ANZ Bank New Zealand Disclosure Statement
ANZ BANK NEW ZEALAND LIMITED
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2019
NUMBER 91 | ISSUED MAY 2019
ANZ BANK NEW ZEALAND LIMITED
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2019
CONTENTS
DISCLOSURE STATEMENT
Condensed Consolidated Interim Financial Statements (Interim Financial Statements)
Income Statement 3
Statement of Comprehensive Income 3
Balance Sheet 4
Cash Flow Statement 5
Statement of Changes in Equity 6
Notes to the Interim Financial Statements 7
Registered Bank Disclosures
General Disclosures 14
Additional Financial Disclosures 15
Asset Quality 19
Capital Adequacy under the Internal Models Based Approach, and Regulatory Liquidity Ratios 24
Concentration of Credit Risk to Individual Counterparties 31
Insurance Business 31
Directors’ Statement 32
Independent Auditor’s Review Report 33
SUPPLEMENTARY INFORMATION
Bank Financial Strength Dashboard 36
Other Information 38
GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited in cluding its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it were
conducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
OnePath means OnePath Life (NZ) Limited.
Paymark means Paymark Limited.
UDC means UDC Finance Limited.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by the Order.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
INCOME STATEMENT
3 months to
6 months to
31 Mar 19 31 Mar 18 31 Mar 19 31 Mar 18
Note
NZ$m NZ$m
NZ$m NZ$m
Interest income
1,628
1,577
3,284
3,170
Interest expense
(820)
(806)
(1,652)
(1,614)
Net interest income 808 771 1,632 1,556
Other operating income 2
221
233
395
505
Net income from insurance business 12
-
32
27
81
Share of associates' profit 4 - 4 1
Operating income
1,033
1,036
2,058
2,143
Operating expenses (359) (361) (744) (747)
Profit before credit impairment and income tax
674
675
1,314
1,396
Credit impairment charge 5
(21)
(60)
(34)
(72)
Profit before income tax 653 615 1,280 1,324
Income tax expense
(171)
(167)
(331)
(366)
Profit for the period
482
448
949
958
STATEMENT OF COMPREHENSIVE INCOME
3 months to
6 months to
31 Mar 19 31 Mar 18 31 Mar 19 31 Mar 18
NZ$m NZ$m NZ$m NZ$m
Profit for the period
482
448
949
958
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss (16) 2 (16) 2
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity (4) (8) - (6)
Realised losses transferred to the income statement
3
1
4
3
Income tax attributable to the above items 4
1
3
-
Other comprehensive income after tax (13) (4) (9) (1)
Total comprehensive income for the period
469
444
940
957
The notes appearing on pages 7 to 13 form an integral part of these financial statements
3
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
BALANCE SHEET
31 Mar 19 30 Sep 18
As at Note NZ$m NZ$m
Assets
Cash and cash equivalents 2,697 2,200
Settlement balances receivable
630
656
Collateral paid 2,370 1,919
Trading securities
7,543
8,024
Derivative financial instruments
9,204
8,086
Investment securities 6,348 6,502
Net loans and advances 4
130,110
126,466
Assets held for sale 12
-
897
Investments in associates - 6
Current tax assets
45
-
Goodwill and other intangible assets 3,279 3,289
Premises and equipment
340
325
Other assets
808
642
Total assets 163,374 159,012
Liabilities
Settlement balances payable
2,619
2,161
Collateral received 519 845
Deposits and other borrowings 7
110,965
108,008
Derivative financial instruments 9,821 8,095
Current tax liabilities
-
161
Deferred tax liabilities
11
21
Liabilities held for sale 12 - 334
Payables and other liabilities
940
947
Provisions 8
310
196
Debt issuances 9 24,598 25,135
Total liabilities
149,783
145,903
Net assets 13,591 13,109
Equity
Share capital
11,888
11,888
Reserves 36 33
Retained earnings
1,667
1,188
Total equity
13,591
13,109
The notes appearing on pages 7 to 13 form an integral part of these financial statements
4
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
CASH FLOW STATEMENT
2019 2018
For the six months ended 31 March Note NZ$m NZ$m
Profit after income tax 949 958
Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation 41 41
Loss on sale and impairment of premises and equipment
5
-
Net derivatives/foreign exchange adjustment
(13)
(375)
Proceeds from divestments net of intangibles disposed of, classified as investing activities (646) -
Other non-cash movements
(147)
(14)
Net (increase)/decrease in operating assets:
Collateral paid (451) (219)
Trading securities
481
(753)
Net loans and advances
(3,644)
(2,180)
Other assets 611 (344)
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
2,957
4,342
Settlement balances payable 458 5
Collateral received
(326)
147
Other liabilities
(398)
(62)
Total adjustments
(1,072)
588
Net cash flows from operating activities
1
(123)
1,546
Cash flows from investing activities
Investment securities:
Purchases
(1,054)
(1,770)
Proceeds from sale or maturity 1,288 1,530
Proceeds from divestments 12
747
-
Other assets
(51)
17
Net cash flows from investing activities
930
(223)
Cash flows from financing activities
Debt issuances
2
Issue proceeds
3,240
2,885
Redemptions
(3,145)
(3,020)
Dividends paid (405) (805)
Net cash flows from financing activities
(310)
(940)
Net change in cash and cash equivalents
497
383
Cash and cash equivalents at beginning of period 2,200 2,439
Cash and cash equivalents at end of period
2,697
2,822
1
Net cash provided by operating activities includes income taxes paid of NZ$519 million (2018: NZ$387 million).
2
Movement in debt issuances (Note 9 Debt Issuances) also includes an NZ$883 million decrease (2018: NZ$155 million increase) from the effect of foreign exchange rates, a NZ$341 million
increase (2018: NZ$174 million decrease) from changes in fair value hedging instruments and a NZ$90 million decrease (2018: NZ$4 million increase) from other changes.
The notes appearing on pages 7 to 13 form an integral part of these financial statements
5
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
Share
capital
Investment
securities
revaluation
reserve
Cash flow
hedging
reserve
Retained
earnings
Total
equity
Note NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2017
8,888 5 43 3,845 12,781
Profit or loss - - - 958 958
Unrealised gains / (losses) recognised directly in equity - 9 (15) - (6)
Realised losses transferred to the income statement - - 3 - 3
Actuarial gain on defined benefit schemes - - - 2 2
Income tax credit / (expense) on items recognised directly in equity - (2) 3 (1) -
Total comprehensive income for the period - 7 (9) 959 957
Transactions with Immediate Parent Company in its capacity as owner:
Ordinary dividends paid - - - (800) (800)
Preference dividends paid - - - (5) (5)
Transactions with Immediate Parent Company in its capacity as owner
- - - (805) (805)
As at 31 March 2018 8,888 12 34 3,999 12,933
As at 1 October 2018 11,888 11 22 1,188 13,109
NZ IFRS 9 transition adjustment 1
- - - (53) (53)
As at 1 October 2018 (adjusted) 11,888 11 22 1,135 13,056
Profit or loss
- - - 949 949
Unrealised gains / (losses) recognised directly in equity
- (7) 7 - -
Realised losses transferred to the income statement - - 4 - 4
Actuarial loss on defined benefit schemes
- - - (16) (16)
Income tax credit / (expense) on items recognised directly in equity
- 2 (3) 4 3
Total comprehensive income for the period
- (5) 8 937 940
Transactions with Immediate Parent Company in its capacity as owner:
Ordinary dividends paid - - - (400) (400)
Preference dividends paid
- - - (5) (5)
Transactions with Immediate Parent Company in its capacity as owner
- - - (405) (405)
As at 31 March 2019 11,888 6 30 1,667 13,591
The notes appearing on pages 7 to 13 form an integral part of these financial statements
6
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These interim financial statements (financial statements) for the Banking Group were issued on 17 May 2019 and should be read in conjunction with
the Banking Group’s financial statements for the year ended 30 September 2018.
These financial statements comply with:
• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;
• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and
• IAS 34 Interim Financial Reporting.
Use of estimates, assumptions and judgements
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect re ported amounts
and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective
decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an ongoing
basis.
Basis of measurement
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:
• derivative financial instruments;
• financial instruments measured at fair value through other comprehensive income;
• financial instruments held for trading; and
• financial instruments designated at fair value through profit and loss.
Changes in accounting policies
The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year financial statements,
except as disclosed below.
The following new standards relevant to the Banking Group have been adopted from 1 October 2018 and have been applied in the preparation of
these financial statements:
NZ IFRS 9 Financial Instruments (NZ IFRS 9)
NZ IFRS 9 was effective for the Banking Group from 1 October 2018. NZ IFRS 9 stipulates new requirements for the impairment of financial assets,
classification and measurement of financial assets and financial liabilities and general hedge accounting. Details of the key requirements and
estimated impacts on the Banking Group are outlined below.
Impairment
NZ IFRS 9 replaced the incurred loss impairment model under NZ IAS 39: Financial Instruments: Recognition and Measurement (NZ IAS 39) with an
expected credit loss (ECL) model incorporating forward looking information. The ECL model has been applied to all financial assets measured at
amortised cost, debt instruments measured at fair value through other comprehensive income, lease receivables, certain loan commitments and
financial guarantees. Under the ECL model, the following three-stage approach is applied to measuring ECL based on credit migration between the
stages since origination:
• Stage 1: At the origination of a financial asset, a provision equivalent to 12 months ECL is recognised.
•
Stage 2: Where there has been a significant increase in credit risk since origination, a provision equivalent to lifetime ECL is recognised.
•
Stage 3: Similar to the previous NZ IAS 39 requirements for individual impairment provisions, lifetime ECL is recognised for loans where there is
objective evidence of impairment.
Expected credit losses are probability weighted and determined by evaluating a range of possible outcomes, taking into account the time value of
money, past events, current conditions and forecasts of future economic conditions.
Classification and measurement
There are three measurement classifications under NZ IFRS 9: Amortised cost, Fair Value through Profit or Loss and Fair Value through Other
Comprehensive Income. Financial assets are classified into these measurement classifications taking into account the business model within which
they are managed, and their contractual cash flow characteristics.
The classification and measurement requirements for financial liabilities under NZ IFRS 9 are largely consistent with NZ IAS 39 with the exception that
for financial liabilities designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included in other
comprehensive income. This part of the standard was early adopted by the Banking Group on 1 October 2013.
General hedge accounting
NZ IFRS 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
hedging financial and non-financial risks.
NZ IFRS 9 provides the Banking Group with an accounting policy choice to continue to apply the NZ IAS 39 hedge accounting requirements until the
International Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Banking Group has continued to apply
the hedge accounting requirements of NZ IAS 39.
7
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Transition to NZ IFRS 9
Other than as noted above under classification and measurement of financial liabilities, NZ IFRS 9 had a date of initial application for the Banking
Group of 1 October 2018. The classification and measurement, and impairment requirements, are applied retrospectively by adjusting opening
retained earnings at 1 October 2018. The Banking Group has not restated comparatives.
Impact
Impairment
The application of NZ IFRS 9 as at 1 October 2018 resulted in higher aggregate impairment provisions of approximately NZ$72 million, with an
associated decrease in deferred tax liabilities of approximately NZ$19 million. The net impact on total equity is a reduction of approximately NZ$53
million. These remain subject to change until the Banking Group finalises its financial statements for the year ending 30 September 2019.
Classification and measurement of financial assets
There have been no changes in classification and measurement as a result of the application of the business model and contractual cash flow
characteristics tests.
NZ IFRS 15 Revenue from Contracts with Customers (NZ IFRS 15)
NZ IFRS 15 is effective for the Banking Group from 1 October 2018 and replaces existing guidance on the recognition of revenue from contracts with
customers. The standard requires identification of distinct performance obligations within a contract, and allocation of the transaction price of the
contract to those performance obligations. Revenue is then recognised as each performance obligation is satisfied. The standard also provides
guidance on whether an entity is acting as a principal or an agent which impacts the presentation of revenue on a gross or net basis.
The Banking Group has assessed all revenue streams existing at the date of transition to the new standard and determined that the impact of NZ IFRS
15 is immaterial given the majority of the Banking Group revenues are outside the scope of the standard. The Banking Group has adopted NZ IFRS 15
retrospectively including restatement of prior period comparatives.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the Bank and its subsidiaries.
2. OTHER OPERATING INCOME
3 months to
6 months to
31 Mar 19 31 Mar 18 31 Mar 19 31 Mar 18
Note
NZ$m NZ$m
NZ$m NZ$m
(i) Fee and commission revenue
Lending fees
8
7
16
15
Non-lending fees
206
196
410
403
Commissions
12
11
23
21
Funds management income
63
61
127
122
Fee and commission income 289 275 576 561
Fee and commission expense (117) (114) (241) (230)
Net fee and commission income
172
161
335
331
(ii) Other income
Net trading gains
60
35
73
100
Fair value gain / (loss) on hedging activities and financial liabilities
designated at fair value
(57)
11
(121)
24
Net foreign exchange earnings and other financial instruments income
3
46
(48)
124
Loss on sale of mortgages to NZ Branch
-
-
-
(1)
Gain on UDC terminated transaction
-
20
-
20
Insurance proceeds
-
-
-
20
Sale of OnePath 12
1
-
59
-
Sale of Paymark 12
39
-
39
-
Other 6 6 10 11
Other income 49 72 60 174
Other operating income
221
233
395
505
8
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
3. SEGMENT REPORTING
The Banking Group is organised into three major business segments for segment reporting purposes - Retail, Commercial and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
Comparative data has been adjusted to reflect a change in the methodology for allocating earnings on capital to each segment. While neutral at the
Banking Group level, this change has impacted net interest income and profit after income tax at the segment level.
Retail
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
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions through
dedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment.
Institutional
The Institutional division services global institutional and corporate customers across three product sets: Transaction Banking, Loans & Specialised
Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance,
debt structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to
managing the Banking Group’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
Operating segment analysis
Retail Commercial Institutional Other Total
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
For the six months ended 31 March NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net interest income 926 897 517 495 169 157 20 7 1,632 1,556
Fee and commission revenue
- Lending fees
8
8
-
-
8
7
-
-
16
15
- Non-lending fees 371 358 9 9 30 36 - - 410 403
- Commissions
23
21
-
-
-
-
-
-
23
21
- Funds management fees
127
122
-
-
-
-
-
-
127
122
- Fee and commission expense
(241)
(230)
-
-
-
-
-
-
(241)
(230)
Net fee and commission income
288
279
9
9
38
43
-
-
335
331
Other income 7 3 1 - 75 104 (23) 67 60 174
Net income from insurance business
19
67
-
-
-
-
8
14
27
81
Share of associates' profits
4
1
-
-
-
-
-
-
4
1
Operating income 1,244 1,247 527 504 282 304 5 88 2,058 2,143
Profit after income tax
499
501
286
279
140
119
24
59
949
958
Other segment
The Other segment profit after income tax comprises:
2019 2018
For the six months ended 31 March
NZ$m NZ$m
Central functions
1
- 14
Technology and Group Centre
2, 3
195 19
Economic hedges (90) 16
Revaluation of insurance policies from changes in interest rates
3
(81) 10
Total 24 59
1
Central functions’ other income for the six months ended 31 March 2018 includes the NZ$20 million insurance proceeds (Note 2 Other Operating Income) that were received from a member
of the Overseas Banking Group.
2
Technology and Group Centre’s other income for the six months ended 31 March 2019 includes the NZ$59 million gain on sale of OnePath and the NZ$39 million gain on sale of Paymark
(Note 2 Other Operating Income).
3
Amounts for the six months ended 31 March 2019 include the transfer of NZ$86 million of accumulated after tax gains previously recognised in revaluation of insurance policies from changes
in interest rates to Technology and Group Centre. These gains were transferred upon the sale of OnePath.
9
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4. NET LOANS AND ADVANCES
31 Mar 19 30 Sep 18
Note NZ$m NZ$m
Overdrafts 1,085 905
Credit cards 1,620 1,644
Term loans - housing 81,194 78,395
Term loans - non-housing 44,803 44,169
Finance lease and hire purchase receivables
1,830
1,791
Subtotal
130,532
126,904
Unearned income
(246)
(239)
Capitalised brokerage/mortgage origination fees
308
313
Gross loans and advances 130,594
126,978
Provision for credit impairment 5 (484) (512)
Net loans and advances 130,110 126,466
The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$1,677 million as at 31 March 2019 (30 September 2018:
NZ$2,210 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.
5. PROVISION FOR CREDIT IMPAIRMENT
PROVISION FOR CREDIT IMPAIRMENT – BALANCE SHEET
Net loans and
advances
Off-balance sheet credit
related commitments
1
Total
31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18
Provision for credit impairment NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Individual provision
2
111 130 - - 111 130
Collective provision
3
373
311
82
71
455
382
Total provision for credit impairment 484
441
82
71
566
512
1
Collective provision relating to off-balance sheet credit related commitments is included in provisions from 1 October 2018.
2
Individual provision comprises Stage 3 ECL assessed individually from 1 October 2018.
3
Collective provision comprises Stage 1, 2 and 3 ECL assessed collectively from 1 October 2018.
Net loans
and
advances
Off-balance
sheet credit
related
commitments Total
Collective provision reconciliation NZ$m NZ$m NZ$m
As at 30 September 2018 311 71 382
NZ IFRS 9 transition adjustment 60 12 72
As at 1 October 2018
371 83 454
Collective credit impairment charge / (release) 2 (1) 1
As at 31 March 2019 373 82 455
CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
3 months to
6 months to
31 Mar 19 31 Mar 18 31 Mar 19 31 Mar 18
Credit impairment charge NZ$m NZ$m NZ$m NZ$m
New and increased provisions
32
92
64
132
Write-backs
(10)
(18)
(20)
(30)
Recoveries of amounts previously written-off
(5)
(12)
(11)
(18)
Individual credit impairment charge
17
62
33
84
Collective credit impairment charge / (release)
4
(2)
1
(12)
Total credit impairment charge 21 60 34 72
10
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
6. IMPAIRED AND PAST DUE LOANS
31 Mar 19 30 Sep 18
NZ$m NZ$m
Loans that are at least 90 days past due but not impaired 275 205
Impaired loans
291
321
7. DEPOSITS AND OTHER BORROWINGS
31 Mar 19 30 Sep 18
NZ$m NZ$m
Term deposits 53,109 51,298
On demand and short term deposits 42,800 41,602
Deposits not bearing interest 10,836 10,224
UDC secured investments
783
931
Total customer deposits
107,528
104,055
Certificates of deposit
912
910
Deposits from banks and securities sold under repurchase agreements
256
517
Commercial paper
2,240
2,486
Deposits from Immediate Parent Company and NZ Branch
29
40
Deposits and other borrowings 110,965 108,008
8. PROVISIONS
31 Mar 19 30 Sep 18
Note NZ$m NZ$m
Employee entitlements
123
120
Collective provision on undrawn commitments 5
82
-
Other
1
105 76
Provisions 310
196
1
Other provisions include provisions relating to customer remediation, make-good of leased premises and restructuring (including OnePath separation).
9. DEBT ISSUANCES
31 Mar 19 30 Sep 18
NZ$m NZ$m
Senior debt 17,995 18,767
Covered bonds 4,164 3,929
Total unsubordinated debt
22,159
22,696
Subordinated debt (Additional Tier 1 capital)
2,439
2,439
Total debt issued
24,598
25,135
Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is not
a member of the Banking Group.
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are
security for the guarantee by the Covered Bond Guarantor as trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its
wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of the
Bank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (if any) after all
prior ranking creditors of the Covered Bond Trust have been satisfied.
11
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
10. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Financial assets and financial liabilities carried at fair value on the balance sheet
The Banking Group categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure fair value:
• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical financial instruments;
• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar financial asset or liability,
either directly or indirectly; and
• Level 3 – valuations using inputs for the asset or liability that are not based on observable market date (unobservable inputs).
The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Quoted market price
(Level 1)
Using observable
inputs
(Level 2)
Using unobservable
inputs (Level 3)
Total
31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Trading securities
7,204
6,795
339
1,229
-
-
7,543
8,024
Derivative financial instruments
11
7
9,188
8,076
5
3
9,204
8,086
Investment securities
6,347
6,457
-
44
1
1
6,348
6,502
Investments backing insurance contract liabilities
1
- - - 127 - - - 127
Total 13,562 13,259 9,527 9,476 6 4 23,095 22,739
Liabilities
Deposits and other borrowings
-
-
2,240
2,486
-
-
2,240
2,486
Derivative financial instruments
15
10
9,803
8,084
3
1
9,821
8,095
Other financial liabilities
159
110
-
-
-
-
159
110
Total 174
120
12,043
10,570
3
1
12,220
10,691
1
Including items reclassified as held for sale.
Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories other
than those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.
Carrying amount Fair value
31 Mar 19 30 Sep 18 31 Mar 19 30 Sep 18
NZ$m NZ$m NZ$m NZ$m
Financial assets
Net loans and advances
1
130,110
126,466
130,553
126,745
Total 130,110
126,466
130,553
126,745
Financial liabilities
Deposits and other borrowings
2
108,725
105,522
108,826
105,592
Debt issuances
1
24,598 25,135 24,862 25,462
Total 133,323 130,657 133,688 131,054
1
Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.
2
Excludes commercial paper (Note 7 Deposits and Other Borrowings) designated at fair value through profit or loss.
12
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
11. COMMITMENTS AND CONTINGENT LIABILITIES
31 Mar 19 30 Sep 18
Credit related commitments and contingencies NZ$m NZ$m
Contract amount of:
Undrawn facilities
26,903
27,245
Guarantees and letters of credit
1,351
1,531
Performance related contingencies
1,460
1,329
Total 29,714 30,105
The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore these
transactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As the
facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
There are outstanding court proceedings, claims and possible claims for and against the Banking 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 Banking Group.
In recent years there has been an increase in the number of matters on which the Banking Group engages with its regulators. There have been
significant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement actions (whether by court action
or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions globally. The nature of these investigations and
reviews can be wide ranging and, for example, may include a range of matters including responsible lending practices, product suitability and
distribution, interest and fees and the entitlement to charge them, wealth advice, insurance distribution, pricing, competition, conduct in financial
markets and capital market transactions, reporting and disclosure obligations and product disclosure documentation. The Banking Group has received
various notices and requests for information from its regulators as part of both industry-wide and Banking Group-specific reviews and has also made
disclosures to its regulators at its own instigation. There may be exposures to customers which are additional to any regulatory exposures. These could
include class actions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such
reviews and possible
exposures remain uncertain.
Warranties and indemnities
The Banking Group has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments.
12. DIVESTMENTS
OnePath and Paymark
On 30 November 2018, the Banking Group sold OnePath to Cigna Corporation and on 11 January 2019, the Banking Group sold its 25% shareholding
in Paymark to Ingenico Group. The Banking Group recognised net gains on sale of NZ$59 million and NZ$39 million respectively, which are included
in other operating income.
Assets and liabilities sold
NZ$m
Investments backing insurance contract liabilities
101
Other assets, net of amounts payable to the Bank 6
Life insurance contract assets
675
Investments in associates - Paymark
7
Goodwill and other intangible assets 101
Total assets 890
Deposits and other borrowings (deposits with the Bank)
(50)
Current tax liabilities 18
Deferred tax liabilities
178
Payables and other liabilities 146
Provisions
2
Total liabilities 294
Net assets sold 596
13
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES
Guarantees
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. This
obligation is guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered
Bond Trust. The Covered Bond Guarantor’s address for service is Level 9, 34 Shortland Street, Auckland, New Zealand. The Covered Bond Guarantor is
not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The covered bonds have been
assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 11 for further details, and to
page 15 for the amount of assets of the ANZ Covered Bond Trust pledged as security for covered bonds.
No other material obligations of the Bank are guaranteed as at 17 May 2019.
Changes in the Bank’s Board of Directors
There have been no changes to the Directors of the Bank since 30 September 2018, the balance date of the last full year disclosure statement.
Conditions of registration
Changes between 30 September 2018 and 31 March 2019
The conditions of registration applying to the Bank were amended on 1 October 2018, to reflect changes in liquidity requirements, and again on 1
January 2019 to reflect changes to the loan-to-valuation (LVR) requirements applicable to residential mortgage lending. These amendments refer to
revised versions of the RBNZ Banking Supervision Handbook documents Liquidity Policy Annex: Liquid Assets (BS13A) and Framework for Restrictions on
High-LVR Residential Mortgage Lending (BS19) respectively. The 1 January 2019 amendments also detailed specific sections of the RBNZ Banking
Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach) (BS2B) to be complied with.
Non-compliance
In April 2019, the Bank informed RBNZ that in the course of a self-review, the Bank discovered that it had not been using an approved model for the
calculation of the operational risk capital (ORC) requirement since December 2014.
ORC was calculated for the Bank by the Ultimate Parent Bank. A failure of systems and controls, as well as no verification being undertaken by the
Bank, meant that the Ultimate Parent Bank decommissioned the RBNZ approved model without the Bank ensuring that it had the necessary
regulatory approvals in place to move to a new model. Calculation of the ORC requirement since December 2014 was based on a previous RBNZ
approved ORC model output last run in September 2014, with an adjustment to reflect the growth of the Banking Group’s business. The Bank accepts
that this was not in compliance with condition of registration 1B.
The adoption of this calculation and decommissioning of the authorised ORC model occurred following development of a new ORC model in 2015 to
be used by the Overseas Banking Group that better reflected the risks in the business. This new ORC model was approved by APRA in September 2015
and subsequently submitted to RBNZ for approval in June 2016. In 2016, RBNZ suspended approval of capital models and, the new ORC model has
not been approved.
The RBNZ decided that the Banking Group’s ORC requirement will be calculated in accordance with the RBNZ Banking Supervision Handbook
document Capital Adequacy Framework (Standardised Approach) (BS2A). As a result, as at 31 March 2019, the Banking Group’s ORC requirement has
increased by NZ$277 million, and its capital ratios have decreased by 0.4% for common equity tier 1 capital and 0.6% for total capital. Restatement of
prior period comparatives is not required.
The Bank is working to provide the RBNZ with further information to show there are no other similar capital model compliance issues. A governance
framework including appropriate systems and controls has been put in place to ensure the Ultimate Parent Bank cannot decommission an RBNZ
approved model without required approvals.
Changes since 31 March 2019
Effective 15 May 2019, the Bank’s conditions of registration have been amended to require the Banking Group’s ORC requirement to be calculated in
accordance with BS2A.
Effective 30 June 2019, the Bank’s conditions of registration have been amended to include a supervisory adjustment to the Banking Group’s capital
adequacy calculations. This supervisory adjustment introduces minimum pre-scalar risk weightings for residential mortgage exposures and corporate
farm lending exposures and is expected to increase risk weighted assets by approximately NZ$10.1 billion, based on 31 March 2019 exposures.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effect
on the Bank or the Banking Group is included in Note 11 Commitments and Contingent Liabilities.
14
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Credit rating
As at 17 May 2019 the Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.
The Bank’s credit ratings are:
Rating Agency Credit Rating Qualification
S&P Global Ratings
AA- Outlook Negative
Fitch Ratings
AA- Outlook Stable
Moody’s Investors Service
A1 Outlook Stable
Directors’ statements
The Directors' statement is included on page 32.
Auditor’s review report
The auditor’s review report is included on page 33.
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2019
NZ$m
Total interest earning and discount bearing assets
149,092
Total interest and discount bearing liabilities
126,189
Total amounts due from related entities
4,288
Total amounts due to related entities
6,298
Assets charged as security for liabilities
These amounts exclude the amounts disclosed as collateral paid on the balance sheet that relate to derivative liabilities. The terms and conditions of
the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association
Master Agreement.
Assets charged as security for liabilities include the following types of instruments:
• Securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements.
• UDC secured investments are secured by a security interest granted under the trust deed over all of UDC’s present and future assets and
undertakings, to Trustees Executors Limited, as supervisor. The assets subject to the security interest comprise mainly loans to UDC's customers
and certain plant and equipment. The security interest secures all amounts payable by UDC on the UDC secured investments and all other
moneys payable by UDC under the trust deed.
• Specified residential mortgages provided as security for notes and bonds issued to investors as part of the Bank’s covered bond programme.
The carrying amounts of assets pledged as security are as follows:
As at 31 March 2019 NZ$m
Securities sold under agreements to repurchase
151
Assets pledged as collateral for UDC secured investments
3,374
Residential mortgages pledged as security for covered bonds 10,330
Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 Other Operating Income. The Banking Group does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, all other items of other income (all in Note 2 Other Operating Income), net income from insurance business and share of
associates’ profit (both shown on the income statement).
15
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Additional information on concentrations of credit risk
Analysis of financial assets by industry is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans and
advances
3
Other
financial
assets
Off-balance
sheet credit
related
commitments
4
Total
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m
New Zealand residents
Agriculture 17,906 85 1,502 19,493
Forestry and fishing, agriculture services 1,392 7 261 1,660
Manufacturing 2,936 197 1,709 4,842
Electricity, gas, water and waste services
1,306 437 1,600 3,343
Construction
1,866 28 977 2,871
Wholesale trade
1,496 59 1,736 3,291
Retail trade and accommodation
2,970 31 1,034 4,035
Transport, postal and warehousing
1,335 94 755 2,184
Finance and insurance services
827 5,430 1,646 7,903
Public administration and safety
1
248 8,606 1,070 9,924
Rental, hiring & real estate services
32,786 737 3,466 36,989
Professional, scientific, technical, administrative and support services 1,217 9 582 1,808
Households
59,170 199 11,317 70,686
All other New Zealand residents
2
2,418 196 1,942 4,556
Subtotal 127,873 16,115 29,597 173,585
Overseas
Finance and insurance services
283 13,017 117 13,417
Households
1,557 5 - 1,562
All other non-NZ residents
819 91 - 910
Subtotal 2,659 13,113 117 15,889
Gross subtotal 130,532 29,228 29,714 189,474
Provision for credit impairment
(484) - (82) (566)
Subtotal 130,048 29,228 29,632 188,908
Unearned income
(246) - - (246)
Capitalised brokerage / mortgage origination fees
308 - - 308
Maximum exposure to credit risk 130,110 29,228 29,632 188,970
1
Public administration and safety includes exposures to local government administration and central government administration, defence and public safety.
2
Other includes exposures to mining, information media and telecommunications, education and training, health care and social assistance and arts, recreation and other services.
3
Excludes individual and collective provisions for credit impairment held in respect of off-balance sheet credit related commitments.
4
Off-balance sheet credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.
16
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Additional information on concentrations of funding
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
As at 31 March 2019 Note NZ$m
Funding composition
Customer deposits 7 107,528
Wholesale funding
Debt issuances
24,598
Certificates of deposit and commercial paper
3,152
Other borrowings
285
Total wholesale funding 28,035
Total funding
135,563
Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing
3,935
Manufacturing
2,128
Construction 2,128
Wholesale trade
1,573
Retail trade and accommodation
1,618
Financial and insurance services 12,136
Rental, hiring and real estate services
3,058
Professional, scientific, technical, administrative and support services 5,377
Public administration and safety
1,286
Arts, recreation and other services
1,966
Households 57,902
All other New Zealand residents
1
4,043
97,150
Customer deposits by industry - overseas
Households
9,821
All other 557
10,378
Total customer deposits
107,528
Wholesale funding (financial and insurance services industry)
New Zealand
7,484
Overseas
20,551
Total wholesale funding
28,035
Total funding
135,563
Concentrations of funding by geography
New Zealand
104,634
Australia 824
United States
13,360
Europe
9,454
Other countries 7,291
Total funding
135,563
1
Other includes mining; electricity, gas, water and waste services; transport, postal and warehousing; information media and telecommunications; education and training; health care and
social assistance.
17
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Additional information on interest rate sensitivity
The following tables represent the interest rate sensitivity of the Banking Group's assets, liabilities and off balance sheet instruments by showing the
periods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.
Total
Up to
3 months
Over 3 to
6 months
Over 6 to
12 months
Over 1 to
2 years
Over
2 years
Not bearing
interest
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Cash and cash equivalents
2,697 2,355 - - - - 342
Settlement balances receivable
630 - - - - - 630
Collateral paid
2,370 2,370 - - - - -
Trading securities
7,543 503 107 388 928 5,617 -
Derivative financial instruments
9,204 - - - - - 9,204
Investment securities
6,348 253 15 149 1,210 4,720 1
Net loans and advances
130,110 63,993 11,368 24,968 22,363 7,785 (367)
Other financial assets
729 - - - - - 729
Total financial assets
159,631 69,474 11,490 25,505 24,501 18,122 10,539
Liabilities
Settlement balances payable 2,619 784 - - - - 1,835
Collateral received
519 519 - - - - -
Deposits and other borrowings
110,965 71,543 14,102 10,602 2,469 1,413 10,836
Derivative financial instruments
9,821 - - - - - 9,821
Debt issuances
24,598 3,263 1,739 443 4,969 14,184 -
Other financial liabilities
697 159 - - - - 538
Total financial liabilities
149,219 76,268 15,841 11,045 7,438 15,597 23,030
Hedging instruments - 21,217 (8,059) (7,206) (11,841) 5,889 -
Interest sensitivity gap
10,412 14,423 (12,410) 7,254 5,222 8,414 (12,491)
Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2019 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts represent principal
and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
On demand
Less than
3 months
3 to 12
months
1 to 5
years
After
5 years Total
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Settlement balances payable
1,470 1,163 - - - 2,633
Collateral received
- 519 - - - 519
Deposits and other borrowings 53,845 28,386 26,080 4,226 - 112,537
Derivative financial liabilities (trading)
- 7,666 - - - 7,666
Debt issuances
1
- 37 2,309 19,660 4,165 26,171
Other financial liabilities
- 95 6 138 22 261
Derivative financial instruments
(balance sheet management)
- gross inflows
- 1,049 2,389 8,731 795 12,964
- gross outflows
- (1,156) (2,739) (9,408) (832) (14,135)
1
Any callable wholesale debt instruments have been included at their next call date.
At 31 March 2019, NZ$67 million of the Banking Group’s NZ$409 million of non-credit related commitments and all NZ$29,714 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which the Banking Group may be required to
pay.
18
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking
Group’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity scenario metrics.
As at 31 March 2019 NZ$m
Cash and balances with central banks
2,273
Certificates of deposit
144
Government, local body stock and bonds
7,645
Reserve Bank bills 55
Other bonds 5,663
Total liquidity portfolio 15,780
The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into repurchase
transactions with a value of NZ$7,434 million at 31 March 2019.
Reconciliation of mortgage related amounts
As at 31 March 2019
Note NZ$m
Term loans - housing
1
4 81,194
Less: fair value hedging adjustment (5)
Less: housing loans made to corporate customers
(2,176)
On-balance sheet residential mortgage exposures as per LVR analysis B4
79,013
Add: off-balance sheet residential mortgage exposures as per LVR analysis B4
8,242
Total residential mortgage exposures subject to the IRB approach and as per LVR analysis
B4
87,255
1
Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.
B3. ASSET QUALITY
Collectively assessed loss allowances
Residential
mortgages
Other retail
exposures
Corporate
exposures Total
Collectively assessed loss allowances - Total Note NZ$m NZ$m NZ$m NZ$m
As at 30 September 2018 (NZ IAS 39) 82 118 182 382
NZ IFRS 9 transition adjustment 1,5
(36) 20 88 72
As at 1 October 2018 (NZ IFRS 9) 46 138 270 454
Collectively assessed loss allowances - recognised in:
Net loans and advances
46 108 217 371
Provisions - 30 53 83
As at 1 October 2018 (NZ IFRS 9) 46 138 270 454
19
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Movements in components of loss allowance - total
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - total NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 160 171 40 130 501
Transfer between stages
19 (20) 2 (1) -
New and increased provisions (net of collective provision releases)
(22) 21 2 65 66
Write-backs
- - - (20) (20)
Recoveries of amounts previously written off - - - (11) (11)
Credit impairment charge / (release) (3) 1 4 33 35
Bad debts written-off (excluding recoveries) - - - (58) (58)
Add back recoveries of amounts previously written off
- - - 11 11
Discount unwind
- - - (5) (5)
As at 31 March 2019 157 172 44 111 484
Off-balance sheet credit related commitments - total
As at 1 October 2018 59 22 2 - 83
Transfer between stages 3 (3) - - -
New and increased provisions (net of collective provision releases) (7) 6 - - (1)
Write-backs
- - - - -
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
(4) 3 - - (1)
Bad debts written-off (excluding recoveries)
- - - - -
Add back recoveries of amounts previously written off
- - - - -
Discount unwind
- - - - -
As at 31 March 2019 55 25 2 - 82
Impacts of changes in gross financial assets on loss allowances - total
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Gross loans and advances - total NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 118,878 7,448 331 321 126,978
Additions
11,485 1,298 193 129 13,105
Deletions
(8,762) (500) (69) (100) (9,431)
Amounts written off - - - (58) (58)
As at 31 March 2019 121,601 8,246 455 292 130,594
Loss allowance as at 31 March 2019 157 172 44 111 484
Off-balance sheet credit related commitments - total
As at 1 October 2018 28,882 1,198 11 14 30,105
Additions
282 1,284 60 7 1,633
Deletions
(1,933) (80) (3) (8) (2,024)
Amounts written off - - - - -
As at 31 March 2019 27,231 2,402 68 13 29,714
Loss allowance as at 31 March 2019 55 25 2 - 82
Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances on gross loans and advances have remained stable at approximately 0.4% of gross loans and advances. Loss allowances have
decreased by NZ$18 million (3%) driven by NZ$58 million of amounts written off. The remaining NZ$40 million increase in loss allowances is driven by
an increase in past due but not impaired assets, which have increased from 1.5% to 1.8% of gross exposures.
20
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Movements in components of loss allowance - residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 13 26 7 21 67
Transfer between stages 7 (8) 1 - -
New and increased provisions (net of collective provision releases) (7) 10 2 2 7
Write-backs - - - (2) (2)
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
- 2 3 - 5
Bad debts written-off (excluding recoveries)
- - - - -
Add back recoveries of amounts previously written off
- - - - -
Discount unwind
- - - - -
As at 31 March 2019 13 28 10 21 72
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2018 - - - - -
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases)
- - - - -
Write-backs
- - - - -
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
- - - - -
Bad debts written-off (excluding recoveries) - - - - -
Add back recoveries of amounts previously written off - - - - -
Discount unwind - - - - -
As at 31 March 2019 - - - - -
Impacts of changes in gross financial assets on loss allowances - residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Gross loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 73,992 1,948 203 25 76,168
Additions 7,836 303 150 18 8,307
Deletions (5,129) (276) (41) (16) (5,462)
Amounts written off
- - - - -
As at 31 March 2019 76,699 1,975 312 27 79,013
Loss allowance as at 31 March 2019 13 28 10 21 72
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2018 8,206 26 - - 8,232
Additions 18 3 - - 21
Deletions (11) - - - (11)
Amounts written off
- - - - -
As at 31 March 2019 8,213 29 - - 8,242
Loss allowance as at 31 March 2019 - - - - -
Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$5 million (7.5%) increase in loss allowances on residential mortgage exposures is driven primarily by an increase in past due but not impaired
exposures, which have increased from 1.3% to 1.6% of gross exposures. Overall loss allowances and individually impaired exposures remain low,
reflecting that approximately 95% of on-balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80% (refer to page
28).
21
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Movements in components of loss allowance - other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 28 55 25 11 119
Transfer between stages
8 (8) - - -
New and increased provisions (net of collective provision releases) (9) 10 - 44 45
Write-backs - - - (5) (5)
Recoveries of amounts previously written off
- - - (10) (10)
Credit impairment charge / (release)
(1) 2 - 29 30
Bad debts written-off (excluding recoveries)
- - - (38) (38)
Add back recoveries of amounts previously written off
- - - 10 10
Discount unwind
- - - - -
As at 31 March 2019 27 57 25 12 121
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2018 18 10 2 - 30
Transfer between stages
3 (3) - - -
New and increased provisions (net of collective provision releases)
(3) 3 - - -
Write-backs
- - - - -
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
- - - - -
Bad debts written-off (excluding recoveries) - - - - -
Add back recoveries of amounts previously written off - - - - -
Discount unwind - - - - -
As at 31 March 2019 18 10 2 - 30
Impacts of changes in gross financial assets on loss allowances - other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Gross loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 3,288 315 48 25 3,676
Additions 340 32 16 53 441
Deletions (292) (35) (18) (13) (358)
Amounts written off
- - - (38) (38)
As at 31 March 2019 3,336 312 46 27 3,721
Loss allowance as at 31 March 2019 27 57 25 12 121
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2018 4,859 54 4 - 4,917
Additions - 175 59 - 234
Deletions
(612) - - - (612)
Amounts written off
- - - - -
As at 31 March 2019 4,247 229 63 - 4,539
Loss allowance as at 31 March 2019 18 10 2 - 30
Explanation of how changes in the gross carrying amounts of other retail mortgages contributed to changes in loss allowance
The NZ$2 million (1.7%) increase in loss allowances was primarily driven by Stage 2 and individually assessed exposures, reflecting the increase in past
due but not impaired assets and impaired assets respectively, offset by amounts written off.
22
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Movements in components of loss allowance - corporate exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 119 90 8 98 315
Transfer between stages 4 (4) 1 (1) -
New and increased provisions (net of collective provision releases) (6) 1 - 19 14
Write-backs - - - (13) (13)
Recoveries of amounts previously written off
- - - (1) (1)
Credit impairment charge / (release)
(2) (3) 1 4 -
Bad debts written-off (excluding recoveries)
- - - (20) (20)
Add back recoveries of amounts previously written off
- - - 1 1
Discount unwind
- - - (5) (5)
As at 31 March 2019 117 87 9 78 291
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2018 41 12 - - 53
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases)
(4) 3 - - (1)
Write-backs
- - - - -
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
(4) 3 - - (1)
Bad debts written-off (excluding recoveries) - - - - -
Add back recoveries of amounts previously written off - - - - -
Discount unwind - - - - -
As at 31 March 2019 37 15 - - 52
Impacts of changes in gross financial assets on loss allowances - corporate exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Gross loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 41,598 5,185 80 271 47,134
Additions 3,309 963 27 58 4,357
Deletions (3,341) (189) (10) (71) (3,611)
Amounts written off
- - - (20) (20)
As at 31 March 2019 41,566 5,959 97 238 47,860
Loss allowance as at 31 March 2019 117 87 9 78 291
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2018 15,817 1,118 7 14 16,956
Additions 264 1,106 1 7 1,378
Deletions (1,310) (80) (3) (8) (1,401)
Amounts written off
- - - - -
As at 31 March 2019 14,771 2,144 5 13 16,933
Loss allowance as at 31 March 2019 37 15 - - 52
Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$25 million (6.8%) decrease in loss allowances on corporate exposures was primarily driven by the NZ$33 million reduction in individually
impaired assets, which includes NZ$20 million of amounts written off.
23
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Past due assets and other asset quality information
Residential
mortgages
Other retail
exposures
Corporate
exposures Total
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m
Past due assets
Less than 30 days past due
716 337 572 1,625
At least 30 days but less than 60 days past due
191 47 92 330
At least 60 days but less than 90 days past due
131 22 3 156
At least 90 days past due
193 44 38 275
Total past due but not impaired 1,231 450 705 2,386
Other asset quality information
Undrawn facilities with impaired customers
- - 13 13
Other assets under administration
8 2 - 10
The Banking Group does not have any loans and advances designated at fair value.
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND
REGULATORY LIQUIDITY RATIOS
RBNZ Basel III capital ratios
Banking Group
Bank
(Solo Consolidated)
As at 31 March RBNZ minimum 2019 2018
2019 2018
Common equity tier 1 capital 4.5% 11.4% 11.0% 10.2% 9.5%
Tier 1 capital 6.0% 14.6% 14.4% 13.5% 13.0%
Total capital 8.0% 14.6% 14.4% 13.5% 13.0%
Buffer ratio 2.5% 6.6% 6.4% n/a n/a
Capital of the Banking Group
As at 31 March 2019 NZ$m
Tier 1 capital
Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
11,588
Retained earnings (net of appropriations)
1,667
Accumulated other comprehensive income and other disclosed reserves
36
Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
(3,279)
Deferred tax assets less deferred tax liabilities relating to temporary differences
(23)
Cash flow hedge reserve (30)
Expected losses to the extent greater than total eligible allowances for impairment (276)
Common equity tier 1 capital 9,683
Additional tier 1 capital
Preference shares
1
300
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)
2
500
NZD 1,003m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)
2
1,003
NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)
2
938
Retained earnings of the Bonus Bonds Scheme
3
56
Less deductions from additional tier 1 capital
Surplus retained earnings of the Bonus Bonds Scheme
3
(20)
Additional tier 1 capital
2,777
Total tier 1 capital
12,460
Tier 2 capital
-
Total capital
12,460
1
Classified as equity on the balance sheet under NZ GAAP.
2
Classified as a liability on the balance sheet under NZ GAAP.
3
Bonus Bonds Scheme is not consolidated on the balance sheet under NZ GAAP but is classified as AT1 capital for capital adequacy purposes as set out in BS2B.
24
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Capital requirements of the Banking Group
Total
exposures
after credit
risk mitigation
Risk weighted
exposure or
implied risk
weighted
exposure
1
Total capital
requirement
As at 31 March 2019 NZ$m NZ$m NZ$m
Total credit risk
186,426 68,955 5,517
Operational risk
n/a 9,493 759
Market risk
n/a 4,688 375
Agri business supervisory adjustment n/a 2,118 169
Total 186,426 85,254 6,820
1
The calculation of capital requirements for total credit risk weighted includes a scalar of 1.06 in accordance with the Bank's Conditions of Registration.
Capital structure
Ordinary shares- common equity tier 1 capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On a show of hands
every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll every member shall
have one vote for each share held.
Preference shares – additional tier 1 capital
All preference shares were issued by the Bank to the Immediate Parent and do not carry any voting rights. The preference shares are wholly classified
as equity instruments as there is no contractual obligation for the Bank to either deliver cash or another financial instrument or to exchange financial
instruments on a potentially unfavourable basis. The key terms of the preference shares are as follows:
Dividends are payable at the discretion of the directors of the Bank and are non-cumulative. The Bank must not resolve to pay any dividend or make
any other distribution on its ordinary shares until the next preference dividend payment date if the dividend on the preference shares is not paid.
Should the Bank elect to pay a dividend, the dividend is based on a floating rate equal to the aggregate of the New Zealand 6 month bank bill rate
plus a 325 basis point margin, multiplied by one minus the New Zealand company tax rate, with dividend payments due on 1 March and 1 September
each year.
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of the
preference shares:
• on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of the preference shares or
• on any dividend payment date on or after 2 September 2019 or
• on any date if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.
The preference shares may be redeemed for nil consideration should a non-viability trigger event occur.
The preference shares qualify as AT1 capital for RBNZ’s capital adequacy purposes.
In the event of liquidation, holders of preference shares are entitled to available subscribed capital per share, pari passu with all holders of existing
preference shares and ANZ capital notes but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution
of profits or assets.
Additional tier 1 (AT1) capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. The AT1 capital notes rank equally with each other and with
the Bank’s preference shares. Holders of AT1 capital notes do not have any right to vote in general meetings of the Bank.
As at 31 March 2019, ANZ NZ CN carried a BB+ credit rating from S&P Global Ratings.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) or the Ultimate Parent Bank (ANZ NZ CN).
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
(including regulatory requirements).
Where specified, AT1 capital notes provide the Bank with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). This option is subject to RBNZ’s and, in respect of the ANZ NZ CN, APRA’s prior written approval.
25
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Each of the AT1 capital notes will immediately convert into a variable number of ordinary shares of the:
• Bank based on the net assets per share in the Bank’s most recently published Disclosure Statement (ANZ NZ ICN and ANZ NZ ICN2); or
• Ultimate Parent Bank based on the average market price of the Ultimate Parent Bank’s ordinary shares immediately prior to conversion less a 1%
discount, subject to a maximum conversion number (ANZ NZ CN)
if:
• the Banking Group’s, or in the case of the ANZ NZ CN the Overseas Banking Group’s Level 2, common equity tier 1 capital ratio is equal to or less
than 5.125% - known as a Common Equity Capital Trigger Event; or
• RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert or
write-off the notes, or in the case of the ANZ NZ CN, APRA notifies the Ultimate Parent bank that, without the conversion or write-off of certain
securities or a public injection of capital (or equivalent support), it considers that the Ultimate Parent Bank would become non-viable – known as a
Non-Viability Trigger Event.
Where specified, AT1 capital notes mandatorily convert into a variable number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) (based
on the net assets per share in the Bank’s recently published Disclosure Statement) or Ultimate Parent Bank (ANZ NZ CN) (based on the average market
value of the shares immediately prior to conversion less a 1% discount):
• on a specified mandatory conversion date; or
• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
The table below show the key details of the AT1 capital notes on issue at 31 March 2019:
ANZ NZ CN ANZ NZ ICN ANZ NZ ICN2
Issuer The Bank The Bank The Bank
Issue date 31 March 2015 5 March 2015 15 June 2016
Issue amount NZ$500 million NZ$1,003 million NZ$938 million
Face value NZ$1 NZ$100 NZ$100
Interest frequency Quarterly in arrears Semi-annually in arrears Semi-annually in arrears
Interest rate
Fixed at 7.2% p.a. until 25
May 2020. Resets in May
2020 to a floating rate: (New
Zealand 3 month Bank Bill
rate + 3.5%)
Floating rate: (New Zealand
6 month Bank Bill
rate + 3.8%)
Floating rate: (New Zealand 6
month Bank Bill
rate + 6.29%)
Issuer's early redemption or conversion option 25 May 2020 24 March 2023
15 June 2026 and each 5th
anniversary
Mandatory conversion date 25 May 2022 24 March 2025 n/a
Common equity capital trigger event Yes Yes Yes
Non-viability trigger event Yes Yes Yes
Carrying value as at 31 March 2019 (net of issue costs) NZ$498 million NZ$1,003 million NZ$938 million
Reserves – common equity tier 1 capital
Common equity tier 1 capital includes the investment securities revaluation reserve of NZ$6 million as at 31 March 2019.
Retained earnings of the Bonus Bonds Scheme– additional tier 1 capital
The Bonus Bonds Scheme is consolidated for capital adequacy purposes, and its retained earnings are included in additional tier 1 capital less 8.5% of
the consolidated risk-weighted assets that relate to the Bonus Bonds Scheme.
26
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating
Probability
of default Total value
Exposure at
default
Exposure-
weighted
LGD used
for the
capital
calculation
Exposure-
weighted
risk weight
Risk
weighted
assets
Minimum
capital
requirement
As at 31 March 2019 % NZ$m NZ$m % % NZ$m NZ$m
Corporate
0 - 2 0.06 71,687 4,950 60 32 1,697 136
3 - 4 0.32 44,491 23,596 36 41 10,196 816
5 1.00 14,886 12,979 33 58 8,036 643
6
2.23 4,379 3,998 34 78 3,287 263
7 - 8
11.63 2,404 1,999 39 155 3,278 262
Default
100.00 326 320 45 183 619 49
Total corporate exposures
1.77 138,173 47,842 38 53 27,113 2,169
Sovereign
0 0.01 24,406 11,053 5 1 136 11
1 - 8 0.01 860 842 5 1 11 1
Total sovereign exposures 0.01 25,266 11,895 5 1 147 12
Bank
0
0.03 30 30 65 15 5 -
1
0.03 1,332,653 9,446 57 25 2,509 201
2 - 4
0.12 70,594 744 65 39 306 25
5 - 8
8.35 2 2 26 106 2 -
Total bank exposures 0.04 1,403,279 10,222 57 26 2,822 226
Residential mortgages
0 - 3 0.20 25,605 25,969 12 5 1,478 118
4
0.46 35,595 35,748 18 15 5,637 451
5
0.92 21,136 21,246 23 31 6,994 560
6
1.98 4,318 4,324 26 60 2,730 218
7 - 8
4.85 324 324 27 94 323 26
Default
100.00 277 276 19 18 53 4
Total residential mortgages exposures 0.90 87,255 87,887 18 18 17,215 1,377
Other retail
0 - 2 0.10 537 540 77 50 284 23
3 - 4
0.27 4,724 4,810 78 55 2,786 223
5
1.05 1,988 1,936 72 74 1,527 122
6
2.32 2,006 2,045 69 88 1,915 153
7 - 8
8.85 1,352 1,390 85 133 1,965 157
Default
100.00 87 87 76 56 51 4
Total other retail exposures 2.69 10,694 10,808 76 74 8,528 682
Total credit risk exposures subject
to the IRB approach
1.15 1,664,667 168,654 29 31 55,825 4,466
27
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
IRB credit exposures include the following undrawn commitments and other off-balance sheet amounts:
Total value
Exposure at
default
As at 31 March 2019 NZ$m NZ$m
Undrawn commitments and other off-balance sheet amounts excluding market related contracts
Corporate 12,066 11,166
Sovereign 341 325
Bank 1,670 1,347
Residential mortgages 8,242 8,657
Other retail
5,431 5,459
Market related contracts
Corporate
90,753 1,736
Sovereign
13,307 128
Bank
1,395,538 3,915
Residential mortgages
- -
Other retail
- -
Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn residential mortgage loans as well
as commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance
sheet
Off-balance
sheet Total
As at 31 March 2019 NZ$m NZ$m NZ$m
LVR range
Does not exceed 60%
39,406 5,623 45,029
Exceeds 60% and not 70%
17,926 1,339 19,265
Exceeds 70% and not 80%
17,533 969 18,502
Does not exceed 80%
74,865 7,931 82,796
Exceeds 80% and not 90% 2,913 139 3,052
Exceeds 90% 1,235 172 1,407
Total 79,013 8,242 87,255
Specialised lending subject to the slotting approach
Total
exposures
after
credit risk
mitigation Risk weight
Risk
weighted
assets
Minimum
Pillar 1
capital
requirement
As at 31 March 2019 NZ$m % NZ$m NZ$m
On-balance sheet exposures
Strong 4,957 70 3,678 294
Good 5,808 90 5,541 443
Satisfactory 393 115 480 38
Weak 154 250 409 34
Default 37 - - -
Exposure at
default
Average
risk weight
Risk
weighted
assets
Minimum
Pillar 1
capital
requirement
As at 31 March 2019 NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet exposures
1,435 91 1,378 110
The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to the
following external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.
28
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
Credit risk exposures subject to the standardised approach
Total
exposure
after credit
risk
mitigation
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2019
NZ$m % NZ$m NZ$m
On-balance sheet exposures
Cash and gold bullion
293 - - -
Sovereign and central banks
1,891 - - -
Multilateral development banks and other international organisations
- - - -
Public sector entities
- - - -
Banks
- - - -
Corporate
1,085 10 119 10
Residential mortgages - - - -
Past due assets 1 150 1 -
Other assets 1,009 100 1,070 86
Total
exposure or
principal
amount
Average
credit
conversion
factor
Credit
equivalent
amount
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2019 NZ$m % NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet
exposures
605 70 421 97 434 35
Market related contracts
Foreign exchange contracts
6 n/a - 138 - -
Interest rate contracts
245,396 n/a 286 5 15 1
Other - OTC etc - n/a - - - -
Equity exposures
Total
exposure Risk weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2019 NZ$m % NZ$m NZ$m
Equity holdings (not deducted from capital) that are publicly traded
- 300 - -
All other equity holdings (not deducted from capital)
1 400 5 -
Credit risk mitigation
As at 31 March 2019, the Banking Group had NZ$876 million of Corporate exposures covered by guarantees where the presence of the guarantees
was judged to reduce the underlying credit risk of the exposures. Information on the total value of exposures covered by financial guarantees and
eligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk exposures is not considered to
be material.
Operational risk
The Banking Group is accredited by the Bank’s conditions of registration to use the Advanced Measurement Approach (AMA) for its ORC requirement.
However, as explained in Note B1, due to the Banking Group not having an approved internal model, RBNZ has decided that the Banking Group’s ORC
requirement will be calculated in accordance with BS2A. As at 31 March 2019, the Banking Group had an implied risk weighted exposure of NZ$9,493
million for operational risk and an operational risk capital requirement of NZ$759 million.
29
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures are for the six
months ended 31 March 2019.
Implied risk weighted
exposure Aggregate capital charge
Period end Peak Period end Peak
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m
Interest rate risk 4,577 6,593 366 527
Foreign currency risk 110 156 9 12
Equity risk 1 1 - -
Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions of
Registration. Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group include
pension risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk and software risk. The Banking Group's internal capital allocation for
these other material risks is NZ$282 million. (March 2018: NZ$399 million). Insurance, value in -force and business retention risks are no longer included
following the sale of OnePath.
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
Overseas Banking Group
Ultimate Parent Bank
(Extended Licensed Entity)
As at 31 March 2019 2018 2019 2018
Common equity tier 1 capital
11.5%
11.0%
11.2%
10.9%
Tier 1 capital
13.4%
12.9%
13.2%
12.9%
Total capital
15.3%
14.9%
15.3%
15.1%
The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal to
that specified under the Basel III capital framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets. There are however small portfolios
(mainly retail and local corporates in Asia Pacific) where the Overseas Banking Group applies the standardised approach.
• the AMA for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 31 March 2019 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2019. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2019, in accordance with APS 330: Public Disclosure of Prudential Information, discloses capital
adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risks. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1-
month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. The minimum amount of core funding is currently
set at 75% of a bank’s total loans. The Banking Group must maintain its core funding ratio above 75% on a daily basis. This measure of the core funding
ratio is averaged over the quarter.
For the three months ended 31 Mar 19 31 Dec 18
Quarterly average 1-week mismatch ratio 5.6% 5.0%
Quarterly average 1-month mismatch ratio 4.7% 4.8%
Quarterly average core funding ratio 88.8% 88.3%
30
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
B5. CONCENTRATIONS OF CREDIT RISK TO INDIVIDUAL COUNTERPARTIES
The Banking Group measures its concentration of credit risk to individual counterparties at the reporting date on the basis of actual exposures. Peak
end-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting date for
the previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:
•connected persons (ie other members of the Overseas Banking Group and Directors of the Bank);
•the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and
•any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.
As at
Peak end of
day over 6
months to
31 Mar 19 31 Mar 19
Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capital
3 3
with a long-term credit rating of A- or A3 or above, or its equivalent
3 3
- 10% to less than 15% of CET1 capital
3 1
- 15% to less than 20% of CET1 capital -1
- 20% to less than 25% of CET1 capital -1
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
--
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1
2 3
with a long-term credit rating of A- or A3 or above, or its equivalent
2 3
- 10% to less than 15% of CET1 capital
1 3
- 15% to less than 20% of CET1 capital
1 -
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent - -
B6. INSURANCE BUSINESS
The Banking Group previously conducted insurance business through its subsidiary OnePath. OnePath was sold to Cigna Corporation on 30
November 2018, and as at 31 March 2019, the Banking Group does not conduct any insurance business. The Banking Group continues to market and
distribute life insurance products provided by OnePath.
31
ANZ BANK NEW ZEALAND LIMITED
DIRECTORS' STATEMENT
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:
• The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014; and
• The Disclosure Statement is not false or misleading.
Over the six months ended 31 March 2019, after due enquiry, each Director believes that:
• ANZ Bank New Zealand Limited has complied with all Conditions of Registration that applied during that period except as noted on page 14;
• Credit exposures to connected persons were not contrary to the interests of the Banking Group; and
• ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that those
systems were being properly applied.
This Disclosure Statement is dated, and has been signed by all Directors of the Bank on, 17 May 2019.
Antony Carter
Shayne Elliott
David Hisco
Michelle Jablko
Rt Hon Sir John Key, GNZM AC
Mark Verbiest
Joan Withers
32
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
TO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
REPORT ON THE HALF YEAR DISCLOSURE STATEMENT
BASIS FOR CONCLUSION
A review of the half year disclosure statement in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of ANZ Bank New Zealand Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the
annual financial statements.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These matters
have not impaired our independence as reviewer of the Banking Group. The firm has no other relationship with, or interest in, the Banking Group.
EMPHASIS OF MATTER
We draw attention to sections B1 and B4 of the disclosure statement which describe the Banking Group’s identification of historic non-compliance
with the Operational Risk Capital calculation requirements of its Conditions of Registration, and the steps that have been agreed between the Banking
Group and the Reserve Bank of New Zealand to calculate and report Operational Risk Capital using a standardised approach under RBNZ Banking
Handbook document Capital Adequacy Framework (Standardised Approach) (BS2A) as at 31 March 2019. Our opinion is not modified in respect of this
matter.
USE OF THE INDEPENDENT REVIEW REPORT
This independent review report is made solely to the shareholder of the Banking Group. Our review work has been undertaken so that we might state
to the shareholder those matters we are required to state to them in the independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume re sponsibility to anyone other than the shareholder for our review work, this independent review
report, or any of the opinions we have formed.
CONCLUSION
Based on our review of the interim financial statements and the registered bank disclosures (together referred to as ‘the disclosure statement’) of
ANZ Bank New Zealand Limited and its subsidiaries (the Banking Group) on pages 3 to 31, nothing has come to our attention that causes us to
believe that:
• the interim financial statements on pages 3 to 13 do not present fairly in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34
Interim Financial Reporting, in all material respects, the Banking Group’s financial position as at 31 March 2019 and its financial performance
and cash flows for the 6 month period ended on that date;
• the registered bank disclosures in Sections B2, B3, B5 and B6 disclosed in accordance with schedules 5, 7, 13, 16 and 18 of the Registered
Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly
state, in all material respects, the matters to which they relate in accordance with those schedules; and
• the registered bank disclosures relating to capital adequacy and liquidity requirements in section B4 are not, in all material respects,
disclosed in accordance with the applicable clauses of schedule 9 and 11 of the Order.
We have completed a review of the accompanying half year disclosure statement which comprises:
• the interim financial statements formed of:
• the consolidated balance sheet as at 31 March 2019;
• the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the 6 month period
then ended; and
• notes, including a summary of significant accounting policies and other explanatory information.
• the registered bank disclosures prescribed in Schedules 5, 7, 9, 11, 13, 16 and 18 of the Order.
33
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
34
RESPONSIBILITIES OF THE DIRECTORS FOR THE HALF YEAR DISCLOSURE STATEMENT
The Directors, on behalf of the Banking Group, are responsible for:
the preparation and fair presentation of the half year disclosure statement in accordance with IAS 34, NZ IAS 34 and Schedules 3, 5, 7, 13, 16 and
18 of the Order;
the preparation and fair presentation of the registered bank disclosures in regards to capital adequacy and liquidity requirements in accordance
with the applicable clauses of Schedule 9 and 11 of the Order;
implementing necessary internal controls to enable the preparation of a half year disclosure statement that is fairly presented and free from
material misstatement, whether due to fraud or error; and
assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE HALF YEAR DISCLOSURE STATEMENT
Our responsibility is to express a conclusion on the half year disclosure statement based on our review. We conducted our review in accordance with
NZ SRE 2410. NZ 2410 requires us to conclude whether anything has come to attention that causes us to believe that:
the interim financial statements do not present fairly in all material respects the Banking Group’s financial position as at 31 March 2019 and its
financial performance and cash flows for the 6 month period ended on that date;
the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34;
the registered bank disclosures in sections B2, B3, B5 and B6 does not, fairly state, in all material respects, the matters to which it relates in
accordance with Schedules 5, 7, 13, 16 and 18 of the Order; and
the registered bank disclosures relating to capital adequacy and liquidity requirements in section B4 is not, in all material respects, disclosed in
accordance with the applicable clauses of Schedule 9 and 11 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the half year disclosure statement. This description forms part of our
independent review report.
KPMG
Auckland
17 May 2019
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35
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
BANK FINANCIAL STRENGTH DASHBOARD
Background
This section does not form part of the Disclosure Statement. It
contains information in respect of the Banking Group included on the
Bank Financial Strength Dashboard (Dashboard) published on RBNZ’s
website. There is no requirement for the Directors to review or
approve this information. Amounts below may differ slightly from
those published by RBNZ due to rounding differences. The tables
include reconciliations to amounts included in the Disclosure
Statement where there are classification differences between the
financial statements and the Dashboard.
D1. CREDIT RATINGS
As at 31 March 2019
Credit rating
S&P Global
AA-
Fitch
AA-
Moody's
A1
D2. CAPITAL ADEQUACY
Capital ratios
As at 31 March 2019
Total capital ratio 14.6%
Common equity tier 1 (CET1) capital ratio 11.4%
Tier 1 capital ratio
14.6%
Buffer ratio
6.6%
Total capital ratio regulatory minimum
8.0%
Capital
As at 31 March 2019 NZ$m
CET1 capital 13,291
CET1 deductions (3,608)
Net CET1 capital 9,683
Total additional tier 1 capital
2,777
Total tier 1 capital
12,460
Total capital
12,460
Risk weighted assets
Classification differences
Disclosure
Statement
Default
exposures
Credit valuation
adjustments
Exposure
categories Dashboard
As at 31 March 2019
NZ$m NZ$m NZ$m NZ$m NZ$m
Sovereign / quasi-sovereign
147 - (25) - 122
Public sector entities - - (443) 809 366
Registered banks 2,822 - (371) (809) 1,642
Corporates 27,113 (618) (607) 11,410 37,298
Retail / Residential mortgages 17,215 (53) - - 17,162
Other retail 8,528 (51) - (8,477) -
Specialised lending exposures subject to slotting approach
11,486 - (76) (11,410) -
Exposures subject to standardised approach 569 - - (569) -
Problem loans - 722 - - 722
Equity holdings 5 - - - 5
Credit risk supervisory adjustment - - - 2,118 2,118
All other assets
1,070 - 1,522 9,046 11,638
Credit risk 68,955 - - 2,118 71,073
Market risk
4,688 - - - 4,688
Operational risk
9,493 - - - 9,493
Agri business supervisory adjustment
2,118 - - (2,118) -
Total risk weighted assets
85,254 - - - 85,254
D3. ASSET QUALITY
Housing Consumer Business Agriculture All other Total
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Total loans 78,755 3,524 29,532 17,483 1,307 130,601
Impaired loans
35 12 44 156 44 291
Loans 90 days past due but not impaired
186 25 50 13 1 275
Total non-performing loans
221 37 94 169 45 566
Non-performing loans ratio (%)
0.28% 1.05% 0.32% 0.97% 3.44% 0.43%
Individual provisions
11 6 29 31 35 112
Collective provisions
50 68 188 61 5 372
On-balance sheet residential mortgage exposures with LVRs that:
Exceeds 80% and not 90%
3.7%
Exceeds 90%
1.6%
The Supplementary Information does not form part of the Disclosure Statement
36
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
BANK FINANCIAL STRENGTH DASHBOARD
D4. PROFITABILITY / PERFORMANCE
Dashboard
3 months to 31 March 2019 NZ$m
Interest income
1,628
Interest expense
820
Net interest income
808
Gains/losses on trading and hedging
3
Fee and commission income
172
All other income
50
Operating expenses 359
Impaired asset expense
21
Profit before tax
653
Tax expense
171
Profit after tax
482
Return on assets (%)
1.2%
Return on equity (%)
14.4%
Net interest margin (%)
2.2%
D5. FINANCIAL POSITION
Classification differences
Financial
statements
Other bank
deposits and
other assets
Securities
purchased under
agreements
to re-sell Dashboard
As at 31 March 2019 NZ$m NZ$m NZ$m NZ$m
Cash and bank deposits
1
5,067 (83) (336) 4,648
Debt securities held
2
13,891 - - 13,891
Net loans and advances
130,110 - - 130,110
Derivatives in an asset position
9,204 - - 9,204
All other assets
5,102 83 336 5,521
Total assets
163,374 - - 163,374
Deposits
107,528 - - 107,528
Debt securities issued
3
27,750 - - 27,750
Other borrowings
4
804 1,470 - 2,274
Derivatives in a liability position 9,821 - - 9,821
All other liabilities 3,880 (1,470) - 2,410
Total liabilities
149,783 - - 149,783
Equity 13,591 - - 13,591
1
Comprises cash and cash equivalents and collateral paid
2
Comprises trading securities and investment securities
3
Comprises debt issuances plus certificates of deposit and commercial paper from deposits and other borrowings
4
Comprises collateral received and the remaining items of deposits and other borrowings
D6. LIQUIDITY
3 months to 31 March 2019
Quarterly average core funding ratio 88.8%
Quarterly average 1-month mismatch ratio 4.7%
Quarterly average 1-week mismatch ratio 5.6%
D7. LARGE EXPOSURES
As at 31 March 2019
Top 5 credit exposures to non-bank counterparties
(ie corporates) as a ratio of CET1 capital
52.4%
Credit exposures to non-bank counterparties
(ie corporates) that are greater than 10% of CET1 capital
2
Top 5 credit exposures to banks as a ratio of
CET1 capital
43.8%
Credit exposures to banks that are greater than
10% of CET1 capital
3
The Supplementary Information does not form part of the Disclosure Statement
37
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
OTHER INFORMATION
Reconciliation of total loans by industry and sector
The financial statements and Dashboard include amounts for total loans which are based on different definitions. The table below reconciles the
various amounts. This information does not form part of the Disclosure Statement.
Housing loans and residential mortgage definitions
Housing loans comprise loans for owner occupier property use and residential investor property use. Owner occupiers are borrowers who own or are
in the process of buying or building the house or flat they will live in as their principal place of residence. An owner can occupy more than one
property e.g. a family home and a holiday home. Only households can have owner occupier property use loans. Investors are entities or persons
borrowing for the purpose of building or purchasing residential property to rent. This includes ‘Mum and dad’ investor loans and any person(s) that
have a separate residential investor property use loan which is not for their normal business purpose.
Residential mortgage exposures used in the loan-to-valuation ratio analysis are based on the definition of residential mortgage loans as defined in the
Banking Supervision Handbook document Capital Adequacy Framework (internal models based approach) (BS2B). This metric is based on a collateral
definition and may include some other lending that is not defined as Housing lending in the asset quality section of the Dashboard. See the Banking
Supervision Handbook for a more detailed definition.
Housing Consumer Business Agriculture All other
1
Total
As at 31 March 2019 Note NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Total loans per Balance Sheet 4
81,194 n/a n/a n/a 49,338 130,532
Fair value hedge adjustment
(5) - - - 5 -
Business loans secured by residential property
(2,434) - - 326 2,108 -
Residential investor property
(21,552) - - 51 21,501 -
Other household and agriculture industry loans
- 3,524 - 17,529 (21,053) -
Concentration of loans by industry
2
B2
57,203 3,524 - 17,906 51,899 130,532
Fair value hedge adjustments
- - - - (5) (5)
Unearned income on finance leases - - - - (203) (203)
Deposit components of overdraft product - - - - 277 277
Residential investor property 21,552 - - (51) (21,501) -
Business lending - - 29,166 (46) (29,120) -
Loans by purpose (RBNZ series S31) 78,755 3,524 29,166 17,809 1,347 130,601
Other business loans secured by residential property - - 366 (326) (40) -
Total loans per Dashboard D3 78,755 3,524 29,532 17,483 1,307 130,601
1
All other in RBNZ series S31 and the Dashboard comprises: Depository and other financial institutions, Central and Local Government, Non-profit institutions serving households.
2
Household exposures (resident and non-resident) in Note B2 comprise Housing and Consumer.
The Supplementary Information does not form part of the Disclosure Statement
38
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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.
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