ANZ Bank New Zealand Disclosure Statement
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008
27 May 2020
Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000
ANZ Bank New Zealand Limited
Registered Bank Disclosure Statement
Attached is the ANZ Bank New Zealand Limited Registered Bank Disclosure Statement
for the six months ended 31 March 2020.
Yours faithfully
Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
ANZ BANK NEW ZEALAND LIMITED
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2020
NUMBER 93 | ISSUED MAY 2020
ANZ BANK NEW ZEALAND LIMITED
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2020
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 24
Additional financial disclosures 26
Asset quality 31
Capital adequacy under the internal models based approach, and regulatory liquidity ratios 35
Concentration of credit risk to individual counterparties 42
Insurance business 42
Directors’ Statement 43
Independent Auditor’s Review Report 44
GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it 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.
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
The notes appearing on pages 7 to 23 form an integral part of these financial statements
3
INCOME STATEMENT
2020 2019
For the six months ended 31 March
Note
NZ$m NZ$m
Interest income
2,998
3,284
Interest expense
(1,332)
(1,652)
Net interest income
1,666
1,632
Other operating income 2
483
395
Net income from insurance business
-
27
Share of associates' profit
-
4
Operating income
2,149
2,058
Operating expenses 3
(836)
(744)
Profit before credit impairment and income tax
1,313
1,314
Credit impairment charge 7
(233)
(34)
Profit before income tax
1,080
1,280
Income tax expense
(296)
(331)
Profit for the period
784
949
STATEMENT OF COMPREHENSIVE INCOME
2020 2019
For the six months ended 31 March NZ$m NZ$m
Profit for the period
784
949
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
(17)
(16)
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity
(65)
-
Realised losses transferred to the income statement
14
4
Income tax attributable to the above items
19
3
Other comprehensive income after tax
(49)
(9)
Total comprehensive income for the period
735
940
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pages 7 to 23 form an integral part of these financial statements
4
BALANCE SHEET
31 Mar 20 30 Sep 19
As at Note NZ$m NZ$m
Assets
Cash and cash equivalents 5
7,746
2,363
Settlement balances receivable
404
193
Collateral paid
2,527
2,324
Trading securities
11,679
8,942
Derivative financial instruments
13,216
11,666
Investment securities
7,293
7,027
Net loans and advances 6
135,355
132,525
Deferred tax assets
283
77
Goodwill and other intangible assets
3,267
3,276
Premises and equipment
620
335
Other assets
670
688
Total assets
183,060
169,416
Liabilities
Settlement balances payable
2,265
1,607
Collateral received
1,290
991
Deposits and other borrowings 8
121,040
113,427
Derivative financial instruments
12,680
11,042
Current tax liabilities
92
101
Payables and other liabilities
1,191
1,159
Employee entitlements
145
138
Other provisions 9
330
314
Debt issuances 10
28,883
26,207
Total liabilities
167,916
154,986
Net assets
15,144
14,430
Equity
Share capital
11,888
11,888
Reserves
(15)
21
Retained earnings
3,271
2,521
Total equity
15,144
14,430
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
The notes appearing on pages 7 to 23 form an integral part of these financial statements
5
CASH FLOW STATEMENT
2020 2019
For the six months ended 31 March NZ$m NZ$m
Profit after income tax
784
949
Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation
69
41
Loss on sale and impairment of premises and equipment
-
5
Net derivatives/foreign exchange adjustment
1,260
(13)
Proceeds from divestments net of intangibles disposed of, classified as investing activities
-
(646)
Other non-cash movements
117
(147)
Net (increase)/decrease in operating assets:
Collateral paid
(203)
(451)
Trading securities
(2,737)
481
Net loans and advances
(2,830)
(3,644)
Other assets
(399)
611
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
7,613
2,957
Settlement balances payable
658
458
Collateral received
299
(326)
Other liabilities
(278)
(398)
Total adjustments
3,569
(1,072)
Net cash flows from operating activities
1
4,353
(123)
Cash flows from investing activities
Investment securities:
Purchases
(1,050)
(1,054)
Proceeds from sale or maturity
768
1,288
Proceeds from divestments
-
747
Other assets
(21)
(51)
Net cash flows from investing activities
(303)
930
Cash flows from financing activities
Debt issuances
2
Issue proceeds
2,327
3,240
Redemptions
(966)
(3,145)
Repayment of lease liabilities
3
(24) -
Dividends paid
(4)
(405)
Net cash flows from financing activities
1,333
(310)
Net change in cash and cash equivalents
5,383
497
Cash and cash equivalents at beginning of period
2,363
2,200
Cash and cash equivalents at end of period
7,746
2,697
1
Net cash provided by operating activities includes income taxes paid of NZ$485 million (2019: NZ$519 million).
2
Movement in debt issuances (Note 10 Debt Issuances) also includes a NZ$901 million increase (2019: NZ$883 million decrease) from the effect of foreign exchange rates, a NZ$320 million
increase (2019: NZ$341 million increase) from changes in fair value hedging instruments and a NZ$94 million increase (2019: NZ$90 million decrease) from other changes.
3
Relates to repayments of lease liabilities which the Banking Group commenced recognising on 1 October 2019 following the adoption of NZ IFRS 16. Comparative information has not been
restated.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pages 7 to 23 form an integral part of these financial statements
6
STATEMENT OF CHANGES IN EQUITY
Share
capital
Investment
securities
revaluation
reserve
Cash flow
hedging
reserve
Retained
earnings
Total
equity
Note NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018
11,888 11 22 1,188 13,109
Impact on transition to NZ IFRS 9 Financial Instruments
- - - (52) (52)
As at 1 October 2018 (adjusted)
11,888 11 22 1,136 13,057
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 1,668 13,592
As at 1 October 2019
11,888 (6) 27 2,521 14,430
Impact on transition to NZ IFRS 16 Leases 1
- - - (17) (17)
As at 1 October 2019 (adjusted)
11,888 (6) 27 2,504 14,413
Profit or loss
- - - 784 784
Unrealised losses recognised directly in equity
- (38) (27) - (65)
Realised losses transferred to the income statement
- - 14 - 14
Actuarial loss on defined benefit schemes
- - - (17) (17)
Income tax credit on items recognised directly in equity
- 11 4 4 19
Total comprehensive income for the period
- (27) (9) 771 735
Transactions with Immediate Parent Company in its capacity as owner:
Preference dividends paid
- - - (4) (4)
Transactions with Immediate Parent Company in its capacity as owner
- - - (4) (4)
As at 31 March 2020
11,888 (33) 18 3,271 15,144
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
7
1. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These interim financial statements (financial statements) for the Banking Group were issued on 26 May 2020 and should be read in conjunction with
the Banking Group’s financial statements for the year ended 30 September 2019.
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.
Presentation currency and rounding
The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.
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; and
• financial instruments designated at fair value through profit and loss.
Use of estimates, assumptions and judgements
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect reported amounts
and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective
decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are reviewed on an ongoing
basis.
A brief explanation of the key estimates, assumptions and judgements that have changed during the half year ended 31 March 2020 follows:
Coronavirus (COVID-19) pandemic
The ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these financial statements. The estimation
uncertainty is associated with:
• the extent and duration of the disruption to business arising from the actions by governments, businesses and consumers to contain the spread
of the virus;
• the extent and duration of the expected economic downturn (and forecasts for key economic factors including GDP, employment and house
prices). This includes the disruption to capital markets, deteriorating credit quality, liquidity concerns, increasing unemployment, declines in
consumer discretionary spending, reductions in production because of decreased demand, and other restructuring activities; and
• the effectiveness of government and central bank measures that have been and will be put in place to support businesses and consumers
through this disruption and economic downturn.
The Banking Group has developed various accounting estimates in these financial statements based on forecasts of economic conditions which
reflect expectations and assumptions as at 31 March 2020 about future events that the Directors believe are reasonable in the circumstances. There is
a considerable degree of judgement involved in preparing forecasts, particularly given the substantial uncertainty as to how long the period of
significant lockdown restrictions and flow on impacts will last, and the outlook for recovery. The underlying assumptions are also subject to
uncertainties which are often outside the control of
the Banking Group. Accordingly, actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting
estimates included in these financial statements.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses
and recoverable amount assessments of non-financial assets. The impact of the COVID-19 pandemic on each of these accounting estimates is
discussed further below and/or in the relevant note to these financial statements. Readers should carefully consider these disclosures in light of the
inherent uncertainty described above.
Allowance for expected credit losses
The Banking Group measures the allowance for expected credit losses (ECL) using an expected credit loss impairment model as required by NZ IFRS 9
Financial Instruments (NZ IFRS 9). The Banking Group’s accounting policy for the recognition and measurement of the allowance for ECL is described at
Note 12 to the Banking Group’s Financial Statements for the year ended 30 September 2019.
The table below shows the Banking Group’s allowance for ECL (refer to Note 7 and Note 11 for further information).
Mar 20 Sep 19
As at
NZ$m NZ$m
Individually assessed
98 108
Collectively assessed
675 486
Total
1
773 594
1.
Includes allowance for ECL for Net Loans and advances – at amortised cost and Off-balance sheet commitments – undrawn and contingent facilities.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
8
Individually assessed ECL
In estimating individually assessed ECL for Stage 3 exposures, the Banking Group makes judgements and assumptions in relation to expected
repayments, the realisable value of collateral, the business prospects for the customer, competing claims and the likely cost and duration of the work-
out process. Judgements and assumptions in respect of these matters have been updated to reflect the potential impact of COVID-19.
Collectively assessed ECL
During the six months ended 31 March 2020 the collectively assessed allowance for ECL increased by NZ$189 million. This was attributable to changes
in economic outlook of NZ$168 million and changes in portfolio composition and risk of NZ$21 million.
In estimating collectively assessed ECL, the Banking Group makes judgements and assumptions in relation to:
• the selection of an estimation technique or modelling methodology, noting that the modelling of the Banking Group’s ECL estimates are
complex; and
• the selection of inputs for those models, and the interdependencies between those inputs.
The modelling methodology applied in estimating ECL in these financial statements is consistent with that applied in the Banking Group’s Financial
Statements for the year ended 30 September 2019.
The impact of COVID-19 on the global economy and how governments, businesses and consumers respond is uncertain. This uncertainty is reflected
in the Banking Group’s assessment of ECL from its credit portfolio which are subject to a number of management judgements and estimates.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between those
inputs, and highlights significant changes during the six months ended 31 March 2020.
The judgements and associated assumptions have been made within the context of the impact of COVID-19, and reflect historical experience and
other factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the circumstances.
In relation to COVID-19, judgements and assumptions include the extent and duration of the pandemic, the impacts of actions of governments and
other authorities, and the responses of businesses and consumers in different industries, along with the associated impact on the global economy.
Accordingly, the Banking Group’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.
Judgement/assumption Description Changes and considerations during the six months
ended 31 March 2020
Determining when a
significant increase in
credit risk (SICR) has
occurred
In the measurement of ECL, judgement is involved in
setting the rules and trigger points to determine
whether there has been a SICR since initial
recognition of a loan, which would result in the
financial asset moving from ‘stage 1’ to ‘stage 2’. This
is a key area of judgement since transition from
stage 1 to stage 2 increases the ECL from an
allowance based on the probability of default in the
next 12 months, to an allowance for lifetime ECL.
Subsequent decreases in credit risk resulting in
transition from stage 2 to stage 1 may similarly result
in significant changes in the ECL allowance. The
setting of precise trigger points requires judgement
which may have a material impact upon the size of
the ECL allowance.
Various initiatives, such as payment deferrals have been
offered to customers in the six months ended 31 March
2020 recognising the potential detrimental impact of
COVID-19. Such offers, if accepted, are not automatically
considered to indicate SICR but are used as necessary
within the broader set of indicators used to assess and
grade customer facilities.
Measuring both 12-
month and lifetime
credit losses
ECL is a function of the probability of default (PD),
the loss given default (LGD) and the exposure at
default (EAD) which are point-in-time measures
reflecting the relevant forward looking information
determined by management. Judgement is involved
in determining which forward-looking information
variables are relevant for particular lending portfolios
and for determining the sensitivity of the parameters
to movements in these forward looking variables.
In addition, judgement is required where
behavioural characteristics are applied in estimating
the lifetime of a facility to be used in measuring ECL.
The PD, EAD and LGD models are subject to the Banking
Group’s model risk policy that stipulates periodic model
monitoring, periodic re-validation and defines approval
procedures and authorities according to model
materiality. There were no material changes to the models
during the six months ended 31 March 2020.
There were no changes to behavioural lifetime estimates
during the six months ended 31 March 2020.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
9
Judgement/assumption Description Changes and considerations during the six months
ended 31 March 2020
Base case economic
forecast
The Banking Group derives a forward looking “base
case” economic scenario which reflects our view of
the most likely future macro-economic conditions.
There have been no changes to the types of forward
looking variables (key economic drivers) used as model
inputs in the six months ended 31 March 2020.
As at 31 March 2020, the base case assumptions have
been updated to reflect the rapidly evolving global
situation with respect to COVID-19. This includes an
assessment of the impact of central bank (monetary
policy), government (wage subsidies), and institution
specific responses (such as payment deferrals). These are
considered in determining the length and severity of the
forecast economic downturn.
The expected outcomes of key economic drivers for the
base case scenario as at 31 March 2020 and those
previously used at 30 September 2019 are described
below under the heading “Forecast base case
assumptions”.
Probability weighting of
each scenario (base
case, upside
1
,
downside
1
and severe
downside
2
scenarios)
Probability weighting of each scenario is determined
by management considering the risks and
uncertainties surrounding the base case scenario.
The key consideration for probability weightings in the
current period is the continuing impact of COVID-19.
In addition to the base case forecast which reflects largely
the negative economic consequences of COVID-19,
greater weighting has been applied to the downside and
severe downside scenarios (base 50%, upside 4%,
downside 36% and severe downside 10%) given the
Banking Group’s assessment of downside risks.
The assigned probability weightings are subject to a high
degree of inherent uncertainty and therefore the actual
outcomes may be significantly different to those
projected. The Banking Group considers these weightings
to provide the best estimate of the possible loss outcomes
and has analysed inter-relationships and correlations (over
both the short and long term) within the Banking Group’s
credit portfolios in determining them.
Management
temporary adjustments
Management temporary adjustments to the ECL
allowance are adjustments used in circumstances
where it is judged that our existing inputs,
assumptions and model techniques do not capture
all the risk factors relevant to our lending portfolios.
Emerging local or global macroeconomic,
microeconomic or political events, and natural
disasters that are not incorporated into our current
parameters, risk ratings, or forward-looking
information are examples of such circumstances. The
use of management temporary adjustments may
impact the amount of ECL recognised.
Temporary adjustments for agriculture industry exposures
increased by NZ$15 million, to a total of NZ$30 million as
at 31 March 2020.
Also, temporary adjustments have been assessed in the
context of COVID-19 and the extent that associated credit
loss exposures are captured within the modelled
economic scenarios, with no further temporary
adjustments considered necessary.
1.
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
2.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.
Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the forecast resulting in an understatement or overstatement of the ECL
balance due to uncertainties around:
• The extent and duration of measures to stop or reduce the speed of the spread of COVID-19;
• The extent and duration of the economic downturn, along with the time required for economies to recover; and
• The effectiveness of government stimulus measures, in particular their impact on the magnitude of the economic downturn and the extent and
duration of the recovery.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
10
The Banking Group’s base case economic forecast scenarios reflects a sharp deterioration in economic conditions in the second quarter with a gradual
improvement thereafter. It reflects a widespread shutdown in the second quarter of calendar 2020 followed thereafter by a progressive relaxation of
lockdown restrictions.
The economic drivers of the base case economic forecasts at 31 March 2020 and those that were used at 30 September 2019 are set out below. These
reflect the Banking Group’s view, at the respective reporting dates, of the most likely future macro-economic conditions.
New Zealand Base case economic forecast as at 31 March 2020 Base case economic forecast as at 30 September 2019
• GDP
Expected sizeable contraction in GDP in June quarter,
starting to recover partially over the remainder of the
year. Moderate GDP growth is expected in 2021.
GDP is expected to contract by 17% in the June 2020
quarter, starting to recover in the September 2020
quarter once activity resumes, with an overall
contraction of 6.7% over the 2020 calendar year. GDP
is expected to grow by 4.2% in calendar year 2021.
Expected to improve modestly.
• Unemployment
rate
Unemployment is expected to increase significantly
over the June quarter, recovering gradually over the
remainder of 2020 and 2021, but remaining
significantly higher than levels of first half of 2020. It is
expected to average 7.4% for calendar year 2020 and
7.7% for calendar year 2021.
Expected to remain stable.
• Residential
property prices
Property prices are expected to contract by 1.9% in
calendar year in 2020, followed by 6.0% growth in
calendar year 2021.
Expected to achieve modest levels of growth.
• Commercial
property prices
Property prices are expected to increase moderately
in 2020, continuing but less so in 2021.
Expected to grow by 3.1% in calendar year 2020 and
a further 0.5% in 2021.
Expected to grow, however, the growth rate is expected
to be modest through the forecast period.
• Consumer price
index
CPI growth is forecast at slightly lower levels than
2019 across 2020 and 2021.
CPI growth is forecast at 1.5% for calendar year 2020
and 1.5% for calendar year 2021.
Expected to rise modestly.
Sensitivity analysis
The uncertainty of the impact of COVID-19 introduced significant estimation uncertainty in relation to the measurement of the Banking Group’s
allowance for ECL. While a combined 46% weighting has been applied to the downside and severe downside scenarios as at 31 March 2020, the
rapidly evolving consequences of COVID-19 and government, business and consumer responses could result in significant adjustments to the
allowance within the current and next financial years.
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future periods,
expected credit losses reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of ECL to key factors used in determining it:
Total ECL Impact
ECL sensitivity - weightings applied to forecast scenarios
NZ$m NZ$m
100% upside scenario
322 (353)
100% base scenario
575 (100)
100% downside scenario
766 91
100% severe downside scenario
986 311
Customer remediation and other provisions
The Banking Group holds provisions for various obligations including customer remediation, restructuring costs, leasehold make good and
litigation related claims (refer to Note 9). These provisions involve judgements regarding the outcome of future events, including estimates of
expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice, provisions
and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the cost of
settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of different
assumptions, including, the number of impacted customers, the average refund per customer and the associated remediation costs.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant
evidence and adjustments are made to the provisions where appropriate.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
11
Annual goodwill impairment testing
Management judgement is used to assess the recoverable value of goodwill. Goodwill is assessed for indicators of impairment half-yearly and tested
for impairment annually. The level at which goodwill is allocated, the estimation of future cash flows and the selection of discount rates applied
requires significant judgement.
For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a cash generating unit (CGU). The Banking Group’s CGUs are
consistent with the operating segments described in Note 4, and the allocation of goodwill to each CGU as at 31 March 2020 is the same as at 30
September 2019. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. To estimate the
recoverable amount of the CGU to which each goodwill component is allocated, we use a value-in-use approach.
Value-in-use
These calculations use cash flow projections based on a number of financial budgets within each segment approved by management covering an
initial forecast period. These projections also incorporate economic assumptions including GDP, inflation, unemployment and residential and
commercial property prices. Cash flows beyond the forecast period are extrapolated using the terminal growth rate. These cash flow projections are
discounted using a discount rate derived using a capital asset pricing model.
Market observable information is not readily available at the CGU level therefore management performed stress tests for key sensitivities in each
segment. Given the rapidly changing situation associated with COVID-19, a further specific stress scenario was applied as at 31 March 2020. This
additional stress scenario decreased the recoverable amount of each CGU by an average of 23.5% compared to the 29 February 2020 annual
impairment test, but did not cause the carrying amount of goodwill for any CGU to exceed its recoverable amount.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential write-off of
part or all of the goodwill balances.
29 February 2020 annual impairment test 31 March 2020 stress scenario
Forecast period and
projections
Three years
Projections based on a number of financial
budgets within each segment approved by
management.
Eight years - incorporating a two and a half year initial stress
period followed by a three year recovery and a three year
return to maintainable earnings.
The periods of initial stress included allowances for increased
credit impairment losses, based on stress scenarios used in
the Banking Group’s Internal Capital Adequacy Assessment
Process (ICAAP) and having regard to the economic forecasts
used in the calculation of ECL as at 31 March 2020, and
decreased revenue.
Terminal growth rate 2% - based on RBNZ long term inflation target.
2% - based on RBNZ long term inflation target
Discount rates
9.5% (2019: 11.1%). Pre-tax: 12.3% (2019: 14.7%).
The main variables in the calculation of the
discount rate used are the risk free rate, beta and
the market risk premium. The risk free rate was
based on a blended yield rate between the 10
year New Zealand government bond rate and
the associated 5 year forward rate. Beta and the
market risk premium were consistent with
observable and comparative market rates
applied in the regional banking sector.
7.1% for one year to 10.2% for the terminal cash flows. Pre-tax:
10.1% to 13.2%.
The range of rates used was equivalent to using a flat rate of
10.0% (Pre-tax: 12.9%).
Given RBNZ has stated that the Official Cash Rate will be held
at 0.25% for at least one year, a range of rates applicable to
the discounting period were used.
These were calculated on the same basis as for the annual
impairment test, using risk free rates applicable to the
discount period, and an updated market risk premium.
Result Carrying amount did not exceed the recoverable
amount for any CGU.
Carrying amount did not exceed the recoverable amount for
any CGU.
Sensitivity testing
Sensitivity analysis was performed on key
assumptions in early March, and this did not
cause the carrying amount of any CGU to
exceed its recoverable amount.
Cashflow forecasts were flexed for changes in credit
impairment charges.
Credit impairment charges as a proportion of gross loans and
advances were increased for the initial stress period to at least
30% above the ICAAP scenario applied, equivalent to at least
30% higher than the levels experienced over 2008 to 2011
(covering the period of the global financial crisis).
Carrying amount did not exceed the recoverable amount for
any CGU.
Conclusion No impairment of goodwill for any CGU No impairment of goodwill for any CGU
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
12
Other intangible assets
Management judgement is used to assess the recoverable value of other intangible assets, and the useful economic life of an asset, or if an asset
has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
At each reporting date, software and other intangible assets are assessed for indicators of impairment. In addition, software and intangible assets
not ready for use are tested annually for impairment. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the carrying value of the asset is written down immediately.
In addition, the expected useful life of intangible assets, including software assets, are assessed on a semi-annual basis. The assessment requires
management judgement, and in relation to our software assets, a number of factors can influence the expected economic useful lives. These
factors include changes to business strategy, significant divestments and the underlying pace of technological change.
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 standard relevant to the Banking Group has been adopted from 1 October 2019 and has been applied in the preparation of these
financial statements:
NZ IFRS 16 Leases (NZ IFRS 16)
NZ IFRS 16 became effective for the Banking Group from 1 October 2019 and replaced the previous standard NZ IAS 17 Leases (NZ IAS 17). NZ IFRS 16
primarily impacts the Banking Group’s property and technology leases which were previously classified as operating leases. Under NZ IAS 17,
operating leases were not recognised on the balance sheet and rent payments were expensed over the lease term.
Under NZ IFRS 16, the Banking Group recognises all leases (except for leases of low value assets and short term leases) on the balance sheet under a
single accounting model. Accordingly, the Banking Group recognises its right to use an underlying leased asset over the lease term, as a right-of-use
(ROU) asset, and its obligation to make lease payments as a lease liability. In the income statement, the Banking Group recognises depreciation
expense on the ROU asset and interest expense on the lease liability. As a result, lease expenses will be higher in the early periods of a lease and lower
in the later periods of the lease compared to the previous standard where expenses were constant over the lease term. Cumulative expenses over the
life of a lease will not change.
As permitted by the standard, the Banking Group does not recognise ROU assets and lease liabilities for leases of low value items and short term leases
(less than 12 months). Instead, the lease payments associated with these leases are recognised as operating expense in the income statement on a
straight-line basis over the lease term.
The Banking Group has applied the modified retrospective transition approach whereby initial lease liabilities are recognised based on the present
value of remaining lease payments as of the transition date. The initial ROU asset recognised for certain large commercial leases was measured as if NZ
IFRS 16 had always been applied to the leases. For all other leases, the initial ROU asset was measured as equal to the initial lease liability plus any
future make good obligations associated with exiting the lease.
The implementation of NZ IFRS 16 requires management to make certain key judgements including the determination of lease terms, discount rates
and identifying arrangements that contain a lease.
Based on the modified retrospective transition approach, the Banking Group recognised lease liabilities of $333 million presented within Payables and
other liabilities and right-of-use assets of $309 million presented within Premises and equipment. This resulted in a reduction to opening retained
earnings of $17 million and an increase in deferred tax assets of $7 million as of 1 October 2019. Comparatives have not been restated.
In addition, the Banking Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:
• Impairment of ROU assets at the transition date were assessed by relying on onerous lease provisions previously recognised as of 30 September
2019 under NZ IAS 17;
• Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised at
transition;
• No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases
were treated as short-term leases with all lease payments recognised in rent expense as incurred; and
• Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
The following table reconciles the operating lease commitments disclosed under NZ IAS 17 as at 30 September 2019 to the opening lease liabilities
recognised under NZ IFRS 16 as at 1 October 2019.
NZ$m
Operating lease commitments as at 30 September 2019
279
Increase in lease term for extension options
93
Total undiscounted lease payments 372
Effect of discounting at a weighted average incremental borrowing rate of 2.75%
(39)
Total lease liabilities under NZ IFRS 16 333
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
13
Interest Rate Benchmark Reform
Background
Interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), play a critical role in global financial markets, serving as reference
rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments.
Uncertainty surrounding the integrity of IBOR rates has in recent years, led regulators, central banks and market participants to work towards a
transition to alternative risk-free benchmark reference rates (RFRs) and market-led working groups in respective jurisdictions have recommended
alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant
uncertainty in the future of IBOR benchmarks beyond 1 January 2022.
Accounting amendments
In response to the uncertainty about the long-term viability of these benchmark rates, and LIBOR in particular, the International Accounting Standards
Board (IASB) has established a project to consider the financial reporting implications of the reform. The transition from LIBOR is expected to have an
impact on various elements of financial instrument accounting, including hedge accounting, as well as fair value methodologies and disclosures.
In November 2019, the External Reporting Board (XRB) issued XRB amending standard Interest Rate Benchmark Reform, which amends certain existing
hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the interest rate benchmark reform. The Banking
Group elected to early adopt the amendments from 1 October 2019 which have not had a significant impact on the Banking Group.
These amendments address the accounting effects of uncertainty in the period leading up to the reform arising from the Banking Group’s ability to
satisfy the existing prospective hedge effectiveness requirements of NZ IAS 39 Financial Instruments: Recognition and Measurement. This uncertainty
arises as it is not known when the hedged items (such as debt issuances) and associated hedging instruments (such as interest rate swaps) will be
changed to reference the RFRs, or if both the hedging item and the associated hedging instrument will move to the new rates at the same time. The
Banking Group has applied this amendment to all hedge accounted relationships (cash flow or fair value hedges) where the reform gives rise to
uncertainties about the timing or amount of IBOR based cash flows of the hedged item or hedging instrument.
The IASB has commenced working on Phase 2 of its IBOR Reform project, which focuses on potential issues that might affect financial reporting once
the existing rate is replaced with an alternative rate. The Banking Group is monitoring these developments and continues to assess the expected
financial impact.
Impact of IBOR reform
The Banking Group has exposure to IBOR through its issuance of debt, the structural interest rate risk position, products denominated in foreign
currencies and associated hedging activities in our markets and treasury businesses within Institutional and Other segments respectively.
The Banking Group has established a programme to manage the transition. The programme includes the assessment and actions necessary to
accommodate the transition to RFRs as they apply to internal processes and systems including pricing, risk management, documentation and hedge
arrangements. The programme includes management of the impact on customers.
Impact of IBOR reform on the Banking Group’s hedging relationships
The most significant interest rate benchmarks to which the Banking Group's hedging relationships are exposed are US dollar LIBOR, Euro Interbank
Offered Rate (Euribor), Bank Bill Swap Rate (BBSW) and Bank Bill Market (BKBM).
Of these benchmarks the Banking Group expects BBSW, BKBM and Euribor to exist as benchmark rates for the foreseeable future and therefore does
not believe its BBSW, BKBM or Euribor benchmark fair value or cash flow hedges to be directly impacted by IBOR reform.
The table below details the carrying values of the Banking Group's exposures designated in hedge accounting relationships that will be impacted by
IBOR reform, principally US dollar LIBOR. The nominal value of the associated hedging instruments are also included:
US dollar LIBOR
As at 31 March 2020
NZ$m
Hedged items
Debt issuances
12,572
Notional designated
up to
31 December 2021
Notional designated
beyond
31 December 2021
Total notional
amount
As at 31 March 2020 NZ$m NZ$m NZ$m
Hedging Instruments
Fair value hedges
5,393 6,637 12,030
As at 31 March 2020 the Banking Group also has Swiss franc LIBOR exposures designated in hedge accounting relationships of NZ$1,080 million.
Comparatives
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Principles of consolidation
The financial statements consolidate the financial statements of the Bank and its subsidiaries.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
14
2. OTHER OPERATING INCOME
2020 2019
For the six months ended 31 March NZ$m NZ$m
(i) Fee and commission revenue
Lending fees
17
16
Non-lending fees
374
410
Commissions
21
23
Funds management income
133
127
Fee and commission income
545
576
Fee and commission expense
(260)
(241)
Net fee and commission income
285
335
(ii) Other income
Net trading gains
68
73
Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value
119
(121)
Net foreign exchange earnings and other financial instruments income
187
(48)
Sale of OnePath Life (NZ) Limited (OnePath)
-
59
Sale of investment in Paymark Limited (Paymark)
-
39
Other
11
10
Other income
198
60
Other operating income
483
395
3. OPERATING EXPENSES
2020 2019
For the six months ended 31 March NZ$m NZ$m
Personnel
Salaries and related costs
454
413
Superannuation costs
15
14
Other
24
10
Personnel
493
437
Premises
Rent
1
12
41
Other
2
65
34
Premises
77
75
Technology
Depreciation and amortisation
24
24
Licences and outsourced services
60
53
Other
22
24
Technology (excluding personnel)
106
101
Other
Advertising and public relations
24
21
Professional fees
31
27
Freight, stationery, postage and communication
21
22
Charges from Ultimate Parent Bank
41
26
Other
43
35
Other
160
131
Operating expenses
836
744
1
Following the adoption of NZ IFRS 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with operating leases are shown as
depreciation of the right-of-use asset and interest expense associated with the lease liability (comparatives are not restated).
2
Includes depreciation and amortisation on right-of-use assets which the Banking Group commenced recognising on the adoption of NZ IFRS 16 (comparatives not restated).
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
15
4. 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.
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, government and government
related entities.
Institutional
The Institutional division services government, 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.
Retail Commercial Institutional Other Total
For the six months 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
ended 31 March NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net interest income
921
926
549
517
177
169
19
20
1,666
1,632
Net fee and commission income
- Lending fees
8
8
-
-
9
8
-
-
17
16
- Non-lending fees
343
371
5
9
26
30
-
-
374
410
- Commissions
21
23
-
-
-
-
-
-
21
23
- Funds management fees
133
127
-
-
-
-
-
-
133
127
- Fee and commission expense
(260)
(241)
-
-
-
-
-
-
(260)
(241)
Net fee and commission income
245
288
5
9
35
38
-
-
285
335
Other income
8
7
1
1
46
75
143
(23)
198
60
Net income from insurance
business
-
19
-
-
-
-
-
8
-
27
Share of associates' profits
-
4
-
-
-
-
-
-
-
4
Other operating income
253
318
6
10
81
113
143
(15)
483
426
Operating income
1,174
1,244
555
527
258
282
162
5
2,149
2,058
Operating expenses
(574)
(514)
(147)
(128)
(96)
(86)
(19)
(16)
(836)
(744)
Profit before credit impairment
and income tax
600
730
408
399
162
196
143
(11)
1,313
1,314
Credit impairment charge
(83)
(31)
(106)
(2)
(44)
(1)
-
-
(233)
(34)
Profit before income tax 517
699
302
397
118
195
143
(11)
1,080
1,280
Income tax expense
(145)
(200)
(85)
(111)
(33)
(55)
(33)
35
(296)
(331)
Profit after income tax 372
499
217
286
85
140
110
24
784
949
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
16
Retail Commercial Institutional Other Total
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
As at NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial position
Goodwill
1,039
1,039
1,052
1,052
1,069
1,069
-
-
3,160
3,160
Net loans and advances
84,676
81,789
43,559
43,464
7,110
7,270
10
2
135,355
132,525
Customer deposits
76,408
73,866
17,218
16,138
19,785
19,232
-
-
113,411
109,236
Other segment
The Other segment profit after income tax comprises:
2020 2019
For the six months ended 31 March
NZ$m NZ$m
Central functions
3
-
Technology and Group Centre
1, 2
11
195
Economic hedges
96
(90)
Revaluation of insurance policies from changes in interest rates
2
-
(81)
Total
110
24
1
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).
2
Amounts for the six months ended 31 March 2019 include the transfer of NZ$86 million of accumulated after tax gains previously recognised in revaluation of insurance policies from changes
in interest rates to Technology and Group Centre. These gains were transferred upon the sale of OnePath.
5. CASH AND CASH EQUIVALENTS
31 Mar 20 30 Sep 19
NZ$m NZ$m
Coins, notes and bank deposits
755
192
Securities purchased under agreements to resell in less than 3 months
557
297
Balances with central banks
1
6,052
1,448
Settlement balances receivable within 3 months
382
426
Cash and cash equivalents 7,746
2,363
1
From 20 March 2020, RBNZ removed allocated credit tiers for Exchange and Settlement Account System (ESAS) holders, with all ESAS credit balances earning interest at the Official Cash Rate
(OCR).
6. NET LOANS AND ADVANCES
31 Mar 20 30 Sep 19
Note NZ$m NZ$m
Overdrafts
816
927
Credit cards
1,426
1,569
Term loans - housing
87,269
84,007
Term loans - non-housing
44,539
44,586
Finance lease and hire purchase receivables
1,844
1,863
Subtotal
135,894
132,952
Unearned income
(221)
(237)
Capitalised brokerage/mortgage origination fees
326
307
Gross loans and advances
135,999
133,022
Allowance for ECL 7
(644)
(497)
Net loans and advances
135,355
132,525
The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$326 million as at 31 March 2020 (30 September 2019:
NZ$739 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
17
7. ALLOWANCE FOR EXPECTED CREDIT LOSSES
This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.
ALLOWANCE FOR EXPECTED CREDIT LOSSES – BALANCE SHEET
Net loans and advances - at amortised cost
Allowance for ECL is included in net loans and advances.
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019 164 194 42 97 497
Transfer between stages
22 (25) 3 - -
New and increased provisions (net of collective provision releases)
20 122 16 72 230
Write-backs
- - - (15) (15)
Recoveries of amounts previously written off
- - - (14) (14)
Credit impairment charge
42 97 19 43 201
Bad debts written-off (excluding recoveries)
- - - (64) (64)
Add back recoveries of amounts previously written off
- - - 14 14
Discount unwind
- - - (4) (4)
As at 31 March 2020 206 291 61 86 644
Off-balance sheet credit related commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions
As at 1 October 2019 60 24 2 11 97
Transfer between stages
4 (4) - - -
New and increased provisions (net of releases)
18 13 - 1 32
Credit impairment charge
22 9 - 1 32
As at 31 March 2020 82 33 2 12 129
CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
2020 2019
For the six months ended 31 March NZ$m NZ$m
New and increased provisions
- Collectively assessed
189
1
- Individually assessed
73
64
Write-backs
(15)
(20)
Recoveries of amounts previously written-off
(14)
(11)
Total credit impairment charge
233
34
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
18
8. DEPOSITS AND OTHER BORROWINGS
31 Mar 20 30 Sep 19
NZ$m NZ$m
Term deposits
51,769
54,984
On demand and short term deposits
47,215
42,329
Deposits not bearing interest
14,427
11,795
UDC secured investments
-
128
Total customer deposits
113,411
109,236
Certificates of deposit
1,695
1,484
Deposits from banks and securities sold under repurchase agreements
1,461
203
Commercial paper
4,456
2,461
Deposits from Immediate Parent Company and NZ Branch
17
43
Deposits and other borrowings
121,040
113,427
9. OTHER PROVISIONS
31 Mar 20 30 Sep 19
Note
NZ$m NZ$m
ECL allowance on undrawn facilities 7
129
97
Customer remediation
124
139
Restructuring costs
27
25
Leasehold make good
23
23
Other
1
27
30
Total other provisions 330
314
1
Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities provided in connection with various
disposals of businesses and assets.
10. DEBT ISSUANCES
31 Mar 20 30 Sep 19
NZ$m NZ$m
Senior debt
21,812
19,307
Covered bonds
4,630
4,460
Total unsubordinated debt
26,442
23,767
Subordinated debt (Additional Tier 1 capital)
2,441
2,440
Total debt issued
28,883
26,207
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
19
11. CREDIT RISK
This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1.
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these
differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
Reported Excluded
1
Maximum exposure to
credit risk
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
On-balance sheet positions
Net loans and advances
135,355
132,525
-
-
135,355
132,525
Other financial assets:
Cash and cash equivalents
7,746
2,363
355
192
7,391
2,171
Settlement balances receivable
404
193
-
-
404
193
Collateral paid
2,527
2,324
-
-
2,527
2,324
Trading securities
11,679
8,942
-
-
11,679
8,942
Derivative financial instruments
13,216
11,666
-
-
13,216
11,666
Investment securities
7,293
7,027
-
-
7,293
7,027
Other financial assets
2
586
622
-
-
586
622
Total other financial assets 43,451
33,137
355
192
43,096
32,945
Subtotal 178,806
165,662
355
192
178,451
165,470
Off-balance sheet commitments
Undrawn and contingent facilities
3
30,018
29,253
-
-
30,018
29,253
Total 208,824
194,915
355
192
208,469
194,723
1
Excluded comprises bank notes and coins and cash at bank within cash and cash equivalents.
2
Other financial assets mainly comprise accrued interest, insurance receivables and acceptances.
3
Undrawn facilities and contingent facilities include guarantees, letters of credit and performance related contingencies, net of allowance for ECL.
Credit quality
We use the Banking Group’s internal customer credit rating (CCR) to manage the credit quality of financial assets. To enable wider comparisons, the
Banking Group’s CCRs are mapped to external rating agency scales as follows:
Credit quality
description
Internal CCR
The Banking Group customer requirements
Moody’s
Rating
S&P Global
Ratings
Strong CCR 0+ to 4- Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.
Aaa – Baa3 AAA – BBB-
Satisfactory CCR 5+ to 6- Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible to
cyclical trends or variability in earnings.
Ba1 – B1 BB+ – B+
Weak CCR 7+ to 8= Demonstrated some operational and financial instability, with
variability and uncertainty in profitability and liquidity projected to
continue over the short and possibly medium term.
B2 – Caa B - CCC
Defaulted CCR 8- to 10 When doubt arises as to the collectability of a credit facility, the
financial instrument (or ‘the facility’) is classified as defaulted.
n/a n/a
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
20
Net loans and advances
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
100,607 2,243 - - 102,850
Satisfactory
24,510 4,565 - - 29,075
Weak
580 2,537 - - 3,117
Defaulted
- - 577 275 852
Subtotal 125,697 9,345 577 275 135,894
Allowance for ECL
(206) (291) (61) (86) (644)
Net loans and advances at amortised cost 125,491 9,054 516 189 135,250
Coverage ratio 0.16% 3.11% 10.57% 31.27% 0.47%
Unearned income
(221)
Capitalised brokerage/mortgage origination fees
326
Net carrying amount 135,355
As at 30 September 2019
Strong
95,589 2,270 - - 97,859
Satisfactory
26,402 4,621 - - 31,023
Weak
1,224 2,117 - - 3,341
Defaulted
- - 444 285 729
Subtotal 123,215 9,008 444 285 132,952
Allowance for ECL
(164) (194) (42) (97) (497)
Net loans and advances at amortised cost 123,051 8,814 402 188 132,455
Coverage ratio 0.13% 2.15% 9.46% 34.04% 0.37%
Unearned income
(237)
Capitalised brokerage/mortgage origination fees
307
Net carrying amount 132,525
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
25,019 131 - - 25,150
Satisfactory
4,196 594 - - 4,790
Weak
20 160 - - 180
Defaulted
- - 4 23 27
Gross undrawn and contingent facilities 29,235 885 4 23 30,147
Allowance for ECL included in Other provisions (refer to Note 9)
(82) (33) (2) (12) (129)
Net undrawn and contingent facilities 29,153 852 2 11 30,018
Coverage ratio 0.28% 3.73% 50.00% 52.17% 0.43%
As at 30 September 2019
Strong
23,296 59 - - 23,355
Satisfactory
4,883 641 - - 5,524
Weak
312 137 - - 449
Defaulted
- - 3 19 22
Gross undrawn and contingent facilities 28,491 837 3 19 29,350
Allowance for ECL included in Other provisions (refer to Note 9)
(60) (24) (2) (11) (97)
Net undrawn and contingent facilities 28,431 813 1 8 29,253
Coverage ratio 0.21% 2.87% 66.67% 57.89% 0.33%
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
21
12. 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 assets or liabilities;
• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and
• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
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 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Trading securities
9,265
8,319
2,414
623
-
-
11,679
8,942
Derivative financial instruments
28
10
13,185
11,653
3
3
13,216
11,666
Investment securities
7,292
7,026
-
-
1
1
7,293
7,027
Total 16,585
15,355
15,599
12,276
4
4
32,188
27,635
Liabilities
Deposits and other borrowings
-
-
4,456
2,461
-
-
4,456
2,461
Derivative financial instruments
11
11
12,669
11,031
-
-
12,680
11,042
Other financial liabilities
154
213
-
-
-
-
154
213
Total 165
224
17,125
13,492
-
-
17,290
13,716
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 20 30 Sep 19 31 Mar 20 30 Sep 19
NZ$m NZ$m NZ$m NZ$m
Financial assets
Net loans and advances
1
135,355
132,525
136,160
133,087
Total
135,355
132,525
136,160
133,087
Financial liabilities
Deposits and other borrowings
2
116,584
110,966
116,772
111,098
Debt issuances
1
28,883
26,207
28,192
26,585
Total
145,467
137,173
144,964
137,683
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
22
13. COMMITMENTS AND CONTINGENT LIABILITIES
31 Mar 20 30 Sep 19
Credit related commitments and contingencies NZ$m NZ$m
Contract amount of:
Undrawn facilities
27,399
26,600
Guarantees and letters of credit
1,232
1,248
Performance related contingencies
1,516
1,502
Total 30,147
29,350
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
seriously the interests of the Banking Group.
Regulatory and customer exposures
In recent years 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), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued by
regulators, particularly against financial institutions globally. There has also been an increase in the number of matters on which the Banking Group
engages with its regulators. 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. The nature of these interactions can be
wide ranging and, for example, may include a range of matters including responsible lending practices, regulated lending financial transactions,
product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance
distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering and
counter-terrorism financing obligations, reporting and disclosure obligations and product disclosure documentation. 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.
Commerce Commission settlement
Between June 2015 and May 2016, the Bank had an issue with a loan calculator which meant some interest to be charged to customers was left out
when calculating their repayments or loan term. On 2 March 2020, The Commerce Commission announced it had agreed with the Bank that the Bank
would pay some customers affected by the issue a further NZ$29.4 million, in addition to the NZ$8.4 million the Bank has paid previously. All amounts
in relation to this matter were provided for in the period to 30 September 2019.
Reviews under section 95 of the Reserve Bank of New Zealand Act 1989 (RBNZ Act)
On 5 July 2019, the RBNZ issued a notice under section 95 of the RBNZ Act, requiring the Bank to obtain two external reviews, the first on the Bank’s
compliance with certain aspects of the RBNZ Banking Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach)
(BS2B) and the second on the effectiveness of the Bank’s directors’ attestation and assurance framework.
• The director attestation and assurance framework review was completed in December 2019, and the Bank is committed to implementing the
recommendations identified and addressing the issues raised. On 11 December 2019 RBNZ issued a further notice under section 95 of the RBNZ
Act, requiring the Bank to obtain an external review of the improvements made to the Bank’s directors’ attestation and assurance framework.
• The report regarding the Bank's compliance with the RBNZ's capital adequacy requirements was completed in April 2020. This report identified
instances of both current and historical non-compliance with capital adequacy requirements. The Bank has accepted the findings of this review,
and is working with the RBNZ to rectify the issues identified. The RBNZ has stated that it is confident the Bank will resolve this matter without
issue, and has emphasised that the Banking Group remains sound and well capitalised.
The Section 95 reviews have highlighted the need for a broader programme of improving the Bank's processes covered by those reviews, and this
programme is underway.
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
23
14. SUBSEQUENT EVENTS
On 2 April 2020, RBNZ announced that locally incorporated banks, including the Bank, cannot pay dividends on ordinary shares and should not
redeem capital notes at this time. Accordingly, the Bank was not permitted to, and did not, redeem NZ$500 million of mandatory convertible
perpetual subordinated securities (ANZ NZ CN) on 25 May 2020 (the Optional Exchange Date). Further, the Bank did not exercise its option to convert
ANZ NZ CN into ordinary shares of the Ultimate Parent Bank on the Optional Exchange Date.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
24
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 18 for further details, and to
page 26 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 26 May 2020.
Changes in the Bank’s Board of Directors
As at 26 May 2020 there have been changes to the Directors of the Bank since 30 September 2019, the balance date of the last full year disclosure
statement. These changes were:
• Alison Gerry was appointed as a Non-Executive Director on 18 October 2019; and
• Antonia Watson was appointed as an Executive Director on 18 December 2019.
Conditions of registration
Non-compliance with conditions of registration
a) Condition of Registration 1B – compliance with BS2B
The report completed under section 95 of the RBNZ Act regarding the Bank's compliance with the RBNZ's capital adequacy requirements was
completed in April 2020. The Bank has accepted the findings of this review, and is working with the RBNZ to rectify the issues identified. The RBNZ has
stated that it is confident the Bank will resolve this matter without issue, and has emphasised that the Banking Group remains sound and well
capitalised.
As reported in the disclosure statement for the year ended 30 September 2019, the Bank has not complied with condition of registration 1B in relation
to the implementation of changes to rating models and processes that were not approved by RBNZ. Applying the last RBNZ approved methodologies
to the affected exposures as at 30 September 2019 would have decreased Risk Weighted Assets (RWA) by NZ$47 million (0.05%) in aggregate, which
was not sufficient to affect the reported capital ratios.
Affected models and the initial dates of non-compliance are:
• Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development) - 2011
• Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds) - 2009
• Project and Structured Finance - 2009
• Bank, Country & Sovereigns - 2008
The Bank’s model compendium required under section 1.3B of BS2B is non-compliant as it includes unapproved model changes.
Further to the above, in May 2020 the Bank identified that its approach to enhancing wholesale risk grades in the presence of a guarantee is not
compliant with BS2B. The estimated impact as at 31 March 2020 is an understatement of RWA of NZ$26 million (0.03%), which is not sufficient to affect
the reported capital ratios. The Bank is working with the RBNZ to resolve this issue.
b) Condition of Registration 5 - Exposures to connected persons not on more favourable terms (BS8)
As reported in the disclosure statement for the year ended 30 September 2019, from time to time, the Bank provides a guarantee or standby letter of
credit to a third party in respect of an obligation of a customer of the Ultimate Parent Bank. The Ultimate Parent Bank provides a counter-guarantee or
standby letter of credit to the Bank, giving the Bank recourse directly to the Ultimate Parent Bank if the guarantee or standby letter of credit the Bank
provides in respect of the customer's obligations is called upon. The Bank charges the Ultimate Parent Bank a fee for this service. However, through an
internal review, the Bank identified that since January 2014 this fee had been lower than the fee charged for this same service provided to unrelated
banks and, as a result, the Bank has not complied with condition of registration 5. The Bank has implemented a revised pricing methodology for all
new transactions entered into from 1 January 2020. As at 31 December 2019, the value of the exposure under the previous pricing arrangements was
NZ$374 million across 232 individual transactions.
c) Condition of Registration 13 - Liquidity ratios (BS13)
The following matters of non-compliance with BS13 were reported in the disclosure statement for the year ended 30 September 2019. These errors
were not sufficient to affect the reported liquidity ratios and processes have been updated with effect from 31 January 2020 to ensure the calculations
comply with BS13.
• The Bank calculated the next cash inflow on variable-rate housing loans based on a current wholesale rate plus the existing margin rather than
using the current interest rate to calculate the inflow. This calculation error had existed since 2010.
• The liquidity ratio calculation system and the system of record for certain bond liabilities and certain swaps calculate future cash flows
differently. The difference had been known since 2017.
d) Condition of Registration 24 – Outsourcing (BS11 dated September 2017)
BS11 requires the Bank to apply specified risk mitigants against each outsourcing arrangement.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
25
• During the year ended 30 September 2019, the Bank outsourced two arrangements to the Overseas Banking Group without the required
prescribed contractual terms. These arrangements were remediated in December 2019.
• During the six months ended 31 March 2020, one of the Bank’s independent third party contracts expired nine days before a replacement
contract was entered into. During those nine days the relevant outsourcing arrangement did not include the prescribed contractual terms.
BS11 requires the Bank to have a compendium of information about outsourcing arrangements in place from 1 October 2019.
• In November 2019, the Bank informed the RBNZ that minor data discrepancies had been identified for certain information entered in the
compendium during the year ended 30 September 2019. The discrepancies were corrected in December 2019.
• Additional data discrepancies and instances of potentially incomplete information have been identified during the six months ended 31 March
2020, which will be investigated and corrected by 30 September 2020.
Changes since 31 March 2020
Effective 2 April 2020, the Bank’s conditions of registration have been amended to:
• include restrictions on payments of dividends on ordinary shares;
• reduce the minimum requirement for the core funding ratio from 75% to 50%; and
• refer to the revised version of the RBNZ Banking Supervision Handbook document BS11 which extends the transition period to 6 years, with this
revised version of BS11 becoming fully effective from 1 October 2021.
Effective 1 May 2020, the Bank’s conditions of registration have been amended to remove restrictions on high loan-to-valuation residential mortgage
lending.
Other matters
The Bank has identified one counterparty that had been misclassified as sovereign, inconsistent with the definition in BS2B paragraph 4.5, since
December 2017. The estimated impact as at 31 March 2020 is an understatement of RWA of NZ$383 million (0.38%), and an overstatement of the
Banking Group’s capital ratios of 0.05%. This did not result in non-compliance with the Bank’s conditions of registration over the six months ended 31
March 2020. However, until 31 December 2018, Condition of Registration 1B required compliance with all aspects of BS2B and, as a result, the Bank
had not complied with Condition of Registration 1B in respect of this matter between December 2017 and 31 December 2018. The Bank is working
with the RBNZ to resolve this issue.
There are several matters under review, including the calculation of the market risk capital requirement (under BS2B) and liquidity ratios (under BS13
and BS13A), where there may be more than one valid interpretation of the respective policy wording or requirement. Where there may be some
uncertainty about the interpretation the Bank has applied, where appropriate, it will seek further guidance from the RBNZ on these matters. In the
Bank’s current view, the potential impact of the application of other interpretations is immaterial to reported ratios.
Other material matters
RBNZ review of capital requirements
Between May 2017 and December 2019, the RBNZ conducted a comprehensive review of the capital adequacy framework applying to New Zealand
locally incorporated registered banks. The RBNZ's final decisions on the capital review as they relate to the Bank are set out below. In response to the
COVID-19 pandemic, the RBNZ has delayed the start date for the increased capital requirements by 12 months to support credit availability, with
further delays possible if the conditions warrant it in 2021. The new regime is currently expected to be implemented in stages from 1 July 2021, with a
transition period of seven years before banks are required to fully comply with the new rules.
• The Banking Group’s total capital requirement will increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to 2.5% can be
made up of additional tier 1 (AT1) capital, with the remaining 13.5% made up of common equity tier 1 (CET1) capital. AT1 capital must consist of
redeemable perpetual preference shares. The total capital requirement can also include tier 2 capital of up to 2% of RWA. Tier 2 capital must
consist of long-term subordinated debt.
• The tier 1 capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include a 2% prudential capital buffer; a 1.5%
'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or temporarily increased to prevent
asset price bubbles from developing; and a 5.5% conservation buffer.
• Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 31 March 2020, the Bank had approximately
NZ$2,741 million of AT1 instruments that will progressively lose their eligible regulatory capital treatment over a seven year transition period.
• As an internal ratings based (IRB)-approach accredited bank, the Banking Group’s RWA outcomes will be increased to approximately 90% of
what would be calculated under the standardised approach. This will be achieved by applying an 85% output floor, and increasing the credit
RWA scalar from 1.06 to 1.2.
• The Banking Group will be required to report RWA, and resulting capital ratios, using both internal models and the standardised approach.
The RBNZ’s reforms will result in a material increase in the level of capital that the Banking Group is required to hold, although the amount of the
increase is currently uncertain. The reforms could have a material impact on the Banking Group and its business, including on its capital allocation and
business planning.
The Banking Group has started preparing for the changes. Of the Banking Group’s NZ$1.8 billion net profit after tax in for the year ended 30
September 2019, approximately 80% was retained in response to the proposals and no ordinary dividends were paid during the six months ended 31
March 2020.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effect
on the Bank or the Banking Group is included in Note 13 Commitments and Contingent Liabilities.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
26
Credit rating
As at 26 May 2020 the Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.
The Bank’s credit ratings are:
Rating agency Credit rating Qualification
S&P Global Ratings
AA- Outlook Negative
Fitch Ratings
A+ Outlook Negative
Moody’s Investors Service
A1 Outlook Stable
Directors’ statements
The Directors' statement is included on page 43.
Auditor’s review report
The auditor’s review report is included on page 44.
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2020
NZ$m
Total interest earning and discount bearing assets
164,760
Total interest and discount bearing liabilities
138,007
Total amounts due from related entities
4,969
Total amounts due to related entities
7,210
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.
• 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 2020 NZ$m
Securities sold under agreements to repurchase
1,161
Residential mortgages pledged as security for covered bonds
12,063
Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 Other Operating Income. The Banking Group does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, all other items of other income (all in Note 2 Other Operating Income), net income from insurance business and share of
associates’ profit (both shown on the income statement).
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
27
Additional information on c oncentrations of c redit r isk
Analysis of financial assets by industry is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans and
advances
3
Other
financial
assets
Off-balance
sheet credit
related
commitments
4
Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m
New Zealand residents
Agriculture
17,449 79 1,024 18,552
Forestry and fishing, agriculture services
1,188 10 173 1,371
Manufacturing
2,802 454 2,122 5,378
Electricity, gas, water and waste services
1,246 538 1,764 3,548
Construction
1,710 30 929 2,669
Wholesale trade
1,536 199 1,585 3,320
Retail trade and accommodation
2,884 27 846 3,757
Transport, postal and warehousing
1,452 175 735 2,362
Finance and insurance services
565 12,514 1,708 14,787
Public administration and safety
1
338 12,377 1,122 13,837
Rental, hiring & real estate services
35,031 1,325 2,224 38,580
Professional, scientific, technical, administrative and support services
1,062 11 475 1,548
Households
64,153 189 14,133 78,475
All other New Zealand residents
2
2,535 258 1,201 3,994
Subtotal 133,951 28,186 30,041 192,178
Overseas
Finance and insurance services
77 14,830 106 15,013
Households
1,193 4 - 1,197
All other non-NZ residents
673 76 - 749
Subtotal
1,943 14,910 106 16,959
Gross subtotal 135,894 43,096 30,147 209,137
Allowance for ECL
(644) - (129) (773)
Subtotal 135,250 43,096 30,018 208,364
Unearned income
(221) - - (221)
Capitalised brokerage / mortgage origination fees
326 - - 326
Maximum exposure to credit risk 135,355 43,096 30,018 208,469
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
28
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 2020 Note NZ$m
Funding composition
Customer deposits 8
113,411
Wholesale funding
Debt issuances
28,883
Certificates of deposit and commercial paper
6,151
Other borrowings
1,478
Total wholesale funding
36,512
Total funding
149,923
Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing
3,990
Manufacturing
2,318
Construction
2,563
Wholesale trade
2,081
Retail trade and accommodation
2,053
Financial and insurance services
11,959
Rental, hiring and real estate services
3,637
Professional, scientific, technical, administrative and support services
5,806
Public administration and safety
1,441
Arts, recreation and other services
2,074
Households
60,917
All other New Zealand residents
1
4,426
103,265
Customer deposits by industry - overseas
Households
9,508
All other
638
10,146
Total customer deposits
113,411
Wholesale funding (financial and insurance services industry)
New Zealand
8,714
Overseas
27,798
Total wholesale funding
36,512
Total funding
149,923
Concentrations of funding by geography
New Zealand
111,979
Australia
832
United States
18,603
Europe
11,152
Other countries
7,357
Total funding
149,923
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
29
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
1
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Cash and cash equivalents
7,746 7,358 - - - - 388
Settlement balances receivable
404 - - - - - 404
Collateral paid
2,527 2,527 - - - - -
Trading securities
11,679 2,255 870 505 1,652 6,397 -
Derivative financial instruments
13,216 - - - - - 13,216
Investment securities
7,293 294 - 298 1,737 4,963 1
Net loans and advances
135,355 63,163 12,340 21,662 30,854 7,885 (549)
Other financial assets
586 - - - - - 586
Total financial assets
178,806 75,597 13,210 22,465 34,243 19,245 14,046
Liabilities
Settlement balances payable
2,265 743 - - - - 1,522
Collateral received
1,290 1,290 - - - - -
Deposits and other borrowings
121,040 77,652 15,420 10,011 2,137 1,393 14,427
Derivative financial instruments
12,680 - - - - - 12,680
Debt issuances
28,883 4,117 3,712 1,984 5,987 13,083 -
Other financial liabilities
929 167 12 23 56 220 451
Total financial liabilities
167,087 83,969 19,144 12,018 8,180 14,696 29,080
Hedging instruments - 14,569 1,196 (9,812) (14,832) 8,879 -
Interest sensitivity gap
11,719 6,197 (4,738) 635 11,231 13,428 (15,034)
1
Excludes non-coupon bearing discounted financial assets and financial liabilities which are shown as repricing on their maturity date.
Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2020 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts represent principal
and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
On demand
Less than
3 months
3 to 12
months
1 to 5
years
After
5 years Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Settlement balances payable
1,325 951 - - - 2,276
Collateral received
- 1,290 - - - 1,290
Deposits and other borrowings
61,643 28,188 28,631 3,819 1 122,282
Derivative financial liabilities (trading)
- 10,957 - - - 10,957
Debt issuances
1
- 358 5,854 18,093 5,577 29,882
Other financial liabilities
- 53 5 107 58 223
Derivative financial instruments
(balance sheet management)
- gross inflows
- 736 1,422 8,369 796 11,323
- gross outflows
- (830) (1,674) (8,800) (809) (12,113)
1
Any callable wholesale debt instruments have been included at their next call date.
At 31 March 2020, NZ$51 million of the Banking Group’s NZ$124 million of non-credit related commitments and all NZ$30,147 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which the Banking Group may be required to
pay.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
30
Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking
Group’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity scenario metrics.
As at 31 March 2020 NZ$m
Coins, notes and bank deposits
755
Balances with central banks
6,052
Settlement balances receivable within 3 months
170
Certificates of deposit
547
Government, local body stock and bonds
9,186
Government treasury bills
469
Reserve Bank bills
400
Other bonds
7,152
Total liquidity portfolio 24,731
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$7,087 million at 31 March 2020.
Reconciliation of mortgage related amounts
As at 31 March 2020 Note NZ$m
Term loans - housing
1
6
87,269
Less: fair value hedging adjustment
(9)
Less: fair value adjustment on mortgages repurchased from the NZ Branch
(1)
Less: housing loans made to corporate customers
(2,062)
Add: unsettled re-purchases of mortgages from the NZ Branch
4
On-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
85,201
Add: off-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
8,527
Total residential mortgage exposures subject to the IRB approach (per LVR analysis)
B4
93,728
1
Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
31
B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1, and
Note 7 and Note 11, to the financial statements.
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 2019 164 194 42 97 497
Transfer between stages
22 (25) 3 - -
New and increased provisions (net of collective provision releases)
20 122 16 72 230
Write-backs
- - - (15) (15)
Recoveries of amounts previously written off
- - - (14) (14)
Credit impairment charge
42 97 19 43 201
Bad debts written-off (excluding recoveries)
- - - (64) (64)
Add back recoveries of amounts previously written off
- - - 14 14
Discount unwind
- - - (4) (4)
As at 31 March 2020 206 291 61 86 644
Off-balance sheet credit related commitments - total
As at 1 October 2019 60 24 2 11 97
Transfer between stages
4 (4) - - -
New and increased provisions (net of collective provision releases)
18 13 - 1 32
Credit impairment charge
22 9 - 1 32
As at 31 March 2020 82 33 2 12 129
Impacts of changes in gross financial assets on loss allowances - total
Gross loans and advances - total
As at 1 October 2019 123,285 9,008 444 285 133,022
Net transfers in to each stage
- 708 191 36 935
Amounts drawn from new or existing facilities
19,434 772 36 106 20,348
Additions
19,434 1,480 227 142 21,283
Net transfers out of each stage
(935) - - - (935)
Amounts repaid
(16,087) (1,143) (94) (88) (17,412)
Deletions
(17,022) (1,143) (94) (88) (18,347)
Amounts written off
- - - (64) (64)
As at 31 March 2020 125,697 9,345 577 275 135,894
Loss allowance as at 31 March 2020 206 291 61 86 644
Off-balance sheet credit related commitments - total
As at 1 October 2019 28,491 837 3 19 29,350
Transfers in to each stage
- 81 4 2 87
Amounts drawn from new or existing facilities
5,149 122 1 17 5,289
Additions
5,149 203 5 19 5,376
Transfers out of each stage
(87) - - - (87)
Amounts repaid
(4,318) (155) (4) (15) (4,492)
Deletions
(4,405) (155) (4) (15) (4,579)
Amounts written off
- - - - -
As at 31 March 2020 29,235 885 4 23 30,147
Loss allowance as at 31 March 2020 82 33 2 12 129
Explanation of how changes in the gross carrying amounts of gross amounts contributed to changes in loss allowance
Overall, loss allowances are 0.5% of gross balances as at 31 March 2020, up from 0.4% as at 30 September 2019. While gross balances have increased,
and there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$179 million (30.1%) increase in loss allowances
is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to the financial
statements.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
32
Movements in components of loss allowance - residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019 18 25 12 22 77
Transfer between stages
7 (8) 1 - -
New and increased provisions (net of collective provision releases)
(1) 40 11 2 52
Write-backs
- - - (3) (3)
Recoveries of amounts previously written off
- - - - -
Credit impairment charge / (release)
6 32 12 (1) 49
Bad debts written-off (excluding recoveries)
- - - - -
Add back recoveries of amounts previously written off
- - - - -
Discount unwind
- - - - -
As at 31 March 2020 24 57 24 21 126
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2019 - - - - -
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases)
- - - - -
Credit impairment charge
- - - - -
As at 31 March 2020 - - - - -
Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2019 79,128 2,475 273 25 81,901
Transfers in to each stage
- 301 99 8 408
Amounts drawn from new or existing facilities
12,543 330 23 13 12,909
Additions
12,543 631 122 21 13,317
Transfers out of each stage
(408) - - - (408)
Amounts repaid
(9,176) (358) (54) (21) (9,609)
Deletions
(9,584) (358) (54) (21) (10,017)
Amounts written off
- - - - -
As at 31 March 2020 82,087 2,748 341 25 85,201
Loss allowance as at 31 March 2020 24 57 24 21 126
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2019 8,232 36 - - 8,268
Transfers in to each stage
- 6 - - 6
Amounts drawn from new or existing facilities
1,235 7 - - 1,242
Additions
1,235 13 - - 1,248
Transfers out of each stage
(6) - - - (6)
Amounts repaid
(976) (7) - - (983)
Deletions
(982) (7) - - (989)
Amounts written off
- - - - -
As at 31 March 2020 8,485 42 - - 8,527
Loss allowance as at 31 March 2020 - - - - -
Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
While gross balances have increased, and there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$49
million (63.6%) increase in loss allowances on residential mortgage exposures is primarily driven by changes in the forward looking economic
scenarios and changes in probability weightings as described in Note 1 to the financial statements. Overall loss allowances and individually impaired
exposures remain low, reflecting that approximately 94% of on-balance sheet residential mortgage exposures have loan to valuation ratios not
exceeding 80% (refer to page 39).
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
33
Movements in components of loss allowance - other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019 26 51 24 14 115
Transfer between stages
8 (8) - - -
New and increased provisions (net of collective provision releases)
(6) 17 2 39 52
Write-backs
- - - (7) (7)
Recoveries of amounts previously written off
- - - (10) (10)
Credit impairment charge
2 9 2 22 35
Bad debts written-off (excluding recoveries)
- - - (34) (34)
Add back recoveries of amounts previously written off
- - - 10 10
Discount unwind
- - - - -
As at 31 March 2020 28 60 26 12 126
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2019 17 11 2 - 30
Transfer between stages
3 (3) - - -
New and increased provisions (net of collective provision releases)
(1) 5 - - 4
Credit impairment charge
2 2 - - 4
As at 31 March 2020 19 13 2 - 34
Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2019 3,135 305 45 30 3,515
Transfers in to each stage
- 13 18 16 47
Amounts drawn from new or existing facilities
773 20 1 30 824
Additions
773 33 19 46 871
Transfers out of each stage
(47) - - - (47)
Amounts repaid
(1,127) (62) (19) (16) (1,224)
Deletions
(1,174) (62) (19) (16) (1,271)
Amounts written off
- - - (34) (34)
As at 31 March 2020 2,734 276 45 26 3,081
Loss allowance as at 31 March 2020 28 60 26 12 126
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2019 4,578 46 3 - 4,627
Transfers in to each stage
- 4 3 - 7
Amounts drawn from new or existing facilities
321 7 1 - 329
Additions
321 11 4 - 336
Transfers out of each stage
(7) - - - (7)
Amounts repaid
(227) (8) (3) - (238)
Deletions
(234) (8) (3) - (245)
Amounts written off
- - - - -
As at 31 March 2020 4,665 49 4 - 4,718
Loss allowance as at 31 March 2020 19 13 2 - 34
Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
While there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$15 million (10.3%) increase in loss allowances
is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to the financial
statements. This has been partially offset by a decrease in gross balances.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
34
Movements in components of loss allowance - corporate exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019 120 118 6 61 305
Transfer between stages
7 (9) 2 - -
New and increased provisions (net of collective provision releases)
27 65 3 31 126
Write-backs
- - - (5) (5)
Recoveries of amounts previously written off
- - - (4) (4)
Credit impairment charge
34 56 5 22 117
Bad debts written-off (excluding recoveries)
- - - (30) (30)
Add back recoveries of amounts previously written off
- - - 4 4
Discount unwind
- - - (4) (4)
As at 31 March 2020 154 174 11 53 392
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2019 43 13 - 11 67
Transfer between stages
1 (1) - - -
New and increased provisions (net of collective provision releases)
19 8 - 1 28
Credit impairment charge
20 7 - 1 28
As at 31 March 2020 63 20 - 12 95
Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2019 41,022 6,228 126 230 47,606
Transfers in to each stage
- 394 74 12 480
Amounts drawn from new or existing facilities
6,118 422 12 63 6,615
Additions
6,118 816 86 75 7,095
Transfers out of each stage
(480) - - - (480)
Amounts repaid
(5,784) (723) (21) (51) (6,579)
Deletions
(6,264) (723) (21) (51) (7,059)
Amounts written off
- - - (30) (30)
As at 31 March 2020 40,876 6,321 191 224 47,612
Loss allowance as at 31 March 2020 154 174 11 53 392
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2019 15,681 755 - 19 16,455
Transfers in to each stage
- 71 1 2 74
Amounts drawn from new or existing facilities
3,593 108 - 17 3,718
Additions
3,593 179 1 19 3,792
Transfers out of each stage
(74) - - - (74)
Amounts repaid
(3,115) (140) (1) (15) (3,271)
Deletions
(3,189) (140) (1) (15) (3,345)
Amounts written off
- - - - -
As at 31 March 2020 16,085 794 - 23 16,902
Loss allowance as at 31 March 2020 63 20 - 12 95
Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
While there has been a small increase in the proportion of gross balances in Stage 2 and Stage 3, the NZ$115 million (30.9%) increase in loss
allowances is primarily driven by changes in the forward looking economic scenarios and changes in probability weightings as described in Note 1 to
the financial statements. This has been partially offset by a net decrease in Stage 3 individually assessed exposures as a result of amounts written-off.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
35
Past due assets and other asset quality information
Residential
mortgages
Other retail
exposures
Corporate
exposures Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m
Past due assets
Less than 30 days past due
677 198 437 1,312
At least 30 days but less than 60 days past due
186 34 136 356
At least 60 days but less than 90 days past due
169 19 1 189
At least 90 days past due
338 36 11 385
Total past due but not individually impaired 1,370 287 585 2,242
Other asset quality information
Undrawn facilities with impaired customers
- - 23 23
Other assets under administration
3 1 - 4
The Banking Group does not have any loans and advances designated at fair value.
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND
REGULATORY LIQUIDITY RATIOS
RBNZ Basel III capital ratios
Banking Group
Bank
(Solo Consolidated)
As at 31 March RBNZ minimum 2020 2019
2020 2019
Common equity tier 1 capital 4.5% 11.1% 11.4% 10.7% 10.2%
Tier 1 capital 6.0% 13.9% 14.6% 13.5% 13.5%
Total capital 8.0%
13.9%
14.6%
13.5%
13.5%
Buffer ratio 2.5%
5.9%
6.6%
n/a
n/a
Capital of the Banking Group
As at 31 March 2020 NZ$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)
3,271
Accumulated other comprehensive income and other disclosed reserves
(15)
Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
(3,267)
Deferred tax assets less deferred tax liabilities relating to temporary differences
(314)
Cash flow hedge reserve
(18)
Expected losses to the extent greater than total eligible allowances for impairment
(181)
Common equity tier 1 capital
11,064
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
59
Less deductions from additional tier 1 capital
Surplus retained earnings of the Bonus Bonds Scheme
3
(20)
Additional tier 1 capital
2,780
Total tier 1 capital
13,844
Tier 2 capital
-
Total capital
13,844
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.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
36
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 2020 NZ$m NZ$m NZ$m
Total credit risk
202,828 71,289 5,703
Operational risk
n/a 9,987 799
Market risk
n/a 5,226 418
Supervisory adjustment
n/a 13,303 1,064
Total
n/a 99,805 7,984
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; 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 2020, ANZ NZ CN carried a BBB- 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 prior written approval.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
37
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 2020:
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 n/a
1
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 2020 (net of issue costs) NZ$500 million NZ$1,003 million NZ$938 million
1
On 2 April 2020, RBNZ announced that locally incorporated banks, including the Bank, should not redeem capital notes at this time. Accordingly, the Bank was not permitted to, and did not,
redeem ANZ NZ CN on 25 May 2020 (the Optional Exchange Date). Further, the Bank did not exercise its option to convert ANZ NZ CN into ordinary shares of the Ultimate Parent Bank on the
Optional Exchange Date.
Reserves – common equity tier 1 capital
Accumulated other comprehensive income and other disclosed reserves includes the cash flow hedging reserve of NZ$18 million less the investment
securities revaluation reserve of NZ$33 million as at 31 March 2020.
Retained earnings of the Bonus Bonds Scheme – additional tier 1 capital
The Bonus Bonds Scheme is consolidated for capital adequacy purposes, and its retained earnings are included in additional tier 1 capital less 8.5% of
the consolidated risk-weighted assets that relate to the Bonus Bonds Scheme.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
38
Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating
Probability
of default Total value
Exposure at
default
Exposure-
weighted
LGD used
for the
capital
calculation
Exposure-
weighted
risk weight
Risk
weighted
assets
Minimum
capital
requirement
As at 31 March 2020 % NZ$m NZ$m % % NZ$m NZ$m
Corporate
0 - 2
0.06 61,861 5,025 59 28 1,515 121
3 - 4
0.32 45,433 23,908 38 42 10,664 853
5
1.00 14,364 12,213 33 57 7,372 590
6
2.31 5,127 4,758 35 80 4,054 324
7 - 8
18.87 2,265 1,970 41 184 3,845 308
Default
100.00 463 461 41 113 552 44
Total corporate exposures
2.36 129,513 48,335 39 55 28,002 2,240
Sovereign
0
0.01 28,898 14,475 5 1 173 14
1 - 8
0.01 1,309 1,292 5 2 22 2
Total sovereign exposures
0.01 30,207 15,767 5 1 195 16
Bank
1
0.03 986,034 9,960 55 26 2,791 223
2 - 4
0.11 45,938 749 64 38 299 24
5 - 8
1.69 1 1 65 131 2 -
Total bank exposures
0.04 1,031,973 10,710 56 27 3,092 247
Residential mortgages
0 - 3
0.20 29,389 29,766 12 5 1,707 137
4
0.45 38,228 38,377 19 15 6,229 498
5
0.91 21,330 21,426 24 31 7,117 569
6
1.97 4,088 4,092 26 58 2,514 201
7 - 8
4.79 282 282 26 91 272 22
Default
100.00 411 410 18 14 58 5
Total residential mortgages exposures
0.99 93,728 94,353 18 18 17,897 1,432
Other retail
0 - 2
0.10 544 547 77 49 287 23
3 - 4
0.26 4,618 4,702 78 55 2,717 217
5
1.07 1,850 1,826 71 75 1,447 116
6
2.35 1,965 2,002 69 88 1,871 150
7 - 8
8.99 1,189 1,224 85 134 1,733 139
Default
100.00 85 86 76 62 56 4
Total other retail exposures
2.64 10,251 10,387 76 74 8,111 649
Total credit risk exposures subject
to the IRB approach
1.31 1,295,672 179,552 28 30 57,297 4,584
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
39
IRB credit exposures include the following undrawn commitments and other off-balance sheet amounts:
Total value
Exposure at
default
As at 31 March 2020 NZ$m NZ$m
Undrawn commitments and other off-balance sheet amounts excluding market related contracts
Corporate
12,534 11,622
Sovereign
289 281
Bank
1,337 1,148
Residential mortgages
8,527 8,954
Other retail
5,336 5,400
Market related contracts
Corporate
81,709 2,194
Sovereign
13,869 152
Bank
1,022,598 3,462
Residential mortgages
- -
Other retail
- -
Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn residential mortgage loans as well
as commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance
sheet
Off-balance
sheet Total
As at 31 March 2020 NZ$m NZ$m NZ$m
LVR range
Does not exceed 60%
42,255 5,894 48,149
Exceeds 60% and not 70%
19,358 1,355 20,713
Exceeds 70% and not 80%
18,710 951 19,661
Does not exceed 80%
80,323 8,200 88,523
Exceeds 80% and not 90%
3,666 145 3,811
Exceeds 90%
1,212 182 1,394
Total 85,201 8,527 93,728
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 2020 NZ$m % NZ$m NZ$m
On-balance sheet exposures
Strong
4,895 70 3,632 291
Good
6,469 90 6,172 494
Satisfactory
247 115 302 24
Weak
233 250 618 48
Default
12 - - -
Exposure at
default
Average
risk weight
Risk
weighted
assets
Minimum
Pillar 1
capital
requirement
As at 31 March 2020 NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet exposures
1,375 92 1,343 108
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-.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
40
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 2020
NZ$m % NZ$m NZ$m
On-balance sheet exposures
Cash and gold bullion
355 - - -
Sovereign and central banks
6,052 - - -
Multilateral development banks and other international organisations
- - - -
Public sector entities
- - - -
Banks
- - - -
Corporate
1,510 6 94 8
Residential mortgages
- - - -
Past due assets
1 150 1 -
Other assets
1,314 100 1,393 111
Total
exposure or
principal
amount
Average
credit
conversion
factor
Credit
equivalent
amount
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2020 NZ$m % NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Total off-balance sheet exposures subject to the
standardised approach
598 68 405 96 411 33
Market related contracts subject to the
standardised approach
Foreign exchange contracts
- n/a - - - -
Interest rate contracts
341,817 n/a 407 5 21 2
Other - OTC etc
- n/a - - - -
Equity exposures
Total
exposure Risk weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2020 NZ$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 2020, the Banking Group had NZ$900 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
As required by its conditions of registration, the Banking Group uses the standardised approach to the calculation of its operational risk capital
requirement. As at 31 March 2020, the Banking Group had an implied risk weighted exposure of NZ$9,987 million for operational risk and an
operational risk capital requirement of NZ$799 million.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
41
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures are for the six
months ended 31 March 2020.
Implied risk weighted
exposure Aggregate capital charge
Period end Peak Period end Peak
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m
Interest rate risk
5,187 7,015 415 561
Foreign currency risk
38 110 3 9
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$343 million. (March 2019: NZ$282 million).
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 2020 2019 2020 2019
Common equity tier 1 capital
10.8%
11.5%
10.6%
11.2%
Tier 1 capital
12.5%
13.4%
12.6%
13.2%
Total capital
15.5%
15.3%
15.8%
15.3%
The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal 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 Pacific, and local corporates in Asia) 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 2020 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2020. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2020, 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. Effective 2 April 2020, RBNZ has reduced the minimum core funding ratio to 50%.
For the three months ended 31 Mar 20 31 Dec 19
Quarterly average 1-week mismatch ratio
6.5%
5.6%
Quarterly average 1-month mismatch ratio
6.6%
5.6%
Quarterly average core funding ratio
87.2%
88.0%
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
42
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 20 31 Mar 20
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
1 1
- 15% to less than 20% of CET1 capital
1 1
- 20% to less than 25% of CET1 capital
1 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
4 4
with a long-term credit rating of A- or A3 or above, or its equivalent
4 4
- 10% to less than 15% of CET1 capital
4 4
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
As at 31 March 2020, the Banking Group does not conduct any insurance business.
ANZ BANK NEW ZEALAND LIMITED
DIRECTORS' STATEMENT
43
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 2020, after due enquiry, each Director believes that, except as noted on pages 24 and 25:
• ANZ Bank New Zealand Limited has complied with all Conditions of Registration that applied during that period;
• 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, 26 May 2020.
Antony Carter
Shayne Elliott
Alison Gerry
Michelle Jablko
Rt Hon Sir John Key, GNZM AC
Mark Verbiest
Antonia Watson
Joan Withers
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
44
TO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
REPORT ON THE HALF YEAR DISCLOSURE STATEMENT
REPORT ON THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5
AND B6
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 the Banking Group, 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 – ESTIMATION UNCERTAINTY IN THE PREPARATION OF THE INTERIM FINANCIAL
STATEMENTS
We draw attention to Note 1 Use of estimates, assumptions and judgements in the interim financial statements, which describes increased estimation
uncertainty in the preparation of the interim financial statements, specifically as it relates to the potential impacts of Coronavirus (COVID-19) pandemic
on the Banking Group’s allowance for credit losses (ECL) and annual goodwill impairment testing. These disclosures include:
• key judgements and assumptions in relation to the ECL model inputs and the interdependencies between those inputs, and highlight
significant changes made during the six months ended 31 March 2020; and
• key changes made in the goodwill impairment test to reflect a further specific stress scenario associated with COVID-19.
As described in Note 1 Use of estimates, assumptions and judgements the underlying forecasts and assumptions are subject to uncertainties which are
often outside the control of the Banking Group. Actual economic conditions are likely to be different from those forecast since anticipated events
frequently do not occur as expected, and the effect of those differences may significantly impact the resulting accounting estimates.
In our view, this issue is fundamental to the users’ understanding of the interim financial Statements and the financial position and performance of the
Banking Group.
Our conclusion on the interim financial statements and registered bank disclosures is not modified in respect of this matter.
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 42, nothing has come to our attention that causes us to
believe that:
• the interim financial statements on pages 3 to 23 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 2020 and its financial performance
and cash flows for the six month period ended on that date; and
• 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.
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 2020;
• the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the six 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, 13, 16 and 18 of the Order.
45
EMPHASIS OF MATTER – NON-COMPLIANCE WITH CERTAIN CONDITIONS OF REGISTRATION
We draw attention to section B1 of the half year disclosure statement, in which the Banking Group discloses that it has identified non-compliance with
aspects of its Conditions of Registration relating to:
• Capital adequacy;
• Exposures to connected persons; and
• Outsourcing.
Further details of the matters relating to capital adequacy are described below in our qualified review conclusion on the registered bank disclosures in
section B4 relating to capital adequacy and regulatory liquidity ratios.
Our conclusion on the interim financial statements and registered bank disclosures in sections B2, B3, B5 and B6 is not modified in respect of these
matters.
DIRECTORS' RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK DISCLOSURES
IN SECTIONS B1, B2, B3, B5 AND B6
The Directors, on behalf of the Banking Group, are responsible for:
• the preparation and fair presentation of the interim financial statements and registered bank disclosures in accordance with IAS 34, NZ IAS 34
and Schedules 3, 5, 7, 13, 16 and 18 of the Order;
• implementing necessary internal controls to enable the preparation of interim financial statements that are 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 INTERIM FINANCIAL STATEMENTS AND REGISTERED
BANK DISCLOSURES IN SECTIONS B2, B3, B5 AND B6
Our responsibility is to express a conclusion on the interim financial statements and registered bank disclosure statements in sections B2, B3, B5 and
B6 based on our review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 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 2020 and its
financial performance and cash flows for the six month period ended on that date;
• the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34; and
• 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.
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 interim financial statements and the registered bank disclosures in
sections B2, B3, B5 and B6. This description forms part of our independent review report.
REPORT ON THE REGISTERED BANK DISCLOSURES IN SECTION B4 RELATING TO CAPITAL ADEQUACY AND
REGULATORY LIQUIDITY RATIOS (SECTION B4)
BASIS FOR QUALIFIED CONCLUSION ON THE REGISTERED BANK DISCLOSURES IN SECTION B4
A review of the registered bank disclosures in section B4 in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs
procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures. Our responsibilities under that standard are further described in the ‘Auditor’s Responsibilities for the review of the
registered bank disclosures in section B4’ section of our report.
As the auditor of the Banking Group, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
As described in section B1, the Banking Group has identified that it was not compliant with Condition of Registration 1B in relation to the operation of
versions of the following rating models and processes, which were not approved by the Reserve Bank of New Zealand (in some cases since 2008):
QUALIFIED REVIEW CONCLUSION
We have reviewed the registered bank disclosures, as disclosed in section B4 of the disclosure statement for the six month period ended 31 March
2020, which are required to be disclosed in accordance with Schedule 11 of the Order.
Based on our review, with the exception of the matter described below, nothing has come to our attention that causes us to believe that the
information relating to Capital Adequacy and Regulatory Liquidity Ratios, disclosed in section B4 of the half year disclosure statement, is not, in all
material respects disclosed in accordance with Schedule 11 of the Order.
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
46
• Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development);
• Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds);
• Project and Structured Finance; and
• Bank, Country and Sovereigns.
In this respect, the Capital Adequacy Ratios disclosed in section B4 of the disclosure statement have not been disclosed in accordance with Schedule
11 of the Order, with section B1 disclosing the Banking Group’s calculation of the corresponding impact on risk weighted assets. The Banking Group is
working with the Reserve Bank of New Zealand to remediate this matter.
The above matters do not affect the Regulatory Liquidity information, which is also disclosed in section B4.
DIRECTORS’ RESPONSIBILITIES FOR THE REGISTERED BANK DISCLOSURES IN SECTION B4
The Directors, on behalf of the Banking Group, are responsible for the preparation of the registered bank disclosures in section B4 of the Disclosure
Statement in accordance with Schedule 11 of the Order.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE REGISTERED BANK DISCLOSURES IN SECTION B4
Our responsibility is to express a conclusion on the registered bank disclosures in section B4 based on our review. We conducted our review in
accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the
registered bank disclosures in section B4 is not, in all material respects, disclosed in accordance with Schedule 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 registered bank disclosures in section B4. This description forms
part of our independent review report.
USE OF THIS 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 responsibility to anyone other than the shareholder for our review work, this independent review
report, or any of the opinions or conclusions we have formed.
KPMG
Auckland
26 May 2020
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