ANZ Bank New Zealand Disclosure Statement
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008
10 May 2021
Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000
ANZ Bank New Zealand Limited
Registered Bank Disclosure Statement
Australia and New Zealand Banking Group Limited (ANZ) today released its ANZ Bank
New Zealand Limited Registered Bank Disclosure Statement for the six months ended 31
March 2021.
It has been approved for distribution by ANZ’s Continuous Disclosure Committee.
Yours faithfully
Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
ANZ BANK NEW ZEALAND LIMITED
REGISTERED BANK DISCLOSURE STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2021
NUMBER 95 | ISSUED MAY 2021
2
CONTENTS
Glossary of terms 2
DISCLOSURE STATEMENT
Interim Financial Statements 3
Condensed consolidated interim financial statements 4
Notes to the interim financial statements 8
Registered Bank Disclosures 24
Directors’ Statement
44
Independent Auditor’s Review Report
45
GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled
entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it
were conducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for
service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by
the Order.
3
INTERIM FINANCIAL
STATEMENTS
Condensed consolidated interim financial statements
Income statement 4
Statement of comprehensive income
4
Balance sheet 5
Cash flow statement
6
Statement of changes in equity 7
Notes to the condensed consolidated interim financial statements
Basis of preparation
1. About our interim financial statements 8
Financial performance
2. Other operating income 9
3. Operating expenses 9
4. Segment reporting 10
Financial and non-financial assets
5. Net loans and advances 11
6. Allowance for expected credit losses 12
7. Goodwill and other intangible assets 16
Financial and non-financial liabilities
8. Deposits and other borrowings 18
9. Other provisions 18
10. Debt issuances 18
Financial instrument disclosures
11. Credit risk 19
12. Fair value of financial assets and financial liabilities 21
Other disclosures
13. Commitments and contingent liabilities 22
14. Subsequent events 22
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pages 8 to 22 form an integral part of these interim financial statements
4
INCOME STATEMENT
2021 2020
For the six months ended 31 March Note
NZ$m NZ$m
Interest income 2,334 2,998
Interest expense (661) (1,332)
Net interest income
1,673
1,666
Other operating income 2 338 483
Operating income
2,011
2,149
Operating expenses 3
(772)
(836)
Profit before credit impairment and income tax 1,239 1,313
Credit impairment release / (charge) 6
70
(233)
Profit before income tax
1,309
1,080
Income tax expense (362) (296)
Profit for the period
947
784
STATEMENT OF COMPREHENSIVE INCOME
2021 2020
For the six months ended 31 March NZ$m NZ$m
Profit for the period 947 784
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss 43
(17)
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity
(3)
(65)
Realised losses transferred to the income statement
4
14
Income tax attributable to the above items (11) 19
Other comprehensive income after tax 33
(49)
Total comprehensive income for the period 980 735
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
The notes appearing on pages 8 to 22 form an integral part of these interim financial statements
5
BALANCE SHEET
31 Mar 21 30 Sep 20
As at Note NZ$m NZ$m
Assets
Cash and cash equivalents 5,579 8,248
Settlement balances receivable
447
378
Collateral paid 1,380 1,394
Trading securities
9,700
12,797
Derivative financial instruments
12,259
9,702
Investment securities 12,046 9,893
Net loans and advances 5
137,488
132,698
Deferred tax assets
368
327
Goodwill and other intangible assets 7 3,088 3,092
Premises and equipment
549
590
Other assets 639 625
Total assets
183,543
179,744
Liabilities
Settlement balances payable 2,874 2,950
Collateral received
1,202
1,275
Deposits and other borrowings 8
128,860
125,061
Derivative financial instruments 11,111 8,252
Current tax liabilities
83
251
Payables and other liabilities 1,331 1,115
Employee entitlements
137
143
Other provisions 9
348
389
Debt issuances 10 20,752 24,439
Total liabilities
166,698
163,875
Net assets
16,845
15,869
Equity
Share capital
11,888
11,888
Reserves 119 118
Retained earnings
4,838
3,863
Total equity
16,845
15,869
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
INTERIM FINANCIAL STATEMENTS
The notes appearing on pages 8 to 22 form an integral part of these interim financial statements
6
CASH FLOW STATEMENT
2021 2020
For the six months ended 31 March NZ$m NZ$m
Profit after income tax 947 784
Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation 63 69
Loss on sale and impairment of premises and equipment
1
-
Net derivatives/foreign exchange adjustment
(776)
1,260
Other non-cash movements 115 117
Net (increase)/decrease in operating assets:
Collateral paid
14
(203)
Trading securities 3,097 (2,737)
Net loans and advances
(4,790)
(2,830)
Other assets
(124)
(399)
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
3,799
7,613
Settlement balances payable
(76)
658
Collateral received (73) 299
Other liabilities
22
(278)
Total adjustments
1,272
3,569
Net cash flows from operating activities
1
2,219
4,353
Cash flows from investing activities
Investment securities:
Purchases
(4,046)
(1,050)
Proceeds from sale or maturity
1,509
768
Other assets (17) (21)
Net cash flows from investing activities (2,554)
(303)
Cash flows from financing activities
Debt issuances
2
Issue proceeds
-
2,327
Redemptions
(2,307) (966)
Repayment of lease liabilities
(23)
(24)
Dividends paid
(4)
(4)
Net cash flows from financing activities
(2,334) 1,333
Net change in cash and cash equivalents
(2,669)
5,383
Cash and cash equivalents at beginning of period
8,248
2,363
Cash and cash equivalents at end of period
5,579
7,746
1 Net cash provided by operating activities includes income taxes paid of NZ$582 million (2020: NZ$485 million).
2 Movement in debt issuances (Note 10 debt issuances) also includes an NZ$1,089 million decrease (2020: NZ$901 million increase) from the effect of foreign exchange rates, a NZ$336
million decrease (2020: NZ$320 million increase) from changes in fair value hedging instruments and a NZ$45 million increase (2020: NZ$94 million increase) of other changes.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
The notes appearing on pages 8 to 22 form an integral part of these interim financial statements
7
STATEMENT OF CHANGES IN EQUITY
Share
capital
Investment
securities
revaluation
reserve
Cash flow
hedging
reserve
Retained
earnings
Total
equity
NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2019
11,888 (6) 27 2,521 14,430
Impact on transition to NZ IFRS 16 Leases
- - - (17) (17)
As at 1 October 2019 (adjusted)
11,888 (6) 27 2,504 14,413
Profit or loss - - - 784 784
Unrealised losses recognised directly in equity - (38) (27) - (65)
Realised losses transferred to the income statement - - 14 - 14
Actuarial loss on defined benefit schemes - - - (17) (17)
Income tax credit on items recognised directly in equity - 11 4 4 19
Total comprehensive income for the period - (27) (9) 771 735
Transactions with Immediate Parent Company in its capacity as owner:
Preference dividends paid - - - (4) (4)
Transactions with Immediate Parent Company in its capacity as owner - - - (4) (4)
As at 31 March 2020
11,888 (33) 18 3,271 15,144
As at 1 October 2020
11,888 8 110 3,863 15,869
Profit or loss
- - - 947 947
Unrealised gains / (losses) recognised directly in equity - 49 (52) - (3)
Realised losses / (gains) transferred to the income statement
- (2) 6 - 4
Actuarial gain on defined benefit schemes
- - - 43 43
Income tax credit / (expense) on items recognised directly in equity - (13) 13 (11) (11)
Total comprehensive income for the period
- 34 (33) 979 980
Transactions with Immediate Parent Company in its capacity as owner:
Preference dividends paid
- - - (4) (4)
Transactions with Immediate Parent Company in its capacity as owner
- - - (4) (4)
As at 31 March 2021
11,888 42 77 4,838 16,845
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
8
1. ABOUT OUR INTERIM FINANCIAL STATEMENTS
BASIS OF PREPARATION
These are the condensed consolidated interim financial statements (financial statements) for ANZ Bank New Zealand Limited (the Bank) and its
controlled entities (together, the ‘Banking Group’) and should be read in conjunction with the Banking Group’s financial statements for the year ended
30 September 2020.
On 7 May 2021, the Directors resolved to authorise the issue of these financial statements.
These financial statements comply with:
• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;
• NZ IAS 34 Interim Financial Reporting and other applicable Financial Reporting Standards, as appropriate for publicly accountable for-profit
entities; and
• IAS 34 Interim Financial Reporting.
The financial statements consolidate the financial statements of the Bank and its subsidiaries.
We present the financial statements in New Zealand dollars and have rounded values to the nearest million dollars (NZ$m), unless otherwise stated.
The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year financial statements.
BASIS OF MEASUREMENT
These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets
and liabilities are stated at their fair value:
• derivative financial instruments;
• financial instruments measured at fair value through other comprehensive income; and
• financial instruments designated at fair value through profit and loss.
KEY JUDGEMENTS AND ESTIMATES
The preparation of these financial statements requires the use of management judgement, estimates and assumptions that affect reported
amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex
or subjective decisions or assessments, are provided in the previous full year financial statements. Such estimates and judgements are
reviewed on an ongoing basis.
A brief explanation of the key estimates, assumptions and judgements that have changed during the six months ended 31 March 2021 follows:
Coronavirus (COVID-19) pandemic
The COVID-19 pandemic and its effect on the global economy have impacted our customers, operations and the Banking Group‘s
performance. The outbreak necessitated governments to respond at unprecedented levels to protect the health of the population, local
economies and livelihoods. It has affected different regions at different times and at varying degrees and there remains a risk of
subsequent waves of infection. Thus the pandemic has significantly increased the estimation uncertainty in the preparation of these
financial statements including:
• the extent and duration of the disruption to business arising from the actions of governments, businesses and consumers to contain
the spread of the virus;
• the impact, extent and duration of the expected economic downturn (and forecasts for key economic factors including GDP,
employment and house prices). This includes disruption to capital markets, and the impacts on credit quality, liquidity,
unemployment, consumer spending, as well as specific sector impacts and other restructuring activities; and
• the efficacy, extent and pace of roll-out of vaccines, as well as the effectiveness of government and central bank measures that have
been and will be put in place to support businesses and consumers through this disruption.
The Banking Group
has made various accounting estimates in these financial statements based on forecasts of economic conditions which
reflect expectations and assumptions as at 31 March 2021 about future events that the Directors believe are reasonable in the circumstances.
There is a considerable degree of judgement involved in preparing these estimates. The underlying assumptions are also subject to
uncertainties which are often outside the control of the Banking Group. Accordingly, actual economic conditions are likely to be different from
those forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact
accounting estimates included in these financial statements.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly re lated to expected credit
losses, carrying values of goodwill, fair value measurement, and recoverable amounts of non-financial assets.
The impact of the COVID-19 pandemic on each of these estimates is discussed further in the relevant note in these financial statements and/or
in the relevant note in the previous full year financial statements. Readers should consider these disclosures in light of the inherent uncertainty
described above.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
9
2. OTHER OPERATING INCOME
2021 2020
For the six months ended 31 March NZ$m NZ$m
(i) Fee and commission income
Lending fees
16
17
Non-lending fees
341 374
Commissions
18 21
Funds management income
131 133
Fee and commission income
506
545
Fee and commission expense
(230)
(260)
Net fee and commission income 276
285
(ii) Other income
Net trading gains
66
68
Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value
(26) 119
Net foreign exchange earnings and other financial instruments income
40 187
Other
22 11
Other income 62
198
Other operating income
338
483
3. OPERATING EXPENSES
2021 2020
For the six months ended 31 March NZ$m NZ$m
Personnel
Salaries and related costs 421 454
Superannuation costs 14 15
Other
9
24
Personnel
444
493
Premises
Rent
9
12
Depreciation
40
45
Other
20
20
Premises 69 77
Technology
Depreciation and amortisation
23
24
Subscription licences and outsourced services
62
60
Other
18
22
Technology (excluding personnel)
103
106
Other
Advertising and public relations
17
24
Professional fees 31 31
Freight, stationery, postage and communication 21 21
Charges from Ultimate Parent Bank
53
41
Other
34
43
Other
156
160
Operating expenses
772
836
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
10
4. SEGMENT REPORTING
The Banking Group is organised into three major business segments for segment reporting purposes - Retail, Commercial and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
There were no material changes to the Banking Group’s reportable segments during the six months ended 31 March 2021.
Retail
Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact
centres.
Commercial
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions through
dedicated managers focusing on privately owned medium to large enterprises, the agricultural business segment, government and government
related entities.
Institutional
The Institutional division services governments, global institutional and corporate customers across three product sets: Transaction Banking, Corporate
Finance and Markets.
• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash
management solutions, deposits, payments and clearing.
• Corporate Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance, debt
structuring and acquisition finance and corporate advisory.
• Markets provide risk management services on foreign exchange, interest rates, credit, commodities and debt capital markets in addition to
managing the Banking Group’s interest rate exposure and liquidity position.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
Retail Commercial Institutional Other Total
For the six months
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
ended 31 March NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net interest income
983
921
503
549
168
177
19
19
1,673
1,666
Net fee and commission income
- Lending fees 7 8 - - 9 9 - - 16 17
- Non-lending fees
308
343
5
5
28
26
-
-
341
374
- Commissions
17
21
-
-
1
-
-
-
18
21
- Funds management income 131 133 - - - - - - 131 133
- Fee and commission expense
(230)
(260)
-
-
-
-
-
-
(230)
(260)
Net fee and commission income
233
245
5
5
38
35
-
-
276
285
Other income 15 8 - 1 75 46 (28) 143 62 198
Other operating income
248
253
5
6
113
81
(28)
143
338
483
Operating income 1,231 1,174 508 555 281 258 (9) 162 2,011 2,149
Operating expenses
(547)
(574)
(118)
(147)
(94)
(96)
(13)
(19)
(772)
(836)
Profit before credit impairment
and income tax
684
600
390
408
187
162
(22)
143
1,239
1,313
Credit impairment release /
(charge)
32
(83)
31
(106)
7
(44)
-
-
70
(233)
Profit / (loss) before income tax 716 517 421 302 194 118 (22) 143 1,309 1,080
Income tax expense
(197)
(145)
(118)
(85)
(54)
(33)
7
(33)
(362)
(296)
Profit / (loss) after income tax 519
372
303
217
140
85
(15)
110
947
784
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
11
Retail Commercial Institutional Other Total
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
As at NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial position
Goodwill 1,011 1,011 926 926 1,069 1,069 - - 3,006 3,006
Net loans and advances
92,112
86,362
38,832
39,333
6,533
6,993
11
10
137,488
132,698
Customer deposits
81,358
79,867
20,172
18,437
21,256
22,559
-
-
122,786
120,863
Other segment
The Other segment profit/(loss) after tax comprises:
2021 2020
For the six months ended 31 March
NZ$m NZ$m
Central functions
1
3
Group Centre
8
11
Economic hedges
(24)
96
Total
(15)
110
5. NET LOANS AND ADVANCES
31 Mar 21 30 Sep 20
Note NZ$m NZ$m
Overdrafts
660
659
Credit cards
1,287
1,300
Term loans - housing
95,081
89,258
Term loans - non-housing
40,732
41,882
Subtotal
137,760 133,099
Unearned income
(23) (26)
Capitalised brokerage and other origination costs
368
319
Gross loans and advances 138,105
133,392
Allowance for expected credit losses 6
(617)
(694)
Net loans and advances 137,488
132,698
The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$306 million as at 31 March 2021 (30 September 2020:
NZ$287 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
12
6. ALLOWANCE FOR EXPECTED CREDIT LOSSES
This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 included in Note 1.
ALLOWANCE FOR EXPECTED CREDIT LOSSES – BALANCE SHEET
Net loans and advances - at amortised cost
Allowance for Expected Credit Losses (ECL) is included in net loans and advances.
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020 162 347 79 106 694
Transfer between stages
21 (20) (2) 1 -
New and increased provisions (net of collective provision releases)
(33) 1 (15) 38 (9)
Write-backs
- - - (36) (36)
Bad debts written-off (excluding recoveries)
- - - (28) (28)
Discount unwind
- - - (4) (4)
As at 31 March 2021 150 328 62 77 617
Off-balance sheet credit related commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions.
As at 1 October 2020 79 55 3 22 159
Transfer between stages
3 (3) - - -
New and increased provisions (net of collective provision releases)
(11) (1) - (3) (15)
As at 31 March 2021 71 51 3 19 144
CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
2021 2020
For the six months ended 31 March NZ$m NZ$m
New and increased provisions
- Collectively assessed
(60) 189
- Individually assessed
36 73
Write-backs
(36)
(15)
Recoveries of amounts previously written-off
(10)
(14)
Total credit impairment charge / (release) (70)
233
LOAN DEFERRAL AND RELIEF PACKAGES
From March 2020, the Banking Group offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of
customers to meet their loan obligations. The assistance provided included arrangements such as temporary deferral of principal and interest
repayments, replacing principal and interest with interest only repayments, and extension of loan maturity dates. The loan deferral and relief packages
are considered to be a loan modification under NZ IFRS 9. This either results in the loan being derecognised and replaced with a new loan (substantial
modification) or the existing loan continuing to be recognised (non-substantial modification).
These relief packages were phased out during the six months ended 31 March 2021. In the case of loan deferral packages, 86% of all customers who
took advantage of a deferral package have reverted back to loan repayments, with the remainder having been either restructured or, for less than 2%
of customers, transferred to hardship. For those customers who took up loan deferral packages, it is considered that the packages, as well as
government support measures, may have obscured repayment delinquencies that might otherwise have occurred over the loan deferral period and
those that may still occur in the future. Thus the Banking Group has provided a component of ECL for expected delinquencies and increases in
Significant Increase in Credit Risk (SICR) for this population of loans.
Facilities which transitioned to interest-only or took up term extensions offered as a result of COVID-19, are now subsumed within the normal loan
population and are managed accordingly.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
13
KEY JUDGEMENTS AND ESTIMATES
In estimating individually assessed ECL for Stage 3 exposures, the Banking Group makes judgements and assumptions in relation to expected
repayments, the realisable value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the
work-out process. Judgements and assumptions in respect of these matters have been updated to reflect the ongoing and potential impact of
COVID-19.
In estimating collectively assessed ECL, the Banking Group makes judgements and assumptions in relation to:
• the selection of an estimation technique or modelling methodology, noting that the modelling of the Banking Group’s ECL estimates are
complex; and
• the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between
those inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made in the context of the impact of COVID-19, and reflect historical experience and
other factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the
circumstances. The Banking Group’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.
Judgement /
assumption
Description
Considerations for the six months ended
31 March 2021
Determining
when a SICR
has occurred
In the measurement of ECL, judgement is involved in
setting the rules and trigger points to determine
whether there has been a SICR since initial recognition
of a loan, which would result in the financial asset
moving from Stage 1 to Stage 2. This is a key area of
judgement since transition from Stage 1 to Stage 2
increases the ECL from an allowance based on the
probability of default in the next 12 months, to an
allowance for lifetime expected credit losses.
Subsequent decreases in credit risk resulting in
transition from Stage 2 to Stage 1 may similarly result in
significant changes in the ECL allowance.
The setting of precise trigger points requires judgement
which may have a material impact upon the size of the
ECL allowance. The Banking Group monitors the
effectiveness of SICR criteria on an ongoing basis.
The relief packages offered to customers in
response to COVID-19 in 2020 are no longer being
offered, and the majority of customers who took up
the relief have reverted back to their normal loan
repayments.
The relief packages, as well as government support
measures, may have obscured repayment
delinquencies that might otherwise have occurred
and those that may still occur in the future. Thus the
Banking Group has provided a component of ECL
for expected delinquencies and increases in SICR.
Measuring
both 12-month
and lifetime
credit losses
The probability of default (PD), loss given default (LGD)
and exposure at default (EAD) credit risk parameters
used in determining ECL are point-in -time measures
reflecting the relevant forward looking information
determined by management. Judgement is involved in
determining which forward-looking information
variables are relevant for particular lending portfolios
and for determining each portfolio’s point-in -time
sensitivity.
The PD, EAD and LGD models are subject to the
Banking Group’s model risk policy that stipulates
periodic model monitoring, periodic re -validation
and defines approval procedures and authorities
according to model materiality.
During the six months ended 31 March 2021 an
adjustment was made to the modelled outcome to
account for continuing model uncertainties as a
result of COVID-19.
In addition, judgement is required where behavioural
characteristics are applied in estimating the lifetime of a
facility to be used in measuring ECL.
There were no material changes to the policies
during the six months ended 31 March 2021.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
14
KEY JUDGEMENTS AND ESTIMATES
Judgement /
assumption
Description
Considerations for the six months ended
31 March 2021
Base case
economic
forecast
The Banking Group derives a forward looking “base
case” economic scenario which reflects our view of
future macro-economic conditions.
There have been no changes to the types of forward
looking variables (key economic drivers) used as
model inputs in the current period.
As at 31 March 2021, the base case assumptions have
been updated to reflect the current phase of COVID-
19, including containment in key geographies,
government stimulus measures and roll-out of
vaccines. In determining the expected path and
timing out of the current economic downturn,
assessments of the impact of central bank policies,
governments’ actions, the response of business, and
institution specific responses (such as payment
deferrals) were considered.
The expected outcomes of key economic drivers for
the base case scenario as at 31 March 2021 are
described below under the heading “Base case
economic forecast assumptions”.
Probability
weighting of
each scenario
(base case,
upside,
downside
and
severe
downside
scenarios)
1,2
Probability weighting of each economic scenario is
determined by management considering the risks and
uncertainties surrounding the base case scenario at
each measurement date.
The key consideration for probability weightings in
the current period is the extent and timing of
recovery from the economic downturn caused by
COVID-19.
The Banking Group considers these weightings to
provide the best estimate of the possible loss
outcomes and has analysed inter-relationships and
correlations (over both the short and long term)
within the Banking Group’s credit portfolios in
determining them.
In addition to the base case forecast which reflects a
significant improvement as we emerge from an
economic environment heavily influenced by COVID-
19, greater weighting continues to be applied to the
downside scenario given the Banking Group’s
assessment of downside risks.
The assigned probability weightings are subject to a
high degree of inherent uncertainty and therefore
the actual outcomes may be significantly different to
those projected.
Management
temporary
adjustments
Management temporary adjustments to the ECL
allowance are used in circumstances where it is judged
that our existing inputs, assumptions and model
techniques do not capture all the risk factors relevant to
our lending portfolios. Emerging local or global
macroeconomic, microeconomic or political events,
and natural disasters that are not incorporated into our
current parameters, risk ratings, or forward-looking
information are examples of such circumstances. The
use of management temporary adjustments may
impact the amount of ECL recognised.
The uncertainty associated with the COVID-19
pandemic, including the roll-out of vaccines, and the
extent to which the actions of governments, businesses
and consumers mitigate against potentially adverse
credit outcomes are not fully incorporated into existing
ECL models which are based on historical underlying
data. Accordingly, management overlays have been
applied to ensure credit provisions are appropriate.
Management have applied a number of adjustments
to the modelled ECL primarily due to the uncertainty
associated with continuing COVID-19 impacts.
Management overlays (including COVID-19 overlays)
which add to the modelled ECL provision have been
made for risks particular to retail, commercial and agri
banking.
1. The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
2. The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
15
KEY JUDGEMENTS AND ESTIMATES
Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the economic forecast resulting in an understatement or
overstatement of the ECL balance due to uncertainties around:
• the extent and duration of measures, including the roll-out of vaccines, to contain the spread of COVID-19;
• the extent and duration of the economic downturn, along with the time required for economies to recover; and
• the effectiveness of government stimulus measures, in particular their impact on the magnitude of the economic downturn and the
extent and duration of the recovery.
The economic drivers of the base case economic forecasts at 31 March 2021 are set out below. These reflect our view of future macro-
economic conditions at 31 March 2021. For years beyond the near term forecasts below, the ECL models project future year economic
conditions including an assumption to eventual reversion to mid-cycle economic conditions.
Actual calendar year Forecast calendar year
New Zealand 2020 2021 2022
Gross domestic product (GDP) -3.0% 3.6% 3.7%
Unemployment 4.6% 5.4% 4.6%
Residential property prices 15.6% 17.4% 4.1%
Consumer price index (CPI) 1.7 1.9 1.6
The base case economic forecasts as at 31 March 2021 indicate a significant improvement in current and expected economic conditions from
the forecasts as at 30 September 2020 reflecting the ongoing progress and actions in responding to the COVID-19 pandemic.
Probability weightings
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
scenario. The key consideration for probability weightings in the current period is the effectiveness of actions taken in response to COVID-19
and the ability of vaccines to limit the impact of the virus.
The base case scenario represents a significant improvement in the forecasts since September 2020. Given the uncertainties associated with a
potential recovery in the economy, greater weighting continues to be applied to the downside and severe downside scenarios given the
Banking Group’s assessment of downside risks.
The assigned probability weightings are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be
significantly different to those projected. The Banking Group considers these weightings to provide the best estimate of the possible loss
outcomes and has analysed inter-relationships and correlations (over both the short and long term) within the Banking Group’s credit
portfolios in determining them. The average weightings applied are set out below:
31 Mar 21 30 Sep 20
Base 50% 50%
Upside 8% 8%
Downside 32% 32%
Severe downside 10% 10%
ECL - sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future
periods, ECL reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 31 March 2021:
Total
NZ$m
Impact
NZ$m
If 1% of Stage 1 facilities were included in Stage 2 669 4
If 1% of Stage 2 facilities were included in Stage 1 664 (1)
100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario
457
544
802
998
(208)
(121)
137
333
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
16
7. GOODWILL AND OTHER INTANGIBLE ASSETS
31 Mar 21 30 Sep 20
NZ$m NZ$m
Goodwill
3,006 3,006
Funds management rights (indefinite life) 76 76
Software 6 10
Goodwill and other intangible assets
3,088
3,092
GOODWILL AND OTHER INTANGIBLE ASSETS ALLOCATED TO CASH-GENERATING UNITS (CGUs)
Goodwill arose on the acquisition of the NBNZ Holdings Limited group on 1 December 2003, and the carrying amount reflects amortisation
recognised before the application of NZ IFRS from 1 October 2004 and subsequent business disposals. Funds management rights, assessed as having
indefinite useful lives, arose on the acquisition of the ING Holdings (NZ) Limited (now ANZ Wealth New Zealand Limited) group on 30 November 2009.
Goodwill and funds management rights are allocated to CGUs as follows:
Goodwill Management rights
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
Cash generating unit NZ$m NZ$m NZ$m NZ$m
Retail and business banking
893 893 - -
Wealth
118 118 76 76
Retail segment
1,011 1,011 76 76
Commercial
926
926
-
-
Institutional
1,069
1,069
-
-
Total
3,006
3,006
76
76
Annual goodwill impairment test
The annual impairment test is performed as at the end of February each year. Goodwill is considered to be impaired if the carrying amount of the
relevant CGU exceeds its recoverable amount. The recoverable amount of a CGU is the higher of its fair value less costs of disposal (FVLCOD) and its
value-in use (VIU). We use a value-in -use approach to estimate the recoverable amount of the CGU to which each goodwill component is allocated.
Based on this assessment no impairment was identified for any CGU, and therefore a FVLCOD calculation was not required.
VALUE-IN-USE
These calculations use cash flow projections based on a number of financial budgets within each CGU covering an initial forecast period. These
projections also incorporate economic assumptions including GDP, inflation, unemployment, residential and commercial property prices, the impact
of the restriction imposed by the RBNZ on the payment of ordinary dividends by all New Zealand incorporated registered banks, and the
implementation of the RBNZ’s increased capital requirements. Cash flows beyond the forecast period are extrapolated using the terminal growth rate.
These cash flow projections are discounted using a discount rate derived using a capital asset pricing model.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential impairment
of part or all of the goodwill balances.
Input / assumption
Values applied in 28 February 2021 impairment test
Forecast period and projections To 30 September 2028 - an extended forecast period was used to cover the implementation period of the
RBNZ’s increased capital requirements over the period 1 July 2021 to 1 July 2028.
Revenue growth over forecast
period
Comprises impacts of net interest margin and volume growth, arising from planned responses to known
re gulatory and economic forecasts. Average annual forecast revenue growth rates are shown below.
Credit impairment over forecast
period
Varies by CGU, based on ECL modelling for 2021 to 2023, before returning to long run experience levels for
2024 to 2028. Long run experience levels are based on the Banking Group’s bad debts written off, net of
recoveries, since 2004 of 0.15% of gross loans and advances. Credit impairment for each CGU as a
percentage of forecast gross loans and advances for 2024 to 2028 is shown below.
Terminal growth rate 2.0% - based on 2023 forecast inflation from the RBNZ’s February 2021 Monetary Policy Statement.
Discount rate
Post tax: 9.4% (February 2020: 9.3%).
The main variables in the calculation of the discount rate used are the risk free rate, beta and the market risk
premium. The risk free rate was the traded 10 year New Zealand government bond yield as at 28 February
2021 of 1.9%. The market risk premium was estimated using a range of methods incorporating historical
and forward looking market data. Beta was consistent with observable measures applied in the regional
banking sector.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
17
The values of the average revenue growth, credit impairment as a percentage of forecast gross loans and advances, and pre-tax discount rates
assumptions by CGU are shown in the table below. The implied pre-tax discount rates are significantly higher than the post-tax discount rate above
because regulatory capital retention over the forecast period is not tax effected.
Revenue growth Credit impairment Pre-tax discount rate
Cash generating unit
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
Retail and business banking
6.1% 5.8% 0.13% 0.13% 17.5% 16.7%
Wealth
3.4% 2.7% 0.10% 0.01% 16.4% 16.0%
Commercial
4.2%
4.8%
0.21%
0.22%
17.8%
17.1%
Institutional
4.5%
0.6%
0.21%
0.12%
17.3%
17.0%
We performed stress tests for key sensitivities in each CGU. A change, considered to be reasonably possible by management, in key assumptions
would not cause the recoverable amounts of the Retail & business banking and Wealth CGUs to exceed their carrying amounts, but would do so for
the Commercial and Institutional CGUs.
A summary of the amounts by which key assumptions for Commercial and Institutional must change in order for their recoverable amounts to equal
their carrying amounts is shown below.
Commercial
Institutional
Forecast Change Forecast Change
Value required Value required
Amount by which recoverable amount exceeds carrying amount (NZ$m) 513 n/a 386 n/a
Value of assumption and change (in basis points) required to reduce recoverable amount to nil:
Average annual revenue growth over forecast period 4.2% -87 bp 4.5% -113 bp
Average annual credit impairment FY24-FY28 0.21% +17 bp 0.21% +73 bp
Discount rate 9.4% +63 bp 9.4% +80 bp
Terminal growth rate 2.0% -106 bp 2.0% -140 bp
KEY JUDGEMENTS AND ESTIMATES
Management judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of
an asset, or if an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired:
• the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Banking
Group’s four revenue generating segments that benefit from relevant historical business combinations generating goodwill.
• determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
• assessment of the recoverable amount of each CGU used to determine whether the carrying amount of goodwill is supported is
based on judgements including the selection of the model and key assumptions used to calculate the recoverable amount.
The assessment of the recoverable amount of each CGU has been made within the context of the ongoing impact of COVID-19, and
reflects expectations of future events that are believed to be reasonable under the circumstances. The rapidly evolving consequences of
COVID-19 and government, business and consumer responses create heightened uncertainty in these estimates and any variations could
have a positive or adverse impact on the determination of recoverable amounts.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
18
8. DEPOSITS AND OTHER BORROWINGS
31 Mar 21 30 Sep 20
NZ$m NZ$m
Term deposits
43,264
50,069
On demand and short term deposits
59,240
53,910
Deposits not bearing interest 20,282 16,884
Total customer deposits 122,786 120,863
Certificates of deposit 1,407 1,782
Commercial paper
3,543
1,748
Securities sold under repurchase agreements
1,113
646
Deposits from Immediate Parent Company and NZ Branch
11
22
Deposits and other borrowings
128,860
125,061
9. OTHER PROVISIONS
31 Mar 21 30 Sep 20
Note
NZ$m NZ$m
ECL allowance on undrawn facilities 6
144
159
Customer remediation
121
141
Restructuring costs
31
36
Leasehold make good
23
23
Other
1
29
30
Total other provisions 348 389
1 Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities provided in connection with various
disposals of businesses and assets.
10. DEBT ISSUANCES
The Banking Group uses a variety of funding programmes to issue unsubordinated debt (including senior debt and covered bonds) and subordinated
debt. The difference between unsubordinated debt and subordinated debt is that holders of unsubordinated debt take priority over holders of
subordinated debt owed by the relevant issuer and subordinated debt will be repaid by the relevant issuer only after the repayment of claims of
depositors, other creditors and the senior debt holders.
31 Mar 21 30 Sep 20
NZ$m NZ$m
Senior debt 14,066 17,476
Covered bonds 4,245 4,522
Total unsubordinated debt 18,311 21,998
Subordinated debt (additional tier 1 capital)
2,441
2,441
Total debt issued
20,752
24,439
Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is not
a member of the Banking Group.
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are
security for the guarantee by the Covered Bond Guarantor as trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its
wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors of the
Bank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of the Covered Bond Trust (if any) after all
prior ranking creditors of the Covered Bond Trust have been satisfied.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
19
11. CREDIT RISK
This note should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 in Note 1 and ECL in Note 6.
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these
differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
Reported Excluded
1
Maximum exposure to
credit risk
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
On-balance sheet positions
Net loans and advances
137,488
132,698
-
-
137,488
132,698
Other financial assets:
Cash and cash equivalents 5,579 8,248 211 187 5,368 8,061
Settlement balances receivable 447 378 - - 447 378
Collateral paid
1,380
1,394
-
-
1,380
1,394
Trading securities
9,700
12,797
-
-
9,700
12,797
Derivative financial instruments
12,259
9,702
-
-
12,259
9,702
Investment securities
12,046
9,893
-
-
12,046
9,893
Other financial assets
2
551
547
-
-
551
547
Total other financial assets 41,962
42,959
211
187
41,751
42,772
Subtotal 179,450 175,657 211 187 179,239 175,470
Off-balance sheet commitments
Undrawn and contingent facilities
3
30,448
30,857
-
-
30,448
30,857
Total 209,898
206,514
211
187
209,687
206,327
1 Bank notes and coins and cash at bank within cash and cash equivalents.
2 Other financial assets mainly comprise accrued interest and acceptances.
3 Undrawn facilities and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for
expected credit losses.
Credit quality
We use the Banking Group’s internal customer credit rating (CCR) to manage the credit quality of financial assets. To enable wider comparisons, the
Banking Group’s CCRs are mapped to external rating agency scales as follows:
Credit quality
description
Internal CCR
The Banking Group customer requirements
Moody’s
Rating
S&P Global
Ratings
Strong CCR 0+ to 4- Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.
Aaa – Baa3 AAA – BBB-
Satisfactory CCR 5+ to 6- Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible to
cyclical trends or variability in earnings.
Ba1 – B1 BB+ – B+
Weak CCR 7+ to 8= Demonstrated some operational and financial instability, with
variability and uncertainty in profitability and liquidity projected to
continue over the short and possibly medium term.
B2 – Caa B - CCC
Defaulted CCR 8- to 10 When doubt arises as to the collectability of a credit facility, the
financial instrument (or ‘the facility’) is classified as defaulted.
n/a n/a
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
20
Net loans and advances
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
106,586 2,087 - - 108,673
Satisfactory
21,964 3,918 - - 25,882
Weak
522 1,685 - - 2,207
Defaulted
- - 683 315 998
Subtotal 129,072 7,690 683 315 137,760
Allowance for ECL (150) (328) (62) (77) (617)
Net loans and advances at amortised cost 128,922 7,362 621 238 137,143
Coverage ratio 0.12% 4.27% 9.08% 24.44% 0.45%
Unearned income
(23)
Capitalised brokerage and other origination costs
368
Net carrying amount 137,488
As at 30 September 2020
Strong 98,259 5,508 - - 103,767
Satisfactory 21,446 4,578 - - 26,024
Weak 405 1,734 - - 2,139
Defaulted - - 808 361 1,169
Subtotal 120,110 11,820 808 361 133,099
Allowance for ECL (162) (347) (79) (106) (694)
Net loans and advances at amortised cost
119,948 11,473 729 255 132,405
Coverage ratio
0.13% 2.94% 9.78% 29.36% 0.52%
Unearned income (26)
Capitalised brokerage and other origination costs 319
Net carrying amount 132,698
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
25,165 194 - - 25,359
Satisfactory
3,848 1,160 - - 5,008
Weak
19 140 - - 159
Defaulted
- - 31 35 66
Gross undrawn and contingent facilities 29,032 1,494 31 35 30,592
Allowance for ECL included in other provisions (refer to Note 9) (71) (51) (3) (19) (144)
Net undrawn and contingent facilities 28,961 1,443 28 16 30,448
Coverage ratio 0.24% 3.41% 9.68% 54.29% 0.47%
As at 30 September 2020
Strong 25,525 302 - - 25,827
Satisfactory 3,949 974 - - 4,923
Weak 27 179 - - 206
Defaulted - - 19 41 60
Gross undrawn and contingent facilities
29,501 1,455 19 41 31,016
Allowance for ECL included in other provisions (refer to Note 9) (79) (55) (3) (22) (159)
Net undrawn and contingent facilities 29,422 1,400 16 19 30,857
Coverage ratio
0.27% 3.78% 15.79% 53.66% 0.51%
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
21
12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Financial assets and financial liabilities carried at fair value on the balance sheet
The Banking Group categorises financial assets and financial liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 Fair Value
Measurement based on the observability of inputs used to measure the fair value:
• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and
• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
Fair value measurements
Quoted market price
(Level 1)
Using observable inputs
(Level 2)
Using unobservable
inputs (Level 3)
Total
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Trading securities
8,854
8,848
846
3,949
-
-
9,700
12,797
Derivative financial instruments
10
8
12,247
9,691
2
3
12,259
9,702
Investment securities
12,045
9,892
-
-
1
1
12,046
9,893
Total 20,909
18,748
13,093
13,640
3
4
34,005
32,392
Liabilities
Deposits and other borrowings - - 3,543 1,748 - - 3,543 1,748
Derivative financial instruments 19 4 11,092 8,248 - - 11,111 8,252
Other financial liabilities
598
158
-
-
-
-
598
158
Total 617
162
14,635
9,996
-
-
15,252
10,158
Financial assets and financial liabilities not measured at fair value
Below is a comparison of the carrying amounts as reported on the balance sheet and fair values of financial asset and financial liability categories other
than those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value.
The fair values below have been calculated using discounted cash flow techniques where contractual future cash flows of the instrument are
discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve
appropriate for the remaining term to maturity.
Carrying amount Fair value
31 Mar 21 30 Sep 20 31 Mar 21 30 Sep 20
NZ$m NZ$m NZ$m NZ$m
Financial assets
Net loans and advances
1
137,488
132,698
137,903
133,305
Total
137,488
132,698
137,903
133,305
Financial liabilities
Deposits and other borrowings
2
125,317 123,313 125,439 123,486
Debt issuances
1
20,752 24,439 21,165 24,748
Total 146,069
147,752
146,604
148,234
1 Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.
2 Excludes commercial paper (Note 8 deposits and other borrowings) designated at fair value through profit or loss.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
22
13. COMMITMENTS AND CONTINGENT LIABILITIES
31 Mar 21 30 Sep 20
Credit related commitments and contingencies NZ$m NZ$m
Contract amount of:
Undrawn facilities
27,709
28,273
Guarantees and letters of credit
1,298
1,309
Performance related contingencies
1,585
1,434
Total 30,592 31,016
The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore these
transactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As the
facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
Other contingent liabilities
There are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has been
obtained and, in the light of such advice, provisions (refer to Note 9 other provisions) and/or disclosures as deemed appropriate have been made. In
some instances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because
such disclosure may prejudice seriously the interests of the Banking Group.
Regulatory and customer exposures
In recent years there has been an increase in the number of matters on which the Banking Group engages with its regulators. There have also been
significant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement actions (whether by court action
or otherwise), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued by regulators, particularly against
financial institutions both in New Zealand and globally. The Banking Group has received various notices and requests for information from its
regulators as part of both industry-wide and Banking Group-specific re views, and has also made disclosures to its regulators at its own instigation. The
nature of these interactions can be wide ranging and, for example, may include a range of matters including responsible lending practices, regulated
lending financial transactions, product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth
advice, insurance distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money
laundering and counter-terrorism financing obligations, reporting and disclosure obligations and product disclosure documentation. There may be
exposures to customers which are additional to any regulatory exposures. These could
include class actions, individual claims or customer
remediation or compensation activities. The outcomes and total costs associated with such reviews and possible exposures remain uncertain.
Reviews under section 95 of the Reserve Bank of New Zealand Act 1989 (RBNZ Act)
On 5 July 2019, the RBNZ issued a notice under section 95 of the RBNZ Act requiring the Bank to obtain two external reviews: the first on the Bank’s
compliance with certain aspects of the RBNZ Banking Supervision Handbook document Capital Adequacy Framework (Internal Models Based Approach)
(BS2B) (Capital Adequacy Review); and the second on the effectiveness of the Bank’s directors’ attestation and assurance framework (Attestation Review).
The Attestation Review and the Capital Adequacy Review were completed in December 2019 and April 2020, respectively. The Bank is committed to
implementing the recommendations and addressing the issues raised by these reviews.
Due to the impacts of the COVID-19 pandemic, the RBNZ extended the time period for addressing the Attestation Review recommendations, subject
to the Bank obtaining external interim reviews of the remediation activities being undertaken in respect of the Attestation Review and the Capital
Adequacy Review, assessed as at March 2021, with final reviews being assessed as at September 2021 for the Attestation review and December 2021
for the Capital Models review. The interim review of the Attestation Review is in the process of being finalised. The interim review of the Capital
Adequacy Review has been completed. The external reviewer has reported that the Bank has made significant progress to address non-compliance
issues and improvement areas identified by the Capital Adequacy Review, and the programme of work is expected to be completed by December
2021.
The Attestation Review and the Capital Adequacy Review have highlighted the need for a broader programme of improving the Bank's processes
covered by those reviews, and this programme is now in its implementation phase.
Warranties and indemnities
The Banking Group has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments.
14. SUBSEQUENT EVENTS
On 31 March 2021, the RBNZ announced that it was easing the restrictions preventing banks from paying any dividends on ordinary shares and
redeeming non-common equity tier 1 capital instruments that were put in place in April 2020. The changes to the dividend restrictions allow the Bank
to pay up to a maximum of 50% of its earnings as dividends. The 50% dividend restriction will remain in place until 1 July 2022 at which point the
RBNZ intends to remove the restrictions entirely, subject to no significant worsening in economic conditions. The Bank’s conditions of registration
were amended on 29 April 2021 to bring the 50% dividend restriction into effect.
23
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24
REGISTERED BANK
DISCLOSURES
This section contains the additional disclosures required by the
Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Section Order reference Page
B1. General disclosures Schedule 3 25
B2. Additional financial disclosures Schedule 5 27
B3. Asset quality Schedule 7 32
B4. Capital adequacy under the internal models based approach, Schedule 11 36
and regulatory liquidity ratios
B5. Concentration of credit exposures to individual counterparties Schedule 13 43
B6. Insurance business Schedule 16 43
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
25
B1. GENERAL DISCLOSURES
Guarantees
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. This
obligation is guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered
Bond Trust. The Covered Bond Guarantor’s address for service is Level 9, 34 Shortland Street, Auckland, New Zealand. The Covered Bond Guarantor is
not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The covered bonds have been
assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 18 for further details, and to
page 27 for the amount of assets of the ANZ Covered Bond Trust pledged as security for covered bonds.
No other material obligations of the Bank are guaranteed as at 7 May 2021.
Changes in the Bank’s Board of Directors
Michelle Jablko resigned as a Non-Executive Director on 1 February 2021. As at 7 May 2021, there have been no other changes to the Directors of the
Bank since 30 September 2020, the balance date of the last full year disclosure statement.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Conditions of registration
Changes to the Bank’s conditions of registration
Effective 1 March 2021, the Bank’s conditions of registration have been amended to include restrictions on high loan-to-valuation residential
mortgage lending to owner-occupiers and investors.
Since 31 March 2021, the Bank’s conditions of registration have been amended to:
• ease restrictions on dividends on ordinary shares to 50% of the Bank’s earnings (effective 29 April 2021);
• include further restrictions on high loan-to-valuation residential mortgage lending to investors (effective 1 May 2021); and
• refer to updated versions of BS13 Liquidity Policy and BS13A Liquidity Policy Annex: Liquid Assets (effective 1 May 2021).
Material non-compliance with conditions of registration
A review of the Bank’s compliance with the RBNZ’s capital adequacy requirements was undertaken under section 95 of the RBNZ Act and was
completed in April 2020. The Bank has accepted the improvements identified in the review, and is working to rectify its processes. The RBNZ has
stated that it is confident the Bank will resolve this matter without issue, and has emphasised that the Banking Group remains sound and well
capitalised.
As first reported in the disclosure statement for the year ended 30 September 2019, the Bank has not complied with condition of registration 1B in
relation to the implementation of changes to rating models and processes that were not approved by the RBNZ.
Applying the last RBNZ approved methodologies to the affected exposures as at 30 September 2019 would have decreased Risk Weighted Assets
(RWA) by NZ$47 million (0.05%) in aggregate, which was not sufficient to affect the reported capital ratios.
Affected models and the initial dates of non-compliance are:
• Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development) - 2011
• Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds) - 2009
• Project and Structured Finance - 2009
• Bank, Country & Sovereigns - 2008
The Bank’s model compendium required under section 1.3B of BS2B was found to be non-compliant as it included unapproved model changes.
The first tranche of remediated models was submitted to the RBNZ for approval in August 2020, a second tranche was submitted in November 2020,
with a third submission completed in April 2021. As at 30 April 2021, fourteen remediated models had been submitted to the RBNZ for approval, with
the three remaining models expected to be submitted before the end of 2021.
Other matters relevant to the conditions of registration
There are other matters currently under review where there may be more than one valid interpretation of the respective policy wording or
requirement. Where there may be some uncertainty about the interpretation the Bank has applied, where appropriate it has sought guidance from,
and will be liaising with, the RBNZ on these matters.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effect
on the Bank or the Banking Group is included in Note 13 commitments and contingent liabilities.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
26
Credit rating
As at 7 May 2021, the Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New
Zealand in New Zealand dollars.
The Bank’s credit ratings are:
Rating agency Credit rating Qualification
S&P Global Ratings AA- Outlook Negative
Fitch Ratings A+ Outlook Stable
Moody’s Investors Service A1 Outlook Stable
Other material matters
RBNZ review of capital requirements
Between May 2017 and December 2019, the RBNZ conducted a comprehensive review of the capital adequacy framework applying to New Zealand
locally incorporated registered banks. The RBNZ's final decisions on the capital review as they relate to the Bank are set out below. In response to the
COVID-19 pandemic, the RBNZ delayed the start date for the increased capital requirements to support credit availability. The new regime is expected
to be implemented in stages from 1 July 2021.
• The Banking Group’s total capital requirement will increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to 2.5% of the tier 1
capital requirement can be made up of additional tier 1 (AT1) capital, with the remainder of the tier 1 requirement made up of common equity
tier 1 (CET1) capital. The increased capital ratios requirement will be implemented progressively from 1 July 2022 to 1 July 2028. AT1 capital must
consist of perpetual preference shares, which may be redeemable. The total capital requirement can also include tier 2 capital of up to 2% of
RWA. Tier 2 capital must consist of long-term subordinated debt.
• The tier 1 capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include: a 2% domestic, systemically important
bank capital buffer; a 1.5% 'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or
temporarily increased to prevent asset price bubbles from developing; and a 5.5% capital conservation buffer.
• Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 31 March 2021, the Bank had approximately
NZ$2,741 million of AT1 instruments that will progressively lose eligible re gulatory capital treatment over a seven year transition period from 1
July 2021 to 1 July 2028.
• As an internal ratings based approach accredited bank, the Banking Group’s RWA outcomes will be increased to approximately 90% of what
would be calculated under the standardised approach. This will be achieved by applying an 85% output floor from 1 January 2022, and
increasing the credit RWA scalar from 1.06 to 1.20 from 1 October 2022.
• The Banking Group will be required to report RWA, and resulting capital ratios, using both the internal models and the standardised approaches
from 1 January 2022.
The RBNZ’s reforms will result in a material increase in the level of capital that the Banking Group is required to hold, although the amount of the
increase is currently uncertain. The reforms could have a material impact on the Banking Group and its business, including on its capital allocation and
business planning.
Since 30 September 2018, CET1 capital has increased by NZ$3.8 billion to NZ$12.9 billion at 31 March 2021 and total capital has increased by NZ$3.8
billion to NZ$15.7 billion, in preparation for these changes and due to the RBNZ’s COVID-19 related dividend restrictions.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
27
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
As at 31 March 2021
NZ$m
Total interest earning and discount bearing assets
166,477
Total interest and discount bearing liabilities
133,037
Total amounts due from related entities
4,417
Total amounts due to related entities
6,514
Assets charged as security for liabilities
These amounts exclude the amounts disclosed as collateral paid on the balance sheet that relate to derivative liabilities. The terms and conditions of
the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association
Master Agreement.
Assets charged as security for liabilities include the following types of instruments:
• Securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements.
• Specified residential mortgages provided as security for notes and bonds issued to investors as part of the Bank’s covered bond programme.
The carrying amounts of assets pledged as security are as follows:
As at 31 March 2021 NZ$m
Securities sold under agreements to repurchase
1,113
Residential mortgages pledged as security for covered bonds
11,696
Additional information on the income statement
The amounts of net trading gains or losses and other fair value adjustments are included in Note 2 other operating income. The Banking Group does
not have any loans and advances designated at fair value through profit or loss. Other operating income for the purposes of the Order comprises net
fee and commission income, and all other items of other income (all in Note 2 other operating income).
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
28
Additional information on concentrations of credit risk
Analysis of financial assets by industry is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans and
advances
Other
financial
assets
Off-balance
sheet credit
related
commitments Total
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m
New Zealand residents
Agriculture 16,743 57 1,107 17,907
Forestry and fishing, agriculture services 652 6 145 803
Manufacturing 2,437 167 2,138 4,742
Electricity, gas, water and waste services 1,066 486 1,838 3,390
Construction 1,168 16 864 2,048
Wholesale trade
1,207 86 1,790 3,083
Retail trade and accommodation
2,380 22 865 3,267
Transport, postal and warehousing
816 131 712 1,659
Finance and insurance services
901 8,705 1,831 11,437
Public administration and safety
1
315 14,506 836 15,657
Rental, hiring & real estate services
37,195 1,360 2,324 40,879
Professional, scientific, technical, administrative and support services
872 8 458 1,338
Households
68,042 165 13,680 81,887
All other New Zealand residents
2
1,985 112 1,898 3,995
Subtotal 135,779 25,827 30,486 192,092
Overseas
Finance and insurance services
123 15,907 106 16,136
Households
1,185 3 - 1,188
All other non-NZ residents
673 14 - 687
Subtotal 1,981 15,924 106 18,011
Gross subtotal 137,760 41,751 30,592 210,103
Allowance for ECL
(617) - (144) (761)
Subtotal 137,143 41,751 30,448 209,342
Unearned income
(23) - - (23)
Capitalised brokerage and other origination costs
368 - - 368
Maximum exposure to credit risk 137,488 41,751 30,448 209,687
1 Public administration and safety includes exposures to local government administration and central government administration, defence and public safety.
2 Other includes exposures to mining, information media and telecommunications, education and training, health care and social assistance and arts, recreation and other services.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
29
Additional information on concentrations of funding
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
As at 31 March 2021 Note NZ$m
Funding composition
Customer deposits 8
122,786
Wholesale funding
Debt issuances 20,752
Certificates of deposit and commercial paper
4,950
Other borrowings
1,124
Total wholesale funding
26,826
Total funding
149,612
Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing 4,264
Manufacturing
2,764
Construction
2,951
Wholesale trade 2,487
Retail trade and accommodation
2,287
Financial and insurance services
12,958
Rental, hiring and real estate services
4,365
Professional, scientific, technical, administrative and support services
6,331
Public administration and safety 1,916
Arts, recreation and other services
2,179
Households
65,697
All other New Zealand residents
1
5,072
113,271
Customer deposits by industry - overseas
Households
8,803
All other non-NZ residents
712
9,515
Total customer deposits
122,786
Wholesale funding (financial and insurance services industry)
New Zealand 6,294
Overseas
20,532
Total wholesale funding 26,826
Total funding
149,612
Concentrations of funding by geography
New Zealand
119,565
Australia 1,171
United States
11,836
Europe
10,216
Other countries 6,824
Total funding
149,612
1 Other includes mining; electricity, gas, water and waste services; transport, postal and warehousing; information media and telecommunications; education and training; health care and
social assistance.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
30
Additional information on interest rate sensitivity
The following table represents the interest rate sensitivity of the Banking Group's assets, liabilities and off-balance sheet instruments by showing the
periods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.
Total
Up to
3 months
Over 3 to
6 months
Over 6 to
12 months
Over 1 to
2 years
Over
2 years
Not bearing
interest
1
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Cash and cash equivalents
5,579 5,327 - - - - 252
Settlement balances receivable
447 - - - - - 447
Collateral paid
1,380 1,380 - - - - -
Trading securities
9,700 1,331 133 175 782 7,279 -
Derivative financial instruments
12,259 - - - - - 12,259
Investment securities
12,046 439 - 486 595 10,525 1
Net loans and advances
137,488 64,818 19,632 33,651 15,310 4,614 (537)
Other financial assets
551 - - - - - 551
Total financial assets
179,450 73,295 19,765 34,312 16,687 22,418 12,973
Liabilities
Settlement balances payable 2,874 1,630 - - - - 1,244
Collateral received
1,202 1,202 - - - - -
Deposits and other borrowings
128,860 83,996 13,872 7,247 2,397 1,066 20,282
Derivative financial instruments
11,111 - - - - - 11,111
Debt issuances
20,752 3,568 2,277 3,102 1,350 10,455 -
Lease liabilities
277 12 12 23 86 144 -
Other financial liabilities
869 598 - - - - 271
Total financial liabilities
165,945 91,006 16,161 10,372 3,833 11,665 32,908
Hedging instruments - 63,675 (65,857) 2,054 (3,210) 3,338 -
Interest sensitivity gap
13,505 45,964 (62,253) 25,994 9,644 14,091 (19,935)
1 Excludes non-coupon bearing discount financial assets and financial liabilities which are shown as repricing on their maturity date.
Additional information on liquidity risk
Maturity analysis of financial liabilities
The table below provides residual contractual maturity analysis of financial liabilities at 31 March 2021 within relevant maturity groupings. All
outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts represent principal
and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
On demand
Less than
3 months
3 to 12
months
1 to 5
years
After
5 years Total
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Settlement balances payable
2,510 365 - - - 2,875
Collateral received
- 1,202 - - - 1,202
Deposits and other borrowings 79,522 24,304 21,978 3,659 - 129,463
Derivative financial liabilities (trading)
- 8,971 - - - 8,971
Debt issuances
1
- 1,025 5,431 10,481 4,577 21,514
Lease liabilities - 13 39 169 81 302
Other financial liabilities
- 42 7 226 486 761
Derivative financial instruments
(balance sheet management)
- gross inflows - 1,367 2,900 3,981 300 8,548
- gross outflows
- (1,388) (2,924) (4,106) (266) (8,684)
1 Any callable wholesale debt instruments have been included at their next call date.
At 31 March 2021, NZ$10 million of the Banking Group’s NZ$14 million of non-credit related commitments and all NZ$30,592 million of its credit
related commitments and contingent liabilities mature in less than 1 year, based on the earliest date on which the Banking Group may be required to
pay.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
31
Liquidity portfolio
The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking
Group’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity scenario metrics.
As at 31 March 2021 NZ$m
Cash and balances with central banks
4,939
Certificates of deposit
380
Central and local government bonds
11,997
Government treasury bills 329
Other bonds 7,853
Total liquidity portfolio 25,498
Assets held in the Banking Group’s liquidity portfolio include short term cash held with the RBNZ, New Zealand Government securities, securities
issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned Enterprises, Local Authorities and
highly rated New Zealand domestic corporates. These assets would be accepted as collateral by the RBNZ in repurchase transactions. At 31 March
2021, the Banking Group would be eligible to enter into repurchase transactions with a value of NZ$20,559 million. The Bank also held unencumbered
internal residential mortgage backed securities (RMBS) which would entitle the Banking Group to enter into repurchase transactions with a value of
NZ$8,629 million at 31 March 2021.
Reconciliation of mortgage related amounts
As at 31 March 2021
Note NZ$m
Term loans - housing
1
5
95,081
Less: fair value hedging adjustment
(3)
Less: housing loans made to corporate customers (1,682)
Add: unsettled re-purchases of mortgages from the NZ Branch 3
On-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
93,399
Add: off-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
8,925
Total residential mortgage exposures subject to the IRB approach (per LVR analysis)
B4
102,324
1 Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
32
B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements relating to COVID-19 and ECL included in Note 1, Note 6
and Note 11 to the financial statements.
Movements in components of loss allowance – total
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - total NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020 162 347 79 106 694
Transfer between stages
21 (20) (2) 1 -
New and increased provisions (net of collective provision releases)
(33) 1 (15) 38 (9)
Write-backs - - - (36) (36)
Recoveries of amounts previously written off - - - (10) (10)
Credit impairment charge
(12) (19) (17) (7) (55)
Bad debts written-off (excluding recoveries)
- - - (28) (28)
Add back recoveries of amounts previously written off
- - - 10 10
Discount unwind
- - - (4) (4)
As at 31 March 2021 150 328 62 77 617
Off-balance sheet credit related commitments - total
As at 1 October 2020 79 55 3 22 159
Transfer between stages 3 (3) - - -
New and increased provisions (net of collective provision releases)
(11) (1) - (3) (15)
Credit impairment charge
(8) (4) - (3) (15)
As at 31 March 2021 71 51 3 19 144
Impacts of changes in gross financial assets on loss allowances - total
Gross loans and advances - total
As at 1 October 2020 120,110 11,820 808 361 133,099
Net transfers in to each stage
3,150 147 35 8 3,340
Amounts drawn from new or existing facilities
22,623 535 61 62 23,281
Additions
25,773 682 96 70 26,621
Net transfers out of each stage
(189) (3,096) (55) - (3,340)
Amounts repaid (16,622) (1,716) (166) (88) (18,592)
Deletions (16,811) (4,812) (221) (88) (21,932)
Amounts written off - - - (28) (28)
As at 31 March 2021 129,072 7,690 683 315 137,760
Loss allowance as at 31 March 2021 150 328 62 77 617
Off-balance sheet credit related commitments - total
As at 1 October 2020 29,501 1,455 19 41 31,016
Net transfers in to each stage
15 121 7 1 144
New and increased facilities and drawn amounts repaid 4,648 173 9 3 4,833
Additions 4,663 294 16 4 4,977
Net transfers out of each stage
(129) (15) - - (144)
Reduced facilities and amounts drawn
(5,003) (240) (4) (10) (5,257)
Deletions
(5,132) (255) (4) (10) (5,401)
As at 31 March 2021 29,032 1,494 31 35 30,592
Loss allowance as at 31 March 2021 71 51 3 19 144
Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances are 0.45% of gross balances as at 31 March 2021, down from 0.52% as at 30 September 2020. The NZ$92 million (10.8%)
decrease in loss allowances was driven by a decrease in the proportion of gross balances in Stage 2 and Stage 3, and changes in the forward looking
economic scenarios as described in Note 6 to the financial statements.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
33
Movements in components of loss allowance – residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020
1
20 63 29 8 120
Transfer between stages
13 (12) (1) - -
New and increased provisions (net of collective provision releases) (14) (4) (15) 3 (30)
Write-backs - - - (3) (3)
Recoveries of amounts previously written off
- - - - -
Credit impairment charge
(1) (16) (16) - (33)
Bad debts written-off (excluding recoveries)
- - - - -
Add back recoveries of amounts previously written off
- - - - -
Discount unwind
- - - - -
As at 31 March 2021 19 47 13 8 87
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2020 - - - - -
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases)
- - - - -
Credit impairment charge
- - - - -
As at 31 March 2021 - - - - -
Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2020 81,057 5,859 512 24 87,452
Net transfers in to each stage
3,150 - - 1 3,151
Amounts drawn from new or existing facilities
17,147 254 5 8 17,414
Additions
20,297 254 5 9 20,565
Net transfers out of each stage - (3,096) (55) - (3,151)
Amounts repaid (10,633) (742) (77) (15) (11,467)
Deletions
(10,633) (3,838) (132) (15) (14,618)
Amounts written off
- - - - -
As at 31 March 2021 90,721 2,275 385 18 93,399
Loss allowance as at 31 March 2021 19 47 13 8 87
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2020 8,793 73 - - 8,866
Net transfers in to each stage 15 - - - 15
New and increased facilities and drawn amounts repaid 1,348 6 1 - 1,355
Additions
1,363 6 1 - 1,370
Net transfers out of each stage
- (15) - - (15)
Reduced facilities and amounts drawn
(1,285) (11) - - (1,296)
Deletions
(1,285) (26) - - (1,311)
Amounts written off
- - - - -
As at 31 March 2021 8,871 53 1 - 8,925
Loss allowance as at 31 March 2021 - - - - -
1 Amounts have been updated to reclassify a total net NZ$17 million relating to residential mortgages previously included in corporate.
Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
While gross balances have increased, there has been a decrease in the proportion of gross balances in Stage 2 and Stage 3. The NZ$33 million (27.3%)
decrease in loss allowances on residential mortgage exposures is primarily driven by changes in the forward looking economic scenarios as described
in Note 6 to the financial statements. Overall loss allowances and individually impaired exposures remain low, reflecting that approximately 93% of on-
balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80% (refer to page 40).
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
34
Movements in components of loss allowance – other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020
1
11 60 26 8 105
Transfer between stages
5 (5) - - -
New and increased provisions (net of collective provision releases) (6) (1) (7) 20 6
Write-backs - - - (3) (3)
Recoveries of amounts previously written off
- - - (9) (9)
Credit impairment charge / (release)
(1) (6) (7) 8 (6)
Bad debts written-off (excluding recoveries)
- - - (18) (18)
Add back recoveries of amounts previously written off
- - - 9 9
Discount unwind
- - - - -
As at 31 March 2021 10 54 19 7 90
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2020 19 13 3 - 35
Transfer between stages
3 (3) - - -
New and increased provisions (net of collective provision releases)
(8) 1 (1) - (8)
Credit impairment charge
(5) (2) (1) - (8)
As at 31 March 2021 14 11 2 - 27
Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2020
2
2,570 165 49 11 2,795
Net transfers in to each stage
- 20 9 1 30
Amounts drawn from new or existing facilities
331 11 2 20 364
Additions
331 31 11 21 394
Net transfers out of each stage (30) - - - (30)
Amounts repaid (407) (32) (20) (3) (462)
Deletions
(437) (32) (20) (3) (492)
Amounts written off
- - - (18) (18)
As at 31 March 2021 2,464 164 40 11 2,679
Loss allowance as at 31 March 2021 10 54 19 7 90
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2020
2
5,183 47 15 - 5,245
Net transfers in to each stage - 13 2 - 15
New and increased facilities and drawn amounts repaid 139 4 2 - 145
Additions
139 17 4 - 160
Net transfers out of each stage
(15) - - - (15)
Reduced facilities and amounts drawn
(268) (9) (4) - (281)
Deletions
(283) (9) (4) - (296)
As at 31 March 2021 5,039 55 15 - 5,109
Loss allowance as at 31 March 2021 14 11 2 - 27
1 Amounts have been updated to reclassify a total net NZ$31 million relating to other retail exposures previously included in corporate.
2 For consistency with capital adequacy classifications, amounts have been updated to reclassify NZ$1,179 million of gross loans and advances previously included in corporate and NZ$635
million of off balance sheet credit related commitments to corporate.
Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
The NZ$23 million (16.4%) decrease in loss allowances is primarily driven by changes in the forward looking economic scenarios as described in Note 6
to the financial statements.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
35
Movements in components of loss allowance – corporate exposures
1
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020
2
131 224 24 90 469
Transfer between stages
3 (3) (1) 1 -
New and increased provisions (net of collective provision releases) (13) 6 7 15 15
Write-backs - - - (30) (30)
Recoveries of amounts previously written off
- - - (1) (1)
Credit impairment charge
(10) 3 6 (15) (16)
Bad debts written-off (excluding recoveries)
- - - (10) (10)
Add back recoveries of amounts previously written off
- - - 1 1
Discount unwind
- - - (4) (4)
As at 31 March 2021 121 227 30 62 440
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2020 60 42 - 22 124
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases)
(3) (2) 1 (3) (7)
Credit impairment charge
(3) (2) 1 (3) (7)
As at 31 March 2021 57 40 1 19 117
Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2020
3
36,483 5,796 247 326 42,852
Net transfers in to each stage
- 127 26 6 159
Amounts drawn from new or existing facilities
5,145 270 54 34 5,503
Additions
5,145 397 80 40 5,662
Net transfers out of each stage (159) - - - (159)
Amounts repaid (5,582) (942) (69) (70) (6,663)
Deletions
(5,741) (942) (69) (70) (6,822)
Amounts written off
- - - (10) (10)
As at 31 March 2021 35,887 5,251 258 286 41,682
Loss allowance as at 31 March 2021 121 227 30 62 440
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2020
3
15,525 1,335 4 41 16,905
Net transfers in to each stage - 108 5 1 114
New and increased facilities and drawn amounts repaid 3,161 163 6 3 3,333
Additions
3,161 271 11 4 3,447
Net transfers out of each stage
(114) - - - (114)
Reduced facilities and amounts drawn
(3,450) (220) - (10) (3,680)
Deletions
(3,564) (220) - (10) (3,794)
As at 31 March 2021 15,122 1,386 15 35 16,558
Loss allowance as at 31 March 2021 57 40 1 19 117
1 Also includes all other non-retail exposure classes in net loans and advances and off balance sheet credit related commitments to reconcile to the respective totals for the Banking Group.
2 Amounts have been updated to reclassify aggregate amounts of NZ$17 million to residential mortgages and NZ$31 million to other retail.
3 For consistency with capital adequacy classifications of other retail exposures, amounts have been updated to reclassify NZ$1,179 million of gross loans and advances to other retail
exposures and NZ$635 million of off balance sheet credit related commitments from other retail exposures.
Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$36 million (6.1%) decrease in loss allowances is primarily driven by small decrease in the proportion of gross balances in Stage 2 and changes
in the forward looking economic scenarios as described in Note 6 to the financial statements.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
36
Past due assets and other asset quality information
Residential
mortgages
Other retail
exposures
Corporate
exposures Total
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m
Past due assets
Less than 30 days past due 449 91 259 799
At least 30 days but less than 60 days past due 139 16 200 355
At least 60 days but less than 90 days past due 67 8 36 111
At least 90 days past due
347 26 15 388
Total past due but not individually impaired 1,002 141 510 1,653
Other asset quality information
Undrawn facilities with impaired customers - - 35 35
Other assets under administration
3 1 - 4
The Banking Group does not have any loans and advances designated at fair value.
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS
RBNZ Basel III capital ratios
Banking Group
Bank
(Solo Consolidated)
As at 31 March RBNZ minimum 2021 2020
2021 2020
Common equity tier 1 capital 4.5% 13.1% 11.1% 12.7% 10.7%
Tier 1 capital 6.0% 15.9% 13.9% 15.5% 13.5%
Total capital 8.0% 15.9% 13.9% 15.5% 13.5%
Buffer ratio 2.5% 7.9% 5.9% n/a n/a
Capital of the Banking Group
As at 31 March 2021 NZ$m
Tier 1 capital
Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
11,588
Retained earnings (net of appropriations)
4,838
Accumulated other comprehensive income and other disclosed reserves
119
Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
(3,088)
Deferred tax assets less deferred tax liabilities relating to temporary differences
(396)
Cash flow hedge reserve
(77)
Expected losses to the extent greater than total eligible allowances for impairment
(73)
Common equity tier 1 capital
12,911
Additional tier 1 capital
Preference shares
1
300
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)
2
500
NZD 1,003m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)
2
1,003
NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)
2
938
Retained earnings of the Bonus Bonds Scheme
3
102
Less deductions from additional tier 1 capital
Surplus retained earnings of the Bonus Bonds Scheme
3
(91)
Additional tier 1 capital 2,752
Total tier 1 capital 15,663
Tier 2 capital -
Total capital 15,663
1 Classified as equity on the balance sheet under NZ GAAP.
2 Classified as a liability on the balance sheet under NZ GAAP.
3 Bonus Bonds Scheme is not consolidated on the balance sheet under NZ GAAP but retained earnings are classified as AT1 capital for capital adequacy purposes as set out in BS2B.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
37
Capital requirements of the Banking Group
Total
exposures
after credit
risk mitigation
Risk weighted
exposure or
implied risk
weighted
exposure
1
Total capital
requirement
As at 31 March 2021 NZ$m NZ$m NZ$m
Total credit risk
204,516 67,189 5,375
Operational risk
n/a 10,234 819
Market risk
n/a 5,671 454
Supervisory adjustment n/a 15,387 1,231
Total n/a 98,481 7,879
1 The calculation of risk weighted credit exposures includes a scalar of 1.06 in accordance with the Bank's Conditions of Registration.
Capital structure
Ordinary shares– common equity tier 1 capital
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On a show of hands
every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll every member shall
have one vote for each share held.
Preference shares– additional tier 1 capital
All preference shares were issued by the Bank to the Immediate Parent Company and do not carry any voting rights. The preference shares are wholly
classified as equity instruments as there is no contractual obligation for the Bank to either deliver cash or another financial instrument or to exchange
financial instruments on a potentially unfavourable basis. The key terms of the preference shares are as follows:
Dividends are payable at the discretion of the directors of the Bank and are non-cumulative. The Bank must not resolve to pay any dividend or make
any other distribution on its ordinary shares until the next preference dividend payment date if the dividend on the preference shares is not paid.
Should the Bank elect to pay a dividend, the dividend is based on a floating rate equal to the aggregate of the New Zealand 6 month bank bill rate
plus a 325 basis point margin, multiplied by one minus the New Zealand company tax rate, with dividend payments due on 1 March and 1 September
each year.
The preference shares are redeemable, subject to prior written approval of the RBNZ, by the Bank providing notice in writing to holders of the
preference shares:
• on any date on or after a change to laws or regulations that adversely affects the regulatory capital or tax treatment of the preference shares; or
• on any dividend payment date; or
• on any date if the Bank has ceased to be a wholly owned subsidiary of the Ultimate Parent Bank.
The preference shares may be redeemed for nil consideration should a non-viability trigger event occur.
The preference shares qualify as AT1 capital for RBNZ’s capital adequacy purposes.
In the event of liquidation, holders of preference shares are entitled to available subscribed capital per share, pari passu with all holders of existing
preference shares and ANZ capital notes but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution
of profits or assets.
Additional tier 1 (AT1) capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. The AT1 capital notes rank equally with each other and with
the Bank’s preference shares. Holders of AT1 capital notes do not have any right to vote in general meetings of the Bank.
As at 31 March 2021, ANZ NZ CN carried a BBB- credit rating from S&P Global Ratings.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) or the Ultimate Parent Bank (ANZ NZ CN).
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
(including regulatory requirements).
Where specified, AT1 capital notes provide the Bank with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). Early redemption is subject to RBNZ’s, and in the case of ANZ NZ CN, APRA’s prior written approval.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
38
Each of the AT1 capital notes will immediately convert into a variable number of ordinary shares of the:
• Bank based on the net assets per share in the Bank’s most recently published Disclosure Statement (ANZ NZ ICN and ANZ NZ ICN2); or
• Ultimate Parent Bank based on the average market price of the Ultimate Parent Bank’s ordinary shares immediately prior to conversion less a 1%
discount, subject to a maximum conversion number (ANZ NZ CN)
if:
• the Banking Group’s, or in the case of the ANZ NZ CN the Overseas Banking Group’s Level 2, common equity tier 1 capital ratio is equal to or less
than 5.125% - known as a Common Equity Capital Trigger Event; or
• RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert
or write-off the notes or, in the case of the ANZ NZ CN, APRA notifies the Ultimate Parent Bank that, without the conversion or write-off of certain
securities or a public injection of capital (or equivalent support), it considers that the Ultimate Parent Bank would become non-viable – known
as a Non-Viability Trigger Event.
Where specified, AT1 capital notes mandatorily convert into a variable number of ordinary shares of the Bank (ANZ NZ ICN and ANZ NZ ICN2) (based
on the net assets per share in the Bank’s recently published Disclosure Statement) or the Ultimate Parent Bank (ANZ NZ CN) (based on the average
market value of the shares immediately prior to conversion less a 1% discount):
• on a specified mandatory conversion date; or
• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
The table below show the key details of the AT1 capital notes on issue at 31 March 2021:
ANZ NZ CN ANZ NZ ICN ANZ NZ ICN2
Issuer The Bank The Bank The Bank
Issue date 31 March 2015 5 March 2015 15 June 2016
Issue amount NZ$500 million NZ$1,003 million NZ$938 million
Face value NZ$1 NZ$100 NZ$100
Interest frequency Quarterly in arrears Semi-annually in arrears Semi-annually in arrears
Interest rate
Floating rate: (New Zealand 3
month Bank bill rate + 3.5%)
Floating rate: (New Zealand 6
month Bank Bill rate + 3.8%)
Floating rate: (New Zealand 6
month Bank Bill rate + 6.29%)
Issuer's early redemption or conversion option n/a 24 March 2023
15 June 2026 and each 5th
anniversary
Mandatory conversion date 25 May 2022 24 March 2025 n/a
Common equity capital trigger event Yes Yes Yes
Non-viability trigger event Yes Yes Yes
Reserves – common equity tier 1 capital
Accumulated other comprehensive income and other disclosed reserves includes the cash flow hedging reserve of NZ$77 million and the investment
securities revaluation reserve of NZ$42 million as at 31 March 2021.
Retained earnings of the Bonus Bonds Scheme – additional tier 1 capital
The Bonus Bonds Scheme is consolidated for capital adequacy purposes, and its retained earnings are included in additional tier 1 capital less 8.5% of
the consolidated risk-weighted assets that relate to the Bonus Bonds Scheme.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
39
Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating
Probability
of default Total value
Exposure at
default
Exposure-
weighted
LGD used
for the
capital
calculation
Exposure-
weighted
risk weight
Risk
weighted
assets
Minimum
capital
requirement
As at 31 March 2021 % NZ$m NZ$m % % NZ$m NZ$m
Corporate
0 - 2 0.05 68,818 6,071 62 36 2,301 184
3 - 4 0.31 43,059 22,380 37 41 9,648 772
5 1.00 13,923 11,367 33 58 7,022 562
6
2.26 4,099 3,678 32 75 2,906 232
7 - 8
17.49 1,820 1,521 40 177 2,852 228
Default
100.00 642 630 39 165 1,103 89
Total corporate exposures
1
2.55 132,361 45,647 39 53 25,832 2,067
Sovereign
0 0.01 27,287 16,670 5 1 230 18
1 - 8 0.47 92 87 5 6 5 1
Total sovereign exposures 0.01 27,379 16,757 5 1 235 19
Bank
0
0.03 1 1 65 51 - -
1
0.03 43,773 3,518 37 27 1,006 80
2 - 4
0.05 2,266,361 6,145 65 27 1,767 141
5 - 8
10.85 2 2 65 223 4 1
Total bank exposures 0.05 2,310,137 9,666 55 27 2,777 222
Residential mortgages
0 - 3 0.20 34,587 34,972 12 5 2,023 162
4
0.45 42,630 42,772 20 16 7,341 587
5
0.90 21,038 21,124 24 32 7,262 581
6
1.95 3,426 3,430 26 60 2,197 176
7 - 8
4.68 235 235 26 91 228 18
Default
100.00 408 407 16 6 25 2
Total residential mortgages exposures 0.91 102,324 102,940 19 17 19,076 1,526
Other retail
0 - 2 0.10 543 546 77 49 286 23
3 - 4
0.26 4,551 4,633 78 55 2,701 216
5
1.10 1,146 1,157 78 83 1,020 82
6
2.70 685 717 83 108 823 66
7 - 8
8.62 810 836 87 137 1,212 97
Default
100.00 53 52 81 44 25 1
Total other retail exposures 2.14 7,788 7,941 79 72 6,067 485
Total credit risk exposures subject
to the IRB approach
1.25 2,579,989 182,951 27 28 53,987 4,319
1 During the six months ended 31 March 2021, two immaterial issues impacting the calculation of RWA for corporate exposures were identified. They related to the tenor treatment for
performance guarantee products (estimated impact +NZ$106m RWA) and the measurement of security coverage for corporate customers with residential mortgages (estimated impact
+NZ$143m RWA). There is no impact on reported capital ratios and remediation is in progress.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
40
IRB credit exposures include the following undrawn commitments and other off-balance sheet amounts:
Total value
Exposure at
default
As at 31 March 2021 NZ$m NZ$m
Undrawn commitments and other off-balance sheet amounts excluding market related contracts
Corporate
13,059 12,321
Sovereign 91 86
Bank 1,315 1,154
Residential mortgages 8,925 9,368
Other retail 5,109 5,199
Market related contracts
Corporate 87,210 1,705
Sovereign 10,567 106
Bank 2,304,020 4,039
Residential mortgages - -
Other retail
- -
Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off-balance sheet exposures include undrawn and partially drawn residential mortgage loans as well
as commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance
sheet
Off-balance
sheet Total
As at 31 March 2021 NZ$m NZ$m NZ$m
LVR range
Does not exceed 60%
45,957 6,261 52,218
Exceeds 60% and not 70%
19,631 1,218 20,849
Exceeds 70% and not 80%
21,841 1,063 22,904
Does not exceed 80% 87,429 8,542 95,971
Exceeds 80% and not 90% 4,299 148 4,447
Exceeds 90%
1,671 235 1,906
Total 93,399 8,925 102,324
Specialised lending subject to the slotting approach
Total
exposures
after
credit risk
mitigation Risk weight
Risk
weighted
assets
Minimum
Pillar 1
capital
requirement
As at 31 March 2021 NZ$m % NZ$m NZ$m
On-balance sheet exposures
Strong
5,924 70 4,396 352
Good
5,175 90 4,937 395
Satisfactory 408 115 497 40
Weak 80 250 211 16
Default 13 - - -
Exposure at
default
Average
risk weight
Risk
weighted
assets
Minimum
Pillar 1
capital
requirement
As at 31 March 2021 NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet exposures
1,397 86 1,277 102
The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to the
following external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
41
Credit risk exposures subject to the standardised approach
Total
exposure
after credit
risk
mitigation
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2021
NZ$m % NZ$m NZ$m
On-balance sheet exposures
Cash and gold bullion
211 - - -
Sovereign and central banks
4,696 - - -
Multilateral development banks and other international organisations
- - - -
Public sector entities
- - - -
Banks
- - - -
Corporate
1,215 7 94 8
Residential mortgages - - - -
Past due assets - - - -
Other assets 1,152 100 1,221 98
Total
exposure or
principal
amount
Average
credit
conversion
factor
Credit
equivalent
amount
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2021 NZ$m % NZ$m % NZ$m NZ$m
Off-balance sheet exposures
Undrawn commitments and other off-balance sheet
exposures
631 72 452 99 473 38
Market related contracts
Foreign exchange contracts
- n/a - - - -
Interest rate contracts
1,469,287 n/a 841 10 91 7
Other - OTC etc - n/a - - - -
Equity exposures
Exposure at
default Risk weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
As at 31 March 2021 NZ$m % NZ$m NZ$m
Equity holdings (not deducted from capital) that are publicly traded
- 300 - -
All other equity holdings (not deducted from capital) 1 400 5 -
Credit risk mitigation
Information on the total value of exposures covered by financial guarantees and eligible financial collateral is not disclosed, as the effect of these
guarantees and collateral on the underlying credit risk exposures is not considered to be material.
For portfolios subject to
the standardised approach:
total value of exposures
covered by eligible financial
collateral (after haircut)
For all portfolios:
total value of exposures
covered by guarantees
or credit derivatives
1
As at 31 March 2021 NZ$m NZ$m
Exposure class
Sovereign - -
Bank - -
Corporate (including specialised lending) - 833
Residential mortgage - -
Other - -
1 Covered by guarantees where the presence of the guarantees was judged to reduce the underlying credit risk of the exposures.
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
REGISTERED BANK DISCLOSURES
42
Operational risk
As required by its conditions of registration, the Banking Group uses the standardised approach to the calculation of its operational risk capital
requirement. As at 31 March 2021, the Banking Group had an implied risk weighted exposure of NZ$10,234 million for operational risk and an
operational risk capital requirement of NZ$819 million.
Market risk
The aggregate market risk exposures below have been calculated in accordance with BS2B. The peak end-of-day market risk exposures are for the six
months ended 31 March 2021.
Implied risk weighted
exposure Aggregate capital charge
Period end Peak Period end Peak
As at 31 March 2021 NZ$m NZ$m NZ$m NZ$m
Interest rate risk 5,598 11,377 448 910
Foreign currency risk 72 112 6 9
Equity risk 1 1 - -
Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions of
Registration. Under the Banking Group's ICAAP it identifies and measures all "other material risks", which are those material risks that are not explicitly
captured in the calculation of the Banking Group's tier 1 and total capital ratios. The other material risks identified by the Banking Group include
pension risk, strategic equity risk, fixed asset risk, deferred acquisition cost risk and software risk. As at 31 March 2021, the Banking Group's internal
capital allocation for these other material risks is NZ$274 million (March 2020: NZ$343 million).
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
Overseas Banking Group
Ultimate Parent Bank
(Extended Licensed Entity)
As at 31 March 2021 2020 2021 2020
Common equity tier 1 capital
12.4%
10.8%
12.2%
10.6%
Tier 1 capital
14.3%
12.5%
14.2%
12.6%
Total capital 18.3% 15.5% 18.6% 15.8%
The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA, which is at least equal to
that specified under the Basel III capital framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted assets. There are however small portfolios
(mainly retail and local corporates in Pacific, and local corporates in Asia) where the Overseas Banking Group applies the standardised approach.
• the Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 31 March 2021 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 March 2021. The Overseas Banking Group’s Pillar 3
disclosure document for the quarter ended 31 March 2021, in accordance with APS 330: Public Disclosure of Prudential Information, discloses capital
adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risks. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1-
month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. From 2 April 2020, the minimum amount of core
funding was lowered from 75% to 50% of a bank’s total loans. The Banking Group must maintain its core funding ratio above the regulatory minimum
on a daily basis. This measure of the core funding ratio is averaged over the quarter.
For the three months ended 31 Mar 21 31 Dec 20
Quarterly average 1-week mismatch ratio
6.5%
9.2%
Quarterly average 1-month mismatch ratio
6.2%
9.1%
Quarterly average core funding ratio
90.8%
92.3%
ANZ BANK NEW ZEALAND LIMITED UNAUDITED
43
B5. CONCENTRATION OF CREDIT EXPOSURES TO INDIVIDUAL COUNTERPARTIES
The Banking Group measures its concentration of credit exposures to individual counterparties at the reporting date on the basis of actual exposures.
Peak end-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting
date for the previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:
• connected persons (i.e. other members of the Overseas Banking Group and Directors of the Bank);
• the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and
• any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.
As at
Peak end of
day over 6
months to
31 Mar 21 31 Mar 21
Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capital
1 1
with a long-term credit rating of A- or A3 or above, or its equivalent
1 1
- 10% to less than 15% of CET1 capital
1 1
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent - -
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1 capital
2 2
with a long-term credit rating of A- or A3 or above, or its equivalent
2 2
- 10% to less than 15% of CET1 capital
1 1
- 30% to less than 35% of CET1 capital
1 1
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
- -
B6. INSURANCE BUSINESS
As at 31 March 2021, the Banking Group does not conduct any insurance business.
ANZ BANK NEW ZEALAND LIMITED
DIRECTORS' STATEMENT
44
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:
• The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014; and
• The Disclosure Statement is not false or misleading.
Over the six months ended 31 March 2021, after due enquiry, each Director believes that:
• ANZ Bank New Zealand Limited has complied in all material respects with each condition of registration that applied during that period
except
as noted on page 25
1
;
• Credit exposures to connected persons were not contrary to the interests of the Banking Group; and
• ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that those
systems were being properly applied.
1. In accordance with the Order, ANZ Bank New Zealand Limited has complied in all material respects with each of its conditions of registration that applied during the period if the RBNZ has
not published any information about a breach on its website, and has not notified ANZ Bank New Zealand Limited of any material breach.
This Disclosure Statement is dated, and has been signed by all Directors of the Bank on, 7 May 2021.
Antony Carter
Shayne Elliott
Alison Gerry
Rt Hon Sir John Key, GNZM AC
Mark Verbiest
Antonia Watson
Joan Withers
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
45
TO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
REPORT ON THE HALF YEAR DISCLOSURE STATEMENT
REPORT ON THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5
AND B6
BASIS FOR CONCLUSION
A review of the half year disclosure statement in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of
the Entity (NZ SRE 2410) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of the Banking Group, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These matters
have not impaired our independence as reviewer of the Banking Group. The firm has no other relationship with, or interest in, the Banking Group.
EMPHASIS OF MATTER – NON-COMPLIANCE WITH CERTAIN CONDITIONS OF REGISTRATION
We draw attention to section B1 of the half year disclosure statement, in which the Banking Group discloses that it has identified non-compliance with
aspects of its Conditions of Registration relating to Capital adequacy.
Further details of the matters relating to capital adequacy are described below in our qualified review conclusion on the registered bank disclosures in
section B4 relating to capital adequacy and regulatory liquidity ratios.
Our conclusion on the interim financial statements and registered bank disclosures in sections B2, B3, B5 and B6 is not modified in respect of these
matters.
RESPONSIBILITIES OF THE DIRECTORS FOR THE INTERIM FINANCIAL STATEMENTS AND REGISTERED BANK
DISCLOSURES IN SECTIONS B1, B2, B3, B5 AND B6
The Directors, on behalf of the Banking Group, are responsible for:
• the preparation and fair presentation of the interim financial statements and registered bank disclosures in accordance with IAS 34, NZ IAS 34
and Schedules 3, 5, 7, 13, 16 and 18 of the Order;
• implementing necessary internal controls to enable the preparation of interim financial statements that are fairly presented and free from
material misstatement, whether due to fraud or error; and
• assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
CONCLUSION
Based on our review of the interim financial statements and the registered bank disclosures (together referred to as ‘the half year disclosure
statement’) of ANZ Bank New Zealand Limited and its subsidiaries (the Banking Group) on pages 4 to 43, nothing has come to our attention that
causes us to believe that:
• the interim financial statements on pages 4 to 22 do not present fairly in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34
Interim Financial Reporting, in all material respects, the Banking Group’s financial position as at 31 March 2021 and its financial performance
and cash flows for the six month period ended on that date; and
• the re gistered bank disclosures in sections B2, B3, B5 and B6 disclosed in accordance with Schedules 5, 7, 13, 16 and 18 of the Registered
Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended) (the Order) respectively, do not fairly
state, in all material respects, the matters to which they relate in accordance with those schedules.
We have completed a review of the accompanying half year disclosure statement which comprises:
• the interim financial statements formed of:
• the consolidated balance sheet as at 31 March 2021;
• the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the six month period
then ended; and
• notes, including a summary of significant accounting policies and other explanatory information.
• the registered bank disclosures prescribed in Schedules 5, 7, 13, 16 and 18 of the Order.
ANZ BANK NEW ZEALAND LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
46
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE INTERIM FINANCIAL STATEMENTS AND REGISTERED
BANK DISCLOSURES IN SECTIONS B2, B3, B5 AND B6
Our responsibility is to express a conclusion on the interim financial statements and registered bank disclosure statements in sections B2, B3, B5 and
B6 based on our review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come
to attention that causes us to believe that:
• the interim financial statements do not present fairly, in all material respects, the Banking Group’s financial position as at 31 March 2021 and its
financial performance and cash flows for the six month period ended on that date;
• the interim financial statements do not, in all material respects, comply with IAS 34 and NZ IAS 34; and
• the registered bank disclosures in sections B2, B3, B5 and B6 does not, fairly state, in all material respects, the matters to which it relates in
accordance with Schedules 5, 7, 13, 16 and 18 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the interim financial statements and the registered bank disclosures in
sections B2, B3, B5 and B6. This description forms part of our independent review report.
REPORT ON THE REGISTERED BANK DISCLOSURES IN SECTION B4 RELATING TO CAPITAL ADEQUACY AND
REGULATORY LIQUIDITY RATIOS (SECTION B4)
BASIS FOR QUALIFIED CONCLUSION ON THE REGISTERED BANK DISCLOSURES IN SECTION B4
A review of the registered bank disclosures in section B4 in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs
procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures. Our responsibilities under that standard are further described in the ‘Auditor’s Responsibilities for the review of the
registered bank disclosures in section B4’ section of our report.
As the auditor of the Banking Group, NZ SRE 2410 requires that we comply with the ethical re quirements relevant to the audit of the annual financial
statements.
As described in section B1, the Banking Group has identified that it was not compliant with Condition of Registration 1B in relation to the operation of
versions of the following rating models and processes, which were not approved by the Reserve Bank of New Zealand (in some cases since 2008):
• Commercial Property Model Suite (Single Investment, Multi Investment, Hotel Investment, Special Purpose Asset Investment, Single Residential
Development, Commercial Development, Englobo Land Pre Development);
• Non-Bank Financial Institutions Model Suite (Life Insurance, Non-life Insurance, Insurance Holding Company, Finance Companies, Financial
Services Companies, Real Money Funds);
• Project and Structured Finance; and
• Bank, Country and Sovereigns.
In this respect, the Capital Adequacy Ratios disclosed in section B4 of the half year disclosure statement have not been disclosed in accordance with
Schedule 11 of the Order, with section B1 disclosing the Banking Group’s calculation of the corresponding impact on risk weighted assets. The
Banking Group is remediating these models and has submitted fourteen of the seventeen affected models to the Reserve Bank of New Zealand for
approval.
The above matters do not affect the Regulatory Liquidity information, which is also disclosed in section B4.
RESPONSIBILITIES OF THE DIRECTORS FOR THE REGISTERED BANK DISCLOSURES IN SECTION B4
The Directors, on behalf of the Banking Group, are responsible for the preparation and fair presentation of the registered bank disclosures in section B4
of the half year disclosure statement in accordance with Schedule 11 of the Order.
AUDITOR’S RESPONSIBILITIES FOR THE REVIEW OF THE REGISTERED BANK DISCLOSURES IN SECTION B4
Our responsibility is to express a conclusion on the registered bank disclosures in section B4 based on our review. We conducted our review in
accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the
registered bank disclosures in section B4 is not, in all material respects, disclosed in accordance with Schedule 11 of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards
on Auditing (New Zealand). Accordingly we do not express an audit opinion on the registered bank disclosures in section B4. This description forms
part of our independent review report.
QUALIFIED REVIEW CONCLUSION
We have reviewed the registered bank disclosures, as disclosed in section B4 of the half year disclosure statement for the six month period ended
31 March 2021, which are required to be disclosed in accordance with Schedule 11 of the Order.
Based on our review, with the exception of the matter described below, nothing has come to our attention that causes us to believe that the
information relating to Capital Adequacy and Regulatory Liquidity Ratios, disclosed in section B4 of the half year disclosure statement, is not, in all
material respects disclosed in accordance with Schedule 11 of the Order.
ANZ BANK NEW ZEALAND LIMITED
47
USE OF THIS INDEPENDENT REVIEW REPORT
This independent review report is made solely to the shareholder of the Banking Group. Our review work has been undertaken so that we might state
to the shareholder those matters we are required to state to them in the independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the shareholder as a body for our review work, this independent
review report, or any of the opinions we have formed.
KPMG
Auckland
7 May 2021
48
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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