivative
valuation
adj.
-48
Wealth
8.5%
17.8%
FY16 large items FY17 SRCB, Asia Retail & Queen St impacts
•Equity accounted earnings SRCB & BOT
•Software capialisation changes
•Asian minority valuation adjustments
•(AMMB & BOT
)
•Restructuring charge
•Esanda Dealer Finance divestment
•Derivative CVA methodology change
•Equity accounted earnings SRCB (1QFY17)
•Sale of Asia Retail & Wealth (Loss on sale)
•Gain of sale of 100 Queen St
DETAILS OF LARGE/NOTABLE ITEMS ARE INCLUDED WITHIN THE INVESTOR DISCUSSION PACK
FY16 LARGE ITEMS & FY17 DIVESTMENTS AND GAIN ON SALE
From -$71m (FY16)
to +$160m (FY17)
5% excluding derivative valuation adjustment
237.1
25.2
4.8
0.6
20.5
202.6
Revenue FY17 SRCB, Asia
Retail & Queen St
impacts
-3.4
FY16
large items
FY16
EPS
FY17
EPS
Change in
share count
-1.5
Tax & OEI
-11.7
Provisions Expenses
RETURN ON EQUITY
20
CASH EPS FULL YEAR 2017
CASH ROE FULL YEAR 2017
cents
%
11.9
1.3
0.2
0.0
1.0
10.3
FY17
ROE
-0.1
Capital generation Tax & OEI FY16
large items
FY17 SRCB, Asia
Retail & Queen St
impacts
-0.2
FY16
ROE
Revenue Expenses
-0.6
Provisions
17.0%
159bp
Business performance
Business performance
9.3%
90bp
This drove an Economic Profit increase of 38%
PORTFOLIO REBALANCING
21
1.Including acceptances
2.Not FX adjusted
3.Largely Markets
$b
$b
121
128
144
123
142
169
Sep-16 Sep-15 Sep-17
Credit RWAs
2
Gross Loans & Advances
1
456
437
414
202
194
163
Sep-17 Sep-16 Sep-15
INSTITUTIONAL
AUS & NZ RETAIL & COMMERCIAL
FY17 INSTITUTIONAL LENDING MOVEMENT
1H17 2H17 FY17
$b change Aus/NZ International Aus/NZ International TOTAL
Total -0.5 -4.8 -1.6 0.2 -6.7
Trade -0.3 -1.3 0.1 0.7 -0.7
Loans -0.1 -3.7 -1.7 -1.2 -6.7
Other
3
-0.1 0.1 0 0.7 0.7
RETAIL & COMMERCIAL LENDING
265256
247
17
16
18
108
106
107
456
67 (NZD 72)
Mar-17
444
64 (NZD 70)
Sep-16
437
66 (NZD 69)
Sep-17
Housing Aus
Housing NZ
Other retail (Aus & NZ)
Commercial (Aus & NZ)
Gross loans and advances
Gross loans and advances
Credit RWAs Gross Loans & Advances
1
RISK ADJUSTED MARGINS & RETURNS
22
TOTAL GROUP
DIVISIONS
2
1.Excluding Global Markets
2.Australia Division FY16 includes impacts from regulatory changes to Australian housing risk weights introduced 1 July 2016. Australia Division FY17 includes impacts from further increases to Australia housing risk
weights following APRA having completed its review of ANZ’s mortgage capital model and approved the new model for Australian residential mortgages effective from June 2017
PROFIT BEFORE PROVISIONS / AVERAGE TOTAL RWA (%)
NET INTEREST INCOME (NII) / AVERAGE CREDIT RWA
1
NII / AVERAGE CREDIT RWA
1
(%)
NII / AVERAGE CREDIT RWA
1
MOVEMENT
2h17
4.52%
1H17
4.39%
2H16
4.59%
1H16
4.54%
5.74
5.82
6.65
7.14
4.87
4.784.724.79
2.142.092.05
1.94
2H16 2H17 1H17 1H16
4.460.25
4.57
-0.34
Impact of
bank levy
-0.02
FY16 Impact of
mortgage
RWA changes
Portfolio
management
and improved
returns
FY17
%
July 16 ~31bps
June 17 ~3bps
Aus. ~150bp
due to RWA
changes
Institutional (ex-Markets) NZ (NZD) Aus.
3.80
3.83
4.28
4.62
3.47
3.33
3.20
3.33
1.42
1.89
1.15
1.24
1H17 2H17 2H16 1H16
Aus. NZ (NZD) Institutional
INCOME DRIVERS
23
TOTAL INCOME
$m
4,686
4,7224,735
4,867
1,521
1,571
1,577
1,595
2,716
2,464
2,945
2,469
1,402
1,512
1,046
1,255
1H17
10,303
2H16
10,269
1H16
10,325
2H17
10,186
1.Other includes Wealth Australia, Asia Retail & Pacific, TSO & Group Centre
Half Year growth
(vs prior half)
Full Year
growth
% 1H17 2H17 FY17
Group 0.3 -1.1 -0.5
Australia 0.3 2.8 2.1
New Zealand (NZD) -0.1 2.4 1.8
Institutional 19.5 -16.2 4.5
Wealth -10.8 -0.4 -13.5
INSTITUTIONAL (EX. MARKETS)
Other
1
Australia New Zealand Institutional
-9.6
-14.8
Revenue (ex. Markets) Credit RWA (ex. Markets)
% (FY17 vs FY16)
TOTAL INCOME GROWTH
198
1
1
1
2
200
2H17 Asia
Retail
exit
-1
Markets
-3
Treasury
-1
Assets Deposits Major
Bank
levy
-2
Funding
cost
Funding
& Asset
mix
1H17
INCOME DRIVERS
24
GROUP NET INTEREST MARGIN
NIM 2H17 TIMING IMPACTS
BALANCE SHEET
RATE MOVEMENTS
bp
$b
GROUP NET INTEREST MARGIN
+2
584
450
447
445
436
Sep-17
468
Mar-17
468
580
Sep-16
580
Mar-16
566
Sep-15
574
Mar-15
562
Customer Deposits Gross Loans & Advances
0
2
4
6
8
Sep-
17
Sep-
15
Sep-
13
Sep-
11
Sep-
09
Sep-
07
Sep-
05
Replicating Yield 3 year swap (spot) OCR
%
-2
3
rd
Quarter 4
th
Quarter
Home loan repricing
* *
Home Loan switching
*
Asia Retail exits
*
(China, Singapore)
*
(& Hong Kong)
Bank Levy
*
MARKETS INCOME
25
MARKETS INCOME
MARKETS SALES INCOME
MARKETS AVERAGE VALUE AT RISK (99% VAR)
1.Excludes Large/notable items in 2H16 for mCVA derivative methodology change (-$237m)
$m
$m
-150
0
150
300
450
600
750
900
1,050
1,
200
1,350
1,500
2H17
960
1,075
1H16 2H15
988
1H15
1,182
1H17
993
2H16
1,363
Sales Valuation adjustments
1
Balance Sheet Trading
935
1,085
-20
Market
conditions
-74
Client exits FY16
-56
FY17 Product exits
$m
$b
0
10
20
30
40
50
0
10
20
30
40
50
60
70
Mar 17 Sep 17 Sep 15 Mar 15 Sep 16 Mar 16
HQLA (RHS) Traded market risk (LHS)
Non-traded interest rate risk (LHS)
EXPENSE DRIVERS
26
FULL YEAR 2017 EXPENSES
1
1.Excluding FY16 large items
$m
FTE (TOTAL #) FTE REDUCTION
9,448124
55
10,439
FY17 Other Tech Premises
-14
Personnel
-305
FY16
large
items
-851
FY16
FY17
44,896
FY16
46,554
FY15
50,152
DIVISIONAL EXPENSE CONTRIBUTION
1
$m
1,659
1,6811,6931,730
587
618600
593
1,4601,406
1,379
1,357
1,0771,100
1,0591,037
4,783
4,805
1H16 2H16 1H17 2H17
4,731 4,717
% change (HoH) 2H16 1H17 2H17
Aus 1.3 0.7 2.2
NZ (NZD) 3.3 -3.2 0
Institutional -3.7 -1.9 -1.6
Other Institutional NZ Aus
YOY change FY16 FY17
TOTAL -7% -4%
Senior Mgt -16% -6%
DIVISIONAL EXPENSE GROWTH
-1%
EXPENSE & INVESTMENT MANAGEMENT
27
1.Excluding FY16 large items
2.AR&P = Asia Retail & Pacific
4,511
4,551
4,506
4,394
2H17
4,717
323
1H17
4,731
225
2H16
4,805
254
1H16
4,783
272
Run (BAU) Change (Expensed investment spend)
BAU VS CHANGE EXPENSES
1
$m
% change (HoH) 2H16 1H17 2H17
TOTAL 0.5 -1.5 -0.3
BAU 0.9 -1.0 -2.5
Change -6.6 -11.4 43.6
TOTAL INVESTMENT SPEND
$m
294
274
327
245
175
164
300
326
328
91
FY17
935
66
50
FY16
926
75
76
FY15
997
67
NZ Institutional TSO & Group Wealth & AR&P
2
Aus.
CAPITALISED SOFTWARE
3
0
1
2
Sep-
08
Sep-
07
Sep-
09
Sep-
10
Sep-
13
Sep-
12
Sep-
11
Sep-
15
Sep-
14
Sep-
17
Sep-
16
Amortisation Capitalised software balance
$b
BAU VS CHANGE EXPENSE GROWTH
1
Avg amortization ~4 yrs
(vs ~5 yrs in FY16)
PROVISIONS
TOTAL PROVISION CHARGE
28
-200
0
200
400
600
800
1,000
1,
200
1,038
2H17
479
1H17
720
2H16
918
1H16
Consumer IP Commercial IP Institutional IP Collective Provision
$m
LONG TERM IP LOSS RATES
COLLECTIVE PROVISION CHARGE
$m
bp
0
50
100
150
200
250
Sep
90
Sep
93
Sep
96
Sep
99
Sep
02
Sep
05
Sep
08
Sep
11
Sep
14
Sep
17
IP Loss Rate Median IP Loss Rate (ex- current period)
Avg IP loss rate
FY14-FY17: 25bp
Avg ex Esanda &
Asia Retail: 21bp
1H16 2H16 1H17 2H17 FY17
Lending Growth
56
-59 -30 -18 -48
Change in Risk/Portfolio
mix
1
-30 50 -78 -91 -169
Eco Cycle
0
0 41 34 75
TOTAL
26
-9 -67 -75 -142
% Sep 16 Sep 17
Australia
0.33 0.33
New Zealand
0.26 0.22
Institutional
0.35 0.30
Subtotal
0.33 0.31
Asia Retail
1.51 2.67
Total
0.35 0.32
EXPECTED LOSS
Individual provision expected loss as % of Gross Lending Assets
Net impact of new $75m retail trade overlay, less release
of $41m Qld flood and Asia Retail & Pacific overlays
CREDIT QUALITY
GROSS IMPAIRED ASSETS CONSUMER 90+ DAY ARREARS
1.Excludes Non Performing Loans
29
1.5
1.0
0.5
0.0
Sep
15
Mar-
15
Sep
14
Mar-
14
Sep
13
Mar-
17
Sep
16
Mar-
16
Home Loans NZ Cards Aus. Home Loans Aus.
$m
% of Total GLAs
2,384
3,173
2,719
2,889
4,264
5,196
5,581
6,561
0.0
0.2
0.4
0.
6
0.8
1.0
1.2
1.4
1.6
1.8
FY17 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Gross impaired assets (GIA) GIA as a % of GLA (RHS)
%
HOME LOANS 90+ DPD BY STATE
1
%
0.0
0.5
1.0
1.5
2.0
NSW
& ACT
SA & NT VIC & TAS Portfolio WA QLD
Sep 17 Sep 12 Sep 13 Sep 16 Sep 14 Sep 15
73
83
86
8080
95
95
8080
91
0
10
20
30
40
50
60
70
80
90
100
2013
164
2016
160
2015
181
2014
178
2017
160
CAPITAL, LIQUIDITY & DIVIDENDS
30
CAPITAL
FUNDING & LIQUIDITY
DIVIDEND AND DIVIDEND PAYOUT RATIO
DPOR (%)
%
Sep-17
114%
Mar 17
113%
Sep 16
108%
Sep-17
135%
Mar 17
135%
Sep 16
125%
Net Stable Funding Ratio
Liquidity Coverage Ratio
1st half DPS 2nd half DPS Cash DPOR (RHS)
10.57
0.09
1.18
10.13
9.61
Sep-17 Other
-0.25
Dividends
-0.58
Organic
capital
generation
Asia Retail
& Wealth
Mar-17 Sep-16
DPS (cents)
ASIA RETAIL & WEALTH DIVESTMENT
ASIA RETAIL CONTRIBUTION TO EARNINGS ASIA RETAIL INDIRECT COST REDUCTION PROFILE
1.Approximates. Difference to 31/10/16 announcement due to inclusion of Vietnam, timing and rounding
2.Excludes loss on sale impact of $270m (post tax)
$m
$m (anticipated)
FINANCIAL IMPACTS
31
FY16
Earnings
1
FY17
earnings
2
FY18 anticipated
earnings impact
(partial year
ownership)
Revenue 850 673 down ~85%
Expenses
650 492
-Direct 300 217
down ~85%
-indirect 350 275 down $80-90m
Provisions 160 124 down ~70%
Cash Profit 50 46
CET1 benefit 9bp 6+ bp
350
FY19
~- 50
Sep-16
~140
Residual
indirect costs
(post FY19)
FY17
-75
Sep-17
~275
FY18
~- 85
Countries settled in 2H17 Countries to settle 1H18
•China, Singapore, Hong Kong •Indonesia, Taiwan, Vietnam
Allocated group costs,
addressing as part of
overall simplification
program
ANNOUNCED DIVESTMENTS
2018 IMPACTS
32
$m Asia Retail SRCB MCC UDC
FY18 Total
(lower earnings)
Revenue ~- 570 -58 -39 ~- 80 ~- 750
Expenses – Direct
~- 185 ~- 25 ~- 210
Expenses – Indirect ~- 85 ~- 85
Provisions ~- 85 ~-5 ~- 90
Cash Profit
(pre gain / loss on sale)
~- 175 -58 -39 ~- 40 ~- 310
Gain / (Loss) on sale ~60
Nominal
~245 ~100 ~255
3
CET1 impact ~6+ bp ~40bp ~9bp ~10bp ~65+ bp
Basis for lower earnings
3 divestments in
2H17, 3 in 1H18:
Revenue -~85%,
Direct exp. -~85%
Indirect exp. -~30%
Provisions -~70%
Cessation of
equity
accounting
earnings
Cessation of
equity
accounting
earnings
~9 months
earnings impact
1.Indicative only based on anticipated timing and FY17 earnings as a basis for FY18. FY17 not necessarily representative of future earnings
2.Estimated loss on sale at completion – some separation costs to be incurred in FY18
3.Includes MCC (+245), UDC (+100), Asia Retail (+60) and ~150m P&I costs
INDICATIVE CHANGE IN CONTRIBUTION FROM DIVESTMENTS (FY18 vs FY17)
1
OnePath P&I
• Completion 1H19
• Loss on sale 120
2
• CET1 impact 15bp
All divestments are indicative and subject to regulatory approvals
2017 FUL L Y EAR
RESULT S
INVESTOR DISCUSSION PACK
26 October 2017
FY17 FINANCIAL PERFORMANCE
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
GROUP PERFORMANCE
STATUTORY & CASH PROFIT STATUTORY TO CASH ADJUSTMENTS
1
1.Definitions of the adjustments between statutory profit and cash profit are detailed in the 2017 Full Year Results (Consolidated Financial Report & Dividend Announcement) within the
Profit Reconciliation section.
$m
STATUTORY & CASH PROFIT RECONCILIATION
34
6,406
5,709
7,493
6,938
5,889
7,216
FY15 FY17 FY16
Statutory Profit 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 and Divisional performance against prior periods and
against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory
profit.
$m FY16 FY17
Statutory Profit 5,709 6,406
Adjustments
Treasury share adjustment 44 58
Revaluation of policy liabilities (54) 34
Economic hedges 102 209
Revenue Hedges 92 (99)
Structured credit intermediation trades (4) (3)
Revaluation of SRCB to held for sale 0 333
Total adjustments 180 532
Cash Profit 5,889 6,938
Reclassification of SRCB to held for sale
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai
Rural Commercial Bank (SRCB). The sale is subject to customary closing conditions and regulatory
approvals. In the March 2017 half, the Group recognised a $219 million impairment to the
investment, $11 million of foreign exchange losses and $86 million of tax expenses, following the
reclassification of the investment to held for sale. The loss will be largely offset by the release of
foreign currency translation and available for sale reserves of $289 million on sale completion. In
light of the timing difference (and that these amounts largely offset), the impact is excluded from
cash profit result, however the net impact will be included within cash profit for full year reporting.
FY17 growth
Statutory profit 12.2%
Cash Profit 17.8%
FINANCIAL PERFORMANCE OVERVIEW
35
REVENUE
PROFIT BEFORE PROVISIONS
1.Consistent basis excludes Esanda Dealer Finance from 2015 expense base and applies capitalised software expenses based on revised policy announced in 2016 (higher expensed
threshold)
2.Profit and loss impacts of large/notable items is shown on the following 3 Large/Notable Items slides
$m
$m
$m
$m
CASH PROFIT & LARGE/NOTABLE ITEMS
EXPENSES
CASH PROFIT
FY17 2H17 (vs 1H17)
Growth (Cash basis) $m % change $m % change
Income 20,489 -0.5 10,186 -1.1
Expenses
9,448 -9.5 4,717 -0.3
PBP
11,041 8.8 5,469 -1.8
Provisions
1,199 -38.7 479 -33.3
Cash Profit
6,938 18.1 3,527 3.4
LARGE/NOTABLE ITEMS IN CASH PROFIT
2
2017
20,489
2016
20,594
2015
20,537
9,448
9,378
10,439
2015 2017 2016
2017
11,041
2016
10,155
2015
11,159
6,938
5,889
7,216
2016 2017 2015
$9,522 on a consistent basis
to FY16 & FY17
1
Post tax impact ($m) FY16 FY17 1H17 2H17
Derivative valuation adj. (71) 160 113 47
Equity accounted earnings 345 58 58 -
Sale of Asia Retail & Wealth - (270) (284) 14
Gain on sale – 100 Queen St - 112 112 -
Software Capitalisation changes (389) - - -
Asian minority valuation adj. (231) - - -
Restructuring (201) - - -
Esanda Dealer Finance divest. 45 - - -
Derivative CVA methodology change (168) - - -
TOTAL (670) 60 (1) 61
LARGE/NOTABLE ITEMS IN CASH PROFIT
36
Profit & Loss item ANZ Division
Cash profit impact
FY16 FY17 1H17 2H17
CASH PROFIT 5,889 6,938 3,411 3,527
CASH PROFIT COMPOSITION:
-Cash profit excluding large/notable items 6,559
6,878 3,412 3,466
•Large/notable items (
670) 60 (1) 61
Large/Notable items:
Derivative valuation adjustments Other operating income Institutional (71) 160 113 47
Equity accounted earnings (SRCB & BOT)
SRCB (FY16 & FY17) & BOT (FY16) equity accounted earnings prior to reclassification of these Asian
minority investments to available for sale
Other operating income TSO & Group Centre 345 58 58 -
Sale of Asia Retail & Wealth businesses
As a result of the sale relating to Asia Retail & Wealth businesses, the Group recognised charges to
impair software, goodwill and fixed assets as well as provide for redundancies.
Other operating income Asia Retail & Pacific - (270) (284) 14
Gain on sale – 100 Queen St, Melbourne
Gain on sale of the Group’s 100 Queen Street office tower and former head office in Melbourne
Other operating income TSO & Group Centre - 112 112 -
Software Capitalisation changes
Accelerated amortisation charge associated with changes to the Group’s software capitalisation policy
Expenses TSO & Group Centre (389) - - -
Asian minority valuation adjustment
Recognised impairment on AMMB; recognised gain on BoT on cessation of equity accounting
Other operating income TSO & Group Centre (231) - - -
Restructuring
Restructuring expense associated with accelerating the process of reshaping the Group’s workforce to
build a simpler, more agile bank
Expenses
Australia
New Zealand
Institutional
Asia Retail & Pacific
TSO & Group Centre
(201) - - -
Esanda Dealer Finance divestment
Esanda Dealer Finance earnings prior to transfer of assets to acquirer.
Net interest income,
Other operating income,
Provisions
Australia 45 - - -
Derivative CVA methodology change
Impact of revised methodology for determining the derivative credit valuation adjustment (associated
with the derivative portfolio) to make greater use of market information and enhanced modelling, and to
align with leading market practice.
Other operating income Institutional (168) - - -
LARGE/NOTABLE ITEMS DETAIL
37
PROFIT & LOSS: FULL YEAR 2016 & 2017
September 2017 Full Year September 2016 Full Year
Large/notable items in cash profit Large/notable items in cash profit
Cash
profit
$M
Derivative
valuation
adj.
$M
Equity
accounted
earnings
SRCB
$M
Sale of
Asia Retail
& Wealth
businesses
$M
Gain on
Sale 100
Queen St
$M
Cash
profit
$M
Derivative
valuation
adj.
$M
Equity
accounted
earnings
SRCB &
BOT
$M
Software
capital-
isation
changes
$M
Asian
minority
valuation
adj.
$M
Restruct-
uring
$M
1
Esanda
Dealer
Finance
divestment
$M
Derivative
CVA
method.
change
$M
Net interest income
14,872 - - - - 15,095 - - - - - 31 -
Other operating
income
5,617 229 58 (310) 114 5,499 (102) 345 - (231) - 78 (237)
Operating income
20,489 229 58 (310) 114 20,594 (102) 345 - (231) - 109 (237)
Operating expenses
(9,448) - - - - (10,439) - - (556) - (278) (17) -
Profit before credit
impairment and
income tax
11,041 229 58 (310) 114 10,155 (102) 345 (556) (231) (278) 92 (237)
Credit impairment
charge
(1,199) - - - - (1,956) - - - - - (23) -
Profit before income
tax
9,842 229 58 (310) 114 8,199 (102) 345 (556) (231) (278) 69 (237)
Income tax expense
(2,889) (69) - 40 (2) (2,299) 31 - 167 - 77 (24) 69
Non-controlling
interests
(15) - - - - (11) - - - - - - -
Cash profit
6,938 160 58 (270) 112 5,889 (71) 345 (389) (231) (201) 45 (168)
1.Restructuring charges by division: Australia $49m, Institutional $90m, New Zealand $18m, Wealth Australia $20m, Asia Retail & Pacific $12m, TSO & Group Centre $89m
2.Further information is set out on page 14
-16 of the 2017 Full Year Consolidated Financial Report
LARGE/NOTABLE ITEMS DETAIL
38
PROFIT & LOSS: HALF YEAR 2017
Sep. 2017 Half Year March 2017 Half Year
Large/notable items
in cash profit
Large/notable items in cash profit
Cash
profit
$M
Derivative
valuation
adj.
$M
Sale of Asia
Retail
& Wealth
businesses
$M
Cash
profit
$M
Derivative
valuation
adj.
$M
Equity
accounted
earnings
SRCB
$M
Sale of
Asia Retail
& Wealth
businesses
$M
Gain on
sale 100
Queen St
$M
Net interest income 7,456 - -
7,416 - - -
-
Other operating
income
2,730 67 14 2,887 162 58 (324) 114
Operating income 10,186 67 14 10,303 162 58
(324) 114
Operating expenses
(4,717) - - (4,731) - - - -
Profit before credit
impairment and
income tax
5,469 67 14
5,572 162 58 (324) 114
Credit impairment
charge
(479) - - (720) - - - -
Profit before income
tax
4,990 67 14
4,852 162 58 (324) 114
Income tax expense
(1,456) (20) - (1,433) (49) - 40 (2)
Non-controlling
interests
(7) - - (8) - - - -
Cash profit 3,527 47 14
3,411 113 58 (284) 112
1.Further information is set out on page 14-16 of the 2017 Full Year Consolidated Financial Report
FY17 BALANCE SHEET
1.Other largely Asia Retail & Pacific
$b
CUSTOMER DEPOSITS
39
75.6
84.3
89.2
104.6
111.0
117.5
62.0
65.170.1
183.0
171.2
186.8
4.2
Sep-17 Sep-16
449.7
19.4
Sep-15
467.6
444.6
18.0
FY17 2H17
(vs 1H17)
TOTAL 4.0% -0.1%
Institutional 9.2% 4.2%
Transaction Banking 5.5% 7.8%
Loans & Specialised Finance 12.3% 5.1%
Markets 13.4% 0.5%
Commercial (Aus & NZ) 7.6% 1.0%
Small Business (Aus) 8.8% 3.2%
Business & Regional Business Banking (Aus) 6.3% 1.0%
Corporate (Aus) 22.6% 2.8%
Commercial (NZ) 2.4% -5.3%
Other Retail (Aus & NZ) 5.8% 1.0%
Other Retail ( Aus) 5.8% 1.0%
Housing (Aus & NZ) 5.7% 3.4%
Housing (Aus) 10.9% 4.6%
Housing (NZ) 3.7% 2.9%
GROWTH
Housing (Aus & NZ) Other
1
Institutional Other Retail (Aus & NZ) Commercial (Aus & NZ)
BY SEGMENT
FY17 BALANCE SHEET
1.Other largely Asia Retail & Pacific
NET LOANS & ADVANCES
40
288.8
312.3
331.2
107.1
106.3
106.3
142.2
125.9
119.6
570.2
Sep-16
15.9
580.3
15.0
Sep-17
7.4
16.4
575.9
16.2
Sep-15
15.8
FY17
2H17
(vs 1H17)
TOTAL 0.8% 0.7%
Institutional -5.0% -1.0%
Transaction Banking -5.7% 7.8%
Loans & Specialised Finance -7.7% -3.5%
Markets 3.3% 2.5%
Commercial (Aus & NZ) -0.1% 1.3%
Small Business (Aus) 0.1% -0.8%
Business & Regional Business Bank (Aus) -1.6% -0.2%
Asset Finance 3.5% 1.0%
Corporate (Aus) 6.9% 4.5%
Commercial (NZ) -2.2% 2.2%
Other Retail (Aus & NZ) -3.9% -2.2%
Other Retail ( Aus) -3.4% -2.9%
Other Retail (NZ) -5.8% -0.3%
Housing (Aus & NZ) 6.1% 3.2%
Housing (Aus) 7.2% 3.3%
Housing (NZ) 1.6% 3.4%
Housing (Aus & NZ) Other
1
Commercial (Aus & NZ) Other Retail (Aus & NZ) Institutional
$b
GROWTH
BY SEGMENT
NET INTEREST MARGIN
41
GROUP FULL YEAR
NEW ZEALAND
(bp)
(bp)
(bp)
(bp)
GROUP & DIVISIONAL MARGIN PERFORMANCE
AUSTRALIA INSTITUTIONAL
199
207
210
FY15 FY16 FY17
268
275
273
FY16 FY17 FY15
231
237
250
FY15 FY17 FY16
101
113
119
FY16 FY17 FY15
GROUP HALF YEAR
NEW ZEALAND
(bp) (bp)
(bp)
(bp)
AUSTRALIA INSTITUTIONAL
198
200
206207
2H16 1H16 1H17 2H17
268269
274275
1H17 2H17 2H16 1H16
231
230
235
240
1H17 2H17 2H16 1H16
96
105
111
115
1H16 2H16 2H17 1H17
Bank levy
impact ~2bp
Bank levy
impact ~4bp
Bank levy
impact ~1bp
Bank levy
impact ~2bp
IMPACTS OF DECLINING RATES
LOWER RETURNS ON CAPITAL AND LOW RATE DEPOSITS
42
1. AUD OCR / Swap rates
2. AUD average capital portfolio yield displayed. The Group’s overall portfolio includes multiple portfolios & currencies.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Sep-
15
Sep-
16
Sep-
17
Sep-
10
Sep-
14
Sep-
09
Sep-
05
Sep-
11
Sep-
12
Sep-
13
Sep-
08
Sep-
07
Sep-
06
%
The lower earnings rate on capital
and low rate deposits reduced Group
NIM by ~4bp in FY17. Headwind is
expected to reduce in FY18
Replicating Yield 3 year swap (spot) OCR
$m
TOTAL OPERATING INCOME
43
$m
TOTAL MARKETS INCOME
OTHER NON INTEREST INCOME
1.Excluding Markets other income and Share of Associates Profit
$m
$m
$m
BY CATEGORY
AIEA & NIM
SHARE OF ASSOCIATES PROFIT
14,616
15,098
14,872
4,234
4,192
3,881
1,062
1,436
300
625
541
20,537
20,597
766
FY15 FY16
20,489
FY17
Markets other op. income
Share of Assoc Profit Other operating income
1
Net interest income
748
731717
2.10%
2015 2016
2.07%
1.99%
2017
AIEA NIM (RHS)
1,107
1,032
920
1,062
766
1,436
2,356
2016
1,798
2015 2017
2,169
1,504
2,437
2,362
1,518
1,332
2,527
265
4,189
-56
2015
-77
2017
3,881
290
2016
80
4,234
123
Other operating Net interest income
138
218
259
155
100
96
94
86
38
64
36
78
625
2015
541
2016 2017
46
300
58
TOTAL INCOME
AMMB
Panin
Bank of Tianjin
SRCB Other
Fees & Commissions
Other Funds Mgt & Ins.
FX earnings
TOTAL OPERATING INCOME
44
TOTAL INCOME - CASH
$m
8,912
9,408
9,602
2,985
3,092
3,172
5,762
5,180
5,414
1,273
1,255
1,086
1,176
1,123
643
572483
FY17
20,594
20,489 20,537
FY15 FY16
482
$m
Australia Institutional New Zealand Asia Retail & Pacific Wealth Australia TSO & Group Centre
BY DIVISION
FY17
2H17
(vs 1H17)
TOTAL
Institutional 5% -16%
Transaction Banking -4% -1%
Loans & Specialised Finance -15% -13%
Markets 31% -27%
NEW ZEALAND 2% 2%
Retail 3% 3%
Commercial 1% 2%
AUSTRALIA 2% 3%
Retail 4% 4%
Commercial -1% 0%
Asia Retail & Pacific -45% 135%
Wealth -13% 0%
TSO & Group Centre 18% -15%
INCOME GROWTH
TOTAL EXPENSES
45
$m
FTE BY DIVISION
FTE #
$m
EXPENSES BY DIVISION
5,479
5,541
5,178
922
928
911
1,462
2,167
1,666
1,484
1,525
1,631
FY17
9,448
62
FY16
10,439
278
FY15
9,378
31
6,103
5,112
4,754
6,472
6,317
6,207
5,727
4,894
3,981
Sep-17
44,896
11,387
2,110
16,457
Sep-16
46,554
11,563
2,174
16,494
Sep-15
50,152
12,013
2,347
17,490
TOTAL EXPENSES
Personnel
Premises
Technology
Restructuring
Other
3,193
3,4263,423
2,806
2,958
2,736
1,197
1,225
1,193
751
801
743
834
808
651
597
1,221
702
FY17
9,448
FY16
10,439
FY15
9,378
Australia
Institutional
New Zealand
Wealth Aus.
Asia Retail & Pacific
TSO & Group Centre
TECHNOLOGY INFRASTRUCTURE SPEND
& CAPITALISED SOFTWARE
46
SPEND BY CATEGORY
$m
1.Excluding Markets other income and Share of Associates Profit
438
333
285
164
171
210
223
229
228
172
193212
926
FY16
935
FY15 FY17
997
TECHNOLOGY INFRASTRUCTURE SPEND
Productivity
Growth Risk & Compliance
Infrastructure / Other
CAPITALISED SOFTWARE
BALANCE
$m
EXPENSED / CAPITALISED
$m
SPEND BY DIVISION
$m
567
542
500
556
1,056
2016 2015 2017
361
349
393
245
300
326328
164
175
997
2016
926
76
50
91
2015
935
2017
739
400387
258
526548
997
2015
935 926
2016 2017
AMORTISATION
$b
Expensed investment spend
Capitalisaed investment spend
Institutional
Wealth, Asia Retail & Pacific
TSO & Group Centre
Aus. & NZ Divisions
1,059
465515
701
559
782
943
822
819
1,860
2017
83
2,202
190
2,893
17
2015 2016
Aus. & NZ Divisions
TSO & Group Centre
Wealth, Asia Retail & Pacific
Institutional
Current period amortisation
Accelerated amortisation
2017 FUL L Y EAR
RESULT S
CORPORATE PROFILE
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
CORPORATE PROFILE
48
CORPORATE PROFILE
PURPOSE AND VISION
CREDIT RATING
1.As at 30 September 2017
oANZ is a top 5 listed corporate in Australia and number one
bank in New Zealand
oMarket capitalisation of AU$86.9b
1
oTotal Assets of AU$897.3 billion
1
oWe operate in 34 markets across
oAustralia
oNew Zealand
oAsia
oPacific
oEurope
oAmerica
oMiddle East
oOur ~45,
000 staff serve retail, commercial and institutional
c
ustomers through
oconsumer and corporate offerings in our core
mar
kets, and
oRegional trade and capital flows across the region
oWe have over 550,000 shareholders
and paid ~$5b in
dividends in 2017
oShape a world where people and communities
th
rive
oBuild the best connected and most respected
bank
in the region
AA-
Negative
Aa3
Stable
AA-
Stable
S&P
FITCH
MOODY’S
Create a simpler, better capitalised, better balanced and more agile bank
Reduce operating costs and risks by
removing complexity and exiting low
return and non-core businesses
•Reduction of Institutional CRWA by $46 billion over two years, $18b year on year
•$8 billion increase in Retail and Commercial CRWA (FY17 vs FY16)
•53% of Group Capital is now allocated to the Retail and Commercial businesses in Australia and NZ
•The Group CET1 ratio was 10.6% at 30 September 2017
•Completion of announced asset disposals will deliver an estimated additional 80 bps of capital by the end of
FY
18.
•Group costs have reduced 9% in absolute terms (FY17 vs FY16) for the first time since 1999
Focus are efforts on 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 the
world for customers driven by the
movement of goods and capital in our
region
•Introduction of First Home Buyer coaches to assist customers navigate the home buying process
•Increased number of retail customers in Australia from 5.3m to 5.6m
•In New Zealand we hold a leading position in overall brand consideration (51%)
•Small business lending in Australia was steady year on year with deposits up 9%. In New Zealand lending
inc
reased 5% with deposits up 7%
•Institutional Payments and Cash Management business is now 21% of Institutional income, up from 19% in FY15
•Our Institutional business in Aus & NZ ranks No.1 for overall market and lead penetration and the quality of our
service
1
and a top 4 Corporate Bank in Asia for a fifth successive year
2
STRATEGIC PROGRESS- EXAMPLES
49
1.Peter Lee Associates 2017 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand (issued in June and August 2017 respectively)
2.Greenwich Associates 2016 Asian Large Corporate Banking Study (issued in March 2017): ANZ rank
ed =No.4
Build a superior everyday experience for our people and customers in order to compete in the digital age
Build more convenient, engaging
banking solutions to simplify the lives
of customers and our people
•The only bank to offer payment options across Apple Pay, Android Pay, Samsung Pay and FitBit Pay – backed
by the ability to make high value transactions easier with the introduction of voice biometrics
•Expanded accessibility features for ANZ Visa Debit cards including features to assist customers with visual
im
pairment and reading difficulties
•Acquired online property site RealAs to bolster our digital offering in Australia’s property market
•Added to our small business product offering through our employment hero partnership while adding to our
payments capability with BladePay and FastPay Next Generation
Drive a purpose and values led transformation of the Bank
Create a stronger sense of core
purpose, ethics and fairness, investing
in leaders who can help sense and
navigate a rapidly changing
environment
•Established CEO-l
ed Responsible Business Committee and revised Charter of ES&G Board Committee
•Contributed $131m in community investment supported by 113k community volunteering hours by employees.
•Introduced ‘The ANZ Way’, focusing on ANZ’s purpose, strategy, refreshed values and Code of Conduct
•Introduced a new ‘balanced scorecard’ incentive plan in our branches and retail banking contact centres in
Aus
tralia
•Implemented key priorities of our revised Human Rights Standards, including strengthened customer due
dil
igence and employee training
STRATEGIC PROGRESS - EXAMPLES
50
1.Peter Lee Associates 2017 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand (issued in June and August 2017 respectively)
2.Greenwich Associates 2016 Asian Large Corporate Banking Study (issued in March 2017): ANZ rank
ed =No.4
CORPORATE SUSTAINABILITY
CORPORATE SUSTAINABILITY FRAMEWORK
OUR MATERIAL ISSUES
51
Our Corporate Sustainability Framework supports ANZ’s
business strategy and is aligned with the bank’s
Purpose.
The Framework has three key areas of focus:
Sustainable Growth, Social and Economic Participation
and Fair and Responsible Banking.
Our 2017 Corporate Sustainability Review, discussing
progress against the bank’s FY17 sustainability targets,
will be available on anz.com/cs
on 12 December 2017.
Fairness and ethical conduct: stakeholders want us to ‘work
harder to get it right’ and supported cultural change being driven
from the highest level within ANZ.
Fraud and data security: stakeholders consider we have a key
role in educating customers and the wider community about cyber
security and must ensure our policies and processes prevent
fraud and protect customer data.
Responsible lending to business: stakeholders consider the
social and environmental impacts of our business lending
decisions are core to risk management.
Customer experience: stakeholders highlighted fairness,
transparency and simplicity of products as central to building
customer and community trust.
Digital innovation: stakeholders consider keeping pace with digital
innovation and customer expectations is core to ANZ’s ability to
compete successfully now and in the long term.
Through our annual materiality assessment we engage with a
range of internal and external stakeholders to build a clear picture
of the ESG risks and opportunities that have the most potential to
impact our ability to create value. Stakeholder feedback informs
our sustainability approach, reporting and public targets.
In 2017, the top rated issues remained similar to those in 2016:
CORPORATE SUSTAINABILITY
FY17 PERFORMANCE ON TARGETS
52
The information provided covers the period 1 October 2016 – 30 September 2017 and has not been externally assured. Our full year Corporate Sustainability Review, to be released 12 December
2017, will be assured by KPMG and include our performance against all FY17 targets 1. This is the estimated number of people who have benefitted from ANZ’s MoneyMinded and SaverPlus
programs since 2003. 2. Includes Aboriginal and Torres Strait Islander people, people with a disability and refugees 3. Cumulative total since launch in 2013. 4. Employee headcount is used for
the basis of this disclosure. Includes all employees regardless of leave status excluding contractors (which are included in FTE).
FAIR &
RESPONSIBLE
BANKING
Implemented key priorities of our revised Human Rights Standards, including strengthened customer due
diligence and employee training
Cyber security education delivered to >60,000 customers
Implemented and embedded a third party risk screening tool covering ESG risk for suppliers
SOCIAL AND
ECONOMIC
PARTICIPATION
Almost 500,000 people reached through our financial inclusion programs
1
250 people employed from under-represented groups
2
184,576 customers have registered for goMoney™ in the Pacific
3
41.5% women in management positions
4
SUSTAINABLE
GROWTH
Funded and facilitated $6.9 billion in low carbon and sustainable solutions, such as green buildings, low
emissions transport, green bonds, renewable energy, efficient irrigation and low emissions gas power
generation, since 2015
Reduced carbon emissions from premises energy by 20% against 2013 baseline
$1,836m $3,695m $1,369m
New Zealand Division Institutional Division Other Australia Division
2017
Cash
Profit
$6,938m
CORPORATE PROFILE
ANZ GROUP – FULL YEAR 2017 CASH PROFIT
53
All figures provided on a Cash Basis for Full Year 2017
1.Other Includes: Wealth Australia ($238m), Asia Retail & Pacific (-$148m)
, Technology, Services & Operations and Group Centre (-$52m). Other = $38m
Institutional
Division
Cash profit:
$1,836m
New Zealand
Division
Cash profit:
$1,369m
Australia
Division
Cash profit:
$3,695m
Providing products, services and solutions
to Retail and Commercial customers
through our Retail and Corporate &
Commercial Banking businesses
Retail:
consumer and private banking customers
Commercial:
privately owned small, medium and large
enterprises and agricultural business
Providing products, services and solutions
to Retail and Commercial customers
through our Retail and Commercial
businesses
Retail:
consumer, wealth, private banking and
small business customers
Commercial:
privately owned medium and large
enterprises and agricultural business
Provides products, services and solutions to
global Institutional and business customers
across geographies
Products:
Cash, Loans & Specialised Finance, Trade
and Markets
Geographies:
located in Australia, New Zealand, Asia,
Europe, America, PNG and the Middle East
CORPORATE PROFILE
ANZ GROUP – SEPTEMBER 2017 Revenue & Expenses
54
CONSUMER (AUS & NZ) COMMERCIAL (AUS, NZ & International)
1.All figures provided on a Cash Basis for Full Year 2017
2.Other Includes: Wealth Australia, Asia Retail & Pacific, Technology, Services & Operations and Group Centre
52% $18,232m
$7,986m
Revenue 48%
Consumer
Expenses 50% 50%
Commercial
$3,981m
Revenue
Retail
Expenses
$8,837m
$9,395m
Institutional
$4,005m
42%
Expenses
Corporate
Revenue
67%
58%
33%
CORPORATE PROFILE
ANZ GROUP – SEPTEMBER 2017 BALANCE SHEET
55
CONSUMER (AUS & NZ) COMMERCIAL (AUS, NZ & International)
1.All figures provided on a Cash Basis for Full Year 2017
2.Other Includes: Wealth Australia, Asia Retail & Pacific, Technology, Services & Operations and Group Centre
Deposits $466b
Consumer
55%
Commercial
Loans $577b
45%
39% 61%
5%
Other Retail
Housing
Deposits Loans
$209b
95%
$350b
27%
$227b
Institutional
Loans
Corporate
Deposits
53%
73%
47%
$257b
CUSTOMER EXPERIENCE
MARKET SHARE – AUSTRALIA
1
MARKET SHARE – NEW ZEALAND
2
1. APRA Monthly Banking Statistics as at August 2017. 2. Sources: Mortgages - RBNZ, share of all banks as of August 2017, Kiwisaver - IRD, FUM market share as of June 2017, Life insurance
- ( Financial Services Council), share of all providers as of June 2017.
3. Peter Lee Associates 2017 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand
(issued in June and August 2017 respectively); ranked against the Top 4 competitors. 4. Greenwich Associates 2016 Asian Large Corporate Banking Study (issued in March 2017): ANZ ranked
=No.4 (2017 results published March 2018)
MARKET POSITION
56
AUSTRALIA
#1 Lead Bank Penetration
3
NEW ZEALAND
#1 Lead Bank Penetration
3
ASIA
Top 4 Corporate Bank
4
Clear leadership positions for key performance indicators including overall market penetration, lead
penetration and quality of service (Relationship Strength)
Top 4 Corporate Bank in Asia for a fifth successive year
2
16.9%
Personal
Lending
Home
Loans
Business
Deposits
Business
Loans
13.5%
14.5%
Household
Deposits
15.7%
Credit Cards
12.8%
18.7%
Agri
24.5%
34.1%
31.1%
Household
Deposits
9.5%
Mortgages KiwiSaver
29.2%
27.4%
Life
Insurance
Credit Cards
Bank 2
31%
26%
Bank 4
24% 24%
Bank 3 ANZ Bank 3 Bank 4
25%
9%
28%
Bank 2
46%
ANZ Bank 5 Bank 2
42%
Bank 1
54%
43%
Bank 3 ANZ
28% 28%
INSTITUTIONAL DIVISION
CUSTOMER EXPERIENCE
57
BUILDING KEY CAPABILITIES
DIGITAL WALLET ADOPTION
DIGITAL WALLET USAGE
Volume of transactions per quarter
m
KEY ACHIEVEMENTS:
Volume of cards provisioned and available per quarter
‘000
STRONG FOUNDATION BUILT TO CAPITALISE ON EMERGING MOBILE PAYMENTS
LANDSCAPE
Apple Pay
TM
Android Pay
TM
ANZ Mobile Pay Samsung Pay
FitBit
TM
Pay
•661k cards provisioned across eligible devices in digital wallets
with particularly strong adoption of Apple Pay
•Ongoing customer engagement and adoption with digital wallets
with 31m transactions and $1b spend since launch
•Continued to strengthen ANZ’s leadership position in Mobile
Payments through launch of ANZ with Samsung Pay, Fitbit Pay
and virtual Apple Pay provisioning through goMoney
•Enabled Australia’s domestic payments system, eftpos, to join
mobile payments revolution through partnership with Apple Pay
•Close attention to managing risk and regulatory landscape
•Demonstrated capability to partner and deliver to customer
needs – underlying capabilities are scalable
661
614
577
474
344
206
16
Q3FY17 Q2FY17 Q1FY17 Q4FY16 Q3FY16 Q2FY16 Q4FY17
8.27
7.19
5.94
4.94
3.37
1.74
0.05
Q4FY16 Q3FY17 Q2FY17 Q1FY17 Q4FY17 Q3FY16 Q2FY16
SHAREHOLDER RETURNS
58
DIVIDEND PER SHARE
SHARE PRICE
TOTAL SHAREHOLDER RETURN
10 YEAR PERFORMANCE
160160
181
178
164
145
140
126
136
0
50
100
150
200
FY15 FY11 FY09 FY08
56
FY14 FY10 FY17 FY13 FY12 FY16
cents
%
$
DPOR DPS
•Setting a conservative, sustainable DPS
•Confidence in the strong ongoing capital generation (NPAT)
in
our Retail / Commercial businesses and continued capital
efficiency in Institutional
•Credit quality trends
•Expected capital requirements
•The impact of expected asset sales on earnings and on
opport
unities for capital management initiatives
•Importance of stable payout ratio and franking credits
DIVIDEND CONSIDERATIONS
29.60
27.63
27.08
30.9230.78
24.75
19.52
23.68
24.39
18.75
29.70
2016 2015 2011 2012 2017 2010 2013 2014 2008 2009 2007
Share price close (last trading day in September of the financial year)
1 YEAR
(FY17)
TSR
78.2%
-0.3%
Share price
change
5 YEARS
(FY12 – FY17)
10 YEARS
(FY08 – FY17)
TSR
19.6%
Share price
change
59.2%
7.1%
TSR Share price
change
13.1%
FINANCIAL PERFORMANCE
59
REVENUE
EXPENSES
PROVISIONS
CASH PROFIT
$b
$b
$b
10 YEAR PERFORMANCE – CASH BASIS
9.4
10.4
9.4
8.8
8.3
8.0
7.7
6.7
6.1
5.4
FY11 FY13 FY15 FY14 FY08 FY17 FY09 FY10 FY16 FY12
20.5
20.620.5
19.6
18.4
17.6
16.8
15.8
14.4
11.5
FY15 FY16 FY08 FY11 FY17 FY10 FY12 FY09 FY14 FY13
1.2
2.0
1.2
1.0
1.2
1.2
1.2
1.8
3.0
1.9
FY17 FY09 FY11 FY12 FY14 FY15 FY13 FY10 FY08 FY16
7.0
5.9
7.2
7.1
6.5
6.0
5.7
5.0
3.4
3.0
FY17 FY15 FY16 FY14 FY11 FY10 FY09 FY13 FY12 FY08
$b
FINANCIAL PERFORMANCE - RATIOS
60
NET INTEREST MARGIN
COST TO INCOME
RETURN ON EQUITY
EARNINGS PER SHARE
1.In the March 2017 half, the group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. The revised 2016 NIM is
2.07%
10 YEAR PERFORMANCE – CASH BASIS
1
46.1
50.7
45.7
44.7
44.945.6
45.9
44.2
45.7
46.8
FY09 FY14 FY17 FY13 FY08 FY12 FY15 FY11 FY10 FY16
1.99
2.002.00
2.10
2.20
2.30
2.40
2.50
2.29
2.01
FY08 FY11 FY09 FY16
1
FY10 FY14 FY13 FY15 FY12 FY17
11.9
10.3
14.0
15.415.3
15.6
16.2
15.5
10.3
14.5
FY08 FY09 FY11 FY12 FY16 FY14 FY13 FY15 FY10 FY17
237.1
202.6
260.3260.3
238.3
225.3
218.4
198.7
150.8
155.3
FY17 FY16 FY12 FY09 FY13 FY11 FY14 FY10 FY08 FY15
%
%
cents %
Changes to NIM
calculations. Refer
footnote
2017 FUL L Y EAR
RESULT S
BUSINESS PERFORMANCE
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
FINANCIAL PERFORMANCE
62
1.Growth rates on a PCP basis (FY17 v FY16)
DIVISIONAL CONTRIBUTION TO CASH PROFIT
6,938398795
101
148
5,889
Asia Retail & Pacific FY17 Cash Profit Wealth Australia Australia FY16 Cash Profit TSO & Group Centre New Zealand Institutional
-307
-86
Revenue : +2%
Expenses : 0%
Provisions : -3%
Revenue : +3%
Expenses : -3%
Provisions : -35%
Revenue : +5%
Expenses : -9%
Provisions : -89%
Revenue : -13%
Expenses : -7%
FUM : +2%
Revenue : +18%
Expenses : -43%
Revenue : -45%
Expenses : -19%
Provisions : -16%
AUSTRALIA
63
REVENUE TOTAL PROVISIONS
CASH PROFIT RETURN
1
$m
$m
$m
$m
RISK WEIGHTED ASSETS
$b
FINANCIAL PERFORMANCE
EXPENSES
9,602
9,408
8,875
837
785
718
FY17 FY15 FY16
Revenue/Avg FTE ($k) Revenue
3,4233,426
3,232
FY16 FY17
35.6%
36.4%
FY15
36.4%
Expenses CTI
897
920
852
FY15 FY16 FY17
3,695
3,547
3,378
FY16 FY15 FY17
171
157
130
FY15 FY16 FY17
7.0%
2.6%
FY15 FY16
2.2%
FY17
5.9%
7.5%
2.9%
Return on RWA Revenue/RWA
%
AUSTRALIA DIVISION
PRIORITIES
64
MOVEMENTS
PRIORITIES ACTIONS METRICS
FY15 FY16 FY17
STRATEGIC FOCUS
Create a simpler, better
capitalised, better
balanced and more agile
bank
Simplified products
More digital branches
More self service
More digital sales
More digitally active
customers
# Products decommissioned
# Digital branches
# OTC transactions
Digital % of retail sales
Digital active customers
<10
5
37.3m
15%
2.9m
<10
40
33.8m
16%
3.0m
47
81
29.1m
21%
3.3m
Focus efforts on attractive
areas where we can carve
out a winning position
Attract more customers
Deepen customer
relationships
Grow FUM above system
# Retail Customers
Retail Customers holding >1 Product
Commercial Cross Sell (% growth)
HL (ANZ vs system)
1
Household Deposits (ANZ vs system)
1
5.3m
59.0%
4.8%
1.2x
0.9x
5.4m
59.9%
10.8%
1.0x
0.6x
5.6m
60.6%
6.7%
1.2x
1.1x
Build a superior
experience for our people
and customers to compete
in the digital age
Launch innovative solutions
to improve banker &
customer experience
Android Pay transaction (000’s)
Bladepay transactions (000’s)
Electronic verification uptake (trans / month)
-
-
-
138
n/a
4,405
1,871
62
9,828
Innovative
solutions in
place,
improving the
banker and
customer
experience
BladePay
Apple Pay
TM
Android Pay
TM,
ANZ Mobile Pay
Samsung Pay
FitBit
TM
Pay
VoiceID to
authorise
payments
Digital Branches
Improved
Frontline Tools for
our bankers
41 new digital branches, full
range of digital banking
options
1.APRA System growth numbers up to Aug-17
AUSTRALIA DIVISION
CONSISTENT GROWTH SUSTAINABLE RETURNS
RIGHTSIZING OUR COST BASE MANAGING OUR RISK
$b
$m
CONSISTENTLY DELIVERING SUSTAINABLE RESULTS
65
345
327
315
201
188
177
+ 7%
+ 6%
+ 6%
+ 4%
FY17 FY16 FY15
Deposits NLA
3,695
3,547
3,378
2.68
2.752.75
+ 4%
+ 5%
FY17 FY16 FY15
NIM (%) Cash Profit
FY17
35.6%
0.0%
2.0%
FY16
36.4%
6.0% 6.0%
FY15
36.4%
5.0%
6.0%
CTI Costs Revenue
FY17
0.38%
0.26%
FY16
0.36%
0.28%
FY15
0.38%
0.25%
GIA as a % of GLA IP Loss Rate
2.70 ex
levy
1,553
1,455
1,321
510
497
474
FY17 FY16 FY15
MORE BUSINESS RELATIONSHIPS
AUSTRALIA DIVISION
MORE RETAIL CUSTOMERS MORE PRODUCTS PER CUSTOMER
BALANCED GROWTH
000’s
Retail Products Per Customer (%)
MORE CUSTOMERS, MORE ENGAGEMENT
66
6,000
5,000
4,000
3,000
+~300k
Sep-17 Sep-16 Sep-15
41.040.139.4
59.0
59.960.6
Sep-17 Sep-16 Sep-15
Commercial Customers (’000)
Commercial Cross Sell ($m)
FY17
6.1%
7.1%
FY16
6.5%
6.4%
Household Lending (System)
1
Household Lending (ANZ)
1
FY17
5.4%
6.2%
FY16
8.7%
5.1%
Household Deposits (System)
1
Household Deposits (ANZ)
1
Retail Customers (’000)
Multiple
Single
1.APRA System growth numbers up to Aug-17
MANAGING RISK
Offsets
+11%
AUSTRALIA DIVISION
CONSISTENT GROWTH FOCUSED GROWTH
RESPONDING TO REGULATORY CHANGES
$b
Retail FUM ($b) , PCP growth (%)
Home Loans FUM
RETAIL
67
277
259
244
144
135
126
FY17 FY16 FY15
+6%
+7%
+7%
+7%
Deposits NLA
FY17
$12b
$265b
Investor
33%
34%
37%
OO
63%
62%
58%
IO
31%
36%
36%
P&I
69%
64%
64%
FY17 FY16 FY15
FY17
0.11%
0.18%
FY16
0.10%
0.17%
FY15
0.09%
0.15%
GIA as a % of GLA IP Loss Rate (%)
$14b
FY17
$104b
$27b
Home Loans
+7%
Consumer Finance
-3%
Savings
+6%
Transact
+7%
IMPROVING CRWA PROFILE MANAGING RISK
AUSTRALIA DIVISION
BALANCED GROWTH GROWNG PRIORITY SEGMENTS
1
- Revenue Growth
1.Growth rates reflect Aug-17 pcp
2.On 1 November 2015, the Group sold the Esanda Dealer Finance portfolio with the majority of the business transferred by 31 December
2015
CORPORATE & COMMERCIAL BANKING
68
69
68
71
57
53
51
FY17 FY16 FY15
-4%
+1%
+4%
+9%
+15%
FY17 FY16
6968
71
58
59
61
FY17 FY16 FY15
Deposits NLA Lending Revenue
+12%
FY17 FY16
CRWA
2
NLA
2
FY17
1.43%
0.56%
FY16
1.34%
0.68%
FY15
1.35%
0.58%
IP Loss Rate (%) GIA as % of GLA
Health
Emerging Corporate
$b
$b
CRWA -2%
NLA +1%
AUSTRALIA DIVISION
DIGITAL
69
DELIVERING SUPERIOR EXPERIENCE FOR OUR
PEOPLE AND CUSTOMERS
TRANSLATING INTO BUSINESS OUTCOMES
Cutting Edge Experiences
Launched Fitbit Pay
TM
, Samsung Pay
TM
and delivered Touch ID,
instant card replacement for customers with a digital wallet and voice
biometrics for high value payments
.
Helping Australians buy a house
•In its first month alone, 40 thousand unique visitors have used
Real
As – Australia’s most accurate property price prediction
service – to better buy their home.
•Launched HOLA, an online home loan service enabling
cus
tomers to be “Auction Ready” within minutes – generating
$200m in FUM pipeline and now accounts for 25% of call centre
home loans volumes.
Helping Australians start and run their business
•Partnered with Employment Hero to help our Small Business
cus
tomers manage their employee base.
•Launched SBOS, reducing business loan processing times by up
to 65% and enabling “Walk out working” - real time account
opening for Deposit & Transaction products.
Leading with Data for our clients
Built a world class Institutional Data Science team enabling better
client experience and winning ANZ new client business.
Making banking easier for our customers
•Opened 41 new digital branches with a full range of digital banking
opti
ons including digital self-service.
•Launched PLCC, personal loans online in just a few steps, with an
answer within 60 seconds.
70%
75%
80%
85%
Sep-17 Sep-16 Sep-15
of value transactions
(deposits and withdrawals)
are now completed digitally
83%
digitally active customers
3.3m
of Australia retail sales are
completed digitally
21%
15%
20%
25%
Sep-17 Sep-16 Sep-15
2.7m
3.0m
3.3m
3.
6m
Sep-17 Sep-16 Sep-15
App logons weekly
15.8m
INSTITUTIONAL
DELIVERING ON OUR STRATEGIC AGENDA
70
1. Peak RWA was $199b in January 2015; 2.FTE and expense reduction from FY15 to FY17; 3. From October 2016 to September 2017; 4. Weighted average CCR of the portfolio;
5. Cash profit divided by average risk weighted assets from FY15 to FY17; 6. From peak at September 2015; excludes Papua New Guinea
Maintained our leading market position with customers,
while transforming the business (37% fewer
customers
6
)
Making targeted investment in priority channels and
products to improve customer experience and position
the business for profitable growth
CUSTOMER
FUTURE
FOCUSSED
22% fewer staff
2
and 5% reduction in costs
2
by
simplifying and streamlining the business
36% of Australia and 29% of New Zealand revenue
sourced from our International network
3
$50b (25%) reduction in RWA
1
by focussing on higher
return, on-strategy priority segments
Lowered the risk profile
4
of the business and improved
returns
5
of Institutional (15% higher) and the Group
SIMPLIFICATION
NETWORK
RWA
RISK & RETURN
INSTITUTIONAL
71
AUSTRALIA ASIA
1.Peter Lee Associates 2017 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand (issued in June and August 2017 respectively)
2.Greenwich Associates 2016 Asian Large Corporate Banking Study (issued in March 2017): ANZ ranked =No.4
#1 Lead Bank Penetration
1
Top 4 Corporate Bank
2
#1 Lead Bank Penetration
1
MAINTAINED OUR LEADING MARKET POSITIONS ACROSS OUR KEY GEOGRAPHIES
NEW ZEALAND
Bank 4
24%
Bank 3
24%
Bank 2
26%
ANZ
31%
Bank 5
28%
ANZ
28%
Bank 3
42%
Bank 2
43%
Bank 1
54%
Bank 4
9%
Bank 3
25%
Bank 2
28%
ANZ
46%
INSTITUTIONAL
72
REVENUE
1
TOTAL PROVISION CHARGES
CASH PROFIT
1
RETURN
1
1.Excluding FY16 large/notable Items (derivative CVA methodology change and restructuring costs): Institutional revenue was $3m (0%) lower; expenses were $130m (5%) lower; cash
profit was $564m (44%) higher; and revenue/average RWA was 44bps (15%) higher in FY17
2.Cash Profit divided by average Risk Weighted Assets
$m
$m
$m
$m
RISK WEIGHTED ASSETS
$b
A SIMPLER, BETTER-BALANCED AND HIGHER RETURNING INSTITUTIONAL
EXPENSES
1
1,098
929
913
FY15
5,748
5% -6%
FY17
5,414
FY16
5,180
-237
Revenue/Average FTE ($k)
Derivative CVA methodology change
Revenue
1,918
1,272
1,041
-231
FY15
1,911
76%
FY17
1,836
FY16
-7
-4%
149
168
198
-12% -25%
FY17 FY16 FY15
80
743
199
FY17 FY16 FY15
1.1%
FY16
2.8%
0.6%
FY15
3.0%
1.0%
13% 20%
FY17
3.4%
Return on Average RWA
2
Revenue/Average RWA
57%
92
FY15
2,873
50%
10
2,736
51%
FY16
2,958
-5% -8%
FY17
Cost-to-income ratio
Restructuring costs
Expenses
FY15/16 Large/Notable Items
Cash Profit
INSTITUTIONAL
73
REVENUE CONTRIBUTION
1,2
CREDIT RISK WEIGHTED ASSETS
MARKETS REVENUE
2
1.L&SF = Loans and Specialised Finance; Trade = Trade and Supply Chain; PCM = Payments and Cash Management
2.Excluding the $237m FY16 Derivative CVA methodology change, Institutional revenue was $3m (0%) lower; and Markets revenue was $321m
(16%) higher, in FY17
3.
Cash Profit divided by average Risk Weighted Assets
$m
$m
$b
1,795
1,655
1,413
1,080
1,139
1,156
645
516
430
2,170
2,356
1,798
5% -6%
FY17
5,414
59
FY16
5,180
72
FY15
5,748
58
Other L&SF PCM Trade Markets
634
573
663
559
1,1781,084
934
390396
9% 31%
FY17
2,356
229
FY16
1,798
-237
-102
FY15
2,170
23
Derivative CVA methodology change
Derivative valuation adjustments
Balance Sheet
Franchise Trading
Franchise Sales
42
99
86
73
33
38
28
-13% -27%
FY17
123
17
FY16
142
18
FY15
169
Other L&SF Trade
STRONG MARKETS AND PCM RESULT, WITH L&SF AND TRADE REPOSITIONED
INSTITUTIONAL
74
TOTAL RWA CRWA REDUCTION
REVENUE ON AVERAGE RWA
RETURN ON AVERAGE RWA
3
1.Lending movement comprises $10b reduction from active client management, $3b reduction from shorter tenor across the portfolio and $3b from reduction in counterparty credit risk on derivatives
2.Institutional ex-Ma
rkets net interest income divided by average credit risk weighted assets
3.
Cash profit divided by average risk weighted assets
$b
$b
$b
RISK ADJUSTED NIM
2
SMALLER, BETTER BALANCED AND HIGHER RETURNING
CREDIT RWA
169
142
123
29
26
-25% -12%
Sep 17
149
26
Sep 16
168
Sep 15
198
Other RWA CRWA
77
71
64
82
60
51
11
Sep 15
169
10
-27% -13%
Sep 17
123
8
Sep 16
142
International NZ Aus & PNG
FY17
1.1%
0.6%
3.0%
1.3%
FY16
0.6%
0.2%
1.5%
0.7%
FY15
1.0%
0.5%
2.5%
1.2%
Institutional
International
NZ
Aus & PNG
FY17
3.4%
2.6%
5.5%
3.7%
FY16
2.8%
2.5%
3.6%
3.0%
FY15
3.0%
2.4%
5.0%
3.3%
Institutional
International
NZ
Aus & PNG
FY17
2.11%
1.50%
2.49%
2.59%
FY16
1.99%
1.44%
2.38%
2.52%
FY15
1.94%
1.30%
2.46%
2.65%
Institutional
International
NZ
Aus & PNG
1
-13%
Sep-17
123
Data &
methodology
Risk
-2
Lending
1
-16
FX
-2
Sep-16
142
41%
46%
53%
51%
48%
41%
FY16
6%
FY15
6%
8%
FY17
Aus & PNG International NZ
2.75%
2.42%
2.49%
1.75%
1.35%
2.05%
FY15
2.06%
FY17
2.10%
1.68%
1.54%
FY16
2.20%
1.68%
NZ
Aus & PNG International
Institutional
3
FY17
210
Bank levy
-2
220
Deposit
Pricing
and Mix
Asset
Pricing
and Mix
-6
-5
FY16 Balance
Sheet Mix
4
INSTITUTIONAL
INTEREST EARNING ASSETS
1
VOLUMES AND MARGINS
2
NIM BY REGION
3
FY17 NIM
3
1. Average interest earning assets for L&SF and Trade; 2. Asset margins represents Loan Product, Specialised Finance and Trade. Deposit margins represents Payments and Cash
Management; 3. Institutional ex-Markets net interest margin; 4. Balance sheet mix represents the portfolio level change between interest earnings assets and interest earning liabilities. In FY17,
Institutional had higher interest earning liabilities than interest earning assets, and this mix change is dilutive to Institutional’s net interest margin
$b
bps
OPTIMISING PORTFOLIO MIX AND MANAGING MARGINS
75
94
107
119
FY17 FY16 FY15
Average Interest Earning Assets
1
FY17
0.72%
1.50%
FY16
0.64%
1.57%
FY15
1.53%
0.69%
Deposit margins
Asset margins
91
92
93
8
97
FY17
100
FY16
101
FY15
99
Average Customer Deposits
Average Deposits from Banks
INSTITUTIONAL
76
EXPENSES
1
FTE REDUCTIONS
2
PRODUCTIVITY
1
STP RATES
3
1. Excluding FY16 large/notable Items (derivative CVA methodology change and restructuring costs): Institutional expenses were $130m (5%) lower; revenue/FTE improved 13%; Opex/Assets
was 2 basis points lower; and personnel cost was $175m lower in FY17; 2. Senior Management and Other Staff include Central Functions. Central Functions comprises enablement and support
functions within Institutional; 3. Straight through processed (STP) volumes for Markets (Trade Capture, Confirmation, Settlement), Cash Management (Australia and NZ blended inward and
outward payments) and Trade (volumes via the Transactive Trade Portal)
$m
$k
EXPENSE DRIVERS
1
$m
DRIVING PRODUCTIVITY BY SIMPLIFYING AND STREAMLINING THE BUSINESS
FTE
Other Staff
-25%
-22%
Senior Mgmt
Sep-17 Sep 16 Sep 15
4,754
5,112
6,103
Sep 15
-7%
Sep 16
-22%
Sep 17
1,098
929
913
0.75%
0.68%
FY15 FY16 FY17
0.72%
20% 18%
Revenue/Average FTE
Operating Expenses/Average Assets
42
3
FY17 Other D&A
-267
Personnel
-8%
2,958
FY16
2,736
-32%
Central
Functions
FY15
-7%
57%
2,736
51%
2,873
10
FY17
-5%
50%
2,958
92
FY16
Expenses
Cost-to-income ratio Restructuring Costs
45%
93%
36%
Trade
88%
30%
Markets
84%
93%
88%
Cash
Management
79%
FY17 FY15 FY16
INSTITUTIONAL
77
EXPOSURE-AT-DEFAULT
1
NEW IMPAIRED ASSETS
INDIVIDUAL PROVISIONS TOTAL LOSS RATE
2
1.Net of credit risk mitigation such as guarantees, credit derivatives, netting and financial collateral. Includes amounts for 'Securitisation' and 'Other Assets' Basel asset classes
2.Credit Impairment Charges divided by average Gross Lending Assets
$b
$m
$m
$m
COLLECTIVE PROVISIONS
$m
DISCIPLINED PORTFOLIO MANAGEMENT AND BENIGN CREDIT ENVIRONMENT
GROSS IMPAIRED ASSETS
363
17%
39%
Sep 16
-1%
367
15%
34%
-10%
Sep 17
85%
18%
83%
82%
Sep 15
402
42%
Investment
Sub-investment
CRWA/EAD %
551
78
147
FY15
207
776
FY16
177
FY17
Oswal Settlement
Emerging Corporates
Individual Provisions
-97
-33
-8
FY15 FY16 FY17
509
728
409
557
272
321
42
960
Sep 15
120
1,405
Sep 16
31
624
Sep 17
-35% -56%
Aus & PNG NZ International
467
546
493
507
290
292
-29% +7%
Sep 17
1
760
Sep 15
112
1,151
Sep 16
19
816
Aus & PNG NZ International
0.14%
0.06%
0.56%
NEW ZEALAND
78
REVENUE TOTAL PROVISIONS
CASH PROFIT RETURN
1.FY16 includes large/notable items relevant to New Zealand Division. These are software capitalisation changes and restructuring costs
NZDm
NZDm
NZDm
NZDm
RISK WEIGHTED ASSETS
NZDb
FINANCIAL PERFORMANCE
1
EXPENSES
3,381
3,320
3,211
538
521
491
FY17 FY15 FY16
Revenue Revenue/Avg FTE ($k)
1,271
1,316
1,303
39.6%
37.6%
40.6%
FY15 FY16 FY17
Expenses CTI
83
129
59
FY15 FY16 FY17
1,459
1,361
1,339
FY15 FY17 FY16
61
63
60
Sep 17 Sep 16 Sep 15
2.22%
5.55%
FY16 FY15 FY17
5.31%
2.18%
5.32%
2.39%
Revenue/RWA
Return on RWA
NEW ZEALAND DIVISION
PRIORITIES
79
1.Source: McCulley Research Brand Tracking (online survey, first choice or seriously considered); six month rolling average
2.Source: Camorra Retail Market Monitor (RMM); six month rolling score
3.Source: RBNZ, September 2017 FUM market share as of June 2017
4.Source: RBNZ, September 2017 share of all banks as of August 2017. Changes i
n
RBNZ data reporting from February 2017 onwards has resulted in a step change in data vs prior periods
5.New Zealand Geography (NZD)
6.Dynamic basis, as of September 2017
PRIORITIES ACTIONS METRICS
SEP 15 SEP 16 SEP 17
STRATEGIC FOCUS
#1 in service
Grow customer
satisfaction and brand
consideration
Brand Consideration
1
45.5% 49.6% 50.9%
Migrant Banking Brand Consideration
1
66% 75% 74%
Retail Net Promoter Score
2
-0.6 8.6 12.3
KiwiSaver provider
3
24.4% 24.8% 24.5%
Home ownership and
running a small
business
Make banking easier for
home owners and small
business
Home Loans (Market Share)
4
31.6% 31.5% 31.1%
Home Loan (FUM)
5
$68b $73b $77b
Household deposits (Market Share)
4
31.2% 31.7% 34.1%
Business Loans (Market Share)
4
30.8% 29.6% 28.4%
Leading digital bank
Build a digital bank with
a human touch
Digitally active customers 1.2m 1.2m 1.3m
Value transactions completed digitally
75% 80% 82%
Leader in mobile banking
2
29% 32% 37%
Create a simpler better
balanced bank
Continue to automate,
simplify and
industrialise
Funding gap
5
$29.5b $29.3b $28.1b
NLA
5
$114.4b $120.7b $124.9b
Deposits
5
$84.9b $91.4b $96.8b
Mortgages LVR <80%
6
89.3% 93.3% 94.1%
FTE
6,472 6,317 6,207
CTI
40.6% 39.6% 37.6%
6,207
6,317
6,472
20%
40%
60%
FY17 FY16 FY15
NEW ZEALAND
BALANCE SHEET
1
PROFITABILITY & MARGIN
2
MORTGAGES
LOAN TO VALUE RATIO
3
FTE & CTI
2
1.NZ Geography
2.NZ Division
3.
Dynamic basis, as of September 2017
NZDb
STRATEGIC FOCUS – SIMPLER, BETTER BALANCED BANK
96.8
91.4
84.9
124.9
120.7
114.4
29.5
28.1
29.3
Sep 17 Sep 16 Sep 15
Deposits NLA Funding gap (RHS)
FTE CTI (RHS)
Sep 17
5.9%
94.1%
Sep 16
6.7%
93.3%
Sep 15
10.7%
89.3%
> 80% LVR mortgages < 80% LVR mortgages
80
Focus on customer deposit growth
encouraging New Zealanders to save
Simplification and automation
contributing to FTE and CTI reductions
Continue to de-risk the bank by
improving credit profile
1,459
1,339
1,361
2.0%
2.2%
2.4%
2.6%
FY17 FY16 FY15
Cash Profit NIM (RHS)
NIM stabilised 2H17
NZDm
#2 #2 #1
NEW ZEALAND
NET CUSTOMER GROWTH BRAND CONSIDERATION
1
RETAIL NET PROMOTER SCORE
2
BRAND CONSIDERATION – MIGRANTS
1.Source: McCulley Research Brand Tracking (online survey, first choice or seriously considered); six month rolling average
2.Source: Camorra Retail Market Monitor (RMM); si
x month rolling score
3.Source: Statistics NZ, 12 months to September
New Zealand Division (‘000)
STRATEGIC FOCUS – # 1 IN SERVICE
FY17
54
FY16
65
FY15
56
Net Retail acquisition (new less defection)
50.9%
49.6%
45.5%
Sep 16 Sep 17 Sep 15
ANZ brand consideration
71
70
61
0%
20%
40%
60%
80%
100%
Sep 17 Sep 15 Sep 16
Net migration
3
Brand consideration
1
(RHS)
81
12.3
8.6
-0.6
Sep 17 Sep 16 Sep 15
(‘000)
NEW ZEALAND
HOUSE PRICES
3
1.Source: ANZ Research
2.Source: ANZ, Statistics NZ
3.Source: ANZ, REINZ
4.Source: Roy Morgan, ANZ Research
ENVIRONMENT
82
GDP
1
2.8%
2.9%
2.6%
3.0%
2.5%
3.4%
2016 2015 2014 2019F 2017F 2018F
CONSUMER CONFIDENCE
4
100
110
120
130
140
14 15 17 13 12 18 16
-5
0
5
10
15
20
25
30
14 13 16 15 18 12 17
Annual % change (3 month avg)
Index
Annual average % change
0.0
0.5
1.0
1.
5
2.0
2.5
3.0
Mar
15
Sep
17
Sep
15
Sep
16
Mar
17
Sep
14
Mar
16
INFLATION
2
%
Actual CPI CPI Expectations
Actual Seasonally adjusted Auckland NZ ex-Auckland
NEW ZEALAND
RETAIL
1.Source: RBNZ, share of all banks as of August 2017
2.Source: RBNZ
, FUM market share as of June 2017
3.Source: FSC (Financial Services Council), share of all providers as of June 2017
MARKET SHARE
•Maintained our leading position in core banking products to support our vision of helping more Kiwis succeed
•Focus on well managed sustainable growth means our deposit growth has exceeded that of lending
Mo
rtgages
1
•Maintained our #1 market share position while continuing to lead the market in responsible lending
•Managed risk by taking a cautious approach in selected segments (overseas income earners and long term interest only loans)
Household deposits
1
•Continued to experience strong household deposit growth in an increasingly competitive marketplace with our emphasis on
encouraging New Zealanders to save
Credit cards
1
•Focus on productive business has seen our attention remain on interest bearing balances and share of spend remains strong
•Simplified our product offerings in the market, reducing the number of active consumer products from 11 to 5
KiwiSaver
2
•#1 KiwiSaver provider with almost 735,000 KiwiSaver members. FY17 FUM growth of $1.8b, taking total FUM to >$11b
Life insurance
3
•Continued to improve the quality of proprietary distribution, with bank channel lapse rates improving 140bps from last year
•Digital capabilities enhanced through market leading life and general insurance premium calculators
31.1%
34.1%
27.4%
9.5%
24.5%
83
COMMERCIAL AND AGRI CREDIT QUALITY
Dairy as a % of total NZ Geography
12.4% 11.9% 11.7% 10.9% 10.0%
AGRI PORTFOLIO (GLA)
1
NEW ZEALAND
AGRI MARKET SHARE
2
1.NZ Geography (Gross Loans and Advances)
2.Source: RBNZ
, changes in RBNZ data reporting from February 2017 onwards has resulted in a step change in data vs prior periods
NZDb
COMMERCIAL
20
10
0
FY17 FY16 FY15 FY14 FY13
84
Other rural Sheep & Beef Dairy
Aug 17
2.2%
0.6%
29.2%
1H17
-2.8%
-4.7%
29.7%
2H16
2.5%
0.6%
30.3%
1H16
1.4%
0.0%
30.9%
System growth ANZ growth ANZ market share
COMMERCIAL AND AGRI PORTFOLIO (GLA)
4%
6%
3%
12%
27%
48%
Manufacturing
Other
Entertainment, Leisure
& Tourism
Wholesale & Retail Trade
Property
Agri
2H15
0.56%
2H17
0.68%
1H17
0.94%
2H16
0.67%
1H16
0.47%
GIA AS % OF GLA
DIGITAL
NEW ZEALAND
DELIVERING SUPERIOR EXPERIENCE FOR OUR
PEOPLE AND CUSTOMERS
TRANSLATING INTO BUSINESS OUTCOMES
1.Banker Workbench is a frontline ANZ tool
2.As at point of time, September 2017
First Bank in NZ to launch Apple Pay
TM
Enabled self-service to report lost or stolen cards and
arrange a replacement card via goMoney
An enhanced and intuitive view of the Cards pages on
ANZ.co.nz
Apply & Open functionality in goMoney for Everyday
Accounts, Savings, Cards, Loans and KiwiSaver
Banker Workbench
1
won a Gold Award for User
Experience in 2017 NZ Design Institute Awards
20%
30%
40%
Sep 15 Sep 17
+8%
Sep 16
considered a leader in
mobile banking
#1
digitally active customers
1.3m
of value transactions
2
(deposits and withdrawals)
are now completed digitally
82%
70%
75%
80%
85%
Sep 15
+6%
Sep 17 Sep 16
1.1m
1.2m
1.3m
1.4m
Sep 15 Sep 16 Sep 17
+171k
85
-1,580
-1,446
3,824
4,077
-1,478
3,885
FY17
2,631
FY16
2,244
FY15
2,407
NEW ZEALAND GEOGRAPHY
1.FY16 includes large/notable items relevant to New Zealand Geography. These are software capitalisation changes, derivative credit valuation adjustment changes and restructuring costs
2.RWA is on an APRA basis
CASH PROFIT
FY17 2H17 1H17
NZDm NZDm NZDm
Income
4,077 2,029 2,048
Net interest
3,078 1,544 1,534
Other income
999 485 514
Expenses
1,446 728 718
PBP
2,631 1,301 1,330
Provisions charge
59 19 40
Cash profit
1,855 927 928
CTI
35.5% 35.9% 35.0%
Customer deposits
96,829 96,829 96,259
NLA
124,880 124,880 122,954
RWA
2
72,162 72,162 74,511
86
PROFIT BEFORE PROVISIONS
1
BALANCE SHEET
NZDb
NZDm
Expenses Revenue
114
121
125
85
91
97
Sep 17
222
Sep 16
212
Sep 15
199
NLA Customer Deposits
WEALTH AUSTRALIA
PRIORITIES
87
Notes: 1.Sourced from Wealth Analytics. Wealth solutions are matched only to customers with an existing retail relationship and customer number. Match rates vary between products. Excludes
$0 balance superannuation accounts, Oasis, Group Life, Inactive Share Trading accounts and legacy Employer Super customers/accounts; 2. As at 31 August 2017; 3. This includes the transition
of Closed Employer Super plans to ANZ Smart Choice (Employer) 4. Percentage is based on ADA member count transitioned. 5. Women in Management is defined as the proportion of female
staff in Group 1-4 roles; 6. Talent and Culture figures for FY15 are for Global Wealth and include Private Bank and Wealth outside of Australia; 7. FY17 engagement score based on MyVoice
Pulse survey, a significantly smaller sample size than previous years
Sources: Wealth Analytics; NMG
PRIORITIES ACTIONS METRICS
FY15 FY16 FY17
STRATEGIC FOCUS
Integrate into the
bank propositions
Embedded Wealth program
Wealth Solutions held by ANZ
customers
1
956k 993k 998k
2
Solutions uplift
1
n/a 3.9% 0.5%
2
Empower advisers
Grow for Advice
•Grow for Advice Ins
urance offer developed and piloted
•Client engagement tool, Wealth Report and Projection Modeller launched
•Launch of digital underwriting pre-assessment tool for advisers
Australia’s leading life
insurer
One Care repricing
Launch Essentials
Retail Life Inforce Premium ($m) 932
998 1,038
Retail Life New Business ($m) 103 94 88
Retail Lapse rate 13.3% 14.0% 14.1%
Simplify super and
investment
Launched Grow Wrap
Completed transition
program
Voyage & Grow Wrap:
Avg FUM ($m) 1,599
1,954 2,848
Inflows ($m) 430 542 645
Smart Choice:
Avg FUM ($m)
3
3,414 9,850 14,430
Legacy book transitioned ($m)
4
17% 57% 100%
Develop our people
Women in Management
5
41.2%
6
43.2% 45.5%
Employee engagement 73%
6
71% 69%
7
115
3
112311
21
157
Tax
Insurance
-21
-14
Funds
Management
Tax Insurance Expenses 2H16
-31
-6 -3
Corp &
Other
1H17 2H17 Corp &
Other
Funds
Management
Expenses
2
-3
REVENUE & COST TREND
WEALTH AUSTRALIA
PROFIT CONTRIBUTION
1.Embedded value includes Insurance and Funds Management businesses only. The product lines used are on the same basis as the Results Announcement in prior periods. This is
different to the product lines used in the strategic review. Embedded value is adjusted to allow for the impact of dividends and net transfers.
2.Decrease in expenses includes $7m in restructuring costs in 2H17. The underlying reduction in expenses was $14m.
$m
$m
FINANCIAL HIGHLIGHTS
88
EMBEDDED VALUE
1
$m
4,752
4,505
4,012
Sep-15
Sep-17 Sep-16
1,086
1,255
1,273
743
801
751
FY17 FY15 FY16
Expenses Income
• Adverse Insurance claims experience
• Margin decline due to rationalisation of
Funds
Management portfolio
• Lower realised gains due to rebalancing
of i
nvested capital
• Disciplined expense management
•Claims experience steady in 2H17
•Margin decline due to rationalisation of
Funds
Management portfolio has
stabilised
•Disciplined expense management
4,492
4,893
4,536
304
138
Experience
Deviations
Sep-17
-85
Net
Transfers
-291
Economic
Assumption
changes
Subtotal
-110
Value of
New
Business
Sep-16 Expected
Return
WEALTH AUSTRALIA
PRODUCT MIX IN INDIVIDUAL
LIFE INSURANCE IN-FORCE
RETAIL LIFE LAPSE RATES
EMBEDDED VALUE
1
1.Embedded value includes Insurance and Funds Management businesses only. The product lines used are on the same basis as the Results Announcement in prior periods. This is different
to the product lines used in the strategic review.
$m %
$m
INSURANCE
1,183
FY17
31%
FY16 FY15
30%
69%
1,093
30%
70%
70%
1,158
14.0%
13.3%
FY15
14.1%
FY16 FY17
89
COMPOSITION OF LIFE INSURANCE
IN-FORCE
$m
Underlying growth of 8%
Lump Sum Income Protection
1,614
FY17
28%
FY16 FY15
27%
72%
1,516
28%
72%
73%
1,603
Individual Group
WEALTH AUSTRALIA
FUNDS MANAGEMENT AVERAGE FUM
SMARTCHOICE ACTIVE MEMBERS
FUNDS MANAGEMENT FUM BY SOLUTION
FY17 FUNDS MANAGEMENT NETFLOWS BY
SOLUTION
1.Includes the transition of Closed Employer Super plans to ANZ Smart Choice (Employer)
$b
% growth
FUM $b
$m
FUNDS MANAGEMENT
49
4848
FY16 FY17
+3%
FY15
(444)
(2,255)
267
953
229
Wrap
(Voyage
& Grow)
ANZ
Smart Choice
Employer Retail OneAnswer
Frontier
Open solutions
1
Closed solutions
1
43%
31%
Employer
1
24%
26%
Retail
FY16 (vs FY15) FY17 (vs FY16)
16
1110
9
11
3
Sep-17
4
2
+97%
2
23
15
Sep-15 Sep-16
30
Wrap (Voyage & Grow)
ANZ Smart Choice
OneAnswer Frontier
Open solutions
1
Closed solutions
1
20
19
17
12
-40%
3
Sep-17
25
19
6
Sep-15 Sep-16
32
Legacy Employer
Legacy Retail
90
2017 FUL L Y EAR
RESULT S
TREASURY
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
REGULATORY CAPITAL
CAPITAL UPDATE
APRA COMMON EQUITY TIER 1 (CET1)
BASEL III CET1
1. Internationally Comparable methodology aligns with APRA’s information paper entitled International Capital Comparison Study (13 July 2015). Basel III Internationally Comparable ratios do
not include an estimate of the Basel I capital floor. 2.Based on APRA information paper “Strengthening banking system resilience - establishing unquestionably strong capital ratios” released in
July 2017 3.Based on Group 1 banks as identified by the BIS (internationally active banks with Tier 1 capital of more than €3 billion). The top quartile of this group was 14.4% as at December
2016. 4. Cash Earnings excludes ‘Large/notable’ items’. 5. Represents the movement in retained earnings in deconsolidated entiti es, capitalised software, EL v EP shortfall and other intangibles.
6. Other mainly due to implementation of ANZ’s new Australian mortgages capital model.
%
%
Capital Position
APRA CET1 ratio of 10.6% achieves APRA’s ‘unquestionably strong’
requirements well ahead of 2020 implementation.
Internationally Comparable
1
CET 1 ratio of 15.8% – above the APRA
Unquestionably Strong top quartile
2
calibration of 15% and Basel top
quartile
3
CET1 of 14.4%.
APRA Leverage ratio of 5.4% or 6.2% on an Internationally
Comparable basis.
Organic Capital Generation & Dividend
Relative to historical averages, higher organic capital generation for
FY17 (+229bp) and 2H17 (+118bp) was mainly driven by the reduction
in Institutional Credit RWA (from lending) of $16.4bn and $7.6bn
respectively.
Final dividend of 80 cents fully franked, consistent with transition to
revised 60%-65% payout strategy.
Capital Outlook
ANZ intends to neutralise shares allocated under the FY17 Final
Dividend Re-investment Plan (DRP) by acquiring an equivalent number
of shares on market.
Announced asset sales would increase the CET1 ratio by ~80 bps
(taking Sep-17 pro-forma CET1 ratio to ~ 11.4%).
As we receive the proceeds from the announced sales of non-core
businesses we will have the flexibility to consider additional capital
management initiatives.
10.57
0.09
0.05
0.25
0.88
10.13
9.61
-0.25
RWA
Business
Release
Capital
Deductions
5
Dividends
(Net
DRP)
Sep -16
-0.58
Other
6
Asia
Retail
Divestments
Mar -17 Cash
NPAT
4
Sep -17
10.6
10.1
9.6
15.8
15.2
14.5
Mar-17 Sep-16 Sep-17
APRA Internationally Comparable
Net Organic Capital
Generation +118bps
92
REGULATORY CAPITAL GENERATION
93
Organic Capital Generation
•Strong net organic capital generation in F
Y17
and 2H17. Reflects progress on the Group’s
strategy to reshape its business, including the
run-off of low returning assets in Institutional
.
Non -Core and non-recurring items
•Non-core and non-r
ecurring items in 2H17 and
FY17 largely reflect the impact of increased risk
weights following implementation of ANZ’s new
Australian mortgages capital model -22bps,
non cash adjustments and FX impacts, partially
offset by benefits from Asia Retail and Wealth
sale +9bps (Singapore, Hong Kong and China).
1. Cash profit for 2H17 and FY17 excludes ‘large/notable items’ (which are included as “as capital deductions” and “other non-core and non-recurring items”).
2. Represents m
ovement in retained earnings in deconsolidated entities, capitalised software, EL v EP shortfall and other intangibles.
COMMON EQUITY TIER 1
GENERATION (bps)
Second half
average
2H12 – 2H16
2H17
Full Year
average
FY12-FY16
FY17
Cash Profit
1
98 88 195 169
RWA movement (10) 25 (31) 54
Capital Deductions
2
(9) 5 (24) 6
Net capital generation 79 118 140 229
Gross dividend (63) (59) (133) (115)
Dividend Reinvestment Plan 14 1 25 7
Core change in CET1
capital ratio
30 60 32 121
Other non-core and non-
recurring items
(13) (16) (6) (25)
Net change in CET1
capital ratio
17 44 26 96
INTERNATIONALLY COMPARABLE
1
REGULATORY CAPITAL POSITION
94
1.Internationally Comparable methodology aligns with APRA’s information paper entitled International Capital Comparison Study (13 July 2015). Basel III Internationally Comparable ratios do
not include an estimate of the Basel I capital floor.
APRA Common Equity Tier 1 (CET1) – 30 September 2017 10.6%
Corporate undrawn EAD
and unsecured LGD
adjustments
Australian ADI unsecured corporate lending LGDs and undrawn CCFs exceed those applied in
many jurisdictions
1.4%
Equity Investments & DTA
APRA requires 100% deduction from CET1 vs. Basel framework which allows concessional
threshold prior to deduction
1.1%
Mortgages
APRA requires use of 20% mortgage LGD floor vs. 10% under Basel framework. Additionally,
APRA also requires a higher correlation factor vs 15% under Basel framework
1.3%
Specialised Lending
APRA requires supervisory slotting approach which results in more conservative risk weights
than under Basel framework
0.6%
IRRBB RWA APRA includes in Pillar 1 RWA. This is not required under the Basel framework 0.4%
Other
Includes impact of deductions from CET1 for capitalised expenses and deferred fee income
required by APRA, currency conversion threshold and other retail standardised exposures
0.4%
Basel III Internationally Comparable CET1 15.8%
Basel III Internationally Comparable Tier 1 Ratio 18.4%
Basel III Internationally Comparable Total Capital Ratio 21.2%
CET1 AND LEVERAGE IN A GLOBAL
CONTEXT
1. CET1 and leverage ratios are based on ANZ estimated adjustment for accrued expected future dividends where applicable. ANZ ratios are on an Internationally Comparable basis. All data
sourced from company reports and ANZ estimates based on last reported half/full year results assuming Basel III capital reforms fully implemented. 2. Includes adjustments for transitional AT1
where applicable. Exclude US banks as leverage ratio exposures are based on US GAAP accounting and therefore incomparable with other jurisdictions which are based on IFRS. 3. Based on
APRA information paper “Strengthening banking system resilience - establishing unquestionably strong capital ratios” release in July 2017. 4. Based on Group 1 banks as identified by the BIS
(internationally active banks with Tier 1 capital of more than €3 billion). The top quartile of this group was 14.4% as at December 2016.
Top Quartile Banks (CET1)
CET1
ANZ ranks in the top
quartile of the largest
internationally active
banks
4
and equally is
ranked in the top quartile
of internationally active G-
SIBs and D-SIBs
Leverage
ANZ compares
equally well on
leverage, however
international
comparisons are more
difficult to make given
the favourable
treatment of
derivatives under US
GAAP
95
10% 20% 5% 15% 25% 30%
Scotia
Bank of America
Wells Fargo
Societe Generale
OCBC
State Street
BNP Paribas
Goldman Sachs
JP Morgan
Erste Bank
Raiffeisen Bank International
UniCredit
Commerzbank
Citibank
Barclays
UOB
DBS
Credit Suisse
UBS
Intesa Sanpaolo
Standard Chartered
Deutsche Bank
Groupe BPCE
Rabobank
ING Group
RBS
HSBC
Cedit Agricole Group
BBVA
Morgan Stanley
Danske Bank
ABN Amro
SEB
Nordea
ANZ
Swedbank
Santander
RBC
TD
BMO
Svenska Handelsbanken
8% 6% 7% 3% 5% 4%
Santander
BNP Paribas
Credit Agricole Group
OCBC
SEB
Nordea
Danske Bank
Scotia
Barclays
Raiffeisen Bank International
TD
Credit Suisse
UniCredit
Societe Generale
BMO
RBC
Commerzbank
ING Group
BBVA
Swedbank
Intesa Sanpaolo
DBS
ABN Amro
Group BPCE
UBS
RBS
ANZ
Erste Bank
Svenska Handelsbanken
UOB
Standard Chartered
HSBC
Deutsche Bank
Rabobank
CET1 RATIOS
1
LEVERAGE RATIOS
1,2
APRA Top
quartile of
15.0%
3
Basel Top
quartile
14.4%
4
BALANCE SHEET STRUCTURE
96
1.Stable customer deposits represent operational type deposits or those sourced from retail / business / corporate customers and the stable component of Other funding liabilities.
2.Excludes trade lending, repo, interbank and bills of ac
ceptances.
3.Includes $5.3b mandat
ory and $2.7b discretionary liquids growth.
FUNDED BALANCE SHEET
Sep 2017
SOURCES AND USES OF FUNDS
Sep 16 to Sep 17
SHE & Hybrids
9%
Assets
Stable Customer
Deposits
1
53%
Funding
Term Funding
>12M 12%
Lending
69%
Other Customer
Deposits 10%
Other Short Term
Assets & Trade 7%
Other Short
Term 6%
Liquids
22%
Term Funding
<12M 2%
Short Term
Funding 8%
$786b $786b
Fixed
Assets &
Other 2%
0.1
22.0
19.0
Term Debt
Issuance
Stable
Customer
Deposits
1
Term Debt
<12 mths
-8.0
-1.2
Trade,
Other
Aseets
& Other
Funding
-18.0
FX on
Term Debt
-2.9
Term
Lending
& Fixed
Assets
2
-6.9
-4.1
Liquid
Assets
3
ST
Wholesale
Funding
Capital inc.
Hybrids
LONG TERM SHORT TERM
+$16.1b improvement to Long Term
funding position
-$ 16.1b reduction in Short
Term funding position
Sources of funds
Uses of funds
FUNDING & LIQUIDITY METRICS
97
All figures shown on a Level 2 basis. 1. ‘Other’ includes Sovereign, PSE and FI Deposits. 2. ‘Other Assets’ include Off Balance Sheet, Derivatives, Fixed Assets and Other Assets. 3. All lending other
than Residential Mortgages <35% Risk Weight. 4. Includes NSFR impact of self-securitised assets backing the Committed Liquidity Facility (CLF). 5. Net of other ASF and other RSF. 6. Comprised of
assets qualifying as collateral for the Committed Liquidity Facility (CLF), excluding internal RMBS and any assets contained in the RBNZ’s Liquidity Policy – Annex: Liquidity Assets – Prudential
Supervision Department Document BS13A12. 7. ‘Other’ includes off-balance sheet and cash inflows. 8. RBA CLF reduced by $6.5b, from 1 January 2017 (to $43.8b).
LCR COMPOSITION (AVERAGE)
FY17
Wholesale
Funding
$13b
Net Cash Outflows
HQLA 1 $128b
Customer
Deposits &
Other
7
$ 121b
Liquid Assets
Internal RMBS
$33b
HQLA 2 $5b
$181b
$134b
Other ALA
1
$15b
Other ALA
6
$15b
NSFR COMPOSITION
Sep 2017
$483b
$425b
Retail/SME
Capital
Other
Loans
3
Residential
Mortgages
4
<35%
Available
Stable Funding
Wholesale
Funding
& Other
1
Non Financial
Corporates
Required
Stable Funding
Liquids
and
Other Assets
2
MOVEMENT IN AVERAGE LCR SURPLUS (A$b )
FY16 to FY17
1
2
2
2
10
47
36
Wholesale
Funding
Other Corp / FI /
PSE
Retail /
SME
FY16 CLF
8
FY17
-6
Liquid
Assets
LCR Surplus
LCR Surplus
FY17
LCR 135%
FY16
LCR 126%
NSFR MOVEMENT
Sep 16 v Sep 17
1%
Other
5
Sep-
17
Sep-16
Proform
a
Derivative
s & Other
Assets
Sep-
16
Wholesal
e
Funding
1%
1%
2%
Corp /
FI /
PSE
2%
114%
Asia
Retail &
Wealth
108%
-1%
107%
Retail/SM
E
%
TERM WHOLESALE FUNDING PORTFOLIO
1
98
WEIGHTED AVERAGE TENOR
PORTFOLIO BY CURRENCY
1.All figures based on historical FX and exclude AT1. Includes transactions with a call or maturity date greater than 12 months as at the respective reporting date. Tier 2 maturity profile is
based on the next callable date.
years
PORTFOLIO BY TYPE
ISSUANCE
MATURITIES
$b
FY24+ FY23 FY22 FY21
16
FY20 FY19
23
FY18
18
FY17 FY16
32
FY15
19
FY14
24
FY13
24
3
21
22
13
15
RMBS Tier 2 Covered Bonds Senior Unsecured
5.3
5.5
4.9
3.3
3.2
2.8
3.93.9
3.5
FY17 FY16 FY15 FY17 FY16 FY15 FY17 FY16 FY15
Portfolio ex
<12 months
Total
Portfolio
Issuance
1%
9%
17%
73%
RMBS
Tier 2
Covered Bonds
Senior Unsecured
6%
22%
39%
33%
Asia (JPY, HKD, SGD, CNY)
UK & Europe (£, €, CHF)
North America (USD, CAD)
Domestic (AUD, NZD)
FOREIGN CURRENCY HEDGING
99
FY17 EARNINGS COMPOSITION (BY CURRENCY)
EARNINGS PER SHARE FX IMPACT
1
TRANSLATION RATES (INCLUSIVE OF HEDGES)
1.Underlying basis, inclusive of hedges.
•The key objective of hedging is to manage short term EPS
volatility arising from foreign currency earnings
•Hedges currently in place:
•FY18: ~70% of NZD
•FY19: ~50% of NZD
•FY20: ~5% of NZD
•Hedging has reduced the impact of a 5% movement of the
A
U
D on FY18 EPS to circa 1%.
PGK
Other
INR
IDR
CNY
MYR
NZD
25.0%
Other
9.0%
AUD
66.0%
-0.7%
-0.4%
2H17 v 1H17 FY16 v FY17
1.0
1.1
1.2
1.3
0.7
0.8
0.9
1.0
FY16 FY15 FY14 FY17 FY13
USD Translation (RHS) NZ Translation (LHS)
2017 FUL L Y EAR
RESULT S
RISK MANAGEMENT
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
RISK MANAGEMENT
TOTAL & COLLECTIVE PROVISION (CP) CHARGE
TOTAL PROVISION CHARGE CP BALANCE BY DIVISION
TOTAL PROVISION CHARGE COMPOSITION CRWA & CP AS A % OF CRWA
IP: Individual Provision charge CP: Collective Provision charge CIC: Total Credit Impairment charge
1. FY16 and FY17 CRWA includes the impact of regulatory changes and revised capital models on Australian mortgage CRWA. Excluding these: CP Balance as a % of CRWA increases to 88 bp;
2. 2H17 Eco Cycle charge includes a $75m overlay for retail trade
$m
$m
$m
$b
-142
-500
0
500
1,000
1,
500
2,000
0.0
0.1
0.2
0.
3
0.4
1,258
FY17
1,197
FY12
1,956
1,199
FY15 FY16
1,205
FY14 FY13
989
IP Charge CP Charge CIC as % Avg.GLA
1,000
0
2,000
3,000
Sep 17
2,662
Sep 16
2,876
AUS TSO Group Centre Insto. NZ Asia Retail & Pacific
Sep17 vs Sep16 $m
Divisional mvt (142)
FX impact (72)
2H14 1H15 2H15 1H16 2H16 1H17 2H17
CIC
461 510 695 918
1,038 720 479
CP Composition
Lending Growth
61 54 50 56
-59 -30 -18
Change in
Risk/Portfolio
Mix
-52 8 62 -30 50 -78 -91
Eco Cycle
2
-90 -7 -72 0
0 41 34
337
352350
309
288
0.88%
Sep’17
0.88%
Sep’15
0.79%
1
0.89%
0.82%
Sep’14
0.85%
1.00%
Sep’16 Sep’13
CP Bal. as a % of CRWA (excl. impact of mortgage risk weight changes)
Credit Risk Weighted Assets
CP Bal. as % of CRWA
101
RISK MANAGEMENT
INDIVIDUAL PROVISION (IP) CHARGE
ANZ HISTORICAL LOSS RATES IP CHARGE COMPOSITION
IP CHARGE BY SEGMENT IP CHARGE BY REGION
bps
$m
$m
$m
0
100
200
300
Sep
05
Sep
93
Sep
90
Sep
11
Sep
17
Sep
96
Sep
08
Sep
14
Sep
99
Sep
02
-1,000
0
1,000
2,
000
3,000
FY15
1,939
1,341
FY16 FY17
1,167
1,637
FY14
1,110
1,144
FY12 FY13
New Increased Writebacks & Recoveries IP Loss Rate Median IP Loss Rate (ex- current period)
0
500
1,000
1,500
2,000
1,341
FY16 FY15
1,144
1,939
FY14 FY13
1,110
FY17 FY12
1,167
1,637
Consumer Institutional Commercial
0
500
1,000
1,500
2,000
1,341
FY16 FY15
1,144
1,939
FY14 FY13
1,110
FY17 FY12
1,167
1,637
Australia APEA New Zealand
102
RISK MANAGEMENT
IMPAIRED ASSETS
CONTROL LIST GROSS IMPAIRED ASSETS BY DIVISION
NEW IMPAIRED ASSETS BY DIVISION GROSS IMPAIRED ASSETS BY EXPOSURE SIZE
1.Other includes Retail Asia & Pacific and Australian Wealth
Index Sep 09 = 100
$m
$m
$m
0
50
100
150
Sep
15
Sep
16
Sep
10
Sep
17
Sep
11
Sep
09
Sep
14
Sep
13
Sep
12
41
117
0
2,000
4,000
6,
000
0
50
100
150
3,173
47
55
2,889
55
FY16
2,384
FY14 FY17
2,719
FY15
87
5,196
4,264
FY12 FY13
Other
1
New Zealand
Institutional Group GIA/Group GLA (EOP) Australia
0
1,000
2,000
3,000
4,000
3,287
2,980
FY15 FY13 FY16
3,628
3,212
FY17
2,868
FY14
Institutional
Other New Zealand
Australia
0
2,000
4,000
6,000
2,384
2,889
2,719
FY14
3,173
FY15 FY16 FY13 FY17
5,196
4,264
FY12
< 10m 10m to 100m > 100m
Control List by No. of Groups Control List by Limits
103
bp
336.8
10.6
352.0
Sep’17 Risk
-4.4
Data/Meth.
Review
Lending
Mvmt.
-17.6
FX Impact
-3.8
Sep’16
CRWA MOVEMENT
RISK MANAGEMENT
TOTAL RISK WEIGHTED ASSETS
TOTAL RWA MOVEMENT
$b
$b
$b
RISK WEIGHTED ASSETS
150
158
181
210
214
23
21
18
17
29
32
38
39
37
123
142
169
151
138
Sep’17
391
Sep’16
409
Sep’15
402
14
Sep’14
362
Sep’13
340
Op-RWA
Mkt. & IRRBB RWA
CRWA (ex Inst.)
CRWA (Inst.)
391.1
408.6
Sep 17 Mkt. RWA
-0.8
IRRBB
RWA
-0.1
Op RWA
-1.4
Credit RWA
-15.2
Sep 16
104
GROUP EAD
1
& CRWA GROWTH
2
MOVEMENT
RISK MANAGEMENT
GROUP EAD
1
& CRWAs
GROUP EAD
1
MOVEMENT
1.Post CRM EAD, net of credit risk mitigation such as guarantees, credit derivatives, netting and financial collateral. Includes amounts for ‘Securitisation’ and ‘Other Assets’ Basel asset
classes
2.
Refers to lending movement, excluding FX Impact, Data/Meth Review and Risk
SEP 17 v SEP 16 ($b)
$b
SEP 17 v SEP 16 ($b)
RISK WEIGHTED ASSETS
917
910
919
813
741
37%
Sep’15 Sep’14
38%
Sep’17
39%
Sep’16
39%
38%
Sep’13
EAD CRWA/EAD %
917.01.018.0
910.4
FX Impact
-12.4
Sep’16 Sep’17 Lending Mvmt. Data/Meth.
Review
0.7
-6.1
3.4
0.5
19.5
-16.4
-5.3
0.2
-1.2
5.1
NZ Institutional Other AUS HL AUS Non HL
CRWA Gth. EAD Gth.
105
Category
% of Group EAD
% of Portfolio in
Non Performing
Portfolio Balance
in Non Performing
Sep 16 Sep 17 Sep 16 Sep 17 Sep 17
Consumer Lending
40.6% 41.5%
0.1% 0.1% $436m
Finance, Investment & Insurance
17.4% 17.2%
0.1% 0.0% $20m
Property Services
6.8% 6.6%
0.4% 0.3% $150m
Manufacturing
5.2% 4.5%
1.6% 0.7% $289m
Agriculture, Forestry, Fishing
3.9% 3.8%
1.5% 1.2% $393m
Government & Official Institutions
6.2% 7.2%
0.0% 0.0% $0m
Wholesale trade
3.1% 3.0%
0.5% 0.5% $136m
Retail Trade
2.4% 2.3%
1.2% 0.8% $170m
Transport & Storage
2.2% 2.0%
0.4% 0.7% $16m
Business Services
1.7% 1.7%
0.9% 1.1% $169m
Resources (Mining)
1.8% 1.5%
2.9% 1.2% $170m
Electricity, Gas & Water Supply
1.3% 1.3%
0.0% 0.1% $16m
Construction
1.4% 1.4%
2.0% 2.3% $290m
Other
6.0% 6.0%
0.4% 0.6% $208m
Total 100.0%
100.0%
$2,673m
Total Group EAD
1
$b $895b $903b
RISK MANAGEMENT
EXPOSURE AT DEFAULT (EAD) AS A %
OF GROUP TOTAL
1.EAD excludes amounts for ‘Securitisation’ and ‘Other Assets’ Basel classes and manual adjustments. Data provided is as at Sep 17 on a P
ost CRM basis, net of credit risk mitigation
such as guarantees, credit derivatives, netting and financial collateral. Note that APS330 disclosure is reported on a Post CRM basis from 30 June 2016
PORTFOLIO COMPOSITION
7.2%
3.8%
4.5%
1.7%
2.0%
2.3%
3.0%
6.0%
1.4%
1.3%
1.5%
17.2%
6.6%
41.5%
TOTAL GROUP EAD (Sep 17)
= $903b
1
106
RISK MANAGEMENT
RESOURCES EXPOSURE BY SECTOR
RESOURCES EXPOSURE CREDIT QUALITY (EAD) RESOURCES PORTFOLIO MANAGEMENT
TOTAL EAD (Sep 17): $14b
As a % of Group EAD (Sep 17): 1.5%
$b
GROUP RESOURCES PORTFOLIO
107
3.1
1.0
6.8
4.0
2.6
2.9
1.3
8.6
4.9
2.3
1.7
1.1
7.8
4.0
1.5
1.4
1.0
7.0
3.5
1.1
Services To Mining Other Mining Oil & Gas Extraction Coal Mining Metal Ore Mining
AUS NZ ASIA OTHER
6.5 0.7 2.8 4.0
Sep 15 Sep 16 Sep 14 Sep 17
80%
38%
46%
AUS
20%
54%
NZ ASIA
62%
EA & Other
15%
85%
Investment Grade Sub-Investment Grade
•Portfolio is skewed towards well capitalised and lower cost
resource producers. 29% of the book is less than one year
duration.
•Investment grade exposures represent 66% of portfolio vs.
65%
at Sep'16 and Trade business unit accounts for 16% of
the total Resources EAD.
•Mining services customers are subject to heightened
over
sight given the cautious outlook for the services sector.
PROPERTY PORTFOLIO MANAGEMENT
RISK MANAGEMENT
COMMERCIAL PROPERTY OUTSTANDINGS BY
REGION
1
COMMERCIAL PROPERTY OUSTANDINGS BY
SECTOR
1
1.As per ARF230 disclosure
2.APEA = Asia Pacific, Europe & America
$b
%
COMMERCIAL PROPERTY PORTFOLIO
24.4
25.7
24.8
25.5
24.7
8.4
8.8
9.5
9.5
10.2
4.7
3.9
3.6
2.7
2.3
8.0
7.5
7.0
6.5
6.0
5.5
5.0
8.5
4.5
Mar 16 Jun 17
37.2
Mar 17
37.7
Sep 16
37.9
38.3
Sep 15
37.5
100
80
20
60
40
Sep 16 Sep 14 Sep 14 Jun 17
•Australia volumes decreased by 3%, primarily driven by
tightening strategies in Residential development and Land
exposures. The decrease in Industrial exposure was offset by
increase in Office volumes, mainly due to rebalancing of
portfolio mix by one of the major REITs.
•New Zealand volumes grew 8% across the portfolio over the
9 m
onths of FY17, driven by investment lending to larger
commercial customers across Office, Retail and Industrial.
•APEA volumes for 2Q17 declined 15% qoq due t
o continued
RWA optimisation efforts to reduce lower returns lending, a
more competitive landscape and margin compression
evidenced in key markets of HK & Singapore.
New Zealand % of Group GLA
APEA Australia
Industrial Other Offices Tourism Residential Retail
108
RISK MANAGEMENT
AGRICULTURE EXPOSURE BY SECTOR (% EAD) NEW ZEALAND DAIRY CREDIT QUALITY
GROUP AGRICULTURE EAD SPLITS
2
1.Wholesale PD model changes account for 55 bps increase in FY16
2.Security indicator is based on ANZ extended security valuations
NZ$b
GROUP AGRICULTURE PORTFOLIO
Total EAD (Sep 17) As a % of Group EAD
A$34.0b 3.8%
12.1
12.412.4
11.911.6
12.0
12.7
14.0
1.9%
Sep 17 Sep 16
2.2%
Sep 15
1.1%
Sep 14
0.8%
Sep 13
0.9%
Sep 12
1.2%
Sep 11
1.6%
Sep 10
1.8%
NZ Dairy EAD Wt. Avg. Probability of Default
1
9.7%
12.4%
16.9%
9.2%
14.2%
37.7%
Forestry & Fishing/Agriculture Services
Horticulture/Fruit/Other Crops
Grain/Wheat
Sheep & Other Livestock
Beef
Dairy
0.3%
57.3%
42.4%
Intl. Markets New Zealand Australia
1.7%
98.3%
Impaired Productive
72.2%
17.8%
4.1%
5.8%
Fully Secured
80 - <100% Secured
60 - <80% Secured
<60% Secured
FY16 PD increase reflects customer downgrades
driven by continued low milk price; FY17 PD decrease
reflects subsequent impact of milk price recovery
109
RISK MANAGEMENT
NEW ZEALAND
NEW ZEALAND GEOGRAPHY GROSS IMPAIRED
ASSETS
NEW ZEALAND GEOGRAPHY TOTAL PROVISION
CHARGE
1
NEW ZEALAND DIVISION 90+DAYS DELINQUENCIES MORTGAGE DYNAMIC LOAN TO VALUE RATIO
2
1.Credit valuation adjustments (CVA) for customers with CCR10 are reported differently for cash profit and headline views of earnings. In the headline (statutory) view of provision reported
above, changes in CVA are reported in Other Operating Income, but in the cash profit view of earnings the change in CVA is reclassified to IP
2.Dynamic basis, as of September 2017
NZ$m
NZ$m
% of portfolio
368
491
419
708
955
1,451
1,818
0.0
0.5
1.0
1.5
2.0
2.5
Sep 15 Sep 11 Sep 17 Sep 16 Sep 13 Sep 12 Sep 14
GIA GIA as % GLA
100
200
0
-100
2H15 1H15 1H14 2H12
22
103
1H16
97
50
46
2H13 2H17 1H17
40
2H16
19
1H13
-39
44
30
1H12 2H14
31
99
2H11
105
CP Charge IP Charge
1.5
1.0
0.5
0.0
Sep
11
Sep
12
Sep
09
Sep
15
Sep
14
Sep
07
Sep
10
Sep
16
Sep
17
Sep
08
Sep
13
Home Loans Agri Commercial
4%
19%
13%
62%
2%
90%+
61-70%
0- 60%
71-80%
81-90%
110
RISK MANAGEMENT
111
INSTITUTIONAL PORTFOLIO SIZE & TENOR (EAD
2
)
ANZ INSTITUTIONAL INDUSTRY COMPOSITION
ANZ INSTITUTIONAL PRODUCT COMPOSITION
1. Country is defined by the counterparty’s Country of Incorporation. 2. Data provided is as at Sep17 on a Post CRM basis, net of credit risk mitigation such as guarantees, credit derivatives,
netting and financial collateral. Position excludes Basel Asset Class ‘Securitisation’, ‘Other Assets’, ‘Retail’ and manual adjustments. 3. ~88% of the ANZ Institutional “Property Services” portfolio
is to entities incorporated in either Australia or New Zealand. 4. Other is comprised of 48 different industries with none comprising more than 2.0% of the Institutional portfolio.
EAD (Sep 17): A$353
2
$b
EAD (Sep 17): A$353
2
ANZ INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION
1
)
50
350
250
0
150
300
100
400
200
39%
90%
20%
Total
Institutional
Asia
51%
61%
49%
80%
China
10%
APEA
Tenor <1 Yr Tenor 1Yr+
2%
8%
31%
8%
3%
3%
18%
24%
3%
Basic Material Wholesaling
Machinery & Equip Mnfg
Property Services³
Other
4
Finance (Banks and Central Banks)
Electricity & Gas Supply
Government Admin.
Food, Beverage & Tobacco Mnfg
Services to Fin. & Ins.
13%
12%
11%
1%
25%
15%
23%
Derivatives & Money Market Loans
Traded Securities (e.g. Bonds)
Contingent Liabilities &
Commitments
Other
Loans & Advances
Trade & Supply Chain
Gold Bullion
RISK MANAGEMENT
112
COUNTRY OF INCORPORATION
1
ANZ ASIA INDUSTRY COMPOSITION
ANZ ASIA PRODUCT COMPOSITION
1. Country is defined by the counterparty’s Country of Incorporation. 2. Data provided is as at Sep17 on a Post CRM basis, net of credit risk mitigation such as guarantees, credit derivatives,
netting and financial collateral. Position excludes Basel Asset Class ‘Securitisation’, ‘Other Assets’, ‘Retail’ and manual adjustments. 3. “Other” within industry is comprised of 46 different
industries with none comprising more than 3.2% of the Asian Institutional portfolio; Other product category is predominantly exposure due from other financial institutions.
EAD (Sep 17): A$91b
2
EAD (Sep 17): A$91b
2
EAD (Sep 17): A$91b
2
ANZ ASIAN INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION
1
)
4%
58%
3%
3%
22%
3%
3%
4%
5%
13%
24%
2%
22%
20%
14%
Other
Gold Bullion
Contingent Liabilities & Commitments
Trade & Supply Chain
Traded Securities (e.g. Bonds)
Loans & Advances
Derivatives & Money Market Loans
6%
6%
27%
6%
3%
15%
23%
3%
11%
Taiwan
Sth Korea
Japan
China HK
Other Singapore
India
Indonesia
Government Administration
Petroleum,Coal,Chem & Assoc Prod Mnfg
Communication Services
Machinery & Equip Mnfg
Finance
Basic Material Wholesaling
Other³
Pers & Household Good Wholesaling
RISK MANAGEMENT
113
COUNTRY OF INCORPORATION
1
ANZ CHINA INDUSTRY COMPOSITION
ANZ CHINA PRODUCT COMPOSITION
1.Country is defined by the counterparty’s Country of Incorporation
2.
Data provided is as at Sep17 on a Post CRM basis, net of credit risk mitigation such as guarantees, credit derivatives, netting and financial collateral. Position excludes Basel Asset Class
‘Securitisation’, ‘Other Assets’, ‘Retail’ and manual adjustments.
EAD (Sep 17): A$21b
2
EAD (Sep 17): A$21b
2
EAD (Sep 17): A$21b
2
ANZ CHINA INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION
1
)
8%
2%
12%
13%
65%
Other
Transport & Storage
Wholesale Trade
Manufacturing
Finance (Banks and Central Banks)
26%
6%
38%
6%
1%
7%
16%
Derivatives & Money Market Loans
Other
Gold Bullion
Trade & Supply Chain
Contingent Liabilities & Commitments
Traded Securities (e.g. Bonds)
Loans & Advances
China EAD
•Total China EAD of A$21b, with 39% or A$8.0b booked
onshor
e in China
Tenor
•~90% of EAD has a tenor less than 1 year
Ri
sk rating
•China exposure has a stronger average credit rating
com
pared to Australia.
Industry
•65% of China exposures to Financial institutions, with ~62% of
thi
s to China’s central bank and its Top 5 largest banks
Products
•Largest growth in ‘Derivatives & Money Market Loans’
(+
A$2.0b) mostly from increase in Money Market Loans whilst
reduction in ‘Other’ (A$2.9b) due to decline in Nostro accounts
•Within Loans and Advances ~69% have a tenor of less than 1
year
, down from ~74% as at Sep 16
RESIDENTIAL DEVELOPMENT
AUSTRALIAN COMMERCIAL PROPERTY
EXPOSURE
114
OVERVIEW
PROFILE (Sep 17)
•Overall Apartment Development limits reduced by $0.7bn (17%)
in the second half of 2017.
•Tightening st
rategies were introduced to moderate appetite for
Inner City Apartment development during 2015, with formal
changes made to lending guidelines for residential development
since Jan 2016. Strategies include increase in Pre-sales
coverage, with lower level of foreign buyers, and reduced LVRs.
•Limits to Inner City Apartment D
evelopment remained modest
accounting for 20% of total. This was spread mainly across
Melbourne, Brisbane and Sydney.
•Average qualifying pre-sal
es and LVRs were 104% and 57%
respectively for Inner City Apartment Developments.
•Outside of Inner City, Apar
tment Development limits were
weighted 59% towards NSW and otherwise diversified across
VIC, QLD and WA.
•Ongoing monitoring of development projects with regul
ar internal
management reporting, noting our facilities are continuing to be
repaid on time to date.
•Industry trends and risks are being closely monitored with
t
ightening strategies implemented where appropriate.
•$0.7b of inner city CBD apartment developments predominantly
in B
risbane and Melbourne.
36%
8%
34%
22%
Total Residential Limits: $9.5bn
Apartment Development:
$3.4bn
Investment
Apartment Development
Other Development
Residential & Subdivision
$0.7bn
Inner City
Apartment
Dev.
$0.3
QLD
$0.1
$0.1
$0.6
VIC
$0.3
Melb
$1.6 NSW
$0.3
Bris
Syd
WA
$b
$2.7bn
Other
Apartment
Dev.
2017 FUL L Y EAR
RESULT S
HOUSING
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
AUSTRALIA HOME LOANS
PORTFOLIO OVERVIEW
1. Home Loans (excludes Non Performing Loans, excludes offset balances) 2. YTD (12 months to) unless noted 3. New accounts includes increases to existing accounts and split loans (fixed and variable components of the same loan)
4. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classific ation at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to
advise ANZ of any change in circumstances. We have initiated a customer contact program to determine whether there are any inconsistencies in this approach. Outcomes and impacts will be determined in due course 5. Excludes
Equity Manager 6. Based on APRA definition ie includes Equity Manager 7. September Half to Date 8. Originated FY16 for FY16, originated FY17 for FY17 9. Unweighted 10. Includes capitalised premiums 11. Valuations updated to
Sep’17 where available 12. Source for Australia: APRA to Aug’17 13. % of Owner Occupied and Investment Loans that have any amount ahead of repayments. Includes Offset balances. Excludes Equity Manager. Excludes Non
Performing Loans. 14. Balances of Offset accounts connected to existing Instalment Loans 15. Low Doc is comprised of less than or equal to 60% LVR mortgages primarily for self-employed without scheduled PAYG income.
However, it also has ~A$500m of less than or equal to 80% LVR mortgages, primarily booked pre-2008 16. Write-off net of recoveries 17. Based on Gross Loans and Advances 18. Based on Group Cash Profit basis.
Portfolio
1
Flow
2
FY16 FY17 FY17
Number of Home Loan accounts
975k 1,008k 178k
3
Total FUM
1
$246bn $264bn $67bn
Average Loan Size
$252k $262k $379k
% Owner Occupied
4
62% 63% 66%
% Investor
4
34% 33% 32%
% Equity Line of Credit 4% 4% 2%
% Paying Variable Rate Loan
5
87% 83% 82%
% Paying Fixed Rate Loan
5
13% 17% 18%
% Paying Interest Only
6
36% 31% 27%
7
% Broker originated 49% 51% 56%
Portfolio
1
FY16 FY17
Average LVR at Origination
8,9,10
71% 69%
Average Dynamic LVR
9,10,11
52% 50%
Market Share
12
15.5% 15.7%
% Ahead of Repayments
13
73% 71%
Offset Balances
14
$24b $27b
% First Home Buyer 7% 7%
% Low Doc
15
5% 4%
Loss Rate
16
0.01% 0.02%
% of Australia Geography Lending
17
62% 64%
% of Group Lending
17,18
43% 45%
116
AUSTRALIA HOME LOANS
LOAN BALANCE & LENDING FLOWS
1
DYNAMIC LOAN TO VALUE RATIO
1,2,3
PORTFOLIO
1,4
& FLOW
5
COMPOSITION
1. Excludes Non Performing Loans. 2. Includes capitalised premiums 3. Valuations updated to Sep’17 where available 4. The current classification of Investor vs Owner Occupier, as reported
to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precisi on relies on the customers obligation to advise ANZ of any change in
circumstances. We have initiated a customer contact program to determine whether there are any inconsistencies in this approach. Outcomes and impacts will be determined in due course.
5. YTD (12 months to) unless noted 6. Includes capitalised premiums
$b
% of portfolio
PORTFOLIO TRENDS
117
58%
62%63%
66%
37%
34%
33%
32%
FY17
2%
FY17
4%
FY16
4%
FY15
5%
58%
54%
56%
61%
18%
22%
21%
19%
24%24%
23%
20%
FY17 FY16 FY15 FY14
31%31%32%
37%
29%
30%
31%
36%
17%
17%
16%
14%
16%
15%
14%
8%
5%7%7%7%
FY17 FY17 FY16 FY15
264
246
52
+7%
FY17 Repay
/ Other
-53
Redraw &
Interest
15
Net OFI
Refi
5
New Sales
exc Refi-In
FY16
50
40
30
20
10
0
95%+ 91-95% 81-90% 76-80% 61-75% 0- 60%
Sep-17
Mar-17
Sep-16
Mar-16
Sep-15
Mar-15
Sep-14
Mar-14
Sep-13
Mar-13
Sep-12
By purpose:
Portfolio
By origination LVR
6
:
Flow
By location:
Equity Investor Owner Occ SA WA QLD/NT NSW/ACT VIC/TAS
Flow
Flow
Portfolio
>80% LVR 80% LVR <80% LVR
AUSTRALIA DIVISION
PRODUCT 90+ DAY DELINQUENCIES
1
HOME LOAN DELINQUENCIES
1,3
HOME LOANS REPAYMENT PROFILE
4
HOME LOANS 90+ DPD BY STATE
1
1. Excludes Non Performing Loans 2. Comprises Small Business, Commercial Cards and Asset Finance 3. The current classification of Investor vs Owner Occupier, as reported to regulators
and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ of any change in
circumstances. We have initiated a customer contact program to determine whether there are any inconsistencies in this approach. Outcomes and impacts will be determined in due course.
4. % of Owner Occupied and Investment Loans that have any amount ahead of repayments. Includes Offset balances. Excludes Equity Manager. Excludes Non Performing Loans.
%
%
%
PORTFOLIO PERFORMANCE
118
0.0
0.5
1.0
1.5
2.0
NSW
& ACT
SA & NT VIC & TAS Portfolio WA QLD
2.0
0.5
0.0
1.0
1.5
Sep
14
Sep
17
Sep
16
Sep
15
Sep
12
Sep
13
Personal Loans
Consumer Cards
Home Loans
Corporate & Commercial
2
0.0
0.5
2.0
1.5
1.0
Sep
15
Sep
16
Sep
13
Sep
14
Sep
12
Sep
17
90+ Investor
90+ Owner Occupied
30+ DPD %
3%
Overdue
3% 3%
27%
1 Month
ahead
>= 3 Months
ahead
On Time
46%
13%
< 1 Month
ahead
4%
16%
26%
6% 6%
2 Months
ahead
47%
Mar-17 Mar-16 Sep-16 Sep-17 Sep-15 Mar-15
Sep 17
Mar 14 Mar 12
Sep 12
Mar 13
Sep 13
Mar 16
Sep 16
Mar 17
Sep 14 Sep 15
Mar 15
71% of accounts ahead of repayments
AUSTRALIA HOME LOANS
PAYMENTS IN ADVANCE
3
INTEREST ONLY FLOW COMPOSITION
2
1. Losses is based on New Individual Provision Charges 2. Based on APRA definition i.e. includes Equity Manager 3. Excludes Non Performing Loans; Includes offset balances
Average number of monthly payments ahead of scheduled repayments
Will meet APRA’s 30% limit
within agreed timeframe
AREAS OF INTEREST
119
•Serviceability assessment is based on ability to repay principal &
interest repayments calculated over the residual term of loan
•80% of IO customers have net income >$100k pa. (vs portfolio 64%)
•IO customers typically further ahead of repayments vs portfolio a
vg
•A
rrears levels are lower for Interest Only vs overall portfolio
•Recent policy and pricing changes have led to a reduction in IO
l
endi
ng resulting in ANZ meeting the APRA 30% threshold lending
requirement
42
31
Interest Only Portfolio
1H17 2H16 2H17
30%
HOME LOANS AND WA 90+ DELINQUENCIES
HOME LOAN INTEREST ONLY (IO)
WA OUTSTANDING BALANCE
$b
0
20
40
Sep15 Sep 14 Mar 14 Mar 15 Sep 13 Sep 16 Mar 17 Mar 16 Sep 17
WA 90+ Rate Portfolio 90+ Rate
0
1
2
Sep
16
Sep
17
Sep
14
Sep
15
Sep
13
WESTERN AUSTRALIA
•Greater focus on Acquisition & Collection management strategies
have been applied
•Exposure to WA has decreased since Mar-16 driven by the economic
environment and credit policy tightening (mining town lending, etc)
•Currently WA makes up 14% of portfolio FUM (and decreasing),
however makes up 30% of 90+ (and approximately half of portfolio
losses
1
)
•Tailored treatment of collection and account management strategies
•Conservative approach to provisions management
IO % of total flows
$b
AUSTRALIA HOME LOANS
UNDERWRITING PRACTICES AND POLICY CHANGES
1
120
1. 2015 to 2017 changes to lending standards and underwriting 2. Customers have the ability to assess their capacity to borrow on ANZ tools 3. Excludes investment lending for specific medical
practitioners (eligible Medicos) where LVR cap is a maximum of 90% of lending. 4. Residential Investment Loans 5 Equity Manager Accounts
•End-to-end home lending responsibility managed
within ANZ
•Effective hardship & collections processes
•Full recourse lending
•ANZ assessment process across all channels
Multiple checks during origination process
Quality assurance, info verification & policy reviews
Know Your Customer
Application
Income Verification
Income Shading
Expense Models
Interest Rate Buffer
Serviceability
LVR Policy
LMI policy
Valuations Policy
Collateral /
Valuations
Credit History
Bureau Checks
Credit
Assessment
Documentation
Security
Fulfilment
Income & Expenses
Pre - application
2
Repayment Sensitisation
Serviceability
Aug'15
Interest rate floor applied to new and existing mortgage lending introduced at
7.25%
Apr'16
Introduction of an income adjusted living expense floor (HEM)
Introduction of a 20% haircut for overtime and commission income
Increased income discount factor for residential rental income from 20% to 25%
ANZ Policy changes
Jun'15
LVR cap reduced to 70% in high risk mining towns
Jul'15
LVR cap reduced to 90% for investment loans
Sep'16
Withdrawal of lending to non-residents
Limited acceptance of foreign income to demonstrate serviceability and
tightened controls on verification
Dec'16
Tightening of acceptances for guarantees
Jan'17
Decreased maximum interest only term of owner occupied interest only loans to
5 years
May'17
The maximum interest only period reduced from 10 years to 5 years for
investment lending to align to owner occupier lending
Reduced LVR cap of 80% for Interest Only
3
lending
Interest only lending no longer available on new Simplicity PLUS loans (owner
occupier and investment lending)
Jun’17
Minimum default housing expense (rent/board) applied to all borrowers not
living in their own home and seeking RILs
4
or EMAs
5
Oct’17
Restrict Owner Occupier and Investment Lending (New Security to ANZ) to
Maximum 80% LVR for all apartments within 7 inner city Brisbane postcodes.
Restrict Investment Lending (New Security to ANZ) to Maximum 80% LVR for
all apartments within 4 inner city Perth postcodes
AUSTRALIA HOME LOANS
STRESS TESTING THE AUSTRALIAN MORTGAGE PORTFOLIO
121
1.Exposure at default
ANZ conducts regular stress tests of its loan portfolios to
meet risk management objectives and satisfy regulatory
requirements.
Stress tests are highly assumption-dr
iven; results will
depend on economic assumptions, on modelling
assumptions, and on assumptions about actions taken in
response to the economic scenario.
This illustrative recession scenario assumes significant
reduc
tions in consumer spending and business
investment, which lead to eight consecutive quarters of
negative GDP growth. This results in a significant
increase in unemployment and material nationwide falls
in property prices.
Estimated portfolio losses under these stressed
condi
tions are manageable and within the Group’s
capital base, with cumulative total losses at A$1.6b over
three years (net of LMI recoveries).
Assumptions Current Year 1 Year 2 Year 3
Unemployment rate 5.8% 9.0% 10.5% 11.5%
Cash Rate 1.5% 0.25% 0.25% 0.25%
Real GDP year
ended growth
3.1 -3.8% -2.4% 4.7%
Cumulative
reduction in house
prices
- -26.8% -38.3% -32.7%
Portfolio size
1
( A$b) 290 289 281 273
Outcomes Base Year 1 Year 2 Year 3
Net Losses (A$m) - 184 688 739
Net losses (bps) - 6 24 27
LENDERS MORTGAGE INSURANCE
ANZLMI HAS MAINTAINED STABLE LOSS RATIOS
122
FINANCIAL YEAR 2017 RESULTS
LMI & REINSURANCE STRUCTURE
ANZLMI MAINTAINS LOW LOSS RATIOS
1
1. Negative Loss ratios are the result of reductions in outstanding claims provisions. Source: APRA general insurance statistics (loss ratio net of reinsurance) ; 2. Quota Share arrangement - reinsurer
assumes an agreed reinsured % whereby reinsurer shares all premiums and losses accordingly with ANZLMI ; 3. Aggregate Stop Loss arrangement –reinsurer indemnifies ANZLMI for an aggregate
(or cumulative) amount of losses in excess of a specified aggregate amount. When the sum of the losses exceeds the pre-agreed amount, the reinsurer will be liable to pay the excess up to a pre-
agreed upper limit.
Australian Home Loan portfolio LMI and Reinsurance Structure
at 30 Sep 2017 (% New Business FUM)
Gross Written Premium ($m)
$173.6m
Net Claims Paid ($m)
$14.7m
Loss Rate (of Exposure)
2.4 bps
ANZLMI uses a diversified panel of reinsurers (10+)
comprising a mix of APRA authorised reinsurers and reinsurers
with highly rated security
Reinsurance is comprised of a Quota Share arrangement
2
with reinsurers for mortgages 90% LVR and above and in
addition an Aggregate Stop Loss arrangement
3
for policies
over 80% LVR
Quota Share
2
Arrangement
(LVR > 90%)
Aggregate Stop Loss
3
Arrangement on
Net Risk Retained
(LVR > 80%)
LVR 80% to 90% LMI
Insured
LVR > 90% LMI
Insured
2017 Reinsurance
Arrangement
10%
6%
-50
0
50
100
150
FY11 FY12 FY13 FY14 FY16 FY06 FY07 FY08 FY09 FY10 FY15
Industry ANZ LMI Insurer 1 Insurer 3 Insurer 2
LVR<80% Not
LMI Insured
84%
NEW ZEALAND MORTGAGES
PORTFOLIO OVERVIEW
1
1.New Zealand Geography
2.Average data as of September 2017
3.Source for New Zealand: RBNZ, as of August 2017. C
hanges
in RBNZ data reporting from February 2017 onwards has resulted in a step change in data vs prior periods
4.Excludes revolving credit fa
cilities
5.Low Documentation (Low Doc) lending allowed customers who met certain criteria to apply for a mortgage with reduced income confirm
ation requirements. New Low Doc lending ceased in 2007
Portfolio
Growth
FY16 FY17 FY17
Number of Home Loan accounts 511k 520k 1.7%
Total FUM NZ$73b NZ$77b 5.0%
Average Loan Size at Origination
2
NZ$300k NZ$285k -5.0%
Average Loan Size
2
NZ$143k NZ$148k 3.3%
% of NZ Geography Lending 58% 61% 290bps
% of Group Lending 12% 12% 10bps
% Owner Occupied 73% 73% 72bps
% Investor 27% 27% -72bps
% Paying Variable Rate Loan 24% 21% -346bps
% Paying Fixed Rate Loan 76% 79% 346bps
% Broker Originated 34% 35% 90bps
Portfolio
Growth
FY16 FY17 FY17
Average LVR at Origination
2
60%
59% -108bps
Average Dynamic LVR
2
44%
43% -106bps
Market Share
3
31.5%
31.1%
-38bps
% Paying Interest Only
4
24%
22% -154bps
% Paying Principal & Interest 76% 78% 154bps
% First Home Buyer N/A N/A N/A
% Low Doc
5
0.49% 0.44% -5bps
Mortgage Loss Rates (0.01%) (0.01%) -
Group IP Loss Rates 0.34% 0.21% -13bps
123
49%
52%
40%
37%
11%
11%
FY17 FY16
45%46%
23%
22%
FY16
9%
9%
FY17
6%
7%
10%
10%
7%
6%
NEW ZEALAND
FLOW
2
PORTFOLIO
MARKET SHARE
4
ANZ MORTGAGE LVR PROFILE
5
1.New Zealand Geography
2.Retail and Small Business Banking mortgage flow. Branch includes Small Business Banking Managers (FY16 restated)
3.Other includes loans booked centrally (Business Direct, Contact Centre, Lending Services, Property Finance)
4.Source: RBNZ, changes in RBNZ data reporting from February 2017 onwards has resulted in a step change in data vs prior periods
5.D
ynamic basis, as of September 2017
HOME LENDING
1
Other³
Other Nth Is.
Other Sth Is. Wellington
Christchurch Auckland
1H17
31.1%
31.5%
1H16
4.0%
31.6%
4.1%
2.0%
31.1%
2H16
4.5%
5.0%
2.4%
3.1%
2.3%
Aug 17
System growth ANZ market share ANZ growth
Broker Mobile mortgage managers Branch
76%
79%
24%
21%
FY16 FY17
Variable Fixed
4%
19%
13%
62%
2%
90%+
61-70%
0- 60%
71-80%
81-90%
124
2017 FUL L Y EAR
RESULT S
ECONOMICS
AUSTRA LIA A ND NEW Z EA L A ND
BA NK ING G RO UP L IMITED
ECONOMICS
ANZ GLOBAL LEAD INDEX GLOBAL
AUSTRALIA AUSTRALIAN STATE GROWTH
%yoy
GDP
126
-10
-5
0
5
NSWVICTASSAQLD WA
201420152016
-1
0
1
2
3
4
5
6
0001020304050607080910111213141516171819
% change y/y
GDP % q/qGDP y/yPrevious forecasts
forecasts
-3
-2
-1
0
1
2
3
4
5
6
7
0002
0406
0810
1214
1618
ppt contribution
USOther DevelopedChinaIndiaOther Emerging
forecasts
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
11131517
Contribution to ANZ GLI
USeuro areaJapanChinaANZ GLI
Above trend
activity and rising
Below trend activity
and falling
ECONOMICS
BUSINESS CONDITIONS AND CONFIDENCE BUSINESS CONDITIONS BY STATE
CONSUMER CONFIDENCE JOBS GROWTH AND UNEMPLOYMENT
BUSINESS & CONSUMER CONDITIONS
127
Source: NAB, ANZ Research
Source: Roy Morgan, ANZ Research
Source: ABS, ANZ Research
2.7
3.2
3.7
4.2
4.7
5.2
5.7
6.2
6.7
7.2
-60
-30
0
30
60
90
120
150
180
210
000102030405060708091011121314151617
%
000s per month
Trend
Unemployment rate (RHS)
Employment growth (000s, LHS)
-40
-30
-20
-10
0
10
20
30
40
050709111315170709111315
Net balance of respondents, 3
-
month average
NSWVICQLDWASATAS
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
000102030405060708091011121314151617
Business conditionsBusiness confidence
Index
ECONOMICS
SUPPY DEMAND BUILDING APPROVALS
HOUSE PRICES MORTGAGE RATES VS HOUSE PRICING
HOUSING
128
Source: ABS, ANZ Research
4
5
6
7
8
9
10-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
22
969800020406081012141618
%
% change, Y/Y
House prices (LHS)
Mortgage rate ('blended' investor/OOH, standard variable), advanced 6 months,
inverted (RHS)
0
2
4
6
8
10
12
14
16
18
20
22
9092949698000204060810121416
Dwelling approvals ('000s per month)
Total dwellings (sa)Total dwellings (trend)
Houses (sa)Houses (trend)
Flats/units/townhouses (sa)
Flats/units/townhouses (trend)
-150
-100
-50
0
50
100
150
200
8688909294969800020406081012141618
Dwellings ('000)
Housing Balance - ActualHousing Balance - Unchanged Headship Ratios
Forecast
Surplus
Shortage
0
200
400
600
800
1,000
1,200
1,400
96979899000102030405060708091011121314151617
House prices ($000, sa)
Australia capital city averageSydneyMelbourne
BrisbaneAdelaidePerth
HobartDarwinCanberra
* Seasonally adjusted by ANZ Research
Source: CoreLogic, ANZ Research
ECONOMICS
HOUSING AFFORDABILITY DEBT & DEBT SERVICING
HOUSEHOLD DEBT & DEPOSITS
1
ASSET GROWTH CHART
Sources: 1. ABS, RBA. Housing Debt refers to ratio of housing debt to annualised household disposable income. Deposits include transferrable and other deposits.
HOUSING AFFORDABILITY
129
Source: ABS, CoreLogic RP Data, ANZ Research
Source: RBA, ANZ Research
Source: CoreLogic RP Data, ANZ Research
0
2
4
6
8
10
12
14
0
20
40
60
80
100
120
140
160
180
200
9092949698000204060810121416
% household income
Household debtHousehold interest payments (RHS)
% of household income
-10
-5
0
5
10
15
20
060708091011121314151617
Total housing prices (y/y % change)
Australian capital cities
Australia rest of state/territory
* Seasonally adjusted by ANZ Research
ECONOMICS
INFLATION VS RBA TARGET RBA CASH RATE
UNIT LABOUR COSTS VS DOMESTIC MAKRET
SERVICES INFATION
G7 INFLATION
INFLATION AND INTEREST RATES
130
0
1
2
3
4
5
6
03
0507
0911
1315
1719
y/y % change
Headline CPIUnderlying CPI*
* Average of trimmed mean and weighted median
RBA target band
ANZ
forecasts
Source: ABS, RBA, ANZ Research
Source: Bloomberg, RBA, ANZ Research
-2.5
0.0
2.5
5.0
7.5
10.0
0
1
2
3
4
5
00020406081012141618
% change y/y
% change y/y
Domestic market services inflation (lhs)*Non-farm unit labour costs, forward 1 year, (RHS)
* Excludesdeposit & loan facilities to June quarter 2011, housing services
Source: ABS, NAB, ANZ Research
1
2
3
4
5
1112131415161718
RBA cash rate, per cent
ANZ forecastsCurrent market pricing
forecasts
ECONOMICS
GSP / GDP EMPLOYMENT
EMPLOYMENT BY SECTOR HOUSE PRICES
%yoy
WESTERN AUSTRALIA
131
-2
-1
0
1
2
3
4
5
6
060708091011121314151617
Western AustraliaAustralia (excluding Western Australia)
y/y % change (trend)
-20-10010203040
TOTAL
Construction
Education and Training
Health Care and Social Assistance
Agriculture, Forestry and Fishing
Accommodation and Food Services
Public Administration and Safety
Financial and Insurance Services
Rental, Hiring and Real Estate Services
Electricity, Gas, Water and Waste Services
Transport, Postal and Warehousing
Wholesale Trade
Administrative and Support Services
Information Media and Telecommunications
Arts and Recreation Services
Other Services
Mining
Retail Trade
Manufacturing
Professional, Scientific and Technical Services
'000 change in employment over the year to Aug-17
Source: ABS, ANZ Research
Source: ABS, ANZ Research
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
060708091011121314151617
House prices (y/y % change)
PerthWestern Australia - Rest of state
* Seasonally adjusted by ANZ Research
Source: CoreLogic, ANZ Research
ECONOMICS
AUSTRALIA FORECAST TABLE
132
2012 2013 2014 2015 2016 2017 2018
Australia – annual % growth GDP
3.6 2.1 2.8 2.4 2.5 2.3 2.9
Domestic final demand 4.2 0.7 1.3 1.3 1.6 2.6 2.8
Headline CPI 1.8 2.4 2.5 1.5 1.3 2.0 2.3
Core CPI 2.2 2.5 2.5 2.2 1.5 1.9 2.0
Employment 1.2 0.9 0.7 1.9 1.6 2.0 2.1
Wages 3.6 2.8 2.6 2.2 2.0 2.1 2.5
Unemployment (ann. avg) 5.2 5.7 6.1 6.1 5.7 5.6 5.3
Current Account (% of GDP) -4.1 -3.2 -2.9 -4.7 -2.7 -1.8 -2.3
Terms of Trade -10.1 -3.7 -7.5 -11.6 0.1 13.3 -0.6
Private Sector Credit 3.9 3.4 5.2 6.3 5.9 5.0 5.4
Housing 4.9 4.9 6.5 7.3 7.3 6.6 6.5
Business
3.2 1.5
3.6 5.6 5.8 3.2 4.1
Personal -0.9 0.4 0.9 0.7 -1.0 -1.3 -0.5
RBA cash rate (% year end) 3.00 2.50 2.50 2.00 1.50 1.50 2.00
3yr bond yield (% year end) 2.67 2.95 2.13 2.02 1.96 1.85 2.05
10 year bond yield (% year end) 3.27 4.24 2.74 2.88 2.77 2.50
2.90
AUD/USD (year-end value) 1.04 0.89 0.82 0.73 0.72 0.73 0.71
ECONOMICS
1.Quarterly GDP are annualised growth rates.
2.Fiscal years e.g. 2017 is year-ending
March 2018. New GDP base year is 2011-2012.
3.NZ GDP numbers are production based GDP(P).
Source: Consensus Economics, Tomson Reuters Datastream, ANZ Research.
GLOBAL & ASIA FORECAST TABLES
133
GROSS DOMESTIC PRODUCT (YEAR-AVERAGE % CHANGE)
1998-2007 average 2008-2016 average 2017F 2018F 2019F
United States 3.1 1.1 2.2 2.3 2.0
Euro area 2.4 0.0 2.1 1.8 1.9
United Kingdom 2.9 0.1 1.7 1.4 1.6
Japan 1.0 0.2 1.4 0.8 1.0
China 10.0 8.9 6.7 6.3 6.3
Korea 4.9 3.1 3.0 2.6 2.6
Taiwan 5.0 3.1 2.2 2.3 2.3
Indonesia 4.6 5.9 5.2 5.4 5.4
Thailand 3.9 2.9 3.5 3.5 3.5
Hong Kong 3.9 2.7 3.2 2.6 2.6
Malaysia 4.3 4.6 5.3 5.0 5.0
Singapore 5.6 5.0 2.6 2.6 2.6
Philippines 4.2 5.2 6.5 6.1 6.1
Vietnam 6.8 5.8 6.5 6.5 6.5
East Asia ex. Japan 7.2 7.1 5.9 5.8 5.8
India
2
7.2 7.1 6.2 7.6 7.6
Australia 3.6 2.6 2.3 3.0 3.0
New Zealand
3
3.4 1.7 2.6 2.8 2.8
World 4.3 3.3 3.6 3.8 3.8
Our Shareholder information
shareholder.anz.com
DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information
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These should be considered, with or without professional advice when deciding if an investment is appropriate
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hereof to reflect the occurrence of unanticipated events.
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Group General Manager Investor Relations
+61 3 8654 7749
+61 412 047 448
jill.campbell@anz.com
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+61 421 613 819
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Senior Manager Investor Relations
+61 3 8655 3261
+61 435 965 899
katherine.hird@anz.com
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Manager Shareholder Services & Events
+61 3 8654 7682
+61 411 143 090
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Further Information
---
News Release
For release: 26 October 2017
Transcript: 2017 Full Year Result bluenotes
interview with ANZ CEO Shayne Elliott
The following is a transcript of a video interview with ANZ Chief Executive Officer Shayne
Elliott discussing ANZ’s 2017 Full Year result which was released today.
The interview was conducted by Andrew Cornell Managing Editor of BlueNotes, ANZ’s digital
publication for news, opinion and insight and can be viewed at www.bluenotes.anz.com
Andrew Cornell Morning Shayne. Thanks again for joining us on bluenotes on the morning of
the bank’s full year result. A very solid result looking at all the numbers.
Return on equity is up. Earnings per share up. Capital up. Costs are down.
Where did you see the strengths in this result?
Shayne Elliott Well exactly what you just said. I mean I think this is tremendous progress
for the Group and it’s really showing that the strategy that we have and the
execution focus is delivering and it’s delivering results for customers, but
importantly for shareholders.
So I think the strength here is, you know we have said for some time, we
saw the operating environment going to be much more different than what it
has in the last 20 or 30 years, and we needed to get ready to deal with that.
And so we’ve been transforming our business. We’ve been reshaping the
bank. We’ve been changing the way we work and been really focussed on
execution and speed. And the results, as you mention, high return on equity,
costs down for the year – first time since 1999 we’ve actually had absolute
costs come down and of course the stronger capital level, lets’ not forget
that. That’s really important, so we’ve strengthened the balance sheet at the
same time. So I’m really pleased with the pace and the degree of the
transformation.
Andrew Cornell Nevertheless, as you say, this is in part as a response to a very challenging
environment. So where do you see maybe weaknesses or areas where you
want to focus more in the results?
Shayne Elliott Sure. I think for the industry the first thing people are going to focus on at
this part of the cycle is revenue growth, or the lack there of. The reality is, it
is hard out there you know. It is a competitive market, we’ve got our
traditional competitors, we’ve got new competitors, consumers are really
voting with their feet – and good on them, and that’s what they should be
doing.
So revenue growth is a little bit harder to come by. That’s why we have been
transforming ANZ, getting ready for that. Really making sure that we put our
resources – whether they are intellectual resources, our financial resources –
to work where we can make a difference and we can win.
And so, tough times. But that’s exactly why we are in this transformation
phase.
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
Andrew Cornell And indeed, in the actual announcement you talk about 2016 as being the
year of reshaping and this is now the period of execution. Does that mean
the reshaping has finished and the concentration is all on execution now?
Shayne Elliott No. I mean, you know reshaping is going to be a bit of a constant because
we live in a fast-changing world. The expectations of the community change
fast, the expectations of our customers change fast and so we constantly
have to be changing.
What we’re trying to build at ANZ is really an agile, flexible approach that
allows us to respond to those needs really quickly.
But, from a technical point of view if you think about the rebalancing of our
capital mix, we’re more than halfway through, that’s certainly true. We’ve
kind of broken the back of it. But it’s not a skill we want to forget, we don’t
want that skill to atrophy away. We want to keep reinvesting and making
sure we’re constantly reshaping and responding to market conditions.
Andrew Cornell And one of the measures of the achievement is return on equity. Another is
earnings per share, which is particularly strong. Is EPS a big focus now?
Shayne Elliott Yes. You may have noticed we’ve talked about it a little bit more in this result
than perhaps in the past. And that’s really a reflection of us being out and
listening to our shareholders, particularly retail shareholders, it’s something
they really focus on as a measure of success. And so, yes we talk about it,
and I understand it, it’s a great indicator of real value creation for
shareholders. So yes, we are focussed on making sure – because it reflects
not only good earnings story, but also good capital management. Making
sure, you know, we don’t have too many shares out there on issue.
Andrew Cornell And indeed capital has been a very strong focus for the industry and indeed
for regulators since the financial crisis. In Australia the Murray Inquiry said
banks had to be unquestionably strong. Is ANZ now unquestionably strong
from that perspective?
Shayne Elliott Yes. And one of the big things we’ve had as an industry this year was APRA
giving kind of a an unqualified definition of what that is from a capital
perspective saying it’s ten and-a-half per cent on a common equity tier one
basis. And we, the banks, the industry has to be there at the beginning of
2020. And the good news for ANZ and for our shareholders is actually, as you
see in this result, we’re already there. So we’re there two years ahead of
schedule, so we’re very, very well capitalised. And why is that important?
Because it gives us more options about the future than perhaps some of our
peer group.
Andrew Cornell And as shareholders, and I’m a shareholder, we always want more. You talk
about capital management, does that mean capital back to shareholders at
some point?
Shayne Elliott Yes, essentially. I mean, what we’re talking about here is we’ve got to run
the bank prudently. We’ve got to have sufficient capital both, not just to
meet the regulators’ requirements, but what we think the right amount of
capital has and we’ve got to get that right. But, because of our strategy,
because of the rebalancing we are freeing up capital. So as we sell things we
get the funds and so what we’ve said is there’s no real incentive for us to sit
on lazy capital, so when we do get those proceeds – and we haven’t really
received that money from any of those sales just yet – when we do, we
would be in a position to consider returning that to shareholders. And that’s
usually through, you know maybe through a buy-back or something like that.
Andrew Cornell In your outlook you talked about being optimistic, but still cautious given
what’s happening geopolitically and around the world. And you raised the
issue of household indebtedness as a particular area of concern, but you
seem much more sanguine about the risk in the mortgage book than say
APRA, the regulator is.
Shayne Elliott I don’t know that we’re more sanguine. I mean, it’s a big exposure for any
bank so we watch it like a hawk. I mean it’s something we look at the data
literally on a daily basis to try and understand you know, it’s in our interest
to make sure that tour customers borrow responsibly and so we do look at
that.
Household debt levels are high. They’re higher than they have been in both
Australia and New Zealand. And they’re reasonably high on an international
basis. There’s some good reasons why that’s ok, but we don’t want to be
complacent about it. So, I think we get paid to be cautious and to be
prudent. That’s the nature of banking.
Andrew Cornell The return on equity was another very strong story, but in your comments
you mention that it may well have been three percentage points higher had it
not been for recent waves of regulatory impost and taxes and things. So
that’s 300 basis points off your capital; is that a sort of one off or do you
think those sorts of discounts are continuing to apply?
Shayne Elliott So what we said there was is we just look at the impact of the changing
regulation and taxes over the last two years. And that’s a period where APRA
has required us to have more capital, to hold more liquidity. And of course,
we had the imposition of the Australian Bank Tax. Those three combined, all
else being equal, would mean the ROE of the industry would drop about three
per cent. That’s a big, that’s a big number. Now the good news is that ANZ
was ahead of the game, you know, we’ve always, part of our reshaping –
getting our self kind of match-fit has been to help mitigate some of those
pressures. I imagine that those things will continue to put pressure on our
industry, but not to the same magnitude again. I think again we’re way past
the middle of that, but that’s why we have to be match-fit. That’s why we
have to be lean. That’s why we really have to be on top of our game.
Andrew Cornell And one thing that you did announce at the half year profit was a new agile
way of working, particularly for the Australian bank. And that’s part obviously
of the cost – drive the efficiency, drive the agility, drive. How is that
program progressing?
Shayne Elliott Well it’s a really important program. And why? It goes back to where we
talked about before, this need – essentially the need for speed – you know,
we need to be out there responding to our customers’ expectations,
community expectations at pace. And so that puts it ... we have to think
about the way we organise ourselves, the way we work to enable that. And
that’s what this agile way of working is about. We kicked it off early in the
year, we’ve done a lot of planning. It’s really quite exciting to be in that
division at the moment, there’s a lot of buzz, there’s lots of excitement about
what the future holds.
Early in 2018 we will be moving to this way of working so, we’re still, we’re
at the end of the planning phase we’re appointing people into jobs and, you
know, it’s going to be a really terrific differentiator for ANZ and I know our
customers will notice and get the benefit. And, our people will as well.
For media enquiries:
Stephen Ries; +61-409-655551
---
News Release
For release: 26 October 2017
Transcript: 2017 Full Year Result bluenotes
interview with ANZ CFO Michelle Jablko
The following is a transcript of a video interview with ANZ Chief Financial Officer Michelle
Jablko discussing ANZ’s 2017 Full Year result which was released today.
The interview was conducted by Andrew Cornell Managing Editor of BlueNotes, ANZ’s digital
publication for news, opinion and insight and can be viewed at www.bluenotes.anz.com
Andrew Cornell Good morning Michelle. Thanks very much for joining us on bluenotes once
again, the morning of the bank’s annual year result. A strong result on many
fronts and particularly capital generation. So can you talk us through how
you’re balancing capital generation, extra capital from divestments and then
the potential to pay back some capital maybe to shareholders?
Michelle Jablko I mean the core of our strategy really is about how we optimise our capital so
we put it to its best use. And this year, we’ve done two things; it’s about how
we allocate the pie – and we wanted more of our capital allocated to Australia
and New Zealand and less to institutional, and we’ve done that. And then it’s
about driving better returns in the businesses, and we’ve done that as well.
At the same time we’ve generated capital and pleasingly we’re two years
ahead of where we need to be based on APRA’s new requirements and so
that gives us lots of flexibility going forward.
Andrew Cornell Provisions for bad and doubtful debts continue to come down, which is
obviously good for earnings, but is there a concern that the banking world is
perhaps under-pricing risk? Are these lower provisions sustainable?
Michelle Jablko I mean, again, core part of our strategy is making sure we use our capital
where we think we can optimise the risk adjusted returns on that capital. So
for example, selling out of Asia retail, which for us, given our scale in that
market, we weren’t driving the right risk adjusted returns so makes sense for
us to do that.
It’s the same with the way we’re reshaping the institutional business to focus
on areas and customers where we feel we bring real value to them. And so if
you look at it, this year we’ve improved risk adjusted returns. Clearly there’s
been some mark, the market environment has been good as well, but we’ve
also made some structural changes in our business.
Andrew Cornell And the cost story too, is another very strong element of this story. And
Shayne Elliott said that the focus on costs, on absolute costs is going to
continue. There’s been a reshaping of the business so we’ve seen costs come
out, so how much more can be done on that absolute cost front?
Michelle Jablko Yes, as we look at it there are financial and business reasons for what we’re
doing. You know, financially when we look at the environment we think a
focus on costs is absolutely right. Included by the fact that we’re reshaping
our business and so we need to be serious about our cost base. But more
importantly, when we look at the bank we think that being simpler and more
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
focussed is really what’s going to help us win in the long term with customers
and by, just by having, you know focussing on a few areas and doing them
well. And so the absolute cost focus will absolutely continue.
Andrew Cornell And once again in this result there is evidence of pressure on net interest
margins and that’s sort of an industry wide phenomenon and a longer term
trend. What’s the outlook for net interest margins?
Michelle Jablko Margins have been coming down for years now and that’s one of the reasons
actually why we are focussed on our using capital in the most efficient way
and focussed on costs. If I look at margins this year there are probably some
positives and negatives particularly in the last half. Outside of the markets
business margins actually improved a bit in the second half. We had some
positives going on compared to the first half around asset and liability pricing
but on the flip side as we go into next year we will have a full year of the
bank tax.
Andrew Cornell You refer to the reshaping part of that is the divestments of business and we
are seeing that’s sort of ongoing and there a couple more on the horizon
down the track. Does that mean while it’s obviously good for the
management of the balance sheet and the way the business is focussed,
does it leave you with an earnings gap going into the future?
Michelle Jablko If I step back and say why are we selling these businesses again we think we
are better off focussing the bank on a few areas and doing them really well.
So there are things like Asia Retail where we are just not the best owner of
that business because we are subscale. If we kept that business we’d need to
keep investing in the business and that would take money away from our
core businesses. Now selling a business of course it’s got revenue associated
with it. It’s also got costs and ptrovisions. At the same time we also no
longet need capital allocated to the business so we have a benfit there. So
we’ve got to weigh those two things up.
Andrew Cornell Thanks once again for your time with bluenotes
For media enquiries:
Stephen Ries; +61-409-655551
---
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
News Release
For release: 26 October, 2017
ANZ 2017 Final Dividend
- key dates and associated information -
As part of ANZ’s full year 2017 financial results released today, the Group announced a
proposed fully franked 2017 Final Dividend of 80 cents per share. This brings the total
dividend for the year to 160 cents per share. New Zealand imputation credits of NZ 10 cents
per share will also be attached.
ANZ announced an intention to neutralise the impact of the shares allocated under the
Dividend Reinvestment Plan (DRP). DRP participants do not need to take any action in
respect of this in order to receive shares under the DRP.
The neutralisation of the DRP is expected to involve shares being purchased on-market
during the DRP Pricing Period by a third party appointed by ANZ. To the extent that the on-
market purchase is not able to be completed for any reason, then ANZ will issue new shares
to meet its obligations under the DRP.
Key Dividend Dates
The key dates related to the payment of the 2017 Final Dividend and the associated
Dividend Reinvestment Plan (DRP) and Bonus Option Plan (BOP) are as follows:
Ex-date
Monday, 13 November 2017
Record Date
DRP/BOP/Foreign Currency Election
Date
DRP & BOP Pricing Period
Dividend Payment Date
Tuesday, 14 November 2017
Wednesday, 15 November 2017
Friday, 17 November 2017 to Thursday,
30 November 2017 (both inclusive)
Monday, 18 December 2017
DRP & BOP Information
For the 2017 Final Dividend, under the DRP and BOP Terms and Conditions no discount will
be applied when calculating the Acquisition Price used to determine the number of ANZ
ordinary shares provided, and the Pricing Period will be 10 trading days.
Election notices from shareholders wanting to commence, cease or vary their participation in
the DRP or BOP for the 2017 Final Dividend must be received by ANZ’s Share Registrar
Computershare by 5.00pm (Australian Eastern Daylight Time) on 15 November 2017.
Copies of all results materials and information in relation to the DRP and BOP are available
on the ANZ website at anz.com/shareholdercentre
For media enquiries contact:
Stephen Ries
Head of Media Relations
Tel: +61 409 655 551
For shareholder enquiries contact:
Computershare
1800 11 33 99
+613 9415 4010 (international callers)
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.