ANZ NZ Branch DS 31 March 2020
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
Australia and New Zealand Banking Group Limited – ANZ New Zealand
Registered Bank Disclosure Statement
Attached is the ANZ New Zealand Branch 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
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
- ANZ NEW ZEALAND
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2020
NUMBER 42 | ISSUED MAY 2020
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2020
CONTENTS
DISCLOSURE STATEMENT
Condensed Consolidated Interim Financial Statements (Interim Financial Statements)
I ncome statement 3
Statement of comp rehensi ve income 3
Bal ance sheet 4
Cash fl ow statement 5
Statement of chang es in eq uit y 6
Notes to the i nte r im fi nanci al statements 7
Registered Bank Disclosures
General d i scl osur es 24
Additional fi nanci al d i scl osur es 25
Asset quality 30
Cr edi t and mar ket r i sk exposures and cap i tal adeq uacy 32
I nsur an ce b usi ness 32
Directors’ and New Z e a l an d C h i ef Ex e cu t i v e Officer’s Statement 33
Independent Au di t o r ’s Review Repo rt 34
GLOSSARY OF TERMS
In thi s Registered Bank Di scl osur e Statement (Di scl osur e Statement) unl ess the context other w i se requires:
Bank means ANZ Bank New Zeal and Limited.
Banking Group means the Bank and al l its controlled entities.
Immediate Parent Company means ANZ F und s Pty Limited, whi ch is the immediate p ar ent comp any of ANZ Holdings (New Zeal and ) Limited.
Ultimate Parent Bank means Australia and New Zeal and Banki ng Gr oup Limited.
Overseas Banking Group means the worldwide oper ati ons of Australia and New Zeal and Banki ng Gr oup Limited incl ud i ng its controlled entities.
New Zealand business means al l b usi ness, oper ati ons, or und er taki ng s cond ucted in or fr om New Zeal and identified and treated as if it were
cond ucted by a comp any for med and registered in New Zeal and .
NZ B ranch means the New Zeal and b usi ness of the Ultimate Par ent Bank.
ANZ New Zealand, We or Our means the New Zeal and b usi ness of the Overseas Banki ng Gr oup .
UDC means UDC F i nance Limited.
Registered Office is Level 10, 171 Featherston Street, Wel l i ng ton, New Zeal and , whi ch is al so ANZ New Zeal and’s address for service.
RB NZ means the Reserve Bank of New Zeal and .
APRA means the Austr al i an Pr ud enti al Reg ul ati on Authority.
the Order means the Registered Bank Di scl osur e Statements (New Zeal and I ncor por ated Registered Banks) Order 2014.
Any term or exp r essi on whi ch is defined i n, or in the manner prescribed by, the Order shal l have the meani ng g i ven in or prescribed by the Order.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pa g e s 7 to 23 fo rm an i nt e g r al p art of these financial statements
3
INCOME STATEMENT
2020 2019
For the six months ended 31 March
Note
NZ$m NZ$m
I nter est i ncome 3,006 3,322
Interest expense (1,358) (1,696)
Net interest income 1,648 1,626
Other op er ati ng i ncome 2 507 373
Net i ncome fr om i nsur ance b usi ness - 27
S har e of associ ates' p r ofi t - 4
Op er ati ng i ncome 2,155 2,030
Operating expenses 3 (836) (745)
Profit before credit impairment and income tax 1,319 1,285
Credit impairment charge 7 (232) (32)
Profit before income tax 1,087 1,253
I ncome tax expense (298) (324)
Profit for the period 789 929
STATEMENT OF COMPREHENSIVE INCOME
2020 2019
For the six months ended 31 March
NZ$m NZ$m
Profit for the period 789 929
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 740 920
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pa g e s 7 to 23 fo rm an i nt e g r al p art of these financial statements
4
BALANCE SHEET
31 Mar 20 30 Sep 19
As at Note NZ$m NZ$m
Assets
Cash and cash eq ui val ents 5 7,746 2,709
Settlement balances receivable 404 193
Collateral paid 2,527 2,324
Trading securities 11,679 8,942
Derivative financial instruments 13,246 11,653
Investment securities 7,293 7,027
N et l oans and ad vances 6 135,679 133,264
Deferred tax assets 293 80
Good wi l l and other i ntang i b l e assets 3,267 3,276
Pr emi ses and eq ui p ment 620 335
Other assets 670 689
Total assets 183,424 170,492
Liabilities
S ettl ement b al ances p ayab l e 2,215 1,590
Collateral received 1,290 991
Deposi ts and other bor r owi ng s 8 124,091 117,071
Derivative financial instruments 12,505 10,912
Current tax liabilities 110 110
Payab l es and other l i ab i l i ti es 1,212 1,174
Employee entitlements 145 138
Other p r ovi si ons 9 329 314
Deb t i ssuances 10 28,205 25,593
Total liabilities (excluding head office account) 170,102 157,893
Net assets (excluding head office account) 13,322 12,599
Equity
S har e cap i tal and i ni ti al head offi ce account 11,055 11,055
Reserves (15) 21
Retai ned ear ni ng s 2,282 1,523
To tal equity & head o f f ice acco unt 13,322 12,599
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
The notes appearing on pa g e s 7 to 23 fo rm an i nt e g r al p art 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 789 929
Adjustments to reconcile to net cash flows from operating activities:
Dep r eci ati on and amor ti sati on 69 41
Loss on sale and impairment of premises and equipment - 5
Net derivatives/foreign exchange adjustment 1,203 (16)
Pr oceed s fr om d i vestments net of i ntang i b l es d i sp osed of, cl assi fi ed as i nvesti ng activities - (646)
Other non-cash movements 118 (146)
Net (increase)/decrease in operating assets:
Collateral paid (203) (451)
Trading securities (2,737) 481
N et l oans and ad vances (2,415) (3,111)
Other assets (405) 625
Net increase/(decrease) in operat ing liabilit ies:
Deposits and other borrowings (excluding borrowings from Immediate Parent and Ultimate Parent Bank) 7,639 2,968
S ettl ement b al ances p ayab l e 625 476
Collateral received 299 (326)
Other liabilities (264) (421)
Total adjustments 3,929 (521)
Net cash flows from operating activities
1
4,718 408
Cash flows from investing activities
Investment securities:
Pur chases (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
Deb t i ssuances
2
Issue proceeds 2,327 3,240
Redemptions (966) (3,145)
Bor r owi ng s fr om I mmed i ate Par ent and U l ti mate Par ent Bank:
3
Loans d r awn d own - 512
Repayments (715) (1,280)
Repayment of lease liabilities
4
(24) -
Dividends p ai d - (375)
Net cash flows from financing activities 622 (1,048)
Net chang e i n cash and cash eq ui val ents 5,037 290
Cash and cash eq ui val ents at b eg i nni ng of p er i od 2,709 2,407
Cash and cash equivalents at end of period 7,746 2,697
1
N et cash pr ovided 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$836 million incr ease (2019: NZ$942 million decr ease) fr om the effect of for eign exchange r ates, a NZ$320 million
incr ease (2019: NZ$341 million incr ease) fr om changes in fair value hedging instr uments and a NZ$95 million incr ease (2019: NZ$89 million decr ease) fr om other changes.
3
Movement in borrowings fr om Immediate P ar ent and Ultimate P ar ent Bank (Note 8 Deposit and Other Borrowings) also includes a N Z$32 million incr ease (2019: N Z$83 million decr ease) fr om
the effect of for eign exchange r ates and a N Z$64 million incr ease (2019: N Z$54 million incr ease) fr om changes in fair value hedging instr uments.
4
R elates to r epayments of lease liabilities wh i ch ANZ N ew Zealand commenced r ecognising on 1 October 2019 following the adoption of NZ IFR S 16. Comparative information has not been
r estated.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pa g e s 7 to 23 fo rm an i nt e g r al p art of these financial statements
6
STATEMENT OF CHANGES IN EQUITY
Share
capital
and initial
head
office
acco unt
Investment
securities
revaluation
reserve
Cash flow
hedging
reserve
Retained
earnings
Total
equity
Note NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2018 11,055 11 22 148 11,236
Impact on transition to NZ IFRS 9 Financial Inst rum ent s
- - - (52) (52)
As at 1 October 2018 (adjusted) 11,055 11 22 96 11,184
Pr ofi t or l oss - - - 929 929
Unrealised gains / (losses) recognised directly in equity - (7) 7 - -
Real i sed l osses 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) 8 917 920
Transactions with Immediate Parent Company in its capacity as owner:
Ordinary dividends paid - - - (375) (375)
Transactions with Immediate Parent Company in its capacity as owner - - - (375) (375)
As at 31 March 2019 11,055 6 30 638 11,729
As at 1 October 2019 11,055 (6) 27 1,523 12,599
Impact on transition to NZ IFRS 16 Leases 1
- - - (17) (17)
As at 1 October 2019 (adjusted) 11,055 (6) 27 1,506 12,582
Pr ofi t or l oss - - - 789 789
U nr eal i sed l osses r ecog ni sed 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) 776 740
As at 31 March 2020 11,055 (33) 18 2,282 13,322
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
7
1. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
T hese interim fi nanci al statements (fi nanci al statements) for ANZ New Zeal and were i ssued on 26 May 2020 and shoul d be r ead in conj uncti on with
ANZ New Zeal and’s fi nanci al statements for the year ended 30 September 2019.
T hese fi nanci al statements compl y wi th:
• New Zeal and Generally Accepted Accounti ng Pr acti ce (NZ GAAP), as defined in the F i nanci al Rep or ti ng Act 2013;
• NZ IAS 34 Int erim Financial Report ing and other applicable F i nanci al Rep or ti ng S tand ar d s, as appropriate for publicly accountab l e for-pr ofi t
entities; and
• IAS 34 Int erim Financial Report ing.
Presentation currency and rounding
T he amounts contai ned in the fi nanci al statements ar e presented in millions of New Zeal and dollars, unl ess other w i se stated.
Basis of measurement
T hese fi nanci al statements have been prepared on a g oi ng concer n b asi s in accor d ance with historical cost concepts except that the fol l owi ng assets
and liabilities ar e stated at thei r fai r val ue:
• d er i vati ve fi nanci al i nstr uments;
• fi nanci al i nstr uments measured at fai r val ue thr oug h other comp r ehensi ve i ncome; and
• fi nanci al i nstr uments designated at fai r val ue thr oug h pr ofi t and l oss.
Use of estimates, assumptions and judgements
T he p r ep ar ati on of these fi nanci al statements requires the use of manag ement judgement, estimates and assump ti ons that affect reported amounts
and the ap p l i cati on of accounti ng policies. Di scussi on of the cr i ti cal accounti ng estimates and judgements, whi ch i ncl ud e compl ex or sub j ecti ve
decisions or assessments, ar e p r ovi d ed in the p r evi ous ful l year fi nanci al statements. S uch esti mates and judgements ar e reviewed on an ong oi ng
b asi s.
A brief exp l anati on of the key esti mates, assump ti ons and judgements that have chang ed d ur i ng the hal f year ended 31 Mar ch 2020 fol l ows:
Coronavirus (CO VID-19) pandemic
T he ong oi ng COVID-19 p and emi c has increased the estimation uncer tai nty in the p r ep ar ati on of these fi nanci al statements. T he estimation
uncer tai nty is associ ated wi th:
• the extent and d ur ati on of the disruption to b usi ness arising fr om the acti ons by g over nments, b usi nesses and consumer s to contai n the sp r ead
of the vi r us;
• the extent and d ur ati on of the expected economi c d owntur n (and for ecasts for key economi c factor s i ncl ud i ng GDP, employment and house
p r i ces). T hi s i ncl ud es the disruption to cap i tal mar kets, deteriorating cr ed it quality, l i qui d it y concer ns, i ncr easi ng unemp l oyment, declines in
consumer discretionary sp end i ng , r ed ucti ons in pr od ucti on b ecause of decreased demand, and other restructuring activities; and
• the effectiveness of g over nment and centr al b ank measures that have been and will be put in p l ace to support b usi nesses and consumer s
thr oug h thi s disruption and economi c d owntur n.
ANZ New Zeal and has developed var i ous accounti ng estimates in these fi nanci al statements b ased on for ecasts of economi c cond i ti ons whi ch reflect
expectations and assump ti ons as at 31 Mar ch 2020 ab out futur e events that the Directors believe ar e r easonab l e in the ci r cumstances. T her e is a
considerable degree of judgement i nvol ved in preparing for ecasts, p ar ti cularly g i ven the sub stanti al uncer tai nty as to how l ong the per i od of
significant l ockd own restrictions and fl ow on i mp acts will l ast, and the outl ook for recovery. T he und er l yi ng assump ti ons ar e al so sub j ect to
uncer tai nti es whi ch ar e often outsi d e the contr ol of
ANZ New Zeal and. Accor d i ng l y, actual economi c cond i ti ons ar e likely to be different fr om those
for ecast si nce anti ci p ated events frequently do not occur as expected, and the effect of those differences may significantly i mp act accounti ng
estimates i ncl ud ed in these fi nanci al statements.
T he significant accounti ng estimates i mp acted by these for ecasts and associ ated uncer tai nti es ar e p r ed omi nantl y related to expected cr ed i t l osses
and recoverable amount assessments of non-fi nanci al assets. T he i mp act of the COVID-19 p and emi c on each of these accounti ng estimates is
d i scussed fur ther bel ow and /or in the relevant note to these fi nanci al statements. Readers should carefully consi d er these d i scl osur es in l i g ht of the
i nher ent uncer tai nty described ab ove.
Allowance for expected credit losses
ANZ New Zeal and measures the al l owance for expected cr ed i t l osses (ECL) usi ng an expected cr ed i t l oss impairment mod el as required by NZ IFRS 9
Financial Inst rum ent s (NZ IFRS 9). ANZ New Zeal and’s accounti ng pol i cy for the r ecog ni ti on and measurement of the al l owance for ECL is described at
Note 12 to ANZ New Zeal and’s F i nanci al Statements for the year ended 30 September 2019.
T he tab l e bel ow show s ANZ New Zeal and’s al l owance for ECL (refer to Note 7 and Note 11 for fur ther i nfor mati on).
Mar 20 Sep 19
As at NZ$m NZ$m
I nd i vi d ual l y assessed 98 109
Col l ecti vel y assessed
675 487
T otal
1
773 596
1.
Includes allowance for ECL for N et Loans and advances – at amor tised cost and Off-balance sheet commitments – u n d r awn and contingent facilities.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
8
Individually assessed ECL
In estimating individually assessed ECL for S tag e 3 exp osur es, ANZ New Zeal and makes judgements and assump ti ons in relation to expected
repayments, the realisable val ue of collateral, the b usi ness prospects for the customer , comp eti ng cl ai ms and the likely cost and d urati on of the wor k-
out p r ocess. Judgements and assump ti ons in respect of these matters have been up d ated to reflect the potential i mp act of COVID-19.
Collectively assessed ECL
Dur i ng the si x months ended 31 Mar ch 2020 the collectively assessed al l owance for ECL increased by NZ$188 million. T hi s was attributable to chang es
in economi c outl ook of NZ$167 million and chang es in por tfol i o composi ti on and r i sk of NZ$21 million.
In estimating collectively assessed ECL, ANZ New Zeal and makes judgements and assump ti ons in relation to:
• the selection of an estimation techni q ue or modelling method ol og y, noti ng that the modelling of ANZ New Zeal and’s ECL estimates ar e
compl ex; and
• the selection of i np uts for those mod el s, and the interdependencies between those i np uts.
T he modelling method ol og y applied in estimating ECL in these fi nanci al statements is consi stent with that applied in ANZ New Zeal and’s F i nanci al
Statements for the year ended 30 September 2019.
T he i mp act of COVID-19 on the glob al economy and how g over nments, b usi nesses and consumer s r esp ond is uncer tai n. T hi s uncer tai nty is reflected
in ANZ New Zeal and’s assessment of ECL fr om its cr ed i t por tfol i o whi ch ar e sub j ect to a numb er of manag ement judgements and esti mates.
T he fol l owi ng tab l e summar i ses the key judgements and assump ti ons in relation to the mod el i np uts and the interdependencies between those
i np uts, and hi g hl i g hts significant chang es d ur i ng the si x months ended 31 Mar ch 2020.
T he judgements and associ ated assump ti ons have been mad e within the context of the i mp act of COVID-19, and reflect historical experience and
other factor s that ar e considered to be relevant, i ncl ud i ng expectations of futur e events that ar e believed to be reasonab l e und er the ci r cumstances.
In relation to COVID-19, judgements and assump ti ons i ncl ud e the extent and d ur ati on of the p and emi c, the i mp acts of acti ons of g over nments and
other authorities, and the r esp onses of b usi nesses and consumer s in different industries, al ong with the associ ated i mp act on the g l ob al economy.
Accor d i ng l y, ANZ New Zeal and’s ECL estimates ar e i nher entl y uncer tai n and , as a result, actual results may differ fr om these esti mates.
Judgement/assumption Description
Changes and co nsiderations during the six months
ended 31 March 2020
Determining when a
significant increase in
credit risk (SICR) has
o ccurred
In the measurement of ECL, judgement is i nvol ved in
setting the rules and trigger p oi nts to determine
whether ther e has been a SICR si nce initial
r ecog ni ti on of a l oan, whi ch woul d result in the
fi nanci al asset movi ng fr om ‘stag e 1’ to ‘stag e 2’. T hi s
is a key ar ea of judgement si nce transition fr om
stag e 1 to stag e 2 increases the ECL fr om an
al l owance b ased on the probability of d efaul t in the
next 12 months, to an al l owance for lifetime ECL.
S ubseq uent decreases in cr ed i t r i sk resulting in
transition fr om stag e 2 to stag e 1 may similarly result
in significant chang es in the ECL al l owance. T he
setting of p r eci se trigger p oi nts requires judgement
whi ch may have a mater i al i mp act upon the si ze of
the ECL al l owance.
Var i ous initiatives, such as p ayment deferrals have been
offered to customer s in the si x months ended 31 Mar ch
2020 r ecog ni si ng the potential detrimental i mp act of
COVID-19. S uch offers, if accepted , ar e not automati cal l y
considered to indicate SICR but ar e used as necessar y
within the b r oad er set of indicators used to assess and
grade customer facilities.
Measuring both 12-
month and lifetime
credit losses
ECL is a functi on of the probability of d efaul t (PD),
the l oss g i ven d efaul t (LGD) and the exp osur e at
d efaul t (EAD) whi ch ar e p oi nt-in-time measures
reflecting the relevant forward l ooki ng i nfor mati on
determined by manag ement. Judgement is i nvol ved
in d eter mi ni ng whi ch forward-l ooki ng i nfor mati on
var i ab l es ar e relevant for p ar ti cul ar l end i ng por tfol i os
and for d eter mi ni ng the sensitivity of the p ar ameter s
to movements in these forward l ooki ng var i ab l es.
In addition, judgement is required wher e
b ehavi our al char acter i sti cs ar e applied in estimating
the lifetime of a facility to be used in measur i ng ECL.
T he PD, EAD and LGD mod el s ar e sub j ect to ANZ New
Zeal and’s mod el r i sk pol i cy that stipulates periodic mod el
moni tor i ng , periodic re-val i d ati on and defines ap p r oval
procedures and authorities accor d i ng to mod el
mater i al i ty. T her e were no mater i al chang es to the mod el s
d ur i ng the si x months ended 31 Mar ch 2020.
T her e were no chang es to b ehavi our al lifetime estimates
d ur i ng the si x months ended 31 Mar ch 2020.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
9
Judgement/assumption Description
Changes and considerations during the six months
ended 31 March 2020
Base case economic
f o recast
ANZ New Zeal and derives a forward l ooki ng “ b ase
case” economi c scenar i o whi ch reflects our vi ew of
the most likely futur e macr o-economi c cond i ti ons.
T her e have been no chang es to the types of forward
l ooki ng var i ab l es (key economi c drivers) used as mod el
i np uts in the si x months ended 31 Mar ch 2020.
As at 31 Mar ch 2020, the b ase case assump ti ons have
been up d ated to reflect the rapidly evol vi ng g l ob al
situation with respect to COVID-19. T hi s i ncl ud es an
assessment of the i mp act of centr al b ank (monetar y
pol i cy), g over nment (wag e sub si d i es), and institution
specific r esp onses (such as p ayment deferrals). T hese ar e
considered in d eter mi ni ng the l eng th and severity of the
for ecast economi c d owntur n.
T he expected outcomes of key economi c drivers for the
b ase case scenar i o as at 31 Mar ch 2020 and those
previously used at 30 September 2019 ar e described
bel ow und er the head i ng “Forecast b ase case
assump ti ons” .
Probability weighting of
each scenario (base
case, upside
1
,
downside
1
and severe
downside
2
scenarios)
Probability wei g hti ng of each scenar i o is determined
by manag ement consi d er i ng the r i sks and
uncer tai nti es sur r ound i ng the b ase case scenar i o.
T he key consi d er ati on for probability wei g hti ng s in the
current per i od is the conti nui ng i mp act of COVID-19.
In addition to the b ase case for ecast whi ch reflects largely
the neg ati ve economi c consequences of COVID-19,
greater wei g hti ng has been applied to the d ownsi d e and
severe downside scenar i os (b ase 50%, up si d e 4%,
downside 36% and severe downside 10%) g i ven ANZ New
Zeal and’s assessment of downside r i sks.
T he assi g ned probability wei g hti ng s ar e sub j ect to a hi g h
degree of i nher ent uncer tai nty and therefore the actual
outcomes may be significantly different to those
projected. ANZ New Zeal and consi d er s these wei g hti ng s
to p r ovi d e the b est estimate of the p ossi b l e l oss outcomes
and has anal ysed i nter-r el ati onshi p s and correlations (over
both the shor t and l ong term) within ANZ New Zeal and’s
cr ed i t por tfol i os in d eter mi ni ng them.
Management
temporary adjustments
Manag ement temporary adjustments to the ECL
al l owance ar e adjustments used in ci r cumstances
wher e it is judged that our existing i np uts,
assump ti ons and mod el techni q ues do not cap tur e
al l the r i sk factor s relevant to our l end i ng por tfol i os.
E mer g i ng l ocal or g l ob al macr oeconomi c,
mi cr oeconomi c or political events, and natur al
d i saster s that ar e not i ncor por ated i nto our current
p ar ameter s, r i sk r ati ng s, or forward-l ooki ng
i nfor mati on ar e examples of such ci r cumstances. T he
use of manag ement temporary ad j ustments may
i mp act the amount of ECL recognised.
Temporary adjustments for agriculture i nd ustr y exposures
increased by NZ$15 million, to a total of NZ$30 million as
at 31 Mar ch 2020.
Al so, temporary adjustments have been assessed in the
context of COVID-19 and the extent that associ ated cr ed i t
l oss exposures ar e cap tur ed within the modelled
economi c scenar i os, with no fur ther temporary
adjustments considered necessar y.
1.
The upside and downside scenar ios are fixed by r efer ence to average economic cycle conditions (t hat is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of mor e optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
2.
The sever e downside scenar io is fixed by r efer ence to average economic cycle conditions and accounts for the potentially sever e downside impact of less likely extr emely adver se economic
conditions.
Base case economic fo recast assumptions
T he uncer tai n evol uti on of the COVID-19 p and emi c increases the r i sk to the for ecast resulting in an understatement or overstatement of the ECL
b al ance d ue to uncer tai nti es ar ound :
• T he extent and d ur ati on of measures to stop or r ed uce the speed of the sp r ead of COVID-19;
• T he extent and d ur ati on of the economi c d owntur n, al ong with the time required for economi es to recover; and
• T he effectiveness of g over nment sti mul us measur es, in p ar ti cul ar thei r i mp act on the magnitude of the economi c d owntur n and the extent and
d ur ati on of the recovery.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
10
ANZ New Zeal and ’s b ase case economi c for ecast scenar i os reflects a shar p d eter i or ati on in economi c cond i ti ons in the second q uar ter with a g r ad ual
improvement thereafter. It reflects a widespread shutd ow n in the second q uar ter of cal end ar 2020 fol l owed thereafter by a p r og r essi ve r el axati on of
l ockd own restrictions.
T he economi c drivers of the b ase case economi c for ecasts at 31 Mar ch 2020 and those that were used at 30 September 2019 ar e set out bel ow. T hese
reflect ANZ New Zeal and’s vi ew, at the respective reporting d ates, of the most likely futur e macr o-economi c cond i ti ons.
New Zealand Base case economic f o recast as at 31 March 2020 Base case economic f o recast as at 30 September 2019
• GDP Expected si zeab l e contr acti on in GDP in June quarter,
starting to recover partially over the r emaind er of the
year . Mod er ate GDP g r owth is expected in 2021.
GDP is expected to contr act by 17% in the June 2020
quarter, starting to recover in the September 2020
q uar ter once activity r esumes, with an overall
contr acti on of 6.7% over the 2020 cal end ar year. GDP
is expected to g r ow by 4.2% in cal end ar year 2021.
Expected to i mp r ove mod estl y.
• U nemp l oyment
r ate
U nemp l oyment is expected to i ncr ease significantly
over the June quarter, recovering gradually over the
remainder of 2020 and 2021, but r emai ni ng
significantly hi g her than levels of fi r st hal f of 2020. It is
expected to aver ag e 7.4% for cal end ar year 2020 and
7.7% for cal end ar year 2021.
Expected to r emai n stab l e.
• Residential
property pr i ces
Property pr i ces ar e expected to contr act by 1.9% in
cal end ar year in 2020, fol l owed by 6.0% g r owth in
cal end ar year 2021.
Expected to achi eve mod est levels of g r owth.
• Commercial
property pr i ces
Property pr i ces ar e expected to i ncr ease moderately
in 2020, conti nui ng but l ess so in 2021.
Expected to g r ow by 3.1% in cal end ar year 2020 and
a fur ther 0.5% in 2021.
Expected to g r ow, however, the g r owth r ate is expected
to be mod est thr oug h the for ecast per i od .
• Consumer pr i ce
i nd ex
CPI g r owth is for ecast at slightly l ower levels than
2019 acr oss 2020 and 2021.
CPI g r owth is for ecast at 1.5% for cal end ar year 2020
and 1.5% for cal end ar year 2021.
Expected to r i se mod estl y.
Sensitivity analysis
T he uncer tai nty of the i mp act of COVID-19 i ntr od uced significant estimation uncer tai nty in relation to the measurement of ANZ New Zeal and ’s
al l owance for ECL. Whi l e a comb i ned 46% wei g hti ng has been applied to the downside and severe downside scenar i os as at 31 Mar ch 2020, the
rapidly evol vi ng consequences of COVID-19 and g over nment, b usi ness and consumer r esp onses coul d result in significant adjustments to the
al l owance within the current and next fi nanci al year s.
Gi ven current economic uncer tai nti es and the j ud gement applied to factor s used in d eter mi ni ng the expected d efaul t of borrowers in futur e p er i od s,
expected cr ed i t l osses reported by ANZ New Zeal and shoul d be considered as a b est estimate within a r ang e of p ossi b l e esti mates.
T he tab l e bel ow illustrates the sensitivity of ECL to key factor s used in d eter mi ni ng 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 rem ediat ion and ot her provisions
ANZ New Zeal and hol d s pr ovi si ons for var i ous obl i g ati ons i ncl ud i ng customer remediation, restructuring costs, leasehold make g ood and
litigation related cl ai ms (refer to Note 9). T hese pr ovi si ons i nvol ve judgements regarding the outcome of futur e events, i ncl ud i ng estimates of
expenditure required to sati sfy such obl i g ati ons. Wher e relevant, expert l eg al ad vi ce has been ob tai ned and , in l i g ht of such ad vi ce, pr ovi si ons
and /or d i scl osur es as deemed appropriate have been mad e.
In relation to customer remediation, d eter mi ni ng the amount of the p r ovi si ons, whi ch represent manag ement’s b est esti mate of the cost of
settling the identified matters, requires the exercise of significant judgement. It will often be necessar y to for m a vi ew on a numb er of different
assump ti ons, i ncl ud i ng , the numb er of i mp acted customer s, the aver ag e r efund per customer and the associ ated remediation costs.
Conseq uentl y, the appropriateness of the und er l yi ng assump ti ons is reviewed on a regular b asi s ag ai nst actual experience and other relevant
evidence and adjustments ar e mad e to the pr ovi si ons wher e appropriate.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
11
Annual goodwill im pairm ent testing
Manag ement judgement is used to assess the recoverable val ue of g ood wi l l . Good wi l l is assessed for indicators of impairment hal f-yearly and tested
for impairment annual l y. T he level at whi ch g ood wi l l is al l ocated , the estimation of futur e cash fl ows and the selection of d i scount r ates applied
requires significant judgement.
F or the purposes of impairment testing, g ood wi l l is al l ocated at the d ate of acquisition to a cash g ener ati ng uni t (CGU). ANZ New Zeal and’s CGU s ar e
consi stent with the op er ati ng segments described in Note 4, and the al l ocati on of g ood wi l l to each CGU as at 31 Mar ch 2020 is the same as at 30
September 2019. Good wi l l 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 whi ch each g ood wi l l comp onent is al l ocated , we use a val ue-in-use ap p r oach.
Value-in-use
T hese cal cul ati ons use cash fl ow pr oj ecti ons b ased on a numb er of fi nanci al budgets within each segment approved by manag ement cover i ng an
initial for ecast per i od . T hese pr oj ecti ons al so i ncor por ate economi c assump ti ons i ncl ud i ng GDP, i nfl ati on, unemployment and residential and
commer ci al property p r i ces. Cash fl ows b eyond the for ecast per i od ar e extr ap ol ated usi ng the ter mi nal g r owth r ate. T hese cash fl ow proj ecti ons ar e
d i scounted usi ng a d i scount r ate derived usi ng a cap i tal asset pricing mod el .
Mar ket observable i nfor mati on is not readily avai l ab l e at the CGU level therefore manag ement performed str ess tests for key sensitivities in each
segment. Gi ven the rapidly chang i ng situation associ ated with COVID-19, a fur ther specific str ess scenar i o was applied as at 31 Mar ch 2020. T hi s
ad d i ti onal str ess scenar i o decreased the recoverable amount of each CGU by an aver ag e of 23.5% comp ar ed to the 29 February 2020 annual
impairment test, but did not cause the carrying amount of g ood wi l l for any CGU to exceed its recoverable amount.
F utur e chang es in the assump ti ons upon whi ch the cal cul ati on is b ased may materially i mp act thi s assessment, resulting in the potential write-off of
p ar t or al l of the g ood wi l l b al ances.
29 February 2020 annual impairment test 31 March 2020 stress scenario
Fo recast period and
projections
T hr ee year s
Pr oj ecti ons b ased on a numb er of fi nanci al
budgets within each segment approved by
manag ement.
E i g ht year s - i ncor p or ati ng a two and a hal f year initial str ess
per i od fol l owed by a thr ee year recovery and a thr ee year
return to mai ntai nab l e ear ni ng s.
T he per i od s of initial str ess i ncl ud ed al l owances for increased
cr ed i t impairment l osses, b ased on str ess scenar i os used in
ANZ New Zeal and’s I nter nal Cap i tal Ad eq uacy Assessment
Pr ocess (ICAAP) and havi ng regard to the economi c for ecasts
used in the cal cul ati on of ECL as at 31 Mar ch 2020, and
decreased revenue.
Terminal growth rate 2% - b ased on RBNZ l ong term inflation target. 2% - b ased on RBNZ l ong term inflation tar g et
Disco unt rates 9.5% (2019: 11.1%). Pre-tax: 12.3% (2019: 14.7%).
T he mai n var i ab l es in the cal cul ati on of the
d i scount r ate used ar e the r i sk free r ate, beta and
the mar ket r i sk premium. T he r i sk free r ate was
b ased on a blended yield r ate between the 10
year New Zeal and g over nment b ond r ate and
the associ ated 5 year forward r ate. Beta and the
mar ket r i sk pr emi um were consi stent with
observable and comp ar ati ve mar ket r ates
applied in the r eg i onal b anki ng sector .
7.1% for one year to 10.2% for the ter mi nal cash fl ow s. Pre-tax:
10.1% to 13.2%.
T he r ang e of r ates used was equivalent to usi ng a fl at r ate of
10.0% (Pre-tax: 12.9%).
Gi ven RBNZ has stated that the Official Cash Rate will be hel d
at 0.25% for at l east one year , a r ang e of r ates applicable to
the d i scounti ng per i od were used .
T hese were cal cul ated on the same b asis as for the annual
impairment test, usi ng r i sk free r ates applicable to the
d i scount per i od , and an up d ated mar ket r i sk premium.
Resu lt
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 anal ysi s was performed on key
assump ti ons in early Mar ch, and thi s did not
cause the carrying amount of any CGU to
exceed its recoverable amount.
Cashfl ow for ecasts were flexed for chang es in cr ed i t
impairment char g es.
Credit impairment char g es as a pr opor ti on of g r oss l oans and
ad vances were increased for the initial str ess per i od to at l east
30% ab ove the ICAAP scenar i o applied, equivalent to at l east
30% hi g her than the levels experienced over 2008 to 2011
(cover i ng the per i od of the g l ob al fi nanci al cr i si s).
Carrying amount did not exceed the recoverable amount for
any CGU .
Conclusion No impairment of g ood wi l l for any CGU No impairment of g ood wi l l for any CGU
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
12
Ot her int angible asset s
Manag ement judgement is used to assess the recoverable val ue of other i ntang i b l e assets, and the useful economi c life of an asset, or if an asset
has an indefinite life. We r eassess the recoverability of the carrying val ue at each reporting d ate.
At each reporting d ate, softw ar e and other i ntang i b l e assets ar e assessed for indicators of impairment. In addition, softw ar e and i ntang i b l e assets
not r ead y for use ar e tested annual l y for impairment. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the carrying val ue of the asset is written d own immediately.
In addition, the expected useful life of i ntang i b l e assets, i ncl ud i ng softw ar e assets, ar e assessed on a semi-annual b asi s. T he assessment requires
manag ement judgement, and in relation to our softw ar e assets, a numb er of factor s can i nfl uence the expected economi c useful l i ves. T hese
factor s i ncl ud e chang es to b usi ness strategy, significant divestments and the und er l yi ng p ace of technol og i cal chang e.
Changes in accounting policies
T he accounti ng policies ad op ted by ANZ New Zeal and ar e consi stent with those ad op ted and d i scl osed in the p r evi ous ful l year fi nanci al statements,
except as d i scl osed bel ow.
T he fol l owi ng new stand ar d relevant to ANZ New Zeal and has been ad op ted fr om 1 October 2019 and has been applied in the p r ep ar ati on of these
fi nanci al statements:
NZ IFRS 16 Leases (NZ IFRS 16)
NZ IFRS 16 b ecame effective for ANZ New Zeal and fr om 1 October 2019 and replaced the p r evi ous stand ar d NZ IAS 17 Leases (NZ IAS 17). NZ IFRS 16
primarily i mp acts ANZ New Zeal and’s property and technol og y leases whi ch were previously cl assi fi ed as op er ati ng l eases. U nd er NZ IAS 17, op er ati ng
leases were not recognised on the bal ance sheet and r ent p ayments were expensed over the l ease term.
U nd er NZ IFRS 16, ANZ New Zeal and recognises al l leases (except for leases of l ow val ue assets and shor t term l eases) on the b al ance sheet und er a
si ng l e accounti ng mod el . Accor d i ng l y, ANZ New Zeal and recognises its r i g ht to use an und er l yi ng leased asset over the l ease term, as a r i g ht-of-use
(ROU) asset, and its obl i g ati on to make l ease p ayments as a l ease liability. In the i ncome statement, ANZ New Zeal and recognises depreciation
expense on the ROU asset and interest expense on the l ease liability. As a result, l ease expenses will be hi g her in the early per i od s of a l ease and l ower
in the l ater per i od s of the l ease comp ar ed to the p r evi ous stand ar d wher e expenses were constant over the l ease term. Cumul ati ve expenses over the
life of a l ease will not chang e.
As permitted by the stand ar d , ANZ New Zeal and d oes not r ecog ni se ROU assets and l ease liabilities for leases of l ow val ue items and shor t term leases
(l ess than 12 months). Instead, the l ease p ayments associ ated with these leases ar e recognised as op er ati ng expense in the i ncome statement on a
str ai g ht-l i ne b asi s over the l ease term.
ANZ New Zeal and has applied the modified retrospective transition ap p r oach whereby initial l ease liabilities ar e recognised b ased on the present
val ue of r emai ni ng l ease p ayments as of the transition d ate. T he initial ROU asset recognised for cer tai n large commer ci al leases was measured as if NZ
IFRS 16 had al ways been applied to the l eases. F or al l other l eases, the initial ROU asset was measured as eq ual to the initial l ease liability pl us any
futur e make g ood obl i g ati ons associ ated with exiting the lease.
T he implementation of NZ IFRS 16 requires manag ement to make cer tai n key judgements i ncl ud i ng the determination of l ease ter ms, d i scount r ates
and identifying ar r ang ements that contai n a lease.
Based on the modified retrospective transition ap p r oach, ANZ New Zeal and recognised l ease liabilities of $333 million presented within Payab l es and
other liabilities and r i g ht-of-use assets of $309 million presented within Premises and equipment. T hi s resulted in a r ed ucti on to op eni ng retained
ear ni ng s of $17 million and an i ncr ease in deferred tax assets of $7 million as of 1 October 2019. Comp ar ati ves have not been restated.
In addition, ANZ New Zeal and elected to apply the fol l owi ng p r acti cal expedients as permitted und er the modified retrospective transition ap p r oach:
• Impairment of ROU assets at the transition d ate were assessed by relying on oner ous l ease pr ovi si ons previously recognised as of 30 September
2019 und er NZ IAS 17;
• Initial d i r ect costs associ ated with enter i ng leases pr i or to the transition d ate were excluded fr om the carrying val ue of ROU assets recognised at
tr ansi ti on;
• No ROU assets or l ease liabilities were recognised for cer tai n leases with l ess than 12 months r emai ni ng as of the transition d ate; these leases
were treated as shor t-term leases with al l l ease p ayments recognised in r ent expense as incurred; and
• H i nd si g ht was used to determine the l ease term of contr acts that contai ned opti ons to extend the lease.
T he fol l owi ng tab l e r econci l es the op er ati ng l ease commitments d i scl osed und er NZ IAS 17 as at 30 September 2019 to the op eni ng l ease liabilities
recognised und er NZ IFRS 16 as at 1 October 2019.
NZ$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
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
13
Interest Rate Benchmark Ref o rm
Background
I nter b ank offered r ates (IBORs), such as the Lond on I nter b ank Offered Rate (LIBOR), p l ay a cr i ti cal role in g l ob al fi nanci al mar kets, ser vi ng as reference
r ates for d er i vati ves, l oans and secur i ti es, and as p ar ameter s in the val uati on of fi nanci al i nstr uments.
U ncer tai nty sur r ound i ng the integrity of IBOR r ates has in recent year s, led regulators, centr al b anks and mar ket p ar ti ci p ants to wor k towar d s a
transition to al ter nati ve r i sk-free b enchmar k reference r ates (RFRs) and mar ket-led wor ki ng g r oups in respective jurisdictions have recommended
al ter nati ve r i sk-free reference r ates, whi ch ar e gradually b ei ng adopted. Progress in the transition to these new b enchmar ks has resulted in significant
uncer tai nty in the futur e of IBOR b enchmar ks b eyond 1 Januar y 2022.
Account ing am endm ent s
In r esp onse to the uncer tai nty ab out the l ong-term viability of these b enchmar k r ates, and LI BOR in particular, the I nter nati onal Accounti ng S tand ar d s
Boar d (IASB) has estab l i shed a pr oj ect to consi d er the fi nanci al reporting implications of the reform. T he transition fr om LI BOR is expected to have an
i mp act on var i ous elements of fi nanci al i nstr ument accounti ng , i ncl ud i ng hedge accounti ng , as well as fai r val ue method ol og i es and d i scl osur es.
In November 2019, the E xter nal Rep or ti ng Boar d (XRB) i ssued XRB amend i ng stand ar d Interest Rate Benchm ark Reform, whi ch amend s cer tai n existing
hedge accounti ng requirements to p r ovi d e relief fr om potential effects of the uncer tai nty caused by the interest r ate b enchmar k reform. ANZ New
Zeal and elected to early ad op t the amend ments fr om 1 October 2019 whi ch have not had a significant i mp act on ANZ New Zeal and .
T hese amend ments address the accounti ng effects of uncer tai nty in the per i od l ead i ng up to the refor m arising fr om ANZ New Zeal and’s ability to
sati sfy the existing prospective hedge effectiveness requirements of NZ IAS 39 Financial Inst rum ent s: Recognit ion and Measurement. T hi s uncer tai nty
ar i ses as it is not known when the hedged items (such as debt i ssuances) and associ ated hed g i ng i nstr uments (such as interest r ate sw ap s) will be
chang ed to reference the RFRs, or if both the hed g i ng item and the associ ated hed g i ng i nstr ument will move to the new r ates at the same time. ANZ
New Zeal and has applied thi s amend ment to al l hedge accounted r el ati onshi p s (cash fl ow or fai r val ue hedges) wher e the reform g i ves r i se to
uncer tai nti es ab out the timing or amount of IBOR b ased cash fl ows of the hedged item or hed g i ng i nstr ument.
T he IASB has commenced wor ki ng on Phase 2 of its IBOR Refor m pr oj ect, whi ch focuses on potential i ssues that mi g ht affect fi nanci al reporting once
the existing r ate is replaced with an al ter nati ve r ate. ANZ New Zeal and is moni tor i ng these developments and conti nues to assess the expected
fi nanci al i mp act.
Impact of IB O R reform
ANZ New Zeal and has exp osur e to IBOR thr oug h its i ssuance of debt, the structur al interest r ate r i sk posi ti on, pr od ucts d enomi nated in for ei g n
cur r enci es and associ ated hed g i ng activities in our mar kets and treasury b usi nesses within Institutional and Other segments respectively.
ANZ New Zeal and has estab l i shed a programme to manag e the tr ansi ti on. T he programme i ncl ud es the assessment and acti ons necessar y to
accommod ate the transition to RFRs as they apply to i nter nal p r ocesses and systems i ncl ud i ng pricing, r i sk manag ement, d ocumentati on and hedge
ar r ang ements. T he programme i ncl ud es manag ement of the i mp act on customer s.
Impact of IB O R reform on ANZ New Zealand’s hedging relat ionships
T he most significant interest r ate b enchmar ks to whi ch ANZ New Zeal and's hed g i ng relationships ar e exposed ar e US dollar LI BOR, Eur o Inter b ank
Offered Rate (Euribor), Bank Bill S wap Rate (BBSW) and Bank Bill Mar ket (BKBM).
Of these b enchmar ks ANZ New Zeal and expects BBSW, BKBM and Eur i bor to exi st as b enchmar k r ates for the foreseeable futur e and therefore d oes
not believe its BBSW, BKBM or Eur i bor b enchmar k fai r val ue or cash fl ow hedges to be directly i mp acted by IBOR reform.
T he tab l e bel ow d etai l s the carrying val ues of ANZ New Zeal and's exposures designated in hedge accounti ng r el ati onshi p s that will be i mp acted by
IBOR reform, principally US dollar LIBOR. T he nomi nal val ue of the associ ated hed g i ng i nstr uments ar e al so included:
US dollar LIBOR
As at 31 March 2020 NZ$m
Hedged items
Deposi ts and other bor r owi ng s 1,142
Deb t i ssuances 12,572
Notional designated
up to
31 December 2021
Notional designated
beyond
31 December 2021
Total notional
amount
As at 31 March 2020 NZ$m NZ$m NZ$m
Hedging Instruments
Fair value hedges
5,393 7,715 13,108
As at 31 Mar ch 2020 ANZ New Zeal and al so has S w i ss fr anc LI BOR exposures designated in hedge accounti ng r el ati onshi p s of NZ$1,080 million.
Comparatives
Cer tai n amounts in the comp ar ati ve i nfor mati on have been r ecl assi fi ed to ensur e consi stency with the current per i od ’s p r esentati on.
Principles of consolidation
T he fi nanci al statements consol i d ate the fi nanci al statements of the NZ Br anch and al l of the New Zeal and b usi nesses of al l the subsidiaries of the
Ultimate Par ent Bank.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
14
2. OTHER OPERATING INCOME
2020 2019
For the six months ended 31 March NZ$m NZ$m
(i) Fee and commission revenue
Lending fees 17 16
Non-lending fees 374 407
Commi ssi ons 21 23
F und s manag ement i ncome 133 127
F ee and commi ssi on i ncome 545 573
Fee and commission expense (260) (241)
Net fee and commi ssi on i ncome 285 332
(ii) Other income
Net trading gains 69 73
F ai r val ue g ai n / (loss) on hedging activities and financial liabilities designated at fair value 143 (140)
Net for ei g n exchang e ear ni ng s and other fi nanci al i nstr uments i ncome 212 (67)
Sale of OnePath Life (NZ) Limited (OnePath) - 59
S al e of i nvestment i n Paymar k Li mi ted (Paymar k) - 39
Other 10 10
Other i ncome 222 41
Other operating income 507 373
3. OPERATING EXPENSES
2020 2019
For the six months ended 31 March NZ$m NZ$m
Personnel
S al ar i es and r el ated costs 454 413
S up er annuati on costs 15 14
Other 24 10
Personnel 493 437
Premises
Rent
1
12 41
Other
2
65 34
Premises 77 75
Technology
Dep r eci ati on and amor ti sati on 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
Char g es fr om U l ti mate Par ent Bank 41 26
Other 43 36
Other 160 132
Operating expenses 836 745
1
Following the adoption of NZ IFR S 16 on 1 October 2019, wi t h the exception of low value leases and leases of less than 12 months, expenses associated wi t h operating leases are sh o wn as
depr eciation of the right-of-use asset and inter est expense associated wi t h the lease liability (comparatives are not r estated).
2
Includes depr eciation and amortisation on right-of -use assets wh i ch ANZ N ew Zealand commenced r ecognising on the adoption of NZ IFR S 16 (comparatives not r estated).
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
15
4. SEGMENT REPORTING
ANZ New Zeal and is or g ani sed i nto thr ee maj or b usi ness segments for segment reporting purposes - Retai l , Commercial and Institutional. Centralised
b ack office and cor por ate functi ons support these seg ments. T hese segments ar e consi stent with i nter nal reporting p r ovi d ed to the chi ef op er ati ng
decision maker , b ei ng the Bank’s Chi ef E xecuti ve Officer.
Retail
Retai l p r ovi d es a ful l r ang e of b anki ng and weal th manag ement services to consumer , p r i vate b anki ng and smal l b usi ness b anki ng customer s. We
deliver our services vi a our i nter net and ap p-b ased digital sol uti ons and networ k of b r anches, mortgage sp eci al i sts, r el ati onshi p manag er s and contact
centres.
Commercial
Commercial p r ovi d es a ful l r ang e of b anki ng services i ncl ud i ng tr ad i ti onal r el ati onshi p b anki ng and sop hi sti cated fi nanci al sol uti ons thr oug h
dedicated manag er s focusi ng on privately owned med i um to large enterprises and the agricultural b usi ness segment, g over nment and g over nment
related entities.
Institutional
T he Institutional division services g over nment, g l ob al institutional and cor por ate customer s acr oss thr ee pr od uct sets: T r ansacti on Banki ng , Loans &
Specialised F i nance and Mar kets.
• T r ansacti on Banki ng p r ovi d es wor ki ng cap i tal and liquidity sol uti ons i ncl ud i ng d ocumentar y tr ad e, supply chai n fi nanci ng as well as cash
manag ement sol uti ons, d ep osi ts, p ayments and clearing.
• Loans & Specialised F i nance p r ovi d es l oan p r od ucts, l oan synd i cati on, sp eci al i sed l oan str uctur i ng and execution, pr oj ect and expor t fi nance,
debt str uctur i ng and acquisition fi nance and cor por ate ad vi sor y.
• Mar kets p r ovi d e r i sk manag ement services on for ei g n exchang e, interest r ates, cr ed i t, commod i ti es, debt cap i tal mar kets in addition to
manag i ng ANZ New Zeal and ’s interest r ate exp osur e and liquidity posi ti on.
Other
Other i ncl ud es treasury and b ack office support functi ons, none of whi ch constitutes a sep ar atel y 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$m
Net interest income 922 940 549 517 176 169 1 - 1,648 1,626
Net fee and commi ssi on i ncome
- Lending fees
8
8
-
-
9
8
-
-
17
16
- Non-lending fees
343
368
5
9
26
30
-
-
374
407
- Commi ssi ons
21
23
-
-
-
-
-
-
21
23
- Funds management fees
133
127
-
-
-
-
-
-
133
127
- Fee and commission expense
(260)
(241)
-
-
-
-
-
-
(260)
(241)
Net fee and commi ssi on i ncome 245 285 5 9 35 38 - - 285 332
Other i ncome
9
5
1
1
46
75
166
(40)
222
41
Net i ncome fr om i nsur ance
b usi ness
- 19 - - - - - 8 - 27
S har e of associ ates' p r ofi ts
-
4
-
-
-
-
-
-
-
4
Other op er ati ng i ncome 254 313 6 10 81 113 166 (32) 507 404
Op er ati ng i ncome 1,176 1,253 555 527 257 282 167 (32) 2,155 2,030
Operating expenses
(574)
(514)
(147)
(128)
(96)
(86)
(19)
(17)
(836)
(745)
Profit before credit impairment
and i ncome tax
602 739 408 399 161 196 148 (49) 1,319 1,285
Credit impairment charge (82) (29) (106) (2) (44) (1) - - (232) (32)
Profit before income tax 520
710
302
397
117
195
148
(49)
1,087
1,253
Income tax expense (146) (200) (85) (111) (33) (55) (34) 42 (298) (324)
Profit after income tax 374
510
217
286
84
140
114
(7)
789
929
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
16
Retail Commercial Institutional Other Total
31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19 31 Mar 20 30 Sep 19
As at NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial position
Good wi l l 1,039 1,039 1,052 1,052 1,069 1,069 - - 3,160 3,160
N et l oans and ad vances 85,001 82,527 43,559 43,464 7,110 7,270 9 3 135,679 133,264
Customer d ep osi ts 76,408 73,866 17,218 16,138 19,785 19,232 - - 113,411 109,236
Other segment
The Other segment profit after income tax comprises:
2020 2019
For the six months ended 31 March
NZ$m NZ$m
Centr al functi ons 3 -
T echnol og y and Gr oup Centr e
1, 2
(1) 178
E conomi c hed g es
112
(104)
Reval uati on of i nsur ance p ol i ci es fr om chang es i n i nter est r ates
2
- (81)
Total 114 (7)
1
Technology and Group Centr e’ s other income for the six months ended 31 March 2019 includes the N Z$59 million gain on sale of OneP ath and the N Z$39 million gain on sale of Paymark
(Note 2 Other Oper ating Inco me).
2
Amounts for the six months ended 31 March 2019 include the tr ansfer of N Z$86 million of accumulated after tax gains pr eviously r ecognised in revaluation of insurance policies fr om changes
in inter est r ates to Technology and Group Centr e. These gains wer e tr ansfer r ed upon the sale of OnePath.
5. CASH AND CASH EQUIVALENTS
31 Mar 20 30 Sep 19
NZ$m NZ$m
Coi ns, notes and bank deposits 755 538
Securities purchased under agreements to resell in less than 3 months 557 297
Bal ances wi th centr al b anks
1
6,052 1,448
Settlement balances receivable within 3 months 382 426
Cash and cash equivalents 7,746
2,709
1
From 20 March 2020, RBNZ r emoved allocated cr edit tier s for Exchange and Settlement Account System (ESAS) holder s, wi t h all ESAS cr edit balances earning inter est at the Official Cash Rate
(OCR ).
6. NET LOANS AND ADVANCES
31 Mar 20 30 Sep 19
Note NZ$m NZ$m
Overdrafts
816 927
Credit cards 1,426 1,569
Term loans - housi ng 87,594 84,748
Term loans - non-housi ng 44,539 44,586
Finance lease and hire purchase receivables 1,844 1,863
Subtotal 136,219 133,693
U near ned i ncome (221) (237)
Capitalised brokerage/mortgage origination fees 326 307
Gross loans and advances 136,324 133,763
Allowance for ECL 7 (645) (499)
Net loans and advances 135,679 133,264
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
17
7. ALLOWANCE FOR EXPECTED CREDIT LOSSES
T hi s note shoul d be r ead in conj uncti on with the esti mates, assump ti ons and judgements relating to COVID-19 and ECL i ncl ud ed in Note 1.
ALLOWANCE FOR EXPECTED CREDIT LOSSES – BALANCE SHEET
Net loans and advances - at amortised cost
Al l owance for E CL i s i ncl ud ed i n net l oans and ad vances.
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019 164 194 43 98 499
Transfer between stages 22 (25) 3 - -
New and increased provisions (net of collective p r ovi si on r el eases) 20 122 16 72 230
Write-b acks - - - (15) (15)
Recover i es of amounts pr evi ousl y wr i tten off - - - (14) (14)
Credit impairment charge 42 97 19 43 201
Bad debts written-off (excluding recoveries) - - - (64) (64)
Add back recoveries of amounts pr evi ousl y wr i tten off - - - 14 14
Di scount unwi nd - - - (5) (5)
As at 31 March 2020 206 291 62 86 645
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) 17 13 - 1 31
Credit impairment charge 21 9 - 1 31
As at 31 March 2020 81 33 2 12 128
CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
2020 2019
For the six months ended 31 March NZ$m NZ$m
New and i ncr eased p r ovi si ons
- Col l ecti vel y assessed
188
-
- I nd i vi d ual l y assessed
73
64
Write-b acks
(15)
(21)
Recoveries of amounts previously written-off
(14)
(11)
Total credit impairment charge 232 32
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND 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 d emand and shor t ter m d ep osi ts 47,215 42,329
Deposits not bearing interest 14,427 11,795
UDC secured i nvestments - 128
T otal customer d eposi ts 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
Borrowings from Ultimate Parent Bank and I mmed i ate Par ent Comp any 3,068 3,687
Deposits and other borrowings 124,091 117,071
9. OTHER PROVISIONS
31 Mar 20 30 Sep 19
Note NZ$m NZ$m
E CL al l owance on und r awn faci l i ti es 7 128 97
Customer remediation 124 139
Restr uctur i ng costs 27 25
Leasehol d make g ood 23 23
Other
1
27 30
Total other provisions 329 314
1
Other provisions compr ise various other provisions including losses arising fr om other legal action, operational issues, and warranties and indemnities pr ovided in connection wi t h 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
Cover ed bond s 4,630 4,460
Total unsubordinated debt 26,442 23,767
Subordinated debt
- AN Z Cap i tal N otes 1,491 1,540
- Other 272 286
Total subordinated debt 1,763 1,826
Total debt issued 28,205 25,593
Covered b ond s ar e g uar anteed by ANZNZ Covered Bond T r ust Limited (the Covered Bond Guar antor ), solely in its cap aci ty as trustee of ANZNZ
Covered Bond T r ust (the Covered Bond T r ust). T he Covered Bond T r ust is a member of the Banki ng Gr oup , whereas the Covered Bond Guar antor is not
a member of the Banki ng Gr oup .
S ub stanti al l y al l of the assets of the Covered Bond T r ust ar e mad e up of cer tai n housi ng l oans and related securities originated by the Bank whi ch ar e
secur i ty for the g uar antee by the Covered Bond Guar antor as trustee of the Covered Bond T r ust of i ssuances of covered b ond s by the Bank, or its
wholly owned sub si d i ar y ANZ New Zeal and (I nt’l ) Limited, fr om time to time. T he assets of the Covered Bond T r ust ar e not avai l ab l e to creditors of the
Bank, al thoug h the Bank (or its liquidator or statutory manag er ) may have a cl ai m ag ai nst the r esi d ual assets of the Covered Bond T r ust (if any) after al l
pr i or r anki ng creditors of the Covered Bond T r ust have been sati sfi ed .
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
19
11. CREDIT RISK
T hi s note shoul d be r ead in conj uncti on with the esti mates, assump ti ons and judgements relating to COVID-19 and ECL i ncl ud ed in Note 1.
Maximum exposure to credit risk
F or fi nanci al assets recognised on the b al ance sheet, the maximum exp osur e to cr ed i t r i sk is the carrying amount. In cer tai n ci r cumstances ther e may
be differences between the carrying amounts reported on the b al ance sheet and the amounts reported in the tab l es bel ow. Principally, these
differences ar i se in respect of fi nanci al assets that ar e sub j ect to r i sks other than cr ed i t r i sk, such as equity i nstr uments whi ch ar e primarily sub j ect to
mar ket r i sk, or b ank notes and coi ns.
F or und r awn facilities, thi s maximum exp osur e to cr ed i t r i sk is the ful l amount of the committed facilities. F or conti ng ent exp osur es, the maximum
exp osur e to cr ed i t r i sk is the maximum amount ANZ New Zeal and woul d have to p ay if the i nstr ument is called up on.
T he tab l e bel ow show s our maximum exp osur e to cr ed i t r i sk of on-b al ance sheet and off-b al ance sheet posi ti ons befor e taki ng account of any
collateral hel d or other cr ed i t enhancements.
Reported Ex cluded
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
N et l oans and ad vances 135,679 133,264 - - 135,679 133,264
Other fi nanci al assets:
Cash and cash eq ui val ents 7,746 2,709 355 192 7,391 2,517
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 13,246 11,653 - - 13,246 11,653
Investment securities 7,293 7,027 - - 7,293 7,027
Other fi nanci al assets
2
586 623 - - 586 623
Total other financial assets 43,481 33,471 355 192 43,126 33,279
Subtotal 179,160 166,735 355 192 178,805 166,543
Off-balance sheet commitments
U nd r awn and conti ng ent faci l i ti es
3
29,769 29,003 - - 29,769 29,003
Total 208,929 195,738 355 192 208,574 195,546
1
Excluded compr ises bank notes and coins and cash at bank within cash and cash equivalents.
2
Other financial assets mainly compr ise accrued inter est, insurance r eceivables and acceptances.
3
U n d r awn facilities and contingent facilities include guar antees, letter s of cr edit and per for mance r elated contingencies, net of allowance for ECL.
Credit quality
We use ANZ New Zeal and’s i nter nal customer cr ed i t r ati ng (CCR) to manag e the cr ed i t quality of fi nanci al assets. To enab l e wider comp ar i sons, ANZ
New Zeal and’s CCRs ar e mapped to external r ati ng ag ency scal es as fol l ows:
Credit quality
description
Internal CCR
ANZ New Zealand customer requirements
Moody’s
Ratin g
S&P Global
Ratin gs
S tr ong CCR 0+ to 4- Demonstrated sup er i or stability in thei r op er ati ng and fi nanci al
performance over the l ong-term, and w hose ear ni ng s cap aci ty is
not significantly vulnerable to foreseeable events.
Aaa – Baa3 AAA – BBB-
S ati sfactor y CCR 5+ to 6- Demonstrated sound op er ati onal and fi nanci al stability over the
med i um to l ong-term even thoug h some may be suscep ti b l e to
cycl i cal tr end s or variability in ear ni ng s.
Ba1 – B1 BB+ – B+
Weak CCR 7+ to 8= Demonstrated some op er ati onal and fi nanci al instability, with
variability and uncer tai nty in profitability and liquidity projected to
conti nue over the shor t and p ossi b l y med i um term.
B2 – Caa B - CCC
Defaulted CCR 8- to 10 When d oubt ar i ses as to the collectability of a cr ed i t facility, the
fi nanci al i nstr ument (or ‘the facility’) is cl assi fi ed as defaulted.
n/a n/a
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND 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$m
S tr ong 100,877 2,250 - - 103,127
S ati sfactor y 24,539 4,571 - - 29,110
Weak 583 2,543 - - 3,126
Defaulted - - 579 277 856
Subtotal 125,999 9,364 579 277 136,219
Allowance for ECL (206) (291) (62) (86) (645)
Net loans and advances at amortised cost 125,793 9,073 517 191 135,574
Coverage ratio 0.16% 3.11% 10.71% 31.05% 0.47%
U near ned i ncome (221)
Capitalised brokerage/mortgage origination fees 326
Net carrying amount 135,679
As at 30 September 2019
S tr ong 96,212 2,291 - - 98,503
S ati sfactor y 26,468 4,629 - - 31,097
Weak 1,229 2,125 - - 3,354
Defaulted - - 452 287 739
Subtotal 123,909 9,045 452 287 133,693
Allowance for ECL (164) (194) (43) (98) (499)
Net loans and advances at amortised cost 123,745 8,851 409 189 133,194
Coverage ratio 0.13% 2.14% 9.51% 34.15% 0.37%
U near ned i ncome (237)
Capitalised brokerage/mortgage origination fees 307
Net carrying amount 133,264
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m
S tr ong 24,769 131 - - 24,900
S ati sfactor y 4,196 594 - - 4,790
Weak 20 160 - - 180
Defaulted - - 4 23 27
Gross undrawn and contingent facilities 28,985 885 4 23 29,897
Allowance for ECL included in Other provisions (refer to Note 9) (81) (33) (2) (12) (128)
Net undrawn and contingent facilities 28,904 852 2 11 29,769
Coverage ratio 0.28% 3.73% 50.00% 52.17% 0.43%
As at 30 September 2019
S tr ong 23,046 59 - - 23,105
S ati sfactor y 4,883 641 - - 5,524
Weak 312 137 - - 449
Defaulted - - 3 19 22
Gross undrawn and contingent facilities 28,241 837 3 19 29,100
Allowance for ECL included in Other provisions (refer to Note 9) (60) (24) (2) (11) (97)
Net undrawn and contingent facilities 28,181 813 1 8 29,003
Coverage ratio 0.21% 2.87% 66.67% 57.89% 0.33%
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
21
12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Financial assets and financial liabilities carried at fair v a lu e on the balance sheet
ANZ New Zeal and categorises fi nanci al assets and fi nanci al liabilities carried at fai r val ue i nto a fai r val ue hi er ar chy as required by NZ IFRS 13 Fair Value
Measurement b ased on the observability of i np uts used to measur e fai r val ue:
• Level 1 – val uati ons b ased on q uoted pr i ces (unad j usted ) in acti ve mar kets for identical assets or liabilities;
• Level 2 – val uati ons usi ng i np uts other than q uoted pr i ces i ncl ud ed within Level 1 that ar e observable for a similar asset or liability, either d i rectly
or indirectly; and
• Level 3 – val uati ons wher e significant unobservable i np uts ar e used to measur e the fai r val ue of the asset or liability.
T he tab l e bel ow summar i ses the attribution of fi nanci al i nstr uments carried at fai r val ue to the fai r val ue hi er ar chy:
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 13,215 11,640 3 3 13,246 11,653
Investment securities 7,292 7,026 - - 1 1 7,293 7,027
Total 16,585 15,355 15,629 12,263 4 4 32,218 27,622
Liabilities
Deposi ts and other bor r owi ng s - - 4,456 2,461 - - 4,456 2,461
Derivative financial instruments 11 11 12,494 10,901 - - 12,505 10,912
Other financial liabilities 154 213 - - - - 154 213
Total 165 224 16,950 13,362 - - 17,115 13,586
Financial assets and financial liabilities n ot measured at fair v a l ue
Bel ow is a compar i son of the carrying amounts as reported on the b al ance sheet and fai r val ues of fi nanci al asset and fi nanci al liability categories ot her
than those categories wher e the carrying amount is at fai r val ue or considered a r easonab l e ap p r oxi mati on of fai r val ue.
T he fai r val ues bel ow have been cal cul ated usi ng d i scounted cash fl ow techni q ues wher e contr actual futur e cash fl ows of the i nstr ument ar e
d i scounted usi ng d i scount r ates i ncor p or ati ng wholesale mar ket r ates or mar ket bor r owi ng r ates of debt with similar maturities or a yield cur ve
appropriate for the r emai ni ng 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
N et l oans and ad vances
1
135,679 133,264 136,486 133,827
Total 135,679 133,264 136,486 133,827
Financial liabilities
Deposi ts and other bor r owi ng s
2
119,635 114,610 119,738 114,840
Deb t i ssuances
1
28,205 25,593 27,563 25,861
Total 147,840 140,203 147,301 140,701
1
Fair value hedging is applied to cer tain financial instr uments within these categor ies. The r esulting fair value adjustments mean that the carrying value differ s fr om the amor tised cost.
2
Excludes commer cial paper (Note 7 Deposits and Other Borrowings) designated at fair value through pr ofit or loss.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND 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
Contr act amount of:
Undrawn facilities 27,149 26,350
Guarantees and letters of credit 1,232 1,248
Performance related contingencies 1,516 1,502
Total 29,897 29,100
ANZ New Zeal and g uar antees the performance of customer s by i ssui ng stand b y letters of cr ed i t and g uar antees to thi r d p ar ti es, i ncl ud i ng its Ultimate
Par ent Bank. T he r i sk i nvol ved is essenti al l y the same as the cr ed i t r i sk i nvol ved in extend i ng l oan facilities to customer s, therefore these tr ansacti ons
ar e subjected to the same cr ed i t origination, por tfol i o manag ement and collateral requirements for customer s applying for l oans. As the facilities may
expire wi thout b ei ng d r awn up on, the noti onal amounts do not necessar i l y reflect futur e cash requirements.
Other contingent liabilities
T her e ar e outstand i ng cour t proceedings, cl ai ms and p ossi b l e cl ai ms for and ag ai nst ANZ New Zeal and . Wher e relevant, expert l eg al ad vi ce has been
ob tai ned and , in the l i g ht of such ad vi ce, pr ovi si ons and /or d i scl osur es as deemed appropriate have been mad e. In some i nstances we have not
d i scl osed the estimated fi nanci al i mp act of the individual items either b ecause it is not p r acti cab l e to do so or b ecause such d i scl osur e may pr ej ud i ce
ser i ousl y the interests of ANZ New Zeal and .
Regulatory and customer exposures
In recent year s ther e have been significant increases in the natur e and scal e of regulatory investigations and reviews, civil and criminal enforcement
acti ons (whether by cour t acti on or otherwise), for mal and i nfor mal inquiries, regulatory sup ervi sor y activities and the q uantum of fi nes i ssued by
regulators, particularly ag ai nst fi nanci al institutions globally. Ther e has al so been an i ncr ease in the numb er of matters on whi ch ANZ New Zeal and
engages with its regulators. ANZ New Zeal and has received var i ous noti ces and requests for i nfor mati on fr om its regulators as p ar t of both i nd ustr y-
wide and ANZ New Zeal and-specific reviews, and has al so mad e d i scl osur es to its regulators at its own instigation. T he natur e of these i nter acti ons can
be wide r ang i ng and , for example, may i ncl ud e a r ang e of matters i ncl ud i ng r esp onsi b l e l end i ng pr acti ces, regulated l end i ng fi nanci al tr ansacti ons,
pr od uct suitability and distribution, interest and fees and the entitlement to char g e them, customer remediation, weal th ad vi ce, i nsur ance
distribution, pricing, competi ti on, cond uct in fi nanci al mar kets and fi nanci al tr ansacti ons, cap i tal mar ket tr ansacti ons, anti-money l aund er i ng and
counter-terrorism fi nanci ng obl i g ati ons, reporting and d i scl osur e obl i g ati ons and pr od uct d i scl osur e d ocumentati on. T her e may be exposures to
customer s whi ch ar e ad d i ti onal to any regulatory exp osur es. T hese
coul d i ncl ud e cl ass acti ons, individual cl ai ms or customer remediation or
compensati on activities. T he outcomes and total costs associ ated with such reviews and p ossi b l e exposures r emai n uncer tai n.
Commerce Com m ission settlement
Between June 2015 and May 2016, the Bank had an i ssue with a l oan cal cul ator whi ch meant some interest to be char g ed to customer s was left out
when cal cul ati ng thei r repayments or l oan term. On 2 Mar ch 2020, T he Commerce Commi ssi on announced it had agreed with the Bank that the Bank
woul d p ay some customer s affected by the i ssue a fur ther NZ$29.4 million, in addition to the NZ$8.4 million the Bank has p ai d previously. All amounts
in relation to thi s matter were p r ovi d ed for in the per i od to 30 September 2019.
Reviews under sect ion 95 of t he Reserve Bank of New Zealand Act 1989 (RBNZ Act )
On 5 Jul y 2019, the RBNZ i ssued a noti ce und er secti on 95 of the RBNZ Act, requiring the Bank to ob tai n two external reviews, the fi r st on the Bank’s
compl i ance with cer tai n asp ects of the RBNZ Banki ng S up er vi si on H and book d ocument Capital Adequacy Fram ework (Int ernal Models Based Approach)
(BS2B) and the second on the effectiveness of the Bank’s directors’ attestation and assur ance framework.
• T he d i r ector attestation and assur ance framework review was completed in December 2019, and the Bank is committed to i mp l ementi ng the
r ecommend ati ons identified and ad d r essi ng the i ssues r ai sed . On 11 December 2019 RBNZ i ssued a fur ther noti ce und er secti on 95 of the RBNZ
Act, requiring the Bank to ob tai n an external review of the improvements mad e to the Bank’s directors’ attestation and assur ance framework.
• T he report regarding the Bank's compl i ance with the RBNZ's cap i tal ad eq uacy requirements was completed in April 2020. T hi s report identified
i nstances of both current and historical non-compl i ance with cap i tal ad eq uacy requirements. T he Bank has accepted the fi nd i ng s of thi s review,
and is wor ki ng with the RBNZ to r ecti fy the i ssues identified. T he RBNZ has stated that it is confi d ent the Bank will resolve thi s matter wi thout
i ssue, and has emp hasi sed that the Banki ng Gr oup r emai ns sound and well cap i tal i sed .
T he S ecti on 95 reviews have hi g hl i g hted the need for a b r oad er programme of improving the Bank's p r ocesses covered by those reviews, and thi s
programme is und er way.
W arrant ies and indem nit ies
ANZ New Zeal and has p r ovi d ed war r anti es, indemnities and other commitments in favour of the p ur chaser in connecti on with var i ous d i sp osal s of
b usi nesses and assets and other tr ansacti ons, cover i ng a r ang e of matters and r i sks. It is exposed to potential cl ai ms und er those war r anti es,
indemnities and commitments.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
23
14. SUBSEQUENT EVENTS
On 2 April 2020, RBNZ announced that locally i ncor por ated b anks, i ncl ud i ng the Bank, cannot p ay dividends on ordinary shar es and shoul d not
redeem cap i tal notes at thi s time. Accor d i ng l y, the Bank was not permitted to, and did not, redeem NZ$500 million of mand ator y convertible
perpetual sub or d i nated securities (ANZ NZ CN) on 25 May 2020 (the Op ti onal E xchang e Date). Further, the Bank did not exercise its opti on to conver t
ANZ NZ CN i nto ordinary shar es of the Ultimate Par ent Bank on the Op ti onal E xchang e Date.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
REGISTERED BANK DISCLOSURES
24
B1. GENERAL DISCLOSURES
Guarantees
No mater i al obl i g ati ons of the NZ Br anch ar e g uar anteed as at 26 May 2020.
Covered b ond s i ssued by ANZ New Zeal and (I nt’l ) Limited, a sub si d i ar y of the Bank, ar e g uar anteed . Refer to p ag e 18 for fur ther d etai l s.
Changes in the Ultimate Parent B an k ’s Board of Directors
Paul O’Sullivan was appointed as an I nd ep end ent Non-E xecuti ve Di r ector of the Ultimate Par ent Bank on 4 November 2019. Ther e have been no other
chang es to the Directors of the Ultimate Par ent Bank si nce 30 September 2019, the b al ance d ate of the l ast ful l year d i scl osur e statement.
Auditors
KPMG, 18 Vi ad uct H ar b our Avenue, Auckl and , New Zeal and .
Credit rating
As at 26 May 2020 the Ultimate Par ent Bank has thr ee cr ed i t r ati ng s, whi ch ar e applicable to its l ong-term seni or unsecur ed obl i g ati ons whi ch ar e
p ayab l e in New Zeal and in New Zeal and dollars.
T he Ultimate Par ent Bank’s credit rati ng s ar e:
Rating agency Credit rating Qualification
S &P Gl ob al Rati ng s AA- Outlook Negative
F i tch Rati ng s A+ Outlook Negative
Mood y’s I nvestor s S er vi ce Aa3 Outlook Stable
Other material matters
RBNZ review of capital requirements
Between May 2017 and December 2019, the RBNZ cond ucted a comp r ehensi ve review of the cap i tal ad eq uacy framework applying to New Zeal and
locally i ncor por ated registered b anks. T he RBNZ's fi nal decisions on the cap i tal review as they relate to the Bank ar e set out bel ow. In r esp onse to the
COVID-19 p and emi c, the RBNZ has delayed the star t d ate for the increased cap i tal requirements by 12 months to support cr ed i t avai l ab i l i ty, with
fur ther d el ays p ossi b l e if the cond i ti ons war r ant it in 2021. T he new regime is currently expected to be implemented in stag es fr om 1 Jul y 2021, with a
transition per i od of seven year s befor e b anks ar e required to fully compl y with the new rules.
• T he Banki ng Gr oup ’s total cap i tal requirement will i ncr ease to 18% of RWA, i ncl ud i ng tier 1 cap i tal of at l east 16% of RWA. Up to 2.5% can be
mad e up of ad d i ti onal tier 1 (AT1) cap i tal , with the r emai ni ng 13.5% mad e up of common equity tier 1 (CET1) cap i tal . AT1 cap i tal must consi st of
redeemable perpetual preference shar es. T he total cap i tal requirement can al so i ncl ud e tier 2 cap i tal of up to 2% of RWA. Tier 2 cap i tal must
consi st of l ong-term sub or d i nated debt.
• T he tier 1 cap i tal requirement will i ncl ud e a CET1 p r ud enti al cap i tal buffer of 9% of RWA. T hi s will i ncl ud e a 2% p r ud enti al cap i tal buffer; a 1.5%
'early-set' counter-cycl i cal cap i tal buffer, whi ch can be temporarily reduced to 0% fol l owi ng a fi nanci al cr i si s, or temporarily increased to prevent
asset pr i ce bubbles fr om developing; and a 5.5% conser vati on buffer.
• Conti ng ent cap i tal i nstr uments will no l ong er be treated as eligible regulatory cap i tal . As at 31 Mar ch 2020, the Bank had ap p r oxi matel y
NZ$2,741 million of AT1 i nstr uments that will progressively l ose thei r eligible regulatory cap i tal treatment over a seven year transition per i od .
• As an i nter nal r ati ng s b ased (IRB)-ap p r oach accr ed i ted b ank, the Banki ng Gr oup ’s RWA outcomes will be increased to approximately 90% of
what woul d be cal cul ated und er the stand ar d i sed ap p r oach. T hi s will be achieved by applying an 85% output fl oor , and i ncr easi ng the cr ed i t
RWA scal ar fr om 1.06 to 1.2.
• T he Banki ng Gr oup will be required to report RWA, and resulting cap i tal r ati os, usi ng both i nter nal mod el s and the stand ar d i sed ap p r oach.
T he RBNZ’s reforms will result in a mater i al i ncr ease in the level of cap i tal that the Banki ng Gr oup is required to hol d , al thoug h the amount of the
i ncr ease is currently uncer tai n. T he reforms coul d have a mater i al i mp act on the Banki ng Gr oup and its b usi ness, i ncl ud i ng on its cap i tal al l ocati on and
b usi ness p l anni ng .
T he Banki ng Gr oup has started preparing for the chang es. Of the Banki ng Gr oup ’s NZ$1.8 billion net pr ofi t after tax in for the year ended 30
September 2019, ap p r oxi matel y 80% was retained in r esp onse to the pr oposal s and no ordinary dividends were p ai d d ur i ng the si x months ended 31
Mar ch 2020.
Directors’ and New Zealand Chief Ex ecutive Officer’s statements
T he Directors' and New Zeal and Chi ef E xecuti ve Officer's statement is i ncl ud ed on p ag e 33.
Financial statements of the Ultimate Parent Bank and Overseas B an k i ng G ro up
Copi es of the most recent publicly avai l ab l e fi nanci al statements of the Ultimate Par ent Bank and Overseas Banki ng Gr oup will be p r ovi d ed
immediately, free of char g e, to any p er son requesting a copy wher e request is mad e at the Registered Office. T he most recent publicly avai l ab l e
fi nanci al statements for the Ultimate Par ent Bank and Overseas Banki ng Gr oup can al so be accessed at the w eb si te shar ehol d er .anz.com.
Au dito r’s review report
T he aud i tor ’s review report is i ncl ud ed on p ag e 34.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
25
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2020
NZ$m
T otal i nter est ear ni ng and d i scount b ear i ng assets 165,085
Total interest and discount bearing liabilities 140,380
Total amounts due from related entities 5,003
Total amounts due to related entities 8,388
Total liabilities of the NZ Branch less amounts due to related entities 1,005
Asset s charged as security for liabilit ies
T hese amounts excl ud e the amounts d i scl osed as collateral p ai d on the b al ance sheet that relate to d er i vati ve liabilities. T he terms and cond i ti ons of
the collateral agreements ar e i ncl ud ed in the stand ar d Credit Support Annex that for ms p ar t of the I nter nati onal S wap s and Derivatives Associ ati on
Master Agreement.
Assets char g ed as secur i ty for liabilities i ncl ud e the fol l owi ng types of i nstr uments:
• Securities p r ovi d ed as collateral for repurchase tr ansacti ons. T hese tr ansacti ons ar e governed by stand ar d i nd ustr y agreements.
• Specified residential mor t g ages p r ovi d ed as secur i ty for notes and b ond s i ssued to i nvestor s as p ar t of the Bank’s covered b ond programme.
T he carrying amounts of assets pledged as secur i ty ar e as fol l ows:
As at 31 March 2020 NZ$m
Securities sold under agreements to repurchase 1,161
Residential mortgages pledged as security for covered bonds 12,063
Additional information on the income statement
T he amounts of net tr ad i ng g ai ns or l osses and other fai r val ue adjustments ar e i ncl ud ed in Note 2 Other Op er ati ng I ncome. ANZ New Zeal and d oes
not have any l oans and ad vances designated at fai r val ue thr oug h pr ofi t or l oss. Other op er ati ng i ncome for the purposes of the Order comp r i ses net
fee and commi ssi on i ncome, al l other items of other i ncome (al l in Note 2 Other Op er ati ng I ncome), net i ncome fr om i nsur ance b usi ness and shar e of
associ ates’ pr ofi t (both show n on the i ncome statement).
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
REGISTERED BANK DISCLOSURES
26
Additional information on concentrations of credit risk
Anal ysi s of fi nanci al assets by i nd ustr y is b ased on Austr al i an and New Zeal and S tand ar d Industrial Classification (AN ZS I C) cod es. T he significant
categories show n ar e the level one New Zeal and S tand ar d Industry Output Categories (NZSIOC), except that Agriculture is show n sep ar atel y as
required by the Order.
Composi ti on of fi nanci al i nstr uments that g i ve r i se to cr ed i t r i sk by i nd ustr y g r oup ar e presented bel ow:
Loans and
advances
3
Other
financial
assets
Off-balance
sheet credit
related
commitments
4
Total
As at 31 March 2020 NZ$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
Manufactur i ng 2,802 454 2,122 5,378
Electricity, gas, water and waste services
1,246 538 1,764 3,548
Constr ucti on 1,710 30 929 2,669
Wholesale trade 1,536 199 1,585 3,320
Retai l tr ad e and accommod ati on 2,884 27 846 3,757
T r ansp or t, p ostal and war ehousi ng 1,453 175 735 2,363
F i nance and i nsur ance ser vi ces 565 12,455 1,458 14,478
Pub l i c ad mi ni str ati on and safety
1
338 12,377 1,122 13,837
Rental, hiring & real estate services 35,098 1,325 2,224 38,647
Professional, scientific, technical, administrative and support services
1,063 11 475 1,549
H ousehol d s 64,399 189 14,133 78,721
All other New Zealand residents
2
2,536 258 1,201 3,995
Subtotal 134,267 28,127 29,791 192,185
Overseas
F i nance and i nsur ance ser vi ces 77 14,919 106 15,102
H ousehol d s 1,197 4 - 1,201
All other non-NZ residents 678 76 - 754
Subtotal 1,952 14,999 106 17,057
Gross subtotal 136,219 43,126 29,897 209,242
Allowance for ECL (645) - (128) (773)
Subtotal 135,574 43,126 29,769 208,469
U near ned i ncome (221) - - (221)
Capitalised brokerage / mortgage origination fees 326 - - 326
Maximum exposure to credit risk 135,679 43,126 29,769 208,574
1
Public administration and safety includes exposur es to local gover nment administration and centr al gover nment administration, defence and public safety.
2
Other includes exposur es to mining, information media and telecommunications, education and training, health care and social assistance and ar ts, r ecr eation and other ser vices.
3
Excludes individual and collective provisions for cr edit impair ment held in r espect of off-balance sheet cr edit r elated commitments.
4
Off-balance sheet cr edit r elated commitments compr ise u n d r awn facilities, customer contingent liabilities and letter s of offer .
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
27
Additional information on concentrations of funding
Anal ysi s of fund i ng liabilities by i nd ustr y is b ased on AN ZS I C cod es. T he significant categories show n ar e the level one N ZS I OC.
As at 31 March 2020 Note NZ$m
Funding composition
Customer d ep osi ts 8 113,411
W holesale funding
Deb t i ssuances 28,205
Certificates of deposit and commercial paper 6,151
Other bor r owi ng s 4,529
T otal whol esal e fund i ng 38,885
Total funding 152,296
Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing 3,990
Manufactur i ng 2,318
Constr ucti on 2,563
Wholesale trade 2,081
Retai l tr ad e and accommod ati on 2,053
F i nanci al and i nsur ance ser vi ces 11,959
Rental, hiring and real estate services 3,637
Professional, scientific, technical, administrative and support services 5,806
Pub l i c ad mi ni str ati on and safety 1,441
Ar ts, recreation and other services 2,074
H ousehol d s 60,917
All other New Zealand residents
1
4,426
103,265
Customer deposits by industry - overseas
H ousehol d s 9,508
All other 638
10,146
T otal customer d eposi ts 113,411
Wholesale funding (financial and insurance services industry)
N ew Zeal and 6,756
Overseas 32,129
T otal whol esal e fund i ng 38,885
Total funding 152,296
Concentrations of funding by geography
N ew Zeal and 110,021
Australia 4,021
United States 18,603
E ur ope 12,294
Other countr i es 7,357
Total funding 152,296
1
Other includes mining; electr icity, gas, wat er and wast e ser vices; transport, postal and war ehousing; information media and telecommunications; education and training; health care and social
assistance.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
REGISTERED BANK DISCLOSURES
28
Additional information on interest rate sensitivity
T he fol l owi ng tab l es represent the interest r ate sensitivity of ANZ New Zeal and 's assets, liabilities and off b al ance sheet i nstr uments by showi ng the
per i od s in whi ch these i nstr uments may reprice, that i s, when interest r ates applicable to each asset or liability can be chang ed .
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$m
Assets
Cash and cash eq ui val ents 7,746 7,358 - - - - 388
Settlement balances receivable 404 - - - - - 404
Collateral paid 2,527 2,527 - - - - -
Trading securities 11,679 2,255 870 505 1,652 6,397 -
Der i vati ve fi nanci al i nstr uments
13,246 - - - - - 13,246
Investment securities 7,293 294 - 298 1,737 4,963 1
N et l oans and ad vances 135,679 63,274 12,385 21,722 30,947 7,901 (550)
Other fi nanci al assets 586 - - - - - 586
T otal fi nanci al assets 179,160 75,708 13,255 22,525 34,336 19,261 14,075
Liabilities
S ettl ement b al ances p ayab l e 2,215 743 - - - - 1,472
Collateral received 1,290 1,290 - - - - -
Deposi ts and other bor r owi ng s 124,091 78,384 15,420 10,011 2,726 3,123 14,427
Derivative financial i nstr uments 12,505 - - - - - 12,505
Deb t i ssuances 28,205 3,179 3,972 1,984 5,987 13,083 -
Other financial liabilities 948 167 12 23 56 220 470
Total financial liabilities 169,254 83,763 19,404 12,018 8,769 16,426 28,874
Hedging instruments - 13,814 770 (9,850) (14,934) 10,200 -
Interest sensitivity gap 9,906 5,759 (5,379) 657 10,633 13,035 (14,799)
1
Excludes non-coupon bear ing discounted financial assets and financial liabilities wh i ch are sh o wn as repricing on their maturity date.
Additional information on liquidity risk
Maturity analysis of financial liabilit ies
T he tab l e bel ow p r ovi d es r esi d ual contr actual maturity anal ysi s of fi nanci al liabilities at 31 Mar ch 2020 within relevant maturity groupings. All
outstand i ng debt i ssuances ar e profiled on the earliest d ate on whi ch ANZ New Zeal and may be required to p ay. T he amounts represent principal and
interest cash fl ows – so they may differ fr om equivalent amounts reported on the b al ance sheet.
On demand
Less than
3 months
3 to 12
months
1 to 5
years
Af ter
5 years Total
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
S ettl ement b al ances p ayab l e 1,325 900 - - - 2,225
Collateral received - 1,290 - - - 1,290
Dep osi ts and other bor r owi ng s 61,643 28,282 28,858 5,922 1,183 125,888
Derivative financial liabilities (trading) - 10,772 - - - 10,772
Deb t i ssuances
1
- 378 5,859 18,355 4,639 29,231
Other financial liabilities - 54 5 107 58 224
Derivative financial instruments
(b al ance sheet management)
- g r oss i nfl ow s - 749 1,628 8,656 884 11,917
- g r oss outfl ows - (842) (1,889) (9,047) (885) (12,663)
1
Any callable wholesale debt instr uments have been included at their next call date.
At 31 Mar ch 2020, NZ$51 million of ANZ New Zeal and ’s NZ$124 million of non-cr ed i t related commitments and al l NZ$29,897 million of its cr ed i t
related commitments and conti ng ent liabilities matur e in l ess than 1 year , b ased on the earliest d ate on whi ch ANZ New Zeal and may be requi r ed to
p ay.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
29
Liquidit y port folio
ANZ New Zeal and hol d s a diversified por tfol i o of cash and hi g h quality liquid securities to support liquidity r i sk manag ement. T he si ze of ANZ New
Zeal and ’s liquidity por tfol i o is b ased on the amount required to meet its i nter nal and regulatory liquidity scenar i o metr i cs.
As at 31 March 2020 NZ$m
Coi ns, notes and b ank d ep osi ts 755
Bal ances wi th centr al b anks 6,052
Settlement balances receivable within 3 months 170
Certificates of deposit 547
Government, local bod y stock and bond s 9,186
Government treasury bills 469
Reserve Bank bills 400
Other b ond s 7,152
Total liquidity portfolio 24,731
T he Bank al so hel d unencumbered i nter nal residential mortgage b acked securities whi ch woul d entitle ANZ New Zeal and to enter i nto repurchase
tr ansacti ons with a val ue of N Z$7,087 million at 31 Mar ch 2020.
Reconciliation of mortgage related amounts
As at 31 March 2020 Note NZ$m
Term loans - housi ng
1
6 87,594
Less: fair value hedging adjustment (9)
Less: housi ng l oans mad e to cor por ate customer s (2,062)
On-balance sheet residential mortgage exposures (per LVR analysis) B4 85,523
Add: off-balance sheet residential mortgage exposures (per LVR analysis) B4
8,527
Total residential mortgage exposures as per LVR analysis B4 94,050
1
Ter m loans – housing includes loans secur ed over r esidential property for o wn er-occupier, r esidential property investment and business pur poses.
Overseas Banking Group Profitability and Size
31 Mar 20
Net Pr ofi t for the six months ended 31 March 2020 (AUDm)
1
1,546
Net profit after tax for the 12 months ended 31 March 2020 as a percentage of average total assets 0.43%
T otal assets (AU Dm) 1,149,955
Per centag e chang e i n total assets i n the 12 months to 31 Mar ch 2020 17.31%
1
Net pr ofit after tax for the per iod includes AU D 1 million of pr ofit attributable to non-controlling inter ests.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
REGISTERED BANK DISCLOSURES
30
B3. ASSET QUALITY
T hi s secti on shoul d be r ead in conj uncti on with the esti mates, assump ti ons and judgements relating to COVID-19 and ECL i ncl ud ed in Note 1, and
Note 7 and Note 11, to the fi nanci al 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 43 98 499
Transfer between stages
22 (25) 3 - -
New and increased provisions (net of collective provision releases)
20 122 16 72 230
Write-b acks
- - - (15) (15)
Recover i es of amounts pr evi ousl y wr i tten off
- - - (14) (14)
Credit impairment charge 42 97 19 43 201
Bad debts written-off (excluding recoveries)
- - - (64) (64)
Ad d back r ecover i es of amounts pr evi ousl y wr i tten off
- - - 14 14
Di scount unwi nd
- - - (5) (5)
As at 31 March 2020 206 291 62 86 645
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) 17 13 - 1 31
Credit impairment charge 21 9 - 1 31
As at 31 March 2020 81 33 2 12 128
Impacts of changes in gross financial assets on loss allowances - total
Gross loans and advances - total
As at 1 October 2019 123,979 9,045 452 287 133,763
Net transfers in to each stage - 713 192 36 941
Amounts drawn from new or existing facilities 19,434 772 36 106 20,348
Additions
19,434 1,485 228 142 21,289
Net transfers out of each stage (940) - (1) - (941)
Amounts r ep ai d (16,474) (1,166) (100) (88) (17,828)
Deletions
(17,414) (1,166) (101) (88) (18,769)
Amounts written off - - - (64) (64)
As at 31 March 2020 125,999 9,364 579 277 136,219
Loss allowance as at 31 March 2020 206 291 62 86 645
Off-balance sheet credit related commitments - total
As at 1 October 2019 28,241 837 3 19 29,100
T r ansfer s i n to each stag e
- 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
T r ansfer s out of each stag e
(87) - - - (87)
Amounts r ep ai d
(4,318) (155) (4) (15) (4,492)
Deletions (4,405) (155) (4) (15) (4,579)
Amounts written off
- - - - -
As at 31 March 2020 28,985 885 4 23 29,897
Loss allowance as at 31 March 2020 81 33 2 12 128
Explanation of how changes in t he gross carrying am ount s of gross balances contributed to changes in loss allowance
Overall, l oss al l owances ar e 0.5% of g r oss b al ances as at 31 Mar ch 2020, up fr om 0.4% as at 30 September 2019. Whi l e g r oss b al ances have increased,
and ther e has been a smal l i ncr ease in the pr opor ti on of g r oss b al ances in S tag e 2 and S tag e 3, the N Z$177 million (29.7%) i ncr ease in l oss al l owances
is primarily d r i ven by chang es in the forward l ooki ng economi c scenar i os and chang es in probability wei g hting s as described in Note 1 to the fi nanci al
statements.
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
31
Past due assets and other asset quality information
Total
As at 31 March 2020 NZ$m
Past due assets
Less than 30 d ays p ast d ue 1,315
At l east 30 d ays b ut l ess than 60 d ays p ast d ue 359
At l east 60 d ays b ut l ess than 90 d ays p ast d ue 190
At l east 90 d ays p ast d ue 386
Total past due but not individually impaired 2,250
Other asset quality information
Undrawn facilities with impaired customers 23
Other assets und er ad mi ni str ati on 4
ANZ New Zeal and d oes not have any l oans and ad vances designated at fai r val ue.
Overseas Banking Group asset quality
As at 31 March 2020
Gr oss i mp ai r ed assets (AU Dm)
2,599
Gr oss i mp ai r ed assets as a p er centag e of total assets 0.2%
Individual provision (AUDm) 1,093
I nd i vi d ual p r ovi si on as a p er centag e of g r oss i mp ai r ed assets 42.1%
Collective provision (AUDm) 4,501
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND UNAUDITED
REGISTERED BANK DISCLOSURES
32
B4. CREDIT AND MARKET RISK EXPOSURES AND CAPITAL ADEQUACY
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%
T i er 1 cap i tal 12.5% 13.4% 12.6% 13.2%
T otal cap i tal 15.5% 15.3% 15.8% 15.3%
T he Ultimate Par ent Bank and the Overseas Banki ng Gr oup ar e required to hol d minimum cap i tal as determined by APRA, whi ch is at l east eq ual to
that specified und er the Basel III cap i tal framework.
APRA has author i sed the Ultimate Par ent Bank and the Over seas Banki ng Gr oup to use:
• the Ad vanced I nter nal Rati ng s Based (AIRB) method ol og y for cal cul ati on of cr ed i t r i sk weighted assets. T her e ar e however smal l por tfol i os
(mai nl y r etai l and l ocal cor por ates in Pacific, and l ocal cor por ates in Asi a) wher e the Overseas Banki ng Gr oup applies the stand ar d i sed ap p r oach.
• the Ad vanced Measurement Approach (AMA) for the op er ati onal r i sk weighted asset equivalent.
T he Overseas Banki ng Gr oup exceeded the minimum cap i tal requirements set by APRA as at 31 Mar ch 2020 and for the comp ar ati ve pr i or p er i od s.
T he Overseas Banki ng Gr oup is required to publicly d i scl ose Pillar 3 fi nanci al i nfor mati on as at 31 Mar ch 2020. T he Overseas Banki ng Gr oup ’s Pillar 3
d i scl osur e d ocument for the q uar ter ended 31 Mar ch 2020, in accor d ance with APS 330: P ublic D isclosure of Prudential Information, d i scl oses cap i tal
ad eq uacy r ati os and other p r ud enti al i nfor mati on. T hi s d ocument can be accessed at the w eb si te anz.com.
Market risk
T he aggregate mar ket r i sk exposures bel ow have been cal cul ated in accor d ance with the RBNZ Banki ng Supervision H and book d ocument Capital
Adequacy Fram ework (Standardised Approach) BS2A. T he p eak end-of-d ay mar ket r i sk exposures ar e for the si x months ended 31 Mar ch 2020.
Implied risk weighted
exposure Notional capital charge
Period end Peak Perio d end Peak
As at 31 March 2020 NZ$m NZ$m NZ$m NZ$m
Interest rate risk 4,952 6,737 396 539
Foreign currency risk 38 110 3 9
Equity risk 1 1 - -
Additional mortgage information
As required by RBNZ, l oan-to-val uati on-r ati os (LVR) ar e cal cul ated as the current exp osur e secured by a residential mortgage divided by ANZ New
Zeal and 's val uati on of the secur i ty property at origination of the exposure. Off b al ance sheet exposures i ncl ud e und r awn and partially d r awn
residential mortgage loans as well as commitments to l end . Commitments to l end ar e for mal offers for housi ng l end i ng whi ch 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% 42,382 5,894 48,276
Exceeds 60% and not 70% 19,363 1,355 20,718
Exceeds 70% and not 80% 18,858 951 19,809
Does not exceed 80%
80,603 8,200 88,803
Exceeds 80% and not 90% 3,699 145 3,844
Exceeds 90% 1,221 182 1,403
Total 85,523 8,527 94,050
B5. INSURANCE BUSINESS
As at 31 Mar ch 2020, ANZ New Zeal and d oes not cond uct any i nsur ance b usi ness.
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - ANZ NEW ZEALAND
DIRECTORS' AND NEW ZEALAND CHIEF EXECUTIVE OFFICER'S STATEMENT
33
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive
Officer – NZ Branch believes that:
• The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (Overseas 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 of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branch
believes that:
• The Ultimate Parent Bank has complied with all Conditions of Registration that applied during that period; and
• The NZ Branch and the Bank had systems in place to monitor and control adequately the material risks of Relevant Members of ANZ New
Zealand including credit risk, concentration of credit risk, interest rate ri sk, currency risk, equity risk, liquidity risk and other business risks, and that
those systems were being properly applied.
Signed by the Chief Executive Officer – NZ Branch
Penny Dell
Chief Executive Officer – NZ Branch
26 May 2020
Signed on behalf of all the Directors of the Ultimate Parent Bank
Antonia Watson
Responsible Person
26 May 2020
on behalf of the Directors of the Ultimate Parent Bank:
Ilana Atlas
Paula Dwyer
Shayne Elliott
David Gonski, AC
Jane Halton, AO, PSM
Rt Hon Sir John Key, GNZM AC
Graeme Liebelt
John Macfarlane
Paul O’Sullivan
AUSTRALIA AND NEW ZEALAND BANKING GRO UP LIMITED - ANZ NEW ZEALAND
INDEPENDENT AUDITOR’S REVIEW REPORT
34
TO THE DIRECTORS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
REPORT ON THE HALF YEAR DISCLOSURE STATEMENT
BASIS FOR CONCLUSION
A review of the hal f year d i scl osure statement in accor d ance with NZ SRE 2410 Review of Financial Statements P erform ed by t he Independent Audit or of
t he Entity (NZ SRE 2410) is a limited assur ance engagement. T he aud i tor performs procedures, consi sti ng of maki ng enquiries, primarily of p er sons
r esp onsi b l e for fi nanci al and accounti ng matters, and applying anal yti cal and other review procedures.
As the aud i tor of ANZ New Zeal and , NZ SRE 2410 requires that we compl y with the ethi cal requirements relevant to the aud i t of the annual fi nanci al
statements.
Our firm has al so p r ovi d ed other services to ANZ New Zeal and in relation to review of regulatory returns, i nter nal contr ol s reports, prospectus
assur ance, agreed upon procedures and other assur ance engagements. Subject to cer tai n r estr i cti ons, partners and employees of our firm may al so
d eal with ANZ New Zeal and on nor mal terms within the ordinary cour se of tr ad i ng activities of the b usi ness of ANZ New Zeal and. T hese matters have
not impaired our i nd ep end ence as reviewer of ANZ New Zeal and. T he firm has no other r el ati onshi p wi th, or interest i n, ANZ New Zeal and.
EMPHASIS OF MATTER – ESTIMATION UNCERTAINTY IN THE PREPARATION OF THE INTERIM FINANCIAL
STATEMENTS
We d r aw attention to Note 1 Use of est imat es, assumpt ions and judgements in the interim fi nanci al statements, whi ch describes increased estimation
uncer tai nty in the p r ep ar ati on of the interim fi nanci al statements, speci fi cal l y as it relates to the potential i mp acts of Cor onavi r us (COVID-19) p and emic
on ANZ New Zeal and ’s al l owance for cr ed i t l osses (ECL) and annual g ood wi l l impairment testing. T hese d i scl osur es i ncl ud e:
• key judgements and assump ti ons in relation to the ECL mod el i np uts and the interdependencies between those i np uts, and hi g hl i g ht
significant chang es mad e d ur i ng the si x months ended 31 Mar ch 2020; and
• key chang es mad e in the g ood wi l l impairment test to reflect a fur ther specific str ess scenar i o associ ated with COVID-19.
As described in Note 1 Use of est imat es, assumpt ions and judgements the und er l yi ng for ecasts and assump ti ons ar e sub j ect to uncer tai nti es whi ch ar e
often outsi d e the contr ol of ANZ New Zeal and . Actual economi c cond i ti ons ar e likely to be different fr om those for ecast si nce antici p ated events
frequently do not occur as expected, and the effect of those differences may significantly i mp act the resulting accounti ng esti mates.
In our vi ew, thi s i ssue is fund amental to the user s’ und er stand i ng of the inter i m fi nanci al statements and the fi nanci al posi ti on and performance of
ANZ New Zeal and .
Our concl usi on on the interim fi nanci al statements and registered b ank d i scl osur es is not modified in respect of thi s matter.
CONCLUSION
Based on our review of the interim fi nanci al statements and registered b ank d i scl osur es (together referred to as ‘the d i scl osur e statement’) of the
New Zeal and b usi ness of Australia and New Zeal and Banki ng Gr oup Limited and its subsidiaries (ANZ New Zeal and) on p ag es 3 to 32, nothi ng has
come to our attention that causes us to believe that:
• the interim fi nanci al statements on p ag es 3 to 23 do not present fairly in accor d ance with NZ IAS 34 Int erim Financial Report ing and IAS 34
Int erim Financial Report ing, in al l mater i al r esp ects, ANZ New Zeal and’s fi nanci al posi ti on as at 31 Mar ch 2020 and its fi nanci al performance
and cash fl ows for the si x month per i od ended on that d ate;
• the registered b ank d i scl osur es in secti ons B2, B3 and B5 d i scl osed in accor d ance with Schedules 5, 7, 12 and 14 of the Registered Bank
Di scl osur e Statements (Overseas I ncor por ated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly state, in al l
mater i al r esp ects, the matters to whi ch they relate in accor d ance with those sched ul es; and
• the registered b ank d i scl osur es relating to cr ed i t and mar ket r i sk exposures and cap i tal ad eq uacy in secti on B4 ar e not, in al l mater i al
r esp ects, d i scl osed in accor d ance with S ched ul e 9 of the Order.
We have completed a review of the accomp anyi ng hal f year d i scl osur e statement whi ch comp r i ses:
• the interim fi nanci al statements for med of:
• the consol i d ated b al ance sheet as at 31 Mar ch 2020;
• the consol i d ated i ncome statement, statements of comp r ehensi ve i ncome, chang es in equity and cash fl ows for the si x month per i od
then ended; and
• notes, i ncl ud i ng a summary of significant accounti ng policies and other exp l anator y i nfor mati on.
• the registered b ank d i scl osur es prescribed in Schedules 5, 7, 9, 12 and 14 of the Order.
35
USE OF THE INDEPENDENT REVIEW REPORT
This independent review report is made solely to the Directors as a body of ANZ New Zealand. Our review work has been undertaken so that we
might state to the Directors 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 Directors as a body for our work, this independent
review report, or any of the opinions we have formed.
DIRECTORS' RESPONSIBILITIES FOR THE HALF YEAR DISCLOSURE STATEMENT
The Directors, on behalf of ANZ New Zealand, are responsible for:
• the preparation and fair presentation of the half year disclosure statement in accordance with IAS 34, NZ IAS 34 and Schedules 3, 5, 7, 12 and 14
of the Order;
• the preparation and fair presentation of ANZ New Zealand’s disclosures in regards to credit and market risk exposures and capital adequacy in
accordance with Schedule 9 of the Order;
• implementing necessary internal controls to enable the preparation of a half year disclosure statement that is fairly presented and free from
material misstatement, whether due to fraud or error; and
• assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE HALF YEAR DISCLOSURE STATEMENT
Our responsibility is to express a conclusion on the half year disclosure statement based on our review. We conducted our review in accordance with
NZ SRE 2410. NZ 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, ANZ New Zealand’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;
• the registered bank disclosures in sections B2, B3, and B5 do not, fairly state, in all material respects, the matters to which it relates in accordance
with Schedules 5, 7, 12 and 14 of the Order; and
• the registered bank disclosures relating to credit and market risk exposures and capital adequacy in section B4 is not, in all material respects,
disclosed in accordance with Schedule 9 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the half year disclosure statement. This description forms part of our
independent review report.
KPMG
Auckland
26 May 2020
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.