UK Disclosure and Transparency Rules Submission
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
21 November 2023
Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)
(“ANZBGL”) - Annual Financial Report submission under the Disclosure and
Transparency Rules of the United Kingdom Financial Conduct Authority (“UK
DTR Submission”)
The attached UK DTR Submission will be lodged by ANZBGL with the London Stock
Exchange (“LSE”) today. This UK DTR Submission has been prepared by ANZBGL in
order to comply with the applicable periodic reporting requirements of DTR 4 of the
Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority in
connection with certain debt securities issued by ANZBGL. For completeness, in addition
to lodgement with the LSE, ANZBGL is lodging this UK DTR Submission with applicable
exchanges, including the Australian Securities Exchange today.
Yours faithfully
Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands Vic 3008
GPO Box 254, MELBOURNE VIC 3001 AUSTRALIA
www.anz.com
Approved for distribution by ANZBGL’s Board of Directors
1
21 November 2023
DISCLOSURE AND TRANSPARENCY RULES – ANNUAL FINANCIAL REPORT
SUBMISSION
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)
(“ANZBGL”) together with its subsidiaries (“ANZBGL Group” or the “Group”) –
Annual Financial Report submission under the Disclosure and Transparency
Rules (“DTR”) of the United Kingdom Financial Conduct Authority
The following attached documents constitute ANZBGL’s 2023 Annual Financial Report for
the purposes of the disclosure requirements of DTR 4.1:
• ANZBGL’s 2023 Annual Report for the year ended 30 September 2023;
• A description of the principal risks and uncertainties for the Group provided in
accordance with DTR 4.1.8 (2); and
• A responsibility statement of the Directors of ANZBGL provided in accordance with DTR
4.1.1 2 (3)(b).
AUSTRALIA AND
NEW ZEALAND
BANKING
GROUP LIMITED
2023 / ANNUAL REPORT
CONTENTS
Overview
Our 2023 reporting suite 3
Operating Environment
Our operating environment 4
How we create value 5
Our purpose and strategy 6
About our business 11
Governance
Directors 8
Risk management 11
Performance overview 20
Remuneration report 34
Directors’ report 72
Financial report 75
Glossary 214
2
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
OUR 2023
REPORTING SUITE
Annual Report structure
The various elements of the Directors’ Report, including the Operating and Financial Review, are covered
on pages 1 to 32. Commentary on our performance overview contained on pages 20 to 32 references
information reported in the Financial Report pages 75 to 213.
The Remuneration Report on pages 34 to 71 and the Financial Report on pages 75 to 213 have been
audited by KPMG.
This report covers all of Australia and New Zealand Banking Group Limited’s operations worldwide over which,
unless otherwise stated, we had control for the financial year 1 October 2022 to 30 September 2023. Monetary
amounts in this document are reported in Australian dollars, unless otherwise stated.
DISCLAIMER & IMPORTANT NOTICES
The material in this report contains general background information about the Group’s activities current as at 10th November 2023. It is information given in
summary form and does not purport to be complete. It is not intended to be and should not be relied upon as advice to investors or potential investors, and
does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without
professional advice, when deciding if an investment is appropriate.
FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements or opinions including statements regarding our intent, belief or current expectations with respect to
the Group’s business operations, market conditions, results of operations and financial condition, capital adequacy, sustainability objectives or targets,
specific provisions and risk management practices. When used in the report, the words ‘forecast’, ‘estimate’, 'goal', 'target', 'indicator', 'plan', 'pathway',
‘ambition’, ‘modelling’, ‘project’, ‘intend’, ‘anticipate’, ‘believe’, ‘expect’, ‘may’, ‘probability’, ‘risk’, ‘will’, ‘seek’, ‘would’, ‘could’, ‘should’ and similar expressions,
as they relate to the Group and its management, are intended to identify forward-looking statements or opinions. Those statements are usually predictive
in character; or may be affected by inaccurate assumptions or unknown risks and uncertainties or may differ materially from results ultimately achieved.
As such, these statements should not be relied upon when making investment decisions. These statements only speak as at the date of publication and
no representation is made as to their correctness on or after this date. Forward-looking statements constitute ‘forward-looking statements’ for the purposes
of the United States Private Securities Litigation Reform Act of 1995. The Group does not undertake any obligation to publicly release the result of any revisions
to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.
ANZ GROUP
HOLDINGS
LIMITED
2023 Full Year Results
Announcement
anz.com/results
2023 ANZGHL Annual Report
anz.com/annualreport
2023 Corporate Governance
Statement
anz.com/corporategovernance
2023 Climate-Related
Financial Disclosures
anz.com/annualreport
2023 Environment, Social and
Governance (ESG) Supplement
anz.com/annualreport
AUSTRALIA AND
NEW ZEALAND BANKING
GROUP LIMITED
2023 ANZBGL Annual Report
anz.com/annualreport
2023 September Quarter
APS 330 Pillar III Disclosure
anz.com/results
2023 Principal Risks and
Uncertainties Disclosure
anz.com/results
2023 United Kingdom
Disclosure and Transparency
Rules Submission
anz.com/results
3
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Our operating environment
The environment in which we operate is
characterised by a range of conflicting forces.
Economic activity and inflationary pressure
have broadly moderated, resulting in an
evolving peak in the most aggressive interest
rate tightening cycle in more than a decade.
This has reduced the risk of a deep recession,
but a range of economic outcomes are
still possible.
China has tracked a different path, with
weak activity and a flirtation with deflation
promoting policy easing. Economic activity
in China continues to grow, albeit at a
slower rate than has been the case in recent
decades. The world’s second largest
economy remains an important source of
demand and business activity, even as its
slowdown is contributing to businesses and
investors examining other opportunities.
Unemployment remains low and
immigration has returned to Australia and
New Zealand at record rates. These are
supporting house price levels and demand
for mortgages, even as consumer spending
has moderated. Workforce shortages are not
as acute, but input costs remain a challenge
for many businesses.
On average, household balance sheets are
strong and corporates hold high levels of
liquidity. In some part this reflects the
regulatory efforts of the past 15 years. This
has reduced the level of delinquencies in
the current interest rate tightening cycle,
but also contributed to sustaining demand.
Public sector demand is strong across a
range of sectors including infrastructure,
defence, and housing. Housing affordability,
in particular, has been subject to more
vigorous policy action. Many governments
are also active in addressing perceived
supply chain vulnerabilities and prioritising
domestic resilience.
The climate transition has gathered
momentum. Over the past year Australia has
introduced the safeguard mechanism, New
Zealand has agreed methane should be
taxed differently from carbon dioxide, the
USA introduced the Inflation Reduction Act
and in Europe the Carbon Border Adjustment
Mechanism began administrative operation.
This is altering patterns of economic activity,
investment, and trade, and creating
opportunities and challenges for banks.
Economic outlook
The year ahead is likely to be one of economic consolidation across ANZ’s geographies. In Australia and New Zealand we expect somewhat
slower growth and only modest movements in interest rates around the peak in the cycle. Consumer spending is likely to remain weak as
the full impact of interest rate increases is felt. Demand is also likely to be supported by strong household balance sheets, resilient housing
markets, government activity, solid business investment intentions in Australia and strong migration in New Zealand. Modest increases in
unemployment and underemployment, while disruptive for the individuals involved, should be sufficient to encourage inflation back
towards target without undue delinquency stress. Both ANZ and the Reserve Bank of Australia expect to see inflation back at the top
of the band by the end of 2025.
In China, weak demand has been the main challenge. Policy has responded, activity has begun to stabilise and inflation, though there are
still deflationary pressures normalise. China’s stabilisation will support the region as it copes with the effects of its own tightening cycle and
weaker global demand.
OUR OPERATING
ENVIRONMENT
ChallengesOur response
Inflationary pressures and
higher interest rates
•Assessing borrowers’ resilience to rising interest rates
•Offering appropriate products and services to customers
•Dealing appropriately with customers experiencing financial hardship or in need of extra care
•Adjusting our staff salaries appropriately
Public and regulatory
scrutiny
•Building trust by ‘doing what we say’
•Working cooperatively with regulators, government and non-governmental organisations (NGOs)
•Continuing to evolve our ESG policies and processes and seek to implement them effectively and
transparently disclose our progress
Competitive banking
industry
•Deploying new and improved digital services, products and processes to help meet customer needs for
efficient and accessible banking
•Investing in underlying technology and systems to establish more flexible and responsive platforms
(including ANZ Plus and Institutional Payments and Cash Management Platforms)
Cyber-security threats •Ongoing investment in cyber-security, fraud and scams detection capabilities and raising customer
awareness as to the relevant risks
Geopolitical tension •Contingency plans for our medium-to-higher risk jurisdictions with trigger events identified
and monitored
Climate change and nature
including biodiversity loss
•Providing sustainable banking and finance products and services, such as green and sustainability-
linked loans and bonds, that drive the transition to a low carbon economy
•Continuing to evolve our strategy, policies, processes, products and services to seek to manage the risks
and opportunities associated with climate change and nature, including biodiversity loss
Australia and New Zealand Banking Group Limited 2023 Annual Report
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Governance
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4
VALUE DRIVERS
To embrace the opportunities, address the risks presented by
the external environment and realise our vision, we are pursuing
a strategy to create value for all our stakeholders.
HOW WE
CREATE VALUE
Better financial
outcomes for
shareholders
and staff
Better access to capital
and talent, driving
greater capacity to
invest well
Better customer
propositions that are
purposeful, engaging,
efficient and safe
Better financial
wellbeing and
sustainability outcomes
for customers and
the community
Better reputation
among customers
and the community,
and higher workforce
engagement
Better customer
engagement, and
greater use of our
products and services
Better data,
insights, risk
decisions and pricing
Better acquisition
and retention rates,
and higher share of
target customers
Our customers will have
relatively better financial
wellbeing, more sustainable
practices and generate
higher average
lifetime value
Shareholder value
We generate stronger long-
term financial results (in terms
of sustainable economic profits)
enabling shareholders to meet
their goals.
Customer value
Our customers are financially
better off over their lifetime and
implement more sustainable
business practices than others.
Employee value
Our diverse teams are engaged
and optimised for success.
Community value
Our practices and services
provide more opportunity for
the community and we have
supported and improved
positive economic
development and transition.
OUR STRATEGY AND BUSINESS MODEL
CREATING VALUE FOR OUR STAKEHOLDERS
Products and services
Loans, transaction banking services,
deposits and other financial products
developed for our customers.
Finance
Access to capital through customer
deposits, debt and equity investors,
to support our operations
and strategy.
People
Engaged workforce with the
skills required to reinvent banking,
in line with our purpose and culture.
Technology, data and
risk management
Flexible, digital-ready infrastructure to
provide a great customer experience,
with systems and processes that are
less complex, less prone to error and
more secure.
Social
Trusted relationships with our customers,
business partners and the community to
strengthen our brand and reputation.
Environment
Minimising the impact
of our operations by:
•The customers we choose to bank
•How we design and distribute
our products
•Collaboration with partners.
Australia and New Zealand Banking Group Limited 2023 Annual Report
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5
Through our purpose we have elevated
three areas facing significant societal
challenges aligned with our strategy
and our reach which include
commitments to:
•Improving the financial wellbeing of our
people, customers and communities by
helping them make the most of their
money throughout their lives;
•Supporting household, business
and financial practices that improve
environmental sustainability; and
•Improving the availability of suitable
and affordable housing options for all
Australians and New Zealanders.
We will achieve our strategy through:
•Propositions our customers love ... with
easy-to-use services that evolve to meet
their changing needs
•Flexible and resilient digital banking
platforms ... powering our customers
and made available for others to power
the industry
•Partnerships that unlock new value ...
with ecosystems that help customers
further improve their financial wellbeing
and sustainability
•Purpose and values-led people ...
who drive value by caring about our
customers and the outcomes we create.
Our people listen, learn, adapt and do the
right thing the first time - delivering the
outcomes that address financial and
sustainability challenges.
Save for, buy and
own a liveable home
Start or buy
and sustainably grow
their business
Move capital and goods
around the region
and sustainably grow
their business
IN PARTICULAR, WE WANT
TO HELP CUSTOMERS:
Our purpose is to shape a world
where people and communities
thrive. It explains ‘why’ we exist and
drives everything we do at ANZ,
including the choices we make
each day about those we serve
and how we operate.
We bring our purpose to life
through our strategy: to improve
the financial wellbeing and
sustainability of customers through
excellent services, tools and insights
that engage and retain them,
and help positively change
their behaviour.
Our values
Our values shape how we deliver our
purpose-led strategy. They are the
foundation of ‘how’ we work – living
our values every day enables us to deliver
on our strategy and purpose, strengthen
stakeholder relationships and earn the
community’s trust. All employees and
contractors must comply with our Code
of Conduct, which sets down the expected
standards of professional behaviour and
guides us in applying our values.
OUR VALUES ARE: I.C.A.R.E
OUR PURPOSE
AND STRATEGY
Integrity: We are honest and fair
by speaking openly and transparently,
making thoughtful and balanced
decisions, doing what’s right and
acting with courage.
Collaboration: We work together
for the customer, by getting the right
people together to get the job done
and helping each other.
Accountability: We take ownership
and get things done – we do what we
say we will do – find the solutions by
testing and learning and act with
determination.
Respect: We care for all those we
serve. We value difference and
encourage everyone to have a voice,
think and act with consideration for
our customers, community and
the environment.
Excellence: We challenge ourselves to
be better. This is done by making things
simple, finding ways to work differently,
using data to improve and asking as well
as acting on feedback.
Australia and New Zealand Banking Group Limited 2023 Annual Report
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6
We operate across a diverse business structure:
Australia RetailProvides a range of banking products and services to
Australian consumers.
Australia
Commercial
Provides a range of banking products and financial services to small
business owners, medium commercial customers, large commercial
customers, and high net worth individuals and family groups.
InstitutionalServices global institutional and corporate customers, and
governments across Australia, New Zealand and International
(including Papua New Guinea (PNG)) via Transaction Banking,
Corporate Finance and Markets business units.
New ZealandProvides a range of banking and wealth management products and
services to consumer and private banking customers and a range of
banking services to business customers.
PacificProvides banking products and services to retail and commercial
customers (including multi-nationals) and to governments located
in the Pacific region (excluding PNG which forms part of the
Institutional division).
Group CentreProvides support to the operating divisions, including technology,
property, risk management, financial management, treasury, strategy,
marketing, human resources, corporate affairs, and shareholder
functions. It also includes minority investments in Asia.
Our international presence and earning composition by geography
1
International
New Zealand
$2,086 million
Australia
$4,027 million
International
$1,359 million
Operating income
Asia
China
Hong Kong
India
Indonesia
Japan
Laos
Malaysia
The Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Pacific
Cook Islands
Fiji
Kiribati
Papua New Guinea
Samoa
Solomon Islands
Timor–Leste
Tonga
Vanuatu
Europe
France
Germany
United Kingdom
Middle East
United Arab Emirates (Dubai)
United States of America
Institutional: 32%
Australia Retail: 31%
New Zealand: 17%
Pacific & Group
Centre: 3%
Australia
Commercial: 17%
ABOUT OUR
BUSINESS
20,900M
Total group cash operating
income, (up 13%)
1. On a cash profit basis. Excludes non-core items included in statutory profit. It is provided to assist readers in understanding
the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash
profit refer to page 21.
Australia and New Zealand Banking Group Limited 2023 Annual Report
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Governance
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Financial
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7
DIRECTORS
As at the date of this report, there are ten members on the Board
of Directors of ANZBGL. Their names, positions within ANZBGL and
relevant other directorships are described below. Graeme Liebelt
ceased as a Non-Executive Director on 15 December 2022, having
served on the Board since 2013.
Ilana Atlas, AO
Position
Independent Non-Executive Director
since September 2014
Relevant other directorships
Chairman: Jawun (from 2017, Director
from 2014). Director: ANZGHL (from 2022),
Scentre Group (from 2021), Origin Energy
Limited (from 2021) and Paul Ramsay
Foundation (from 2017). Member: Council
of the National Gallery of Australia
(from 2021) and Panel of Adara Partners
(from 2015).
Relevant former directorships
held in last three years include
Former Chairman: Coca-Cola Amatil
Limited (2017-2021, Director from 2011).
Shayne Elliott
Relevant other directorships
Director: ANZGHL (from 2022), ANZ Bank
New Zealand Limited (from 2009) and the
Financial Markets Foundation for Children
(from 2016). Member: Business Council of
Australia (from 2016), the Australian Banking
Association (from 2016, Chairman 2017-
2019) and the Australian Customs Advisory
Board (from 2020).
Position
Chief Executive Officer
Executive Director since
January 2016
Paul O’Sullivan
Position
Chairman, Independent
Non-Executive Director since
November 2019
Relevant other directorships
Chairman: ANZGHL (from 2022), Singtel
Optus Pty Limited (from 2014, Director
from 2004) and Western Sydney Airport
Corporation (from 2017).
Director: St Vincent’s Health Australia
(from 2019).
Relevant former directorships
held in last three years include
Former Director: Telkomsel Indonesia
(2010-2020), National Disability Insurance
Agency (2017-2020), Coca-Cola Amatil
(2017-2021) and Indara Digital Infrastructure
(formerly Australian Tower Network Pty Ltd)
(2021-2023).
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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overview
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Jane Halton, AO PSM
Position
Independent Non- Executive Director
since October 2016
Relevant other directorships
Chairman: Coalition for Epidemic
Preparedness Innovations (Norway) (from
2018, Member from 2016) and Council on
the Ageing Australia (from 2017).
Director: ANZGHL (from 2022) and Clayton
Utz (from 2017). Member: Executive Board
of the Institute of Health Metrics and
Evaluation at the University of Washington
(from 2007). Adjunct Professor: University
of Sydney and University of Canberra.
Honorary Professor: Australian National
University Research School of Psychology.
Council Member: Australian Strategic
Policy Institute (from 2016).
Relevant former directorships
held in last three years include
Former Chairman: Vault Systems
(2017-2022). Former Director: Crown
Resorts Limited (2018-2022) and Naval
Group Australia Pty Ltd (2021-2022).
Former Member: National COVID-19
Commission Advisory Board (2020-2021).
Graham Hodges
Position
Non-Executive Director
since February 2023
Relevant other directorships
Chairman: Regis Healthcare Limited
(Director from 2017, Chairman from 2018).
Director: Assemble Communities
(from 2020).
Relevant former directorships
held in last three years include
Director: AmBank Holdings Berhad
(2016-2021).
Rt Hon Sir John Key, GNZM AC
Position
Independent Non-Executive Director
since February 2018
Relevant other directorships
Chairman: ANZ Bank New Zealand Limited
(from 2018, Director from 2017) and
Oritain Global Limited (from 2023).
Director: ANZGHL (from 2022) and Palo Alto
Networks (from 2019). Strategic Advisor:
BHP Group Limited (Australia) (from 2023).
Relevant former directorships
held in last three years include
Former Director: Air New Zealand Limited
(2017-2020).
Holly Kramer
Position
Independent Non-Executive Director
since August 2023
Relevant other directorships
Director: ANZGHL (from 2023), Woolworths
Group Limited (from 2016) and Fonterra
Co-operative Group Limited (from 2020).
Member: Board Advisory Group, Bain &
Company (from 2021). Senior Advisor:
Pollination (from 2023). Pro Chancellor:
Western Sydney University (from 2018).
Relevant former directorships
held in last three years include
Former Chairman: Lendi Group (2020-2021).
Former Deputy Chair: Australia Post
(2015-2020). Former Director: Abacus
Group Holdings (2018-2022) and Endeavour
Group Limited (2021-2023).
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Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
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environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
John Macfarlane
Position
Independent Non-Executive Director
since May 2014
Relevant other directorships
Director: ANZGHL (from 2022), Colmac
Group Pty Ltd (from 2014), AGInvest
Holdings Ltd (MyFarm Ltd) (from 2014,
Chairman 2014-2016), Balmoral Pastoral
Investments (from 2017), L1 Long Short
Fund Ltd (from 2018) and Aikenhead Centre
of Medical Discovery Limited (from 2016).
Relevant former directorships
held in last three year include
Former Director: Craigs Investment
Partners Limited (2013-2020).
Christine O’Reilly
Position
Independent Non-Executive Director
since November 2021
Relevant other directorships
Director: Stockland (from 2018) and BHP
Group Limited (from 2020).
Relevant former directorships
held in last three years include
Former Director: Medibank Private Limited
(2014–2021), CSL Limited (2011–2020),
Transurban Group (2012–2020) and
The Baker Heart & Diabetes Institute
(2013-2023).
Jeff Smith
Position
Independent Non-Executive Director
since August 2022
Relevant other directorships
Director: ANZGHL (from 2022), ANZ Group
Services Pty Ltd (from 2022), Sonrai Security
Inc. (from 2021) and Pexa Australia Limited
(from 2023). Advisor: Zoom Video
Communications, Inc (from 2018), Box,
Inc (from 2018), and World Fuel Services
(from 2023)).
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RISK
MANAGEMENT
2023 has seen an elevation of
geopolitical tensions and continuing
uncertainty in the macroeconomic
environment. These continue to
pose challenges to operating
conditions. We recognise that our
customers are similarly affected
by these, as well as by additional
challenges such as adverse weather
events. Our risk management
framework and practices have
continued to evolve to meet
such challenges.
External environment
The heightened geopolitical landscape with
the ongoing conflicts in Europe and the
Middle East, accompanied by the economic
challenges relating to higher interest rates,
inflation and real cost of living pressures
continue to be the main drivers to create
uncertainty for many of our customers.
While households and businesses have
been largely resilient to date, the Board and
management continually monitor these
developing conditions to set appropriate
risk criteria for a range of potential scenarios.
We have focused on the following to
help support our customers and their
financial resilience:
•Global banking instability – Global
financial stability risks increased during
the year following the failure of some
regional banks in the US and the
regulator facilitated takeover of Credit
Suisse by UBS. In the face of these events
the broader global banking system has
remained resilient. ANZ has navigated
this challenging period from a position
of strength as a profitable, well
provisioned, strongly capitalised and
highly liquid bank and is well placed
to support our customers.
•Home Loans and Consumer Lending –
We continue to engage with our
customers to help them better manage
their home loans and personal finances.
70 per cent of our customers have paid
additional funds to reduce their principal
debt with almost half of those more than
two years ahead on their repayments.
Our portfolio customer credit scores
have improved and we have consistently
written new businesses at a higher
average customer credit score. We have
also proactively communicated with
our customers to provide reassurance
that, where required, we have options
available to continue to support them.
This includes additional support provided
to customers facing natural disasters (for
instance, the 2023 cyclones and floods
in New Zealand).
•Data Analytics – Data and analytics
continue to play an important role in
early identification of customers heading
towards financial difficulty. Our analytics
have focused on customer transaction
data and the identification of customers
that may need additional support.
We are using data analytics to look at
savings, credit, and offset accounts to
better understand customers’ financial
behaviour and potential future outcomes.
The analysis considers interest rate
changes, increases in living expenses
and cashflow. We continue to analyse
our downturn indicators to understand,
quantify, and address impacts to portfolio
delinquency through tailored treatments
to reduce customer financial difficulties/
delinquencies.
•Financial health and Wellbeing –
Financial health and wellbeing is the
guiding principle for our ANZ Plus App
which provides tools and insights to help
customers to have better visibility and
control over their money. In addition,
our targeted communication is designed
to encourage at-risk customers to take
steps to avoid falling behind on loan
repayments and to contact ANZ as early
as possible if they are experiencing
financial difficulty. We have also identified
common reasons customers provide for
experiencing financial hardship, such
as reduced income, medical illness,
separation or over-commitment to assist
with repayment management. We have
also delivered proactive customer support
including communications and webinars
to help customers as they head into
challenging economic times.
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Risk culture
Risk culture is an important component
of our organisational culture and underpins
the shared values, behaviours and practices
that influence how risk is considered in
decision making.
Significant progress has been made in
strengthening risk culture, with the Group
achieving our target state. The Board
and executive leadership teams have
emphasised the importance of risk culture,
providing strong leadership and oversight.
This has resulted in outcomes that have
further embedded our target risk
behaviours and uplifted risk management
in a number of key focus areas – particularly
the group wide non-financial risk
framework. The risk culture framework,
with our Risk Principles at the core, outlines
the approach to measure, assess, embed
and govern risk culture. The approach
assesses risk management behaviours and
practice through consideration of an annual
risk culture survey as well as frequent
monitoring of business and risk metrics
that provide insights about our risk culture.
Risk culture maturity is assessed at the
divisional and functional
1
level to assist
the Board to form a view of our overall
risk culture. Our Board Risk Committee
receives half-yearly updates on plans and
actions being taken to further improve
our risk culture.
Maintaining a sound risk culture is
supported by alignment between our Risk
Principles and organisational behaviours,
training, and tools and resources to
raise awareness of and embed the
behaviours and practices that support
our target risk culture.
Risk culture is included as a performance
objective for all Group Executives, and
risk is a key element of the Group
Performance Framework and Divisional/
individual performance scorecards for our
people’s performance and remuneration.
Behaviours supporting the target risk culture
are reinforced through the Enterprise
Accountability Group (EAG) (see section 8
of the Remuneration Report with the Annual
Report). We acknowledge individuals who
role model outstanding risk behaviours
through their efforts to identify, manage
and mitigate the organisation’s risks and
contribute to our strong risk culture.
Financial crime
We continue to maintain an effective
financial crime risk management program
that anticipates and navigates criminal
threats supported by the right people with
the right tools. The Financial Crime portfolio
continues to be responsible for ensuring
that ANZ meets its regulatory obligations
through its Anti-Money Laundering/
Counter Terrorism Finance and Sanction
Programs, and for delivering enhanced
detection, investigative and/or intelligence
capability focusing on identifying,
mitigating, and managing financial crime
risk and protecting the community. We also
maintain our partnership with the Australian
Transaction Report and Analysis Centre
(AUSTRAC)-led Fintel Alliance to strengthen
the finance industry’s capability to tackle
serious crimes and to better support
police investigations.
Refer to our ESG Supplement available
at anz.com/annualreport for further
information.
Scams
We are continually reviewing and adjusting
our capabilities to keep customers safe as
new scams emerge and cyber criminals
change how they operate. In the last twelve
months, our staff and our systems have
stopped more than $100 million going to
criminals and from April to September this
year. We have has seen a 59% reduction in
customer losses and a 38% increase in
detected and prevented amounts.
Investment in new technologies is critical
as we continue to work to protect our
customers and the community from fraud
and scams. Our newest measures include:
•The deployment of more than 170
new sophisticated algorithms that
have helped to prevent $20m of
customer scam losses across multiple
payment channels.
•A significant investment in a new
capability using Artificial Intelligence
(AI) and Machine Learning technology
designed to detect accounts being used
to receive funds from scam victims.
•Preventing payments being made
to particular high risk cryptocurrency
platforms and introducing new holds
and delays to some payment types
and destinations.
•Working with the major telcos to activate
the Do Not Originate (DNO) service
and to put in place measures that stop
scammers from adopting the “ANZ” label
in text messages.
Non-financial risk
We have made progress against our
non-financial risk transformation agenda.
Our improved Non-financial Risk Framework
is uplifting both the effectiveness and
efficiency of how we manage our non-
financial risks ensuring we can operate
our business well, support the right risk
culture, save time and make things simpler.
It is achieving this by being a holistic,
standardised, integrated and automated
framework with greater data-informed
insights, enhanced operating model
and capability uplift. This enables us to
better anticipate and navigate a changing
environment as we seek to protect our
customers, shareholders and the
community from harm.
Other risks
We manage and monitor risks in
accordance with our Risk Management
Framework (RMF). In addition to our key
material risks - see below - three risks that
we are paying particular attention to are:
Climate-related risk
: the Group’s most
material climate-related risks arise from
lending to business and retail customers,
which contributes to credit risk. These
include the effect of extreme weather
events on a customer’s business or property
including impacts to the cost and
availability of insurance and insurance
exclusions, changes to the regulatory and
policy environment in which the customer
operates, disruption from new technology
and changes in demand towards low
carbon products and services. Climate-
related risks may also indirectly affect a
customer through impacts to its supply
chains and customer base.
1. Enablement Functions – Legal, Enterprise Finance, Talent and Culture, Internal Audit, Group Risk, Comms and PA, Group Technology and Group Capability Centre.
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1. Institutional customers. 2. The ENCORE tool consolidates international and national data from public databases. It is widely used by other banking institutions and recognised as a robust tool.
The ENCORE tool was developed by the Natural Capital Finance Alliance (the NCFA) and the World Conservation Monitoring Centre (the UNEP-WCMC).
Our key material risk category of credit risk
considers the risks associated with lending
to customers that may be impacted by
climate change, including physical and
transition risks. Climate-related risks may
also affect the ability of customers to repay
debt, result in an increased probability of
default, result in ‘stranded assets’, and
impact the amount that the Group is able
to recover due to the value or liquidity of
collateral held as security being impaired.
The Group may also face legal proceedings
and suffer reputational damage if it acts
inconsistently with public commitments
in relation to climate change.
We continue to improve our management
of climate-related risks and recently
elevated climate-related risk as a key
material risk within our RMF - refer below.
We are transitioning our lending with
the goals of the Paris Agreement and
supporting customers to reduce emissions
and enhance their resilience to a changing
climate. In this respect, we factor climate
change risk into lending decisions for large
business customers
1
, assessing their
capacity to respond to climate change
and the evolving regulatory landscape.
We expect our existing large business
customers in higher-emitting sectors such
as energy, building products and transport
to integrate climate change risk into their
company strategies.
For details on the how we are improving
our management of climate-related risks,
how we govern climate-related risks and
opportunities, performance against our
climate targets and our new sectoral
decarbonisation pathways set in
accordance with our commitment to the
Net-Zero Banking Alliance, refer to our
2023 Climate-related Financial Disclosures
available at anz.com/annualreport. Our
Climate Change Commitment is available
at anz.com/esgreport.
Cybersecurity risk: As a bank, we handle
a considerable amount of personal and
confidential information about our
customers across multiple geographies in
which we operate. We continue to take the
security of our bank, our customers and our
customers’ information very seriously. Our
security strategy has helped build a mature
security risk posture and operational cyber
security capability commensurate with the
size and extent of threats to us.
Cyber security threats continue to
evolve, becoming more sophisticated
and increasing in volume and our approach
draws on multiple layers of security testing
and intelligence, seeking to ensure
sustainable security practices to protect
information and assets. We have layers of
defence within the Group complemented
by robust governance. We use industry
benchmarking as well as a series of
exercises to map and simulate potential
threats. This helps us identify and better
understand emerging threats, and adapt
processes, technology and education to
address the increase in customer fraud
and scams. We maintain strong relationships
and strategic partnerships with government,
industry, community groups and law
enforcement agencies locally and
internationally to promote cyber
security resilience across jurisdictions.
We are fostering a security-centric culture
by providing staff education to help us
to respond to the rapidly changing threat
environment, as well as our customer
education service to engage with and
support our customers. We focus on raising
customer awareness to cyber-threat risk.
Our Cyber security centre also publishes
a range of latest security alerts and
protection approaches to assist our
customers to avoid scams.
Biodiversity risk: Biodiversity loss including
as a result of species extinction or decline,
ecosystem degradation and nature loss
(“Biodiversity Loss”) is an emerging risk
which the Group is seeking to understand
further. Biodiversity risks are closely linked
to climate-related risks. Risks are likely to
arise primarily from lending to customers
that have material dependencies and/or
whose actions may have negative impacts
on nature, including biodiveristy. These risks
can also arise from legal, and regulatory
or policy, changes including potential
reforms to halt and reverse forest loss,
species extinction and land degradation.
These changes may impact the Group
directly, or indirectly through our customers.
Biodiversity risk is recognised in our Climate
Change Commitment and across our
‘sensitive sector’ lending policies. In line
with our Social and Environmental Risk
Policy, we expect our large business
customers
1
to use, or mitigate towards
internationally accepted industry practices
to manage social, environmental and
economic impacts, including potential
impacts on nature. This year have continued
to engage with 100 of our large emitting
business customers to support them to
implement and strengthen their lower
carbon transition plans and enhance their
efforts to protect biodiversity. We have
also utilised the Exploring Natural Capital
Opportunities Risks and Exposure (ENCORE)
tool
2
to take initial steps to identify priority
sectors and assess potential sector level
biodiversity impacts and dependencies.
For details on our customer engagement,
the ENCORE tool, including how we are
upskilling our staff and the Taskforce on
Nature-related Financial Disclosures (TNFD)
pilot studies we have participated in this
year, refer to our 2023 Climate-related
Financial Disclosures available at anz.com/
annualreport. This year we have also
sought to draw on the TNFD’s
recommendations to help inform our
disclosures in this document.
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Our Risk Management
Framework (RMF)
The Board is ultimately responsible for
establishing and overseeing the Group’s
RMF, which is supported by the Group’s
underlying systems, structures, policies,
procedures, processes and people.
The Board has delegated authority to
the Board Risk Committee (BRC) to develop
and monitor compliance with the Group’s
risk management policies. The Committee
reports regularly to the Board on its
activities. The key pillars of our Group
RMF include:
•The Risk Management Strategy (RMS),
which describes the approach for
managing risk arising from the Group’s
purpose and strategy. The RMS includes:
how the Risk function is structured
to support the Group’s purpose and
strategy, and the execution of the
Group Chief Risk Officer’s prescribed
responsibilities as an Accountable
Person for ANZBGL under the Banking
Executive Accountability Regime;
the values, attitudes and behaviours
required of employees in delivering on
strategic priorities; a description of each
material risk; and an overview of how
the RMF addresses each material risk,
with reference to the relevant policies,
standards and procedures. It also includes
information on how the Group identifies,
measures, evaluates, monitors, reports
and then either controls or mitigates
the material risks and the oversight
mechanism and/or committees in place.
•The Risk Appetite Statement (RAS),
which sets out the Board’s expectations
regarding – for each material risk – the
maximum level of risk the Group is
willing to accept in pursuing its strategic
objectives and its operating plans
considering its shareholders’, depositors’
and customers’ interests.
•Risk Culture is an intrinsic part of the
Group’s RMF and underpins the values,
attitudes and behaviours of our staff
which drive the risk decisions we make.
The Group operates a Three Lines-of-
Defence Model. Each line of defence has
clearly defined roles, responsibilities and
escalation paths to support effective risk
management at ANZ. The three lines of
defence model embeds a culture where
risk is everyone’s responsibility.
The business occupies the first line of
defence responsibility for implementation
and ongoing maintenance of the RMF
including day-to-day ownership of risks
and controls.
The Risk function (including Divisional/
functional and Group) form the second
line of defence, providing independent
oversight of the Group’s risk profile and
RMF, including effective challenge to
activities and decisions that materially
affect the Group’s risk profile and assistance
in developing and maintaining the RMF.
Internal Audit is the third line of defence,
providing independent evaluation and
objective assurance on the appropriateness,
effectiveness and adequacy of the
Group’s RMF.
The governance and oversight of risk
management, whilst embedded in
day-to-day activities, is also the focus
of committees and regular forums across
the Group (see diagram next page).
The committees and forums discuss
and monitor known and emerging risks,
review management plans and monitor
progress to address known issues.
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BOARD OF DIRECTORS
KEY MANAGEMENT COMMITTEES
Audit
Committee
Executive Committee
The Group’s most senior
executives meet regularly to
discuss performance and review
shared initiatives.
Enterprise
Accountability
Group
Group Performance Execution Committee
The Group’s key Management Committee charged
with oversight of the Group’s overall operational
performance and position and execution of the
operating plan.
Principal Board
Committees
Group
Division
Country
Ethics,
Environment,
Social and
Governance
Committee
Risk
Committee
Digital Business
and Technology
Committee
Nomination
and Board
Operations
Committee
Human
Resources
Committee
Credit Ratings
System Oversight
Committee
Capital and Stress
Testing Oversight
Committee
Financial Crime Operational
Risk Executive Committee
Sub-Committee
Regional or
Country Risk
Management
Committees
Country Assets
and Liability
Committees
Credit and
Market Risk
Committee
Group Asset
and Liability
Committee
Operational
Risk Executive
Committee
Ethics and
Responsible
Business
Committee
Investment
Committee
Group Executive
People
Committee
Divisional/
Functional
Accountability
Groups
Divisional
Initiatives Review
Committees/
Project Advisory
Councils
Divisional Risk Management
Committees
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KEY MATERIAL
RISKS
The key material risks facing the Group per the Group’s RMS, and how these are managed are summarised below.
Climate change risk is managed and monitored as part of ANZ’s business, strategic and capital management processes.
While climate change risk primarily manifests as financial risks, especially credit risk, it may also result in additional market,
operational or other risks.
Our understanding of climate-related risks continues to evolve and mature. On 9 November 2023 our Board Risk Committee
approved that “climate risk” will be elevated as a key material risk. This means going forward that we are further strengthening
our enterprise-wide approach to managing climate risk. We are working to embed this change and expect to disclose our
progress in our 2024 reporting. The table below discusses how climate-related risk has been managed and monitored
during our 2023 financial year.
Capital adequacy
risk
The risk of loss arising from the Group failing
to maintain the level of capital required by
prudential regulators and other key stakeholders
(shareholders, debt investors, depositors, rating
agencies, etc.) to support the Group’s
consolidated operations and risk appetite.
We pursue an active approach to Capital Management,
which is designed to protect the interests of depositors,
creditors and shareholders through ongoing review,
and Board approval, of the level and composition of
our capital base against key policy objectives.
Compliance
risk
The risk of failure to act in accordance with laws,
regulations, industry standards and codes,
internal policies and procedures and principles
of good governance as applicable to the
Group’s businesses.
Key features of how we manage Compliance Risk
as part of our I.AM (Identify, Act and Monitor)
Framework include:
•Management of key obligations via a Global
Obligations Library, enabling our change
management capability in relation to new
and revised obligations.
•An emphasis on the identification of changing
regulations and the business environment, to enable
proactive assessment of emerging compliance risks.
•Recognition of incident management as a separate
element to enhance our ability to identify, manage
and report on incidents/breaches in a timely manner.
Credit risk
The risk of financial loss resulting from:
•A counterparty failing to fulfil its obligations; or
•A decrease in credit quality of a counterparty
resulting in a loss.
Credit Risk incorporates the risks associated
with our lending to business and retail customers
who could be impacted by climate change or
by changes to laws, regulations, or other policies
adopted by governments or regulatory
authorities, including carbon pricing and
climate change adaptation or mitigation policies.
As noted above, we recently elevated climate-
related risk to be a key material risk in its own
right and will work to embed this within our RMF.
Our Credit Risk framework is top down, being defined
by credit principles and policies. Credit policies,
requirements and procedures cover all aspects of
the credit life cycle from initial approval and risk
grading, through to ongoing management and
problem debt management.
For further information about the principal risks and uncertainties that the Group faces, see our
“Principal Risks and Uncertainties” disclosure available at anz.com/shareholder/centre.
RISK TYPE DESCRIPTION
MANAGING THE RISK
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RISK TYPEDESCRIPTIONMANAGING THE RISK
Liquidity and
funding risk
The risk that the Group is unable to meet its
payment obligations as they fall due, including:
•Repaying depositors or maturing
wholesale debt; or
•The Group having insufficient capacity to fund
increases in assets.
Key principles in managing our Liquidity and Funding
Risk include:
•ANZ’s short term liquidity scenario modelling stresses
cash flow projections against multiple survival
horizons’ over which the Group is required
to remain cash flow positive;
•Longer-term scenarios are in place that measure the
structural liquidity position of the balance sheet.
Market risk
The risk stems from our trading and balance
sheet activities and is the risk to the Group’s
earnings arising from:
•Changes in interest rates, foreign exchange
rates, credit spreads, volatility, correlations; or
•Fluctuations in bond, commodity or
equity prices.
We have a detailed market risk management and
control framework to support our trading and balance
sheet activities, which incorporates an independent risk
measurement approach to quantify the magnitude of
market risk within the trading and balance sheet
portfolios. This approach, along with related analysis,
identifies the range of possible outcomes, that can
be expected over a given period of time, and
establishes the likelihood of those outcome and
allocates an appropriate amount of capital to support
these activities.
Operational
risk
The risk of loss and/or non-compliance with laws
resulting from inadequate or failed internal
processes, people and/or systems, or from
external events. This definition includes legal risk,
and the risk of reputation loss or damage arising
from inadequate or failed internal processes,
people and systems, but excludes strategic risk.
We manage Compliance and Operational Risk in the
best interests of our customers and the community and
to meet expectations of the regulators. The Compliance
and Operational Risk (C&OR) Policy establishes the
fundamental requirements at ANZ which inform
policies, processes, and procedure development of
ANZ’s management of Compliance and Operational
Risk, through timely and appropriate identification,
action and monitoring. We take a risk-based approach
to the management of operational risk and obligations.
This enables the Group to be consistent in proactively
identifying, assessing, managing, reporting and
escalating operational risk-related risk exposures,
while respecting the specific obligations of each
jurisdiction in which the Group operates.
Day-to-day management of operational risk is the
responsibility of business unit line management and
staff. Risk management is supported by a strong Risk
Culture, which seeks to ensure all staff manage risk
on a daily basis – “Risk is Everyone’s Responsibility”.
Strategic risk
Risks that affect or are created by an
organisation’s business strategy and strategic
objectives. A possible source of loss might arise
from the pursuit of an unsuccessful business
plan. For example, Strategic risk might arise
from making poor strategic business decisions,
from the sub-standard execution of decisions,
from inadequate resource allocation, or from
a failure to respond well to changes in the
business environment.
Strategic risks are discussed and managed through our
annual strategic planning process, managed by the
Executive Committee and approved by the Board.
Where the strategy leads to an increase in other Key
Material Risks (e.g. Credit Risk, Market Risk, Operational
Risk) the risk management strategies associated with
these risks form the primary controls.
RISK TYPE DESCRIPTIONMANAGING THE RISK
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Technology
risk
The risk of loss and/or non-compliance with
laws from inadequate or failed internal processes,
people or systems that deliver Technology assets
and services to customers and staff. This risk
includes Technology assets and services delivered
or managed by third parties, and external events.
The risk specifically includes information security
and cyber security and how information held
by the Group needs to be protected from
inappropriate modification, loss, disclosure
and unavailability.
Our approach to manage Technology Risk is to manage
our operational risks caused by the use of technology,
including risks associated with cyber security and
third-party providers, in a manner that seeks to ensure
customer information is secure and service disruption
is within acceptable levels.
Conduct risk
The risk of loss or damage arising from the failure
of the Group, its employees or agents to
appropriately consider the interests of customers,
the integrity of the financial markets and the
expectations of the community in conducting
its business activities.
Our approach to manage Conduct Risk is to seek to
ensure that risks to customers, community and market
integrity are identified, assessed, measured, evaluated,
treated, monitored and reported with appropriate
governance and oversight.
The articulation of Conduct Risk as a Level 1 Risk Theme
under the new NFR model will help manage Conduct
Risk as a key material risk for the Group. To support the
NFR model (and our obligations under Prudential
Standard CPS 220 Risk Management), ANZ has
developed a global Conduct Risk Framework and
Conduct Risk taxonomy which facilitates a clear and
consistent way of managing and monitoring the risk,
and the risk is managed in conjunction with the
Compliance and Operational Risk Policy.
Financial
crime risk
Financial Crime Risk covers the following risks
at ANZ:
•Money Laundering (ML) Risk – the risk that
we may reasonably face from our products
and/or services being misused to facilitate
the processing of the proceeds of crime to
conceal their illegal origins and make them
appear legitimate.
•Terrorism Financing (TF) Risk – the risk that
we may reasonably face from our products
and/or services being misused to facilitate
the provision or collection of funds with the
intention or knowledge that they may be
used to carry out acts associated in support
of terrorists or terrorist organisations.
•Sanctions Risk – the risk of failing to comply
with laws and regulations relating to sanctions
imposed by governments and multinational
bodies as a result of our products and services
being misused to facilitate prohibited sanctions
activities.
•Fraud Risk – the risk that we may reasonably
face from our products and/or services
being misused to facilitate intentional acts
by one or more individuals, involving the
use of deception to obtain an unjust or
illegal advantage arising from internal or
external sources.
Financial Crime Risk at ANZ is managed using a
risk-based approach in accordance with the Conduct
Risk Framework, and in conjunction with the
Compliance and Operational Risk Framework (I.AM)
and three lines of defence model. However, for
Sanctions, in addition to a risk-based approach to risk
management, there is a rules-based lens to ensure
compliance with Sanctions legislation. For the Business
to identify and manage Financial Crime Risk, it must
identify its regulatory obligations and impacted business
activities and maintain and monitor key controls.
RISK TYPE DESCRIPTIONMANAGING THE RISK
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LEFT BLANK
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PERFORMANCE
OVERVIEW
OUR PERFORMANCE (continued)
20 ANZ 2023 ANNUAL REPORT
GROUP PERFORMANCE
The results of the Group’s operations and financial position are set out on pages 20-32. Pages 4-7 outline the Group’s strategy and
prospects. Discussion of our approach to risk management, including a summary of our key material risks, is outlined on pages 11-18.
Discussion or disclosure of further business strategies and prospects for future financial years has not been included in this report
because, in the opinion of the directors, it would be likely to result in unreasonable prejudice to the Group.
GROUP PROFIT RESULTS
2023 2022
Statutory Cash Statutory Cash
Income Statement $m $m $m $m
Net interest income
16,575 16,575
14,874 14,874
Other operating income
3,891 4,325
4,552 3,673
Operating income
20,466 20,900
19,426 18,547
Operating expenses
(10,087) (10,087)
(9,579) (9,579)
Profit before credit impairment and income tax
10,379 10,813
9,847 8,968
Credit impairment (charge)/release
(245) (245)
232 232
Profit before income tax
10,134 10,568
10,079 9,200
Income tax expense
(2,941) (3,068)
(2,940) (2,684)
Non-controlling interests
(28) (28)
(1) (1)
Profit attributable to shareholders of the Company
from continuing operations
7,165 7,472
7,138 6,515
Profit/(Loss) after tax from discontinued operations
- -
(19) (19)
Profit for the year
7,165 7,472
7,119 6,496
Statutory profit for the year increased $46 million on the prior year to $7,165 million.
The Group uses cash profit, a non-IFRS measure, to assess the performance of its business activities. It is an industry-wide measure which
enables comparison with our peer group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents the
financial performance of our core business activities. We use cash profit internally to set targets and incentivise our Senior Executives and
leaders through our remuneration plans. Refer to page 21 for adjustments between statutory and cash profit. The adjustments made in
arriving at cash profit are included in statutory profit which is subject to audit within the context of the external auditor’s audit of the 2023
Financial Report. Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that
adjustments between statutory and cash profit have been determined on a consistent basis across each of the periods presented.
DISCONTINUED OPERATIONS
There are no discontinued operations in the current period. Profit/(Loss) from discontinued operations in the comparative periods relates to
immaterial residual operational costs from divested wealth businesses and partial recovery of certain costs based on Transition Service
Agreements, which ceased in April 2022.
ESTABLISHMENT OF A NEW GROUP ORGANISATIONAL STRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating
holding company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a
restructure to separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (Restructure).
The ANZ Bank Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ
Non-Bank Group comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and
banking-adjacent services to the ANZ Group’s customers, and a separate service company.
ANZGHL Financial Information
As a result of the Restructure, the ultimate holding company of ANZBGL is ANZGHL. A copy of the 2023 ANZGHL Annual Report can be
accessed via the ANZ Shareholder Centre on website
https://www.anz.com/shareholder/centre/reporting/.
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 21
CONTINUING OPERATIONS
Key measures of our financial performance are set out below.
ADJUSTMENTS BETWEEN STATUTORY PROFIT AND CASH PROFIT ($m)
Adjustments between continuing operations statutory profit and cash profit are summarised below:
Adjustment Comment for the adjustment
Economic hedges
2023: $217 million loss
2022: $569 million gain
Revenue and expense
hedges
2023: $90 million loss
2022: $54 million gain
The Group enters into economic hedges to manage its interest rate and foreign exchange risk which, in
accordance with accounting standards, result in fair value gains and losses being recognised within the Income
Statement. We remove the fair value adjustments from cash profit since the profit or loss resulting from the hedge
transactions will reverse over time to match with the profit or loss from the economically hedged item as part of
cash profit. This includes gains and losses arising from derivatives not designated in accounting hedge
relationships but which are considered to be economic hedges, including hedges of foreign currency debt
issuances and foreign exchange denominated revenue and expense streams, primarily NZD and USD (and USD
correlated), as well as ineffectiveness from designated accounting hedges.
In the 2023 financial year, losses on economic hedges relate to funding-related swaps, principally from narrowing
USD/EUR and USD/JPY currency basis spreads. Further losses were driven by the yield curve movement impact on
net pay fixed economic hedge positions, largely during the first half of 2023. Losses on revenue and expense
hedges were mainly due to the depreciation of AUD against the NZD.
1.70
1.63
2023
2022
NNeett iinntteerreesstt mmaarrggiinn ––
ccaasshh
11
((%%))
2020
CCrreeddiitt iimmppaaiirrmmeenntt cchhaarrggee
//((rreelleeaassee)) ––ccaasshh
11
(($$mm))
CCaasshh pprrooffiitt
11
(($$mm))
RReettuurrnn oonn eeqquuiittyy ––
ccaasshh
11
((%%))
245
(232)
2023
2022
2023
2022
2023
2022
OOppeerraattiinngg eexxppeennsseess ttoo
ooppeerraattiinngg iinnccoommee ––
ccaasshh
11
((%%))
2023
2022
CCoommmmoonn eeqquuiittyy
ttiieerr 11((%%))
2023
2022
11.2
10.4
7,472
6,515
48.3
51.6
13.3
12.3
217
90
2023 Statutory profit
attributable to shareholders
of the Company from
continuing operations
Economic
hedges
Revenue and
expense hedges
2023 Cash profit
attributable to shareholders
of the Company from
continuing operations
7,165
7,472
1.
Information has been presented on a cash profit from continuing operations basis.
21
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
22 ANZ 2023 ANNUAL REPORT
GROUP CASH PROFIT PERFORMANCE FROM CONTINUING OPERATIONS
Financial performance and the analysis thereof has been presented on a cash profit from continuing operations basis.
CASH PROFIT FROM CONTINUING OPERATIONS ($m)
2023 2022
$m $m Movt
Net interest income
16,575
14,874 11%
Other operating income
4,325
3,673 18%
Operating income
20,900
18,547 13%
Operating expenses
(10,087)
(9,579) 5%
Profit before credit impairment and income tax
10,813
8,968 21%
Credit impairment (charge)/release
(245)
232 large
Profit before income tax
10,568
9,200 15%
Income tax expense
(3,068)
(2,684) 14%
Non-controlling interests
(28)
(1) large
Cash profit attributable to shareholders of the Company
from continuing operations
7,472
6,515 15%
Cash profit attributable to shareholders of the Company from continuing operations
increased $957 million (15%) compared with the 2022
financial year.
Net interest income increased $1,701 million (11%) driven by a $65.5 billion (7%) increase in average interest earning assets and a 7 bps
increase in net interest margin. The increase in average interest earning assets was driven by lending growth across all divisions, higher liquid
assets and the impact of foreign currency translation. The increase of 7 bps was driven by favourable deposit margins, higher earnings on
capital and replicating deposits, and favourable lending mix. This was partially offset by home loan pricing competition, unfavourable deposit
mix, and Markets activities impacted by higher funding costs, primarily on commodity assets, where the related revenues are recognised as
Other operating income.
Other operating income increased $652 million (18%) primarily driven by an increase of $1,063 million in Markets other operating income
from increased customer activity and more favourable trading conditions. This was partially offset by a $232 million decrease from business
divestments/closures, $98 million of lower realised gains on economic hedges against foreign currency denominated revenue streams
offsetting net favourable foreign currency translations elsewhere in the Group, and a $43 million decrease from the loss on disposal of data
centres in Australia.
Operating expenses increased $508 million (5%) driven by inflationary impacts, incremental costs associated with strategic initiatives, higher
Suncorp Bank acquisition related costs, costs previously attributed to discontinued operations, and the initial levy under the Financial Services
Compensation Scheme of Last Resort Levy Act 2023 (CSLR Levy). This was partially offset by productivity initiatives and investment re-
prioritisation.
Credit impairment increased $477 million driven by increases in both collectively assessed and individually assessed credit impairment.
1,701
652
2022 Cash profit
attributable to
shareholders of
the Company
from continuing
operations
Net interest
income
Other
operating
income
Operating
expenses
Credit
impairment
Income tax
expense &
non-controlling
interests
2023 Cash profit
attributable to
shareholders of
the Company
from continuing
operations
6,515
(508)
(477)
(411)
7,472
22
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 23
ANALYSIS OF CASH PROFIT PERFORMANCE
Net interest income
GROUP NET INTEREST MARGIN (bps)
2023 2022
$m $m Movt
Net interest income
1
16,575
14,874 11%
Net interest margin (%) - cash
1
1.70
1.63 7 bps
Average interest earning assets
975,540
910,037 7%
Average deposits and other borrowings
825,113
780,373 6%
1.
Includes the major bank levy of -$353 million (2022: -$340 million).
Net interest income
increased $1,701 million (11%) driven by a $65.5 billion (7%) increase in average interest earning assets and a 7 bps
increase in net interest margin.
Net interest margin
increased 7 bps driven by favourable deposit margin from a rising interest rate environment, higher earnings on capital
and replicating deposits, and favourable lending mix with a shift towards higher margin variable rate home loans. This was partially offset by
home loan pricing competition in the Australia Retail and New Zealand divisions, unfavourable deposit mix with a shift towards lower margin
term deposits and increased term wholesale funding relative to customer deposits, lower average yield on Markets averages earning assets
due to higher funding costs for commodity assets where the related revenues are recognised as Other operating income, growth in lower
yielding liquid assets to replace Committed Liquidity Facility (CLF) which ceased in the first half of 2023 and other increases in liquid assets to
meet regulatory compliance requirements, and higher wholesale funding rates.
Average interest earning assets
increased $65.5 billion (7%) driven by lending growth across all divisions, higher liquid assets and the impact
of foreign currency translation.
Average deposits and other borrowings
increased $44.7 billion (6%) driven by growth in term deposits across all divisions, higher deposits
and repurchase agreements from other banks, higher certificates of deposit and the impact of foreign currency translation. This was partially
offset by lower at-call deposits.
32
11
2022 Cash
net interest
margin
Assets
pricing
Deposits
pricing
Assets and
funding mix
Capital and
replicating
portfolio
Wholesale
funding
2023 Cash
net interest
margin
subtotal
LiquidityMarkets
activities
2023 Cash
net interest
margin
163
(19)
(8)
(1)
178
(2)
(6)
170
23
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OUR PERFORMANCE (continued)
24 ANZ 2023 ANNUAL REPORT
Other operating income
OTHER OPERATING INCOME ($m)
2023 2022
$m $m Movt
Net fee and commission income
1
1,855
1,907 -3%
Markets other operating income
1,923
860 large
Share of associates' profit/(loss)
225
177 27%
Other
1
322
729 -56%
Total cash other operating income
4,325
3,673 18%
1.
Excluding the Markets business unit.
Net fee and commission income
decreased $52 million (-3%) driven by lower revenue post Worldline business divestment in the prior year,
and lower cards revenue in the New Zealand division due to regulatory fee changes introduced in November 2022. This was partially offset by
higher cards revenue in the Australia Retail division due to recovery in spending, and higher home loan offset account and annual card fees as
waivers related to the transition of Breakfree Package concluded.
Markets other operating income
increased $1,063 million driven by increases in Franchise Revenue across all business lines and geographies
from increased customer activity and more favourable trading conditions, an increase in Balance Sheet driven by favourable yield curve
movements and portfolio repricing, and an increase in Derivative Valuation Adjustments with gains from tightening credit spreads and lower
currency and interest rate volatility.
Share of associates' profit
increased $48 million (27%) driven by increase in the Group’s equity accounted share of profit from P.T. Bank Pan
Indonesia and AMMB Holdings Berhad.
Other decreased $407 million (-56%) primarily driven by a gain on completion of the ANZ Worldline partnership in 2022, lower realised gains
on economic hedges against foreign currency denominated revenue streams offsetting net favourable foreign currency translations
elsewhere in the Group, and a loss on disposal of data centres in Australia. This was partially offset by the net impact from recycling of foreign
currency translation reserves from other comprehensive income to profit or loss on dissolution of a number of international entities in the
current and prior year, and a loss on sale of the financial planning and advice business in 2022.
1,063
48
2022 Cash
other
operating
income
Net fee and
commission
income
Markets
other
operating
income
Share of
associates’
profit/(loss)
Other2023 Cash
other
operating
income
3,673
(52)
(407)
4,325
1
1
24
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 25
Operating expenses
OPERATING EXPENSES ($m)
2023 2022
$m $m Movt
Personnel
5,736
5,296 8%
Premises
684
721 -5%
Technology
1,686
1,621 4%
Restructuring
169
101 67%
Other
1,812
1,840 -2%
Total cash operating expenses
10,087
9,579 5%
Full time equivalent staff
1
40,119
39,172 2%
Average full time equivalent staff
1
39,674
39,672 0%
1.
2022 comparative information has been restated to include full time equivalent staff of the consolidated investments managed by 1835i Group Pty Ltd in the Group Centre division (FTE:185;
Average FTE: 126).
Personnel expenses increased $440 million (8%) driven by incremental costs associated with strategic initiatives, inflationary impacts on
wages including an increase in leave provisions, costs previously attributed to discontinued operations, and the impact of unfavourable
foreign currency translation. This was partially offset by productivity initiatives and investment re-prioritisation.
Premises expenses decreased $37 million (-5%) driven by the lease exit on modification of a significant lease arrangement in the prior year.
Technology expenses increased $65 million (4%) driven by incremental costs associated with strategic initiatives, higher software licence
costs, inflationary impacts on vendor costs, and costs previously attributed to discontinued operations. This was partially offset by benefits
from technology simplification, investment re-prioritisation, and lower amortisation.
Restructuring expenses increased $68 million (67%) driven by operational changes across all divisions.
Other expenses decreased $28 million (-2%) driven by the disposal of non-banking businesses as part of the Restructure, and investment re-
prioritisation. This was partially offset by higher Suncorp Bank acquisition related costs and the initial CSLR Levy.
440
65
68
Premises2023 Cash
operating
expenses
2022 Cash
operating
expenses
PersonnelTechnologyRestructuringOther
9,579
(37)
10,087
(28)
25
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
26 ANZ 2023 ANNUAL REPORT
Credit impairment
2023 2022 Movt
Collectively assessed credit impairment charge/(release) ($m)
152
(311) large
Individually assessed credit impairment charge/(release) ($m)
93
79 18%
Credit impairment charge/(release) ($m)
245
(232) large
Gross impaired assets ($m)
1,521
1,445 5%
Credit risk weighted assets ($b)
349.0
359.4 -3%
Total allowance for expected credit losses (ECL) ($m)
4,408
4,395 0%
Individually assessed as % of gross impaired assets
24.7%
37.5%
Collectively assessed as % of credit risk weighted assets
1.16%
1.07%
COLLECTIVELY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)
The collectively assessed impairment charge of $152 million for 2023 was driven by deterioration in the economic outlook and credit risk. This
was partially offset by favourable changes in portfolio composition, particularly in the Institutional division. The collectively assessed
impairment release of $311 million for 2022 was driven by improvements in credit risk, favourable changes in portfolio composition, and a net
release of management temporary adjustments. This was partially offset by an increase of downside risks associated with the economic
outlook.
INDIVIDUALLY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)
The individually assessed credit impairment charge increased $14 million (18%) driven by increases in the New Zealand and Australia Retail
divisions due to lower write-backs and recoveries. This was partially offset by decreases in the Institutional division due to write-back of a
single name exposure, and the Pacific division due to higher write-backs.
(311)
152
25
PacificNew Zealand
0
2022 Collectively
assessed credit
impairment
release
Australia
Retail
Australia
Commercial
InstitutionalGroup Centre2023 Collectively
assessed credit
impairment
charge
224
235
(18)
(3)
79
93
40
5
42
New Zealand2022 Individually
assessed credit
impairment
charge
(19)
Australia
Retail
Australia
Commercial
Pacific2023 Individually
assessed credit
impairment
charge
InstitutionalGroup Centre
(35)
(19)
26
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 27
GROSS IMPAIRED ASSETS BY DIVISION ($m)
Gross impaired assets increased $76 million (5%) driven by increases in the Australia Retail division due to increase in restructured Home Loans
facilities, and the Institutional division due to the downgrade of several single name collateralised exposures. This was partially offset by
decreases in the Australia Commercial division due to reduced number of downgrades, and the Pacific division due to upgrade of restructured
exposures.
TOTAL ALLOWANCE FOR EXPECTED CREDIT LOSSES ($m)
The increase in total allowance for expected credit losses was driven by a $179 million increase in the collectively assessed allowance for
expected credit loss, partially offset by a $166 million decrease in the individually assessed allowance for expected credit losses.
The increase in collectively assessed allowance for expected credit losses was driven by $171 million for the downside risks associated with the
economic outlook, $54 million from deterioration in credit risk and $30 million from foreign currency translation and other impacts. This was
partially offset by $72 million from favourable changes in portfolio composition, particularly in the Institutional division and $4 million
reduction in management temporary adjustments.
The decrease in individually assessed allowance for expected credit losses was driven by decreases in the Institutional division due to the
write-back of a large single name exposure and Australia Commercial division due to reductions in the level of impaired loans.
130
137
29
PacificAustralia
Retail
Institutional2022 Gross
impaired assets
Australia
Commercial
New ZealandGroup Centre2023 Gross
impaired assets
1,445
(112)
(108)
01,521
43
4
106
PacificInstitutionalAustralia
Retail
4,408
2022 Total
allowance
for expected
credit losses
Australia
Commercial
New ZealandGroup Centre2023 Total
allowance
for expected
credit losses
4,395
(101)
(1)
(38)
27
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
28 ANZ 2023 ANNUAL REPORT
DIVISIONAL PERFORMANCE
Australia Australia New Group
2023 Retail Commercial Institutional Zealand Pacific Centre Group
Net interest margin
1
2.22% 2.70% 0.89% 2.64% 3.91% n/a 1.70%
Operating expenses to operating income
55.6% 39.6% 40.2% 36.3% 69.7% n/a 48.3%
Cash profit from continuing
operations ($m)
1,874 1,440 2,963 1,552 71 (428) 7,472
Net loans and advances ($b)
312.2 61.6 210.2 121.8 1.7 0.2 707.7
Customer deposits ($b)
164.8 113.4 266.5 99.1 3.7 (0.1) 647.4
Number of FTE
11,313 3,514 6,412 6,766 1,013 11,101 40,119
Australia Australia New Group
2022 Retail Commercial Institutional Zealand Pacific Centre Group
Net interest margin
1
2.25% 2.10% 0.90% 2.47% 2.82% n/a 1.63%
Operating expenses to operating income 55.2% 40.3% 48.0% 38.2% 93.3% n/a 51.6%
Cash profit from continuing
operations ($m)
2,009 1,551 1,937 1,449 9 (440) 6,515
Net loans and advances ($b) 290.3 59.7 207.2 113.3 1.8 0.1 672.4
Customer deposits ($b) 150.0 112.2 262.5 92.0 3.8 (0.1) 620.4
Number of FTE 11,107 3,551 6,316 6,793 1,086 10,319 39,172
1.
The net interest margin excluding Markets business unit was 2.39% (2022: 2.17%) for the Group and 2.31% (2022: 1.93%) for the Institutional division.
28
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 29
DIVISIONAL PERFORMANCE
Australia Retail
Lending volumes
increased driven by home loan growth, partially offset by lower unsecured lending.
Net interest margin
decreased driven by asset margin contraction from competitive pressure, unfavourable deposit mix with a shift towards lower
margin term deposits and higher net funding costs. This was partially offset by favourable deposit margins from a rising interest rate
environment, favourable lending mix with a shift towards higher margin variable home loans and higher earnings on capital and
replicating portfolio.
Other operating income
increased driven by higher cards revenue reflecting an increase in consumer
spending, and higher home loan offset account and annual card fees as waivers related to the transition of Breakfree Package
concluded. This was partially offset by lower insurance-related income.
Operating expenses
increased driven by inflationary
impacts, incremental costs associated with strategic initiatives including ANZ Plus and higher restructuring expense. This was
partially offset by productivity initiatives and investment re-prioritisation.
Credit impairment charge
increased driven by higher
collectively assessed credit impairment, and higher individually assessed credit impairment due to lower write-backs and recoveries.
Australia Commercial
Lending volumes
increased driven by SME and Specialist Business lending growth, partially offset by the sale of Investment Lending
business and asset finance run-off.
Net interest margin
increased driven by favourable deposit margins from a rising interest rate
environment and higher earnings on capital and replicating portfolio. This was partially offset by unfavourable deposit mix with a
shift towards lower margin term deposits, higher net funding costs and asset margin contraction from competitive pressure.
Other
operating income
decreased driven by the gain on sale relating to the ANZ Worldline partnership in the prior year and lower impact
of divested business results. This was partially offset by the loss on sale of the financial planning and advice business in the prior year,
and higher cards revenue reflecting an increase in commercial spending.
Operating expenses
increased driven by inflationary
pressure, incremental costs associated with strategic initiatives and higher restructuring expense, partially offset by lower costs post
business divestment and productivity initiatives.
Credit impairment charge
increased driven by higher collectively assessed credit
impairment, and higher individually assessed credit impairment charge.
Institutional
Lending
momentum was sustained, with higher Markets balances partially offset by lower Transaction Banking volumes.
Net
interest margin ex-Markets
increased driven by favourable deposit margins from a rising interest rate environment and higher
earnings on capital and replicating portfolio.
Other operating income
increased primarily driven by higher Markets revenues from
increased customer activity and more favourable trading conditions.
Operating expenses
increased driven by inflationary impacts
and incremental costs associated with strategic initiatives, partially offset by productivity initiatives.
Credit impairment release
increased driven by release of collectively assessed credit impairment, and release of individually assessed credit impairment due to
write-back of a single name exposure.
New Zealand
Lending volumes
increased driven by home loan growth, partially offset by contraction in business lending.
Net interest margin
increased driven by favourable deposit margins from a rising interest rate environment. This was partially offset by asset margin
contraction from competitive pressure and unfavourable deposit mix with a shift towards lower margin term deposits.
Other
operating income
decreased driven by gain on sale of government securities in 2022 and lower cards revenue due to regulatory
changes introduced in November 2022.
Operating expenses
increased driven by inflationary pressure and customer remediation
provision release in the prior year.
Credit impairment charge
increased driven by increase in collectively assessed credit impairment
and increase in individually assessed credit impairment due to lower write-backs and recoveries.
Pacific
Cash profit
increased driven by higher net interest margin, loss on the planned closure of ANZ American Territories in 2022, and
higher credit impairment release due to higher write-backs.
Group Centre
2023 included the recycling of foreign currency translation reserves (FCTR gain) from other comprehensive income to profit or loss
on dissolution of a number of legal entities, a loss on sale of data centres in Australia, transaction related costs, and the initial CSLR
Levy. 2022 included the recycling of FCTR loss from other comprehensive income to profit or loss on dissolution of a number of legal
entities, and a net charge on lease modification impacts of a significant lease arrangement.
29
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
30 ANZ 2023 ANNUAL REPORT
FINANCIAL POSITION OF THE GROUP
Condensed balance sheet
As at
2023 2022
$b $b Movt
Assets
Cash / Settlement balances owed to ANZ / Collateral paid
186.1
185.6 0%
Trading assets and investment securities
134.0
121.4 10%
Derivative financial instruments
60.4
90.2 -33%
Net loans and advances
707.7
672.4 5%
Other
17.8
16.0 11%
Total assets
1,106.0
1,085.6 2%
Liabilities
Settlement balances owed by ANZ / Collateral received
29.7
30.0 -1%
Deposits and other borrowings
815.2
797.3 2%
Derivative financial instruments
57.5
85.1 -32%
Debt issuances
116.0
93.7 24%
Other
18.5
13.2 40%
Total liabilities
1,036.9
1,019.3 2%
Total equity 69.1
66.4 4%
Trading assets and investment securities
increased $12.6 billion (+10%) driven by an increase in government and semi-government bonds,
and treasury bills.
Derivative financial assets and liabilities
decreased $29.8 billion (-33%) and $27.6 billion (-32%) respectively driven by market rate
movements and maturing prior period foreign exchange spot and forwards positions.
Net loans and advances
increased $35.3 billion (+5%) driven by home loan growth in the Australia Retail ($21.6 billion) and New Zealand ($3.0
billion) divisions, higher lending volumes in the Australia Commercial ($1.8 billion) and Institutional ($1.8 billion) divisions and the impact of
foreign currency translation.
Deposits and other borrowings
increased $17.9 billion (+2%) driven by increases in customer deposits in the Australia Retail ($14.8 billion),
Institutional ($2.7 billion) and New Zealand ($1.8 billion) divisions, an increase in certificates of deposit ($7.8 billion) and the impact of foreign
currency translation. This was partially offset by decreases in deposits from banks and repurchase agreements ($11.2 billion) and commercial
paper ($6.3 billion).
Debt issuances
increased $22.3 billion (+24%) driven by the issue of new senior and subordinated debt, including ANZ Capital Notes 8.
30
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
ANZ 2023 ANNUAL REPORT 31
Liquidity
Average
2023 2022
Total liquid assets ($b)
1
268.3
241.7
Liquidity Coverage Ratio (LCR)
1
130%
131%
1.
Full year average, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent
with Basel 3 LCR:
• Highest-quality liquid assets: cash, highest credit quality government, central bank or public sector securities eligible for repurchase with
central banks to provide same-day liquidity.
• High-quality liquid assets: high credit quality government, central bank or public sector securities, high quality corporate debt securities
and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
• Alternative liquid assets: eligible securities listed by the RBNZ and assets qualifying as collateral for the CLF.
The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory
requirements and the risk appetite set by the ANZBGL Board.
The LCR remained above the regulatory minimum of 100% throughout this period.
Funding
2023 2022
$b $b
Customer liabilities (funding)
659.1
628.4
Wholesale funding
316.8
300.3
Shareholders’ equity
69.1
66.4
Total funding
1,045.0
995.1
Net Stable Funding Ratio
116%
119%
The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency.
Net Stable Funding Ratio remained above the regulatory minimum of 100% throughout this period.
During 2023, the ANZ Bank Group issued $39.9 billion term wholesale debt funding (of which $3.0 billion was pre-funding for the 2024
financial year) with a remaining term greater than one year as at 30 September 2023, and $1.5 billion of Additional Tier 1 Capital.
31
Australia and New Zealand Banking Group Limited 2023 Annual Report
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OUR PERFORMANCE (continued)
32 ANZ 2023 ANNUAL REPORT
Capital management
1
2023 2022 Movt
Common Equity Tier 1 (Level 2)
- APRA Basel III
13.3%
12.3%
Credit risk weighted assets ($b)
349.0
359.4 -3%
Total risk weighted assets ($b)
433.3
454.7 -5%
APRA Leverage Ratio
5.4%
5.4%
1.
2022 comparatives are based on APRA Basel 3 requirements, whereas 2023 is based on the Capital Reform Requirements.
ANZ’s framework includes managing to Board approved risk appetite settings and maintaining all regulatory requirements. APRA
requirements at Level 1 and Level 2 include ANZ operating at or above APRA’s expectation for Domestic Systematically Important Banks (D-
SIBs) following the implementation of APRA’s Capital Reform which was effective January 2023.
APRA, under the authority of the
Banking Act 1959, sets minimum regulatory requirements for banks including what is acceptable as
regulatory capital and provides methods of measuring the risks incurred by ANZ Bank Group.
APRA Capital Reform
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are set out in APRA’s
Banking Prudential Standard documents. ANZ implemented these new requirements from 1 January 2023. The application of APRA Capital
Reform reduced RWA by $34.5 billion, equivalent to a 100 bps CET1 ratio benefit. This was partially offset by APRA’s expectations that ADIs
operate a higher capital ratio to maintain an unquestionably strong level.
The ANZ Bank Group’s Common Equity Tier 1 ratio was 13.3% based on APRA Basel III standards, exceeding APRA’s minimum requirements. It
increased 105 bps driven by cash earnings, and APRA Capital Reform impacts. This was partially offset by the impact of dividends paid during
the year, underlying RWA movement, capital deductions and surplus capital transferred to ANZGHL as part of the Restructure.
At 30 September 2023, the Group’s APRA leverage ratio was 5.4% which is above the 3.5% proposed minimum for internal ratings-based
approach ADI (IRB ADI), which includes ANZ.
Dividends
ANZBGL paid the following dividends during the year:
• $2,213 million final dividend to ANZ shareholders on 15 December 2022;
• $1,000 million special dividend to its intermediate holding company, ANZ BH Pty Ltd, a wholly owned subsidiary of ANZGHL, as part of the
Restructure on 3 January 2023; and
• $2,387 million interim dividend to ANZ BH Pty Ltd on 3 July 2023.
On 10 November 2023, the Directors proposed a final dividend of $2,825 million be paid on 22 December 2023, to ANZ BH Pty Ltd.
Further details on dividends provided for or paid during the year ended 30 September 2023 are set out in Note 6 Dividends in the Financial
Report.
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LEFT BLANK
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2023 Remuneration
Report – audited
Dear Shareholder,
ANZ delivered strong results strategically,
financially and culturally in financial year
2023. Our performance highlights are
contained in the Chairman and CEO’s
messages within the Annual Report.
The Group achieved a total shareholder
return (TSR) of 20% over the past financial
year with contribution from both share
price appreciation and dividends paid.
ANZ’s three-year TSR was 76%.
The team has produced good year-on-year
outcomes while investing in a number of
longer-term strategic initiatives that will
position us well for the future. This includes
REMUNERATION
REPORT
ongoing investment in our Retail Platform
ANZ Plus which at the end of 2023 had
465K customers and $9.4bn in deposits,
growth in our industry leading high
returning Institutional Payments Cash
Management and Platform Services
businesses and in our Commercial business
which delivered close to 20% of ANZ’s
Group Profit.
The Group maintained a high degree of risk
discipline during this volatile period with
the foundational work completed over prior
years positioning us well to manage
financial and non-financial risk in a
considered and thoughtful way. There was
a material uplift in the work to embed a
non-financial risk framework, and other risk
related programs remain on track despite
their complexity.
Our employee engagement score has
remained the highest in the Australian
banking sector and improved even further
to now sit equal to the world’s best
companies in any industry. We have
made substantial progress in hiring and
promoting women into leadership roles,
and significantly, three of our four Divisions
are now led by women.
2023 variable remuneration
outcomes
As a Board, we believe we have
appropriately recognised the results
achieved by the executive team who have
delivered a strong result for the bank and
shareholders, in a challenging environment.
Our Chief Executive Officer (CEO), Shayne
Elliott, performed well this year and in the
Board’s view deserves an assessment of well
above target for his personal objectives.
He also has ultimate accountability for the
broader Group’s performance which was
assessed as above target.
The Board determined the appropriate
2023 Short Term Variable Remuneration
(STVR) outcome was 96% of his maximum
opportunity (120% of target opportunity).
This is the first above target STVR award
for the CEO since commencing in the
role in 2016.
2023 Long Term Variable Remuneration
(LTVR) was the first LTVR award under our
new executive remuneration structure.
A recap of the remuneration structure
(to ensure compliance with APRA CPS 511
Remuneration), is summarised in section 3.2.
The CEO’s proposed 2024 LTVR of $3.375m
will be subject to a shareholder vote at the
upcoming Annual General Meeting (AGM).
For Disclosed Executives, the Board
approved 2023 STVR outcomes which
range from 80% to 100% of maximum
opportunity (average 89%). This reflects
their individual and Divisional performance
and the above target assessment for Group
performance. 2023 LTVR (50% performance
rights and 50% restricted rights) was
awarded at full opportunity at the start
Ilana Atlas, AO
Chair – Human Resources Committee
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Ilana Atlas, AO Chair – Human Resources Committee
of the 2023 year, following the Board’s
pre grant assessment for restricted rights
determining that no reduction
was required.
There were no performance rights due
to vest in financial year 2023, as a result
of a change in the performance period
from three years to four years in 2019.
2023 fixed remuneration
As reported last year, effective for 2023,
Disclosed Executives (excluding the CEO),
received a fixed remuneration (FR)
adjustment of ~4% as a result of the
changes we made to the executive
remuneration structure in 2022 (i.e., to
balance the significant reduction in their
maximum variable remuneration
opportunity from 402% to 235% of FR).
There were no further increases except for
the Group Executive, Technology & Group
Services who received a market adjustment
reflecting the expansion of responsibilities
effective 1 November 2022.
Changes to the way we
remunerate executives
For future LTVR awards of performance
rights (i.e., these changes apply from
financial year 2024 and do not apply
to awards currently on foot), the Board
has approved that:
•for the relative TSR hurdle: DBS
Bank Limited to be removed from
the Select Financial Services (SFS)
comparator group to better balance the
weighting of international peers in our
comparator group;
•for the absolute Compound Annual
Growth Rate (CAGR) TSR hurdle:
CAGR targets to be based on the time
weighted cost of capital over the
four-year performance period (rather
than the cost of capital at the start of the
period), to better reflect cyclical factors
impacting shareholders for improved
shareholder alignment.
See section 7.2.5 for detail.
Non-Executive Director (NED) fees
While there were no changes to NED fees
for 2023, some uplifts for 2024 have been
approved. For 2024, there is no uplift to
the Board Chair fee, a 2% uplift to the NED
member fee (noting that this is the first
increase since 2016), and uplifts to fees
for Committee chairs and members (see
section 9.1).
This was a year of good performance, where
we achieved good results in the year, while
also making significant progress towards
creating long-term value. Thank you to all
our employees for their commitment and
contribution this year.
On behalf of the Board, I invite you to
consider our Remuneration Report which
will be presented to shareholders at the
2023 AGM.
CONTENTS
1. Who is covered by this report 36
2. 2023 outcomes at a glance 37
3. Overview of ANZ’s
remuneration structure 38
4. Group performance 40
5. 2023 CEO and Disclosed
Executive outcomes 44
6. Structure and delivery:
performance 50
7. Structure and delivery:
remuneration 51
8. Accountability and
Consequence Framework 58
9. Non-Executive Director (NED)
remuneration 60
10. Remuneration governance 62
11. Other information 64
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The Remuneration Report for Australia and New Zealand Banking Group Limited (ANZBGL) outlines our
remuneration strategy and structure and the remuneration practices that apply to Key Management
Personnel (KMP). This report has been prepared, and audited, as required by the Corporations Act 2001.
It forms part of the Directors’ Report.
It should be noted that ANZ Group Holdings Limited (ANZGHL) replaced Australia and New Zealand Banking Group Limited (ANZBGL)
as the listed entity on 3 January 2023 under a scheme of arrangement approved by shareholders at the Annual General Meeting (AGM) on
15 December 2022. This report includes disclosures for the full financial year 2023 (1 October 2022 to 30 September 2023). Ordinary shares
and employee equity (deferred shares, deferred share rights, restricted rights and performance rights) held prior to 3 January 2023 were
previously ANZBGL related equity – post the listing of ANZGHL the equity was converted to ANZGHL related equity.
References to ‘the Board’
throughout this report mean the Boards of ANZGHL and ANZBGL.
Section 4 Group Performance relates to ANZGHL rather than ANZBGL given
this forms the basis for determining performance and remuneration outcomes for the CEO and Disclosed Executives.
1. The responsibility for ANZ’s Capability Centres (formally known as Service Centres) in an acting capacity was taken over by Sreeram Iyer, Chief Operating Officer Institutional, who does
not meet the definition of a KMP.
WHO IS COVERED BY THIS REPORT
1
KMP are Directors of the Group (or
entity) (whether executive directors or
otherwise), and those personnel with
a key responsibility for the strategic
direction and management of the
Group (or entity) (i.e., members of the
Group Executive Committee (ExCo))
who have Banking Executive
Accountability Regime (BEAR)
accountability and who report to the
Chief Executive Officer (CEO) (referred
to as Disclosed Executives).
1.1 Disclosed Executive and Non-
Executive Director changes
1
There were several changes to our KMP
during the 2023 year:
•Graham Hodges commenced as a
Non-Executive Director (NED) on
8 February 2023.
•Graeme Liebelt retired as a NED on
15 December 2022, at the conclusion
of the 2022 AGM.
•Holly Kramer commenced as a NED
on 1 August 2023.
•Gerard Florian was appointed to the
expanded role of Group Executive,
Technology & Group Services, and
Antony Strong was appointed to
ExCo as Group Executive, Strategy &
Transformation, effective
1 November 2022.
•Clare Morgan commenced with
ANZ in the Group Executive, Australia
Commercial role effective 6 March 2023.
•Kathryn van der Merwe concluded as
ANZ’s Group Executive, Talent & Culture
and Service Centres in May 2023 –
the responsibilities of the role were
subsequently split on an acting capacity
1
,
with Richard Howell appointed as Acting
Group Executive, Talent & Culture from
1 June 2023.
1.2 Key Management Personnel (KMP)
The KMP whose remuneration is disclosed in this year’s report are:
2023 Non-Executive Directors (NEDs) – Current
P O’Sullivan Chairman
I AtlasDirector
J HaltonDirector
G HodgesDirector from 8 February 2023 (ANZBGL NED only)
J KeyDirector
H KramerDirector from 1 August 2023
J MacfarlaneDirector
C O’ReillyDirector
J SmithDirector
2023 Non-Executive Directors (NEDs) – Former
G LiebeltFormer Director – retired 15 December 2022
2023 Chief Executive Officer (CEO) and Disclosed Executives – Current
S ElliottCEO and Executive Director
M CarnegieGroup Executive, Australia Retail
K CorballyChief Risk Officer (CRO)
F FaruquiChief Financial Officer (CFO)
G FlorianGroup Executive, Technology & Group Services from 1 November 2022
(previously Group Executive, Technology to 31 October 2022)
R HowellActing Group Executive, Talent & Culture (GE T&C) from 1 June 2023
C MorganGroup Executive, Australia Commercial from 6 March 2023
A StrongGroup Executive, Strategy & Transformation from 1 November 2022
A WatsonGroup Executive and CEO, New Zealand
M WhelanGroup Executive, Institutional
2023 Disclosed Executives – Former
K van der
Merwe
Former Group Executive, Talent & Culture and Service Centres (GE T&C) –
concluded in role 31 May 2023 and ceased employment 30 June 2023
Changes to KMP since the end of 2023 up to the date of signing the Directors’ Report,
as announced:
•Richard Howell ceased as Acting Group Executive, Talent & Culture, effective 8 October 2023.
•Elisa Clements appointed to ExCo as Group Executive, Talent & Culture, effective 9 October 2023.
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2023 OUTCOMES AT A GLANCE
2
Chief Executive Officer
(CEO) remuneration
FOR 2023, OUR CEO:
•Had no increase to fixed
remuneration (FR).
•Was awarded Short Term Variable
Remuneration (STVR) of 96% of
maximum opportunity, reflecting
his overall performance assessment of
well above target (see section 5.2.1).
•Was awarded Long Term Variable
Remuneration (LTVR) of $3.375m
following shareholder approval at
the 2022 AGM.
•Received total remuneration of $4.6m
in 2023 (i.e., includes the value of prior
equity awards which vested in 2023
as per section 5.1).
Disclosed Executive
remuneration
FOR 2023:
•Disclosed Executives received a FR
adjustment on 1 October 2022 (in
accordance with changes we made
to the executive remuneration structure
in 2022, previously disclosed in the 2022
Remuneration Report). There were no
further increases to FR for Disclosed
Executives for 2023 except for the Group
Executive, Technology & Group Services
who received a market adjustment
reflecting the expansion of responsibilities
effective 1 November 2022.
•Disclosed Executives’ STVR outcomes
averaged 89% of maximum opportunity,
with individual outcomes ranging from
80% to 100% of maximum opportunity.
•Disclosed Executives were awarded their
full LTVR opportunity of 135% of FR (100%
of FR for the CRO) (see section 5.4).
Restricted rights and Performance
rights outcomes (CEO and Disclosed
Executives)
The Board determined that the 2023 LTVR
restricted rights (RR) should be made at full
award value based on the outcome of the
pre grant assessment (see section 5.3).
There were no performance rights (PR)
due to vest in financial year 2023, as a result
of a change in the performance period
from three years to four years (i.e., 2018 PR
award vested in Nov/Dec 2021, however
2019 PR award is not due to vest until
Nov/Dec 2023).
Non-Executive Director (NED) fees
No increases to NED fees for 2023
(see section 9.1).
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3.1 Remuneration framework overview
The following overview highlights how the executive remuneration framework supports ANZ’s purpose
and strategy, reinforces ANZ’s focus on risk management, and aligns to shareholder value.
1. See the ‘Our purpose and strategy’ section of the Annual Report.
Is underpinned by our Performance and Remuneration Policies which include our Reward Principles:
Attract, motivate
and keep great
people
Reward our people for
doing the right thing having
regard to our customers
and shareholders
Focus on how things are
achieved as much as what
is achieved
Fair and simple
to understand
With remuneration delivered to our CEO and Disclosed Executives through:
Fixed remuneration (FR)Variable remuneration
Short Term Variable Remuneration (STVR) Long Term Variable Remuneration (LTVR)
Reinforced by aligning remuneration and risk:
Assessing behaviours
based on ANZ’s values
and risk/compliance
standards (including
the BEAR)
Determining variable
remuneration
outcomes with risk
as a modifier –
impacting outcomes
at both a pool and
individual level
Weighting
remuneration toward
the longer-term with a
significant proportion
at risk
Emphasising risk in
the determination
and vesting of LTVR RR
(see section 7.2.4)
Reinforcing the
importance of risk
culture in driving
sustainable long-term
performance in the
LTVR design
Providing material
weight to non-financial
metrics (particularly
risk) in line with APRA
requirements
Ensuring risk measures
are considered over
a long time horizon
(up to 5 and 6 years)
Determining
accountability and
applying consequences
where appropriate
Strengthening
risk consequences
with clawback
(see section 7.3)
Prohibiting the hedging
of unvested equity
While supporting the alignment of executives and shareholders through:
Substantial
shareholding
requirements
Significant variable
remuneration deferral
up to 5 and 6 years in
ANZ equity
Use of relative and
absolute total
shareholder return
(TSR) hurdles
Consideration of cash
profit and economic
profit in determining
the ANZ Incentive
Plan (ANZIP) variable
remuneration pool
Consideration of the
shareholder experience
(in respect of the share
price and dividend) in
determining ANZIP pool
and individual outcomes
While governed by:
The Human Resources (HR) Committee and the Board determining FR and the variable remuneration outcomes for the CEO and each
Disclosed Executive. Additionally, the CEO’s LTVR outcome is also subject to shareholder approval at the AGM.
Board discretion (with supporting decision-making frameworks) is applied when determining performance and remuneration outcomes
(including grant of short and long-term variable remuneration awards), before any scheduled release of previously deferred remuneration
(see section 7.3), before the vesting of LTVR RR (see section 7.2.4), and in applying any required consequences (see section 8).
ANZ’S PURPOSE AND STRATEGY1
3 OVERVIEW OF ANZ’S REMUNERATION STRUCTURE
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3.2 Overview of remuneration structure
CEO and Disclosed Executives (DEs) (excluding CRO1)
As communicated in our 2022 Remuneration Report, the introduction of a new Prudential Standard CPS 511 Remuneration by our regulator
APRA drove a detailed review of the way we reward our CEO and Disclosed Executives. The Board approved changes to the executive
remuneration structure, effective from the 2022 financial year.
The structure has been designed to:
•Maintain a strong focus on performance and risk management
•Promote effective management of financial and non-
financial risks
•Provide material weight to non-financial metrics for variable
remuneration outcomes (in line with APRA requirements)
•Ensure long-term focus and shareholder alignment
•Balance meeting the CPS 511 requirements and having
a market competitive remuneration structure
Key features of the structure include:
•Balanced vesting over the short and long-term, with deferral of
a significant proportion of variable remuneration (~80%) over
2 to 5 years (and over 2 to 6 years for the CEO)
•Strong risk and remuneration consequences, including clawback
applying for two years post the payment/vesting of all variable
remuneration
•Rewarding executives for both annual performance and also
performance over the longer term
•Future focused LTVR comprising a combination of risk-based
and TSR hurdles
YEAR 1 Cash 100%
YEAR 2 DS 25%
YEAR 3 DS 25%
YEAR 1
Cash 50%
Mix at
Maximum
Maximum
opportunity
Delivery
Timing/
deferral
1. CRO mix: 33.3% FR / 33.3% STVR / 33.3% LTVR. STVR maximum opportunity: the same as CEO/DE at 100% of FR, LTVR maximum opportunity: 100% of FR and delivered as 100% RR
to support independence.
2. If the CEO receives above target STVR, the amount above target will be delivered as 40% cash and 60% DS (20% year 4, 20% year 5, 20% year 6) to ensure
compliance with the minimum deferral requirements with respect to BEAR and APRA's Prudential Standard CPS 511 Remuneration.
Fixed Remuneration
(FR)
30%
100% of FR
Cash and superannuation
contributions
Short Term Variable
Remuneration
(STVR)
2
30%
100% of FR
50% Cash
50% Deferred
shares (DS)
Awarded at end of year based
on Group and individual
performance
50% Restricted
rights (RR)
50% Performance
rights (PR)
Long Term Variable
Remuneration
(LTVR)
40%
135% of FR
~2 yr HP
~1 yr HP4-year Performance Period
All variable remuneration is subject to the Board’s ongoing discretion
to apply in-year adjustments, malus and clawback
•Awarded at start of year subject to
–RR: Pre grant assessment (risk-based measures)
–RR & PR: Shareholder approval at AGM for
CEO award
•Performance condition tested at end of 4-year
performance period
–RR: Pre vest assessment (risk-based measures)
–PR: Relative and absolute TSR hurdles
For both RR and PR:
Deferral period = 4-year Performance Period + Holding Period (HP)
YEAR 4
CEO: 33% / DE: 50%
YEAR 5
YEAR 6
CEO: 33% / DE: 50%
CEO 34%
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4
GROUP PERFORMANCE
4.1 Assessment against the ANZ
Group Performance Framework
for 2023
The ANZ Group Performance Framework
is approved by the Board at the start of
each year. It plays a key role to:
•message internally what matters most;
•reinforce the importance of sound
management in addition to risk,
financial, customer, and people
outcomes; and
•inform focus of effort, prioritisation
and decision-making across ANZ.
Assessment of performance against the
ANZ Group Performance Framework
provides a key input:
•in determining the size of the ANZ
Incentive Plan (ANZIP) pool, which
funds STVR for Disclosed Executives; and
•in the overall performance
assessment for the CEO (50%
weighting) and Disclosed Executives
(25% - 50% weighting), which informs
STVR outcomes.
A range of objective indicators and
subjective factors are considered
including management input on work
undertaken, evidence of outcomes
realised and lessons learned, and with
consideration given to the operating,
regulatory and competitive environment.
Overall, performance in 2023 was
assessed as above target with all
business lines contributing strongly.
On the following pages we have
outlined ANZ’s 2023 performance
objectives and provided a summary of
outcomes for each of the key performance
categories to inform the overall
assessment for 2023.
As managing risk appropriately is fundamental to the way
ANZ operates, risk forms an integral part of the assessment,
directly impacting the overall ANZ Group Performance
Framework outcome (a modifier ranging from 0% to 110% of
the ANZ Group Performance assessment).
Modifier
0 TO 110%
Overall assessment
On target (no adjustment)
35%
weight
30%
weight
35%
weight
RISK
CUSTOMER
PEOPLE &
CULTURE
FINANCIAL
DISCIPLINE &
OPERATIONAL
RESILIENCE
Group Performance
Assessment
Above target
OVERALL
Overall assessment
Well above
target
Overall assessment
Below target
Overall assessment
Above target
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FINANCIAL DISCIPLINE & OPERATIONAL RESILIENCE
Assessment (35% weight): Well above target
Key objectivesOutcomes
Run core businesses well, focused on delivering sustainable growth
and operational improvements
Below Target Above
Deliver Group economic profit to plan or better in a high-quality manner
Economic Profit
(ex large / notables
1
)
Contain total cost growth to support the ambition of our 3yr Strategic Plan
Total Cost Growth
(fx adj ex large
/ notables
1
)
Deliver / progress key change programs – plan for day 1 integration of
Suncorp Bank (SB), NOHC structure, BS11, Ngā Tapuwae (NT )
Programs
•Significant improvement in financial performance (see section 4.2.1) with Economic Profit
2
(+293%) and Cash NPAT (+14%) up YoY, as a result of:
–Strong growth in net interest income (+11% YoY ), driven by (i) disciplined volume growth across our divisions and (ii) improved margin outcomes
– in a supportive rate environment, but in the face of continuing home loan competition and customer shifts to higher rate deposit products.
–All four businesses performing strongly against their Plans.
–Continued low credit impairment charges ($245m), as a result of improved portfolio credit quality, and long-term discipline regarding customer selection.
•Costs were managed well in line with market guidance (of +5% YoY, fx adj ex large/notables), with significant productivity gains and management
focus on our investment slate, which helped to partially offset significant headwinds (e.g., inflationary pressure).
•We implemented the NOHC structure in a short time frame, BS11 was delivered (the first of any bank in NZ), Ngā Tapuwae has launched (to move
ANZ NZ core to cloud and redesign business for greater resilience, agility and lower cost), and we are operationally ready to integrate Suncorp
(if our application to the Australian Competition Tribunal is successful).
CUSTOMER
Assessment (35% weight): Below target
Key objectivesOutcomes
Deliver great customer outcomes, focused on improving the financial wellbeing,
sustainability and experience of priority segments
Below Target Above
Australia Retail: accelerate ANZ Plus customer acquisition and engagement and
ensure Plus Home Loan is in market, including the broker channel; and maintain
home lending turnaround times in line with or better than major banks
Aus Retail
Aus Retail
Australia Commercial: materially improve customer and banker experience
Aus Commercial
New Zealand: continue to make banking easier
NZ
Institutional: make meaningful progress on environmental sustainability strategies
Institutional
Business Services: transition our four business services to a uniform service approach
Business Services
•Australia Retail: Significant progress with ANZ Plus, exceeding 2023 targets related to active customers (465K vs 400K target), funds under
management (FUM) ($9.4bn vs $4bn target), and Net Promoter Score (NPS) scores (e.g., Join NPS of +52 vs 45 target). Plus Home Loans launched,
although not via the broker channel as planned. Turnaround times in Classic Home Loans have been stable for the entire year and within the range
targeted (<3 days), while growing market share (32 bps), and improving Home Lending NPS from 71.1 in 2022 to 76.1 in 2023.
•Australia Commercial: Strategy is being executed with early signs of success (e.g., faster and simpler application process; time to final decision on a
small business loan improved from 12 to 9.3 days, launch of market leading “streamlined unsecured lending’’ offering simpler processes, NPS of 29.9
vs 26.5 in 2022); however we targeted a more material improvement in customer and banker experience.
•New Zealand: Remain #1 for Brand Consideration. Data capability enhanced with acquisition of DOT Loves Data. Successful launch of Business
Regrowth Loans and Business Visa Debit for business customers.
•Institutional: Continued leading Asia Pacific market in improving social and environmental outcomes and supporting our customers’ transition
to net zero – having achieved close to $47bn of our 2025 sustainable solutions target of $50bn on 31 March 2023, and rolled out a new $100bn
target (by the end of 2030) from 1 April 2023. Institutional extended its leadership in the Peter Lee
3
surveys, with the highest Relationship Strength
Index scores ever achieved by any bank in both Australia and NZ, and our best ever Transaction Banking results (including ranking #1 for product
development and innovation, and system implementation for the first time), further strengthening our leadership in the provision of Payments
and Cash Management solutions in Australia and NZ (#1 market share).
•Business Services: Our ambition to build enterprise-wide Business Services as a more efficient and resilient path to service delivery, is behind plan,
however progress has been made.
SB Plan, NT
Launch, BS11
$552m
5%
$1,596m
NOHC
Lending
times
Plus in
Broker
Plus
1. 2. 3. See footnotes over page.
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PEOPLE & CULTURE
Assessment (30% weight): Above target
Key objectivesOutcomes
Build a culture where our diverse teams are engaged and optimised for successBelow Target Above
Maintain industry leading employee engagement
Continue to improve our project delivery capability
Retain high performers (particularly those with the critical skills and priority
capabilities to reinvent banking)
•We have continued our purposeful focus on strengthening leadership, capability, culture and project delivery, as evidenced by the
execution of a range of supporting initiatives delivering value, our highly engaged workforce, and recognition as a great place to work.
–Our engagement score is industry leading for financial services at 87% (vs 84% in 2022), and equal to the world’s best companies in any
industry, and we have also maintained our #1 ranking amongst major bank peers in Glassdoor
4
employer of choice ratings.
–We made good progress on Women in Leadership at 37.3% (vs a target of 36.9%), and up on 2022 outcome of 35.9%. Three out of four of
our business divisions are led by women.
–Our project delivery capability continues to improve, and after a sustained effort and investment we are seeing material uplift in our
delivery capability (supported by various independent reports to the Board).
–Uplift in leadership capability with investment in a range of programs (e.g., Lead@ANZ rolled out to ~5,600 people leaders, Executive
Leadership Series with NPS>50). Capability uplift in priority areas (e.g., launch of Engineering Career Pathways to support the development
of technical mastery across critical specialisations, roll out of a Customer Coaching program, implementation of Career Programs strategy
resulting in a 100% increase in applications to the 2024 Graduate Program).
90%94%
87%
BOARD DISCRETION
Assessment: No adjustment
After several years of focus on simplifying ANZ through the sale of businesses and cost restructuring, ANZ has successfully delivered
sustainable growth in the remaining core businesses against a backdrop of increased changes in consumer behaviour, a slowdown in the
economy, as well as increasing disruption in Financial Services (via the rise of new digitally enabled business models and non-bank
competitors). The outcome also aligns strongly with the shareholder experience (see section 4.2.2).
Overall, the Board view that an ‘above target’ assessment accurately reflects overall performance in 2023, noting that STVR outcomes for the
CEO and Disclosed Executives also take into consideration performance against individual objectives.
OVERALL ASSESSMENT
Assessment: Above target
The above target assessment appropriately reflects our performance with all business lines each contributing strongly together to achieve
above target financial results and strong performance against our strategic objectives - positioning ANZ well for the future.
1. The Group’s results include a number of items collectively referred to as large/notable items. Given the nature and significance they are considered separately given the target was established
without consideration of large notables.
2. Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is not subject to audit by the external auditor.
Economic profit is calculated via a series of adjustments to cash profit with the economic credit cost adjustment replacing the accounting credit loss charge; the inclusion of the benefit of
imputation credits (measured at 70% of Australian tax) and an adjustment to reflect the cost of capital. The economic profit increase in 2023 was driven by higher cash profit, favourable economic
credit cost adjustment and higher imputation credits, partially offset by higher cost of capital.
3. Peter Lee Associates 2022 Large Corporate and Institutional Relationship Banking surveys, Australia
and NZ.
4. Glassdoor is a website where employees and former employees anonymously review companies and their management.
RISK MODIFIER
Assessment: On target (no adjustment)
Continued sound risk discipline with no major regulatory, credit, audit or market breaches.
•Strong credit outcome with no material credit events recorded.
•Ongoing progress in delivering key regulatory commitments and uplifting non-financial risk management (through the further
implementation of our new Group wide non-financial risk framework), although the APRA imposed operational risk overlay of
$500m remains.
•Strengthening risk culture (including achieving the target state of ‘Sound’ and continuing to achieve a high ‘Speak Up’ index of 84%),
reflecting sustained efforts to encourage people to speak up and challenge each other respectfully.
•No repeat adverse audits, no material Risk Appetite Statement breaches, and no material non-financial risk events.
84%
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4.2 ANZ Performance Outcomes
4.2.1 ANZ’S FINANCIAL PERFORMANCE 2019–2023
When determining variable remuneration outcomes for the CEO, Disclosed Executives and employees a range of different financial indicators
are considered. The Group uses cash profit
1
as a measure of performance for the Group’s ongoing business activities, as this provides a basis
to assess Group and Divisional performance against earlier periods and against peer institutions. The adjustments made in arriving at cash
profit are included in statutory profit which is subject to audit. Although cash profit is not audited, the external auditor has informed the
Audit Committee that the cash profit adjustments have been determined on a consistent basis across each period presented.
Statutory profit is flat compared to the prior financial year, while cash profit from continuing operations has increased almost 14%.
Underlying performance reflects stronger revenue from lending volumes across our divisions together with improved net interest margin in
a supportive rate environment which enable continued focus on investing for growth.
The table below provides ANZ’s financial performance, including cash profit, over the last five years.
20192020202120222023
Statutory profit attributable to ordinary shareholders ($m)5,9533,5776,1627,1197,098
Cash profit
1
($m, unaudited)6,1613,6606,1816,4967,405
Cash profit – Continuing operations ($m, unaudited)6,4703,7586,1986,5157,405
Cash profit before provisions – Continuing operations
($m, unaudited)
9,9588,3698,3968,96810,754
Cash ROE (%) – Continuing operations (unaudited)10.96.29.910.410.9
Cash EPS – Continuing operations (unaudited)220.2128.7216.5228.8247.1
Share price at 30 September ($)
(On 1 October 2018, opening share price was $27.80)
28.5217.2228.1522.8025.66
Total dividend (cents per share)16060142146175
Total shareholder return (12 month %)9.2(36.9)70.7(14.0)20.0
1. Cash profit excludes non-core items included in statutory profit with the net after tax adjustment resulting in an increase to statutory profit of $307m for 2023, made up of several items. It is
provided to assist readers understand the results of the core business activities of the Group.
4.2.2 ANZ TSR PERFORMANCE (1 TO 10 YEARS)
The table below compares ANZ’s TSR performance against the median TSR and upper quartile TSR of the PR Select Financial Services (SFS)
comparator group
1
over one to ten years, noting that for this table TSR is measured over a different timeframe (i.e., to 30 September 2023) to
the performance period for our PR.
•ANZ’s TSR performance was above the median TSR of the SFS comparator group1 when comparing over one year; and
•below the median over three, five and ten years.
Years to 30 September 2023
13510
ANZ (%)20.076.319.746.1
Median TSR SFS (%)14.677.329.860.0
Upper quartile TSR SFS (%)22.390.960.9128.2
1. See section 7.2.5 for details of the SFS comparator group.
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5
2023 CEO AND DISCLOSED EXECUTIVE OUTCOMES
Variable remuneration is ’at risk’
remuneration and can range from zero
to maximum opportunity.
With the exception of the CEO’s STVR,
individual variable remuneration
outcomes for all other employees
including STVR for Disclosed Executives
are funded under the ANZ Incentive
Plan (ANZIP). The Board decides the
CEO’s variable remuneration outcomes
separately to help mitigate potential
conflicts of interest. See section 10.1.3.
At the end of each financial year the Board
exercise their judgement to determine a fair
and reasonable ANZIP pool. An assessment
of financial performance guides the pool
range but it is not a formulaic outcome. The
Board considers a range of factors including:
•The ANZ Group Performance Framework
assessment (see section 4.1).
•The quality of earnings and operating
environment.
•The shareholder experience during
2023 such as shareholder returns and
dividend comparison with prior periods.
•Our Reward Principles such as attract,
motivate and keep great people (see
section 7).
Annual performance objectives are set at
the Group and also at the Divisional/
individual level at the start of each year.
They are designed to be stretching yet
achievable. The HR Committee and the
Board make variable remuneration outcome
decisions for the CEO and Disclosed
Executives following lengthy and detailed
discussions and assessment, supported by
comprehensive analysis of performance
from a number of sources.
Where expectations are met, STVR is likely
to be awarded around 80% of maximum
opportunity. Where performance is below
expectations, STVR will be less (potentially
down to zero), and where above
expectations, STVR will be more (potentially
up to maximum opportunity).
LTVR will be awarded at the beginning of
the year, based on full opportunity unless
the LTVR RR pre grant assessment results
in any reduction (and is also subject to
shareholder approval for the CEO).
Remuneration outcomes have been
presented in the following three ways:
i. RECEIVED remuneration
(see section 5.1)
ii. AWARDED remuneration
(see sections 5.2, 5.3 and 5.4)
iii. STATUTORY remuneration
(see section 11.1)
5.1 2023 Received remuneration
This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2023 financial year as cash paid, or in the
case of prior equity awards, the value which vested in 2023.
FR adjustments were received by Disclosed Executives in accordance with the executive remuneration structure changes made in 2022, as disclosed
in the 2022 Remuneration Report. There were no other adjustments to FR for Disclosed Executives in 2023, apart from the Group Executive,
Technology & Group Services whose FR was increased on 1 November 2022 from $1.15m to $1.25m to reflect the expansion of responsibilities
and to improve alignment with the market.
2023 Received remuneration – CEO and Disclosed Executives:
Received value includes the value of prior equity awards which vested in that year
Fixed
remuneration
$
Cash variable
remuneration
$
Total cash
$
Deferred variable
remuneration which
vested during the year
1
$
Other deferred
remuneration
which vested
during the year1
$
Actual
remuneration
received
2
$
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott 2,500,000 1,160,000
3,660,000
919,413 -
4,579,413
M Carnegie 1,250,000 550,000
1,800,000
561,264 -
2,361,264
K Corbally 1,250,000 532,500
1,782,500
471,287 -
2,253,787
F Faruqui 1,250,000 600,000
1,850,000
795,274 -
2,645,274
G Florian
3
1,242,000 497,500
1,739,500
496,698 -
2,236,198
R Howell
4
231,792 180,000
411,792
- -
411,792
C Morgan
4,5
627,000 250,000
877,000
- 407,000
1,284,000
A Strong
4
690,000 315,100
1,005,100
291,162 -
1,296,262
A Watson
6
1,106,505 472,570
1,579,075
450,151 -
2,029,226
M Whelan 1,460,000 730,000
2,190,000
753,723 -
2,943,723
FORMER DISCLOSED EXECUTIVES
K van der Merwe
1,4
780,000 n/a 780,000 488,194 - 1,268,194
1. Deferred variable remuneration which either vested or lapsed/forfeited during the year is the point in time value of previously deferred remuneration granted as deferred shares, deferred
shares rights and/or restricted rights/performance rights, and is based on the one day Volume Weighted Average Price (VWAP) of the Company’s shares traded on the ASX on the date of vesting
or lapsing/forfeiture multiplied by the number of deferred shares/deferred share rights and/or restricted rights/performance rights. No previously deferred variable remuneration lapsed/forfeited
during the year for the CEO or Disclosed Executives (due to no performance rights due to vest in 2023) other than for K van der Merwe -$4,880,967, which relates to forfeiture on resignation of
unvested deferred remuneration.
2. The sum of fixed remuneration, cash variable remuneration and deferred variable remuneration which vested during the year. 3. Fixed remuneration reflects
changes in fixed remuneration during the financial year due to expanded role (G Florian).
4. Fixed remuneration based on time as a Disclosed Executive (R Howell, C Morgan, A Strong, K van der
Merwe).
5. Other deferred remuneration for C Morgan relates to deferred remuneration forfeited and bonus opportunity forgone as a result of joining ANZ, that was deferred as cash and vested
during the year.
6. Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant year.
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5.2 Awarded STVR
At the end of the financial year, the HR
Committee makes a recommendation
to the Board for their approval in respect
of STVR outcomes.
STVR will vary up or down year-on-year, it is
not guaranteed, and may range from zero to
a maximum opportunity.
These tables show a year-on-year
comparison of STVR awarded to the CEO,
and Disclosed Executives for the 2022 and
2023 performance periods. STVR awarded
reflects actual cash and the deferred shares
component of STVR awarded in respect
of the relevant financial year. As non-cash
components are subject to future vesting
outcomes, the awarded value may be higher
or lower than the future realised value.
2023 remuneration outcomes reflect both
the overall performance of the Group and
the performance of each individual/Division.
5.2.1 CEO
The Board determined that an STVR
outcome of $2.4m (96% of maximum
opportunity) was appropriate for 2023
having regard to both the overall
performance of the CEO and also the
overall performance of the Group. This is
the first above target STVR award for the
CEO since commencing in the role in 2016,
reflecting the above target performance
outcome in 2023 as summarised below.
Awarded STVR in the relevant financial year – CEO
Actual STVRSTVR as % of
Financial
year
STVR
maximum
opportunity
$
Total STVR
$
STVR cash
$
STVR
deferred shares
$
Target
opportunity
Maximum
opportunity
CEO
S Elliott2023 2,500,000 2,400,000 1,160,000 1,240,000 120%96%
2022 2,500,000 1,860,000 930,000 930,000 93%74%
'WHAT' ASSESSMENT SUMMARY
ANZ Group Performance Framework - see section 4.1
(50% weighting)
Individual Strategic Objectives - see below
(50% weighting)
Assessed as: Above targetAssessed as: Well above target
'HOW' ASSESSMENT SUMMARY
ANZ Values & BehavioursIndividual Risk / Compliance Assessment
Assessed as: Above expectationsAssessed as: Met expectations
OVERALL PERFORMANCE ASSESSMENT
Assessed as: Well above target (120%)
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The CEO delivered a strong performance
this year. After several years focused on
simplification of ANZ (disposal of businesses
and internal re-structures), ANZ has moved
to driving sustainable growth in
each of the core businesses. Pleasingly,
ANZ’s record financial performance in
2023 was contributed to by each of the
four core business divisions. The CEO’s
deliverables highlight that the key strategic
building blocks are in place to support
long-term performance.
The CEO has focused on executing and
delivering sustainable growth in our core
businesses. Key results include:
•ANZ Plus being the fastest growing new
bank platform in Australia, including
exceeding targets related to the number
of active customers, funds under
management and Net Promoter Scores
•Executing the Commercial strategy, with
the new Division performing strongly - in
large part due to the CEO’s stewardship
of this business (pre appointment of GE,
Australia Commercial)
•Exceeding our ambitions to grow
sustainability as a source of revenue
through a range of sustainability banking
activities such as, labelled sustainable
finance (e.g., green and sustainability
linked loans, bonds and guarantees), and
banking activities to fund and facilitate
the transition to a net zero economy
(e.g., green buildings, renewable
energy, energy efficiency, sustainable
infrastructure)
•Recovery of home lending momentum,
with growth exceeding 1x system target
•Improving share on Institutional payment
platforms, with overall payments
growing by ~8%
•Building digital ecosystems in support of
the broader strategy (e.g., investments in
View Media Group, DOT Loves Data and
Pollination, and appointment of a new
CEO in Cashrewards)
There has been continued strong
risk discipline championed by the CEO,
with emphasis on the right behaviours
to identify, discuss, and act on risks the
bank confronts and takes. Strengthening
operational excellence and resilience
has been a key focus of the CEO.
Examples include:
•Clear progress in the build of a Group
wide non-financial risk framework (with
strong business leadership)
•Executed a very ambitious change
agenda (e.g., technology uplift programs,
ANZ Plus, NOHC implementation,
Suncorp acquisition, Platform Services,
major regulatory programs)
•Demonstration of strong cyber resilience,
and positive achievements in the area of
financial crime
•Delivery of BS111 (the first of any New
Zealand bank) and the launch of Ngā
Tapuwae2 in NZ to unlock future growth
in New Zealand
A key strength of the CEO is his strong
advocacy and role modelling of ANZ’s
values and behaviours – create
opportunities, deliver what matters,
succeed together – as evidenced by all
business lines contributing strongly to
achieve a great performance outcome.
The CEO’s leadership translates into
continuing high employee engagement
(87%) – which is equal to the Global Best
In Class across all industries. Similarly,
ANZ’s ‘Speak Up’ index at 84% reflects
continued efforts to encourage a culture
where people feel they can challenge
each other respectfully.
The CEO continues to demonstrate his
ability to communicate effectively and
authentically with stakeholder groups
– shareholders, employees, customers,
regulators, government and the community
(including non-profit and environmental
groups). He is regarded as a thought
and industry leader both internally
and externally, and engages regularly
with employees and the community
at large, via multiple communication
and media channels, parliamentary
hearings, and through proactive
relationship management.
The CEO has played a key role in leading
the Suncorp acquisition initiative, and has
been a strong advocate of the benefits
and opportunities for ANZ, our customers
in Queensland, and the broader community.
While the ACCC rejected ANZ’s application,
the CEO has ensured ANZ is well prepared
for the integration of Suncorp Bank into
ANZ in the event its application for
Australian Competition tribunal review
is successful.
The strong performance in 2023 reflects
the effective support provided by the
CEO to ExCo, along with key moves and
appointments made to his team over the
last 1 to 2 years. Executive succession and
development continue to be a focus for the
CEO and the Board, with the CEO making
solid progress in enabling potential internal
CEO successors in the future.
Overall there were many positive
achievements in 2023 (positioning ANZ
well to deliver against our strategic
priorities), and in the Board’s view the CEO
deserves an overall assessment outcome
of well above target.
2023 CEO individual strategic objectives
•Drive the strategic direction of the organisation, with particular focus on growth, home lending momentum and Commercial strategy
in Australia, and embed our digital transformation, Sustainability, Platforms and Ecosystems
•Focus on sound risk management, operational excellence and resilience including system stability, to ensure ANZ has robust and
reliable platforms to support long-term growth
•Lead and role model the culture and accountability required to transform ANZ
•Enhance the reputation of ANZ across all stakeholder groups
•Complete Suncorp acquisition with agreed integration plan
•Continue to build ExCo effectiveness and succession pipelines for ExCo and CEO
Board assessment of performance on individual strategic objectives:
1. BS11 outlines the Reserve Bank of New Zealand’s outsourcing policy. 2. ANZ New Zealand has embarked on a multi-year program of work to fundamentally transform
its business. Called “Ngā Tapuwae o ANZ” (“The footsteps of ANZ”), this program will change our core technology, processes and ways of working.
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5.2.2 DISCLOSED EXECUTIVES
•STVR outcomes continue to differ both year-on-year and between executives demonstrating the at risk nature of this element of
remuneration and the variability in Group and individual performance year-on-year. In 2023, STVR is at or above target for all Disclosed
Executives (reflecting that they have all jointly delivered material value from strategic and operational decisions in 2023); however only 2
of 38 Disclosed Executives in recent reporting periods (2018 to 2022) received at or above target variable remuneration. See section 5.4 for
2023 variable remuneration awarded details.
•The average STVR outcome for current Disclosed Executives is 89% of maximum opportunity. This reflects both the overall assessment of
ANZ Group performance as above target (see section 4.1), which is weighted 25% or 50%, and also individual performance (see section
6.2) which is weighted 75% or 50% depending on role. Outcomes range from 80% to 100% of maximum opportunity. The remuneration
outcomes in 2023 reflect that this is a high performing team, with all business and enablement functions each contributing significantly to
a strong performance outcome for ANZ.
•2023 STVR awarded outcomes for both C Morgan and A Strong are based on their time as a Disclosed Executive during 2023
(i.e., ~7 months and ~11 months respectively).
•R Howell’s 2023 STVR awarded outcome reflects the period acting as the GE T&C (i.e., ~4 months).
Awarded STVR in the relevant financial year – Disclosed Executives
Actual STVRSTVR as % of
Financial
year
STVR
maximum
opportunity
$
Total STVR
$
STVR cash
$
STVR deferred
shares
$
Target
opportunity
Maximum
opportunity
CURRENT DISCLOSED EXECUTIVES
M Carnegie2023 1,250,000 1,100,000 550,000 550,000 110%88%
2022 1,250,000 920,000 460,000 460,000 92%74%
K Corbally2023 1,250,000 1,065,000 532,500 532,500 107%85%
2022 1,250,000 885,000 442,500 442,500 89%71%
F Faruqui
1
2023 1,250,000 1,200,000 600,000 600,000 120%96%
2022 1,212,500 1,159,150 579,575 579,575 120%96%
G Florian2023 1,250,000 995,000 497,500 497,500 100%80%
2022 1,150,000 885,000 442,500 442,500 96%77%
R Howell
1
2023 348,068 300,000 180,000 120,000 108%86%
C Morgan
1
2023 627,000 500,000 250,000 250,000 100%80%
A Strong
1
2023 690,000 630,200 315,100 315,100 114%91%
A Watson
2
20231,106,505 945,140 472,570 472,570 107%85%
2022 1,108,830 845,483 422,742 422,742 95%76%
M Whelan2023 1,460,000 1,460,000 730,000 730,000 125%100%
2022 1,460,000 1,070,000 535,000 535,000 92%73%
FORMER DISCLOSED EXECUTIVES
K van der Merwe
3
2023 780,000 n/an/an/an/an/a
2022 1,040,000 800,000 400,000 400,000 96%77%
1. STVR based on time as a Disclosed Executive in either 2022 (F Faruqui) or 2023 (R Howell, C Morgan, A Strong). R Howell STVR subject to 40% deferral (see section 7.1 for remuneration
arrangements due to acting nature of appointment).
2. Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant
year.
3. Ineligible for STVR.
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5.3 Awarded LTVR and pre grant assessment outcome
The first award of LTVR under the new remuneration structure was made at the start of the 2023 financial year to Disclosed Executives
(Nov 2022) and the CEO (Dec 2022 post AGM), and it was awarded at full opportunity.
LTVR was not awarded in 2022, due to the transition from awarding LTVR at the beginning of the year rather than at the end.
The RR component of LTVR was subject to a pre grant assessment by the Board which determined that the award should be made at full
value (i.e., no reduction); and will be subject to a pre vest assessment by the Board of non-financial measures at the end of the four-year
performance period to determine whether the RR should vest in full.
Restricted Rights Pre Grant Assessment (see section 7.2.4)
STEPACTIONOUTCOME
Step 1Assess Prudential SoundnessMet
Step 2Assess Risk MeasuresMet
Step 3Apply Board discretionNo adjustment
Pre grant assessment outcome100%
The PR component of LTVR is subject to TSR hurdles (see section 7.2.5), which will determine the level of vesting and subsequent value of PR
at the end of the performance period.
CEO LTVR: Shareholders approved at the 2022 AGM a 2023 LTVR award of $3.375m (135% of FR), delivered in the form of 50% RR and 50% PR.
Similarly, shareholder approval will be sought at the 2023 AGM for a 2024 LTVR award of $3.375m.
Disclosed Executives LTVR: 2023 LTVR awarded at full opportunity (135% of new FR related to the structural change, and 100% for the CRO).
Note that for C Morgan, a pro-rated 2023 LTVR was granted in September 2023 (rather than November 2022) due to commencement with
ANZ partway through 2023, and R Howell was not eligible in his acting capacity. See section 7.2.3 for delivery details.
5.4 2023 Awarded VR
The below charts show the STVR and LTVR awarded to the CEO and Disclosed Executives for the year ending 30 September 2023.
CEO 2023 VR
S ELLIOTT
VR $5,775,000
LTVR PR LTVR RR
STVR deferred shares
STVR cash
$2,400,000$3,375,000
Disclosed Executives 2023 VR
M CARNEGIE
VR $2,787,500
K CORBALLY
VR $2,315,000
F FARUQUI
VR $2,887,500
G FLORIAN
VR $2,547,500
R HOWELL
VR $300,000
C MORGAN
VR $1,350,000
A STRONG
VR $1,642,700
A WATSON
VR $2,442,061
M WHELAN
VR $3,431,000
LTVR PR LTVR RR
STVR deferred shares
STVR cash
$1,100,000$1,687,500
$1,065,000$1,250,000
$1,200,000$1,687,500
$995,000$1,552,500
$300,000
$500,000$850,000
$630,200
$1,012,500
$945,140$1,496,921
$1,460,000$1,971,000
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5.5 2023 Remuneration comparison with prior years
CEO - Summary of 2022 and 2023 total remuneration
AWARDED RECEIVEDSTATUTORY
Awarded remuneration reflects actual cash and the
deferred shares component of STVR awarded in the
year. As non-cash components are subject to future
vesting outcomes, the awarded value may be higher
or lower than the future realised value.
Awarded remuneration appears significantly higher in
2023, largely because no LTVR was awarded for 2022
(as we transitioned to the new remuneration structure
and moved to awarding LTVR at the start (rather than
end) of the financial year). Note, STVR is awarded at
the end of the year.
Received remuneration reflects
the actual remuneration received
in the year (i.e., cash paid and the
value of previously awarded STVR
deferred shares and LTVR
performance rights which vested
in the year).
The amount received is lower
in 2023 (compared to 2022),
primarily due to there being
no LTVR due to vest in 2023
due to changing from a three
to four-year performance period
in Nov/Dec 2019.
Statutory remuneration
reflects remuneration in
accordance with Australian
Accounting Standards which
includes FR and the amortised
accounting value of variable
remuneration, not the actual
awarded or received value in
respect of the relevant financial
year (i.e., includes the value of
STVR and LTVR expensed in
the year). This is different to
remuneration received in 2023
(which includes prior year
awards which vested).
Fixed
remuneration
$
STVR
$
LT V R
$
Total
remuneration
$
Total
remuneration
$
Total
remuneration
$
2023 2,500,000 2,400,000 3,375,000 8,275,000 4,579,413 6,186,508
2022 2,500,000 1,860,000 n/a 4,360,000 6,000,069 5,489,133
Historical STVR and LTVR
This table shows the STVR as a % of maximum opportunity and LTVR vesting outcomes for the CEO over the last five years. STVR outcomes
are reasonably aligned with financial performance trends over the corresponding 2019 to 2023 periods, with 2023 STVR higher than prior
years, consistent with 2023 financial performance (see section 4.2.1).
Historical STVR and LTVR – CEO
1
20192020202120222023
STVR2 outcome (% of maximum opportunity)48%33%
3
53%74%96%
LTVR vesting outcome (% vested)21.8%0%43.3%51.6%n/a
1. Prior to 2022, the maximum STVR opportunity for the CEO was 150% of target, however under the new structure (effective from 2022) this was reduced to 125% of target, therefore the 2022
and 2023 STVR % of maximum opportunity of 74% and 96% respectively is not comparable with prior years. If the maximum opportunity had remained at 150% of target, then the 2022 and
2023 STVR outcomes for the CEO (on a like for like basis) would have equated to 62% and 80% of maximum opportunity respectively.
2. Previously referred to as AVR pre-2022. 3. Post 50%
COVID-19 reduction.
Historical VR
1
This table shows the VR as a % of maximum opportunity for the executives who were disclosed over the last five years.
Historical VR – Disclosed Executive
20192020202120222023
STVR
2
outcome (average % of maximum opportunity
3
)45%36%
4
60%78%
89%
STVR
2
outcome (range % of maximum opportunity
3
)0% - 74%31% - 44%46% - 66%71% - 96%
80% - 100%
VR PR vesting outcome (% vested)21.8%0%43.3%51.6%n/a
1. Prior to 2022 the maximum VR opportunity for Disclosed Executives was 150% of combined VR target, however under the new structure (effective from 2022), this was reduced to 125% of
STVR target component only, therefore the 2022 and 2023 STVR % of maximum opportunity shown above of 78% and 89% respectively are not comparable with prior years. If the maximum
opportunity had remained at 150% of target, then the average 2022 and 2023 STVR outcomes for Disclosed Executives (on a like for like basis) would have equated to 65% and 74% of maximum
opportunity respectively.
2. Previously referred to as VR pre-2022. 3. Pre 2022, % of maximum opportunity applied to the full VR due to the combined VR structure for Disclosed Executives in those
years.
4. Post 50% COVID-19 reduction.
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6
STRUCTURE AND DELIVERY: PERFORMANCE
6.1 CEO performance
With regard to STVR, the CEO is assessed
50% on the ANZ Group Performance
Framework and 50% on achievement
of individual strategic objectives aligned
to ANZ’s strategy. Both the ANZ Group
Performance Framework and individual
strategic objectives are agreed by the
Board at the start of the financial year
and are stretching.
WEIGHTING OF
FINANCIAL METRICS
STVR
The CEO’s STVR is not formulaic –
outcomes are moderated by the Risk
element of the ANZ Group Performance
Framework and the Board’s judgement
on the appropriate STVR considering all
aspects of performance.
LT V R
TSR (both relative and absolute) continue
to determine the outcome of LTVR PR
(50% LTVR weighting). However, LTVR
also includes a 50% weighted RR award
that is primarily focused on risk-based
measures (as part of the pre grant and
pre vest assessments – see section 7.2.4).
This ensures LTVR has a material weight
to non-financial measures as required
under the APRA Prudential Standard CPS
511 Remuneration.
At the end of the financial year, ANZ’s
performance is assessed against the ANZ
Group Performance Framework, and the
CEO’s performance is also assessed against
this, along with his individual strategic
objectives, the ANZ values (behaviours),
delivery of the BEAR obligations and ANZ’s
risk and compliance standards. In
conducting the CEO’s performance
assessment, the HR Committee seeks input
from the Chairman, CRO (on risk
management), CFO (on financial
performance), GE T&C (on talent and culture
matters) and Group General Manager
Internal Audit (GGM IA) (on internal audit
matters). Material risk, audit and conduct
events that have either occurred or come
to light in the year are also considered,
together with input from both the Audit
Committee and the Risk Committee of
the Board.
6.2 Disclosed Executive
performance
At the start of each year, stretching
performance objectives are set in the form
of Divisional Performance Frameworks for
each of our Disclosed Executives, in
alignment with the ANZ Group Performance
Framework approved by the Board.
At the end of the financial year, the
performance of each Disclosed Executive
1
is assessed against the ANZ Group
Performance Framework (25% to 50%
weighting), their Divisional Performance
Framework, ANZ’s values (behaviours),
delivery of BEAR obligations and ANZ’s
risk and compliance standards.
The ANZ Group Performance Framework
weighting for Disclosed Executives
reinforces the importance of collective
accountability and contribution to Group
outcomes. The respective 2023 weighting
varies based on role focus:
•50% Group performance weighting: CFO,
GE Strategy & Transformation, GE T&C,
and GE Technology & Group Services
•25% Group performance weighting:
CRO, GE Australia Retail, GE Australia
Commercial, GE & CEO New Zealand,
and GE Institutional
Similar to the ANZ Group Performance
Framework, the Divisional Performance
Frameworks include the key elements of
Financial Discipline and Operational
Resilience, Customer, and People and
Culture, with Risk acting as a modifier.
2
The
weighting of each element varies to reflect
the responsibilities of each individual’s role.
The Financial Discipline and Operational
Resilience element weightings range from
20% to 40%.
The HR Committee seeks input from the
CEO, and independent reports from Risk,
Finance, Talent and Culture, and Internal
Audit, and also reviews material risk, audit
and conduct events, and seeks input from
both the Audit Committee and the Risk
Committee of the Board.
The HR Committee reviews and
recommends to the Board for approval the
overall performance outcomes for each
Disclosed Executive.
STVR and LTVR
At the end of the financial year, the CEO
and HR Committee determine STVR
recommendations for each Disclosed
Executive, which are ultimately approved by
the Board.
3
STVR varies year-on-year in line
with performance – it is not guaranteed and
may be adjusted up or down ranging from
zero to a maximum opportunity.
As highlighted in section 4, performance
against objectives impacts STVR outcomes
(e.g., where expectations are met, STVR is
likely to be awarded around target which
equates to 80% of maximum opportunity).
The degree of variance in individual STVR
outcomes reflect the weighting of the
Group component (i.e., roles with 50%
Group weighting will generally have less
differentiation), and relative performance of
the different areas/individuals, ensuring
appropriate alignment between
performance and reward. The outcomes
demonstrate the at risk nature of STVR, and
that outcomes vary across the Disclosed
Executives and also from year to year. The
average 2023 STVR for Disclosed Executives
is 89% of maximum opportunity (ranging
from 80% to 100%).
LTVR under the new remuneration structure
was awarded for the first time in 2023, with
a pre grant assessment (focused on risk
measures) resulting in a full RR award. A pre
vest assessment will determine the number
of RR that ultimately vest, and performance
against TSR hurdles will determine the level
of vesting of PR. LTVR (RR and PR) is
designed to strengthen the alignment of
executive interests with shareholders, and
PR provide a strong link between the
reward for executive performance and TSR
returns over the next four-year period.
1. Performance arrangements for the CRO are addressed additionally by the Risk Committee. Performance arrangements for the Group Executive and CEO, New Zealand are determined and
approved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsed by the HR Committee/Board, consistent with their respective regulatory obligations.
2. Except for the
CRO who has a percentage weighting assigned to risk measures.
3. Remuneration arrangements for the Group Executive and CEO, New Zealand are determined and approved by the ANZ NZ
Board in consultation with and endorsed by the Board, consistent with their respective regulatory obligations.
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There are two core components
of remuneration at ANZ – FR and
at risk variable remuneration.
In structuring remuneration, the Board aims
to find the right balance between fixed and
variable remuneration (at risk), the way it is
delivered (cash versus deferred
remuneration) and appropriate deferral
time frames (the short, medium and
long-term).
The Board sets (and reviews annually) the
CEO and Disclosed Executives’ FR based
on financial services market relativities and
reflecting their responsibilities, performance,
qualifications and experience.
The CEO and Disclosed Executives’ variable
remuneration is comprised of STVR
and LTVR consistent with external
market practice.
Variable remuneration is designed to focus
our CEO and Disclosed Executives on
stretching performance objectives
supporting our business strategy, risk
management and the delivery of long-term
stakeholder value.
In considering variable remuneration
outcomes the HR Committee and Board
reflect on the
application of ANZ’s Reward
Principles:
•Reward our people for doing the right
thing having regard to our customers
and shareholders:
Variable remuneration
should be primarily based on ‘outcomes’
rather than ‘effort’ and proportionate
relative to performance. It also needs to
consider the experience and expectations
of a range of stakeholders (including
shareholders, customers, employees,
community and regulators).
•
Attract, motivate and keep great people:
In determining remuneration outcomes,
the Board acknowledges the importance
of balancing performance with being
market competitive to ensure retention of
key talent – particularly in a competitive
talent landscape.
•
Focus on how things are achieved as
much as what is achieved:
The Board
ensures that appropriate consideration
and weight is given to performance
against objectives (which includes a risk
modifier), a risk assessment (capturing
financial and non-financial risks), and how
that performance was achieved (i.e., in
accordance with our values and purpose).
•
Fair and simple to understand: Variable
remuneration should be fair and
consistent through the cycle and have
regard to external influences outside of
management’s control.
Variable remuneration outcomes are based
on a range of measures (as illustrated
overleaf ), with material weight provided to
non-financial measures in accordance with
Prudential Standard CPS 511 Remuneration.
Our variable remuneration approach has
a strong focus on driving long-term
sustainable outcomes for shareholders. For
example, STVR outcomes include a number
of objectives that are considered key drivers
of shareholder value, and the significant
weighting to the LTVR component (around
60% of VR) as well as 50% of STVR delivered
as ANZ shares, aligns a large proportion of
executive remuneration to the shareholder
experience (in respect of the share price
and dividend).
7
STRUCTURE AND DELIVERY: REMUNERATION
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Key Individual Assessment Inputs
Prudential Soundness
•Capital ratio and liquidity
prudential minimums
Risk Measures
•Material risk outcomes
Considers all risk types
including capital adequacy
risk, compliance risk,
credit risk, liquidity and
funding risk, market risk,
operational risk, strategic
risk, technology risk and
conduct risk
•APRA active supervision
•Risk culture
TSR
•75% relative TSR
Rewards for performance
relative to that of SFS
comparator group
•25% absolute TSR
Ensures there is a
continued focus on
providing positive
growth – even when
market is declining
Measures absolute CAGR
ALIGNED TO SHAREHOLDER EXPERIENCE
STVR and LTVR provide material weight to non-financial measures as per CPS 511
ANZ values
Behaviours
Risk/compliance
Including material events
BEAR obligations
Additional financial and
non-financial overlays
considered by the Board
in determining Group and
individual performance
and the size of the ANZIP
pool include:
•Broader financial
performance (beyond
scorecard measures)
•The quality of earnings
and operating
environment
•The shareholder
experience (e.g., share
price growth and
dividends)
ANZ Group
Performance
Framework
25%-50% weighting
Individual strategic
objectives/Divisional
Performance Framework
50%-75% weighting
Control
function input
Risk, Finance,
T&C, Audit
RISK (MODIFIER)
Maintain risk discipline
focused on good customer
and regulatory outcomes
FINANCIAL DISCIPLINE
& OPERATIONAL
RESILIENCE (35%)
Run core businesses well,
delivering sustainable growth
and operational improvements
•Deliver economic profit to plan or
better in a high-quality manner
•Contain total cost growth
•Deliver/progress key change
programs
PEOPLE & CULTURE (30%)
Build a culture where our
diverse teams are engaged
and optimised for success
•Maintain high employee engagement
•Continue to improve project capability
•Attract, retain and develop people
with critical skills to reinvent banking
•Deliver major regulatory
commitments
•Strengthen risk culture
FY23 ANZ Group Performance Framework
Objectives below are examples of key drivers of shareholder value
LTVR RR
Mostly non-financial
LTVR PR
Financial
STVR
Mix of financial and non-financial measures
By deferring a significant portion of variable remuneration (around 80% of maximum opportunity for the CEO and Disclosed Executives
and 75% for the CRO), we seek to ensure alignment with shareholder interests, to deliver on ANZ’s strategic objectives, and to ensure a focus
on long-term value creation. Deferred variable remuneration has significant retention elements, and most importantly, can be adjusted
downwards, including to zero, allowing the Board to hold executives accountable, individually or collectively, for the longer-term impacts
of their decisions and actions.
Board discretion is applied when determining all CEO and Disclosed Executive variable remuneration outcomes including:
•STVR and LTVR outcomes for each financial year;
•LTVR vesting outcomes (pre vest assessment);
•Consideration of malus or further deferral before any scheduled release of previously deferred remuneration;
•Consideration of clawback for up to two years post payment or vesting of variable remuneration. See section 7.3.
CUSTOMER (35%)
Deliver great customer outcomes,
focused on improving the financial
wellbeing, sustainability and
experience of priority segments
•Accelerate ANZ Plus customer
acquisition and engagement
•Materially improve Commercial
customer & banker experience
•Meaningfully progress environmental
sustainability strategies
•Transition to uniform business services
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CRO
To preserve the independence of the
role and to minimise any conflicts of
interest in carrying out the risk control
function across the organisation, the CRO’s
remuneration arrangements differ to
other Disclosed Executives.
While the STVR opportunity (100% of FR)
is the same as the CEO and Disclosed
Executives, the LTVR opportunity is different
(100% of FR instead of 135% of FR)
reflecting the delivery of LTVR as 100% RR
(instead of 50% RR and 50% PR). Maximum
variable remuneration opportunity is 200%
of FR for the CRO. The remuneration mix is
33.3% FR/33.3% STVR/33.3% LTVR.
Acting GE T&C
Due to the acting nature of R Howell’s
appointment his remuneration
arrangements differ to other Disclosed
Executives. For the time spent in this acting
role, his FR was set at $700k per annum
from 1 June 2023 and increased to $703k
from 1 July 2023 (due to the impact of the
Superannuation Guarantee rate change).
His VR maximum opportunity was set at
150% of FR (his remuneration mix is
therefore 40% FR/60% VR). His VR will be
delivered as 60% cash and 40% as shares
deferred over years 4 to 5 to ensure
compliance with CPS 511 deferral
requirements.
7.2 Variable remuneration delivery
Variable remuneration for the CEO and the
Disclosed Executives (excluding the CRO
and Acting GE T&C) is delivered as follows:
•STVR as 50% cash and 50% shares
deferred equally over years 2 and 3; and
•LTVR as RR and PR deferred over:
–year 4 (33%), year 5 (33%) and year 6
(34%) for the CEO; and
–year 4 (50%) and year 5 (50%) for
Disclosed Executives.
Both RR and PR are tested against the
relevant performance condition at the end
of the four-year performance period and are
then subject to additional holding period(s)
until the completion of the respective
deferral periods.
At target performance, 63% of variable
remuneration for the CEO and Disclosed
Executives, and 56% of variable
remuneration for the CRO is deferred
for at least four years (from the date the
Board approved the variable remuneration
in October (and the date shareholders
approve the CEO’s LTVR)), noting that
this complies with the BEAR minimum
deferral requirement of 60% for the CEO
and 40% for Disclosed Executives. If the
CEO receives above target STVR (as is the
case in 2023), the amount above target
will be delivered as 40% cash and 60%
deferred shares (20% year 4, 20% year 5,
20% year 6) to ensure compliance with
the minimum deferral requirements with
respect to BEAR and APRA’s Prudential
Standard CPS 511 Remuneration.
Before any scheduled release of
deferred remuneration, the Board
considers whether malus should be
applied to previously deferred remuneration
(or further deferral of vesting), or clawback
to variable remuneration previously
granted, for the CEO and Disclosed
Executives. See section 7.3.
7.1 Remuneration mix
The CEO and Disclosed Executives
1
have an aligned remuneration mix (30% FR, 30% STVR and 40% LTVR at maximum opportunity),
and structure (with the exception of longer deferral for the CEO in line with APRA’s deferral requirements).
CEO
Remuneration mix – CEO ($m)
2.500
2.500+1.200+1.300+1.688+1.688
2.500
Minimum opportunity
8.375 (44% cash, 56% equity)
Maximum opportunity
LTVR PR LTVR RR
STVR deferred shares
STVR cash
FR
30%30%40%
Remuneration mix – CEO ($m)
Disclosed Executives
The dollar amounts in the below example are for illustrative purposes only, and are based on the FR value of $1.25m.
Remuneration mix – Disclosed Executives1 ($m)
1.250
1.250+0.625+0.625+0.844+0.844
1.250
Minimum opportunity
4.188 (45% cash, 55% equity)
Maximum opportunity
LTVR PR LTVR RR
STVR deferred shares
STVR cash
FR
30%30%40%
Remuneration mix – CEO ($m)
1. Excluding CRO and Acting GE T&C.
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LTVR ELEMENTDETAIL
DescriptionRR and PR provide a right to acquire one ordinary ANZ share at nil cost – as long as applicable time and performance
conditions are met. Their future value may range from zero to an indeterminate value. The value depends on
performance against the applicable performance condition and on the share price at the time of exercise.
Performance
period
Both RR and PR have a four-year performance period commencing from 1 October and ending four years later on
30 September (e.g., 1 October 2022 to 30 September 2026 for the 2023 grant), noting that LTVR is awarded at the
start of the financial year (rather than the end).
A four-year performance period provides sufficient time for longer term performance to be reflected.
Deferral periods The deferral period is the sum of the four-year performance period and the applicable holding period.
The holding period commences the day after the end of the four-year performance period (e.g., 1 October 2026
in the case of the 2023 LTVR award), and finishes on the 4
th
, 5
th
or 6
th
anniversary of grants.
Exercise periodRights can only be exercised at the end of the relevant deferral period (4, 5 or 6 years) when the rights vest
and become exercisable.
There is a two-year exercise period which commences at the end of the relevant deferral period for RR and PR.
ExpensingANZ engages PricewaterhouseCoopers to independently determine the fair value of RR and PR, which is only used
for expensing for accounting purposes. They consider factors including: the market performance conditions, share
price volatility, life of the instrument, dividend yield, and share price at grant date.
DividendsA dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only made
to the extent that all or part of the underlying rights meet the relevant performance condition and vest to the
individual. Dividend equivalent payments accrue over the full deferral period for RR, and only during the holding
period for PR.
Allocation
basis
The value the Board uses to determine the number of RR and PR to be allocated to the CEO and Disclosed
Executives is the face value of ANZGHL shares traded on the ASX in the five trading days leading up to and
including 1 October (beginning of the financial year and LTVR performance period).
LTVR is awarded around the start of the financial year in late November for Disclosed Executives and December
for the CEO (subject to shareholder approval).
1. Excluding Acting GE T&C.
7.2.1 STVR CASH – CEO AND
DISCLOSED EXECUTIVES
The cash component of STVR is paid
to executives at the end of the annual
Performance and Remuneration Review
(December 2023), and is subject to
clawback for two years post payment.
7.2.2 STVR DEFERRED SHARES – CEO
AND DISCLOSED EXECUTIVES
By deferring 50% of an executives’ STVR
as deferred shares over years two and three
(and it remaining subject to malus and
clawback), we enable a substantial amount
of their STVR to be directly linked to
delivering shareholder value. We grant
deferred shares in respect of performance
for the financial year ending 30 September
in late November each year.
For deferred variable remuneration for the
CEO and Disclosed Executives, we calculate
the number of deferred shares to be
granted based on the VWAP of the shares
traded on the ASX in the five trading days
leading up to and including 1 October (i.e.,
in line with the beginning of the financial
year). Allocations prior to the 2022 financial
year were based on the VWAP in the five
trading days leading up to and including
the date of grant. The VWAP used for
disclosure and expensing purposes is the
one-day VWAP at the date of grant, which is
in line with the Accounting Standard.
In some cases, we may grant deferred share
rights to executives instead of deferred
shares. Each deferred share right entitles
the holder to one ordinary share.
7.2.3 LTVR – CEO AND DISCLOSED
EXECUTIVES
1
LTVR reinforces the focus on achieving
longer term strategic objectives, driving
outperformance relative to peers, and
creating long-term sustained value for
all stakeholders. The following table
details design features common to
both LTVR RR and PR.
This section details the LTVR approach that
applied to the 2023 LTVR award granted in
November/ December 2022, and to the GE
Australia Commercial in September 2023.
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7.2.4 LTVR RESTRICTED RIGHTS – CEO AND DISCLOSED EXECUTIVES
1
The award of RR ensures that LTVR provides material weight to non-financial measures (as required under APRA’s Prudential Standard
CPS 511 Remuneration), as well as supporting long-term alignment with shareholders.
Having a risk-based focus reflects the intent of the Prudential Standard CPS 511 Remuneration in ensuring remuneration arrangements
appropriately incentivise individuals to prudently manage risks. The performance conditions are designed to ensure there is focus on both
material risk events and building a strong risk culture over the longer term.
LTVR ELEMENTPERFORMANCE CONDITION DETAIL
RR pre grant
and pre vest
assessments
Pre grant assessment purpose: Determines whether any reduction should be made to RR award value and is
primarily based on outcomes in the prior financial year.
Pre vest assessment purpose: Determines whether the RR amount awarded should vest in full and is based on outcomes
over the four-year performance period.
The pre grant and pre vest assessments also take into consideration any adjustments already applied for the same
event/outcomes in either the current or prior years (i.e., adjustments to STVR and LTVR, malus and clawback),
to ensure the overall impact is fair and proportionate to the severity of the outcome. Therefore, given other
remuneration adjustments are likely to be considered first, and as the award of RR is future focused, it is anticipated
that RR will be allocated at full value in most years – unless the outcome of the following three assessment steps
determines otherwise.
STEP 1
Assess Prudential soundness
STEP 2
Assess risk measures
STEP 3
Apply Board discretion
•Nil award if ANZ does
not meet capital ratio
and liquidity prudential
minimums.
•Consideration of any Material
Risk Outcomes from executive
actions or inactions which is
expected to/or has resulted in
significant impacts.
•Consideration of any significant
adverse change in APRA’s Active
Supervision level.
•Consideration of Risk Culture
(additional measure for pre vest)
that examines whether or not
ANZ has maintained (or made
progress towards) a sound
risk culture, considering both
executive actions or inactions.
•Board to determine whether any
reduction should be made to LTVR RR
outcome based on consideration of a
range of factors, including:
–the outcomes from steps 1 and 2;
–the impact, if any, of the issue/s on ANZ’s
reputation/standing in the market;
–whether the issue was specific to
ANZ, the banking industry or the
broader market;
–any impacts already applied (e.g.,
regarding downward adjustment
mechanisms, pre grant assessment
impact to LTVR RR);
–whether any impact should be made
on an individual or collective basis.
The assessments are not intended to be formulaic given the circumstances requiring the application of Board
discretion will typically be different or unique, however a Board decision making framework is in place to guide
the Board in applying discretion.
Material risk
outcomes process
The consideration of material risk outcomes is a key process that forms part of our broader Accountability and
Consequence Framework (A&CF) (see section 8), and is a comprehensive bottom-up process designed to ensure
that all relevant events are surfaced and considered appropriately. Key steps include:
•Risk, conduct and audit events are reported in ANZ’s Compliance & Operational Risk System.
•Divisional Accountability Groups review serious risk, conduct and audit events, and provide recommendations
regarding accountability and consequences, where appropriate.
•Enterprise Accountability Group (EAG) reviews recommendations of the Divisional Accountability Groups and
make final determination (with some exceptions where local Board approval is required or for material risk takers
and other non-administrative direct reports to the CEO, where Board approval is required).
•HR Committee reviews most serious risk, conduct and audit events (as part of independent report from CRO)
and determines impacts at the Group, Division and individual level for the CEO and ExCo.
1. Excluding Acting GE T&C.
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7.2.5 LTVR PERFORMANCE RIGHTS – CEO AND DISCLOSED EXECUTIVES EXCLUDING THE CRO
1
LTVR ELEMENTPERFORMANCE CONDITION DETAIL
Performance
rights hurdles
The PR have TSR performance hurdles reflecting the importance of focusing on achieving longer term strategic
objectives and aligning executives’ and shareholders’ interests. There are two TSR performance hurdles for the
2023 grants of PR:
•75% will be measured against a relative TSR hurdle.
•25% will be measured against an absolute TSR hurdle.
TSR represents the change in value of a share plus the value of reinvested dividends paid. We regard it as the most
appropriate long-term measure – it focuses on the delivery of shareholder value and is a well understood and
tested mechanism to measure performance. The combination of relative and absolute TSR hurdles provides balance
to the plan by:
•Relative: rewarding executives for performance that exceeds that of comparator companies; and
•Absolute: ensuring there is a continued focus on providing positive growth – even when the market is declining.
The two hurdles measure separate aspects of performance:
•the relative TSR hurdle measures our TSR compared to that of the Select Financial Services (SFS) comparator
group, made up of core local and global competitors. This comparator group is chosen to broadly reflect the
geographies and business segments in which ANZ competes for revenue; and
•the absolute Compound Annual Growth Rate (CAGR) TSR hurdle provides executives with a more direct line
of sight to the level of shareholder return to be achieved. It also provides a tighter correlation between the
executives’ rewards and the shareholders’ financial outcomes.
We will measure ANZ’s TSR against each hurdle at the end of the four-year performance period to determine
whether any PR becomes exercisable. We measure relative and absolute TSR hurdles independently from the other
– for example one may vest fully or partially but the other may not vest.
Relative TSR
hurdle for PR
The relative TSR hurdle is an external hurdle that measures our TSR against that of the SFS comparator group over
four years. The SFS comparator group is made up of: Bank of Queensland Limited; Bendigo and Adelaide Bank
Limited; Commonwealth Bank of Australia Limited; DBS Bank Limited; Macquarie Group Limited; National Australia
Bank Limited; Standard Chartered PLC; Suncorp Group Limited; and Westpac Banking Corporation.
For future LTVR awards of PR (i.e., from financial year 2024), the Board approved for DBS Bank Limited to be
removed from the comparator group (noting that this change does not apply to awards currently on foot). This
change reflects the need to better balance the weighting of international peers in our comparator group to more
appropriately reflect the change in capital allocated to Asia compared to when international comparators were
originally included in 2015 (as part of the super regional strategy at that time). When considering an appropriate
cohort of peers for benchmarking TSR performance, the Board take into consideration organisations with a similar
scope of activities, common geographical focus, broadly comparable risk compliance and regulatory profiles, and
relative stability and transparency across market cycles.
If our TSR when compared to the TSR of
the comparator group
then the percentage of PR that vest
is less than the 50
thth
percentileis nil
reaches at least the 50
thth
percentile, but is less
than the 75
thth
percentile
is 50% plus 2% for every one percentile
increase above the 50
thth
percentile
reaches or exceeds the 75
thth
percentileis 100%
1. Excluding Acting GE T&C.
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LTVR ELEMENTPERFORMANCE CONDITION DETAIL
Absolute TSR
hurdle for PR
The absolute CAGR TSR hurdle is an internal hurdle as to whether ANZ achieves or exceeds a threshold level of
growth the Board sets at the start of the performance period. The Board reviews and approves the absolute TSR
targets each year for the PR award. When reviewing the targets, the Board references ANZ’s assessed Cost of Capital
(CoC). The CoC is determined using methodologies including the Capital Asset Pricing Model (CAPM). The CoC is
regularly reviewed and updated to reflect current market conditions. Due to the prospective nature of the 2023 PR
and given the increased volatility in the 10-year bond rate, the Board determined it was appropriate to use the 2H
average CoC as the CAGR TSR target for the 2023 PR.
If the absolute CAGR of our TSRthen the percentage of 2023 PR that vest
is less than 9.125%is nil
is 9.125%is 50%
reaches at least 9.125%, but is less than 13.688%is progressively increased on a pro-rata, straight-line,
basis from 50% to 100%
reaches or exceeds 13.688%is 100%
For future LTVR awards of PR (i.e., from financial year 2024), the CAGR TSR hurdle will be based on the time weighted
CoC over the four-year performance period of the PR. Therefore, the CAGR TSR target will be adjusted on a time
weighted basis unless the Board applies discretion not to adjust. The CoC will be reviewed by the Board on a
quarterly basis based on the output from the CAPM methodology (which takes into consideration the risk-free
bond rate, the market risk premium and the beta – i.e., the volatility of ANZ’s historical share price relative to the
market). Any CoC changes approved by the Board throughout the performance period are prospective only
(i.e., reflect current market factors) and will form part of the dynamic absolute TSR target calculation. Moving to
a dynamic target that reflects the changes in CoC over the performance period (rather than a static target at
the beginning of the performance period), is more responsive to changes in both interest rates and risks, and is
considered more appropriate and fairer from both an investor and executive perspective, and supports better
shareholder alignment.
Calculating
TSR performance
When calculating performance against TSR, we:
•reduce the impact of share price volatility – by using an averaging calculation over a 90-trading day period
for start and end values;
•ensure an independent measurement – by engaging the services of an external organisation, to calculate ANZ’s
performance against both the absolute and relative TSR hurdles; and
•test the performance against the relevant hurdle once only at the end of the four-year performance period –
the rights lapse if the performance hurdle is not met – there is no retesting.
7.3 Downward adjustment – Board discretion
The Board can exercise its discretion to apply a number of downward adjustment options as part of consequence management (in
accordance with applicable law and any terms and conditions provided). The Board may choose to exercise the following options or a
combination of these at any time, but will always consider their use if any of the circumstances specified by Prudential Standard CPS 511
Remuneration occur. The downward adjustment options specified in #1 to #3 below are applicable to all employees, while clawback (#4) in
2023 is currently limited to select employees (primarily the CEO, Disclosed Executives and some senior employees in jurisdictions where
clawback regulations apply):
1. In year adjustment, the most common type of downward adjustment, which reduces the amount of variable remuneration an employee
may have otherwise been awarded for that year.
2. Further deferral/freezing delays the decision to pay/allocate variable remuneration, or further defers the vesting of deferred remuneration
or freezes vested/unexercised shares and rights. This would typically only be considered where an investigation is pending/underway.
3. Malus is an adjustment to reduce the value of all or part of deferred remuneration before it has vested. Malus is used in cases of more
serious performance or behaviour issues. Any and all variable remuneration we award or grant to an employee is subject to ANZ’s on-going
and absolute discretion to apply malus and adjust variable remuneration downward (including to zero) at any time before the relevant
variable remuneration vests.
4. Clawback is the recovery of variable remuneration that has already vested or been paid (up to two years from vesting/payment or a longer
period as determined by Board discretion, policy or applicable law). This would typically only be considered if the other types of downward
adjustment/other consequences are considered inadequate given the severity of the situation.
Before any scheduled vesting of deferred remuneration, the Board (for the CEO, Disclosed Executives and other specified roles) and/or the
Enterprise Accountability Group (EAG) (for other employees) considers whether any further deferral, malus, or clawback should be applied.
See section 8 for details.
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8.1 Role of the EAG
The EAG is chaired by the CEO and
members include the CRO, CFO and GE T&C.
It operates under the delegated authority of
the HR Committee and is responsible for:
•supporting the Board in monitoring
the implementation and ongoing
effectiveness of ANZ’s A&CF;
•reviewing the most material risk, conduct
and audit events for accountability and
the application of consequences, where
appropriate;
•providing guidance to the Divisions and
considering initiatives across the Divisions
to strengthen risk behaviours;
•acknowledging material positive risk
events and recognising risk role models,
whose achievements are profiled across
the organisation; and
•approving the release or application
of downward adjustment for deferred
variable remuneration (noting that for
the CEO and Disclosed Executives this is
approved by the Board).
8.2 Material positive risk events
The EAG review material positive risk
decisions and events – times when our
proactive approach to identifying and
mitigating risk have had a material positive
outcome. Reviewing these examples
provides an opportunity to acknowledge
the importance of these events and share
learnings across the enterprise.
8.3 Risk role models
In 2023, 81 individuals were recognised by
the EAG for role modelling outstanding risk
behaviours through their efforts to identify,
manage and mitigate the organisation’s
risks and contribute to our strong risk
culture. Recognition provided included a
personalised e-mail from the CEO, local
recognition events, and having their
achievement profiled on our intranet
and in internal newsletters.
8.4 Compliance with Prudential
Standard CPS 511 Remuneration
ANZ’s A&CF is an integral part of our
enterprise approach to meeting the
requirements of APRA Prudential Standard
CPS 511 Remuneration.
We introduced clawback provisions for
the CEO and our Disclosed Executives
effective 2022, in addition to existing
downward adjustment tools such as in year
adjustment, further deferral and malus.
In 2023, we have continued to raise
employee awareness with respect to
accountability and consequences through
explicit references to the A&CF (including
remuneration consequences) in employee
training and communications and
performance and remuneration policy
documents.
In addition, as part of our annual
performance and remuneration process,
we have provided our People Leaders with
guidance regarding appropriate (and in
some cases, mandatory) remuneration
consequences for conduct and
performance issues, including insights from
the previous year’s consequences applied.
These activities are part of our continued
focus on consistency in application
of remuneration consequence across
ANZ globally.
8.5 Consideration of
consequences for material risk,
audit and conduct events
The EAG has processes in place to
ensure that we mitigate the risk of
conflicts of interest in reviewing events
and determining accountability and
consequences. For example, when
undertaking accountability reviews, a
recommendation regarding the review
leader and scope must be sent to the
CRO (or in the case of an event involving
Group Risk to the CEO), for review and
approval to ensure the individual is
capable of undertaking an impartial
and unbiased review.
Considerations regarding accountability
and consequences for our most senior
executives are considered and determined
by the HR Committee and Board.
Reports on the most material risk, audit
and conduct issues were presented to
the HR, Risk and Audit Committees at a
concurrent meeting. This information was
considered by the Board when considering
the performance of the Group and the
2023 ANZIP variable remuneration pool
for all employees and determining the
performance and remuneration outcomes
of the CEO and Disclosed Executives.
The HR Committee and Board consider
accountability and consequences for the
CEO and Disclosed Executives, including
the application of malus and clawback
(see section 7.3). No malus or clawback
was applied to the remuneration of the CEO
and Disclosed Executives during 2023.
When determining consequences,
consideration is given to the level of
accountability, and the severity of the issue,
including customer impacts. Consequences
may include, for example, one or more of
the following: counselling, formal warnings,
impacts to in year performance and
remuneration outcomes or application of
malus to previously deferred remuneration
and ultimately termination of employment
or clawback for the most serious issues.
The Enterprise Accountability Group (EAG) is the primary governance mechanism for the operation of the
Accountability and Consequence Framework (A&CF).
ACCOUNTABILITY AND CONSEQUENCE FRAMEWORK
8
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8.6 Evolving the A&CF
Our ongoing focus on accountability,
consequences and driving a strong risk
culture supports our customer commitment
that when things go wrong, we fix them
quickly and hold executives, current
(and former where we can), to account
where appropriate. We are also focused
on ensuring that we learn from the cause
of the event, mitigate the risk of future
recurrences and continuously seek to
strengthen our risk culture. We review
the effectiveness of the A&CF every year
and implement enhancements to further
strengthen the A&CF based on regulatory
and internal stakeholder input.
8.7 Speak up culture
We continue to raise employee awareness
of, and promote the various ways
employees can speak up and raise issues
and ideas for improvement including
through initiatives such as:
•a global awareness campaign to
mark World Whistleblower Day in
June, which included a conversation
guide designed to support People
Leaders with team discussions on
the importance of speaking up and
promotion of whistleblowing;
•digital communications designed to build
confidence and trust in the Whistleblower
Program and process; and
•through monitoring responses in our
employee engagement surveys.
Key risk and speak-up scores, including
‘The People Leaders in the area I work
demonstrate personal accountability for risk
and sound risk behaviours’ (91%), ‘I can raise
issues and concerns without fear of reprisals’
(81%) and ‘When I speak up, my ideas,
opinions and concerns are heard’ (84%)
remained strong and consistent with 2022
and 2021 results.
1
8.8 Application of consequences
In 2023, there were 1,330 employee
relations cases involving alleged breaches
of our Code, with 501 resulting in a formal
consequence or the employee leaving ANZ,
down from 518 in 2022. Breaches ranged
from compliance/procedural breaches
(23%), through to general unacceptable
behaviour (31.7%), email/systems misuse
(9.2%), attendance issues (20.8%), fraud/
theft (5.4%), conflict of interest (5.6%) and
breaches of our Equal Opportunity, Bullying
and Harassment Policy (3.6%). Outcomes
following investigations of breaches this year
included 100 terminations, 314 warnings and
87 employees leaving ANZ.
In relation to the application of
consequences to our senior leadership
population (senior executives, executives
and senior managers), 30 current and former
employees (21 in 2022) had a consequence
applied as a result of the application
of our Code of Conduct Policy and/or
findings of accountability for a relevant
event. Consequences included warnings,
impacts on performance and remuneration
outcomes and dismissal.
All employees and contractors across
the enterprise are required to complete
mandatory learning modules. Permanent
employees who fail to complete their
mandatory learning requirements within
30 days of the due date are (in the absence
of genuinely exceptional circumstances)
ineligible for any FR increase or variable
remuneration award as part of our annual
Performance and Remuneration Review.
In 2023, the mandatory learning course
compliance rate across the enterprise
was 99.6%.
1. Results reported are taken from the Q2 and/or Q4 employee engagement surveys, and Risk Culture Survey.
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NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
9
2023 NED fee policy structure2023
Chair feeMember fee
Board1, 2$850,000$240,000
Audit Committee$65,000$32,500
Risk Committee $65,000$32,500
HR Committee$65,000$32,500
Digital Business & Technology Committee$55,000$27,500
Ethics, Environment, Social & Governance Committee$55,000$27,500
1. Including superannuation. 2. The Chairman of the Board does not receive additional fees for serving on a Board Committee. The Chairman of the Board and NEDs do not receive a fee for
serving on the Nomination and Board Operations Committee.
NED shareholding guidelines
We expect our NEDs to hold ANZ shares. NEDs are required:
•to accumulate shares – over a five-year period from their appointment to the value of:
–100% of the NED member fee for Directors;
–100% of the Chairman fee for the Chairman; and
•to maintain this shareholding while they are a Director of ANZ.
Based on the ANZ share price as at 30 September 2023, all NEDs meet or, if less than five years' tenure, are on track to meet
the holding guideline.
9.1 Remuneration structure
The HR Committee reviewed NED fees and determined not to increase fees for 2023.
For 2024, the HR Committee has reviewed and approved a 2% increase to the NED member fee (from $240,000 to $245,000) which has
remained unchanged since 2016. The Board Chairman fee remains unchanged. Following review, the HR Committee also approved the
alignment of the fee structure across all Committees increasing each Committee chair fee to $68,000, and each Committee member fee
to $34,000. This fee review considered increased complexity in the regulatory environment, uplifts for ANZ’s broader employee population,
and the external market.
The fee structure is applicable to NEDs of ANZGHL and ANZBGL. Fees prior to the implementation of the Non-Operating Holding Company
(NOHC) structure related to membership of the ANZBGL Board, and post implementation are viewed as a single fee covering both Boards
(i.e., membership of ANZGHL and ANZBGL Boards/Committees). Currently the fee structure applies irrespective of whether NEDs serve on
one or more Boards.
NEDs receive a fee for being a Director of the Board, and additional fees for either chairing, or being a member of a Board Committee.
The Chairman of the Board does not receive additional fees for serving on a Board Committee.
In setting Board and Committee fees, the following are considered: general industry practice, ASX Corporate Governance Principles and
Recommendations, the responsibilities and risks attached to the NED role, the time commitment expected of NEDs on Group and Company
matters, and fees paid to NEDs of comparable companies.
ANZ compares NED fees to a comparator group of Australian listed companies with a similar market capitalisation, with particular focus on
the major financial services institutions. This is considered an appropriate group, given similarity in size and complexity, nature of work and
time commitment by NEDs.
To maintain NED independence and impartiality:
•NED fees are not linked to the performance of the Group; and
•NEDs are not eligible to participate in any of the Group’s variable remuneration arrangements.
The current aggregate fee pool for NEDs of $4m was approved by shareholders at the 2012 AGM. The annual total of NEDs’ fees, including
superannuation contributions, is within this agreed limit.
This table shows the NED fee policy structure for 2023.
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9.2 2023 Statutory remuneration – NEDS
The following table outlines the statutory remuneration of NEDs
1
disclosed in accordance with Australian Accounting Standards.
1. In addition to the fee shown below, Sir John Key received NZD 422,050 in 2022 and 2023 for his role as Chairman of ANZ Bank New Zealand Limited.
2023 Statutory remuneration – NEDS
Short-term NED benefitsPost-employment
Financial
year
Fees1
$
Non monetary
benefits2
$
Super
contributions1
$
Total
remuneration3
$
CURRENT NON-EXECUTIVE DIRECTORS
P O’Sullivan2023 824,181 - 25,819 850,000
2022 813,501 6,128 23,999 843,628
I Atlas2023 339,181 - 25,819 365,000
2022 330,751 - 23,999 354,750
J Halton2023 329,181 - 25,819 355,000
2022 318,001 - 23,999 342,000
G Hodges
4
2023 176,745 - 17,102 193,847
J Key2023 301,681 - 25,819 327,500
2022 290,251 - 23,999 314,250
H Kramer
4
2023 35,841 - 3,942 39,783
J Macfarlane2023 336,443 - 25,819 362,262
2022 301,501 - 23,999 325,500
C O’Reilly42023 344,181 - 25,819 370,000
2022 302,863 - 22,579 325,442
J Smith42023 298,889 - 25,819 324,708
2022 36,003 - 3,780 39,783
FORMER NON-EXECUTIVE DIRECTORS
G Liebelt
4
2023 72,439 2,104 - 74,543
2022 360,427 - 6,323 366,750
Total of all Non-Executive Directors2023 3,058,762 2,104 201,777 3,262,643
2022 2,753,298 6,128 152,677 2,912,103
1. Year-on-year differences in fees relate to changes to the NED fees and also to the superannuation Maximum Contribution Base. G Liebelt elected to receive all payments in fees and therefore did
not receive superannuation contributions during 2022 and 2023 with exception to fees paid in Q422.
2. Non monetary benefits generally consist of company-funded benefits (and the associated
Fringe Benefits Tax) such as car parking and gifts provided upon retirement.
3. Long-term benefits and share-based payments do not apply for the NEDs. 4. Remuneration based on time as a NED
(2022 for C O'Reilly and J Smith, 2023 for G Hodges, H Kramer and G Liebelt).
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10.1 The Human Resources (HR)
Committee
10.1.1 ROLE OF THE HR COMMITTEE
The HR Committee has been established
by the ANZGHL Board, and has been
delegated authority to act as the
remuneration committee for ANZBGL.
The HR Committee supports the Board
on remuneration and other HR matters.
It reviews the remuneration policies and
practices of the Group, and monitors market
practice and regulatory and compliance
requirements in Australia and overseas.
During the year the HR Committee met on
five occasions and reviewed and approved,
or made recommendations to the Board
on matters including:
•remuneration for the CEO and other
key executives (broader than those
disclosed in the Remuneration Report)
in accordance with the ANZ Group
Performance and Remuneration
Policy and ANZBGL Performance
and Remuneration Policy, and fees
for the NEDs;
•matters related to the implementation
of APRA’s Prudential Standard CPS 511
Remuneration, and updates on the BEAR,
and Treasury’s Financial Accountability
Regime (FAR);
•the ANZ Group Performance
Framework (annual objectives setting
and assessment) and annual variable
remuneration spend;
•performance and reward outcomes
for key senior executives, including the
consideration of material events that
have either occurred or came to light
in the year;
•the release, further deferral or application
of malus of deferred remuneration
or clawback;
•key senior executive appointments
and terminations;
•the review of the ANZ Group
Performance and Remuneration
Policy and ANZBGL Performance
and Remuneration Policy, and the
Accountability & Consequence
Framework (A&CF);
•building capabilities required to deliver
on our strategy;
•succession plans for key senior
executives; and
•culture, diversity and inclusion, employee
engagement, and how we work in a post
COVID environment.
More details about the role of the HR
Committee, including its Charter, can be
found on our website. Go to anz.com >
Our company > Strong governance
framework > ANZ Human Resources
Committee Charter.
10.1.2 LINK BETWEEN
REMUNERATION AND RISK
The HR Committee has a strong focus
on the relationship between business
performance, risk management and
remuneration, aligned with our business
strategy. The chairs of the Risk and Audit
Committees and the full Board (ANZGHL
and ANZBGL) are in attendance for specific
HR Committee meetings. A concurrent
meeting of the HR, Risk and Audit
Committees was held to review:
•material risk, conduct and audit
events that either occurred or came
to light in 2023;
•2023 performance and variable
remuneration recommendations at
both the Group, CEO and Disclosed
Executive level.
To further reflect the importance of the
link between remuneration and risk:
•the Board had two NEDs (in addition
to the Chairman) in 2023 who served
on both the HR Committee and the
Risk Committee;
•the HR Committee has free and
unfettered access to risk and financial
control personnel (the CRO and CFO
attend HR Committee meetings for
specific agenda items);
•the CRO (together with GE T&C and GGM
IA) provides an independent report to
the HR Committee on the most material
risk, conduct and audit events (as
relevant) to help inform considerations
of performance and remuneration, and
accountability and consequences at the
Group, Divisional and individual level;
•the CRO also provides an independent
report to assist the Board in their
assessment of performance and
remuneration outcomes for the CEO and
Disclosed Executives;
•the chairs of the Risk and Audit
Committees are asked to provide input
to ensure appropriate consideration of all
relevant risk and internal audit issues;
•the ANZ Group Performance Framework
and Divisional Performance Frameworks
include Risk as a key element acting as a
modifier, and it forms an integral part of
each framework’s assessment and directly
impacts the overall outcomes; and
•the LTVR RR pre grant and pre vest
assessments undertaken by the Board
are primarily based on non-financial
risk outcomes.
10.1.3 CONFLICT OF INTEREST
To help mitigate potential conflicts
of interest:
•management are not in attendance
when their own performance or
remuneration is being discussed by the
HR Committee or Board;
•the CEO’s STVR is funded and determined
separately from the ANZIP variable
remuneration pool;
•the CRO’s remuneration arrangements
differ to other Disclosed Executives to
preserve the independence of the role;
•the EAG also has processes in place to
help mitigate conflicts of interest as
outlined in section 8; and
•the HR Committee seeks input from
a number of sources to inform their
consideration of performance and
remuneration outcomes for the CEO and
Disclosed Executives including:
–independent reports from Risk, Finance,
Talent and Culture, and Internal Audit;
–material risk, conduct and audit event
data provided by the CRO;
–input from both the Audit Committee
and the Risk Committee of the Board.
10.1.4 EXTERNAL ADVISORS
PROVIDED INFORMATION BUT
NOT RECOMMENDATIONS
The HR Committee can engage independent
external advisors as needed.
REMUNERATION GOVERNANCE
10
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Throughout the year, the HR Committee
and management received information
from the following external advisors: Aon,
Ashurst, Deloitte, EY, Guerdon Associates,
Herbert Smith Freehills, PayIQ Executive
Pay and PricewaterhouseCoopers. This
information related to market data, market
practices, analysis and modelling, legislative
requirements and the interpretation of
governance and regulatory requirements.
During the year, ANZ did not receive
any remuneration recommendations
from external advisors about the
remuneration of KMP.
ANZ employs in-house remuneration
professionals who provide recommendations
to the HR Committee and the Board. The
Board made its decisions independently,
using the information provided and with
careful regard to ANZ’s strategic objectives,
purpose and values, risk appetite and the
Performance and Remuneration Policies
and Principles.
10.2 Internal governance
10.2.1 HEDGING PROHIBITION
All deferred equity must remain at risk until
it has fully vested. Accordingly, executives
and their associated persons must not enter
into any schemes that specifically protect
the unvested value of equity allocated.
If they do so, then they would forfeit the
relevant equity.
10.2.2 CEO AND DISCLOSED
EXECUTIVES’ SHAREHOLDING
GUIDELINES
We expect the CEO and each Disclosed
Executive to, over a five-year period:
•accumulate ANZ shares to the value
of 200% of their FR; and
•maintain this shareholding level while
they are an executive of ANZ.
Executives are permitted to sell ANZ
securities to meet taxation obligations on
employee equity even if below the 200%
guideline. However, tax obligations for the
purpose of these guidelines is limited to
that arising from the initial taxing point
event (i.e., when the deferred shares vest
or rights are exercised).
Shareholdings include all vested and
unvested equity (excluding PR). Based on
equity holdings as at 30 September 2023,
the CEO and all Disclosed Executives meet
or, if less than five years’ tenure, are on
track to meet their minimum shareholding
guidelines requirements.
10.2.3 CEO AND DISCLOSED EXECUTIVES’ CONTRACT TERMS AND EQUITY TREATMENT
The details of the contract terms and the equity treatment on termination (in accordance with the Conditions of Grant) relating to the CEO
and Disclosed Executives are below. Although they are similar, they vary in some cases to suit different circumstances.
Type of contractPermanent ongoing employment contract.
Notice on resignation •12 months by CEO;
•6 months by Disclosed Executives.
1
Notice on termination
by ANZ2
•12 months by ANZ for CEO and Disclosed Executives.
3
However, ANZ may immediately terminate an individual’s employment at any time in the case of serious
misconduct. In that case, the individual will be entitled only to payment of FR up to the date of their
termination and their statutory entitlements.
How unvested equity is
treated on leaving ANZ
Executives who resign or are terminated will forfeit all their unvested deferred equity – unless the Board
determines otherwise.
If an executive is terminated due to redundancy or they are classified as a ‘good leaver’, unless the Board
determines otherwise, then:
•their STVR (deferred shares/share rights) remain on foot and are released at the original vesting date;
•their LTVR (RR/PR) (for grants awarded from 31 December 2020) remain on foot and are released at the
original vesting date (to the extent that the performance hurdles are met); and
•their PR
4
(for grants awarded pre 31 December 2020) are prorated for service to the full notice termination
date and released at the original vesting date (to the extent that the performance hurdles are met).
On an executive’s death or total and permanent disablement, their deferred equity vests.
Unvested equity remains subject to malus post termination.
Change of control
(applies to the CEO only)
If a change of control or other similar event occurs, then we will test the performance conditions applying to
the CEO’s LTVR (RR/PR). They will vest to the extent that the performance conditions are satisfied.
1. 3 months by the former Acting GE T&C. 2. For M Carnegie, K Corbally, F Faruqui, G Florian, R Howell, C Morgan, A Strong, M Whelan and K van der Merwe, their contracts state that in particular
circumstances they may be eligible for a retrenchment benefit in accordance with the relevant ANZ policy, as varied from time to time. For A Watson, notice on retrenchment is 6 weeks and
compensation on retrenchment is calculated on a scale up to a maximum of 79 weeks after 25 years’ service.
3. 6 months by ANZ for the Acting GE T&C. 4. Or deferred share rights granted to the
CRO instead of PR.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
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Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
11
OTHER INFORMATION
1. Cash salary includes any adjustments required to reflect the use of ANZ's Lifestyle Leave Policy for the period in the KMP role. 2. Non monetary benefits generally consist of company-funded
benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to relocation/accommodation.
3. The total cash incentive relates
to the cash component of STVR only. The relevant amortisation of the STVR deferred components is included in share-based payments and has been amortised over the vesting period. The total
STVR was approved by the ANZBGL and ANZGHL Boards on 17 October 2023, and in addition for A Watson by the ANZ NZ Board on 17 October 2023. 100% of the cash component of the STVR
awarded for the 2022 and 2023 years vested to the executive in the applicable financial year.
4. Other cash and other equity allocations (C Morgan) relate to the employment arrangements of
deferred variable remuneration forfeited and bonus opportunity forgone as a result of joining ANZ.
5. For Australian based executives, the 2022 and 2023 superannuation contributions reflect
the Superannuation Guarantee Contribution based on the Maximum Contribution Base. F Faruqui's 2022 amount reflects a part year superannuation contribution. A Watson participates in
KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay. KiwiSaver employer superannuation contributions are also
contributed on top of cash STVR at the time of payment.
6. For Australian based executives, long service leave accrued takes into consideration the impact of changes to the Superannuation
Guarantee percentage. Year-on-year fluctuations in long service leave accrued relate to the impact of historical fixed remuneration increases on the accrual as calculated at the end of each
11.1 2023 Statutory remuneration – CEO and Disclosed Executives
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
FR awarded (cash and superannuation contributions) and also the cash component of the 2023 variable remuneration award, it does not
show the actual variable remuneration awarded or received in 2023 (see sections 5.1 to 5.4), but instead shows the amortised accounting
value for this financial year of deferred remuneration (including prior year awards).
2023 Statutory remuneration – CEO and Disclosed Executives
Short–term employee benefitsPost–employment
Long–term
employee benefitsShare–based payments
7
Total amortisation value of
Long service leave
accrued during
the year
6
$
Variable
remuneration
Other equity
allocations
4,8
Financial year Cash salary
1
$
Non monetary
benefits
2
$
Total cash
incentive
3
$
Other cash
4
$
Super
contributions
5
$
Deferred shares
$
Deferred
share rights
$
Restricted
rights
$
Performance
rights
$
Deferred shares
$
Termination
benefits
$
Total
remuneration
$
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott2023 2,474,181 15,676 1,160,000 - 25,819 35,112 1,061,506 - 212,024 1,202,190 - - 6,186,508
2022 2,476,001 15,384 930,000 - 23,999 33,306 933,786 - - 1,076,657 - - 5,489,133
M Carnegie2023 1,224,181 77,341 550,000 - 26,319 22,858 548,990 - 132,871 298,501 - - 2,881,061
2022 1,176,001 31,041 460,000 - 24,499 17,151 522,450 - - 129,603 - - 2,360,745
K Corbally2023 1,224,181 10,176 532,500 - 25,819 27,518 568,319 265,999 196,849 - - - 2,851,361
2022 1,176,001 9,884 442,500 - 23,999 34,577 513,883 238,579 - - - - 2,439,423
F Faruqui92023 1,224,181 11,423 600,000 - 25,819 19,332 600,306 56,608 132,871 364,031 - - 3,034,571
2022 1,159,194 174,222 579,575 - 4,806 17,524 465,805 178,143 - 302,636 - - 2,881,905
G Florian
10
2023 1,216,181 23,179 497,500 - 25,819 30,978 531,235 - 122,240 270,977 - - 2,718,109
2022 1,072,169 18,569 442,500 - 23,999 15,812 512,134 - - 171,181 - - 2,256,364
R Howell
9
2023 224,942 - 180,000 - 6,850 9,321 62,538 - - - - - 483,651
C Morgan
4,9
2023 608,220 15,707 250,000 407,000 18,780 5,367 67,909 - 1,414 798 29,899 - 1,405,094
A Strong
9
2023 670,504 - 315,100 - 19,496 18,550 354,547 - 73,347 38,600 - - 1,490,144
A Watson
8,11
2023 1,062,823 21,431 472,570 - 60,557 6,612 528,328 - 117,866 222,922 46 - 2,493,155
2022 1,019,021 22,049 422,742 - 70,686 4,068 505,698 2,132 - 119,057 312 - 2,165,765
M Whelan2023 1,434,181 10,176 730,000 - 25,819 36,172 700,447 - 155,192 393,646 - - 3,485,633
2022 1,376,001 9,884 535,000 - 23,999 17,779 666,495 - - 181,892 - - 2,811,050
FORMER DISCLOSED EXECUTIVES
K van der Merwe
12
2023 760,635 7,190 - - 19,865 - (418,392) - - (591,168) - 30,626 (191,244)
2022 976,001 16,034 400,000 - 24,499 14,409 472,124 - - 177,072 - - 2,080,139
64
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
11.1 2023 Statutory remuneration – CEO and Disclosed Executives
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
FR awarded (cash and superannuation contributions) and also the cash component of the 2023 variable remuneration award, it does not
show the actual variable remuneration awarded or received in 2023 (see sections 5.1 to 5.4), but instead shows the amortised accounting
value for this financial year of deferred remuneration (including prior year awards).
2023 Statutory remuneration – CEO and Disclosed Executives
Short–term employee benefitsPost–employment
Long–term
employee benefitsShare–based payments
7
Total amortisation value of
Long service leave
accrued during
the year
6
$
Variable
remuneration
Other equity
allocations
4,8
Financial year Cash salary
1
$
Non monetary
benefits
2
$
Total cash
incentive
3
$
Other cash
4
$
Super
contributions
5
$
Deferred shares
$
Deferred
share rights
$
Restricted
rights
$
Performance
rights
$
Deferred shares
$
Termination
benefits
$
Total
remuneration
$
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott2023 2,474,181 15,676 1,160,000 - 25,819 35,112 1,061,506 - 212,024 1,202,190 - - 6,186,508
2022 2,476,001 15,384 930,000 - 23,999 33,306 933,786 - - 1,076,657 - - 5,489,133
M Carnegie2023 1,224,181 77,341 550,000 - 26,319 22,858 548,990 - 132,871 298,501 - - 2,881,061
2022 1,176,001 31,041 460,000 - 24,499 17,151 522,450 - - 129,603 - - 2,360,745
K Corbally2023 1,224,181 10,176 532,500 - 25,819 27,518 568,319 265,999 196,849 - - - 2,851,361
2022 1,176,001 9,884 442,500 - 23,999 34,577 513,883 238,579 - - - - 2,439,423
F Faruqui92023 1,224,181 11,423 600,000 - 25,819 19,332 600,306 56,608 132,871 364,031 - - 3,034,571
2022 1,159,194 174,222 579,575 - 4,806 17,524 465,805 178,143 - 302,636 - - 2,881,905
G Florian
10
2023 1,216,181 23,179 497,500 - 25,819 30,978 531,235 - 122,240 270,977 - - 2,718,109
2022 1,072,169 18,569 442,500 - 23,999 15,812 512,134 - - 171,181 - - 2,256,364
R Howell
9
2023 224,942 - 180,000 - 6,850 9,321 62,538 - - - - - 483,651
C Morgan
4,9
2023 608,220 15,707 250,000 407,000 18,780 5,367 67,909 - 1,414 798 29,899 - 1,405,094
A Strong
9
2023 670,504 - 315,100 - 19,496 18,550 354,547 - 73,347 38,600 - - 1,490,144
A Watson
8,11
2023 1,062,823 21,431 472,570 - 60,557 6,612 528,328 - 117,866 222,922 46 - 2,493,155
2022 1,019,021 22,049 422,742 - 70,686 4,068 505,698 2,132 - 119,057 312 - 2,165,765
M Whelan2023 1,434,181 10,176 730,000 - 25,819 36,172 700,447 - 155,192 393,646 - - 3,485,633
2022 1,376,001 9,884 535,000 - 23,999 17,779 666,495 - - 181,892 - - 2,811,050
FORMER DISCLOSED EXECUTIVES
K van der Merwe
12
2023 760,635 7,190 - - 19,865 - (418,392) - - (591,168) - 30,626 (191,244)
2022 976,001 16,034 400,000 - 24,499 14,409 472,124 - - 177,072 - - 2,080,139
financial year. 7. As required by AASB 2 Share-based payments, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity
that had not yet fully vested as at the commencement of the financial year. The fair value is determined at grant date and is allocated on a straight-line basis over the relevant vesting period.
The amount included as remuneration neither relates to, nor indicates, the benefit (if any) that the executive may ultimately realise if the equity becomes exercisable. No terms of share-based
payments have been altered or modified during the financial year. There were no cash settled share-based payments or any other form of share-based payment compensation during the financial
year for the CEO or Disclosed Executives.
8. Other equity allocations (A Watson) relate to shares received in relation to the historical Employee Share Offer which provided a grant of ANZ shares
in each financial year to eligible employees subject to Board approval.
9. Remuneration based on time as a Disclosed Executive in either 2022 (F Faruqui) or 2023 (R Howell, C Morgan, A Strong).
10. Fixed remuneration reflects changes in fixed remuneration during the financial year due to expanded role (G Florian). 11. Paid in NZD and converted to AUD. 12. 2023 remuneration for
K van der Merwe based on time as a Disclosed Executive up to date of cessation 30 June 2023 (noting her annual fixed remuneration for 2023 was $1.04m). Share-based payments include the
expensing treatment on resignation for unvested deferred remuneration (including reversals for forfeiture on resignation). Termination benefits reflect payment for accrued annual leave in
accordance with her contract, payable on resignation.
65
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
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Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
11.2 Equity holdings
For the equity granted to the CEO and Disclosed Executives in November/December 2022, the CEO’s deferred shares were purchased on
the market and the deferred shares for Disclosed Executives were satisfied through the new issue of shares. For deferred share rights, which
vested to Disclosed Executives in November 2022, where the rights were not able to be satisfied through the reallocation of previously
forfeited shares they were satisfied through the new issue of shares.
11.2.1 CEO AND DISCLOSED EXECUTIVES’ EQUITY GRANTED, VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED
The table below sets out details of deferred shares and rights that we granted to the CEO and Disclosed Executives:
•during the 2023 year, relating to 2022 Performance and Remuneration Review outcomes; or
•in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2023 year.
Equity granted, vested, exercised/sold and lapsed/forfeited – CEO and Disclosed Executives
Type of equity
Number
granted
1
Equity fair
value
(for 2023
grants
only)
$
Grant
date
First
date
exercisable
Date
of
expiry
Vested
Lapsed/
ForfeitedExercised/Sold
Vested
and
exercis-
able as
at 30 Sep
2023
3
Unexer-
cisable
as at 30
Sep
2023
4
NameNumber%
Value
2
$Number%
Value
2
$ Number%
Value
2
$
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott
Deferred shares 8,622 22-Nov-1822-Nov-22 - 8,622 100 213,125 - - - (8,622) 100 205,036 - -
Deferred shares 6,002 22-Nov-1922-Nov-22 - 6,002 100 148,362 - - - (6,002) 100 142,731 - -
Deferred shares 8,130 07-Dec-2022-Nov-22 - 8,130 100 200,963 - - - (8,130) 100 193,336 - -
Deferred shares 14,441 22-Nov-2122-Nov-22 - 14,441 100 356,963 - - - (14,441) 100 343,416 - -
Deferred shares 20,156 22.94 01-Oct-2222-Nov-23 - - - - - - - - - - - 20,156
Deferred shares 20,156 22.9401-Oct-2222-Nov-24 - - - - - - - - - - - 20,156
Restricted rights 24,138 18.75 15-Dec-2215-Dec-2615-Dec-28 - - - - - - - - - - 24,138
Restricted rights 24,138 17.65 15-Dec-2215-Dec-2715-Dec-29 - - - - - - - - - - 24,138
Restricted rights 24,869 16.61 15-Dec-2215-Dec-2815-Dec-30 - - - - - - - - - - 24,869
Performance rights 18,103 11.26 15-Dec-2215-Dec-2615-Dec-28 - - - - - - - - - - 18,103
Performance rights 6,034 7.29 15-Dec-2215-Dec-2615-Dec-28 - - - - - - - - - - 6,034
Performance rights 18,103 10.26 15-Dec-2215-Dec-2715-Dec-29 - - - - - - - - - - 18,103
Performance rights 6,034 7.20 15-Dec-2215-Dec-2715-Dec-29 - - - - - - - - - - 6,034
Performance rights 18,652 9.34 15-Dec-2215-Dec-2815-Dec-30 - - - - - - - - - - 18,652
Performance rights 6,217 7.07 15-Dec-2215-Dec-2815-Dec-30 - - - - - - - - - - 6,217
M Carnegie
Deferred shares 5,202 22-Nov-1822-Nov-22 - 5,202 100 128,587 - - - - - - 5,202 -
Deferred shares 3,961 22-Nov-1922-Nov-22 - 3,961 100 97,911 - - - - - - 3,961 -
Deferred shares 5,323 07-Dec-2022-Nov-22 - 5,323 100 131,578 - - - - - - 5,323 -
Deferred shares 8,220 22-Nov-2122-Nov-22 - 8,220 100 203,188 - - - - - - 8,220 -
Deferred shares 9,970 22.94 01-Oct-2222-Nov-23 - - - - - -
- - - - - 9,970
Deferred shares 9,969 22.94 01-Oct-2222-Nov-24 - - - - - - - - - - - 9,969
Restricted rights 18,286 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 18,286
Restricted rights 18,286 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 18,286
Performance rights 13,715 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 13,715
Performance rights 4,571 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 4,571
Performance rights 13,715 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 13,715
Performance rights 4,571 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 4,571
66
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
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Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Type of equity
Number
granted
1
Equity fair
value
(for 2023
grants
only)
$
Grant
date
First
date
exercisable
Date
of
expiry
Vested
Lapsed/
ForfeitedExercised/Sold
Vested
and
exercis-
able as
at 30 Sep
2023
3
Unexer-
cisable
as at 30
Sep
2023
4
NameNumber%
Value
2
$Number%
Value
2
$ Number%
Value
2
$
CEO AND CURRENT DISCLOSED EXECUTIVES
K Corbally
Deferred shares 3,007 22-Nov-1822-Nov-22 - 3,007 100 74,329 - - - (3,007) 100 74,464 - -
Deferred shares 3,829 22-Nov-1922-Nov-22 - 3,829 100 94,648 - - - (3,829) 100 94,820 - -
Deferred shares 5,581 07-Dec-2022-Nov-22 - 5,581 100 137,955 - - - (5,581) 100 138,206 - -
Deferred shares 6,649 22-Nov-2122-Nov-22 - 6,649 100 164,355 - - - (6,649) 100 164,654 - -
Deferred shares 9,590 22.94 01-Oct-2222-Nov-23 - - - - - - - - - - - 9,590
Deferred shares 9,590 22.94 01-Oct-2222-Nov-24 - - - - - - - - - - - 9,590
Restricted rights 27,091 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 27,091
Restricted rights 27,091 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 27,091
F Faruqui
Deferred shares 10,486 22-Nov-2122-Nov-22 - 10,486 100 259,200 - - - (1,963) 19 48,523 8,523 -
Deferred shares 12,950 22.94 01-Oct-2222-Nov-23 - - - - - - - - - - - 12,950
Deferred shares 12,949 22.9401-Oct-2222-Nov-24 - - - - - - - - - - - 12,949
Deferred share rights 5,158 07-Dec-2022-Nov-2229-Nov-22 5,158 100 127,499 - - - (5,158) 100 127,499 - -
Deferred share rights 8,033 22-Nov-1922-Nov-2229-Nov-22 8,033 100 198,565 - - - (8,033) 100 198,565 - -
Deferred share rights 8,496 22-Nov-1822-Nov-2229-Nov-22 8,496 100 210,010 - - - (8,496) 100 210,010 - -
Restricted rights 18,286 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 18,286
Restricted rights 18,286 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 18,286
Performance rights 13,715 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 13,715
Performance rights 4,571 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 4,571
Performance rights 13,715 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 13,715
Performance rights 4,571 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - -
- - - - - - 4,571
G Florian
Deferred shares 1,609 22-Nov-1822-Nov-21 - - - - - - - (1,609) 100 39,614 - -
Deferred shares 3,251 22-Nov-1822-Nov-22 - 3,251 100 80,360 - - - (476) 15 11,861 2,775 -
Deferred shares 3,367 22-Nov-1922-Nov-21 - - - - - - - (3,367) 100 82,313 - -
Deferred shares 2,244 22-Nov-1922-Nov-22 - 2,244 100 55,469 - - - (2,244) 100 54,859 - -
Deferred shares 6,442 07-Dec-2022-Nov-21 - - - - - - - (6,442) 100 157,487 - -
Deferred shares 4,829 07-Dec-2022-Nov-22 - 4,829 100 119,367 - - - (4,829) 100 118,054 - -
Deferred shares 9,770 22-Nov-2122-Nov-22 - 9,770 100 241,502 - - - (9,770) 100 238,846 - -
Deferred shares 9,590 22.9401-Oct-2222-Nov-23 - - - - - - - - - - - 9,590
Deferred shares 9,590 22.9401-Oct-2222-Nov-24 - - - - - - - - - - - 9,590
Restricted rights 16,823 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 16,823
Restricted rights 16,823 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 16,823
Performance rights 12,617 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 12,617
Performance rights 4,205 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 4,205
Performance rights 12,617 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 12,617
Performance rights 4,205 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 4,205
R Howell
5
C Morgan
5
Deferred shares 3,025 24.52 20-Aug-2320-Aug-24 - - - - - - - - - - - 3,025
Deferred shares 5,082 24.52 20-Aug-2320-Aug-24 - - - - - - - - - - - 5,082
Deferred shares 5,082 24.52 20-Aug-2320-Aug-25 - - - - - - - - - - - 5,082
Restricted rights 18,422 19.45 25-Sep-2322-Nov-2722-Nov-29 - - - - - - - - - - 18,422
Performance rights 13,816 11.89 25-Sep-2322-Nov-2722-Nov-29 - - - - - - - - - - 13,816
Performance rights 4,605 8.24 25-Sep-2322-Nov-2722-Nov-29---------- 4,605
67
Australia and New Zealand Banking Group Limited 2023 Annual Report
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Type of equity
Number
granted
1
Equity fair
value
(for 2023
grants
only)
$
Grant
date
First
date
exercisable
Date
of
expiry
Vested
Lapsed/
ForfeitedExercised/Sold
Vested
and
exercis-
able as
at 30 Sep
2023
3
Unexer-
cisable
as at 30
Sep
2023
4
NameNumber%
Value
2
$Number%
Value
2
$ Number%
Value
2
$
CEO AND CURRENT DISCLOSED EXECUTIVES
A Strong
5
Deferred shares 4,361 22-Nov-1922-Nov-22 - 4,361 100 107,798 - - - (4,361) 100 103,826 - -
Deferred shares 3,229 07-Dec-2022-Nov-22 - 3,229 100 79,817 - - - (639) 20 15,213 2,590 -
Deferred shares 4,189 22-Nov-2122-Nov-22 - 4,189 100 103,547 - - - - - - 4,189 -
Deferred shares 6,133 24.72 22-Nov-2222-Nov-23 - - - - - - - - - - - 6,133
Deferred shares 6,132 24.72 22-Nov-2222-Nov-24 - - - - - - - - - - - 6,132
Deferred shares 6,132 24.72 22-Nov-2222-Nov-25 - - - - - - - - - - - 6,132
Restricted rights 10,972 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 10,972
Restricted rights 10,972 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 10,972
Performance rights 8,229 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 8,229
Performance rights 2,743 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 2,743
Performance rights 8,229 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 8,229
Performance rights 2,743 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 2,743
A Watson
Deferred shares 3,901 22-Nov-1922-Nov-22 - 3,901 100 96,428 - - - (3,901) 100 97,341 - -
Deferred shares 4,354 07-Dec-2022-Nov-22 - 4,354 100 107,625 - - - (4,354) 100 108,644 - -
Deferred shares 9,924 22-Nov-2122-Nov-22 - 9,924 100 245,308 - - - (9,924) 100 247,632 - -
Deferred shares 9,162 22.94 01-Oct-2222-Nov-23 - - - - - - - - - - - 9,162
Deferred shares 9,162 22.9401-Oct-2222-Nov-24 - - - - - - - - - - - 9,162
Employee Share Offer 32 02-Dec-1902-Dec-22 - 32 100 790 - - - - - - 32 -
Restricted rights 16,221 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 16,221
Restricted rights 16,221 18.22 22-Nov-2222-Nov-2722-Nov-29 - - -
- - - - - - - 16,221
Performance rights 12,166 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 12,166
Performance rights 4,055 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 4,055
Performance rights 12,166 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 12,166
Performance rights 4,055 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 4,055
M Whelan
Deferred shares 7,072 22-Nov-1822-Nov-22 - 7,072 100 174,811 - - - (7,072) 100 174,726 - -
Deferred shares 6,998 22-Nov-1922-Nov-22 - 6,998 100 172,981 - - - (6,998) 100 172,897 - -
Deferred shares 4,722 07-Dec-2022-Nov-22 - 4,722 100 116,722 - - - (4,722) 100 116,665 - -
Deferred shares 11,700 22-Nov-2122-Nov-22 - 11,700 100 289,209 - - - (11,700) 100 289,068 - -
Deferred shares 11,595 22.94 01-Oct-2222-Nov-23 - - - - - - - - - - - 11,595
Deferred shares 11,595 22.9401-Oct-2222-Nov-24 - - - - - - - - - - - 11,595
Restricted rights 21,358 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 21,358
Restricted rights 21,358 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 21,358
Performance rights 16,019 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 16,019
Performance rights 5,339 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - - - - - - - - 5,339
Performance rights 16,019 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - 16,019
Performance rights 5,339 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - - - - - - - - 5,339
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Financial
report
Type of equity
Number
granted
1
Equity fair
value
(for 2023
grants
only)
$
Grant
date
First
date
exercisable
Date
of
expiry
Vested
Lapsed/
ForfeitedExercised/Sold
Vested
and
exercis-
able as
at 30 Sep
2023
3
Unexer-
cisable
as at 30
Sep
2023
4
NameNumber%
Value
2
$Number%
Value
2
$ Number%
Value
2
$
FORMER DISCLOSED EXECUTIVES
K van der
Merwe
6
Deferred shares 524 22-Nov-1822-Nov-19 - - - - - - - (524) 100 12,962 - -
Deferred shares 3,577 22-Nov-1822-Nov-20 - - - - - - - (3,577) 100 88,481 - -
Deferred shares 3,577 22-Nov-1822-Nov-21 - - - - - - - (3,577) 100 88,481 - -
Deferred shares 3,577 22-Nov-1822-Nov-22 - 3,577 100 88,419 - - - (1,192) 33 29,485 2,385 -
Deferred shares 3,301 22-Nov-1922-Nov-22 - 3,301 100 81,596 - - - - - - 3,301 -
Deferred shares 1,650 22-Nov-1922-Nov-23 - - - - (1,650) 100 (39,067) - - - - -
Deferred shares 4,293 07-Dec-2022-Nov-22 - 4,293 100 106,117 - - - - - - 4,293 -
Deferred shares 2,862 07-Dec-2022-Nov-23 - - - - (2,862) 100 (67,763) - - - - -
Deferred shares 1,431 07-Dec-2022-Nov-24 - - - - (1,431) 100 (33,882) - - - - -
Deferred shares 8,579 22-Nov-2122-Nov-22 - 8,579 100 212,062 - - - - - - 8,579 -
Deferred shares 6,433 22-Nov-2122-Nov-23 - - - - (6,433) 100 (152,313) - - - - -
Deferred shares 4,288 22-Nov-2122-Nov-24 - - - - (4,288) 100 (101,527) - - - - -
Deferred shares 2,144 22-Nov-2122-Nov-25 - - - - (2,144) 100 (50,763) - - - - -
Deferred shares 8,669 22.9401-Oct-2222-Nov-23 - - - - (8,669) 100 (205,255) - - - - -
Deferred shares 8,669 22.9401-Oct-2222-Nov-24 - - - - (8,669) 100 (205,255) - - - - -
Restricted rights 15,214 19.36 22-Nov-2222-Nov-2622-Nov-28 - - - (15,214) 100 (360,220) - - - - -
Restricted rights 15,214 18.22 22-Nov-2222-Nov-2722-Nov-29 - - - (15,214) 100 (360,220) - - - - -
Performance rights 25,510 22-Nov-1922-Nov-2322-Nov-25 - - - (25,510) 100 (603,998) - - - - -
Performance rights 8,503 22-Nov-1922-Nov-2322-Nov-25 - - - (8,503) 100 (201,325) - - - - -
Performance rights 23,213 07-Dec-2022-Nov-2422-Nov-26 - - - (23,213) 100 (549,612) - - - - -
Performance rights
7,737 07-Dec-2022-Nov-2422-Nov-26 - - - (7,737) 100 (183,188) - - - - -
Performance rights 33,140 22-Nov-2122-Nov-2522-Nov-27 - - - (33,140) 100 (784,652) - - - - -
Performance rights 11,046 22-Nov-2122-Nov-2522-Nov-27 - - - (11,046) 100 (261,535) - - - - -
Performance rights 11,410 11.27 22-Nov-2222-Nov-2622-Nov-28 - - - (11,410) 100 (270,153) - - - - -
Performance rights 3,803 7.46 22-Nov-2222-Nov-2622-Nov-28 - - - (3,803) 100 (90,043) - - - - -
Performance rights 11,410 10.13 22-Nov-2222-Nov-2722-Nov-29 - - - (11,410) 100 (270,153) - - - - -
Performance rights 3,803 7.32 22-Nov-2222-Nov-2722-Nov-29 - - - (3,803) 100 (90,043) - - - - -
1. For the purpose of the five highest paid executive disclosures, Executives are defined as Disclosed Executives or other members of the ExCo. For the 2023 financial year the five highest paid executives include
five Disclosed Executives. Rights granted to Disclosed Executives as remuneration in 2023 are included in the table. No rights have been granted to the CEO, Disclosed Executives or the five highest paid executives
since the end of 2023 up to the Directors’ Report sign-off date.
2. The point in time value of deferred shares/deferred share rights and/or restricted rights/performance rights is based on the one day VWAP of the
Company’s shares traded on the ASX on the date of vesting, lapsing/forfeiture or exercising/sale/transfer out of trust, multiplied by the number of deferred shares/deferred share rights and/or restricted rights/
performance rights. The exercise price for all deferred share rights/restricted rights/performance rights is $0.00. No terms or conditions of grant of the share-based payment transactions have been altered or
modified during the reporting period.
3. The number vested and exercisable is the number of shares, options and rights that remain vested at the end of the reporting period. No shares, options and rights were
vested and unexercisable.
4. Performance rights granted in prior years (by grant date) that remained unexerciseable at 30 September 2023 or date ceased as a KMP include:
Nov-19Nov-20Nov-21Nov-22
S Elliott168,066159,308126,35373,143
M Carnegie40,81638,37842,34536,572
K Corbally----
F Faruqui69,11834,04554,00636,572
G Florian23,12834,82050,32433,644
R Howell----
C Morgan---18,421
A Strong---21,944
A Watson-31,38951,11732,442
M Whelan72,10834,04560,26642,716
K van der Merwe----
Performance rights granted to S Elliott in 2023 were approved by shareholders at the 2022 AGM in accordance with ASX Listing Rule 10.14.
5. Equity transactions disclosed from date commenced as a Disclosed
Executive. There were no disclosable transactions for R Howell.
6. Equity transactions disclosed up to date ceased as a KMP.
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11.2.2 NED, CEO AND DISCLOSED EXECUTIVES’ EQUITY HOLDINGS
The table below sets out details of equity held directly, indirectly or beneficially by each NED, the CEO and each Disclosed Executive,
including their related parties.
Equity holdings – NED, CEO and Disclosed Executives
NameType of equity
Opening
balance at
1 Oct 2022
Granted during
the year as
remuneration
1
Received during
the year on
exercise of
options or rights
Resulting from
any other
changes during
the year
2
Closing
balance at
30 Sep 2023
3,4
CURRENT NON–EXECUTIVE DIRECTORS
P O’Sullivan
Ordinary shares 4,350 - - - 4,350
Capital notes 7 9,250 - - - 9,250
I Atlas
Ordinary shares 15,318 - - - 15,318
J Halton
Ordinary shares 9,653 - - 405 10,058
G Hodges5
Ordinary shares 201,635 - - (17,234) 184,401
Capital notes 4 1,350 - - - 1,350
J Key
Ordinary shares 10,500 - - - 10,500
H Kramer
5
Ordinary shares 5,828 - - - 5,828
J Macfarlane
Ordinary shares 19,042 - - - 19,042
Capital notes 3 5,000 - - (5,000) -
Capital notes 6 2,140 - - - 2,140
Capital notes 7 2,000 - - - 2,000
Capital notes 8 - - - 5,000 5,000
C O’Reilly
Ordinary shares 6,400 - - - 6,400
J Smith
Ordinary shares 2,779 - - - 2,779
FORMER NON–EXECUTIVE DIRECTORS
G Liebelt
6
Ordinary shares 21,671 - - - 21,671
Capital notes 6 2,500 - - - 2,500
Capital notes 7 2,500 - - - 2,500
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott
Deferred shares 69,986 40,312 - (37,195) 73,103
Ordinary shares 395,108 - - 100,532 495,640
Vested shares 1yr restriction 56,989 - - (56,989) -
Restricted rights - 73,145 - - 73,145
Performance rights 453,727 73,143 - - 526,870
M Carnegie
Deferred shares 112,834 19,939 - - 132,773
Ordinary shares 34,098 - - 7,482 41,580
Restricted rights - 36,572 - - 36,572
Performance rights 121,539 36,572 - - 158,111
K Corbally
Deferred shares 45,844 19,180 - (19,066) 45,958
Ordinary shares 1,381 - - 2,964 4,345
Capital notes 6 1,400 - - - 1,400
Deferred share rights 62,675 - - - 62,675
Restricted rights - 54,182 - - 54,182
F Faruqui
Deferred shares 28,006 25,899 - (1,963) 51,942
Ordinary shares 100,380 - 21,687 (1,550) 120,517
Deferred share rights 31,467 - (21,687) - 9,780
Restricted rights - 36,572 - - 36,572
Performance rights 157,169 36,572 - - 193,741
G Florian
Deferred shares 56,605 19,180 - (28,737) 47,048
Ordinary shares 37,583 - - 18,029 55,612
Restricted rights - 33,646 - - 33,646
Performance rights 108,272 33,644 - - 141,916
R Howell
5
Deferred shares 12,138 - - - 12,138
Ordinary shares 324 - - (324) -
C Morgan
5
Deferred shares - 13,189 - - 13,189
Ordinary shares 25 - - (25) -
Restricted rights - 18,422 - - 18,422
Performance rights - 18,421 - - 18,421
A Strong
5
Deferred shares 23,382 18,397 - (5,000) 36,779
Ordinary shares 2,264 - - 1,971 4,235
Restricted rights - 21,944 - - 21,944
Performance rights - 21,944 - - 21,944
A Watson
Deferred shares 41,956 18,324 - (18,179) 42,101
Employee Share Offer 61 - - - 61
Ordinary shares 37,581 - - 13,393 50,974
Restricted rights - 32,442 - - 32,442
Performance rights 82,506 32,442
- - 114,948
M Whelan
Deferred shares 56,260 23,190 - (30,492) 48,958
Ordinary shares 46,963 - - 233 47,196
Restricted rights - 42,716 - - 42,716
Performance rights 166,419 42,716 - - 209,135
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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11.3 Loans
11.3.1 OVERVIEW
When we lend to NEDs, the CEO or Disclosed Executives, we do so in the ordinary course of business and on normal commercial terms and
conditions that are no more favourable than those given to other employees or customers – this includes the term of the loan, the security
required and the interest rate. Details of the terms and conditions of lending products can be found on anz.com. No amounts have been
written off during the period, or individual assessed allowance for expected credit losses raised in respect of these balances.
Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2023 (including those with balances
less than $100,000) was $31,068,195 (2022: $30,679,346) with interest paid of $1,346,442 (2022: $790,118) during the period.
11.3.2 NED, CEO AND DISCLOSED EXECUTIVES’ LOAN TRANSACTIONS
The table below sets out details of loans outstanding to NEDs, the CEO and Disclosed Executives including their related parties, if – at any
time during the year – the individual’s aggregate loan balance exceeded $100,000.
Loan transactions – NED, CEO and Disclosed Executives
Name
Opening balance at
1 Oct 2022¹
$
Closing balance at
30 Sep 2023
$
Interest paid and payable
in the reporting period²
$
Highest balance in
the reporting period
$
CURRENT NON–EXECUTIVE DIRECTORS
P O'Sullivan
731,495657,99828736,813
G Hodges
2,173,4872,322,549105,4113,307,728
J Key
3,703,0093,583,961285,1913,927,633
H Kramer
3,177,7843,189,93529,7333,198,854
J Macfarlane
9,364,2055,907,690539,94110,643,712
CEO AND CURRENT DISCLOSED EXECUTIVES
S Elliott
2,521,407
2,467,062
84,3782,561,192
M Carnegie
3,3745,602,18318,8555,646,088
G Florian
4,250,8562,324,15779,2394,293,369
A Strong
1,461,4901,715,98162,5051,852,107
M Whelan
1,550,9381,528,45889,7381,601,107
FORMER DISCLOSED EXECUTIVES
K van der Merwe
3
1,655,9421,696,038 49,224 1,733,877
Total
30,593,988 30,996,013 1,344,242 39,502,479
1. Opening balances have been adjusted for new and leaving KMP. 2. Actual interest paid after considering offset accounts. The loan balance is shown gross, however the interest paid takes into
account the impact of offset amounts.
3. Closing balance is as at the date ceased as a KMP.
11.4 Other transactions
Other transactions with NEDs, the CEO and Disclosed Executives, and their related parties included deposits.
Other transactions – NED, CEO and Disclosed Executives
Opening balance at
1 Oct 20221
$
Closing balance at
30 Sep 20232,3
$
Total KMP deposits30,432,18740,819,935
1. Opening balance is at 1 October 2022 or the date of commencement as a KMP if part way through the year and it has been adjusted to take into account timing variances. 2. Closing balance is
at 30 September 2023 or at the date ceased as a KMP if part way through the year.
3. Interest received on deposits for 2023 was $1,001,678 (2022: $140,355).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service
fees, brokerage, bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated
with the performance of their duties. These transactions are conducted on normal commercial terms and conditions are no more favourable
than those given to other employees or customers.
FORMER DISCLOSED EXECUTIVES
K van der
Merwe6
Deferred shares 63,515 17,338 - (45,016) 35,837
Ordinary shares 29,407 - - 1,918 31,325
Restricted rights - 30,428 - (30,428) -
Performance rights 109,149 30,426 - (139,575) -
1. Details of options/rights granted as remuneration during 2023 are provided in the previous table. 2. Shares resulting from any other changes during the year include the net result of any shares
purchased (including under the ANZ Share Purchase Plan), forfeited, sold or acquired under the Dividend Reinvestment Plan.
3. The following shares (included in the holdings above) were held on
behalf of the NEDs, CEO and Disclosed Executives (i.e., indirect beneficially held shares) as at 30 September 2023 (or the date ceased as a KMP): P O'Sullivan - 0, I Atlas - 15,318, J Halton - 0,
G Hodges - 0, J Key - 10,500, H Kramer - 5,828, J Macfarlane - 28,182, C O'Reilly - 0, J Smith - 0, G Liebelt - 8,436, S Elliott - 562,395, M Carnegie - 132,773, K Corbally - 47,358, F Faruqui - 51,942,
G Florian - 56,947, R Howell - 12,138, C Morgan - 13,189, A Strong - 36,779, A Watson - 42,162, M Whelan - 92,771, K van der Merwe - 35,837.
4. Zero rights were vested and exercisable, and zero
options/rights were vested and unexerciseable as at 30 September 2023. There was no change in the balance as at the Directors' Report sign-off date.
5. Commencing balance is based on
holdings as at the date of commencement as a KMP.
6. Concluding balance is based on holdings as at the date ceased as a KMP.
71
Australia and New Zealand Banking Group Limited 2023 Annual Report
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DIRECTORS’
REPORT
Directors’ report
The Directors’ Report for the financial year
ended 30 September 2023 has been
prepared in accordance with the
requirements of the Corporations Act 2001.
The information below forms part of this
Directors’ Report:
•Principal activities on page 7;
•Operating and financial review on
pages 20 to 32;
•Dividends on page 32;
•Information on the Directors on
pages 8 to 10;
•Remuneration report on pages 34 to 71.
Establishment of a New Group
Organisational Structure
On 3 January 2023, Australia and New
Zealand Banking Group Limited (ANZBGL)
established by a scheme of arrangement,
a non-operating holding company, ANZ
Group Holdings Limited (ANZGHL), as the
new listed parent holding company of the
ANZ Group and implemented a restructure
to separate ANZ’s banking and certain
non-banking businesses into the ANZ Bank
Group and ANZ Non-Bank Group
(Restructure). The ANZ Bank Group
comprises the majority of the businesses
and subsidiaries that were held in ANZBGL
prior to the Restructure. The ANZ Non-Bank
Group comprises banking-adjacent
businesses developed or acquired by the
ANZ Group to focus on bringing new
technology and banking-adjacent services
to the ANZ Group’s customers, and a
separate service company.
The key steps undertaken in the
Restructure were:
•new legal entities ANZGHL, ANZ BH Pty
Ltd, ANZ NBH Pty Ltd and ANZ Group
Services Pty Ltd were created;
•each ANZBGL shareholder received one
ANZGHL ordinary share for each ANZBGL
ordinary share that they held prior to the
implementation of the Restructure;
•ANZBGL transferred its beneficial interests
in banking-adjacent businesses to ANZ
NBH Pty Ltd;
•ANZBGL transferred its interest in several
properties to ANZ Group Services Pty Ltd;
•ANZBGL transferred all shares in ANZ BH
Pty Ltd, ANZ NBH Pty Ltd and ANZ Group
Services Pty Ltd to ANZGHL; and
•ANZGHL transferred all shares in ANZBGL
to ANZ BH Pty Ltd.
As a result of the Restructure, the
consolidated results of ANZBGL and its
subsidiaries for the 2023 financial year
consist of:
•the results of the former ANZ Group
for the period 1 October 2022 to 2
January 2023;
•the results of the ANZBGL Group for the
period 3 January to 30 September 2023.
ANZGHL Financial Information
As a result of the Restructure, ANZBGL is a
subsidiary of ANZGHL. A copy of the 2023
ANZGHL Annual Report can be accessed via
the ANZ Shareholder Centre at anz.com/
shareholder/centre/reporting.
Significant changes in
state of affairs
There have been no other significant
changes in the Group’s state of affairs other
than Establishment of a New Group
Organisational Structure as described
above.
Events since the end of the
financial year
There have been no significant events from
30 September 2023 to the date of signing
this report.
Participation in political
party activities
We aim to assist the democratic process in
Australia by attending and participating in
paid events hosted by the major federal
political parties. For the year ended 30
September 2023, we contributed $97,159 to
participate in political activities hosted by
the Australian Labor Party, the Liberal Party
of Australia and the National Party of
Australia. These activities included speeches,
political functions and conferences, and
policy dialogue forums. We disclose these
contributions to the Australian Electoral
Commission (AEC), noting the AEC’s
reporting year is a different period to the
Group’s financial year.
Modern slavery statement
The Group is subject to Australia’s Modern
Slavery Act Australian Commonwealth
Modern Slavery Act 2018 (Cth) and United
Kingdom’s Modern Slavery Act 2015.
Our Modern Slavery Statement sets out
actions taken to identify, assess and manage
modern slavery risks in our operations and
supply chain during the financial year
ended 30 September 2023.
Our 2023 Modern Slavery Statement will be
available at anz.com/esgreport prior to our
Annual General Meeting.
Environmental regulation
We recognise the expectations of our
stakeholders – customers, shareholders,
staff and the community – to operate in
a way that mitigates our environmental
impact.
In Australia, we meet the requirements
of the National Greenhouse and Energy
Reporting Act 2007 (Cth), which imposes
reporting obligations where energy
production, usage or greenhouse gas
emissions trigger specified thresholds.
We do not believe that our operations
are subject to any other particular and
significant environmental regulation under
a law of the Commonwealth of Australia or
of an Australian State or Territory. We may
become subject to environmental
regulation as a result of our lending
activities in the ordinary course of business
and have developed policies, which are
reviewed on a regular basis, to help identify
and manage such environmental matters.
Further details of our environmental
performance, including progress against our
targets and management of material issues
aligned with our commitment to fair and
responsible banking and priority areas of
financial wellbeing, environmental
sustainability and housing, are available
in the ESG Supplement, at anz.com/
annualreport.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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Governance
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report
Directors’
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Financial
report
External auditor
The Group’s external auditor is KPMG.
The ANZ Group appointed Peat, Marwick,
Mitchell & Co (predecessor to KPMG)
in 1969.
The Board Audit Committee conducts a
formal annual performance assessment of
the external auditor, including whether to
commence an external tender for the audit.
After considering relevant factors including
tenure, audit quality, local and international
capability and experience, and
independence, the Board Audit Committee
resolved to reappoint KPMG for the 30
September 2024 financial year audit.
KPMG regularly rotates the Group Lead
Audit Engagement Partner and the
Engagement Quality Control Review Partner
with the most recent rotation being for the
financial years ended 30 September 2023
and 30 September 2020, respectively.
Non-audit services
Our Stakeholder Engagement Model for
Relationship with the External Auditor (the
Policy), which incorporates requirements of
the Corporations Act 2001 and industry best
practice, prevents the external auditor from
providing services that are perceived to be
in conflict with the role of the external
auditor or breach independence
requirements. This includes consulting
advice and sub-contracting of operational
activities normally undertaken by
management, and engagements where
the external auditor may ultimately be
required to express an opinion on its
own work. Specifically, the Policy:
•limits the scope of non-audit services
that may be provided;
•requires that audit, audit-related and
permitted non-audit services be
considered in light of independence
requirements and for any potential
conflicts of interest before they are
approved by the Audit Committee,
or approved by the Chair of the Audit
Committee (or delegate) and notified
to the Audit Committee; and
•requires pre-approval before the
external auditor can commence any
engagement for the Group.
Further details about the Policy can be
found in ANZGHL’s Corporate Governance
Statement.
The external auditor has confirmed to the
Audit Committee that it has:
•implemented procedures to ensure it
complies with independence rules in
applicable jurisdictions; and
•complied with applicable policies
and regulations in those jurisdictions
regarding the provision of non-audit
services, and the Policy.
The Audit Committee has reviewed the
non-audit services provided by the external
auditor during the 2023 financial year, and
has confirmed that the provision of these
services is consistent with the Policy,
compatible with the general standard of
independence for auditors imposed by
the Corporations Act 2001 and did not
compromise the auditor independence
requirements of the Corporations Act 2001.
This has been formally advised by the Audit
Committee to the Board of Directors.
The categories of non-audit services
supplied to the Group during the year
ended 30 September 2023 by the external
auditor, KPMG, or by another person or firm
on KPMG’s behalf, and the amounts paid or
payable (including GST ) by the Group are
as follows:
Amount paid/
payable $’000’s
Non-audit services20232022
Methodology,
procedural and
administrative reviews
1058
Total1058
Further details on the compensation paid to
KPMG are provided in Note 33 Auditor Fees
to the financial statements including
details of audit-related services provided
during the year of $5.82 million (2022:
$7.50 million).
For the reasons set out above, the
Directors are satisfied that the provision of
non-audit services by the external auditor
during the year ended 30 September 2023
is compatible with the general standard
of independence for external auditors
imposed by the Corporations Act 2001
and did not compromise the auditor
independence requirements of the
Corporations Act 2001.
Directors’ and officers’ indemnity
ANZBGL’s Constitution (Rule 9.1) permits
ANZBGL to:
•Indemnify any officer or employee of
ANZBGL or any of its related bodies
corporate, or its auditor, against liabilities
(so far as may be permitted under
applicable law) incurred as such an
officer, employee or auditor to a person
(other than ANZBGL or a related body
corporate), including liabilities incurred as
a result of appointment or nomination by
ANZBGL or a related body corporate as
a trustee or as an officer or employee of
another corporation; and
•Make payments in respect of legal costs
incurred by an officer or employee
or auditor in defending an action for
a liability incurred as such an officer,
employee or auditor, or in resisting
or responding to actions taken by a
government agency, a duly constituted
Royal Commission or other official inquiry,
a liquidator, administrator, trustee in
bankruptcy or other authorised official.
Our policy is that our employees should
be protected from any liability they incur
as a result of acting in the course of their
employment, subject to appropriate
conditions.
Under the policy, we will indemnify
employees and former employees against
any liability they incur to any third party
as a result of acting in good faith in the
course of their employment and this
extends to liability incurred as a result of
their appointment/nomination by or at
the request of the ANZ Group as an officer
or employee of another corporation or
body or as a trustee.
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Governance
Performance
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Directors’
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Financial
report
The indemnity is subject to applicable law
and certain exceptions.
ANZBGL has entered into Indemnity Deeds
with each of its Directors, with certain
secretaries and former Directors of
ANZBGL, and with certain employees and
other individuals who act as directors or
officers of related bodies corporate or of
another company, to indemnify them
against liabilities and legal costs of the kind
mentioned in ANZBGL’s Constitution.
During the 2023 financial year, we have
paid premiums for insurance for the benefit
of the Directors and employees of the
Group. In accordance with common
commercial practice, the insurance
prohibits disclosure of the nature of the
liability insured against and the amount of
the premium.
Key management personnel and
employee share and option plans
The Remuneration Report contains details
of Non-Executive Directors, Chief Executive
Officer and Disclosed Executives’ equity
holdings and options/rights issued during
the 2023 financial year and as at the date of
this report.
Note 30 Employee Share and Option Plans
to the 2023 Financial Report contains details
of the 2023 financial year and as at the date
of this report:
•Options/rights issued over shares granted
to employees;
•Shares issued as a result of the exercise of
options/rights granted to employees; and
•Other details about share options/rights
issued, including any rights to participate
in any share issues.
The names of all persons who currently hold
options/rights are entered in the register
kept by ANZGHL pursuant to section 170 of
the Corporations Act 2001. This register may
be inspected free of charge.
Rounding of amounts
ANZBGL is a company of the kind referred
to in Australian Securities and Investments
Commission Corporations (Rounding in
Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016 and, in
accordance with that Instrument, amounts
in the consolidated financial statements and
this Directors’ Report have been rounded to
the nearest million dollars unless specifically
stated otherwise.
This report is made in accordance with a
resolution of the Board of Directors and
is signed for and on behalf of the Directors.
Lead Auditor’s Independence
Declaration
The Lead Auditors Independence
Declaration given under Section 307C of the
Corporations Act 2001 is set out below and
forms part of the Directors’ Report for
the year ended 30 September 2023.
To: the Directors of Australia and New
Zealand Banking Group Limited
I declare that, to the best of my knowledge
and belief, in relation to the audit of
Australia and New Zealand Banking Group
Limited for the financial year ended 30
September 2023, there have been:
•No contraventions of the auditor
independence requirements as set out
in the Corporations Act 2001 in relation to
the audit; and
•No contraventions of any applicable code
of professional conduct in relation
to the audit.
Paul D O’Sullivan
Chairman
10 November 2023
Shayne C Elliott
Managing Director
10 November 2023
KPMGMartin McGrath
Partner
10 November 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member
firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
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FINANCIAL
REPORT
Financial Statements
Income Statement 76
Statement of Comprehensive Income 77
Balance Sheet 78
Cash Flow Statement 79
Statement of Changes in Equity 80
Notes to the Financial Statements
Basis of Preparation
1. About Our Financial Statements 82
Financial Performance
2. Net Interest Income 87
3. Non-Interest Income 88
4. Operating Expenses 91
5. Income Tax 93
6. Dividends 96
7. Segment Reporting 97
Financial Assets and Other Trading Assets
8. Cash and Cash Equivalents 101
9. Trading Assets 102
10. Derivative Financial Instruments 103
11. Investment Securities 115
12. Net Loans and Advances 117
13. Allowance for Expected
Credit Losses 118
Financial Liabilities
14. Deposits and Other Borrowings 129
15. Payables and Other Liabilities 130
16. Debt Issuances 131
Financial Instrument Disclosures
17. Financial Risk Management 137
18. Fair Value of Financial Assets
and Financial Liabilities 159
19. Assets Charged as Security
for Liabilities and Collateral
Accepted as Security for Assets 167
20. Offsetting 168
Non-Financial Assets
21. Goodwill and Other
Intangible Assets 170
Non-Financial Liabilities
22. Other Provisions 174
Equity
23. Shareholders’ Equity 176
24. Capital Management 179
Consolidation and Presentation
25. Controlled Entities 182
26. Investments in Associates 184
27. Structured Entities 186
28. Transfers of Financial Assets 188
Employee and Related Party Transactions
29. Superannuation and Post
Employment Benefit Obligations 190
30. Employee Share and Option Plans 192
31. Related Party Disclosures 198
Other Disclosures
32. Commitments, Contingent
Liabilities and Contingent Assets 201
33. Auditor Fees 204
34. Pending Organisational
Changes Impacting Future
Reporting Periods 205
35. Events Since the End
of the Financial Year 205
Directors’ Declaration 206
Independent Auditor’s Report 207
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76
FINANCIAL REPORT
INCOME STATEMENT
Consolidated The Company
2023 2022 2023 2022
For the year ended 30 September Note
$m $m $m $m
Interest income
1
49,927
23,609
41,144
18,408
Interest expense
(33,352)
(8,735)
(29,026)
(7,433)
Net interest income 2
16,575
14,874
12,118
10,975
Other operating income 3
3,577
4,235
5,401
6,424
Net income from insurance business 3
89
140
-
-
Share of associates' profit/(loss) 3
225
177
(18)
(12)
Operating income
20,466
19,426
17,501
17,387
Operating expenses 4
(10,087)
(9,579)
(8,488)
(8,123)
Profit before credit impairment and income tax
10,379
9,847
9,013
9,264
Credit impairment (charge)/release 13
(245)
232
(75)
265
Profit before income tax
10,134
10,079
8,938
9,529
Income tax expense 5
(2,941)
(2,940)
(1,964)
(1,933)
Profit after tax from continuing operations
7,193
7,139
6,974
7,596
Profit/(Loss) after tax from discontinued operations
-
(19)
-
-
Profit for the year
7,193
7,120
6,974
7,596
Comprising:
Profit attributable to shareholders of the Company
7,165
7,119
6,974
7,596
Profit attributable to non-controlling interests
28
1
-
-
1.
Includes interest income calculated using the effective interest method on financial assets measured at amortised cost or fair value through other comprehensive income of $46,918 million
(2022: $22,844 million) in the Group and $37,235 million (2022: $17,123 million) in the Company.
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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FINANCIAL REPORT
STATEMENT OF COMPREHENSIVE INCOME
Consolidated The Company
2023 2022 2023 2022
For the year ended 30 September
$m $m $m $m
Profit after tax from continuing operations
7,193
7,139
6,974
7,596
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI
(30)
(55)
(23)
(119)
Other reserve movements
1
(80)
127
(105)
132
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve
718
(759)
64
139
Other reserve movements
199
(4,180)
378
(4,132)
Income tax attributable to the above items (22)
1,172
(73)
1,186
Share of associates’ other comprehensive income
2
31
(40)
-
-
Other comprehensive income after tax from continuing operations
816
(3,735)
241
(2,794)
Profit/(Loss) after tax from discontinued operations
-
(19)
-
-
Total comprehensive income for the year 8,009
3,385
7,215
4,802
Comprising total comprehensive income attributable to:
Shareholders of the Company
7,954
3,399
7,215
4,802
Non-controlling interests
1
55
(14)
-
-
1.
The Group includes foreign currency translation differences attributable to non-controlling interests of $27 million (2022: -$15 million).
2.
The Group’s share of associates’ other comprehensive income, that may be reclassified subsequently to profit or loss in the Group, includes:
2023
$m
2022
$m
FVOCI reserve gain/(loss) 25 (56)
Defined benefits gain/(loss) 6 15
Foreign currency translation reserve gain/(loss) - 1
Total 31 (40)
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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FINANCIAL REPORT (continued)
BALANCE SHEET
Consolidated The Company
2023 2022 2023 2022
As at 30 September Note
$m $m $m $m
Assets
Cash and cash equivalents
1
8
168,154
168,132
154,408
155,483
Settlement balances owed to ANZ
9,349
4,762
8,935
4,024
Collateral paid
8,558
12,700
7,717
11,368
Trading assets 9
37,004
35,237
30,693
28,073
Derivative financial instruments 10
60,406
90,174
59,989
88,056
Investment securities 11
96,969
86,153
83,201
72,399
Net loans and advances 12
707,694
672,407
563,017
537,345
Regulatory deposits
646
632
284
249
Due from controlled entities
-
-
26,067
22,860
Shares in controlled entities 25
-
-
16,277
17,630
Investments in associates 26
2,321
2,181
-
53
Current tax assets
37
46
9
43
Deferred tax assets 5
3,386
3,384
2,988
2,992
Goodwill and other intangible assets 21
3,961
3,877
935
935
Premises and equipment
2,360
2,431
1,923
2,171
Other assets
5,196
3,613
3,636
2,402
Total assets
1,106,041
1,085,729
960,079
946,083
Liabilities
Settlement balances owed by ANZ
19,267
13,766
16,574
10,224
Collateral received
10,382
16,230
9,452
14,425
Deposits and other borrowings 14
815,203
797,281
675,075
665,607
Derivative financial instruments 10
57,482
85,149
57,511
84,500
Due to controlled entities
-
-
26,894
25,305
Current tax liabilities
305
829
133
488
Deferred tax liabilities 5
60
83
47
54
Payables and other liabilities 15
15,932
9,835
13,279
8,562
Employee entitlements
568
549
424
409
Other provisions 22
1,714
1,872
1,499
1,648
Debt issuances 16
116,014
93,734
98,213
75,828
Total liabilities
1,036,927
1,019,328
899,101
887,050
Net assets
69,114
66,401
60,978
59,033
Shareholders' equity
Ordinary share capital 23
29,082
28,797
29,005
28,720
Reserves 23
(1,796)
(2,606)
(2,222)
(2,546)
Retained earnings 23
41,306
39,716
34,195
32,859
Share capital and reserves attributable to shareholders of the
Company
23
68,592
65,907
60,978
59,033
Non-controlling interests 23
522
494
-
-
Total shareholders' equity
23
69,114
66,401
60,978
59,033
1.
Includes Settlement balances owed to ANZ that meet the definition of Cash and cash equivalents.
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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FINANCIAL REPORT
CASH FLOW STATEMENT
Consolidated The Company
2023 2022 2023 2022
For the year ended 30 September
$m $m $m $m
Profit after income tax
7,193
7,120
6,974
7,596
Adjustments to reconcile to net cash provided by/(used in) operating
activities:
Allowance for expected credit losses
245
(232)
75
(265)
Depreciation and amortisation
941
1,008
795
867
(Gain)/Loss on sale of premises and equipment
43
(8)
31
(1)
Net derivatives/foreign exchange adjustment
3,505
(4,434)
3,074
(4,687)
(Gain)/Loss on sale from divestments
(29)
(252)
70
(246)
Other non-cash movements
1
(90)
(48)
124
235
Net (increase)/decrease in operating assets:
Collateral paid
4,143
(2,638)
3,590
(2,054)
Trading assets
(23)
8,020
(1,769)
6,355
Net loans and advances
1
(28,289)
(46,364)
(25,708)
(41,990)
Net intra-group loans and advances
-
-
(1,481)
978
Other assets
1
(1,725)
(190)
(1,333)
(81)
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
21,866
48,879
21,353
45,058
Settlement balances owed by ANZ
5,278
(3,486)
6,314
(4,769)
Collateral received
(5,848)
9,468
(4,886)
8,074
Other liabilities
(1,015)
3,333
(1,295)
3,426
Total adjustments
(998) 13,056 (1,046) 10,900
Net cash (used in)/provided by operating activities
2
6,195
20,176
5,928
18,496
Cash flows from investing activities
Investment securities assets:
Purchases
(51,974)
(34,292)
(46,130)
(30,065)
Proceeds from sale or maturity
41,401
32,797
35,495
28,201
Proceeds from divestments, net of cash disposed
1,135
394
1,174
(5)
Net movement in shares in controlled entities
-
(65)
(29)
(133)
Net investments in other assets
(604)
(651)
(612)
(667)
Net cash (used in)/provided by investing activities
(10,042)
(1,817)
(10,102)
(2,669)
Cash flows from financing activities
Deposits and other borrowings drawn down
(11,105)
1,226
(12,002)
-
Debt issuances:
3
Issue proceeds
44,182
23,422
40,428
20,145
Redemptions
(23,985)
(26,017)
(19,641)
(21,985)
Dividends paid
4
(4,700)
(3,784)
(4,673)
(3,782)
On market purchase of treasury shares
(21)
(117)
(21)
(117)
Repayment of lease liabilities
(337)
(218)
(277)
(226)
Share buyback
-
(846)
-
(846)
ANZ Bank New Zealand Perpetual Preference Shares
-
492
-
-
Share entitlement issue
-
3,497
-
3,497
Net cash (used in)/provided by financing activities
4,034
(2,345)
3,814
(3,314)
Net (decrease)/increase in Cash and cash equivalents 187 16,014 (360) 12,513
Cash and cash equivalents at beginning of year
168,132
151,260
155,483
141,436
Effects of exchange rate changes on Cash and cash equivalents
(165) 858 (715) 1,534
Cash and cash equivalents at end of year
168,154
168,132
154,408
155,483
1.
Certain non-cash movements were reclassified to Net loans and advances and Other assets to better reflect the net movement in operating assets. Comparatives have been restated. (2022: reduction to
Other non-cash movements of $861 million, a decrease in Net loans and advances of $14 million, and an increase in Other assets of $875 million) for the Group. (2022: reduction to Other non-cash
movements of $723 million, a decrease in Net loans and advances of $13 million, and an increase in Other assets of $736 million) for the Company.
2.
Net cash (used in)/provided by operating activities for the Group includes interest received of $48,362 million (2022: $22,748 million), interest paid of $30,738 million (2022: $7,857 million) and income taxes
paid of $3,501 million (2022: $2,171 million). Net cash (used in)/provided by operating activities for the Company includes interest received of $40,353 million (2022: $17,672 million), interest paid of $26,846
million (2022: $6,692 million) and income taxes paid of $2,384 million (2022: $1,443 million).
3.
Non-cash movements on Debt issuances include a loss of $2,084 million (2022: $4,725 million gain) from unrealised movements primarily due to fair value hedging adjustments and foreign exchange losses for
the Group, and include a loss of $1,598 million (2022: $3,420 million gain) from unrealised movements primarily due to fair value hedging and foreign exchange losses for the Company.
4.
Cash outflow for shares purchased to satisfy the dividend reinvestment plan are classified in Dividends paid.
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
Ordinary
share capital Reserves
Retained
earnings
Share capital
and reserves
attributable to
shareholders
of the Company
Non-
controlling
interests
Total
shareholders’
equity
Consolidated
$m $m $m $m $m $m
As at 1 October 2021
25,984 1,228 36,453 63,665 11 63,676
Profit or loss from continuing operations - - 7,138 7,138 1 7,139
Profit or loss from discontinued operations - - (19) (19) - (19)
Other comprehensive income for the year from
continuing operations
- (3,835) 115 (3,720) (15) (3,735)
Total comprehensive income for the year
- (3,835) 7,234 3,399 (14) 3,385
Transactions with equity holders in their capacity
as equity holders:
Dividends paid - - (3,965) (3,965) (2) (3,967)
Dividend reinvestment plan
1
183 - - 183 - 183
Group share buy-back
2
(846) - - (846) - (846)
Share entitlement issue
3
3,497 - - 3,497 - 3,497
Other equity movements:
Employee share and option plans (21) - - (21) - (21)
Preference shares issued
4
- - (7) (7) 499 492
Other items - 1 1 2 - 2
As at 30 September 2022
28,797 (2,606) 39,716 65,907 494 66,401
Profit or loss from continuing operations
- - 7,165 7,165 28 7,193
Other comprehensive income for the year from
continuing operations
- 863 (74) 789 27 816
Total comprehensive income for the year
- 863 7,091 7,954 55 8,009
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
- - (5,559) (5,559) (27) (5,586)
Dividend reinvestment plan
1
206 - - 206 - 206
Other equity movements:
Employee share and option plans
79 - - 79 - 79
Net transfers following Restructure
- (39) 39 - -
Other items
- (14) 19 5 - 5
As at 30 September 2023
29,082 (1,796) 41,306 68,592 522 69,114
1.
8.4 million shares were issued under the Dividend Reinvestment Plan for the 2022 final dividend (2022 interim dividend: 7.2 million; 2021 final dividend: nil). On-market share purchases for the DRP in 2022
were $204 million.
2.
The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares on 25 March 2022 resulting in 31 million shares being cancelled in 2022.
3.
The Group issued 187.1 million new ordinary shares under the share entitlement offer in 2022.
4.
Perpetual preference shares issued by ANZ Bank New Zealand, a wholly owned subsidiary of ANZBGL, are considered non-controlling interests to the Group.
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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STATEMENT OF CHANGES IN EQUITY
Ordinary
share capital Reserves
Retained
earnings
Total
shareholders’
equity
The Company
$m $m $m $m
As at 1 October 2021
25,907 341 29,132 55,380
Profit for the year - - 7,596 7,596
Other comprehensive income for the year - (2,888) 94 (2,794)
Total comprehensive income for the year
- (2,888) 7,690 4,802
Transactions with equity holders in their capacity as
equity holders:
Dividends paid - - (3,965) (3,965)
Dividend reinvestment plan
1
183 - - 183
Group share buy-back
2
(846) - - (846)
Share entitlement issue
3
3,497 3,497
Other equity movements:
Employee share and option plans (21) - - (21)
Other items - 1 2 3
As at 30 September 2022
28,720 (2,546) 32,859 59,033
Profit for the year
- - 6,974 6,974
Other comprehensive income for the year
- 319 (78) 241
Total comprehensive income for the year
- 319 6,896 7,215
Transactions with equity holders in their capacity as
equity holders:
Dividends paid
- - (5,559) (5,559)
Dividend reinvestment plan
1
206 - - 206
Other equity movements:
Employee share and option plans
79 - - 79
Other items
- 5 (1) 4
As at 30 September 2023
29,005 (2,222) 34,195 60,978
1.
8.4 million shares were issued under the Dividend Reinvestment Plan for the 2022 final dividend (2022 interim dividend: 7.2 million; 2021 final dividend: nil). On-market share purchases for the DRP in 2022
were $204 million.
2.
The Company completed its $1.5 billion on-market share buy-back on 25 March 2022 resulting in 31 million shares being cancelled in 2022.
3.
The Company issued 187.1 million new ordinary shares under the share entitlement offer in 2022.
The notes appearing on pages 82 to 205 form an integral part of these financial statements.
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Australia and New Zealand Banking Group Limited 2023 Annual Report
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NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1. ABOUT OUR FINANCIAL STATEMENTS
ORGANISATIONAL RESTRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating holding
company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a restructure to
separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (the Restructure). The ANZ Bank
Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-Bank Group
comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacent
services to the ANZ Group’s customers, and a separate service company.
On Restructure, each ANZ shareholder received one ANZGHL ordinary share for each ANZ ordinary share that they held prior to the implementation of
the Restructure. The Restructure is accounted for as a reverse acquisition in the ANZGHL consolidated financial statements as at 30 September 2023,
with ANZBGL identified as the acquirer in accordance with AASB 3
Business Combinations.
As a result of the Restructure, the ANZBGL consolidated results for the 2023 financial year end consist of:
• the results of the former ANZ Group for the period 1 October 2022 to 2 January 2023;
• the result of ANZBGL and its subsidiaries (Group) for the period 3 January to 30 September 2023.
Refer to Accounting Policies Applicable to the Restructure section below for further details.
GENERAL INFORMATION
These are the financial statements for ANZBGL (the Company) and its controlled entities (together, the Group or Consolidated Entity) for the year
ended 30 September 2023. The Company is a public company incorporated and domiciled in Australia with debt listed on securities exchanges. The
Company is a subsidiary of ANZGHL and is regulated by APRA as an ADI. The address of the Company’s registered office and its principal place of
business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals and
business customers and operates in and across 29 markets.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included
only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material and
relevant if, for example:
•
the amount is significant in size (quantitative factor);
•
the information is significant by nature (qualitative factor);
•
the user cannot understand the Group’s results without the specific disclosure (qualitative factor);
•
the information is critical to a user’s understanding of the impact of significant changes in the Group’s business during the period - for example,
business acquisitions or disposals (qualitative factor);
•
the information relates to an aspect of the Group’s operations that is important to its future performance (qualitative factor); and
•
the information is required under legislative requirements of the
Corporations Act 2001, the Banking Act 1959 (Cth) or by the Group’s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:
•
outlines the basis upon which the Group’s financial statements have been prepared; and
•
discusses any new accounting standards or regulations that directly impact the financial statements.
BASIS OF PREPARATION
This financial report is a general purpose (Tier 1) financial report prepared by a ‘for profit’ entity, in accordance with Australian Accounting Standards
(AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the Corporations Act 2001, and International
Financial Reporting Standards
(IFRS) and interpretations published by the International Accounting Standards Board (IASB).
We present the financial statements of the Group in Australian dollars, which is the Company’s functional and presentation currency. We have
rounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the
ASIC Corporations (Rounding in Financial/Directors
Report) Instrument 2016/191. We measure the financial statements of each entity in the Group using the currency of the primary economic
environment in which that entity operates (the functional currency).
NOTES TO THE
FINANCIAL STATEMENTS
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1. ABOUT OUR FINANCIAL STATEMENTS (continued)
BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we have
stated at their fair value:
•
derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;
•
financial instruments held for trading;
•
financial assets and financial liabilities designated at fair value through profit or loss (FVTPL);
•
financial assets at fair value through other comprehensive income (FVOCI); and
•
assets and liabilities classified as held for sale (except those required to be at carrying value).
In accordance with AASB 119
Employee Benefits we have measured defined benefit obligations using the Projected Unit Credit Method.
There were no discontinued operations in the current period. For the purpose of comparative information, discontinued operations in the prior period
are separately presented from the results of the continuing operations as a single line item ‘Profit/(Loss) after tax from discontinued operations’ in the
Income Statement.
BASIS OF CONSOLIDATION
The consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries. An entity, including a
structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of the
entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.
FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
Foreign currency item Exchange rate used
Assets and liabilities
The reporting date rate
Equity
The initial investment date rate
Income and expenses
The average rate for the period – but for a significant transaction if we believe the average rate is not
reasonable, then we use the rate at the date of the transaction
Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.
FIDUCIARY ACTIVITIES
The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on
behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does not
control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or
another legislative requirement.
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1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING POLICIES APPLICABLE TO THE RESTRUCTURE
The implementation of the non-operating holding company involved the transfer of assets and entities between companies within the wider
ANZGHL Group. This had implications for the ANZBGL consolidated financial statements due to the transfers extending outside of the Group. From an
accounting perspective, since the transfers were between wholly owned entities, these are considered common control transactions. As there is no
specific accounting standard for such transfers, the Group is required to make an accounting policy choice.
The Group’s accounting policy for the transfer of the assets and entities between companies under common control is to apply book value
accounting. Under this approach, any differences between book value and the transfer price are recorded in equity. The accounting policy choice did
not have a material impact on profit and loss or equity when the assets were transferred as part of the Restructure. Refer to Note 31 Related Party
Disclosures for details of the transfer.
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates and
assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the
financial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, and continuing
geopolitical tensions which contribute to an elevated level of estimation uncertainty involved in the preparation of these financial
statements.
The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect
expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is a
considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and
associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed in the relevant notes in this Financial Report. Readers
should consider these disclosures in light of the inherent uncertainties described above.
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1. ABOUT OUR FINANCIAL STATEMENTS (continued)
INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had a
wide-ranging impact for the Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Group
established an enterprise-wide Benchmark Transition Program to manage the operational, market, legal, conduct and financial reporting risks
associated with IBOR transition.
As at 30 September 2023 the Group’s Program is largely complete, and included the implementation of the required processes, technology and
product capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early 2021, IBOR rates
including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD) London Interbank
Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Group’s exposure to IBOR reform was
primarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to the Group’s risk management
strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance with industry and supervisory guidance. The
transition activities had an immaterial impact to the Group’s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue to
be published using an alternative ‘synthetic’ methodology. The Group continues to manage a small number of loan and derivative contracts whose
transition is being managed with customers, and a small number of debt issuances with investors. These remaining contracts will either mature or
transition ahead of the synthetic USD LIBOR cessation date of 30 September 2024. The Group has an immaterial exposure to other announced
benchmark cessation events expected to occur between 2024 and 2026.
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
AASB 2023-2
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – INTERNATIONAL TAX REFORM – PILLAR TWO MODEL RULES
In May 2023, the Federal Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax
challenges arising from digitalisation of the economy. This measure is not yet law. Other jurisdictions in which ANZ operates are also considering
implementation of the regime. The ANZ Group is expected to be within the scope of associated legislation. In anticipation of legislation being
enacted, the AASB issued AASB 2023-2
Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules in June
2023. The Group has applied the mandatory exemption included in para. 4A of this standard and will apply the whole amending standard from 1
October 2023. This amending standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to
Pillar Two income taxes. The Group is monitoring progress of associated legislation and has not yet determined the expected impact on its financial
statements.
ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Group in preparing these financial statements. Further details of these are
set out below.
GENERAL HEDGE ACCOUNTING
AASB 9
Financial Instruments (AASB 9) introduced new hedge accounting requirements which more closely align accounting with risk management
activities undertaken when hedging both financial and non-financial risks. AASB 9 provided the Group with an accounting policy choice to continue
to apply the AASB 139
Financial Instruments: Recognition and Measurement (AASB 139) hedge accounting requirements until the International
Accounting Standards Board’s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The Group continues to apply
the hedge accounting requirements of AASB 139.
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1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS NOT EARLY ADOPTED (continued)
AASB 17 INSURANCE CONTRACTS (AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4
Insurance Contracts,
AASB 1023
General Insurance Contracts and AASB 1038 Life Insurance Contracts. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
AASB 17 will not have a material impact on the Group.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
amends AASB 112
Income Taxes. It clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a
liability and that give rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration
obligations. This amendment is effective for the Group from 1 October 2023 and will not have a material impact on the Group.
LEASE LIABILITY IN A SALE AND LEASEBACK
AASB 2022-5
Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback amends AASB 16 Leases and specifies the
accounting for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 October 2024 and will
not have a material impact on the Group.
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2. NET INTEREST INCOME
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Net interest income
Interest income by type of financial asset
Financial assets at amortised cost
44,303
21,737
35,000
16,289
Investment securities at FVOCI
2,615
1,107
2,235
834
Trading assets
1,654
700
1,413
547
Financial assets at FVTPL
1,355
65
1,449
177
External interest income
49,927
23,609
40,097
17,847
Controlled entities' income
-
-
1,047
561
Interest income
49,927
23,609
41,144
18,408
Interest expense by type of financial liability
Financial liabilities at amortised cost
(31,334)
(8,019)
(26,016)
(6,170)
Securities sold short
(451)
(214)
(392)
(191)
Financial liabilities designated at FVTPL
(1,214)
(162)
(1,104)
(151)
External interest expense (32,999)
(8,395)
(27,512)
(6,512)
Controlled entities expense
-
-
(1,161)
(581)
Interest expense (32,999)
(8,395)
(28,673)
(7,093)
Major bank levy
(353)
(340)
(353)
(340)
Net interest income 16,575
14,874
12,118
10,975
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,
assets measured at FVOCI, and assets and liabilities designated at FVTPL. We use the effective interest rate method to calculate the
amortised cost of assets held at amortised cost and to recognise interest income on financial assets measured at amortised cost and FVOCI.
The effective interest rate is the rate that discounts the stream of estimated future cash receipts or payments over the expected life of the
financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject to
prepayment, we determine their expected life on the basis of historical behaviour of the particular asset portfolio taking into account
contractual obligations and prepayment experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using the
effective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
Major Bank Levy
The Major Bank Levy Act 2017 (levy or major bank levy) applies a rate of 0.06% to certain liabilities of ANZBGL. The levy represents a finance
cost and it is presented as interest expense in the Income Statement
.
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3. NON-INTEREST INCOME
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Non-interest income
Fee and commission income
Lending fees
1
397
374
362
340
Non-lending fees
2,275
2,394
1,533
1,744
Commissions
85
103
55
74
Funds management income
246
261
22
27
External fee and commission income
3,003
3,132
1,972
2,185
Controlled entities' income
-
-
187
244
Fee and commission income
3,003
3,132
2,159
2,429
Fee and commission expense
(1,057)
(1,160)
(553)
(695)
Net fee and commission income
1,946
1,972
1,606
1,734
Other income
Net foreign exchange earnings and other financial instruments income
2
1,535
1,993
1,272
1,296
Gain on completion of ANZ Worldline partnership
-
307
-
307
Impairment of interest in controlled entities
-
-
-
(180)
Release of foreign currency translation reserve
43
(65)
-
-
Loss on disposal of financial planning and advice business
-
(62)
-
(22)
Loss on disposal of data centres in Australia
(43)
-
(32)
-
Dividends received from controlled entities
-
-
2,562
3,181
Other
96
90
(7)
108
Other income 1,631
2,263
3,795
4,690
Other operating income 3,577
4,235
5,401
6,424
Net income from insurance business 89
140
-
-
Share of associates' profit/(loss)
225
177
(18)
(12)
Non-interest income
3,891
4,552
5,383
6,412
1.
Lending fees exclude fees treated as part of the effective yield calculation in Interest income.
2.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk, ineffective
portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at FVTPL.
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3. NON-INTEREST INCOME (continued)
RECOGNITION AND MEASUREMENT
OTHER OPERATING INCOME
Fee and Commission Revenue
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is
satisfied across more than one reporting period, or (b) at a point in time when the performance obligation is satisfied immediately or is
satisfied within one reporting period.
•
lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee and
commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct
good or service that are recognised separately from the underlying lending product.
•
non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customer
transactions such as international transaction fees. Where the Group provides multiple goods or services to a customer under the same
contract, the Group allocates the transaction price of the contract to distinct performance obligations based on the relative stand-alone
selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
•
commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to
provide goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service
to the customer. If the Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission
retained as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
•
funds management income represents fees earned from customers for providing asset management services. Revenue is recognised
over the period in which the asset management services are delivered. Performance fees associated with funds management activities
are only recognised when it becomes highly probable the performance hurdle will be achieved.
Net Foreign Exchange Earnings and Other Financial Instruments Income
We recognise the following as net foreign exchange earnings and other financial instruments income:
•
exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised or included in a previous financial report;
•
fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges that we use to
manage interest rate and foreign exchange risk on funding instruments;
•
the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
•
immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges
and amounts accumulated in equity related to designated cash flow hedges;
•
fair value movements on financial assets and financial liabilities designated at FVTPL or held for trading;
•
amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and
•
the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.
Gain or Loss on Disposal of Non-Financial Assets
The gain or loss on the disposal of assets is the difference between the carrying value of the asset and the proceeds of disposal net of costs.
This is recognised in Other income in the year in which control of the asset transfers to the buyer.
When a non-financial asset or group of assets is classified as held for sale, it is measured at the lower of its carrying amount immediately
prior to reclassification and fair value less costs to sell, with any remeasurement recognised in Other operating income to align with the
classification of gain or loss on sale that would have applied if the sale had completed during the year.
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3. NON-INTEREST INCOME (continued)
RECOGNITION AND MEASUREMENT
NET INCOME FROM INSURANCE BUSINESS
We recognise
:
•
premiums received (net of reinsurance premiums paid) based on an assessment of the likely pattern in which risk will emerge over the
term of the policies written. This assessment is undertaken periodically and updated in accordance with the latest pattern of risk
emergence; and
•
claims incurred net of reinsurance, on an accruals basis once the liability to the policy owner has been established under the terms of
the contract and through actuarial assumptions of future claims.
SHARE OF ASSOCIATES’ PROFIT/(LOSS)
The equity method is applied to accounting for associates. Under the equity method, our share of the after tax results of associates is
included in the Income Statement and the Statement of Comprehensive Income.
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4. OPERATING EXPENSES
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Personnel
Salaries and related costs
5,157
4,754
3,791
3,494
Superannuation costs
396
375
335
317
Other
183
167
154
127
Personnel 5,736
5,296
4,280
3,938
Premises
Rent
71
88
50
67
Depreciation
437
419
338
344
Other
176
214
123
168
Premises 684
721
511
579
Technology
Depreciation and amortisation
501
578
455
521
Subscription licences and outsourced services
1,007
899
695
648
Other
178
144
144
162
Technology
1,686
1,621
1,294
1,331
Restructuring 169
101
146
78
Other
Advertising and public relations
176
165
133
128
Professional fees
857
935
795
864
Freight, stationery, postage and communication
175
172
128
128
Other
604
568
1,201
1,077
Other 1,812
1,840
2,257
2,197
Operating expenses 10,087
9,579
8,488
8,123
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4. OPERATING EXPENSES (continued)
RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave and other employee entitlements expected to be paid or settled within twelve months of employees
rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when the liabilities are
settled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff
departures, leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market
yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future
cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.
Personnel expenses also include share-based payments which may be cash or equity settled. We calculate the fair value of equity settled
remuneration at grant date, which is then amortised over the vesting period, with a corresponding increase in share capital or the share
option reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as share price
performance conditions. We take non-market vesting conditions, such as service conditions, into account by adjusting the number of
equity instruments included in the expense.
After the grant of an equity-based award, the amount we recognise as an expense is reversed when non-market vesting conditions are not
met, for example an employee fails to satisfy the minimum service period specified in the award due to resignation, termination or notice
of dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure to meet a
market-based performance condition.
Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note 30
Employee Share and Option Plans.
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93
5. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Profit before income tax from continuing operations
10,134
10,079
8,938
9,529
Prima facie income tax expense at 30%
3,040
3,024
2,681
2,859
Tax effect of permanent differences:
Net (gain)/loss from divestments/closures
-
(83)
-
(113)
Share of associates' (profit)/loss
(68)
(53)
5
4
Interest on convertible instruments
92
49
92
49
Overseas tax rate differential
(163)
(128)
(95)
(70)
Provision for foreign tax on dividend repatriation
41
155
35
150
Rebatable and non-assessable dividends
-
-
(769)
(954)
Impairment of interest in controlled entities
-
-
-
54
Other
(2)
4
23
(21)
Subtotal 2,940
2,968
1,972
1,958
Income tax (over)/under provided in previous years
1
(28)
(8)
(25)
Income tax expense 2,941
2,940
1,964
1,933
Current tax expense
2,887
2,694
2,012
1,725
Adjustments recognised in the current year in relation to the current tax of
prior years
1
(28)
(8)
(25)
Deferred tax expense/(income) relating to the origination and reversal of
temporary differences
53
274
(40)
233
Income tax expense
2,941
2,940
1,964
1,933
Australia
1,640
1,844
1,568
1,755
Overseas
1,301
1,096
396
178
Effective tax rate
29.0%
29.2%
22.0%
20.3%
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NOTES TO THE FINANCIAL STATEMENTS (continued)
94
5. INCOME TAX (continued)
DEFERRED TAX ASSETS AND LIABILITIES
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Deferred tax assets balances comprise temporary differences
attributable to:
Amounts recognised in the Income Statement:
Collectively assessed allowances for expected credit losses
1,128
1,065
897
880
Individually assessed allowances for expected credit losses
102
148
79
119
Provision for employee entitlements
294
252
243
206
Other provisions
263
314
209
240
Software
917
867
781
708
Other
290
285
238
218
Total 2,994
2,931
2,447
2,371
Amounts recognised directly in Other Comprehensive Income:
-
Cash flow hedge reserve
818
882
789
891
Other reserves
29
20
27
16
Total
847
902
816
907
Total deferred tax assets (before set-off) 3,841
3,833
3,263
3,278
Set-off of deferred tax balances pursuant to set-off provisions
(455)
(449)
(275)
(286)
Net deferred tax assets 3,386
3,384
2,988
2,992
2023 2022 2023 2022
$m $m $m $m
Deferred tax liabilities balances comprise temporary differences
attributable to:
Amounts recognised in the Income Statement:
Finance leases
95
79
6
(15)
Other
303
300
212
232
Total 398
379
218
217
Amounts recognised directly in Other Comprehensive Income:
Foreign currency translation reserve
36
36
36
36
Cash flow hedge reserve
17
8
7
8
FVOCI reserve
17
57
19
31
Defined benefit obligations
47
52
42
48
Total
117
153
104
123
Total deferred tax liabilities (before set-off) 515
532
322
340
Set-off of deferred tax balances pursuant to set-off provisions
(455)
(449)
(275)
(286)
Net deferred tax liabilities 60
83
47
54
94
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5. INCOME TAX (continued)
TAX CONSOLIDATION
The Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Following the
Restructure on 3 January 2023, ANZGHL is the head entity in the tax-consolidated group. We recognise each of the following in the separate financial
statements of members of the tax consolidated group on a ‘group allocation’ basis: tax expense/income, and deferred tax liabilities/assets that arise
from temporary differences for members of the tax-consolidated group.
Under a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by each
member of the tax-consolidated group in relation to the tax contribution amounts payable or receivable between members of the tax-consolidated
group and the head entity ANZGHL.
Members of the tax-consolidated group have also entered into a tax sharing agreement that provides for the allocation of income tax liabilities
between the entities were the head entity to default on its income tax payment obligations.
UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Unrecognised deferred tax assets related to unused realised tax losses (on revenue account) total $1 million (2022: $1 million) for the Group and nil
(2022: nil) for the Company.
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches and
subsidiaries are repatriated) total $286 million (2022: $250 million) for the Group and $30 million (2022: $18 million) for the Company.
RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the
accounting and tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when
the tax relates to items recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in
equity or other comprehensive income respectively.
CURRENT TAX EXPENSE
Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting
date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIES
We account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as
the taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax
asset, or liability, on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset
is realised, or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
We offset current and deferred tax assets and liabilities only to the extent that:
• they relate to income taxes imposed by the same taxation authority;
• there is a legal right and intention to settle on a net basis; and
• it is allowed under the tax law of the relevant jurisdiction.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based on
its understanding of the relevant law in each of the countries in which it operates and seeks independent advice where appropriate.
95
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NOTES TO THE FINANCIAL STATEMENTS (continued)
96
6. DIVIDENDS
ORDINARY SHARE DIVIDENDS
Dividends determined by the Board of the Company are recognised with a corresponding reduction of retained earnings on the dividend payment
date. Accordingly, the final dividend announced for the current financial year is paid in the following financial year. Following the Restructure on 3
January 2023, ANZGHL is the head entity in the tax-consolidated group, and the franking and imputation credits have been transferred by the
Company to ANZGHL.
Amount Total dividend
Dividends
% of total per share $m
Financial Year 2022
2021 final dividend paid
1,2
72 cents 2,030
2022 interim dividend paid
1,2
72 cents 2,012
Bonus option plan adjustment (77)
Dividends paid during the year ended 30 September 2022
3,965
Cash
90.2% 3,577
Dividend reinvestment plan
3
9.8% 388
Dividends paid during the year ended 30 September 2022
3,965
Financial Year 2023
2022 final dividend paid
1,2
74 cents 2,213
2023 special dividend paid to ANZ BH Pty Ltd
33 cents 1,000
2023 interim dividend paid to ANZ BH Pty Ltd
79 cents 2,387
Dividends paid during the year ended 30 September 2023
5,600
Cash
96.3% 5,394
Dividend reinvestment plan
3.7% 206
Dividends paid during the year ended 30 September 2023
5,600
Amount
Total
dividend
Dividends announced and to be paid after year-end Payment date per share $m
2023 final dividend
22 December 2023 94 cents 2,825
1.
Carries New Zealand imputation credits of NZD 9 cents for the 2022 final dividend and 2022 interim dividend, and NZD 8 cents for the 2021 final dividend.
2.
Fully franked for Australian tax purposes (30% tax rate).
3.
Includes on-market share purchases for the DRP of $204 million.
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
ANZBGL’s Dividend Reinvestment Plan (DRP) and Bonus Option Plan (BOP) ceased to operate following implementation of the Restructure on 3
January 2023.
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA’s written approval is required before paying dividends on the ordinary shares of the Company if:
• the aggregate dividends exceed the Company’s after tax earnings (in calculating those after tax earnings, we take into account any payments we
made on senior capital instruments) in the financial year to which they relate; or
• ANZ’s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.
If the Company fails to pay a dividend or distribution on its ANZ Capital Notes or ANZ Capital Securities on the scheduled payment date, it may
(subject to a number of exceptions) be restricted from resolving to pay or paying any dividend on the Company’s ordinary shares.
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7. SEGMENT REPORTING
DESCRIPTION OF SEGMENTS
The Group’s six operating segments are presented on a basis that is consistent with the information provided internally to the Chief Executive Officer,
who is the chief operating decision maker. This reflects the way the Group’s businesses are managed, rather than the legal structure of the Group.
We measure the performance of operating segments on a cash profit basis. To calculate cash profit, we exclude items from profit after tax attributable
to shareholders. For 2023 and 2022, the adjustments relate to impacts of economic hedges and revenue and expense hedges which represent timing
differences that will reverse through earnings in the future. Transactions between divisions across segments within ANZ are conducted on an arm’s-
length basis and disclosed as part of the income and expenses of these segments.
The presentation of divisional results has been impacted by the following structural changes during the period. Prior period comparatives have been
restated:
• Non-banking businesses - transfer of non-banking businesses held in the Australia Commercial and Institutional divisions to the Group Centre
division which were then disposed as part of the Restructure.
• Corporate customer re-segmentation - certain business and property finance customers were transferred from the New Zealand division to the
Institutional division.
• Cost reallocations - certain costs were reallocated across the Australia Retail, Australia Commercial, Institutional and Group Centre divisions.
The reportable segments are divisions engaged in providing either different products or services or similar products and services in different
geographical areas. They are as follows:
Australia Retail
The Australia Retail division provides a full range of banking services to Australian consumers. This includes Home Loans, Deposits, Credit Cards and
Personal Loans. Products and services are provided via the branch network, home loan specialists, contact centres, a variety of self-service channels
(digital and internet banking, website, ATMs and phone banking) and third-party brokers. It also includes the costs related to the development and
operation of the ANZ Plus proposition for retail customers.
Australia Commercial
The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across the following
customer segments: SME Banking (small business owners and medium commercial customers), and Specialist Business (large commercial customers,
and high net worth individuals and family groups).
Institutional
The Institutional division services global institutional and corporate customers, and governments across Australia, New Zealand and International
(including Papua New Guinea (PNG)) via the following business units:
• Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,
commodity financing as well as cash management solutions, deposits, payments and clearing.
• Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
• Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets in
addition to managing the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises the following business units:
• Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services
via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
• Business and Agri (previously Business) provides a full range of banking services through our digital, branch and contact centre channels, and
traditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium
and large enterprises, the agricultural business segment, government and government-related entities.
Pacific
The Pacific division provides products and services to retail and commercial customers (including multi-nationals) and to governments located in the
Pacific region, excluding PNG which forms part of the Institutional division.
Group Centre
Group Centre division provides support to the operating divisions, including technology, property, risk management, financial management, treasury,
strategy, marketing, human resources, corporate affairs, and shareholder functions. It also includes minority investments in Asia.
97
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NOTES TO THE FINANCIAL STATEMENTS (continued)
98
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS
Australia
Retail
Australia
Commercial Institutional
New
Zealand Pacific
Group
Centre
Group
Total
Year ended 30 September 2023 $m $m $m $m $m $m $m
Net interest income
5,716 3,224 4,040 3,149 123 323 16,575
Net fee and commission income
546 322 685 398 19 (24) 1,946
Net income from insurance business
89 - - - - - 89
Other income
1,2
16 43 2,009 11 66 (80) 2,065
Share of associates’ profit/(loss)
- - - - - 225 225
Other operating income
651 365 2,694 409 85 121 4,325
Operating income
1,2
6,367 3,589 6,734 3,558 208 444 20,900
Operating expenses
(3,542) (1,423) (2,708) (1,291) (145) (978) (10,087)
Cash profit before credit impairment and income tax
2,825 2,166 4,026 2,267 63 (534) 10,813
Credit impairment (charge)/release
(135) (107) 80 (112) 28 1 (245)
Cash profit before income tax
2,690 2,059 4,106 2,155 91 (533) 10,568
Income tax expense and non-controlling interests
1,2
(816) (619) (1,143) (603) (20) 105 (3,096)
Cash profit/(loss) from continuing operations
1,874 1,440 2,963 1,552 71 (428) 7,472
Cash profit/(loss) from discontinued operations
-
Cash profit/(loss)
7,472
Economic hedges
1
(217)
Revenue and expense hedges
2
(90)
Profit after tax attributable to shareholders
7,165
Includes non-cash items:
Share of associates’ profit/(loss)
- - - - - 225 225
Depreciation and amortisation
(77) (5) (164) (105) (10) (580) (941)
Equity-settled share based payment expenses
(6) (2) (73) (4) - (20) (105)
Credit impairment (charge)/release
(135) (107) 80 (112) 28 1 (245)
Australia
Retail
Australia
Commercial Institutional
New
Zealand Pacific
Group
Centre
Group
Total
Financial position
$m $m $m $m $m $m $m
Goodwill
100 - 1,261 1,617 - - 2,978
Investments in associates
- - - - - 2,321 2,321
Total external assets
315,184 61,916 538,827 125,178 3,391 61,545 1,106,041
Total external liabilities
168,866 119,341 452,779 122,924 3,862 169,155 1,036,927
1.
The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $305 million loss recognised in Other operating income and $88 million benefit
recognised in Income tax expense.
2.
The cash profit adjustment for revenue and expense hedges applies to the Group Centre division with $129 million loss recognised in Other operating income and $39 million benefit recognised in Income
tax expense.
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99
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS (continued)
Australia
Retail
Australia
Commercial Institutional
New
Zealand Pacific
Group
Centre
Group
Total
Year ended 30 September 2022
$m $m $m $m $m $m $m
Net interest income 5,527 2,568 3,697 2,871 96 115 14,874
Net fee and commission income 477 404 648 428 26 (11) 1,972
Net income from insurance business 140 - - - - - 140
Other income
1,2
5 258 1,003 32 42 44 1,384
Share of associates’ profit/(loss) - - - - - 177 177
Other operating income 622 662 1,651 460 68 210 3,673
Operating income
1,2
6,149 3,230 5,348 3,331 164 325 18,547
Operating expenses (3,397) (1,301) (2,566) (1,273) (153) (889) (9,579)
Cash profit before credit impairment and income tax 2,752 1,929 2,782 2,058 11 (564) 8,968
Credit impairment (charge)/release 129 133 27 (45) 6 (18) 232
Cash profit before income tax
2,881 2,062 2,809 2,013 17 (582) 9,200
Income tax expense and non-controlling interests
1,2
(872) (511) (872) (564) (8) 142 (2,685)
Cash profit/(loss) from continuing operations
2,009 1,551 1,937 1,449 9 (440) 6,515
Cash profit/(loss) from discontinued operations (19)
Cash profit/(loss)
6,496
Economic hedges
1
569
Revenue and expense hedges
2
54
Profit after tax attributable to shareholders
7,119
Includes non-cash items:
Share of associates’ profit/(loss) - - - - - 177 177
Depreciation and amortisation (87) (12) (158) (116) (10) (626) (1,009)
Equity-settled share based payment expenses (5) (1) (72) (4) (1) (19) (102)
Credit impairment (charge)/release 129 133 27 (45) 6 (18) 232
Australia
Retail
Australia
Commercial Institutional
New
Zealand Pacific
Group
Centre
Group
Total
Financial position
$m $m $m $m $m $m $m
Goodwill 178 - 1,198 1,530 - - 2,906
Investments in associates - - - - - 2,181 2,181
Total external assets 292,876 59,983 544,066 116,218 3,707 68,879 1,085,729
Total external liabilities 153,494 118,355 473,114 115,263 4,065 155,037 1,019,328
1.
The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $802 million gain recognised in Other operating income and $233 million
expense recognised in Income tax expense.
2.
The cash profit adjustment for economic hedges applies to the Group Centre division with $77 million gain recognised in Other operating income and $23 million expense recognised in Income tax
expense.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
100
7. SEGMENT REPORTING (continued)
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are Interest income and Other operating income, which includes net fee and
commission income, net foreign exchange earnings and other financial instruments income. The Australia Retail, Australia Commercial, New Zealand,
and Pacific divisions derive income from products and services in retail and commercial banking. The Institutional division derives its income from
institutional products and market services. No single customer amounts to greater than 10% of the Group’s income.
GEOGRAPHICAL INFORMATION
The reportable segments operate across three geographical regions as follows:
• Australia Retail division - Australia
• Australia Commercial division - Australia
• Institutional division - all three geographical regions
• New Zealand division - New Zealand
• Pacific division – Rest of World
• Group Centre division - all three geographical regions
Discontinued operations results are included in the Australia geography. The Rest of World geography includes Asia, Pacific, Europe and the Americas.
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
based on the geographical regions in which the Group operates.
Australia New Zealand Rest of World
Total
2023 2022 2023 2022 2023 2022 2023 2022
$m $m $m $m $m $m $m $m
Total operating income
1
12,677
12,462
4,463
4,501
3,326
2,547
20,466
19,510
Assets to be recovered in more than one year
2
407,221
384,724
119,278
109,191
28,877
32,350
555,376
526,265
1.
Includes Operating income earned from discontinued operations of nil (2022: $84 million).
2.
Represents Net loans and advances based on the contractual maturity.
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101
FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, FVTPL and FVOCI. Financial assets are
classified into these measurement classifications on the basis of two criteria:
•
the business model within which the financial asset is managed; and
•
the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments
of principal and interest).
The resultant financial asset classifications are as follows:
•
Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held
in a business model whose objective is to collect their cash flows;
•
FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a
business model whose objective is to collect their cash flows or to sell the assets; and
•
FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:
•
at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or
•
at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognised
by an acquirer in a business combination.
8. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk of
changes in value and with remaining maturities of three months or less, including reverse repurchase agreements.
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Coins, notes and cash at bank
1,070
1,147
667
787
Securities purchased under agreements to resell in less than 3 months
1
31,711
15,996
31,120
14,372
Balances with central banks
105,689
127,790
94,389
118,928
Settlement balances owed to ANZ within 3 months
29,684
23,199
28,232
21,396
Cash and cash equivalents
168,154
168,132
154,408
155,483
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
102
9. TRADING ASSETS
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Government debt securities and notes
28,074
27,291
23,144
21,881
Corporate and financial institution securities
3,885
3,941
2,914
2,700
Commodities
4,881
3,860
4,471
3,348
Other securities
164
145
164
144
Total 37,004
35,237
30,693
28,073
RECOGNITION AND MEASUREMENT
Trading assets are financial instruments or other assets we either:
•
acquire principally for the purpose of selling in the short-term; or
•
hold as part of a portfolio we manage for short-term profit making.
Trading assets include commodity inventories measured at fair value less cost to sell in accordance with the broker trader exemption under
AASB 102
Inventories.
We recognise purchases and sales of trading assets on trade date:
•
initially, we measure them at fair value; and
•
subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as Trading assets are subject to the general classification and measurement policy for Financial Assets outlined at the
commencement of the Group’s financial assets disclosures on page 101.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading assets not valued using quoted
market prices. Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
2022
2023
27,291
145
3,941
3,860
Other securities
Commodities
Government debt
securities and notes
Corporate and financial
institution securities
28,074
164
3,885
4,881
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10. DERIVATIVE FINANCIAL INSTRUMENTS
Consolidated
Assets
2023
Liabilities
2023
Assets
2022
Liabilities
2022
Fair Value
$m $m $m $m
Derivative financial instruments - held for trading
60,059 (57,210)
89,716 (84,793)
Derivative financial instruments - designated in hedging relationships
347 (272)
458 (356)
Derivative financial instruments 60,406 (57,482)
90,174 (85,149)
The Company
Assets
2023
Liabilities
2023
Assets
2022
Liabilities
2022
Fair Value
$m $m $m $m
Derivative financial instruments - held for trading
59,649 (57,256)
87,650 (84,200)
Derivative financial instruments - designated in hedging relationships
340 (255)
406 (300)
Derivative financial instruments 59,989 (57,511)
88,056 (84,500)
FEATURES
Derivative financial instruments are contracts:
•
whose value is derived from an underlying price index (or other variable) defined in the contract - sometimes the value is derived from more than
one variable;
•
that require little or no initial net investment; and
•
that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.
PURPOSE
The Group’s derivative financial instruments have been categorised as following:
Trading
Derivatives held in order to:
•
meet customer needs for managing their own risks.
•
manage risks in the Group that are not in a designated hedge accounting relationship (some elements of balance
sheet management).
•
undertake market making and positioning activities to generate profits from short-term fluctuations in prices
or margins.
Designated in Hedging
Relationships
Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching
movements in underlying positions relating to:
•
hedges of the Group’s exposures to interest rate risk and currency risk.
•
hedges of other exposures relating to non-trading positions.
TYPES
The Group offers or uses four different types of derivative financial instruments:
Forwards
A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional
principal amount at a future date.
Futures
An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on the
transaction date, with a net settlement in cash paid on the future date without physical delivery of the asset.
Swaps
A contract in which two parties exchange one series of cash flows for another.
Options
A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a ‘call option’)
or to sell (known as a ‘put option’) an asset or instrument at a set price on a future date. The seller has the
corresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises
the option.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
104
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
RISKS MANAGED
The Group offers and uses the instruments described above to manage fluctuations in the following market factors:
Foreign Exchange
Currencies at current or determined rates of exchange.
Interest Rate
Fixed or variable interest rates applying to money lent, deposited or borrowed.
Commodity
Soft commodities (that is, agricultural products such as wheat, coffee, cocoa and sugar) and hard commodities (that
is, mined products such as gold, oil and gas).
Credit
Risk of default by customers or third parties.
The Group uses a number of central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting of
collateral exist with these exchanges:
•
some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
•
other transactions, are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative instruments
by the amount paid or received.
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING
The majority of the Group’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
Consolidated
Assets Liabilities Assets Liabilities
2023 2023 2022 2022
Fair Value
$m $m $m $m
Interest rate contracts
Forward rate agreements
- -
- (1)
Futures contracts
294 (37)
336 (123)
Swap agreements
10,815 (15,194)
10,421 (15,031)
Options
1,805 (2,023)
1,698 (1,954)
Total
12,914 (17,254)
12,455 (17,109)
Foreign exchange contracts
Spot and forward contracts
21,399 (19,580)
42,221 (37,426)
Swap agreements
23,230 (18,172)
32,169 (27,548)
Options
690 (1,120)
926 (1,343)
Total
45,319 (38,872)
75,316 (66,317)
Commodity and other contracts 1,812 (1,067)
1,927 (1,353)
Credit default swaps 14 (17)
18 (14)
Derivative financial instruments - held for trading
1
60,059 (57,210)
89,716 (84,793)
1.
Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
104
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105
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING (continued)
The majority of the Company’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
The Company
Assets Liabilities Assets Liabilities
2023 2023 2022 2022
Fair Value $m $m $m $m
Interest rate contracts
Forward rate agreements
2 (1)
2 (7)
Futures contracts
259 (30)
240 (116)
Swap agreements
11,324 (15,178)
10,778 (15,098)
Options
1,807 (2,016)
1,684 (1,947)
Total 13,392 (17,225)
12,704 (17,168)
Foreign exchange contracts
Spot and forward contracts
19,229 (17,595)
36,576 (33,376)
Swap agreements
24,493 (20,216)
35,526 (30,949)
Options
684 (1,110)
895 (1,331)
Total 44,406 (38,921)
72,997 (65,656)
Commodity and other contracts 1,823 (1,078)
1,923 (1,352)
Credit default swaps 28 (32)
26 (24)
Derivative financial instruments - held for trading
1
59,649 (57,256)
87,650 (84,200)
1.
Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
105
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106
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS
As set out in Note 1, under the accounting policy choice provided by AASB 9, the Group has continued to apply the hedge accounting requirements
of AASB 139.
There are three types of hedge accounting relationships the Group utilises:
Fair value hedge Cash flow hedge Net investment hedge
Objective of this
hedging
arrangement
To hedge our exposure to changes to
the fair value of a recognised asset or
liability or unrecognised firm
commitment caused by interest rate
or foreign currency movements.
To hedge our exposure to variability in
cash flows of a recognised asset or
liability, a firm commitment or a highly
probable forecast transaction caused
by interest rate, foreign currency and
other price movements.
To hedge our exposure to exchange
rate differences arising from the
translation of our foreign operations
from their functional currency to
Australian dollars.
Recognition of
effective hedge
portion
The following are recognised in profit
or loss at the same time:
•
all changes in the fair value of the
underlying item relating to the
hedged risk; and
•
the change in the fair value of the
derivatives.
We recognise the effective portion of
changes in the fair value of derivatives
designated as a cash flow hedge in
the cash flow hedge reserve.
We recognise the effective portion of
changes in the fair value of the
hedging instrument in the foreign
currency translation reserve (FCTR).
Recognition of
ineffective hedge
portion
Recognised immediately in Other operating income.
If a hedging
instrument expires,
or is sold, terminated,
or exercised; or no
longer qualifies for
hedge accounting
When we recognise the hedged item
in profit or loss, we recognise the
related unamortised fair value
adjustment in profit or loss. This may
occur over time if the hedged item is
amortised to profit or loss as part of
the effective yield over the period
to maturity.
Only when we recognise the hedged
item in profit or loss is the amount
previously deferred in the cash flow
hedge reserve transferred to profit
or loss.
The amount we defer in the foreign
currency translation reserve remains in
equity and is transferred to profit or
loss only when we dispose of, or
partially dispose of, the foreign
operation.
Hedged item sold or
repaid
We recognise the unamortised fair
value adjustment immediately in
profit or loss.
Amounts accumulated in equity are
transferred immediately to profit
or loss.
The gain or loss, or applicable
proportion, we have recognised in
equity is transferred to profit or loss on
disposal or partial disposal of a foreign
operation.
106
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107
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The fair value of derivative financial instruments designated in hedging relationships is:
2023
2022
Consolidated
Nominal
amount Assets Liabilities
Nominal
amount Assets Liabilities
$m $m $m $m $m $m
Fair value hedges
Foreign exchange spot and forward contracts
607 5 -
604 - (37)
Interest rate swap agreements
126,881 32 (195)
106,366 79 (168)
Interest rate futures contracts
11,778 243 (9)
17,361 264 (3)
Cash flow hedges
Interest rate swap agreements
122,704 17 (48)
125,063 33 (53)
Foreign exchange swap agreements
683 50 (19)
656 48 (44)
Foreign exchange spot and forward contracts
- - -
161 - (4)
Net investment hedges
Foreign exchange spot and forward contracts
47 - (1)
940 34 (47)
Derivative financial instruments - designated in
hedging relationships
262,700 347 (272)
251,151 458 (356)
2023
2022
The Company
Nominal
amount Assets Liabilities
Nominal
amount Assets Liabilities
$m $m $m $m $m $m
Fair value hedges
Foreign exchange spot and forward contracts
607 5 -
604 - (37)
Interest rate swap agreements
101,587 32 (184)
80,185 65 (163)
Interest rate futures contracts
11,778 243 (9)
17,361 264 (3)
Cash flow hedges
Interest rate swap agreements
89,173 10 (42)
94,928 28 (49)
Foreign exchange swap agreements
683 50 (19)
656 48 (44)
Foreign exchange spot and forward contracts
- - -
161 - (4)
Net investment hedges
Foreign exchange spot and forward contracts
47 - (1)
146 1 -
Derivative financial instruments - designated in
hedging relationships
203,875 340 (255)
194,041 406 (300)
107
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NOTES TO THE FINANCIAL STATEMENTS (continued)
108
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The maturity profile of the nominal amounts of our hedging instruments held is:
Consolidated
Average
Rate
Less than 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
After
5 years
$m
Total
$m Nominal Amount
As at 30 September 2023
Fair value hedges
Interest rate Interest Rate
2.38% 2,314 10,533 79,350 46,462 138,659
Foreign exchange HKD/AUD FX Rate
5.02 607 - - - 607
Cash flow hedges
Interest rate Interest Rate
2.27% 7,573 37,630 76,359 1,142 122,704
Foreign exchange
1
AUD/USD FX Rate
0.74
- - - 683 683
USD/EUR FX Rate
0.91
Net investment hedges
Foreign exchange NZD/AUD FX Rate
1.09
-
47 - - 47
As at 30 September 2022
Fair value hedges
Interest rate Interest Rate 1.65% 10,931 17,322 65,259 30,215 123,727
Foreign exchange HKD/AUD FX Rate 5.43 604 - - - 604
Cash flow hedges
Interest rate Interest Rate 1.59% 3,317 32,145 88,461 1,140 125,063
Foreign exchange
1
AUD/USD FX Rate 0.74
40 121 - 656 817
USD/EUR FX Rate 0.91
Net investment hedges
Foreign exchange
TWD/AUD FX Rate 20.68
794 146 - - 940
THB/AUD FX Rate 25.05
1.
Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
108
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109
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The Company
Average
Rate
Less than 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
After
5 years
$m
Total
$m Nominal Amount
As at 30 September 2023
Fair value hedges
Interest rate Interest Rate
2.49% 1,910 8,025 61,644 41,786 113,365
Foreign exchange HKD/AUD FX Rate
5.02 607 - - - 607
Cash flow hedges
Interest rate Interest Rate
1.78% 3,154 22,353 62,577 1,089 89,173
Foreign exchange
1
AUD/USD FX Rate
0.74
- - - 683 683
USD/EUR FX Rate
0.91
Net investment hedges
Foreign exchange NZD/AUD FX Rate
1.09 - 47 - - 47
As at 30 September 2022
Fair value hedges
Interest rate Interest Rate 1.75% 10,931 13,466 48,011 25,138 97,546
Foreign exchange HKD/AUD FX Rate 5.43 604 - - - 604
Cash flow hedges
Interest rate Interest Rate 1.37% 1,708 22,611 69,600 1,009 94,928
Foreign exchange
1
AUD/USD FX Rate 0.74
40 121 - 656 817
USD/EUR FX Rate 0.91
Net investment hedges
Foreign exchange TWD/AUD FX Rate 20.68 - 146 - - 146
1.
Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
109
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NOTES TO THE FINANCIAL STATEMENTS (continued)
110
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:
Ineffectiveness
Amount reclassified
from the cash flow
hedge reserve or FCTR
to profit or loss
4
Consolidated
Change in value
of hedging
instrument
2
Change in value
of hedged item
Hedge ineffectiveness
recognised in profit or
loss
3
As at 30 September 2023 $m $m $m $m
Fair value hedges
1
Interest rate
(846) 870 24 -
Foreign exchange
(4) 4 - -
Cash flow hedges
1
Interest rate
280 (239) 41 (13)
Foreign exchange
- - - 9
Net investment hedges
1
Foreign exchange
(39) 39 - 79
As at 30 September 2022
Fair value hedges
1
Interest rate 697 (719) (22) -
Foreign exchange (55) 55 - -
Cash flow hedges
1
Interest rate (3,619) 3,453 (166) (13)
Foreign exchange (4) 4 - 1
Net investment hedges
1
Foreign exchange 62 (62) - -
Ineffectiveness
Amount reclassified
from the cash flow
hedge reserve or FCTR
to profit or loss
4
The Company
Change in value
of hedging
instrument
2
Change in value
of hedged item
Hedge ineffectiveness
recognised in profit or
loss
3
As at 30 September 2023 $m $m $m $m
Fair value hedges
1
Interest rate
(797) 814 17 -
Foreign exchange
(4) 4 - -
Cash flow hedges
1
Interest rate
386 (344) 42 (15)
Foreign exchange
- - - 9
Net investment hedges
1
Foreign exchange
(4) 4 - -
As at 30 September 2022
Fair value hedges
1
Interest rate 1,570 (1,586) (16) -
Foreign exchange (55) 55 - -
Cash flow hedges
1
Interest rate (3,643) 3,477 (166) (13)
Foreign exchange (4) 4 - 1
Net investment hedges
1
Foreign exchange 58 (58) - -
1.
All hedging instruments are classified as derivative financial instruments.
2.
Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
3.
Recognised in Other operating income.
4.
Recognised in Net interest income and Other operating income.
110
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NOTES TO THE FINANCIAL STATEMENTS
111
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The hedged items in relation to the Group’s fair value hedges are:
Carrying amount
Accumulated fair value
hedge adjustments on
the hedged item
Consolidated
Balance sheet
presentation Hedged risk
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
As at 30 September 2023
Fixed rate loans and advances Net loans and advances Interest rate
3,472 - (139) -
Fixed rate debt issuance Debt issuances Interest rate
- (66,190) - 4,163
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate
61,082 - (5,121) -
Equity securities at FVOCI
1
Investment securities Foreign exchange
607 - 79 -
Total
65,161 (66,190) (5,181) 4,163
As at 30 September 2022
Fixed rate loans and advances Net loans and advances Interest rate 10,252 - (369) -
Fixed rate debt issuance Debt issuances Interest rate - (51,531) - 3,721
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 53,915 - (5,349) -
Equity securities at FVOCI
1
Investment securities Foreign exchange 604 - 75 -
Total
64,771 (51,531) (5,643) 3,721
1.
The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
The hedged items in relation to the Company’s fair value hedges are:
Carrying amount
Accumulated fair value
hedge adjustments on
the hedged item
The Company
Balance sheet
presentation Hedged risk
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
As at 30 September 2023
Fixed rate loans and advances Net loans and advances Interest rate
3,472 - (139) -
Fixed rate debt issuance Debt issuances Interest rate
- (51,602) - 3,025
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate
52,336 - (4,342) -
Equity securities at FVOCI
1
Investment securities Foreign exchange
607 - 79 -
Total
56,415 (51,602) (4,402) 3,025
As at 30 September 2022
Fixed rate loans and advances Net loans and advances Interest rate 10,252 - (369) -
Fixed rate debt issuance Debt issuances Interest rate - (37,141) - 2,572
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 44,038 - (4,489) -
Equity securities at FVOCI
1
Investment securities Foreign exchange 604 - 75 -
Total
54,894 (37,141) (4,783) 2,572
1.
The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
111
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NOTES TO THE FINANCIAL STATEMENTS (continued)
112
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The hedged items in relation to the Group’s and the Company’s cash flow and net investment hedges are:
Cash flow
hedge reserve
Foreign currency
translation reserve
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
Consolidated Hedged risk $m $m $m $m
As at 30 September 2023
Cash flow hedges
Floating rate loans and advances Interest rate
(3,482) 11 - -
Floating rate customer deposits Interest rate
794 (1) - -
Foreign currency debt issuances Foreign exchange
- - - -
Highly probable forecast transactions Foreign exchange
- - - -
Net investment hedges
Foreign operations Foreign exchange
- - 12 49
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances Interest rate (4,286) 19 - -
Floating rate customer deposits Interest rate 1,357 5 - -
Foreign currency debt issuances Foreign exchange (1) (1) - -
Highly probable forecast transactions Foreign exchange (7) - - -
Net investment hedges
Foreign operations Foreign exchange - - 43 (149)
Cash flow
hedge reserve
Foreign currency
translation reserve
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
The Company Hedged risk $m $m $m $m
As at 30 September 2023
Cash flow hedges
Floating rate loans and advances Interest rate
(3,103) 2 - -
Floating rate customer deposits Interest rate
495 - - -
Foreign currency debt issuances Foreign exchange
- - - -
Highly probable forecast transactions Foreign exchange
- - - -
Net investment hedges
Foreign operations Foreign exchange
- - 12 49
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances Interest rate (4,005) 11 - -
Floating rate customer deposits Interest rate 1,053 6 - -
Foreign currency debt issuances Foreign exchange (1) (1) - -
Highly probable forecast transactions Foreign exchange (7) - - -
Net investment hedges
Foreign operations Foreign exchange - - 88 (149)
112
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NOTES TO THE FINANCIAL STATEMENTS
113
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The table below details the reconciliation of the Group’s cash flow hedge reserve by risk type:
Interest rate
Foreign
currency Total
Consolidated $m $m $m
Balance at 1 October 2021
398 (5) 393
Fair value gains/(losses) (3,453) (4) (3,457)
Transferred to profit or loss (13) 1 (12)
Income taxes and others 1,040 - 1,040
Balance at 30 September 2022
(2,028) (8) (2,036)
Fair value gains/(losses)
239 - 239
Transferred to profit or loss
(13) 9 (4)
Income taxes and others
(69) (2) (71)
Balance at 30 September 2023 (1,871) (1) (1,872)
Hedges of net investments in a foreign operation resulted in a $40 million increase in FCTR during the year (2022: $62 million increase).
The table below details the reconciliation of the Company’s cash flow hedge reserve by risk type:
Interest rate
Foreign
currency Total
The Company $m $m $m
Balance at 1 October 2021 389 (5) 384
Fair value gains/(losses) (3,477) (4) (3,481)
Transferred to profit or loss (13) 1 (12)
Income taxes and others 1,048 - 1,048
Balance at 30 September 2022
(2,053) (8) (2,061)
Fair value gains/(losses)
344 - 344
Transferred to profit or loss
(15) 9 (6)
Income taxes and others
(99) (2) (101)
Balance at 30 September 2023
(1,823) (1) (1,824)
Hedges of net investments in a foreign operation resulted in a $4 million decrease in FCTR during the year (2022: $58 million increase).
113
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NOTES TO THE FINANCIAL STATEMENTS (continued)
114
10. DERIVATIVE FINANCIAL INSTRUMENTS
(continued)
RECOGNITION AND MEASUREMENT
Recognition
Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a
derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as a
liability.
Valuation adjustments are integral in determining the fair value of derivatives. This includes:
•
a credit valuation adjustment to reflect the counterparty risk and/or event of default; and
•
a funding valuation adjustment to account for funding costs and benefits in the derivatives
portfolio.
Derecognition of
assets and liabilities
We remove derivative assets from our Balance Sheet when the contracts expire or we have transferred
substantially all the risks and rewards of ownership. We remove derivative liabilities from our Balance
Sheet when the Group’s contractual obligations are discharged, cancelled or expired.
With respect to derivatives cleared through a central clearing counterparty or exchange, derivative
assets or liabilities may be derecognised in accordance with the principle above when collateral is
settled, depending on the legal arrangements in place for each instrument.
Impact on the
Income Statement
The recognition of gains or losses on derivative financial instruments depends on whether the
derivative is held for trading or is designated in a hedge accounting relationship. For derivative
financial instruments held for trading, gains or losses from changes in the fair value are recognised in
profit or loss.
For an instrument designated in a hedge accounting relationship, the recognition of gains or losses
depends on the nature of the item being hedged. Refer to the table on page 106 for details of the
recognition approach applied for each type of hedge accounting relationship.
Sources of hedge accounting ineffectiveness may arise from differences in the interest rate reference
rate, margins, or rate set differences and differences in discounting between the hedged items and the
hedging instruments.
Hedge effectiveness
To qualify for hedge accounting under AASB 139
, a hedge relationship is expected to be highly
effective. A hedge relationship is highly effective only if the following conditions are met:
•
the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash
flows attributable to the hedged risk during the period for which the hedge is designated
(prospective effectiveness); and
•
the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).
The Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection of
valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 18 Fair
Value of Financial Assets and Financial Liabilities for further details.
114
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NOTES TO THE FINANCIAL STATEMENTS
115
11. INVESTMENT SECURITIES
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Investment securities measured at FVOCI
Debt securities
88,271
76,817
76,320
65,257
Equity securities
946
1,353
945
1,027
Investment securities measured at amortised cost
Debt securities
7,752
7,943
5,936
6,115
Investment Securities measured at FVTPL
Debt securities
-
40
-
-
Total
96,969
86,153
83,201
72,399
During 2023, ANZBGL transferred its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure.
The maturity profile of investment securities is as follows:
Consolidated
Less than 3
months
3 to 12
months 1 to 5 years After 5 years
No
maturity
Total
As at 30 September 2023 $m $m $m $m $m $m
Government securities
8,807 10,233 29,482 36,081 - 84,603
Corporate and financial institution securities
358 1,205 5,973 58 - 7,594
Other securities
617 591 602 2,016 - 3,826
Equity securities
- - - - 946 946
Total
9,782 12,029 36,057 38,155 946 96,969
As at 30 September 2022
Government securities 6,544 14,045 29,806 21,856 - 72,251
Corporate and financial institution securities 324 2,462 4,906 97 2 7,791
Other securities 429 423 543 3,363 - 4,758
Equity securities - - - - 1,353 1,353
Total
7,297 16,930 35,255 25,316 1,355 86,153
During the year, the Group recognised a net gain (before tax) of $9 million (2022: $28 million) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
2022
2023
72,251
4,758
7,791
Equity securities
Other securities
Government securities
Corporate and financial
institution securities
1,353
84,603
3,826
7,594
946
115
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116
11. INVESTMENT SECURITIES (continued)
The Company
Less than 3
months
3 to 12
months 1 to 5 years After 5 years
No
maturity
Total
As at 30 September 2023 $m $m $m $m $m $m
Government securities
7,665 8,649 23,140 33,182 - 72,636
Corporate and financial institution securities
280 634 4,822 58 - 5,794
Other securities
617 591 602 2,016 - 3,826
Equity securities
- - - - 945 945
Total
8,562 9,874 28,564 35,256 945 83,201
As at 30 September 2022
Government securities 5,715 11,647 23,100 19,853 - 60,315
Corporate and financial institution securities 276 1,972 3,993 58 - 6,299
Other securities 429 423 543 3,363 - 4,758
Equity securities - - - - 1,027 1,027
Total
6,420 14,042 27,636 23,274 1,027 72,399
During the year, the Company recognised a net loss (before tax) of $6 million (2022: $1 million gain) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group’s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
arrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is
made, gains or losses are not reclassified from Other comprehensive income to profit or loss on disposal of the investment. However, gains
or losses may be reclassified within equity.
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
the commencement of the Group’s financial asset disclosures on page 101. Additionally, expected credit losses associated with ‘Investment
securities - debt securities at amortised cost’ and ‘Investment securities - debt securities at FVOCI’ are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses. For ‘Investment securities - debt
securities at FVOCI’, the allowance for Expected Credit Loss (ECL) is recognised in the FVOCI reserve in equity with a corresponding charge
to profit or loss.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 18 Fair Value of Financial Assets and
Financial Liabilities for further details.
116
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117
12. NET LOANS AND ADVANCES
The following table provides details of Net loans and advances:
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Overdrafts
5,552
5,266
4,516
4,262
Credit cards
6,805
6,755
5,630
5,664
Commercial bills
4,682
5,214
4,682
5,214
Term loans – housing
404,491
374,625
304,772
282,965
Term loans – non-housing
1
285,458
279,730
242,403
238,215
Other
1,292
2,035
1,244
1,929
Subtotal
708,280
673,625
563,247
538,249
Unearned income
2
(515)
(518)
(483)
(480)
Capitalised brokerage and other origination costs
2
3,475
2,882
3,048
2,501
Gross loans and advances
711,240
675,989
565,812
540,270
Allowance for expected credit losses (refer to Note 13)
(3,546)
(3,582)
(2,795)
(2,925)
Net loans and advances
707,694
672,407
563,017
537,345
Residual contractual maturity:
Within one year
152,318
146,142
128,045
121,513
More than one year
555,376
526,265
434,972
415,832
Net loans and advances 707,694
672,407
563,017
537,345
Carried on Balance Sheet at:
Amortised cost
685,806
667,732
541,777
533,082
Fair value through profit or loss
1
21,888
4,675
21,240
4,263
Net loans and advances
707,694
672,407
563,017
537,345
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
2.
Amortised over the expected life of the loan.
RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are facilities the Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance,
which are primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then
measure loans and advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses, or
at fair value when they are specifically designated on initial recognition as FVTPL, are classified as held for sale or when held for trading.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
We classify contracts to lease assets and hire purchase agreements as finance leases if they transfer substantially all the risks and rewards of
ownership of the asset to the customer or an unrelated third party. We include these facilities in ‘Other’ in the table above.
The Group enters into transactions in which it transfers financial assets that are recognised on its Balance Sheet. When the Group retains
substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Group’s Balance Sheet, however if
substantially all the risks and rewards are transferred, the Group derecognises the asset. If the risks and rewards are partially retained and
control over the asset is lost, the Group derecognises the asset. If control over the asset is not lost, the Group continues to recognise the
asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as Net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 101. Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses.
117
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118
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
2023
2022
Consolidated
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
Net loans and advances at amortised cost
3,180 366 3,546
3,049 533 3,582
Off-balance sheet commitments
817 10 827
766 9 775
Investment securities - debt securities at amortised cost
35 - 35
38 - 38
Total
4,032 376 4,408
3,853 542 4,395
Other comprehensive income
Investment securities - debt securities at FVOCI
1
15 - 15
10 - 10
2023
2022
The Company
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
Net loans and advances at amortised cost
2,516 279 2,795
2,500 425 2,925
Off-balance sheet commitments
692 5 697
668 5 673
Investment securities - debt securities at amortised cost
1 - 1
1 - 1
Total
3,209 284 3,493
3,169 430 3,599
Other comprehensive income
Investment securities - debt securities at FVOCI
1
12 - 12
7 - 7
1.
For FVOCI assets, the allowance for ECL does not alter the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding
charge to profit or loss.
The following tables present the movement in the allowance for ECL for the year.
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
Stage 3
1
Consolidated
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 1 October 2021 968 1,994 417 666 4,045
Transfer between stages 219 (224) (95) 100 -
New and increased provisions (net of releases) (48) (202) 42 420 212
Write-backs - - - (222) (222)
Bad debts written off (excluding recoveries) - - - (428) (428)
Foreign currency translation and other movements
2
2 (20) (4) (3) (25)
As at 30 September 2022 1,141 1,548 360 533 3,582
Transfer between stages
148 (138) (94) 84 -
New and increased provisions (net of releases)
(73) 202 61 388 578
Write-backs
- - - (212) (212)
Bad debts written off (excluding recoveries)
- - - (409) (409)
Foreign currency translation and other movements
2
11 12 2 (18) 7
As at 30 September 2023
1,227 1,624 329 366 3,546
1.
The Group’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2.
Other movements include the impacts of discount unwind on individually assessed allowance for ECL or the impact of divestments completed during the year.
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119
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
Stage 3
1
The Company
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 1 October 2021 797 1,679 348 563 3,387
Transfer between stages 192 (201) (84) 93 -
New and increased provisions (net of releases) (59) (220) 31 354 106
Write-backs - - - (193) (193)
Bad debts written off (excluding recoveries) - - - (386) (386)
Foreign currency translation and other movements
2
16 1 - (6) 11
As at 30 September 2022 946 1,259 295 425 2,925
Transfer between stages
122 (118) (83) 79 -
New and increased provisions (net of releases)
(43) 98 39 295 389
Write-backs
- - - (192) (192)
Bad debts written off (excluding recoveries)
- - - (310) (310)
Foreign currency translation and other movements
2
1 - - (18) (17)
As at 30 September 2023
1,026 1,239 251 279 2,795
1.
The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2.
Other movements include the impact of discount unwind on individually assessed allowance for ECL.
Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
Stage 3
1
Consolidated
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 1 October 2021 555 211 19 21 806
Transfer between stages 40 (34) (8) 2 -
New and increased provisions (net of releases) 7 (28) 18 (2) (5)
Write-backs - - - (11) (11)
Foreign currency translation and other movements
2
(9) (5) - (1) (15)
As at 30 September 2022 593 144 29 9 775
Transfer between stages
31 (29) (4) 2 -
New and increased provisions (net of releases)
- 46 (1) 2 47
Write-backs
- - - (4) (4)
Foreign currency translation and other movements
2
6 1 1 1 9
As at 30 September 2023
630 162 25 10 827
1.
The Group’s credit exposures that are POCI are insignificant.
2.
Other movements include impact of divestments completed during the year.
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120
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
Stage 3
1
The Company
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 1 October 2021 484 171 12 7 674
Transfer between stages 33 (27) (6) - -
New and increased provisions (net of releases) 17 (29) 20 - 8
Write-backs - - - (2) (2)
Foreign currency translation and other movements
2
(4) (3) - - (7)
As at 30 September 2022 530 112 26 5 673
Transfer between stages
27 (26) (3) 2 -
New and increased provisions (net of releases)
(10) 35 (2) - 23
Write-backs
- - - (2) (2)
Foreign currency translation
3 - - - 3
As at 30 September 2023
550 121 21 5 697
1.
The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2.
Other movements include the impact of divestments completed during the year.
Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
Stage 3
Consolidated
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 30 September 2022 38 - - - 38
As at 30 September 2023 35 - - - 35
Stage 3
The Company
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 30 September 2022 1 - - - 1
As at 30 September 2023 1 - - - 1
Investment securities - debt securities at FVOCI
As FVOCI assets are measured at fair value, there is no separate allowance for ECL. Instead, the allowance for ECL is recognised in Other
comprehensive income with a corresponding charge to profit or loss.
Stage 3
Consolidated
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 30 September 2022 10 - - - 10
As at 30 September 2023 15 - - - 15
Stage 3
The Company
Stage 1
$m
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
Total
$m
As at 30 September 2022 7 - - - 7
As at 30 September 2023 12 - - - 12
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121
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
New and increased provisions (net of releases)
1,2
- Collectively assessed
152
(311)
41
(333)
- Individually assessed
476
520
376
447
Write-backs
3
(216)
(233)
(194)
(195)
Recoveries of amounts previously written-off
(167)
(208)
(148)
(184)
Total credit impairment charge
245
(232)
75
(265)
1.
Includes the impact of transfers between collectively assessed and individually assessed.
2.
New and increased provisions (net of releases) includes:
Consolidated The Company
2023 2022 2023 2022
Collectively
assessed
$m
Individually
assessed
$m
Collectively
assessed
$m
Individually
assessed
$m
Collectively
assessed
$m
Individually
assessed
$m
Collectively
assessed
$m
Individually
assessed
$m
Net loans and advances at amortised cost 106 472 (308) 520 15 374 (341) 447
Off-balance sheet commitments 43 4 (5) - 21 2 8 -
Investment securities - debt securities at amortised cost (1) - 3 - - - - -
Investment securities - debt securities at FVOCI 4 - (1) - 5 - - -
Total 152 476 (311) 520 41 376 (333) 447
3.
Consists of write-backs in Net loans and advances at amortised cost of $212 million (2022: $222 million) for the Group and $192 million (2022: $193 million) for the Company, and Off-balance sheet
commitments of $4 million (2022: $11 million) for the Group and $2 million (2022: $2 million) for the Company.
The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity is
$147 million (2022: $143 million) for the Group, and $133 million (2022: $128 million) for the Company.
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122
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
(continued)
RECOGNITION AND MEASUREMENT
EXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and
takes into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit
deterioration since origination, according to the following three-stage approach:
•
Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination,
an allowance for ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next
12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are
estimated based on default events that are possible over the remaining time to maturity.
•
Stage 2: Where there has been a SICR since origination, an allowance for ECL is recognised reflecting expected credit losses resulting
from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period
such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification
with ECL measured accordingly.
•
Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis
when transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSS
ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:
•
Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;
•
Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; and
•
Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD,
taking into account direct and indirect recovery costs.
These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For
non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Group’s contractual right to withdraw a
facility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour
and events that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes
across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor is
unlikely to fully satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the
Group’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of
amounts previously written-off are recorded as a release to the credit impairment charge in the income statement.
122
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123
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
(continued)
RECOGNITION AND MEASUREMENT (continued)
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or
commercial reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered
substantial. This assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall
instrument risk profile; for example, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is
considered non-substantial, the existing financial asset is not derecognised and its date of origination continues to be used to determine
SICR. Where a modification is considered substantial, the existing financial asset is derecognised and a new financial asset is recognised at
its fair value on the modification date, which also becomes the date of origination used to determine SICR for this new asset.
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Group considers both
qualitative and quantitative information:
i. Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date
to the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates
both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least
annually or more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at
the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime
probability of default may increase significantly if:
•
there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
•
there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.
ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since origination
and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group considers four probability-weighted
forecast economic scenarios as follows:
i. Base case scenario
The base case scenario is ANZ’s view of future macroeconomic conditions. It reflects management’s assumptions used for strategic
planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process the
Group applies in strategic and capital planning over a 3-year time horizon;
ii. Upside and iii. Downside scenarios
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 events and uncertainty over long term horizons; and
iv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Group altered the severe downside scenario in
2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Group-
wide stress testing.
123
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124
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
(continued)
RECOGNITION AND MEASUREMENT (continued)
FORWARD-LOOKING INFORMATION (continued)
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)
depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates,
Gross Domestic Product (GDP) growth rates, residential property price indices, commercial property price indices and consumer price
indices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario, as well as specific portfolio considerations where required. The Group Asset and Liability Committee (GALCO) is
responsible for reviewing and approving the base case economic scenario and the Credit and Market Risk Committee (CMRC) approves the
probability weights applied to each scenario.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process. CMRC is responsible for approving such adjustments.
KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:
•
the selection of an estimation technique or modelling methodology; 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 within the context of the uncertainty as to how various factors might
impact the global economy 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 Group’s ECL estimates are inherently uncertain and, as a
result, actual results may differ from these estimates.
Judgement/Assumption
Description
Considerations for the year ended 30 September 2023
Determining when a
Significant Increase in
Credit Risk has occurred
or reversed
In the measurement of ECL, judgement is
involved in determining whether there has been
a SICR since initial recognition of a loan, which
would result in it 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
(PD) 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 SICR trigger points
requires judgement which may have a material
impact upon the size of the ECL allowance. The
Group monitors the effectiveness of SICR criteria
on an ongoing basis.
The determination of SICR has been applied consistent
with prior periods.
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13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
(continued)
Judgement/Assumption
Description
Considerations for the year ended 30 September 2023
Measuring both 12-
month and lifetime
expected credit losses
The PD, LGD and EAD factors 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 is relevant for
particular lending portfolios and for
determining each portfolio’s point-in-time
sensitivity.
In addition, judgement is required where
behavioural characteristics are applied in
estimating the lifetime of a facility which is used
in measuring ECL.
The PD, LGD and EAD models are subject to the Group’s
model risk policy that stipulates periodic model
monitoring and re-validation, and defines approval
procedures and authorities according to model
materiality.
There were no material changes to the policy.
Base case economic
forecast
The Group derives a forward-looking ‘base case’
economic scenario which reflects ANZ Research
- Economics’ (ANZ Economics) view of future
macroeconomic conditions.
There have been no changes to the types of forward-
looking variables (key economic drivers) used as model
inputs.
As at 30 September 2023, the base case assumptions
have been updated to reflect slowing economies and
reduced levels of household consumption in Australia
and New Zealand associated with continuing high
interest rates and elevated levels of inflation.
The expected outcomes of key economic drivers for the
base case scenario at 30 September 2023 are described
below under the heading “Base case economic forecast
assumptions”.
Probability weighting of
each economic scenario
(base case, upside,
downside and severe
downside scenarios)
1
Probability weighting of each economic
scenario is determined by management
considering the risks and uncertainties
surrounding the base case economic scenario
at each measurement date.
The assigned probability weightings in Australia,
New Zealand and Rest of World are subject to a
high degree of inherent uncertainty and
therefore the actual outcomes may be
significantly different to those projected.
Probability weightings in the current period have been
adjusted to reflect our assessment of the downside risks
from the impact of continued high interest rates and
inflation on the economies in which the Group operates.
Weightings for current and prior periods are as detailed in
the section below under the heading on ‘Probability
weightings’.
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, natural disasters, and natural hazards
that are not incorporated into our current
parameters, risk ratings, or forward-looking
information are examples of such
circumstances.
Management have continued to apply adjustments to
accommodate uncertainty associated with higher
inflation and interest rates.
Management overlays have been made for risks particular
to retail, including home loans, credit cards and small
business in Australia, and for mortgages, commercial
property and agri in New Zealand.
Management has considered and concluded no
temporary adjustment is required at 30 September 2023
to the ECL in relation to climate- or weather-related
events during the year.
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.
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126
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
(continued)
KEY JUDGEMENTS AND ESTIMATES
(continued)
Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of
the ECL balance.
The economic drivers of the base case economic forecasts, reflective of ANZ Economics’ view of future macroeconomic conditions used at
30 September 2023 are set out below. For the years following the near term forecasts below, the ECL models apply simplified assumptions
for the economic conditions to calculate lifetime loss.
The base case economic forecasts for Australia, New Zealand and Rest of World are for continuing slowdowns in economic activity.
Continued high inflation in Australia and New Zealand is expected to keep interest rates high and dampen growth over the forecast
period.
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base
case economic scenario including the uncertainties described above.
The average base case weighting has increased to 45.9% (Sep 22: 45%) as the downside and severe downside scenario weightings have
been revised. The average downside case weighting has increased to 41.2% (Sep 22: 40%), and the average severe downside case
weighting has decreased to 12.9% (Sep 22: 15%).
The assigned probability weightings in Australia, New Zealand and Rest of World are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography
to provide estimates of the possible loss outcomes and taking into account short and long term inter-relationships within the Group’s
credit portfolios. The average weightings applied across the Group are set out below:
Consolidated
The Company
2023 2022 2023 2022
Base 45.9% 45.0% 45.0% 45.0%
Upside 0.0% 0.0% 0.0% 0.0%
Downside 41.2% 40.0% 42.1% 40.0%
Severe downside 12.9% 15.0% 12.9% 15.0%
Forecast calendar year
2023 2024 2025
Australia
GDP (annual % change) 1.5 1.3 2.2
Unemployment rate (annual average) 3.6 4.4 4.5
Residential property prices (annual % change) 5.9 2.8 4.3
Consumer price index (annual average % change) 5.6 3.5 2.9
New Zealand
GDP (annual % change) 0.7 0.3 1.5
Unemployment rate (annual average) 3.8 4.8 5.1
Residential property prices (annual % change) -0.6 2.3 3.2
Consumer price index (annual average % change) 6.0 3.8 2.2
Rest of world
GDP (annual % change) 1.8 0.9 2.0
Consumer price index (annual average % change) 3.9 2.9 2.2
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13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
(continued)
KEY JUDGEMENTS AND ESTIMATES
(continued)
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in
future periods, expected credit losses reported by the 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 30 September 2023:
Consolidated
The Company
ECL
$m
Impact
$m
ECL
$m
Impact
$m
If 1% of Stage 1 facilities were included in Stage 2 4,116 84 3,283 73
If 1% of Stage 2 facilities were included in Stage 1 4,027 (5) 3,206 (4)
100% upside scenario 1,274 (2,758) 1,050 (2,160)
100% base scenario 1,790 (2,242) 1,406 (1,804)
100% downside scenario 3,123 (909) 2,484 (726)
100% severe downside scenario 9,251 5,219 7,457 4,247
Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the 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 amongst other things, the uncertainties described
above.
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128
FINANCIAL LIABILITIES
Outlined below is a description of how we classify and measure financial liabilities relevant to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or FVTPL when they are held for trading. Additionally, financial liabilities can be
designated at FVTPL where:
• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
• a group of financial liabilities are managed and their performance are evaluated on a fair value basis, in accordance with a documented
risk management strategy; or
• the financial liability contains one or more embedded derivatives unless:
a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or
b) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are
included in Other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.
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14. DEPOSITS AND OTHER BORROWINGS
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Certificates of deposit
41,919
34,049
39,426
32,411
Term deposits
247,893
200,064
196,309
157,479
On demand and short term deposits
356,601
369,460
297,195
310,857
Deposits not bearing interest
42,906
50,906
24,456
29,416
Deposits from banks & securities sold under repurchase agreements
1
92,562
103,580
86,464
98,825
Commercial paper and other borrowings
33,322
39,222
31,225
36,619
Deposits and other borrowings
815,203
797,281
675,075
665,607
Residual contractual maturity:
Within one year
805,808
781,573
671,395
654,997
More than one year
9,395
15,708
3,680
10,610
Deposits and other borrowings
815,203
797,281
675,075
665,607
Carried on Balance Sheet at:
Amortised cost
781,314
794,621
643,868
665,567
Fair value through profit or loss
1
33,889
2,660
31,207
40
Deposits and other borrowings
815,203
797,281
675,075
665,607
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
• are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the
effective interest rate method; and
• are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them
as measured at FVTPL.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in
the Group’s own credit risk in Other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we
recognise directly in profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to
profit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since
the risks and rewards of ownership remain with the Group. Over the life of the repurchase agreement, we recognise the difference
between the sale price and the repurchase price and charge it to interest expense in profit or loss.
20222023
Certificates of deposit
Term deposits
On demand and short
term deposits
Deposits not bearing interest
Deposits from banks &
securities sold under
repurchase agreements
200,064
369,460
50,906
39,222
103,580
Commercial paper and
other borrowings
34,049
247,893
356,601
42,906
33,322
92,562
41,919
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130
15. PAYABLES AND OTHER LIABILITIES
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Payables and accruals
5,811
2,896
4,582
2,189
Liabilities at fair value
1
5,267
3,239
4,922
2,857
Lease liabilities
1,767
1,040
1,531
1,628
Trail commission liabilities
1,469
1,320
1,469
1,320
Other liabilities
1,618
1,340
775
568
Payables and other liabilities
15,932
9,835
13,279
8,562
1.
Relate to securities sold short classified as held for trading and measured at FVTPL.
RECOGNITION AND MEASUREMENT
The Group recognises liabilities when there is a present obligation to transfer economic resources as a result of past events.
Below is the measurement basis for each item classified as other liabilities:
• Payables, accruals and other liabilities are measured at the contractual amount payable or the best estimate of consideration required to
settle the payable.
• Liabilities at fair value relate to securities sold short, which we classify as held for trading and measure at FVTPL based on quoted prices
in active markets.
• Lease liabilities are initially measured at the present value of the future lease payments using the Group’s incremental borrowing rate at
the lease commencement date. The carrying amount is then subsequently adjusted to reflect the interest on the lease liability, lease
payments that have been made and any lease reassessments or modifications.
• Trail commission liabilities are measured based on the present value of expected future trail commission payments taking into
consideration average behavioural loan life and outstanding balances of broker originated loans.
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16. DEBT ISSUANCES
The Group, primarily via ANZBGL or other banking subsidiaries, uses a variety of funding programmes to issue senior debt (including covered bonds
and securitisations) and subordinated debt. The difference between senior debt and subordinated debt is that holders of senior
debt of a Group issuer
take priority over holders of subordinated debt owed by that issuer. In the winding up of a Group issuer, the subordinated debt will be repaid by the
relevant issuer only after the repayment of claims of its depositors, other creditors and the senior debt holders of that issuer.
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
Senior debt
63,233
52,324
50,671
40,325
Covered bonds
18,223
12,967
15,084
9,371
Securitisation
880
1,115
-
-
Total unsubordinated debt 82,336
66,406
65,755
49,696
Subordinated debt
- ANZBGL Additional Tier 1 capital
8,232
7,705
8,287
7,763
- ANZBGL Tier 2 capital
23,707
17,907
23,707
17,907
- Other subordinated debt securities
1,739
1,716
464
462
Total subordinated debt
33,678
27,328
32,458
26,132
Total debt issued 116,014
93,734
98,213
75,828
Residual contractual maturity
1
:
Within one year
21,746
25,208
18,499
21,990
More than one year
92,856
66,660
78,245
51,929
No maturity date (instruments in perpetuity)
1,412
1,866
1,469
1,909
Total debt issued
116,014
93,734
98,213
75,828
Carried on Balance Sheet at:
Amortised cost
114,678
92,623
95,881
72,757
Fair value through profit or loss
1,336
1,111
2,332
3,071
Total debt issued
116,014
93,734
98,213
75,828
1.
Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.
Consolidated
The Company
2023 2022 2023 2022
$m $m $m $m
USD United States dollars
32,723
25,527
24,074
17,206
EUR Euro
26,990
19,923
21,356
14,049
AUD Australian dollars
47,043
36,398
46,123
35,259
NZD New Zealand dollars
1,575
1,628
43
46
JPY Japanese yen
1,993
2,159
1,993
2,159
CHF Swiss francs
1,039
954
-
-
GBP Pounds sterling
2,230
5,261
2,230
5,261
HKD Hong Kong dollars
1,407
771
1,407
771
Other Chinese yuan and Singapore dollars
1,014
1,113
987
1,077
Total debt issued
116,014
93,734
98,213
75,828
SUBORDINATED DEBT
At 30 September 2023, all subordinated debt issued by ANZBGL (other than its USD 300 million perpetual subordinated notes) qualifies as regulatory
capital for the Group. Depending on their terms and conditions, the subordinated debt instruments issued by ANZBGL are classified as either
Additional Tier 1 (AT1) capital for the Group (in the case of the ANZ Capital Notes (ANZ CN) and ANZ Capital Securities (ANZ CS)) or Tier 2 capital for
the Group (in the case of the term subordinated notes) for APRA’s capital adequacy purposes.
Subordinated debt issued externally by ANZ Bank New Zealand will constitute subordinated debt of both ANZ Bank New Zealand and the Group.
Whilst it will constitute tier 2 capital for ANZ Bank New Zealand for the purposes of the Reserve Bank of New Zealand’s (RBNZ) capital requirements, it
will not constitute Tier 2 capital for the Group as the terms of the subordinated debt does not satisfy APRA’s capital requirements.
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132
16. DEBT ISSUANCES (continued)
AT1 Capital
All outstanding AT1 capital instruments issued by ANZBGL are Basel III fully compliant instruments (refer to Note 24 Capital Management for further
information about Basel III) for APRA’s capital adequacy purposes. Each of the ANZ CN and ANZ CS rank equally with each other.
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZGHL’s ordinary shares.
Where specified, the AT1 capital instruments provide the issuer with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). This redemption option is subject to APRA’s prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZGHL’s ordinary shares (based on the average market price
of the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZGHL’s ordinary shares) if:
•
The Group’s or ANZBGL’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
•
APRA notifies ANZBGL that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent support), it
considers that ANZBGL would become non-viable – known as a Non-Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZGHL’s ordinary shares (based on the average market price
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.
If the AT1 capital securities convert, and the holders receive ANZGHL ordinary shares, then:
•
the AT1 capital securities are transferred to ANZGHL for their face value;
•
ANZBGL shall redeem the securities and simultaneously issue ordinary shares to its parent ANZ BH Limited (based on ANZBGL’s share price
calculated by reference to its consolidated net assets, subject to a maximum conversion number); and
•
ANZ BH Limited will issue shares to ANZGHL (calculated on the same basis for ANZ BH Limited).
Preference shares issued externally by ANZ Bank New Zealand will constitute additional tier 1 capital for ANZ Bank New Zealand for the purposes of
the RBNZ’s capital requirements, however they will not constitute Additional Tier 1 capital for the Group as the terms of the preference shares do not
satisfy APRA’s capital requirements. The preference shares are included within non-controlling interests in Note 23 Shareholders’ Equity.
The tables below show the key details of the ANZBGL’s AT1 capital instruments on issue at 30 September in both the current and prior years:
Consolidated The Company
2023 2022 2023 2022
$m $m $m $m
ANZBGL's Additional Tier 1 capital (perpetual subordinated securities)
1
ANZ Capital Notes (ANZ CN)
AUD 970m ANZ CN3
2
-
970
-
985
AUD 1,622m ANZ CN4
1,621
1,619
1,621
1,619
AUD 931m ANZ CN5
929
928
929
928
AUD 1,500m ANZ CN6
1,489
1,487
1,489
1,487
AUD 1,310m ANZ CN7
1,298
1,297
1,298
1,297
AUD 1,500m ANZ CN8
1,483
-
1,481
-
ANZ Capital Securities (ANZ CS)
USD 1,000m ANZ Capital Securities
1,412
1,404
1,469
1,447
Total ANZBGL Additional Tier 1 capital
3
8,232
7,705
8,287
7,763
1.
Carrying values are net of issuance costs.
2.
All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
3.
This forms part of the Group’s qualifying Additional Tier 1 capital. Refer to Note 24 Capital Management for further details.
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16. DEBT ISSUANCES (continued)
ANZ Capital Notes (ANZ CN)
CN3 CN4 CN5
Issuer
ANZBGL, acting through its
New Zealand branch
ANZBGL ANZBGL
Issue date
5 March 2015 27 September 2016 28 September 2017
Issue amount
$970 million $1,622 million $931 million
Face value
$100 $100 $100
Distribution frequency
Semi-annually in arrears Quarterly in arrears Quarterly in arrears
Distribution rate
Floating rate: (180 day Bank
Bill rate +3.6%)x(1-Australian
corporate tax rate)
Floating rate: (90 day Bank
Bill rate +4.7%)x(1-Australian
corporate tax rate)
Floating rate: (90 day Bank
Bill rate +3.8%)x(1-Australian
corporate tax rate)
Issuer’s early redemption or conversion option
24 March 2023
1
20 March 2024 20 March 2025
Mandatory conversion date
24 March 2025
2
20 March 2026 20 March 2027
Common equity capital trigger event
Yes Yes Yes
Non-viability trigger event
Yes Yes Yes
Carrying value (net of issue costs)
nil $1,621 million $929 million
(2022: $970 million) (2022: $1,619 million) (2022: $928 million)
CN6 CN7 CN8
Issuer
ANZBGL ANZBGL ANZBGL
Issue date
8 July 2021 24 March 2022 24 March 2023
Issue amount
$1,500 million $1,310 million $1,500 million
Face value
$100 $100 $100
Distribution frequency
Quarterly in arrears Quarterly in arrears Quarterly in arrears
Distribution rate
Floating rate: (90 day Bank
Bill rate +3.0%)x(1-Australian
corporate tax rate)
Floating rate: (90 day Bank
Bill rate +2.7%)x(1-Australian
corporate tax rate)
Floating rate: (90 day Bank Bill
rate +2.75%)x(1-Australian
corporate tax rate)
Issuer’s early redemption or conversion option
20 March 2028 20 March 2029 20 March 2030
Mandatory conversion date
20 September 2030 20 September 2031 20 September 2032
Common equity capital trigger event
Yes Yes Yes
Non-viability trigger event
Yes Yes Yes
Carrying value (net of issue costs)
$1,489 million $1,298 million $1,483 million
(2022: $1,487 million) (2022: $1,297 million) (2022: nil)
1.
All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
2.
The mandatory conversion date is no longer applicable as all of CN3 have been redeemed.
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134
16. DEBT ISSUANCES (continued)
ANZ Capital Securities (ANZ CS)
Issuer
ANZBGL, acting through its London branch
Issue date
15 June 2016
Issue amount
USD 1,000 million
Face value
Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that
Interest frequency
Semi-annually in arrears
Interest rate
Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary
to a floating rate: 5 year USD mid-market swap rate + 5.168%
Issuer’s early redemption option
15 June 2026 and each 5 year anniversary
Common equity capital trigger event
Yes
Non-viability trigger event
Yes
Carrying value (net of issue costs)
$1,412 million (2022: $1,404 million)
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16. DEBT ISSUANCES
(continued)
TIER 2 CAPITAL
Convertible term subordinated notes issued by ANZBGL are Basel III fully compliant instruments for APRA’s capital adequacy purposes. If a Non-
Viability Trigger Event occurs, each of the convertible term subordinated notes will immediately convert into ANZGHL ordinary shares (based on the
average market price of the ANZGHL shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number).
If the Tier 2 capital securities convert, and the holders receive ANZGHL ordinary shares, then ANZBGL shall issue ordinary shares to its parent ANZ BH
Limited (based on ANZBGL’s share price calculated by reference to its consolidated net assets, subject to a maximum conversion number) and ANZ
BH Limited will issue shares to ANZGHL (calculated on the same basis).
The table below shows the Tier 2 capital subordinated debt issued by ANZBGL at 30 September in both the current and prior year:
Consolidated The Company
Next optional call date – Interest
2023 2022 2023 2022
Currency Face value Maturity subject to APRA’s prior approval rate
$m $m $m $m
ANZBGL Tier 2 capital (term subordinated notes)
USD 800m 2024 N/A Fixed
1,220
1,189
1,220
1,189
JPY 20,000m 2026 N/A Fixed
207
213
207
213
USD 1,500m 2026 N/A Fixed
2,125
2,113
2,125
2,113
JPY 10,000m 2028 2023 Fixed
-
106
-
106
AUD 225m 2032 2027 Fixed
225
225
225
225
AUD 1,750m 2029 2024 Floating
1,750
1,750
1,750
1,750
EUR 1,000m 2029 2024 Fixed
1,555
1,410
1,555
1,410
AUD 265m 2039 N/A Fixed
170
179
170
179
USD 1,250m 2030 2025 Fixed
1,808
1,785
1,808
1,785
AUD 1,250m 2031 2026 Floating
1,250
1,250
1,250
1,250
USD 1,500m 2035 2030 Fixed
1,786
1,830
1,786
1,830
AUD 330m 2040 N/A Fixed
202
214
202
214
AUD 195m 2040 N/A Fixed
117
124
117
124
EUR 750m 2031 2026 Fixed
1,104
1,003
1,104
1,003
GBP 500m 2031 2026 Fixed
830
714
830
714
AUD 1,450m 2032 2027 Fixed
1,400
1,390
1,400
1,390
AUD 300m 2032 2027 Floating
300
300
300
300
JPY 59,400m 2032 2027 Fixed
606
627
606
627
SGD 600m 2032 2027 Fixed
659
618
659
618
AUD 900m 2034 2029 Fixed
871
867
871
867
USD 1,250m 2032 N/A Fixed
1,803
-
1,803
-
EUR 1,000m 2033 2028 Fixed
1,594
-
1,594
-
AUD 1,000m 2038 2033 Fixed
975
-
975
-
AUD 275m 2033 2028 Fixed
275
-
275
-
AUD 875m 2033 2028 Floating
875
-
875
-
Total ANZBGL Tier 2 capital
1,2
23,707
17,907
23,707
17,907
1.
Carrying values are net of issuance costs, and, where applicable, include fair value hedge accounting adjustments.
2.
This forms part of the Group’s qualifying Tier 2 capital. Refer to Note 24 Capital Management for further details.
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136
16. DEBT ISSUANCES (continued)
OTHER SUBORDINATED DEBT SECURITIES
The term subordinated notes issued by ANZ Bank New Zealand constitute tier 2 capital under RBNZ requirements. However, they do not (among
other things) contain a Non-Viability Trigger Event and therefore do not meet APRA’s requirements for Tier 2 capital instruments in order to qualify as
regulatory capital for the Group.
Consolidated The Company
Interest
2023 2022 2023 2022
Currency Face value Maturity Next optional call date
1
rate $m $m $m $m
Non-Basel III compliant perpetual subordinated notes issued by ANZBGL
2
USD 300m Perpetual
Each semi-annual interest payment
date
Floating
464
462
464
462
Term subordinated notes issued by ANZ Bank New Zealand Limited
NZD 600m 2031 2026 Fixed
555
524
-
-
USD 500m 2032 2027 Fixed
720
730
-
-
Other subordinated debt
1,739
1,716
464
462
1.
Subject to APRA’s or RBNZ’s prior approval (as applicable).
2.
The USD 300 million perpetual subordinated notes were redeemed by ANZBGL on 31 October 2023.
RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at FVTPL.
Interest expense on debt issuances is recognised using the effective interest rate method. Where the Group enters into a fair value hedge
accounting relationship, the fair value attributable to the hedged risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are
considered to contain embedded derivatives that we account for separately at FVTPL. The embedded derivatives arise because the
amount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they
have no significant value as of the reporting date given the remote nature of those trigger events.
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17. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Group’s businesses of providing banking and other financial services to our customers. The
associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group’s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governance
and Risk Management sections of this Annual Report.
This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
Key material financial risks Key sections applicable to this risk
Credit risk
The risk of financial loss resulting from:
•
a counterparty failing to fulfil its obligations; or
•
a decrease in credit quality of a counterparty resulting in a
financial loss.
Credit risk incorporates the risks associated with us lending to
customers who could be impacted by climate change, changes to
laws, regulations, or other policies adopted by governments or
regulatory authorities. Climate change impacts include both
physical risks (climate- or weather-related events) and transition
risks resulting from the adjustment to a low emissions
economy. Transition risks include resultant changes to laws,
regulations and policies noted above.
•
Credit risk overview, management and control responsibilities
•
Maximum exposure to credit risk
•
Credit quality
•
Concentrations of credit risk
•
Collateral management
Market risk
The risk to the Group’s earnings arising from:
•
changes in interest rates, foreign exchange rates, credit spreads,
volatility and correlations; or
•
fluctuations in bond, commodity or equity prices.
•
Market risk overview, management and control responsibilities
•
Measurement of market risk
•
Traded and non-traded market risk
•
Equity securities designated at FVOCI
•
Foreign currency risk – structural exposure
Liquidity and funding risk
The risk that the Group is unable to meet payment obligations as
they fall due, including:
•
repaying depositors or maturing wholesale debt; or
•
the Group having insufficient capacity to fund increases in
assets.
•
Liquidity risk overview, management and control responsibilities
•
Key areas of measurement for liquidity risk
•
Liquidity risk outcomes
•
Residual contractual maturity analysis of the Group’s liabilities
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138
17. FINANCIAL RISK MANAGEMENT (continued)
OVERVIEW
AN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORK
This overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures. It should be read in conjunction with the Governance and Risk Management sections of this Annual Report.
The Board is responsible for establishing and overseeing the Group’s Risk Management Framework (RMF). The Board has delegated authority to the
Board Risk Committee (BRC) to develop and monitor compliance with the Group’s risk management policies. The BRC reports regularly to the Board
on its activities.
The Board approves the strategic objectives of the Group including:
•
the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that the Group is prepared to accept in
pursuit of its strategic objectives and business plan; and
•
the Risk Management Strategy (RMS), which describes the Group’s strategy for managing risks and the key elements of the RMF that give effect to
this strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference to the relevant
policies, standards and procedures. It also includes information on how the Group identifies, measures, evaluates, monitors, reports and controls or
mitigates material risks.
The Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment in which
all employees understand their roles and obligations. At ANZ, risk is everyone’s responsibility.
The Group has an independent risk management function, headed by the Chief Risk Officer who:
•
is responsible for overseeing the risk profile and the risk management framework;
•
can effectively challenge activities and decisions that materially affect the Group’s risk profile; and
•
has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
The Internal Audit Function reports directly to the Board Audit Committee (BAC). Internal Audit provides:
•
an independent evaluation of the Group’s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management
framework;
•
facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk
management framework; and
•
recommendations to improve the framework and/or work practices to strengthen the effectiveness of day-to-day operations.
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17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group’s major sources of income. As this activity is also a principal risk, the Group dedicates
considerable resources to its management. The Group assumes credit risk in a wide range of lending and other activities in diverse markets and in
many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and capital markets
activities around the world.
Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit
risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
•
sets the credit risk appetite and credit strategies; and
•
approves credit transactions beyond the discretion of executive management.
We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistent
framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
Probability of Default (PD) Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability
to service and repay debt.
Exposure at Default (EAD) The expected balance sheet exposure at default taking into account repayments of principal and
interest, expected additional drawdowns and accrued interest at the time of default.
Loss Given Default (LGD) Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the
percentage of loan covered by security which the Group can realise if a customer defaults. The A-G
scale is supplemented by a range of other SIs which cover factors such as cash cover and sovereign
backing. For retail and some small business lending, we group exposures into large homogenous pools
– and the LGD is assigned at the pool level.
Our specialist credit risk teams develop and validate the Group’s PD and LGD rating models. The outputs from these models drive our day-to-day
credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and credit
provisioning.
All customers with whom the Group has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
Large and more complex lending Retail and some small business lending
Rating models provide a consistent and structured assessment, with
judgement required around the use of out-of-model factors. We
handle credit approval on a dual approval basis, jointly with the
business writer and an independent credit officer.
Automated assessment of credit applications using a combination of
scoring (application and behavioural), policy rules and external credit
reporting information. If the application does not meet the automated
assessment criteria, then it is subject to manual assessment.
We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped to
external rating agency scales as follows:
Credit Quality
Description Internal CCR ANZ 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
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140
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
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 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
2023 2022 2023 2022 2023 2022
Consolidated
$m $m $m $m $m $m
On-balance sheet positions
Net loans and advances 707,694
672,407
-
-
707,694
672,407
Other financial assets:
Cash and cash equivalents
168,154
168,132
1,070
1,147
167,084
166,985
Settlement balances owed to ANZ
9,349
4,762
9,349
4,762
-
-
Collateral paid
8,558
12,700
-
-
8,558
12,700
Trading assets
37,004
35,237
4,881
3,860
32,123
31,377
Derivative financial instruments
60,406
90,174
-
-
60,406
90,174
Investment securities
- debt securities at amortised cost
7,752
7,943
-
-
7,752
7,943
- debt securities at FVOCI
88,271
76,817
-
-
88,271
76,817
- equity securities at FVOCI
946
1,353
946
1,353
-
-
- debt securities at FVTPL
-
40
-
-
-
40
Regulatory deposits
646
632
-
-
646
632
Other financial assets
2
4,378
2,943
-
-
4,378
2,943
Total other financial assets
385,464
400,733
16,246
11,122
369,218
389,611
Subtotal 1,093,158
1,073,140
16,246
11,122
1,076,912
1,062,018
Off-balance sheet positions
Undrawn and contingent facilities
3
290,055
285,041
-
-
290,055
285,041
Total
1,383,213
1,358,181
16,246
11,122
1,366,967
1,347,059
1.
Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2.
Other financial assets mainly comprise accrued interest and acceptances.
3.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
140
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17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Reported Excluded
1
Maximum exposure
to credit risk
2023 2022 2023 2022 2023 2022
The Company
$m $m $m $m $m $m
On-balance sheet positions
Net loans and advances 563,017
537,345
-
-
563,017
537,345
Other financial assets:
Cash and cash equivalents
154,408
155,483
667
787
153,741
154,696
Settlement balances owed to ANZ
8,935
4,024
8,935
4,024
-
-
Collateral paid
7,717
11,368
-
-
7,717
11,368
Trading assets
30,693
28,073
4,472
3,348
26,221
24,725
Derivative financial instruments
59,989
88,056
-
-
59,989
88,056
Investment securities
- debt securities at amortised cost
5,936
6,115
-
-
5,936
6,115
- debt securities at FVOCI
76,320
65,257
-
-
76,320
65,257
- equity securities at FVOCI
945
1,027
945
1,027
-
-
Regulatory deposits
284
249
-
-
284
249
Due from controlled entities
26,067
22,860
-
-
26,067
22,860
Other financial assets
2
3,024
1,882
-
-
3,024
1,882
Total other financial assets 374,318
384,394
15,019
9,186
359,299
375,208
Subtotal 937,335
921,739
15,019
9,186
922,316
912,553
Off-balance sheet positions
Undrawn and contingent facilities
3
252,415
246,722
-
-
252,415
246,722
Total 1,189,750
1,168,461
15,019
9,186
1,174,731
1,159,275
1.
Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures, and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2.
Other financial assets mainly comprise accrued interest and acceptances.
3.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
141
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142
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
CREDIT QUALITY
An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal credit quality rating by stage without
taking account of the effects of any collateral or other credit enhancements:
Net loans and advances
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Consolidated $m $m $m $m $m
As at 30 September 2023
Strong
411,583 17,063 - - 428,646
Satisfactory
193,170 37,977 - - 231,147
Weak
11,306 10,398 - - 21,704
Defaulted
- - 3,858 1,037 4,895
Gross loans and advances at amortised cost 616,059 65,438 3,858 1,037 686,392
Allowance for ECL
(1,227) (1,624) (329) (366) (3,546)
Net loans and advances at amortised cost
614,832 63,814 3,529 671 682,846
Coverage ratio 0.20% 2.48% 8.53% 35.29% 0.52%
Loans and advances at FVTPL
21,888
Unearned income
(515)
Capitalised brokerage and other origination costs
3,475
Net carrying amount
707,694
As at 30 September 2022
Strong 443,571 15,880 - - 459,451
Satisfactory 154,823 31,864 - - 186,687
Weak 9,197 9,244 - - 18,441
Defaulted - - 3,328 1,043 4,371
Gross loans and advances at amortised cost
607,591 56,988 3,328 1,043 668,950
Allowance for ECL (1,141) (1,548) (360) (533) (3,582)
Net loans and advances at amortised cost
606,450 55,440 2,968 510 665,368
Coverage ratio
0.19% 2.72% 10.82% 51.10% 0.54%
Loans and advances at FVTPL 4,675
Unearned income (518)
Capitalised brokerage and other origination costs 2,882
Net carrying amount
672,407
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17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Net loans and advances
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed
Total
The Company $m $m $m $m $m
As at 30 September 2023
Strong
315,206 11,682 - - 326,888
Satisfactory
160,357 31,769 - - 192,126
Weak
10,906 8,362 - - 19,268
Defaulted
- - 2,994 731 3,725
Gross loans and advances at amortised cost 486,469 51,813 2,994 731 542,007
Allowance for ECL
(1,026) (1,239) (251) (279) (2,795)
Net loans and advances at amortised cost 485,443 50,574 2,743 452 539,212
Coverage ratio 0.21% 2.39% 8.38% 38.17% 0.52%
Loans and advances at FVTPL
21,240
Unearned income
(483)
Capitalised brokerage and other origination costs
3,048
Net carrying amount 563,017
As at 30 September 2022
Strong 334,850 9,641 - - 344,491
Satisfactory 142,772 26,186 - - 168,958
Weak 9,181 7,759 - - 16,940
Defaulted - - 2,744 853 3,597
Gross loans and advances at amortised cost
486,803 43,586 2,744 853 533,986
Allowance for ECL (946) (1,259) (295) (425) (2,925)
Net loans and advances at amortised cost
485,857 42,327 2,449 428 531,061
Coverage ratio
0.19% 2.89% 10.75% 49.82% 0.55%
Loans and advances at FVTPL 4,263
Unearned income (480)
Capitalised brokerage and other origination costs 2,501
Net carrying amount
537,345
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17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Consolidated $m $m $m $m $m
As at 30 September 2023
Strong
189,980 1,234 - - 191,214
Satisfactory
30,007 4,276 - - 34,283
Weak
975 746 - - 1,721
Defaulted
- - 79 47 126
Gross undrawn and contingent facilities subject to ECL
220,962 6,256 79 47 227,344
Allowance for ECL included in Other provisions (refer to Note 22)
(630) (162) (25) (10) (827)
Net undrawn and contingent facilities subject to ECL
220,332 6,094 54 37 226,517
Coverage ratio 0.29% 2.59% 31.65% 21.28% 0.36%
Undrawn and contingent facilities not subject to ECL
1
63,538
Net undrawn and contingent facilities 290,055
As at 30 September 2022
Strong 191,363 1,703 - - 193,066
Satisfactory 18,583 3,078 - - 21,661
Weak 774 706 - - 1,480
Defaulted - - 113 19 132
Gross undrawn and contingent facilities subject to ECL
210,720 5,487 113 19 216,339
Allowance for ECL included in Other provisions (refer to Note 22) (593) (144) (29) (9) (775)
Net undrawn and contingent facilities subject to ECL
210,127 5,343 84 10 215,564
Coverage ratio
0.28% 2.62% 25.66% 47.37% 0.36%
Undrawn and contingent facilities not subject to ECL
1
69,477
Net undrawn and contingent facilities
285,041
1.
Commitments that can be unconditionally cancelled at any time without notice.
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17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed
Total
The Company $m $m $m $m $m
As at 30 September 2023
Strong
167,251 1,065 - - 168,316
Satisfactory
25,966 3,554 - - 29,520
Weak
753 466 - - 1,219
Defaulted
- - 64 35 99
Gross undrawn and contingent facilities subject to ECL 193,970 5,085 64 35 199,154
Allowance for ECL included in Other provisions (refer to Note 22)
(550) (121) (21) (5) (697)
Net undrawn and contingent facilities subject to ECL
193,420 4,964 43 30 198,457
Coverage ratio 0.28% 2.38% 32.81% 14.29% 0.35%
Undrawn and contingent facilities not subject to ECL
1
53,958
Net undrawn and contingent facilities 252,415
As at 30 September 2022
Strong 185,979 1,725 - - 187,704
Satisfactory 15,496 2,306 - - 17,802
Weak 711 463 - - 1,174
Defaulted - - 97 13 110
Gross undrawn and contingent facilities subject to ECL
202,186 4,494 97 13 206,790
Allowance for ECL included in Other provisions (refer to Note 22) (530) (112) (26) (5) (673)
Net undrawn and contingent facilities subject to ECL
201,656 4,382 71 8 206,117
Coverage ratio
0.26% 2.49% 26.80% 38.46% 0.33%
Undrawn and contingent facilities not subject to ECL
1
40,605
Net undrawn and contingent facilities
246,722
1.
Commitments that can be unconditionally cancelled at any time without notice.
145
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Overview
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Governance
Performance
overview
Remuneration
report
Directors’
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Financial
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ANZ 2023 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (continued)
146
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at amortised cost
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed
Total
Consolidated $m $m $m $m $m
As at 30 September 2023
Strong
6,117 - - - 6,117
Satisfactory
112 - - - 112
Weak
1,558 - - - 1,558
Gross investment securities - debt securities at amortised cost
7,787 - - - 7,787
Allowance for ECL
(35) - - - (35)
Net investment securities - debt securities at amortised cost
7,752 - - - 7,752
Coverage ratio 0.45% - - - 0.45%
As at 30 September 2022
Strong 6,279 - - - 6,279
Satisfactory 113 - - - 113
Weak 1,589 - - - 1589
Gross investment securities - debt securities at amortised cost
7,981 - - - 7,981
Allowance for ECL (38) - - - (38)
Net investment securities - debt securities at amortised cost
7,943 - - - 7,943
Coverage ratio
0.48% - - - 0.48%
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed
Total
The Company $m $m $m $m $m
As at 30 September 2023
Strong
5,796 - - - 5,796
Satisfactory
97 - - - 97
Weak
44 - - - 44
Gross investment securities - debt securities at amortised cost
5,937 - - - 5,937
Allowance for ECL
(1) - - - (1)
Net investment securities - debt securities at amortised cost 5,936 - - - 5,936
Coverage ratio 0.02% - - - 0.02%
As at 30 September 2022
Strong 6,032 - - - 6,032
Satisfactory 84 - - - 84
Gross investment securities - debt securities at amortised cost
6,116 - - - 6,116
Allowance for ECL (1) - - - (1)
Net investment securities - debt securities at amortised cost
6,115 - - - 6,115
Coverage ratio
0.02% - - - 0.02%
146
Australia and New Zealand Banking Group Limited 2023 Annual ReportNotes to the financial statements (continued)
Overview
Operating
environment
Governance
Performance
overview
Remuneration
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Directors’
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Financial
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NOTES TO THE FINANCIAL STATEMENTS
147
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at FVOCI
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed
Total
Consolidated $m $m $m $m $m
As at 30 September 2023
Strong
88,271 - - - 88,271
Satisfactory
- - - -
Investment securities - debt securities at FVOCI
88,271 - - - 88,271
Allowance for ECL recognised in Other comprehensive income
(15) - - - (15)
Coverage ratio
0.02% - - - 0.02%
As at 30 September 2022
Strong 76,668 - - - 76,668
Satisfactory 149 - - - 149
Investment securities - debt securities at FVOCI
76,817 - - - 76,817
Allowance for ECL recognised in Other comprehensive income (10) - - - (10)
Coverage ratio
0.01% - - - 0.01%
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
The Company $m $m $m $m $m
As at 30 September 2023
Strong
76,320 - - - 76,320
Satisfactory
- - - - -
Investment securities - debt securities at FVOCI
76,320 - - - 76,320
Allowance for ECL recognised in Other comprehensive income
(12) - - - (12)
Coverage ratio
0.02% - - - 0.02%
As at 30 September 2022
Strong 65,257 - - - 65,257
Satisfactory - - - - -
Investment securities - debt securities at FVOCI
65,257 - - - 65,257
Allowance for ECL recognised in Other comprehensive income (7) - - - (7)
Coverage ratio
0.01% - - - 0.01%
147
Australia and New Zealand Banking Group Limited 2023 Annual ReportNotes to the financial statements (continued)
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ANZ 2023 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (continued)
148
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Other financial assets
Consolidated
The Company
2023 2022 2023 2022
$m $m $m $m
Strong
270,012
301,735
274,741
301,771
Satisfactory
1
2,579
2,164
2,022
1,707
Weak
604
945
280
351
Defaulted
-
7
-
7
Total carrying amount
273,195
304,851
277,043
303,836
1.
Includes Investment Securities - debt securities at FVTPL of $nil (2022: $40 million) for the Group and $nil (2022: $nil) for the Company..
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Group
monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Group also applies single customer counterparty limits to
protect against unacceptably large exposures to one single customer.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans Other financial
Off-balance sheet
credit related
and advances assets commitments Total
Consolidated
2023 2022 2023 2022 2023 2022 2023 2022
$m $m $m $m $m $m $m $m
Agriculture, forestry, fishing and mining
35,797
33,668
612
781
16,707
17,694
53,116
52,143
Business services
8,138
9,252
207
242
7,003
6,245
15,348
15,739
Construction
5,506
6,155
36
48
7,212
6,594
12,754
12,797
Electricity, gas and water supply
8,626
9,650
463
790
11,837
9,865
20,926
20,305
Entertainment, leisure and tourism
13,486
12,886
78
89
3,889
3,691
17,453
16,666
Financial, investment and insurance
77,454
75,118
278,218
305,148
62,409
58,075
418,081
438,341
Government and official institutions
8,300
7,280
80,544
71,139
1,075
1,592
89,919
80,011
Manufacturing
30,261
28,072
1,287
1,279
47,302
46,701
78,850
76,052
Personal lending
392,702
363,539
1,394
955
59,185
57,989
453,281
422,483
Property services
58,064
55,203
439
606
17,503
17,862
76,006
73,671
Retail trade
12,900
11,648
113
98
8,131
7,076
21,144
18,822
Transport and storage
12,110
12,311
369
327
9,215
8,423
21,694
21,061
Wholesale trade
12,538
15,215
660
1,235
25,783
28,042
38,981
44,492
Other
32,398
33,628
4,833
6,912
13,631
15,967
50,862
56,507
Gross total
708,280
673,625
369,253
389,649
290,882
285,816
1,368,415
1,349,090
Allowance for ECL
(3,546)
(3,582)
(35)
(38)
(827)
(775)
(4,408)
(4,395)
Subtotal 704,734
670,043
369,218
389,611
290,055
285,041
1,364,007
1,344,695
Unearned income
(515)
(518)
-
-
-
-
(515)
(518)
Capitalised brokerage and other origination costs
3,475
2,882
-
-
-
-
3,475
2,882
Maximum exposure to credit risk
707,694
672,407
369,218
389,611
290,055
285,041
1,366,967
1,347,059
148
Australia and New Zealand Banking Group Limited 2023 Annual ReportNotes to the financial statements (continued)
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Financial
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NOTES TO THE FINANCIAL STATEMENTS
149
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans Other financial
Off-balance sheet
credit related
and advances assets commitments Total
The Company
2023 2022 2023 2022 2023 2022 2023 2022
$m $m $m $m $m $m $m $m
Agriculture, forestry, fishing and mining
20,622
19,065
586
751
15,198
16,304
36,406
36,120
Business services
7,165
8,382
183
202
6,237
5,517
13,585
14,101
Construction
4,545
5,004
30
42
6,038
5,376
10,613
10,422
Electricity, gas and water supply
7,956
8,820
302
533
10,409
8,526
18,667
17,879
Entertainment, leisure and tourism
11,721
11,267
67
58
3,390
3,192
15,178
14,517
Financial, investment and insurance
74,836
71,889
282,701
306,318
58,806
53,970
416,343
432,177
Government and official institutions
8,294
7,272
68,361
58,342
384
910
77,039
66,524
Manufacturing
26,394
24,645
935
664
40,027
39,279
67,356
64,588
Personal lending
303,801
282,095
1,347
912
47,961
47,596
353,109
330,603
Property services
44,903
42,592
368
531
15,794
15,640
61,065
58,763
Retail trade
11,099
10,048
85
74
7,342
6,279
18,526
16,401
Transport and storage
10,968
11,231
288
270
8,331
7,252
19,587
18,753
Wholesale trade
10,320
13,055
480
791
22,385
24,185
33,185
38,031
Other
20,623
22,884
3,567
5,721
10,810
13,369
35,000
41,974
Gross total 563,247
538,249
359,300
375,209
253,112
247,395
1,175,659
1,160,853
Allowance for ECL
(2,795)
(2,925)
(1)
(1)
(697)
(673)
(3,493)
(3,599)
Subtotal 560,452
535,324
359,299
375,208
252,415
246,722
1,172,166
1,157,254
Unearned income
(483)
(480)
-
-
-
-
(483)
(480)
Capitalised brokerage and other origination
costs
3,048
2,501
-
-
-
-
3,048
2,501
Maximum exposure to credit risk
563,017
537,345
359,299
375,208
252,415
246,722
1,174,731
1,159,275
COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there is
sufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers is
fundamental to the product’s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables is
typically repaid by the collection of those receivables. During the period there was no change in our collateral policies.
149
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ANZ 2023 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (continued)
150
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
The nature of collateral or security held for the relevant classes of financial assets is as follows:
Net loans and advances
Loans - housing and
personal
Housing loans are secured by mortgage(s) over property and additional security may take the form of
guarantees and deposits.
Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take security, then
it is restricted to eligible vehicles, motor homes and other assets.
Loans - business Business loans may be secured, partially secured or unsecured. Typically, we take security by way of a
mortgage over property and/or a charge over the business or other assets.
If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters of
credit or derivative protection.
Other financial assets
Trading assets, Investment
securities, Derivatives and
Other financial assets
For trading assets, we do not seek collateral directly from the issuer or counterparty. However, the collateral
may be implicit in the terms of the instrument (for example, with an asset-backed security). The terms of
debt securities may include collateralisation.
For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at market
levels current at the time of a counterparty default under International Swaps and Derivatives Association
(ISDA) Master Agreements.
Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative positions
with the counterparty are aggregated and cash collateral (or other forms of eligible collateral) is exchanged
daily. The collateral is provided by the counterparty when their position is out of the money (or provided to
the counterparty by ANZ when our position is out of the money).
Off-balance sheet positions
Undrawn and contingent
facilities
Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically
performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured by
mortgages over residential property and business lending secured by commercial real estate and/or charges
over business assets.
The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:
Maximum exposure to credit risk Total value of collateral
Unsecured portion of
credit exposure
2023 2022 2023 2022 2023 2022
Consolidated
$m $m $m $m $m $m
Net loans and advances
707,694
672,407
569,283
531,815
138,411
140,592
Other financial assets
369,218
389,611
38,612
24,758
330,606
364,853
Off-balance sheet positions
290,055
285,041
65,723
60,544
224,332
224,497
Total
1,366,967
1,347,059
673,618
617,117
693,349
729,942
Maximum exposure to credit risk Total value of collateral
Unsecured portion of
credit exposure
2023 2022 2023 2022 2023 2022
The Company
$m $m $m $m $m $m
Net loans and advances
563,017
537,345
436,544
407,610
126,473
129,735
Other financial assets
359,299
375,208
35,542
19,492
323,757
355,716
Off-balance sheet positions
252,415
246,722
50,880
38,618
201,535
208,104
Total
1,174,731
1,159,275
522,966
465,720
651,765
693,555
150
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NOTES TO THE FINANCIAL STATEMENTS
151
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlations between interest
rates, foreign exchange rates, credit spreads, commodities, equities and the volatility within these asset classes.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit and Market
Risk Committee (CMRC) and the Group Asset and Liability Committee (GALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at various
levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk factors
and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
Traded Market Risk Non-Traded Market Risk
Risk of loss from changes in the value of financial instruments due
to movements in price factors for both physical and derivative
trading positions. Principal risk categories monitored are:
1. Currency risk – potential loss arising from changes in foreign
exchange rates or their implied volatilities.
2. Interest rate risk – potential loss from changes in market interest
rates or their implied volatilities.
3. Credit spread risk – potential loss arising from a movement in
margin or spread relative to a benchmark.
4. Commodity risk – potential loss arising from changes in
commodity prices or their implied volatilities.
5. Equity risk – potential loss arising from changes in equity prices.
Risk of loss associated with the management of non-traded interest rate risk,
liquidity risk and foreign exchange exposures. This includes interest rate risk
in the banking book. This risk of loss arises from adverse changes in the
overall and relative level of interest rates for different tenors, differences in
the actual versus expected net interest margin, and the potential valuation
risk associated with embedded options in financial instruments and bank
products.
MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Group’s possible daily loss based on historical market movements. The Group’s VaR approach for both traded and non-traded risk is
historical simulation. We use historical changes in market rates, prices and volatilities over a 500 business day window using a one-day holding period.
Back testing is used to ensure our VaR models remain accurate.
ANZ measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant holding period.
151
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ANZ 2023 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (continued)
152
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:
2023 2022
Consolidated
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
$m $m $m $m $m $m $m $m
Traded value at risk 99% confidence
Foreign exchange
2.8 6.2 1.6 3.0
1.8 4.8 1.1 2.4
Interest rate
6.7 18.3 5.1 8.5
7.9 22.7 5.0 9.5
Credit
5.9 7.7 2.5 4.5
2.6 11.8 1.6 4.9
Commodities
4.0 6.6 1.8 3.0
4.3 7.0 1.4 2.9
Equity
- - - -
- - - -
Diversification benefit
1
(9.7) n/a n/a (8.1)
(7.2) n/a n/a (7.1)
Total VaR 9.7 18.2 7.2 10.9
9.4 26.9 5.6 12.6
2023 2022
The Company
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
$m $m $m $m $m $m $m $m
Traded value at risk 99% confidence
Foreign exchange
2.6 6.0 1.5 2.8
2.0 5.1 0.9 2.4
Interest rate
6.3 15.5 4.8 8.0
6.7 18.6 4.9 8.8
Credit
5.6 7.1 1.9 4.3
2.0 11.9 1.3 4.7
Commodity
2.1 4.5 1.1 2.7
1.4 7.2 0.9 2.8
Equity
- - - -
- - - -
Diversification benefit
1
(8.6) n/a n/a (7.8)
(4.2) n/a n/a (7.4)
Total VaR
8.0 16.2 6.7 10.0
7.9 23.4 5.4 11.3
1.
The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
152
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NOTES TO THE FINANCIAL STATEMENTS
153
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Group’s banking book, while ensuring the Group maintains sufficient
liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group’s future Net interest income. This
risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of
capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the impact of a 1%
rate shock). The table below shows VaR figures for non-traded interest rate risk for the combined Group as well as Australia, New Zealand and Rest of
World geographies which are calculated separately.
2023 2022
Consolidated
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
$m $m $m $m $m $m $m $m
Non-traded value at risk 99% confidence
Australia
81.2 93.2 72.0 82.2
78.5 93.4 63.0 76.1
New Zealand
35.3 35.3 26.1 31.1
25.4 27.1 20.2 23.9
Rest of World
32.2 32.8 23.2 27.9
21.7 38.0 16.8 25.8
Diversification benefit
1
(52.6) n/a n/a (45.6)
(38.1) n/a n/a (33.7)
Total VaR
96.1 101.5 86.4 95.6
87.5 104.9 66.8 92.1
2023 2022
The Company
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
$m $m $m $m $m $m $m $m
Non-traded value at risk 99% confidence
Australia
81.2 93.2 72.0 82.2
78.5 93.4 63.0 76.1
New Zealand
- 0.1 - -
0.0 0.1 0.0 0.0
Rest of World
34.0 34.5 23.7 28.4
22.1 37.7 16.7 25.6
Diversification benefit
1
(30.5) n/a n/a (26.6)
(17.1) n/a n/a (20.2)
Total VaR 84.7 92.4 76.4 84.0
83.5 94.5 62.9 81.5
1.
The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
153
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NOTES TO THE FINANCIAL STATEMENTS (continued)
154
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
We undertake scenario analysis to stress test the impact of extreme events on the Group’s market risk exposures. We model a 1% overnight parallel
positive shift in the yield curve to determine the potential impact on our Net interest income over the next 12 months. This is a standard risk measure
which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported Net
interest income.
Consolidated The Company
2023 2022 2023 2022
Impact of 1% rate shock on the next 12 months' net interest income
As at period end
0.96%
1.29%
0.73%
0.90%
Maximum exposure
1.17%
2.08%
0.90%
1.65%
Minimum exposure
0.38%
1.15%
0.02%
0.71%
Average exposure (in absolute terms)
0.80%
1.56%
0.56%
1.11%
EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprises Bank of Tianjin. The market risk impact on these equity
investments is not captured by the Group’s VaR processes for traded and non-traded market risks. Therefore, the Group regularly reviews the
valuations of the investments within the portfolio and assesses whether the investments are appropriately measured based on the recognition and
measurement policies set out in Note 11 Investment Securities.
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian
Dollar - exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of
exchange differences are reflected in the foreign currency translation reserve in equity. Where considered appropriate, the Group enters into hedges
of the foreign exchange exposures from its foreign operations.
Similarly, the Group may enter into economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar,
US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on
the consolidated capital ratios are minimised.
154
Australia and New Zealand Banking Group Limited 2023 Annual ReportNotes to the financial statements (continued)
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
NOTES TO THE FINANCIAL STATEMENTS
155
17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Group is either:
• unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
• does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding risks are overseen by GALCO. The Group’s liquidity and funding risks are governed by a set of principles
approved by the BRC and include:
• maintaining the ability to meet all payment obligations in the immediate term;
• ensuring that the Group has the ability to meet ‘survival horizons’ under a range of ANZ specific, and general market, liquidity stress scenarios, at a
country and Group-wide level, to meet cash flow obligations over the short to medium term;
• maintaining strength in the Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
• ensuring the liquidity management framework is compatible with local regulatory requirements;
• preparing daily liquidity reports and scenario analysis to quantify the Group’s positions;
• targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
• holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
• establishing detailed contingency plans to cover different liquidity crisis events.
Following the Restructure on 3 January 2023, the Group has operated under a non-operating holding company structure whereby:
• ANZBGL’s liquidity risk management framework remains unchanged and continues to operate its own liquidity and funding program, governance
frameworks and reporting regime reflecting its authorised deposit-taking institution (ADI) operations;
• ANZGHL (parent entity) has no material liquidity risk given the structure and nature of the balance sheet; and
• ANZ Non-Bank Group is not expected to have separate funding arrangements and will rely on ANZGHL for funding.
A separate liquidity policy has been established for ANZGHL and ANZ Bank Group to reflect the differing nature of liquidity risk inherent in each
business model. ANZGHL will ensure that the parent entity and ANZ Non-Bank Group holds sufficient cash reserves to meet operating and financing
requirements.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISK
Scenario modelling of funding sources
Group’s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the ANZBGL Board. The metrics cover a
range of scenarios of varying duration and level of severity.
The objective of this framework is to:
• Provide protection against shorter term extreme market dislocation and stress.
• Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.
• Ensure that no undue timing concentrations exist in the Group’s funding profile.
Key components of this framework are the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario and Net Stable Funding
Ratio (NSFR) a longer term structural liquidity measure, both of which are mandated by banking regulators including APRA.
Liquid assets
Group holds a portfolio of high quality (unencumbered) liquid assets to protect Group’s liquidity position in a severely stressed environment and to
meet regulatory requirements. High quality liquid assets comprise three categories consistent with Basel III LCR requirements:
• Highest-quality liquid assets - cash and highest credit quality government, central bank or public sector securities eligible for repurchase with
central banks to provide same-day liquidity.
• High-quality liquid assets - high credit quality government, central bank or public sector securities, high quality corporate debt securities and high
quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
• Alternative liquid assets (ALA) - eligible securities that the RBNZ will accept in its domestic market operations and asset qualifying as collateral for
the CLF.
Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements and the
risk appetite set by the ANZBGL Board.
155
Australia and New Zealand Banking Group Limited 2023 Annual ReportNotes to the financial statements (continued)
Overview
Operating
environment
Governance
Performance
overview
Remuneration
report
Directors’
report
Financial
report
ANZ 2023 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (continued)
156
17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
LIQUIDITY RISK OUTCOMES
1
Liquidity Coverage Ratio - ANZBGL’s Liquidity Coverage Ratio (LCR) averaged 130% for 2023, (2022: 131%) and above the regulatory minimum of
100%.
Net Stable Funding Ratio - ANZBGL’s Net Stable Funding Ratio (NSFR) as at 30 September 2023 was 116% (2022: 119%), above the regulatory
minimum of 100%.
1.
This information is not within the scope of the external audit of the Group Financial Report by the Group’s external auditor, KPMG. The Liquidity Coverage Ratio and Net Stable Funding Ratio are non-IFRS
disclosures and are disclosed as part of the Group's
APS 330 Public Disclosure which is subject to specific review procedures in accordance with the Australian Standard on Related Services (ASRS) 4400
Agreed upon Procedures Engagements to Report Factual Findings.
Liquidity crisis contingency planning
Group maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country and
Group-wide level. Key liquidity contingency crisis planning requirements and guidelines include:
Ongoing business management Early signs/ mild stress Severe stress
• establish crisis/severity levels
• liquidity limits
• early warning indicators
• monitoring and review
• management actions not requiring
business rationalisation
• activate contingency funding plans
• management actions for altering asset and liability
behaviour
Assigned responsibility for internal and external communications and the appropriate timing to communicate
Since the precise nature of any stress event cannot be known in advance, we design the plans to be flexible to the nature and severity of the stress
event with multiple variables able to be accommodated in any plan.
Group funding
Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that an
appropriate proportion of the Group’s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding
(with a remaining term exceeding one year); and equity.
Funding plans prepared Considerations in preparing funding plans
• 3 year strategic plan prepared annually
• annual funding plan as part of the Group’s planning
process
• forecasting in light of actual results as a calibration to the
annual plan
• customer balance sheet growth
• changes in wholesale funding including: targeted funding volumes; markets;
investors; tenors; and currencies for senior, secured, subordinated, hybrid
transactions and market conditions
RBA Term Funding Facility
As an additional source of funding, in March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system to support lending to
Australian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25% for drawdowns up to 4 November 2020, and
reduced to 0.10% for new drawdowns from 4 November 2020 onwards. The TFF was
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