ANZ Bank New Zealand Disclosure Statement
Australia and New Zealand Banking Group Limited
9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522
8 November 2024
Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000
ANZ Bank New Zealand Limited
Registered Bank Disclosure Statement
Australia and New Zealand Banking Group Limited (ANZ) today released ANZ Bank New Zealand Limited’s
Registered Bank Disclosure Statement for the year ended 30 September 2024.
It has been approved for distribution by ANZ’s Continuous Disclosure Committee.
Yours faithfully
Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
ANZ BANK NEW ZEALAND LIMITED
ANNUAL REPORT AND REGISTERED BANK DISCLOSURE STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
2
CONTENTS
Annual report and glossary 2
DISCLOSURE STATEMENT
Financial statements 3
Consolidated financial statements
4
Notes to the financial statements
8
Assurance report on the financial statements 67
Registered bank disclosures
72
Directors’ statement
108
Assurance reports on the registered bank disclosures 109
ANNUAL REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Pursuant to section 211(3) of the Companies Act 1993, the shareholder of the Bank has agreed that the Annual Report of the Banking
Group need not comply with any of the paragraphs (a), and (e) to (j) of subsection (1) and subsection (2) of section 211.
Accordingly, there is no information to be provided in this Annual Report other than the financial statements for the year ended
30 September 2024 and the assurance report on those financial statements.
For and on behalf of the Board of Directors:
Scot
t St John
Chair
7 November 2024
GLOSSARY
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Non-Bank Holding Company, ANZGHL means ANZ Group Holdings Limited.
ANZ Group means the worldwide operations of ANZGHL including its controlled entities.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of the Ultimate Parent Bank including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it
were conducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZBGL New Zealand means the New Zealand business of the Overseas Banking Group.
ANZ New Zealand means the New Zealand business of the ANZ Group.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for
service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by
the Order.
Antonia Watson
Executive Director
7 November 2024
3
FINANCIAL
STATEMENTS
Financial statements
Income statement 4
Statement of comprehensive income
4
Balance sheet 5
Cash flow statement
6
Statement of changes in equity 7
Notes to the financial statements
Basis of preparation
Non-financial assets
1. About our financial statements 8 19. Goodwill and other intangible assets 53
Financial performance Non-financial liabilities
2. Operating income 10 20. Other provisions 56
3. Operating expenses 12
4. Income tax 13
Equity
5. Dividends 14 21. Shareholders' equity 57
6. Segment reporting 15 22. Capital management 59
Financial assets
Consolidation and presentation
7. Cash and cash equivalents 17 23. Controlled entities 60
8. Trading securities 18 24. Structured entities 61
9. Derivative financial instruments 19 25. Transfers of financial assets 63
10. Investment securities 24
11. Net loans and advances 25 Other disclosures
12. Allowance for expected credit losses 26 26. Related party disclosures 63
27. Commitments and contingent liabilities 65
Financial liabilities
28. Auditor fees 66
13. Deposits and other borrowings 32
14. Debt issuances 33
Financial instrument disclosures
15. Financial risk management 35
16. Fair value of financial assets and financial liabilities 48
17. Assets charged as security for liabilities 51
and collateral accepted as security for assets
18. Offsetting 52
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 66 form an integral part of these financial statements
4
INCOME STATEMENT
2024 2023
For the year ended 30 September Note NZ$m NZ$m
Interest income
11,914 10,215
Interest expense (7,512) (5,922)
Net interest income 2
4,402
4,293
Other operating income 2 480 619
Operating income
4,882
4,912
Operating expenses 3
(1,760)
(1,663)
P
rofit before credit impairment and income tax
3,122 3,249
Credit impairment charge 12
(44)
(183)
P
rofit before income tax
3,078
3,066
Income tax expense 4 (870)(849)
Profit for the year
2,208
2,217
STATEMENT OF COMPREHENSIVE INCOME
2024 2023
For the year ended 30 September NZ$m NZ$m
Profit after tax 2,208 2,217
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gain on defined benefit schemes
3
7
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised gains / (losses) recognised directly in equity
164
(181)
Realised gains transferred to the income statement
(2)
(16)
Income tax attributable to the above items (46)
54
O
ther comprehensive income after tax
119
(136)
Total comprehensive income for the year 2,327
2,081
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 66 form an integral part of these financial statements
5
BALANCE SHEET
2024 2023
As at 30 September Note NZ$m NZ$m
Assets
Cash and cash equivalents 7 11,634 13,094
Settlement balances receivable
574
401
Collateral paid 1,041 801
Trading securities 8
5,576
5,921
Derivative financial instruments 9
10,181
8,753
Investment securities 10 13,295 10,958
Net loans and advances
11
151,666
149,321
Deferred tax assets
4
418
397
Goodwill and other intangible assets 19 3,094 3,119
Premises and equipment
363
371
Other assets 1,334 1,153
Total assets 199,176
194,289
Liabilities
Settlement balances payable 5,367 2,920
Collateral received
525
1,500
Deposits and other borrowings 13
142,645
141,630
Derivative financial instruments 9 11,179 8,326
Current tax liabilities
279
76
Payables and other liabilities 2,415 1,938
Employee entitlements
121
122
Other provisions 20
212
209
Debt issuances 14 17,623 19,147
Total liabilities 180,366
175,868
Net assets 18,810
18,421
Shareholders' equity
Share capital 21
17,680
12,438
Reserves 21 24 (93)
Retained earnings 21
1,106
6,076
Total shareholders' equity
21
18,810
18,421
For and on behalf of the Board of Directors:
Scot
t St John
Chair
7 November 2024
Antonia Watson
Executive Director
7 November 2024
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 66 form an integral part of these financial statements
6
CASH FLOW STATEMENT
2024 2023
For the year ended 30 September NZ$m NZ$m
Profit after income tax
2,208 2,217
Adjustments to reconcile to net cash provided by/(used in) operating activities:
D
epreciation and amortisation
109
114
L
oss/(gain) on sale and impairment of premises and equipment and lease remeasurements
1 (7)
Net derivatives/foreign exchange adjustment
713
543
Ot
her non-cash movements
(88)
(146)
Net (increase)/decrease in operating assets:
Collateral paid
(240)
871
Trading securities
345
1,307
Net loans and advances
(2,345) (2,254)
Other assets
(352)
254
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings (excluding items included in financing activities)
2,087
988
Settlement balances payable
2,447
(2,013)
Collateral received
(975)(462)
Other liabilities
660
366
T
otal adjustments
2,362
(439)
Net cash provided by operating activities
1
4,570
1,778
Cash flows from investing activities
Investment securities:
Purchases
(4,297)
(4,768)
Proceeds from sale or maturity
2,905
5,414
O
ther assets
(35)(28)
Net cash provided by/(used in) investing activities
(1,427)
618
Cash flows from financing activities
Deposits and other borrowings
2
(1,072) 1,000
Debt issuances:
3
Issue proceeds
1,707 3,020
Redemptions
(3,250)
(4,407)
P
roceeds from issue of perpetual preference shares
1,138
-
R
edemption of perpetual preference shares
(300)-
Repayment of lease liabilities
(50)
(46)
D
ividends paid
4
(2,776)
(1,444)
N
et cash used in financing activities
(4,603)
(1,877)
Net change in cash and cash equivalents
(1,460)
519
Cash and cash equivalents at beginning of year 13,094 12,575
Cash and cash equivalents at end of year
11,634
13,094
1 Net cash provided by operating activities includes income taxes paid of NZ$734 million (2023: NZ$1,064 million).
2 Movement in deposits and other borrowings include repayments of repurchase transactions entered into with the RBNZ under the Term Lending Facility of NZ$72 million and NZ$1,000
million under the Funding for Lending Programme (2023: amount drawn under the Funding for Lending Programme of NZ$1,000 million).
3 Movement in debt issuances (Note 14 Debt issuances) also includes a NZ$794 million decrease (2023: NZ$574 million decrease) from the effect of foreign exchange rates, a NZ$811 million
increase (2023: NZ$82 million increase) from changes in fair value hedging instruments and a NZ$2 million increase (2023: NZ$3 million increase) from other changes.
4 Non-cash dividends paid to the Immediate Parent Company of NZ$900 million in June 2024 and NZ$3,500 million in August 2024 were used to purchase ordinary shares in the Bank.
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 66 form an integral part of these financial statements
7
STATEMENT OF CHANGES IN EQUITY
Share
capital Reserves
Retained
earnings
Total
shareholders'
equity
NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
12,438 48 5,298 17,784
Profit for the year - - 2,217 2,217
Other comprehensive income for the year
- (141) 5 (136)
Total comprehensive income for the year
- (141) 2,222 2,081
Transactions with equity holders in their capacity as equity owners:
Ordinary dividends paid - - (1,400) (1,400)
Perpetual preference dividends paid - - (44) (44)
As at 30 September 2023
12,438 (93) 6,076 18,421
Profit for the year
- - 2,208 2,208
Other comprehensive income for the year -1172 119
Total comprehensive income for the year
-1172,210 2,327
Transactions with equity holders in their capacity as equity owners:
Ordinary shares issued 4,400 - - 4,400
Ordinary dividends paid
- - (7,125) (7,125)
Perpetual preference shares issued (net of issue costs)
1,142 -(4)1,138
Perpetual preference shares redeemed
(300)-- (300)
Perpetual preference dividends paid
--(51) (51)
As at 30 September 2024 17,680 24 1,106 18,810
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
8
1.ABOUT OUR FINANCIAL STATEMENTS
GENERAL INFORMATION
These are the consolidated financial statements for ANZ Bank New Zealand Limited (the Bank) and its controlled entities (together, the Banking Group)
for the year ended 30 September 2024. The Bank is incorporated and domiciled in New Zealand. The address of the Bank's registered office and its
principal place of business is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand.
On 7 November 2024, 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 Banking 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 Banking Group’s business during the period – for
example, business acquisitions or disposals (qualitative factor);
•the information relates to an aspect of the Banking Group’s operations that is important to its future performance (qualitative factor); and
•the information is required under legislative or other regulatory requirements.
This section of the financial statements:
•outlines the basis upon which the Banking Group’s financial statements have been prepared; and
•discusses any new accounting standards or regulations that directly impact the financial statements.
BASIS OF PREPARATION
These financial statements are general purpose (Tier 1) financial statements prepared by a ‘for profit’ entity, in accordance with the requirements of
the Financial Markets Conduct Act 2013. These financial statements comply with:
•New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;
•New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as
appropriate for publicly accountable for-profit entities; and
•International Financial Reporting Standards (IFRS).
We present the financial statements of the Banking Group in New Zealand dollars, which is the Banking Group’s functional and presentation currency.
We have rounded values to the nearest million dollars (NZ$m), unless otherwise stated.
Certain comparative amounts have been restated to conform with the basis of presentation in the current year.
BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except for the following assets and liabilities which we have
stated at their fair values:
•derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged items;
•financial instruments held for trading;
•financial assets and financial liabilities designated at fair value through profit or loss (FVTPL); and
•financial assets at fair value through other comprehensive income (FVOCI).
BASIS OF CONSOLIDATION
The consolidated financial statements of the Banking Group comprise the financial statements of the Bank and all its subsidiaries. An entity, including
a structured entity, is considered a subsidiary of the Banking Group when we determine that the Banking Group has control over the entity. Control
exists when the Banking 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 Banking Group 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 Banking 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.
FIDUCIARY ACTIVITIES
The Banking Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Banking Group
holding assets on behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If the Banking Group 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.
NOTES TO THE FINANCIAL STATEMENTS
9
1.ABOUT OUR FINANCIAL STATEMENTS (continued)
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Banking 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 continues to face challenges associated with inflation and interest rate uncertainties, continuing trade and geopolitical
tensions, and impacts from climate change, which contribute to an elevated level of estimation uncertainty involved in the preparation of
these financial statements.
The Banking Group is exposed to climate risk either directly through its operations or indirectly, for example, through lending to customers.
Climate risk may also be a driver of other risks within our risk management framework. Our most material climate risks arise from lending to
business and retail customers, which contributes to credit risk.
The Banking Group has made various accounting estimates in these financial statements based on forecasts of economic conditions which
reflect expectations and assumptions at 30 September 2024 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 further in the relevant notes of these financial
statements, along with assumptions and judgements made in relation to other key estimates. Readers should consider these disclosures in
light of the inherent uncertainties described above.
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
Amendments to New Zealand Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction amends NZ IAS
12
Income Taxes (NZ IAS 12). 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 was effective for the Banking Group from 1 October 2023 and did not have a material impact on the Banking Group.
INTERNATIONAL TAX REFORM – PILLAR TWO MODEL RULES
The Organisation for Economic Co-Operation and Development published the Pillar Two Model Rules in December 2021 which are designed to
ensure large multinational enterprises pay a minimum level of tax of 15% in each of the jurisdictions where they operate. A number of countries in
which the ANZ Group operates have implemented or announced the proposed implementation of the Pillar Two rules including New Zealand.
Pillar Two legislation was enacted in New Zealand in March 2024 and will be effective for t
he Banking Group from 1 October 2025.
The External Reporting Board ( XRB) issued International Tax Reform – Pillar Two Model Rules (Amendments to NZ IAS 12) in July 2023 to address the
Pillar Two Model rules. The Banking Group has applied the mandatory exemption in para 4A of this standard and has not recognised or disclosed any
associated deferred taxes.
The Banking Group has assessed the potential impact from the Pillar Two legislation and does not expect a material exposure, if any, once the Pillar
Two legislation becomes effective.
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 2024 and have not been applied by the Banking Group in preparing these financial statements. Further details of
these are set out below.
NZ IFRS 18
PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS
In May 2024, the XRB issued NZ IFRS 18
Presentation and Disclosure in Financial Statements (NZ IFRS 18) which updates and replaces requirements for
the presentation and disclosure of information in financial statements. NZ IFRS 18 introduces new defined subtotals to be presented in the
consolidated income statement, disclosure of management-defined performance measures and requirements for grouping of information. This
standard will be effective for the financial year beginning 1 October 2027. We are currently assessing the impact of adopting this standard.
CLASSIFICATION AND MEASUREMENT AMENDMENTS TO NZ IFRS 9
FINANCIAL INSTRUMENTS (NZ IFRS 9)
In June 2024, the XRB issued
Amendments to the Classification and Measurement of Financial Instruments which amends requirements related to
settling financial liabilities using an electronic payment system and assessing contractual cash flow characteristics of financial assets with
environmental, social and corporate governance and similar features. The amendments will be effective for the financial year beginning 1 October
2026. We are currently assessing the impact of adopting the amendments.
LEASE LIABILITY IN A SALE AND LEASEBACK
Amendments to New Zealand Accounting Standards – Lease Liability in a Sale and Leaseback amends NZ IFRS 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 Banking Group.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
10
2. OPERATING INCOME
2024 2023
NZ$m NZ$m
Net interest income
Interest income by type of financial asset
Financial assets at amortised cost
11,226
9,645
Trading securities 249 246
Investment securities
409 304
Financial assets at FVTPL
30 20
Interest income 11,914
10,215
Interest expense by type of financial liability
Financial liabilities at amortised cost
(7,284)
(5,711)
Financial liabilities designated at FVTPL
(228)
(211)
Interest expense
(7,512)
(5,922)
Net interest income 4,402 4,293
Other operating income
Fee and commission income
Lending fees
19
28
Non-lending fees
715
729
Commissions
29
33
Funds management income
246
244
Fee and commission income
1,009 1,034
Fee and commission expense
(515) (530)
Net fee and commission income
494 504
Other income
Net foreign exchange earnings and other financial instruments income
1
(26)
71
Loss on sale of mortgages to the NZ Branch
-
(1)
Adjustment to gain on sale of UDC Finance Ltd
2
25
Gain on sale of premises and equipment
1
10
Other
9 10
Other income
(14) 115
Other operating income 480 619
Operating income
4,882
4,912
1 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.
NOTES TO THE FINANCIAL STATEMENTS
11
2.OPERATING INCOME (continued)
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.
OTHER OPERATING INCOME
Fee and commission income
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 Banking Group provides multiple goods or services to a customer under the
same contract, the Banking 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 Banking 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 financial advice and asset management services. Revenue is
recognised either at the point the financial advice is provided or over the period in which the asset management services are delivered.
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;
•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 and cash flow 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.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
12
3.OPERATING EXPENSES
2024 2023
NZ$m NZ$m
Personnel
Salaries and related costs 1,021 974
Superannuation costs
31 29
Other
38 19
Personnel 1,090
1,022
Premises
Rent
19
17
Depreciation
74
78
Other
40
37
Premises 133 132
Technology
Depreciation and amortisation 35 36
Subscription licences and outsourced services
193
186
Other
29
22
Technology 257
244
Other
Advertising and public relations
39
38
Professional fees 76 80
Freight, stationery, postage and communication
43 46
Charges from ANZ Group
68 63
Other
54
38
Other 280
265
Operating expenses 1,760
1,663
RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
Operating expenses are recognised as services are provided to the Banking 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 Banking 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 government 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 Banking 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.
NOTES TO THE FINANCIAL STATEMENTS
13
4.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:
2024 2023
NZ$m NZ$m
Profit before income tax 3,078
3,066
Prima facie income tax expense at 28%
862
859
Tax effect of permanent differences:
Tax provisions no longer required -(3)
Non-assessable income and non-deductible expenditure 8 (7)
Income tax expense 870
849
Current tax expense
933
857
Adjustments recognised in the current year in relation to the current tax of prior years
(1)
(4)
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
(62)
(4)
Income tax expense 870
849
Effective tax rate 28.3% 27.7%
DEFERRED TAX ASSETS AND LIABILITIES
2024 2023
NZ$m NZ$m
Deferred tax assets balances comprise temporary differences attributable to:
Amounts recognised in the income statement:
Collectively assessed allowances for expected credit losses
222
222
Individually assessed allowances for expected credit losses 19 18
Provision for employee entitlements 55 52
Other provisions 21 24
Software
130
146
Lease liabilities
1
67
61
Other
12
12
Total 526
535
Amounts recognised directly in other comprehensive income:
Cash flow hedge reserve -21
Total -21
Total deferred tax assets (before set-off) 526
556
Set-off of deferred tax balances pursuant to set-off provisions
(108)
(159)
Net deferred tax assets 418
397
2024 2023
NZ$m NZ$m
Deferred tax liabilities balances comprise temporary differences attributable to:
Amounts recognised in the income statement:
Finance leases -83
Fixed assets
6
3
Right of use assets
1
54
46
Other
28
27
Total 88
159
Amounts recognised directly in other comprehensive income:
Cash flow hedge reserve 20 -
Total 20 -
Total deferred tax liabilities (before set-off) 108
159
Set-off of deferred tax balances pursuant to set-off provisions
(108)
(159)
Net deferred tax liabilities -
-
1 Comparative amounts have been adjusted to reflect the adoption of amendments to NZ IAS 12 related to right-of-use assets and lease liabilities that arise from a single transaction.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
14
4. INCOME TAX (continued)
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 expense 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 substantively 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.
5. DIVIDENDS
ORDINARY SHARE DIVIDENDS
Amount
per share
Total
dividend
NZ$m
Dividends
Financial Year 2023
Dividend paid in March 2023 14.2 cents 900
Dividend paid in September 2023 7.9 cents 500
Dividends paid during the year ended 30 September 2023
1,400
Financial Year 2024
Dividend paid in March 2024
17.7 cents 1,125
Dividend paid in June 2024
12.4 cents 900
Dividend paid in August 2024
32.6 cents 3,500
Dividend paid in September 2024 14.9 cents 1,600
Dividends paid during the year ended 30 September 2024 7,125
IMPUTATION CREDIT ACCOUNT
Banking Group Bank
1
2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m
Imputation credits available as at 30 September
8,951
8,872
830
1,396
1 Imputation credits available to the Bank are shown separately as this is relevant for holders of perpetual preference shares (refer to Note 21 Shareholders’ equity) issued by the Bank.
The imputation credit balance for the Banking Group includes the imputation credit balance in relation to the New Zealand resident imputation
group, the Bank consolidated imputation group and other companies in the Banking Group that are not in either of these imputation groups. The
imputation credit balance available to the Banking Group includes imputation credits that will arise from the payment of the amount of provision for
income tax as at the reporting date.
The imputation credit balance for the Bank reflects the imputation credit balance of the Bank consolidated imputation group. The imputation credit
balance available to the Bank includes imputation credits that will arise from the payment of the amount of provision for income tax as at the
reporting date.
NOTES TO THE FINANCIAL STATEMENTS
15
6. SEGMENT REPORTING
DESCRIPTION OF SEGMENTS
The Banking Group is organised into three major business segments for segment reporting purposes - Personal, Business & Agri and Institutional.
Centralised back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief
operating decision maker, being the Bank’s Chief Executive Officer.
Segment reporting has been updated to reflect minor changes to the Banking Group’s structure. Comparative amounts have been adjusted to be
consistent with the current period’s segment definitions.
Personal
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, private bankers and contact centres.
Business & Agri
Business & Agri 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.
Institutional
The Institutional division services governments, global institutional and corporate customers 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 sustainable finance solutions.
• Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets in
addition to managing the Banking Group’s interest rate exposure and high quality liquid asset portfolio.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
16
6.SEGMENT REPORTING (continued)
OPERATING SEGMENTS
Personal Business & Agri Institutional Other Total
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
Year ended 30 September NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net interest income
2,380
2,386
1,013
1,014
753
701
256
192
4,402
4,293
Net fee and commission income
- Lending fees
8
7
-
1
11
20
-
-
19
28
- Non-lending fees
449
437
217
243
51
51
(2)
(2)
715
729
- Commissions 28 32 - - 1 1 --29 33
- Funds management income
246
244
-
-
-
-
-
-
246
244
- Fee and commission expense
(345)
(341)
(170)
(189)
-
-
-
-
(515)
(530)
Net fee and commission income
386
379
47
55
63
72
(2)
(2)
494
504
Other income
-
1
-
-
242
271
(256)
(157)
(14)
115
Other operating income 386 380 47 55 305 343 (258)(159) 480 619
Operating income
2,766
2,766
1,060
1,069
1,058
1,044
(2)
33
4,882
4,912
Operating expenses
(1,213)
(1,149)
(276)
(241)
(248)
(235)
(23)
(38)
(1,760)
(1,663)
Profit before credit impairment
and income tax
1,553 1,617 784 828 810 809 (25)(5) 3,122 3,249
Credit impairment release /
(charge)
17 (49) (47)(73) (14)(61) -- (44)(183)
Profit before income tax 1,570
1,568
737
755
796
748
(25)
(5)
3,078
3,066
Income tax expense
(442)
(439)
(207)
(211)
(223)
(210)
2
11
(870)
(849)
Profit / (loss) after income tax 1,128 1,129 530 544 573 538 (23)6 2,208 2,217
Financial position
Goodwill
1,042
1,042
695
695
1,269
1,269
-
-
3,006
3,006
Net loans and advances
110,149
106,138
23,952
24,424
17,565
18,759
-
-
151,666
149,321
Customer deposits
91,814
88,086
17,996
18,345
26,353
26,098
-
-
136,163
132,529
OTHER SEGMENT
The Other segment profit after income tax comprises:
2024 2023
For the year ended 30 September NZ$m NZ$m
Personal and Business & Agri central functions 6 3
Group Centre
156
125
Economic hedges
(185)
(122)
Total (23)
6
NOTES TO THE FINANCIAL STATEMENTS
17
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 NZ IFRS 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.
7. 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.
2024 2023
NZ$m NZ$m
Coins, notes and cash at bank 149 155
Securities purchased under agreements to resell in less than 3 months 1,762 668
Balances with central banks 9,451 12,139
Settlement balances receivable within 3 months
272
132
Cash and cash equivalents 11,634
13,094
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
18
8.TRADING SECURITIES
2024 2023
NZ$m NZ$m
Government securities
4,869
5,249
Corporate and financial institution securities
707
672
Trading securities 5,576 5,921
RECOGNITION AND MEASUREMENT
Trading securities are financial instruments we either:
•acquire principally for the purpose of selling in the short-term; or
•hold as part of a portfolio we manage for short-term profit making.
We recognise purchases and sales of trading securities on trade date:
•initially, we measure them at fair value; and
•subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as trading securities are subject to the general classification and measurement policy for financial assets outlined on page 17.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 16 F air value of financial assets and financial liabilities for further details.
NOTES TO THE FINANCIAL STATEMENTS
19
9. DERIVATIVE FINANCIAL INSTRUMENTS
Assets Liabilities Assets Liabilities
2024 2024 2023 2023
Fair value NZ$m NZ$m NZ$m NZ$m
Derivative financial instruments - held for trading 9,251 (10,135) 7,528 (6,632)
Derivative financial instruments - designated in hedging relationships 930 (1,044) 1,225 (1,694)
Derivative financial instruments
10,181 (11,179) 8,753 (8,326)
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 Banking Group’s derivative financial instruments have been categorised as follows:
Trading
Derivatives held in order to:
• meet customer needs for managing their own risks.
• manage risks in the Banking 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 Banking Group’s exposures to interest rate risk and currency risk.
• hedges of other exposures relating to non-trading positions.
TYPES
The Banking 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.
RISKS MANAGED
The Banking 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.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
20
9.DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The Banking Group uses 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 Banking Group’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for
trading are:
Assets Liabilities Assets Liabilities
2024 2024 2023 2023
Fair value NZ$m NZ$m NZ$m NZ$m
Interest rate contracts
Forward rate agreements
- -
1 (2)
Futures contracts
3 (70)
38 (2
)
Swap agreements
3,015 (2,903)
1,522 (
1,640)
Options
1 (1)
- (
10)
Total 3,019 (2,974) 1,561 (1,654)
Foreign exchange contracts
Spot and forward contracts
2,356 (2,954)
1,856 (
1,739)
Swap agreements
3,797 (4,127)
4,050 (
3,183)
Options
33 (33)
29 (27)
Total 6,186 (7,114)
5,935 (4,949)
Commodity contracts and credit default swaps 46 (47)
32 (29)
Derivative financial instruments - held for trading 9,251 (10,135)
7,528 (
6,632)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS
Under the accounting policy choice provided by NZ IFRS 9, the Banking Group has continued to apply the hedge accounting requirements of NZ IAS
39
Financial Instruments: Recognition and Measurement (NZ IAS 39).
The Banking Group uses two types of hedge accounting relationships:
Fair value hedge Cash flow 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.
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.
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
21
9.DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The fair value of derivative financial instruments designated in hedging relationships are:
2024 2023
Nominal Nominal
amount Assets Liabilities amount Assets Liabilities
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Fair value hedges
Interest rate swap agreements 28,106 661 (721)27,328 988 (1,285)
Cash flow hedges
Interest rate swap agreements
30,383 269 (323)
36,022 2
37 (409)
Derivative financial instruments - designated in
hedging relationships
58,489 930 (1,044) 63,350 1,225 (1,694)
The maturity profile of the nominal amounts of our hedging instruments held is:
Average Less than 3 3 to 12 1 to 5 After 5
interest months months years years Total
Nominal amount
rate NZ$m NZ$m NZ$m NZ$m NZ$m
As at 30 September 2024
Fair value hedges
Interest rate
2.03% 373 1,880 16,843 9,010 28,106
Cash flow hedges
Interest rate 4.62% 6,025 6,495 15,727 2,136 30,383
As at 30 September 2023
Fair value hedges
Interest rate 1.76% 434 2,695 14,261 9,938 27,328
Cash flow hedges
Interest rate 3.59% 4,747 9,389 19,462 2,424 36,022
The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:
Ineffectiveness Amount reclassified
Change in value
Hedge ineffectiveness from the cash flow
of hedging Change in value recognised in profit hedge reserve
instrument
2
of hedged item or loss
3
to profit or loss
4
2024 2023 2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Fair value hedges
1
Interest rate
(65)
(54)
68
77
3
23
-
-
Cash flow hedges
1
.
Interest rate
149 (114) (150)114 -(1) (1)1
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.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
22
9. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The hedged items in relation to the Banking Group’s fair value hedges are:
Accumulated fair value
hedge adjustments on
Carrying amount the hedged item
Balance sheet Assets Liabilities Assets Liabilities
presentation Hedged risk NZ$m NZ$m NZ$m NZ$m
As at 30 September 2024
Fixed rate debt issuance Debt issuances Interest rate - (15,313) - 412
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 12,443 - 39 -
Total
12,443 (15,313) 39 412
As at 30 September 2023
Fixed rate debt issuance Debt issuances Interest rate - (17,630) - 1,223
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 9,395 - (837) -
Total
9,395 (17,630) (837) 1,223
1 The carrying amount of debt instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The hedged items in relation to the Banking Group’s cash flow hedges are:
Continuing Discontinued
hedges hedges
2024 2023 2024 2023
Hedged risk NZ$m NZ$m NZ$m NZ$m
Floating rate loans and advances Interest rate 186 (358) - -
Floating rate customer deposits Interest rate
(114)
283
-
(1)
All cash flow hedges relate to hedges of interest rate risk and the movements in the cash flow hedge reserve are shown in the statement of changes
in equity on page 7.
NOTES TO THE FINANCIAL STATEMENTS
23
9.DERIVATIVE FINANCIAL INSTRUMENTS (continued)
R
ECOGNITION 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 (CVA) to reflect the counterparty risk and/or event of default; and
•a funding valuation adjustment (FVA) 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 Banking 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 into 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 20 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 NZ IAS 39, 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 Banking 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 16
Fair value of financial assets and financial liabilities for further details.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
24
10.INVESTMENT SECURITIES
2024 2023
NZ$m NZ$m
Investment securities measured at FVOCI
Debt securities 13,290 10,957
Equity securities
5
1
Total 13,295 10,958
The maturity profile of investment securities is as follows:
Less than 3 3 to 12 After No
months months 1 to 5 years 5 years maturity Total
As at 30 September 2024 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Government securities
126 829 7,326 4,543 -12,824
Corporate and financial institution securities
1 50 415 - - 466
Equity securities
- - - - 5 5
Total 127 879 7,741 4,543 5 13,295
As at 30 September 2023
Government securities 492 512 6,423 3,115 - 10,542
Corporate and financial institution securities 29 - 386 - - 415
Equity securities - - - - 1 1
Total
521 512 6,809 3,115 1 10,958
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 Banking 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 on page 17.
Additionally, expected credit losses associated with ‘Investment securities - debt securities at FVOCI’ are recognised and measured in accordance
with the accounting policy outlined in Note 12 Allowance for expected credit losses, and the allowance for expected credit loss 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 16 Fair value of financial assets and
financial liabilities for further details.
NOTES TO THE FINANCIAL STATEMENTS
25
11. NET LOANS AND ADVANCES
The following table provides details of net loans and advances for the Banking Group:
2024 2023
Note NZ$m NZ$m
Overdrafts
1,091 973
Credit cards
1,243 1,262
Term loans - housing
110,807 107,040
Term loans - non-housing
38,755
40,345
Subtotal 151,896
149,620
Unearned income
(21)
(28)
Capitalised brokerage and other origination costs
516
459
Gross loans and advances
152,391
150,051
Allowance for expected credit losses 12
(725)
(730)
Net loans and advances
151,666 149,321
Residual contractual maturity:
Within one year
25,259
27,922
More than one year
126,407
121,399
Net loans and advances 151,666
149,321
The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$298 million as at 30 September 2024 (2023: NZ$306 million).
These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.
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 Banking 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.
The Banking Group enters into transactions in which it transfers financial assets that are recognised on its balance sheet. When the Banking Group
retains substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Banking Group’s balance sheet,
however if substantially all the risks and rewards are transferred, the Banking Group derecognises the asset. If the risks and rewards are partially
retained and control over the asset is lost, then the Banking Group derecognises the asset. If control over the asset is not lost, then the Banking
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 17.
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 12 Allowance for expected credit losses.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
26
12.ALLOWANCE FOR EXPECTED CREDIT LOSSES
2024 2023
Collectively Individually Collectively Individually
assessed assessed Total assessed assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net loans and advances at amortised cost
661 64 725
670 60 730
Off-balance sheet commitments
133 3 136
122 5
127
Total 794 67 861
792 65 857
The following tables present the movement in the allowance for expected credit losses (ECL) for the year.
Net loans and advances
Allowance for ECL is included in net loans and advances.
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
199 311 59 77 646
Transfer between stages 19 (19) - - -
New and increased provisions (net of releases) (25) 106 20 94 195
Write-backs - -- (22) (22)
Bad debts written-off (excluding recoveries) - -- (86) (86)
Discount unwind - -- (3) (3)
As at 30 September 2023 193 398 79 60 730
Transfer between stages
36 (40)(1)5 -
New and increased provisions (net of releases)
(42)12 26 99 95
Write-backs
--- (49)(49)
Bad debts written-off (excluding recoveries)
--- (41)(41)
Discount unwind
--- (10)(10)
As at 30 September 2024 187 370 104 64 725
Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions.
As at 1 October 2022
66 31 3 5 105
Transfer between stages 2 (2) - - -
New and increased provisions (net of releases) 12 10 - - 22
As at 30 September 2023
80 39 3 5 127
Transfer between stages 4 (4)-- -
New and increased provisions (net of releases)
(10)21 -(2)9
As at 30 September 2024 74 56 3 3 136
The collectively assessed allowance for ECL increased by NZ$2 million attributable to: increases of NZ$12 million for downside risks associated with the
economic outlook, NZ$70 million due to portfolio credit risk profile changes reflecting the revised economic scenario weightings and enhanced
model methodology, NZ$23 million in large exposure, model risk and other adjustment allowances, offset by a release of NZ$103 million
management temporary adjustments.
CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
2024 2023
NZ$m NZ$m
New and increased provisions (net of releases)
- Collectively assessed
2
123
- Individually assessed
102
94
Write-backs (49)(22)
Recoveries of amounts previously written-off (11)(12)
Total credit impairment charge 44
183
NOTES TO THE FINANCIAL STATEMENTS
27
12.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 Banking Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Banking 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 Banking 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 Banking 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 Banking
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.
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.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
28
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT
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 Banking 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 Banking 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 Banking Group considers four probability-
weighted forecast economic scenarios as follows:
i. Base case scenario
The base case scenario is our view of future macroeconomic conditions. It reflects the same basis of assumptions used by management
for strategic planning and budgeting, and also informs the Banking Group’s Internal Capital Adequacy Assessment Process which is the
process the Banking 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
The severe scenario assumes a deep economic downturn, both domestically and globally. We forecast macroeconomic variables for
such a scenario, reflecting a plausible scenario unfolding over a 5-year period given current economic conditions. These assumptions
have been revised in 2024, reflecting an escalation of geopolitical tensions, persistent inflation, and worsening national budget
positions.
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
29
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Banking 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 Banking Group’s ECL estimates are inherently uncertain and, as a
result, actual results may differ from these estimates.
Judgement /
assumption
Description
Considerations for the year ended
30 September 2024
Determining
when a SICR
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 PD
in the next 12 months, to an allowance for lifetime
ECL. Subsequent decreases in credit risk resulting in
transition from Stage 2 to Stage 1 may similarly result
in significant changes in the ECL allowance.
The setting of precise SICR trigger points requires
judgement which may have a material impact upon
the size of the ECL allowance. The Banking Group
monitors the effectiveness of SICR criteria on an
ongoing basis.
The determination of SICR was consistent with prior
periods.
Measuring
both 12-month
and lifetime
ECL
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
Banking 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 Banking Group derives a forward-looking ‘base
case’ economic scenario which reflects our 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 2024, the base case assumptions
have been updated to reflect a moderation in
inflation and an easing in labour market conditions.
The economy is forecast to continue to grow below
trend. Despite increased household disposable
incomes, limited flow-through to household
consumption is forecast.
The expected outcomes of key economic drivers for
the base case scenario at 30 September 2024 are
described below under the heading ‘Base case
economic forecast assumptions’.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
30
12.ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
Judgement /
assumption
D
escription
Considerations for the year ended
30 September 2024
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 are subject to a
high degree of inherent uncertainty and therefore the
actual outcomes may be significantly different to
those projected.
Probability weightings shifted from downside to
upside scenarios during the current period reflecting
increasing confidence in economic recovery with
high-frequency data providing early indication that
the economy is responding to monetary easing.
The probability 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, and natural disasters 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 mortgages and
commercial lending.
Management temporary adjustments total NZ$73
million (September 2023: NZ$176 million).
Management has considered and concluded no
temporary adjustment is required at 30 September
2024 to the ECL allowance in relation to climate- or
weather-related events during the period.
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.
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 our view of future macroeconomic conditions, used at 30 September
2024 are set out below. For years following the near term forecasts below, the ECL models apply simplified assumptions for the economic
conditions to calculate lifetime loss.
Forecast calendar year
New Zealand 2024 2025 2026
GDP (annual % change) -0.1% 0.8% 2.2%
Unemployment rate (annual average) 4.7% 5.4% 5.4%
Residential property prices (annual % change) -1.0% 4.5% 5.0%
Consumer price index (CPI) (annual % change) 3.1% 2.2% 1.8%
NOTES TO THE FINANCIAL STATEMENTS
31
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
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 upside scenario weighting has increased to 3.75% (2023: 0.0%), and the downside scenario weighting has decreased to 33.75% (2023:
37.5%).
The assigned probability weightings are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be
significantly different to those projected. The Banking Group considers these weightings to provide estimates of the possible loss outcomes
and taking into account short and long term inter-relationships within the Banking Group’s credit portfolios. The weightings applied are set
out below:
2024 2023
Base 50.0% 50.0%
Upside 3.75% 0.0%
Downside 33.75% 37.5%
Severe downside 12.5% 12.5%
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future
periods, ECL reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it at 30 September 2024:
ECL
NZ$m
Impact on ECL
NZ$m
If 1% of Stage 1 facilities were included in Stage 2
803 9
If 1% of Stage 2 facilities were included in Stage 1
793 (1)
100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario
284
420
757
1,961
(510)
(374)
(37)
1,167
Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Banking Group makes judgements and assumptions in relation to expected repayments, the
realisable value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process.
Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties described
above and in Note 1 About our financial statements.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
32
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.
13.DEPOSITS AND OTHER BORROWINGS
2024 2023
Note NZ$m NZ$m
Term deposits 59,308 54,198
On demand and short term deposits 60,983 60,673
Deposits not bearing interest 15,872 17,658
Total customer deposits
136,163
132,529
Certificates of deposit
1,174
2,328
Commercial paper
1,419
2,253
Securities sold under repurchase agreements
3,750
4,429
Deposits from Immediate Parent Company and NZ Branch 26
139
91
Deposits and other borrowings 142,645 141,630
Residual contractual maturity:
Within one year 136,741 135,360
More than one year
5,904
6,270
Deposits and other borrowings 142,645
141,630
Carried on balance sheet at:
Amortised cost
140,204
138,748
Fair value through profit or loss (designated on initial recognition)
2,441
2,882
Deposits and other borrowings 142,645 141,630
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 16 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 Banking
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 Banking 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.
NOTES TO THE FINANCIAL STATEMENTS
33
14. DEBT ISSUANCES
The Banking Group uses a variety of funding programmes to issue unsubordinated debt (including senior debt and covered bonds) and subordinated
debt. The difference between unsubordinated debt and subordinated debt is that, in a winding up of the issuer, holders of unsubordinated debt rank
in priority to holders of subordinated debt. Subordinated debt will be repaid only after the repayment of claims of depositors and other creditors
(including holders of unsubordinated debt) of that issuer.
2024 2023
NZ$m NZ$m
Senior debt
12,349
13,466
Covered bonds
2,156
3,373
Total unsubordinated debt
14,505
16,839
Subordinated debt
- Additional tier 1 capital
938
938
- Tier 2 capital 2,180 1,370
Total debt issued 17,623 19,147
Residual contractual maturity:
Within one year
3,213
3,488
More than one year
14,410
15,659
Total debt issued 17,623
19,147
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Banking Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.
2024 2023
NZ$m NZ$m
AUD Australian dollars
43
42
EUR Euro
5,892
6,053
NZD New Zealand dollars
2,035
2,584
CHF Swiss Francs
743
1,117
USD United States dollars
8,910
9,351
Total debt issued 17,623
19,147
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. This
obligation is guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered
Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group. The Covered Bond Guarantor is not a member of the
Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The covered bonds have been assigned a long term
rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 51 for the amount of assets of the ANZ Covered Bond
Trust pledged as security for covered bonds.
SUBORDINATED DEBT
All subordinated debt is issued by the Bank and qualifies as regulatory capital for the Banking Group. Each subordinated debt instrument is classified
as either additional tier 1 (AT1) capital, in the case of the ANZ NZ Internal Capital Notes (ANZ NZ ICN), or tier 2 capital for RBNZ’s capital adequacy
purposes depending on the terms and conditions of the instruments.
AT1 capital notes
AT1 capital notes are convertible non-cumulative perpetual subordinated debt securities. Holders of AT1 capital notes do not have any right to vote in
general meetings of the Bank. AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is
converted into a variable number of ordinary shares of the Bank. Interest payments on AT1 capital notes are discretionary, non- cumulative and subject
to conditions.
In the event of liquidation, holders of AT1 capital notes are entitled to claim an amount equal to the issue price of the AT1 capital notes. Holders of
AT1 capital notes rank behind the claims of all depositors and other creditors of the Bank (other than creditors that rank equally with the AT1 capital
notes), equally with the rights of holders of perpetual preference shares, and other equal ranking securities and obligations, and in priority to the rights
of holders of ordinary shares.
The Bank issued NZ$938 million of AT1 capital notes to NZ Branch in 2016 (ANZ NZ ICN). The key terms of the ANZ NZ ICN notes are as follows:
The interest amount is based on a floating rate equal to the aggregate of the New Zealand 6 month bank bill rate plus 6.29% per annum.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
34
14. DEBT ISSUANCES (continued)
ANZ NZ ICN notes provide the Bank with a redemption option on specified dates and a redemption or conversion to equity option in certain other
circumstances. Redemption is subject to RBNZ’s prior written approval. The ANZ NZ ICN notes will immediately convert into ordinary shares of the
Bank if:
• the Banking Group’s common equity tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
• RBNZ directs the Bank to convert to equity or write-off the ANZ NZ ICN notes, or a statutory manager is appointed to the Bank and decides that
the Bank must convert to equity or write-off the ANZ NZ ICN notes.
Transitional AT1 capital
RBNZ has revised its capital adequacy requirements for New Zealand banks. Under the revised requirements, the ANZ NZ ICN are subject to a
progressive reduction in their regulatory capital recognition and will not be recognised from 1 July 2028. However, the ANZ NZ ICN are expected to
fully contribute to the Bank’s capital adequacy requirements until at least their next optional call date.
The Bank has determined that a regulatory event has occurred in respect of the ANZ NZ ICN. The occurrence of a regulatory event means that the
Bank may choose to redeem the ANZ NZ ICN at its discretion, subject to certain conditions including the prior written approval of RBNZ. As at 7
November 2024, no decision has been made on whether the Bank will redeem the ANZ NZ ICN.
Tier 2 capital
Tier 2 capital notes are fully paid unsecured subordinated notes. Interest payments are subject to the Bank being solvent at the time of, and
immediately following, the payment. Unpaid interest accumulates, and will be paid at the earlier of when the Bank is solvent again or at maturity. The
Bank may repay the notes early (the next optional call dates are specified below), or in certain other circumstances (such as a tax or regulatory event).
Early repayment is subject to certain conditions, including prior written approval from RBNZ.
The table below shows the tier 2 capital subordinated notes on issue at 30 September 2024 and 30 September 2023:
Next optional call date - Interest Interest Credit
2024 2023
Currency Face value Issue date Maturity subject to RBNZ's approval rate reset date rating
2
NZ$m NZ$m
NZD 600m Sep 2021 Sep 2031 Sep 2026 2.999% Sep 2026 A
597
596
USD 500m Aug 2022 Aug 2032 Aug 2027 5.548% Aug 2027 A
771
774
USD 500m Jul 2024 Jul 2034 Jul 2029 5.898% Jul 2029 A 812 -
Total tier 2 capital
1
2,180 1,370
1 Carrying amounts are net of issuance costs and, where applicable, include fair value hedge accounting adjustments.
2 Credit rating assigned by S&P Global Ratings. The credit rating of the tier 2 capital notes was upgraded to A from A- on 2 April 2024
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 Banking 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.
NOTES TO THE FINANCIAL STATEMENTS
35
15. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Banking Group’s business 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 Banking Group’s material risks.
This note details the Banking Group’s financial risk management policies, processes and quantitative disclosures in relation to the material financial
risks:
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 Banking 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
• Foreign currency risk – structural exposure
Liquidity and funding risk
The risk that the Banking Group is unable to meet its payment obligations as
they fall due, including:
• repaying depositors or maturing wholesale debt; or
• the Banking Group having insufficient capacity to fund increases in
assets.
• Liquidity risk overview, management and control responsibilities
• Key areas of measurement for liquidity risk
• Liquidity portfolio management
• Funding position
• Residual contractual maturity analysis of the Banking Group’s
liabilities
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 NZ IFRS
7
Financial Instruments: Disclosures.
The Board is responsible for establishing and overseeing the Banking Group’s Risk Management Framework (RMF). The Board has delegated authority
to the Bank’s Board Risk Committee (BRC) to develop and monitor compliance with the Banking Group’s risk management policies. The BRC reports
regularly to the Board on its activities.
The Board approves the strategic objectives of the Banking Group including:
• the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that the Banking Group is prepared to
accept in pursuit of its strategic objectives and business plan; and
• the Risk Management Strategy (RMS), which describes the Banking 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 Banking Group identifies, measures, evaluates,
monitors, reports and controls or mitigates material risks.
The Banking 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 the Banking Group, risk is everyone’s responsibility.
The Banking 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 Banking Group’s risk profile; and
• has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
36
15.FINANCIAL RISK MANAGEMENT (continued)
Internal Audit Function
Internal Audit is a function independent of management whose role is to provide the Board and management with an effective and independent
appraisal of the internal controls established by management. Operating under a Board approved Charter, the reporting line for the outcomes of work
conducted by Internal Audit is direct to the Chair of the Audit Committee, with a direct communication line to the Chief Executive Officer and the
external auditor. The Internal Audit Plan is developed using a risk based approach and is reviewed quarterly. The Audit Committee approves the plan.
All audit activities are conducted in accordance with international internal auditing standards, and the results of the activities are reported to the Audit
Committee and management. These results influence the performance assessment of business heads. Furthermore, Internal Audit monitors the
remediation of audit issues and reports the current status of any outstanding audits.
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Banking Group’s major sources of income. As this activity is also a principal risk, the Banking Group
dedicates considerable resources to its management. The Banking 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.
Our credit risk management framework ensures we apply a consistent approach across the Banking 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:
•approves the credit risk appetite and credit strategies; and
•approves policies and control frameworks for the management of the Banking Group’s credit risk.
The BRC delegates responsibility for day-to-day management of credit risk and compliance with credit risk policies to the Bank’s Credit Risk
Management Committee (CRMC).
We quantify credit risk through an internal credit rating system (Master Scale) 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 Banking 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 Banking Group can realise if a customer defaults. The
A- G scale is supplemented by a range of other SIs which cover such factors as cash cover and sovereign
backing. For retail and some small business lending, we group exposures into large homogeneous
pools, and the LGD is assigned at the pool level.
Our specialist credit risk teams develop and validate the Banking 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, internal capital allocation, and credit
provisioning.
All customers with whom the Banking 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.
NOTES TO THE FINANCIAL STATEMENTS
37
15.FINANCIAL RISK MANAGEMENT (continued)
We use the Banking Group’s internal CCR to manage the credit quality of financial assets. To enable wider comparisons, the Banking Group’s CCRs are
mapped to external rating agency scales as follows:
Credit quality
description Internal CCR The Banking Group customer requirements
Moody’s
Ratings
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
MAXIMUM EXPOSURE TO CREDIT RISK
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these
differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
Reported Excluded
1
Maximum exposure
to credit risk
2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
On-balance sheet positions
Net loans and advances 151,666 149,321 - - 151,666 149,321
Other financial assets:
Cash and cash equivalents
11,634
13,094
130
155
11,504
12,939
Settlement balances receivable
574
401
-
-
574
401
Collateral paid
1,041
801
-
-
1,041
801
Trading securities
5,576
5,921
-
-
5,576
5,921
Derivative financial instruments
10,181
8,753
-
-
10,181
8,753
Investment securities
13,295 10,958 - - 13,295 10,958
Other financial assets
2
1,113 995 - - 1,113 995
Total other financial assets 43,414
40,923
130
155
43,284
40,768
Subtotal 195,080
190,244
130
155
194,950
190,089
Off-balance sheet positions
Undrawn and contingent facilities
3
28,511
28,797
-
-
28,511
28,797
Total 223,591
219,041
130
155
223,461
218,886
1 Coins, notes and cash at bank within cash and cash equivalents were excluded as they do not have credit risk exposure.
2 Other financial assets mainly comprise accrued interest and acceptances.
3 Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected
credit losses.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
38
15.FINANCIAL RISK MANAGEMENT (continued)
CREDIT QUALITY
An analysis of the Banking Group’s credit risk exposure is presented in the following tables based on the Banking Group’s internal credit quality rating
by stage without taking account of the effects of any collateral or other credit enhancements.
Net loans and advances
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 30 September 2024 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
73,623 1,549 - - 75,172
Satisfactory
59,827 6,901 - - 66,728
Weak
4,903 3,470 - - 8,373
Defaulted
- - 1,253 370 1,623
Subtotal
138,353 11,920 1,253 370 151,896
Allowance for ECL
(187)(370)(104)(64)(725)
Net loans and advances at amortised cost 138,166 11,550 1,149 306 151,171
Coverage ratio 0.14% 3.10% 8.30% 17.30% 0.48%
Unearned income
(21)
Capitalised brokerage and other origination costs
516
Net carrying amount 151,666
As at 30 September 2023
Strong 116,859 3,646 - - 120,505
Satisfactory 19,979 5,025 - - 25,004
Weak 504 2,430 - - 2,934
Defaulted - - 890 287 1,177
Subtotal
137,342 11,101 890 287 149,620
Allowance for ECL (193) (398) (79) (60) (730)
Net loans and advances at amortised cost 137,149 10,703 811 227 148,890
Coverage ratio
0.14% 3.59% 8.88% 20.91% 0.49%
Unearned income (28)
Capitalised brokerage and other origination costs 459
Net carrying amount
149,321
Other financial assets
2024 2023
NZ$m NZ$m
Strong 43,245 40,598
Satisfactory 32 52
Weak
7 118
Defaulted
- -
Total carrying amount 43,284
40,768
NOTES TO THE FINANCIAL STATEMENTS
39
15.FINANCIAL RISK MANAGEMENT (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 30 September 2024 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong 23,508 196 - - 23,704
Satisfactory 3,530 1,087 - - 4,617
Weak
30 260 - - 290
Defaulted
- - 26 10 36
Gross undrawn and contingent facilities 27,068 1,543 26 10 28,647
Allowance for ECL included in other provisions (refer to Note 20)
(74)(56)(3)(3)(136)
Net undrawn and contingent facilities 26,994 1,487 23 7 28,511
Coverage ratio 0.27% 3.63% 11.54% 30.00% 0.47%
As at 30 September 2023
Strong 24,408 202 - - 24,610
Satisfactory 3,343 701 - - 4,044
Weak 8 234 - - 242
Defaulted - - 15 13 28
Gross undrawn and contingent facilities
27,759 1,137 15 13 28,924
Allowance for ECL included in other provisions (refer to Note 20) (80) (39) (3) (5) (127)
Net undrawn and contingent facilities
27,679 1,098 12 8 28,797
Coverage ratio
0.29% 3.43% 20.00% 38.46% 0.44%
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
40
15. FINANCIAL RISK MANAGEMENT (continued)
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Banking
Group monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Banking Group also applies single customer
counterparty limits to protect against unacceptably large exposures to one single customer.
Analysis of financial assets by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans and
advances
Other
financial
assets
Off-balance
sheet credit
related commitments Total
2024 2023 2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
New Zealand residents
Agriculture 15,489 15,400 82 73 745 926 16,316 16,399
Forestry and fishing, agriculture services 557 549 4 6 94 100 655 655
Mining
158
181
2
12
226
250
386
443
Manufacturing
2,444
2,486
94
185
1,952
1,943
4,490
4,614
Electricity, gas, water and waste services
589
659
290
274
1,383
1,335
2,262
2,268
Construction
961
904
6
4
969
951
1,936
1,859
Wholesale trade 1,439 1,572 39 50 1,578 1,580 3,056 3,202
Retail trade and accommodation 2,902 2,944 28 18 621 606 3,551 3,568
Transport, postal and warehousing
1,042
1,155
89
77
706
591
1,837
1,823
Finance and insurance services
864
972
13,004
15,473
1,465
1,981
15,333
18,426
Rental, hiring & real estate services
37,098
37,679
1,960
2,024
1,996
1,948
41,054
41,651
Professional, scientific, technical,
administrative and support services
1,054
980
8
9
440
422
1,502
1,411
Public administration and safety
209
201
10,938
8,910
845
776
11,992
9,887
Health care and social assistance
915
1,117
9
26
294
270
1,218
1,413
Households 82,871 79,342 427 370 13,760 13,814 97,058 93,526
Other
1
1,153 1,335 109 112 1,384 1,362 2,646 2,809
Subtotal 149,745 147,476 27,089 27,623 28,458 28,855 205,292 203,954
Overseas
Finance and insurance services
66
76
16,170
13,092
189
69
16,425
13,237
Households
1,508
1,485
8
7
-
-
1,516
1,492
All other non-residents 577 583 17 46 - - 594 629
Subtotal 2,151 2,144 16,195 13,145 189 69 18,535 15,358
Gross subtotal 151,896 149,620 43,284 40,768 28,647 28,924 223,827 219,312
Allowance for ECL
(725)
(730)
-
-
(136)
(127)
(861)
(857)
Subtotal 151,171
148,890
43,284
40,768
28,511
28,797
222,966
218,455
Unearned income
(21)
(28)
-
-
-
-
(21)
(28)
Capitalised brokerage and other origination
516
459
-
-
-
-
516
459
Maximum exposure to credit risk 151,666 149,321 43,284 40,768 28,511 28,797 223,461 218,886
1 Other includes exposures to information media and telecommunications; education and training; arts and recreation services; and other services.
NOTES TO THE FINANCIAL STATEMENTS
41
15. FINANCIAL RISK MANAGEMENT (continued)
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.
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 securities, investment
securities, derivatives and other
financial assets
For trading securities, 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 will have large individual exposures to single name counterparties such as central
clearing houses, financial institutions, and other institutional clients. Open derivative positions with
these counterparties are aggregated and cash collateral (or other forms of eligible collateral) is
exchanged daily through the respective Credit Support Annex (CSA) agreements. The collateral is
provided by the counterparty when their position is out of the money (or provided to the counterparty
by the Banking Group when our position is out of the money). Credit risk will remain where the full
amount of the derivative exposure is not covered by any collateral.
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
1
Unsecured portion of
credit exposure
2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net loans and advances
151,666
149,321
144,547
141,874
7,119
7,447
Other financial assets 43,284 40,768 3,605 3,232 39,679 37,536
Off-balance sheet positions
28,511
28,797
15,700
15,542
12,811
13,255
Total
223,461
218,886
163,852
160,648
59,609
58,238
1 In estimating the value of collateral for housing loans, customers are assumed to be meeting their insurance obligations for the properties over which the mortgages are secured.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
42
15. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Banking 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 risk and compliance with market risk policies to the Bank’s Asset &
Liability Management Committee (ALCO).
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 Banking Group level. The Market & Treasury 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:
• Currency risk – potential loss arising from changes in foreign
exchange rates or their implied volatilities.
• Interest rate risk – potential loss from changes in market
interest rates or their implied volatilities.
• Credit spread risk – potential loss arising from a movement
in margin or spread relative to a benchmark.
• Commodity risk – potential loss arising from changes in
commodity prices or their implied volatilities.
• 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 Banking Group’s possible daily loss based on historical market movements.
The Banking 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:
• the previous 500 business days, to calculate standard VaR; and
• a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using a one-day holding period. For stressed VaR we use a ten-day period. Back testing is used to ensure our
VaR models remain accurate.
The Banking Group 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.
NOTES TO THE FINANCIAL STATEMENTS
43
15. FINANCIAL RISK MANAGEMENT (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:
2024 2023
High for Low for Average High for Low for Average
As at year year for year As at year year for year
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Traded value at risk 99% confidence
Foreign exchange 0.8 1.4 0.3 0.8 0.8 1.6 0.5 0.9
Interest rate
1.7 3.8 0.8 1.5
1.7 6.2 1.1 2.0
Credit
0.9 1.1 0.1 0.7
1.0 1.1 0.4 0.7
Diversification benefit
1
(1.8) n/a n/a (1.0)
(1.8) n/a n/a (1.3)
Total VaR
1.6 4.8 1.2 2.0
1.7 6.7 1.2 2.3
1 The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for
the Banking Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Banking Group’s banking book, while ensuring the Banking Group
maintains sufficient liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Banking Group’s future net interest
income. This risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the
investment of capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the
impact of a 1% rate shock). The table below shows VaR figures for non-traded interest rate risk for the Banking Group.
2024 2023
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Non-traded value at risk 99% confidence
Total VaR
29.4 37.5 26.3 28.8
31.2 35.3 24.3 30.7
We undertake scenario analysis to stress test the impact of extreme events on the Banking 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.
2024 2023
Impact of 1% rate shock on the next 12 months' net interest income
As at period end
-0.4%
0.1%
Maximum exposure
1.1% 1.4%
Minimum exposure
-0.6%
-0.7%
Average exposure (in absolute terms)
0.4%
0.2%
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Where it is considered appropriate, the Banking Group takes out economic hedges against larger foreign exchange denominated expenditure streams
(primarily Australian Dollar, US Dollar and US Dollar correlated). The primary objective of hedging these streams is to protect against a significant
decrease in shareholder value due to negative impacts of foreign exchange rate movements.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
44
15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Banking Group:
• is 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 is overseen by ALCO following delegation from the BRC. Within an overall framework established by the BRC,
Treasury and Market & Treasury Risk have responsibility for the control of funding and liquidity risk at the Banking Group level. Liquidity and funding
risks are governed by a set of principles approved by the Risk Committees of the Bank’s and Ultimate Parent Bank’s Boards that include:
• maintaining the ability to meet all payment obligations in the immediate term;
• ensuring that the Banking Group has the ability to meet ‘survival horizons’ under Banking Group specific and general market liquidity stress
scenarios to meet cash flow obligations over the short to medium term;
• maintaining strength in the Banking 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 Banking 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 a detailed contingency plan to cover different liquidity crisis events.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY AND FUNDING RISK
Supervision and regulation
RBNZ requires the Bank to have a comprehensive Board approved liquidity strategy defining: policy, systems and procedures for measuring, assessing,
reporting and managing liquidity. This also includes a formal contingency plan for dealing with a liquidity crisis. The Banking Group is required to meet
one week and one month liquidity mismatch ratios and a one year core funding ratio each day.
Scenario modelling
A key component of the Banking Group’s liquidity management framework is scenario modelling of a range of regulatory and internal liquidity
metrics.
Potential severe liquidity crisis scenarios that model the behaviour of cash flows where there is a problem (real or perceived) may include, but are not
limited to, operational issues, doubts about the solvency of the Banking Group, or adverse credit rating changes. Under these scenarios the Banking
Group may have significant difficulty rolling over or replacing funding. The Banking Group’s liquidity policy requires sufficient high quality liquid assets
to be held to meet its liquidity needs for the following one month under the modelled scenarios.
As at 30 September 2024, the Banking Group was operating above the required minimums for the modelled scenarios.
Structural balance sheet metrics
The Banking Group’s liquidity management framework also encompasses structural balance sheet metrics such as the RBNZ’s core funding ratio. The
core funding ratio is designed to limit the amount of wholesale funding required to be rolled over within a one year timeframe and so interacts with
the modelled liquidity scenarios to maintain the Banking Group‘s liquidity position.
Wholesale funding
The Banking Group’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds that balances cost efficiency with
targeting diversification by markets, investors, currencies, maturities and funding structures. Short-term and long-term wholesale funding is managed
and executed by Treasury.
The Banking Group also uses maturity concentration limits under the wholesale funding and liquidity management framework. Maturity
concentration limits ensure that the Banking Group is not required to issue large volumes of new wholesale funding within a short time period to
replace maturing wholesale funding. Funding instruments used to meet the wholesale borrowing requirement must be on a pre-established list of
approved products.
Funding capacity and debt issuance planning
The Banking Group adopts a conservative approach to determine its funding capacity. Annually, a funding plan is approved by the Bank’s Board. The
plan is supplemented by regular updates and is linked to the Banking Group’s three-year strategic planning cycle.
NOTES TO THE FINANCIAL STATEMENTS
45
15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY PORTFOLIO MANAGEMENT
The Banking Group holds a diversified portfolio of cash and high quality liquid securities primarily to support liquidity risk management. The size of the
Banking Group’s liquidity portfolio is determined with consideration of the amount required to meet the requirements of its internal and regulatory
liquidity scenario metrics.
2024 2023
NZ$m NZ$m
Central and local government bonds 9,684 6,739
Government treasury bills 207 1,190
Certificates of deposit 359 318
Other bonds 8,205 8,193
Securities eligible to be accepted as collateral in repurchase transactions
18,455
16,440
Cash and balances with central banks
9,723
12,362
Total liquidity portfolio 28,178
28,802
Assets held in the Banking Group’s liquidity portfolio are all denominated in New Zealand dollars and include balances held with RBNZ and securities
issued by the New Zealand Government, supranational agencies, highly rated banks, state owned enterprises, local authorities (including through a
funding authority) and highly rated corporates.
The Bank also held unencumbered internal residential mortgage backed securities (RMBS) which would be accepted as collateral by RBNZ in
repurchase transactions. These holdings would entitle the Bank to enter into repurchase transactions with RBNZ with a value of NZ$10,480 million at
30 September 2024 (2023: NZ$10,776 million).
RBNZ Term Lending Facility (TLF) and Funding for Lending Programme (FLP)
• Between May 2020 and July 2021, RBNZ made funds available under the TLF to promote lending to businesses. The TLF is a five-year secured
funding facility for New Zealand banks at a fixed rate of 0.25%.
• Between December 2020 and December 2022, RBNZ made funds available under the FLP to lower the cost of borrowing for New Zealand
businesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official
Cash Rate (OCR).
As at 30 September 2024, the Bank had drawn NZ$228 million (2023: NZ$300 million) under the TLF and NZ$2,500 million (2023: NZ$3,500 million)
under the FLP. These amounts are included in securities sold under repurchase agreements in Note 13 Deposits and other borrowings.
Liquidity crisis contingency planning
The Banking Group maintains a liquidity crisis contingency plan to define an approach for analysing and responding to a liquidity-threatening event.
The framework includes:
• the establishment of crisis severity/stress levels;
• clearly assigned crisis roles and responsibilities;
• early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;
• action plans, and courses of action for altering asset and liability behaviour;
• procedures for crisis management reporting, and covering cash-flow shortfalls; and
• assigned responsibilities for internal and external communications.
FUNDING POSITION
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs funding metrics to
ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longer-dated wholesale debt (with
remaining term exceeding one year) and equity.
2024 2023
NZ$m NZ$m
Funding composition
Customer deposits
136,163
132,529
Wholesale funding
Debt issuances
17,623
19,147
Certificates of deposit
1,174
2,328
Commercial paper
1,419 2,253
Other borrowings
3,889
4,520
Total wholesale funding
24,105
28,248
Total deposits and wholesale funding
160,268
160,777
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
46
15. FINANCIAL RISK MANAGEMENT (continued)
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.
2024 2023
NZ$m NZ$m
Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing
3,949
4,535
Mining
313 204
Manufacturing
3,091
2,809
Construction
2,911 2,926
Wholesale trade
2,326
2,361
Retail trade and accommodation
2,195
2,124
Transport, postal and warehousing
1,530 1,572
Financial and insurance services
13,773
13,899
Rental, hiring and real estate services
3,441
3,498
Professional, scientific, technical, administrative and support services
6,750 6,377
Public administration and safety
1,855
1,515
Health care and social assistance
1,587 1,375
Arts, recreation and other services
2,466
2,502
Households
77,164
74,511
All other New Zealand residents
1
2,577 2,719
Subtotal
125,928
122,927
Customer deposits by industry - overseas
Households 9,488 8,807
All other non-NZ residents
747
795
Subtotal
10,235 9,602
Total customer deposits
136,163
132,529
Wholesale funding (financial and insurance services industry)
New Zealand 6,547 9,201
Overseas
17,558
19,047
Total wholesale funding
24,105
28,248
Total deposits and wholesale funding
160,268
160,777
Concentrations of funding by geography
New Zealand
132,475
132,128
Australia
1,575
1,220
United States
11,156 12,234
Europe
7,747
8,379
Other countries
7,315
6,816
Total deposits and wholesale funding
160,268
160,777
1 Other includes electricity, gas, water and waste services; information media and telecommunications; and education and training.
NOTES TO THE FINANCIAL STATEMENTS
47
15. FINANCIAL RISK MANAGEMENT (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE BANKING GROUP’S FINANCIAL LIABILITIES
The tables below provide residual contractual maturity analysis of financial liabilities at 30 September 2024 and 30 September 2023 within relevant
maturity groupings. All outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts
represent principal and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
It should be noted that this is not how the Banking Group manages its liquidity risk. The management of this risk is detailed on page 44.
On
demand
Less than
3 months
3 to 12
months
1 to 5
years
After
5 years Total
2024 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Settlement balances payable
3,772 1,620 - - - 5,392
Collateral received - 525 - - - 525
Deposits and other borrowings
76,860 25,392 36,705 6,458 2 145,417
Derivative financial liabilities (trading)
- 11,109 - - - 11,109
Debt issuances
1
- 400 3,284 14,692 1,191 19,567
Lease liabilities
- 14 41 156 46 257
Other financial liabilities
- 454 32 152 296 934
Derivative financial instruments
(balance sheet management)
- gross inflows
- 1,731 7,194 4,307 1,203 14,435
- gross outflows
- (1,798) (7,365) (4,345) (1,096) (14,604)
2023
Settlement balances payable 2,425 522 - - - 2,947
Collateral received - 1,500 - - - 1,500
Deposits and other borrowings 78,336 25,822 33,091 7,005 - 144,254
Derivative financial liabilities (trading) - 8,292 - - - 8,292
Debt issuances
1
- 408 3,552 15,790 2,261 22,011
Lease liabilities - 14 40 149 17 220
Other financial liabilities - 260 7 236 253 756
Derivative financial instruments
(balance sheet management)
- gross inflows - 2,434 4,443 8,366 935 16,178
- gross outflows - (2,341) (4,375) (8,748) (942) (16,406)
1 Any callable wholesale debt instruments have been included at their next call date. Refer to Note 14 Debt issuances for subordinated debt call dates.
At 30 September 2024, NZ$28,647 million (2023: NZ$28,924 million) of its credit related commitments and contingent liabilities mature in less than 1
year, based on the earliest date on which the Banking Group may be required to pay.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
48
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Banking Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial
instruments on the balance sheet at fair value.
Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The following tables set out the classification of financial assets and liabilities according to their measurement bases together with their carrying
amounts as recognised on the balance sheet.
2024 2023
At
amortised
cost
At fair
value Total
At
amortised
cost
At fair
value Total
Note NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial assets
Cash and cash equivalents 7
9,872 1,762 11,634
12,426 668 13,094
Settlement balances receivable
574 - 574 401 - 401
Collateral paid
1,041 - 1,041 801 - 801
Trading securities 8
- 5,576 5,576 - 5,921 5,921
Derivative financial instruments 9
- 10,181 10,181
- 8,753 8,753
Investment securities 10
- 13,295 13,295
- 10,958 10,958
Net loans and advances 11
151,666 - 151,666
149,321 - 149,321
Other financial assets
1,113 - 1,113
995 - 995
Total
164,266 30,814 195,080
163,944 26,300 190,244
Financial liabilities
Settlement balances payable 5,367 - 5,367 2,920 - 2,920
Collateral received
525 - 525 1,500 - 1,500
Deposits and other borrowings 13
140,204 2,441 142,645
138,748 2,882 141,630
Derivative financial instruments 9
- 11,179 11,179
- 8,326 8,326
Debt issuances 14
17,623 - 17,623
19,147 - 19,147
Other financial liabilities
1,692 372 2,064
1,249 371 1,620
Total
165,411 13,992 179,403
163,564 11,579 175,143
FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Banking Group holds offsetting risk positions, then the portfolio exception in NZ IFRS 13
Fair Value Measurement (NZ IFRS 13) is used to measure
the fair value of such groups of financial assets and financial liabilities. The Banking Group measures the portfolio based on the price that would be
received to sell a net long position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
We designate commercial paper and certain securities sold under repurchase agreements (included in deposits and other borrowings) at FVTPL where
they are managed on a fair value basis to align the measurement with how the financial instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUES
We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
Asset or liability Fair value approach
Financial instruments classified as:
- Derivative financial assets and financial liabilities
(including trading and non-trading)
- Repurchase agreements <90 days
- Net loans and advances
- Deposits and other borrowings
- Debt issuances
Discounted cash flow techniques are used whereby contractual future cash flows of the
instrument are discounted using wholesale market interest rates, or market borrowing rates
for debt or loans with similar maturities or yield curves appropriate for the remaining term to
maturity.
Financial instruments classified as:
- Trading securities
- Investment securities
Valuation techniques use comparable multiples (such as price-to-book ratios) or discounted
cashflow (DCF) techniques incorporating, to the extent possible, observable inputs from
instruments with similar characteristics.
NOTES TO THE FINANCIAL STATEMENTS
49
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE HIERARCHY
The Banking Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with NZ IFRS 13 based on the
observability of inputs used to measure the fair value:
• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and
• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
Fair value measurements
Quoted price in
active markets
(Level 1)
Using observable inputs
(Level 2)
Using unobservable
inputs (Level 3) Total
2024 2023 2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Cash and cash equivalents - - 1,762 668 - - 1,762 668
Trading securities
1
4,653 3,989 923 1,932 - - 5,576 5,921
Derivative financial instruments
3
38
10,177
8,715
1
-
10,181
8,753
Investment securities
1
12,184
7,796
1,106
3,161
5
1
13,295
10,958
Total 16,840
11,823
13,968
14,476
6
1
30,814
26,300
Liabilities
Deposits and other borrowings
-
-
2,441
2,882
-
-
2,441
2,882
Derivative financial instruments
70 2 11,108 8,314 1 10 11,179 8,326
Other financial liabilities
358 367 14 4 - - 372 371
Total
428
369
13,563
11,200
1
10
13,992
11,579
1 During 2024, no assets were transferred from Level 1 to Level 2 (2023: NZ$1,685 million transferred from level 1 to Level 2) and NZ$2,390 million of assets were transferred from Level 2 to
Level 1 (2023: NZ$338 million transferred from Level 2 to Level 1) for the Banking Group due to a change of the observability of valuation inputs. There were no other material transfers
between Level 1 and Level 2 during the year. Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed below are carried at amortised cost on the Banking Group’s balance s heet. While this is the value at
which we expect the assets will be realised and the liabilities settled, the Banking Group provides an estimate of the fair value of the financial assets
and financial liabilities at balance date in the table below.
Fair values of financial assets and liabilities carried at amortised cost not included in the table below approximate their carrying values. These financial
assets and liabilities are either short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of the
reporting period.
Categorised into fair value hierarchy
At amortised cost
Quoted price in active
markets
(Level 1)
Using observable
inputs
(Level 2)
With significant non-
observable inputs
(Level 3) Total fair value
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial assets
Net loans and advances 151,666 149,321 - - 69 95 151,973 148,167 152,042 148,262
Total 151,666
149,321
-
-
69
95
151,973
148,167
152,042
148,262
Financial liabilities
Deposits and other
borrowings
140,204 138,748 - - 140,382 138,647 - - 140,382 138,647
Debt issuances
17,623
19,147
2,705
2,367
15,106
16,819
-
-
17,811
19,186
Total 157,827
157,895
2,705
2,367
155,488
155,466
-
-
158,193
157,833
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
50
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The following table sets out the Banking Group’s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where the
carrying value is not typically a reasonable approximation of fair value.
Financial asset and liability Fair value approach
Net loans and advances to banks Discounted cash flows using prevailing market rates for loans with similar credit quality.
Net loans and advances to customers Present value of future cash flows, discounted using a curve that incorporates changes in
wholesale market rates, the Banking Group’s cost of wholesale funding and the customer margin,
as appropriate.
Deposit liability without a specified maturity or
at call
The amount payable on demand at the reporting date. We do not adjust the fair value for any
value we expect the Banking Group to derive from retaining the deposit for a future period.
Interest bearing fixed maturity deposits and
other borrowings and acceptances with
quoted market rates
Market borrowing rates of interest for debt with a similar maturity are used to discount contractual
cash flows to derive the fair value.
Debt issuances Calculated based on quoted market prices or observable inputs as applicable. If quoted market
prices are not available, we use a discounted cash flow model using a yield curve appropriate for
the remaining term to maturity of the debt instrument. The fair value reflects adjustments to credit
spreads applicable to the Banking Group for that instrument.
KEY JUDGEMENTS AND ESTIMATES
A significant portion of financial instruments are carried on the Banking Group’s balance sheet at fair value. The Banking Group therefore regularly
evaluates the key valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within the
financial statements, as this can involve a high degree of judgement and estimation in determining the carrying values at the balance sheet
date.
In determining the fair valuation of financial instruments, the Banking Group has considered the impact of related economic and market
conditions on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, as
well as the impact of these matters on the classification of financial instruments in the fair value hierarchy.
Most of the valuation models the Banking Group uses employ only observable market data as inputs. For certain financial instruments, we may
use data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement to
determine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable
inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair value of
a financial instrument using a valuation technique, the Banking Group also considers any required valuation adjustments in determining the
fair value. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments – refer Note 9 Derivative
financial instruments to reflect the Banking Group’s assessment of factors that market participants would consider in determining fair value of
a particular financial instrument.
NOTES TO THE FINANCIAL STATEMENTS
51
17. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SE
CURITY FOR ASSETS
The following disclosure excludes the amounts presented as collateral paid and received in the balance sheet that relate to derivative liabilities and
derivative assets respectively. The terms and conditions of those collateral agreements are included in the standard CSA that forms part of the ISDA
Master Agreement under which most of our derivatives are executed.
ASSETS CHARGED AS SECURITY FOR LIABILITIES
Assets charged as security for liabilities include the following types of instruments:
•securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;
•specified residential mortgages provided as security for notes and bonds issued to investors as part of the Banking Group’s covered bond
programmes; and
•collateral provided to RBNZ under the TLF and FLP.
The carrying amounts of assets pledged as security are as follows:
2024 2023
NZ$m NZ$m
Securities sold under arrangements to repurchase
1
768
626
Residential mortgages provided as security for repurchase agreements with RBNZ
3,559
4,844
Total assets of the ANZNZ Covered Bond Trust pledged as security for covered bonds
10,563
10,926
Comparative amounts have been adjusted to be consistent with the current period’s collateral securities.
1 The amounts disclosed as securities sold under arrangements to repurchase include both:
• assets pledged as security which continue to be recognised on the Banking Group’s balance sheet; and
• assets repledged, which are included in the disclosure below.
COLLATERAL ACCEPTED AS SECURITY FOR ASSETS
The Banking Group has received collateral associated with various financial transactions. Under certain arrangements the Banking Group has the right
to sell, or to repledge, the collateral received. These arrangements are governed by standard industry agreements.
The fair value of collateral we have received and that which we have sold or repledged is as follows:
2024 2023
NZ$m NZ$m
Fair value of assets which can be sold or repledged 1,707 667
Fair value of assets sold or repledged 697 432
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
52
18. OFFSETTING
We offset financial assets and financial liabilities in the balance sheet (in accordance with NZ IAS 32 Financial Instruments: Presentation) when there is:
• a current legally enforceable right to set off the recognised amounts in all circumstances; and
• an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of over
collateralisation.
Amount subject to master netting agreement or similar
Total
amounts
recognised
in the
balance sheet
Amounts not
subject to
master netting
agreement or
similar Total
Financial
instruments
Financial
collateral
(received)/
pledged Net amount
2024 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Derivative financial assets 10,181 (1,600) 8,581 (8,260) (72) 249
Reverse repurchase agreements
1
1,762 - 1,762 - (1,762) -
Total financial assets 11,943 (1,600) 10,343 (8,260) (1,834) 249
Derivative financial liabilities
(11,179) 1,858 (9,321) 8,260 331 (730)
Repurchase agreements
2
(3,750) - (3,750) - 3,750 -
Total financial liabilities (14,929) 1,858 (13,071) 8,260 4,081 (730)
2023
Derivative financial assets 8,753 (1,532) 7,221 (5,703) (538) 980
Reverse repurchase agreements
1
668 - 668 - (668) -
Total financial assets
9,421 (1,532) 7,889 (5,703) (1,206) 980
Derivative financial liabilities (8,326) 1,593 (6,733) 5,703 223 (807)
Repurchase agreements
2
(4,429) - (4,429) - 4,429 -
Total financial liabilities
(12,755) 1,593 (11,162) 5,703 4,652 (807)
1 Reverse repurchase agreements are presented in the balance sheet within cash and cash equivalents.
2
Repurchase agreements are presented in the balance sheet within deposits and other borrowings.
NOTES TO THE FINANCIAL STATEMENTS
53
19. GOODWILL AND OTHER INTANGIBLE ASSETS
2024 2023
NZ$m NZ$m
Goodwill
3,006 3,006
Software 19 37
Management rights
69 76
Goodwill and other intangible assets
3,094
3,119
GOODWILL AND OTHER INTANGIBLE ASSETS ALLOCATED TO CASH-GENERATING UNITS (CGUs)
Goodwill arose on the acquisition of the NBNZ Holdings Limited group on 1 December 2003, and the carrying amount reflects amortisation
recognised before the application of NZ IFRS from 1 October 2004 and subsequent business disposals. Funds management rights, assessed as having
indefinite useful lives, arose on the acquisition of the ING Holdings (NZ) Limited (now ANZ New Zealand Investments Holdings Limited) group on 30
November 2009.
Goodwill and funds management rights are allocated to CGUs as follows:
Goodwill Management rights
2024 2023 2024 2023
Cash generating unit NZ$m NZ$m NZ$m NZ$m
Personal
980 980 - -
Funds Management
62 62 69 76
Personal segment
1,042
1,042
69
76
Business & Agri
695
695
-
-
Institutional
1,269
1,269
-
-
Total
3,006
3,006
69
76
Goodwill was assessed for indicators of impairment as at 30 September 2024, taking into account the results of the February 2024 impairment test and
associated sensitivity and scenario analysis performed and the forecast impact of recent economic events. There were no indicators of impairment
therefore, in accordance with NZ IAS 36
Impairment of Assets, no further impairment test was required.
The following information is for the annual goodwill impairment test, and reflects the CGUs and goodwill allocations as at 29 February 2024.
Annual goodwill impairment test
The annual impairment test is performed as at the end of February each year. Goodwill is considered to be impaired if the carrying amount of the
relevant CGU exceeds its recoverable amount. The recoverable amount of a CGU is the higher of its fair value less costs of disposal (FVLCOD) and its
value-in -use (VIU). We use a VIU approach to estimate the recoverable amount of the CGU to which each goodwill component is allocated. Based on
this assessment no impairment was identified for any CGU, and therefore a FVLCOD calculation was not required.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
54
19. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
VALUE-IN-USE
These calculations use cash flow projections based on a number of financial budgets within each CGU covering an initial forecast period. These
projections also incorporate economic assumptions including GDP, inflation, unemployment, residential and commercial property prices, and the
implementation of RBNZ’s increased capital requirements. Cash flows beyond the forecast period are extrapolated using the terminal growth rate.
These cash flow projections are discounted using a discount rate derived using a capital asset pricing model.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential impairment
of part or all of the goodwill balances.
Input / assumption
Values applied in 29 February 2024 impairment test
Forecast period and projections To 30 September 2028 - an extended forecast period was used to cover the implementation of RBNZ’s
increased capital requirements over the transition period ending on 1 July 2028.
Revenue growth over forecast
period
Comprises impacts of net interest margin and volume growth, arising from planned responses to known
regulatory and economic forecasts. Average annual forecast revenue growth rates are shown below.
Credit impairment over forecast
period
Varies by CGU, based on ECL modelling for 2024 and 2025, before returning to long run experience levels
for 2026 to 2028. Long run experience levels are based on the Banking Group’s bad debts written off, net of
recoveries, since 2004 of 0.13% of gross loans and advances. Credit impairment for each CGU as a
percentage of forecast gross loans and advances for 2025 to 2028 is shown below.
Terminal growth rate 2.0% - based on 2026 forecast inflation from RBNZ’s February 2024 Monetary Policy Statement.
Discount rate Post tax: 11.7% (February 2023: 11.9%).
The main variables in the calculation of the discount rate used are the risk free rate, beta and the market risk
premium. The risk-free rate was the average traded 10-year New Zealand government bond yield as at 29
February 2024 of 4.8%. The market risk premium was estimated using observed historic rates of return for
the New Zealand stock exchange and 10-year government bonds. Beta was consistent with observable
measures applied in the regional banking sector.
The values of the average revenue growth, credit impairment as a percentage of forecast gross loans and advances, and pre-tax discount rates
assumptions by CGU are shown in the table below. The implied pre-tax discount rates are significantly higher than the post-tax discount rate above
because regulatory capital retention over the forecast period is not tax effected.
Revenue growth Credit impairment Pre-tax discount rate
Cash generating unit
29 Feb 24 28 Feb 23 29 Feb 24 28 Feb 23 29 Feb 24 28 Feb 23
Personal
4.6%
2.2%
0.04%
0.07%
25.3%
24.1%
Funds Management
4.4%
5.6%
n/a
n/a
23.5%
21.5%
Business & Agri
2.8%
2.8%
0.11%
0.15%
25.4%
23.5%
Institutional
1.8%
1.8%
0.12%
0.17%
25.5%
23.3%
We performed stress tests for key sensitivities in each CGU. A change, considered to be reasonably possible by management, in key assumptions
would not cause the carrying amount of any CGU to exceed its recoverable amount.
NOTES TO THE FINANCIAL STATEMENTS
55
19. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:
Goodwill Software Other intangibles
Definition
Excess amount the Banking
Group has paid in acquiring a
business over the fair value of
the identifiable assets and
liabilities acquired.
Purchased software owned by the
Banking Group is capitalised.
Internal and external costs incurred
in building software and computer
systems costing greater than
NZ$20 million are capitalised as
assets. Those less than NZ$20
million are expensed in the year in
which the costs are incurred.
Costs incurred in planning or
evaluating software proposals or in
maintaining systems after
implementation are not capitalised.
Management fee rights arising from
acquisition of funds management
business.
Carrying value
Cost less any accumulated
impairment losses.
Allocated to the CGU to which
the acquisition relates.
Initially, measured at cost.
Subsequently, carried at cost less
accumulated amortisation and
impairment losses.
Initially, measured at fair value at
acquisition.
Subsequently, carried at cost less
accumulated impairment losses.
Useful life
Indefinite.
Goodwill is reviewed for
impairment at least annually or
when there is an indication of
impairment.
Except for major core
infrastructure, amortised over
periods between 2-5 years;
however major core infrastructure
may be amortised over 7 years
subject to approval by the Audit
Committee.
Purchased software is amortised
over 2 years unless it is considered
integral to other assets with a
longer useful life.
Management fee rights with an
indefinite life are reviewed for
impairment at least annually or
when there is an indication of
impairment.
Amortisation
method
Not applicable. Straight-line method. Not applicable.
KEY JUDGEMENTS AND ESTIMATES
Management judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of
an asset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:
• the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Banking
Group’s revenue generating segments that benefit from relevant historical business combinations generating goodwill.
• determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
• assessment of the recoverable amount of each CGU used to determine whether the carrying amount of goodwill is supported is
based on judgements including the selection of the model and key assumptions used to calculate the recoverable amount.
The assessment of the recoverable amount of each CGU has been made within the context of the inherent uncertainty described in the
key judgements and estimates section on page 9.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
56
20. OTHER PROVISIONS
2024 2023
Note NZ$m NZ$m
ECL allowance on undrawn and contingent facilities 12
136
127
Customer remediation
24
36
Restructuring costs 8 10
Leasehold make good 22 21
Other 22 15
Total other provisions 212
209
Movements in other provisions
Customer Restructuring Leasehold
remediation costs make good Other
NZ$m NZ$m NZ$m NZ$m
Balance at 1 October 2023
36 10 21 15
New and increased provisions made during the year
4 10 4 7
Provisions used during the year
(16) (11) - -
Unused amounts reversed during the year
- (1) (3) -
Balance at 30 September 2024 24 8 22 22
Customer remediation
Customer remediation includes provisions for expected refunds to customers and other counterparties, remediation project costs and related
customer, counterparty and regulatory claims, penalties and litigation costs and outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Banking Group or the
manner in which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for and
are expensed as incurred.
Leasehold make good
Provisions associated with leased premises where, at the end of a lease, the Banking Group is required to remove any fixtures and fittings installed in
the leased property. This obligation arises immediately upon installation. Estimated make good costs are added to the right of use asset (within
premises and equipment) upon installation and amortised over the lease term.
Other
Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities
provided in connection with various disposals of businesses and assets.
RECOGNITION AND MEASUREMENT
The Banking Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources is
probable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using the estimated cash
flows required to settle the present obligation, its carrying amount is the present value of those cash flows.
KEY JUDGEMENTS AND ESTIMATES
The Banking Group holds provisions for various obligations including customer remediation, restructuring costs, leasehold make good and
litigation related claims. These provisions involve judgements regarding the timing and outcome of future events, including estimates of
expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice,
provisions and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the cost
of settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of
different assumptions, including the number of impacted customers, the average refund per customer, the associated remediation project
costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is a
heightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The
appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence
including expert legal advice and adjustments are made to the provisions where appropriate.
NOTES TO THE FINANCIAL STATEMENTS
57
21. SHAREHOLDERS' EQUITY
SHAREHOLDERS’ EQUITY
2024 2023
NZ$m NZ$m
Share capital 17,680 12,438
Reserves
FVOCI reserve (28) (39)
Cash flow hedge reserve
52
(54)
Total reserves
24
(93)
Retained earnings
1,106
6,076
Total shareholders' equity
18,810
18,421
SHARE CAPITAL
The table below details the movement in issued shares and share capital for the period.
Number of issued shares NZ$ millions
2024 2023 2024 2023
Ordinary shares at start of year
6,345,755,498
6,345,755,498
11,588
11,588
Ordinary shares issued during the year 4,400,000,000 - 4,400 -
Total ordinary shares 10,745,755,498 6,345,755,498 15,988 11,588
Perpetual preference shares
Perpetual preference shares at start of year
850,000,000
850,000,000
850
850
Perpetual preference shares issued during the year
1,141,720,000
-
1,142
-
Perpetual preference shares redeemed during the year
(300,000,000)
-
(300)
-
Total perpetual preference shares
1,691,720,000
850,000,000
1,692
850
Total share capital 12,437,475,498
7,195,755,498
17,680
12,438
Perpetual preference shares
Perpetual preference shares (PPS) do not carry any voting rights. They are classified as equity instruments as there is no contractual obligation for the
Bank to either deliver cash or another financial instrument or to exchange financial instruments on a potentially unfavourable basis.
In the event of liquidation, holders of PPS are entitled to an amount equal to the issue price of the PPS. Holders of PPS rank behind the claims of all
depositors and other creditors of the Bank (other than creditors that rank equally with the PPS), equally with the rights of other holders of PPS,
additional tier 1 (AT1) capital notes and other equal ranking securities and obligations, and in priority to the rights of holders of ordinary shares.
Holders of PPS are entitled to receive dividends that are discretionary, non-cumulative and subject to conditions. If a PPS dividend is not paid, there are
certain restrictions on the ability of the Bank to pay a dividend on its ordinary shares. Holders of the PPS have no other rights to participate in the
profits or property of the Bank.
Holders of PPS have no right to require that the PPS be redeemed.
The Bank has three classes of PPS: PPS issued in 2022 and 2024 that are quoted on the NZX Debt Market (Quoted PPS), and PPS issued to the
Immediate Parent Company in 2024 (2024 PPS). The PPS issued to the Immediate Parent Company in 2013 were redeemed for NZ$300 million in June
2024.
PPS qualify as AT1 capital for RBNZ’s capital adequacy purposes.
The key terms of the PPS are as follows:
2022 Quoted PPS 2024 Quoted PPS 2024 PPS
Issue date 18 July 2022 19 March 2024 18 September 2024
Issue amount NZ$550 million NZ$275 million NZ$867 million
First optional redemption date 18 July 2028 19 March 2030 18 October 2030
Final maturity date Perpetual Perpetual Perpetual
Dividend amount 6.95% per annum until 18 July 2028
(after which it changes to a floating
rate equal to the aggregate of the
New Zealand 3-month bank bill rate
plus 3.25%), multiplied by one minus
the New Zealand company tax rate
(where the PPS dividend is fully
imputed).
7.60% per annum until 19 March
2030 (after which it changes to a
floating rate equal to the aggregate
of the New Zealand 3-month bank
bill rate plus 3.25%), multiplied by
one minus the New Zealand
company tax rate (where the PPS
dividend is fully imputed).
Floating rate equal to the aggregate
of the New Zealand 3-month bank
bill rate plus 3.03%.
As at 30 September 2024, the Quoted PPS carried a BBB+ credit rating from S&P Global Ratings. These credit ratings were upgraded from BBB on 2
April 2024.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
58
21. SHAREHOLDERS' EQUITY (continued)
The Bank may, at its option, redeem a class of PPS on an optional redemption date (being each scheduled quarterly dividend payment date from the
first optional redemption date), or at any time following the occurrence of a tax event or regulatory event, subject to prior written approval of RBNZ
and certain other conditions being met.
RECOGNITION AND MEASUREMENT
Ordinary shares
Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds available on winding
up of the Bank, in proportion to the number of fully paid ordinary shares held. They are recognised at the
amount paid per ordinary share net of directly attributable costs. Every holder of fully paid ordinary shares
present at a meeting in person, or by proxy, is entitled to:
• on a show of hands, one vote; and
• on a poll, one vote, for each share held.
Perpetual
preference shares
Perpetual preference shares do not carry any voting rights. They are wholly classified as equity instruments as
there is no contractual obligation for the Bank to either deliver cash or another financial instrument or to
exchange financial instruments on a potentially unfavourable basis.
In the event of liquidation, holders of perpetual preference shares are entitled to available subscribed capital
per share, pari passu with all holders of existing perpetual preference shares and AT1 capital instruments but in
priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of profits
or assets.
Reserves:
Cash flow hedge
reserve
Includes fair value gains and losses associated with the effective portion of designated cash flow hedging
instruments together with any tax effect.
FVOCI reserve Includes the changes in fair value of investment securities together with any tax effect.
In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records accumulated changes
in fair value arising subsequent to initial recognition, except for those relating to allowance for ECL, interest
income and foreign currency exchange gains and losses which are recognised in profit or loss. As debt
securities at FVOCI are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowance
associated with such assets. When a debt security measured at FVOCI is derecognised, the cumulative gain or
loss recognised in the FVOCI reserve in respect of that security is reclassified to profit or loss and presented in
other operating income.
In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records accumulated
changes in fair value arising subsequent to initial recognition (including any related foreign exchange gains or
losses). When an equity security measured at FVOCI is derecognised, the cumulative gain or loss recognised in
the FVOCI reserve in respect of that security is not recycled to profit or loss.
NOTES TO THE FINANCIAL STATEMENTS
59
22. CAPITAL MANAGEMENT
CAPITAL MANAGEMENT STRATEGY
The Banking Group’s core capital objectives are to:
• protect the interests of depositors, creditors and shareholders;
• ensure the safety and soundness of the Banking Group’s capital position; and
• ensure that the capital base supports the Banking Group’s risk appetite, and strategic business objectives, in an efficient and effective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting, monitoring and obtaining assurance for
the Banking Group’s Internal Capital Adequacy Assessment Process (ICAAP) policy and framework; standardised risk definitions for all material risks;
materiality thresholds; capital adequacy targets; internal capital principles; and risk appetite.
The Banking Group has minimum and trigger levels for common equity tier 1, tier 1 and total capital that ensure sufficient capital is maintained to:
• meet minimum prudential requirements imposed by regulators;
• ensure consistency with the Banking Group’s overall risk profile and financial positions, taking into account its strategic focus and business plan;
and
• support the internal risk capital requirements of the business.
ALCO is responsible for developing, implementing and maintaining the Banking Group's ICAAP framework, including ongoing monitoring, reporting
and compliance. The Banking Group’s ICAAP is subject to independent and periodic review.
Throughout the year, the Banking Group maintained compliance with RBNZ’s minimum capital ratios.
REGULATORY ENVIRONMENT
As the Bank is a registered bank in New Zealand, it is primarily regulated by RBNZ under the Banking (Prudential Supervision) Act 1989. The Bank must
comply with the minimum regulatory capital requirements, capital ratios and specific reporting levels that RBNZ sets. RBNZ requirements are
summarised below:
Regulatory capital definition Minimum capital ratios
Common equity tier 1 (CET1) capital
Comprises ordinary share capital, retained
earnings, and certain accounting reserves. Some
amounts (e.g. the value of goodwill) must be
deducted to determine the final value of CET1
capital.
CET1 capital divided by total risk weighted assets
must be at least 4.5%.
Tier 1 capital
CET1 capital plus additional tier 1 instruments
that comprise high-quality capital and must:
• provide a permanent and unrestricted
commitment of funds;
• be freely available to absorb losses; and
provide for fully discretionary capital
distributions.
Tier 1 capital divided by total risk weighted assets
must be at least 7.0%. (2023: 6.0%)
Total capital
Tier 1 plus tier 2 capital. Tier 2 instruments
include some subordinated instruments and
accounting reserves that are not included in tier
1 capital. Some amounts are deducted in
determining the value of tier 2 instruments.
Total capital divided by total risk weighted assets
must be at least 9.0%. (2023: 8.0%)
Capital buffer
The Capital buffer is actual CET1 capital in excess
of any of the minimum capital requirements
imposed on the Bank.
Capital buffer divided by total risk weighted assets
should be at least 4.5%.
Reporting levels
Solo consolidated
The registered bank plus subsidiaries which are funded exclusively and wholly owned by the
registered bank.
Banking Group
The registered bank’s consolidated group.
The Bank measures capital adequacy and reports to RBNZ on a Banking Group basis monthly, and measures capital adequacy on a Solo consolidated
basis quarterly. Banking Group and Solo consolidated capital ratios are reported publicly in six-monthly disclosure statements.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
60
22. CAPITAL MANAGEMENT (continued)
CAPITAL ADEQUACY
The following table provides details of the Banking Group’s capital adequacy ratios at 30 September:
2024 2023
Unaudited NZ$m NZ$m
Qualifying capital
Tier 1
Shareholders' equity 18,810 18,421
Perpetual preference shares and other adjustments to shareholders' equity
1
(1,699) (857)
Gross common equity tier 1 capital 17,111 17,564
Deductions (3,980) (3,682)
Common equity tier 1 capital 13,131 13,882
Additional tier 1 capital
2,630
1,788
Tier 1 capital
15,761
15,670
Tier 2 capital
2,170
1,546
Total capital
17,931
17,216
Capital adequacy ratios
Common equity tier 1
12.6%
12.5%
Tier 1
15.1%
14.1%
Tier 2
2.1%
1.4%
Total
17.2%
15.5%
Prudential capital buffer ratio
8.1%
7.5%
Risk weighted assets
104,243
111,327
1 Includes a deduction for dividends on AT1 capital instruments approved by the Bank’s board, but not yet paid as at 30 September 2024, as required by BPR110 Capital Definitions.
23. CONTROLLED ENTITIES
The following table lists the subsidiaries of the Banking Group. All subsidiaries are 100% owned and incorporated in New Zealand unless stated
otherwise.
Nature of business
ANZ Bank New Zealand Limited Registered bank
ANZ Custodial Services New Zealand Limited
Custodian and nominee
ANZ Investment Services (New Zealand) Limited
Funds management
ANZ National Staff Superannuation Limited
Staff superannuation scheme trustee
ANZ New Zealand (Int'l) Limited
Finance
ANZ New Zealand Investments Holdings Limited
Holding company
ANZ New Zealand Investments Limited Funds management
ANZ New Zealand Investments Nominees Limited Custodian and nominee
OneAnswer Nominees Limited Wrap services provider
ANZNZ Covered Bond Trust
1
Securitisation entity
Arawata Assets Limited Property
Endeavour Finance Limited Investment
Kingfisher NZ Trust 2008-1
1
Securitisation entity
1 The Banking Group does not own ANZNZ Covered Bond Trust and Kingfisher NZ Trust 2008-1. Control exists as the Banking Group retains substantially all the risks and rewards of the
operations. Details of the Banking Group’s interest in consolidated structured entities is included in Note 24 Structured entities.
RECOGNITION AND MEASUREMENT
The Banking Group subsidiaries are those entities it controls through:
• being exposed to, or having rights to, variable returns from the entity; and
• being able to affect those returns through its power over the entity.
The Banking Group assesses whether it has power over those entities by examining the Banking Group’s existing rights to direct the relevant
activities of the entity.
NOTES TO THE FINANCIAL STATEMENTS
61
24. STRUCTURED ENTITIES
A Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls
the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives.
SEs are classified as subsidiaries and consolidated when control exists. If the Banking Group does not control a SE, then it is not consolidated. This note
provides information on both consolidated and unconsolidated SEs.
The Banking Group’s involvement with SEs is as follows:
Type Details
Securitisation
The Banking Group uses the Kingfisher NZ Trust 2008-1 (the Kingfisher Trust) to securitise residential mortgages
that it has originated, in order to diversify sources of funding for liquidity management. The Kingfisher Trust is an
internal securitisation (bankruptcy remote) vehicle created for the purpose of structuring assets that are eligible for
repurchase under agreements with RBNZ (these are known as ‘Repo eligible’).
The Banking Group is exposed to variable returns from its involvement with the Kingfisher Trust and has the ability
to affect those returns through its power over the Kingfisher Trust’s activities. The Kingfisher Trust is therefore
consolidated.
As at 30 September 2024 and 30 September 2023, the Banking Group had entered into repurchase agreements
with RBNZ in relation to the TLF and FLP.
Additionally, the Banking Group may acquire interests in securitisation vehicles set up by third parties through
providing lending facilities to, or holding securities issued by, such entities.
ANZNZ Covered Bond Trust
(the Covered Bond Trust)
Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related
securities originated by the Bank which are security for the guarantee by ANZNZ Covered Bond Trust Limited as
trustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ
New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditors
of the Bank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets
of the Covered Bond Trust (if any) after all priority ranking creditors of the Covered Bond Trust have been satisfied.
The Banking Group is exposed to variable returns from its involvement with the Covered Bond Trust and has the
ability to affect those returns through its power over the Covered Bond Trust’s activities. The Covered Bond Trust is
therefore consolidated.
Structured finance
arrangements
The Banking Group is involved with SEs established:
• in connection with structured lending transactions to facilitate debt syndication and/or to ring-fence
collateral; and
• to own assets that are leased to customers in structured leasing transactions.
The Banking Group may provide risk management products (derivatives) to the SE.
In all instances, the Banking Group does not control these SEs. Further, the Banking Group’s involvement does not
establish more than a passive interest in decisions about the relevant activities of the SE, and accordingly we do
not consider that interest disclosable.
Funds management activities
The Banking Group is the scheme manager for a number of Managed Investment Schemes (MIS). These MIS
include the ANZ and OneAnswer branded KiwiSaver, retail and wholesale schemes. These MIS are financed
through the issue of units to investors and the Banking Group considers them to be SEs. The Banking Group’s
interests in these MIS are limited to receiving fees for services or providing risk management products (derivatives).
These interests do not create significant exposures to the MIS that would allow the Banking Group to control the
funds. Therefore, these MIS are not consolidated.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
62
24. STRUCTURED ENTITIES (continued)
CONSOLIDATED STRUCTURED ENTITIES
Financial or other support provided to consolidated SEs
The Bank provides lending facilities, derivatives and commitments to the Kingfisher Trust and the Covered Bond Trust and/or holds debt instruments
that they have issued. The Bank did not provide any non-contractual support to consolidated SEs during the year (2023: nil).
UNCONSOLIDATED STRUCTURED ENTITIES
The Banking Group’s interest in unconsolidated SEs
An ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Banking Group to variability
of returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass on
risks specific to the performance of the SE; lending; loan commitments; financial guarantees; and fees from funds management activities.
For the purpose of disclosing interests in unconsolidated SEs:
• no disclosure is made if the Banking Group’s involvement is not more than a passive interest - for example: when the Banking Group’s
involvement constitutes a typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading
and investing activities are not considered disclosable interests - unless the design of the structured entity allows the Banking Group to
participate in decisions about the relevant activities (being those that significantly affect the entity’s returns).
• ‘interests’ do not include derivatives intended to expose the Banking Group to market risk (rather than performance risk specific to the SE) or
derivatives through which the Banking Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit
protection under a credit default swap).
The Banking Group earned funds management fees from its MIS of NZ$199 million (2023: NZ$192 million) during the year. As at 30 September 2024,
the Banking Group had total funds under management of NZ$39.7 billion (2023: NZ$37.1 billion) of which NZ$26.0 billion (2023: NZ$26.1 billion)
related to its MIS, with the largest individual fund being approximately NZ$5.2 billion (2023: NZ$4.4 billion).
The Banking Group did not provide any non-contractual support to unconsolidated SEs during the year (2023: nil): nor does it have any current
intention to provide financial or other support to unconsolidated SEs.
SPONSORED UNCONSOLIDATED STRUCTURED ENTITIES
The Banking Group may also sponsor unconsolidated SEs in which it has no disclosable interest.
For the purposes of this disclosure, the Banking Group considers itself the ‘sponsor’ of an unconsolidated SE if it is the primary party involved in the
design and establishment of that SE and:
• the Banking Group is the major user of that SE; or
• the Banking Group’s name appears in the name of that SE, or on its products; or
• the Banking Group provides implicit or explicit guarantees of that SE’s performance.
The Bank has sponsored the ANZ PIE Fund, which invests only in deposits with the Bank. The Banking Group does not provide any implicit or explicit
guarantees of the capital value or performance of investments in the ANZ PIE Fund. There was no income received from, nor assets transferred to, this
entity during the year.
KEY JUDGEMENTS AND ESTIMATES
Significant judgement is required in assessing whether the Banking Group has control over SEs. Judgement is required to determine the
existence of:
• power over the relevant activities (being those that significantly affect the entity’s returns); and
• exposure to variable returns of the entity.
NOTES TO THE FINANCIAL STATEMENTS
63
25. TRANSFERS OF FINANCIAL ASSETS
In the normal course of business the Banking Group enters into transactions where it transfers financial assets directly to third parties. These transfers
may give rise to the Banking Group fully, or partially, derecognising those financial assets - depending on the Banking Group’s exposure to the risks
and rewards or control over the transferred assets. If the Banking Group retains substantially all of the risk and rewards of a transferred asset, the
transfer does not qualify for derecognition and the asset remains on the Banking Group’s balance sheet in its entirety.
Covered bonds
The Banking Group operates a covered bond programme to raise funding. Refer to Note 24 Structured entities for further details. The covered bonds
issued externally are included within debt issuances.
Repurchase agreements
When the Banking Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership,
then those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.
The table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
Covered bonds Repurchase agreements
2024 2023 2024 2023
NZ$m NZ$m NZ$m NZ$m
Current carrying amount of assets transferred
10,563
10,926
4,327
5,470
Carrying amount of associated liabilities
2,156
3,373
3,750
4,429
26. RELATED PARTY DISCLOSURES
Key management personnel and their related parties
Key management personnel (KMP) are defined as directors and those executives having authority and responsibility for planning, directing and
controlling the activities of the Banking Group. Executive roles included in KMP are the Bank’s Chief Executive Officer (CEO)and all executives reporting
directly to the Bank’s CEO, and the CEO – NZ Branch.
2024 2023
Key management personnel compensation
1
NZ$000 NZ$000
Salaries and short-term employee benefits
13,318
12,139
Post-employment benefits
363
351
Other long-term benefits
2
76 78
Share-based payments 4,200 3,589
Total
17,957
16,157
1 Includes former disclosed KMPs until the end of their employment, and close family members of KMP employed by the Banking Group.
2 Comprises long service leave accrued during the year.
2024 2023
Transactions and balances with key management personnel and their related parties
1
NZ$m NZ$m
Secured loans and advances
12 24
Credit related commitments (undrawn loan facilities) 4 3
Interest income
1 1
Customer deposits
2
9
22
Payables and other liabilities (share-based payments liability)
4
3
1 Includes KMP, close family members of KMP and entities that are controlled or jointly controlled by KMP or their close family members, of the Banking Group and its parent companies.
2 Includes holdings of units in the ANZ PIE Fund (a sponsored unconsolidated structured entity) which are invested solely in deposits of the Bank.
Loans made to KMP and their related parties are made in the ordinary course of business on normal commercial terms and conditions no more
favourable than those given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts
have been written off or forgiven, or individually assessed allowances for expected credit losses raised in respect of these balances (2023: nil).
All other transactions with KMP and their related parties are made on terms and conditions no more favourable than those given to other employees
or customers. These transactions generally involve the provision of financial and investment services. In addition to the amounts above:
• Aggregate amounts for each of unsecured loans and advances, interest expense, fee income, debt issuances and collectively assessed credit
impairment charge and allowance for expected credit losses were less than NZ$1 million for both years presented.
• KMP and their related parties also hold units in other MIS managed by the Banking Group. Transactions and balances in respect of these MIS
holdings are not disclosed because those MIS are unconsolidated structured entities and not included in the financial statements of the Banking
Group.
• Some KMP pay the Banking Group for the use of carparks in premises owned or leased by the Banking Group. These amounts were less than
NZ$0.1 million (2023: less than NZ$0.1 million).
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
64
26. RELATED PARTY DISCLOSURES (continued)
Transactions with other members of the ANZ Group and associates
The Banking Group undertakes transactions with the Immediate Parent Company, the Ultimate Parent Bank, other members of the ANZ Group and
associates.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment services, technology and
process support, and compensation for share based payments made to Banking Group employees. These transactions are conducted on an arm’s
length basis and on normal commercial terms.
2024 2023
Transactions NZ$m NZ$m
Immediate Parent Company
Interest expense
4
4
Ordinary shares issued
4,400
-
Perpetual preference shares issued
1,142
-
Perpetual preference shares redeemed
300
-
Dividends paid
7,141 1,417
Ultimate Parent Bank and other ANZ Group subsidiaries
Interest income 7 7
Interest expense
132 159
Loss on sale of mortgages to the NZ Branch
-
(1)
Other operating income
12
10
Operating expenses
68
63
Mortgages sold to the NZ Branch
65
72
Mortgages repurchased from the NZ Branch
23
20
Associates
Operating expenses 3 3
2024 2023
Outstanding balances
NZ$m NZ$m
Immediate Parent Company
Derivative financial instruments
4
4
Ultimate Parent Bank and other ANZ Group subsidiaries
Cash and cash equivalents
117
177
Derivative financial instruments
7,452
5,507
Other assets
160
50
Total due from related parties 7,733 5,738
Immediate Parent Company
Deposits and other borrowings 128 80
Ultimate Parent Bank and other ANZ Group subsidiaries
Settlement balances payable
90
41
Collateral received
-
547
Deposits and other borrowings
271
12
Derivative financial instruments
7,473
4,993
Payables and other liabilities
37
43
Debt issuances 940 939
Associates
Deposits and other borrowings
1
1
Total due to related parties
8,940
6,656
Balances due from / to other members of the ANZ Group and associates are unsecured. T he Bank has provided guarantees and commitments to, and
received guarantees from, these entities as follows:
2024 2023
NZ$m NZ$m
Financial guarantees provided by the Ultimate Parent Bank and other ANZ Group subsidiaries
249
227
Financial guarantees provided to the Ultimate Parent Bank and other ANZ Group subsidiaries
189
69
Performance related contingent liabilities to the Ultimate Parent Bank and other ANZ Group subsidiaries 58 70
Undrawn facilities provided to the Immediate Parent Company - 250
Undrawn facilities provided to associates
1
1
NOTES TO THE FINANCIAL STATEMENTS
65
27. COMMITMENTS AND CONTINGENT LIABILITIES
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
2024 2023
NZ$m NZ$m
Contract amount of:
Undrawn facilities
25,759
26,305
Guarantees and letters of credit
1,232
1,029
Performance related contingencies
1,656
1,590
Total 28,647
28,924
UNDRAWN FACILITIES
The majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities
are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Banking Group may be required to pay, the
full amount of undrawn facilities mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
Guarantees, letters of credit and performance related contingencies relate to transactions that the Banking Group has entered into as principal.
Letters of credit involve the Banking Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured against an
underlying shipment of goods or backed by a confirmatory letter of credit from another bank.
Performance related contingencies are liabilities that oblige the Banking Group to make payments to a third party if the customer fails to fulfil its non-
monetary obligations under the contract.
To reflect the risks associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that
we apply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial
obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Based
on the earliest date on which the Banking Group may be required to pay, the full amount of guarantees and letters of credit and performance related
contingencies mature within 12 months.
OTHER CONTINGENT LIABILITIES
There are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has been
obtained and, in the light of such advice, provisions (refer to Note 20 Other provisions) and/or disclosures as deemed appropriate have been made. In
some instances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because
such disclosure may prejudice seriously the interests of the Banking Group.
REGULATORY AND CUSTOMER EXPOSURES
The Banking Group regularly engages with its regulators. The nature of these regulatory interactions can be wide ranging and include regulatory
investigations, surveillance and reviews, reportable situations, formal and informal inquiries and regulatory supervisory activities in New Zealand and
globally. The Banking Group also receives notices and requests for information from its regulators from time to time as part of both industry-wide and
Banking Group-specific reviews and makes disclosures to its regulators at its own instigation.
The nature of these interactions can be wide ranging and, for example, may relate to matters including responsible lending practices, regulated
lending requirements, product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice,
insurance distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering
and counter-terrorism financing obligations, privacy obligations and information security, business continuity management, reporting and disclosure
obligations and product disclosure documentation.
The possible exposures associated with the Banking Group’s regulatory interactions may include civil enforcement actions, criminal proceedings, fines
and penalties, imposition of capital or liquidity requirements, customer remediation, the requirement to conduct independent reviews, sanctions or
the exercise of other regulatory powers.
There may also be exposures to customers, investors or third parties which are additional to any regulatory exposures. These could include class
actions or claims for compensation or other remedies.
The outcomes and total costs associated with these possible regulatory, customer and other exposures remain uncertain.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
66
27.COMMITMENTS AND CONTINGENT LIABILITIES (continued)
LOAN INFORMATION LITIGATION
In September 2021, a representative proceeding was brought against the Bank, alleging breaches of disclosure requirements under consumer credit
legislation in respect of variation letters sent to certain loan customers. The Bank is defending the allegations. In July 2022, the High Court ruled that
the plaintiffs may bring the proceeding as an opt-out representative action on behalf of a class, being certain customers who entered into a home
loan or personal loan with the Bank between 6 June 2015 and 28 May 2016 and requested a variation to that loan during that period. Aspects of the
decision were appealed by both parties, and a hearing took place at the Court of Appeal in April 2024. The decision was issued in July 2024, with the
Court of Appeal confirming that the Bank’s class size, with the current representative plaintiff, remains the same. The Court of Appeal also granted the
plaintiff’s application for a common fund order with immediate effect. The Bank has applied to the Supreme Court for leave to appeal the Court of
Appeal’s decision as it relates to common fund orders and is awaiting the Supreme Court’s decision on whether to grant a hearing.
WARRANTIES AND INDEMNITIES
The Banking Group has provided warranties, indemnities and other commitments in various contracts for the disposal of businesses and assets and
other commercial transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties, indemnities and
commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.
28. AUDITOR FEES
2024 2023
NZ$000 NZ$000
KPMG New Zealand
Audit or review of financial statements
1
2,169 2,120
Audit related services:
Prudential and regulatory services
2
326 295
Offer documents assurance or review
147
141
Other assurance services
3
804
399
Total audit related services
1,277
835
Total KPMG New Zealand fees relating to the Banking Group
3,446
2,955
Fees related to certain managed funds not recharged
4
266 280
Total KPMG New Zealand fees 3,712 3,235
KPMG Australia
Other assurance services - operational greenhouse gas emissions
-
53
Total auditor fees 3,712
3,288
1 Includes fees for both the audit of annual financial statements and reviews of interim financial statements.
2 Includes fees for reviews and controls reports required by regulations.
3 Includes fees for other reviews, agreed upon procedures and reasonable and limited assurance engagements.
4 Amounts relate to the ANZ PIE Fund, ANZ Investments Private Scheme and SIL Mutual Funds, and include fees for audits of annual financial statements, registry audits, supervisor reporting
and other agreed upon procedures engagements.
U
nder the Banking Group’s policy, KPMG New Zealand or any of its related practices are allowed to provide assurance and other audit related services
that, while outside the scope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews
requested by regulators such as RBNZ. Any other services that are not audit or audit-related services are non-audit services. The Banking Group’s p olicy
allows certain non-audit services to be provided where the service would not contravene auditor independence requirements. KPMG New Zealand or
any of its related practices may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor
independence. These include consulting advice and subcontracting 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.
ASSURANCE REPORT
67
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
REPORT ON AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
B
ASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)). We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Banking Group in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand)
issued by the New Zealand Auditing and Assurance Standards Board
and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards)
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code.
Our responsibilities under ISAs (NZ) are further described in the
Auditor’s responsibilities for the audit of the consolidated financial statements section
of our report.
Our firm has provided services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus assurance or
reviews, agreed upon procedures engagements and other assurance engagements. Subject to certain restrictions, partners and employees of our firm
may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These
matters have not impaired our independence as auditor of the Banking Group. The firm has no other relationship with, or interest in, the Banking
Group.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the
shareholder as a body may better understand the process by which we arrived at our audit opinion.
Our procedures were undertaken in the context of and solely for the purpose of our audit opinion on the consolidated financial statements as a whole
and we do not express discrete opinions on separate elements of the consolidated financial statements.
ALLOWANCE FOR EXPECTED CREDIT LOSSES ($861 MILLION)
Refer to Note 12 of the consolidated financial statements.
The key audit matter
Allowance for expected credit losses is a key audit matter due to the significance of the loans and advances balance to the consolidated financial
statements and the inherent complexity of the Banking Group’s Expected Credit Loss (ECL) models used to measure ECL allowances. These models are
reliant on data and a number of estimates including impacts of multiple economic scenarios, and other assumptions such as defining a Significant
Increase in Credit Risk (SICR).
NZ IFRS 9 requires t
he Banking Group to measure ECL on a forward-looking basis reflecting a range of future economic conditions, of which GDP and
unemployment levels are considered key assumptions. Post-model adjustments to the ECL results are also made by the Banking Group to address
known ECL model limitations or emerging trends in the loan portfolios. We exercise significant judgement in challenging both the economic
scenarios used and the judgemental post-model adjustments that the Banking Group applies to the ECL results.
The Banking Group’s criteria selected to identify a SICR, such as a decrease in customer credit rating (CCR), are key areas of judgement within the
Banking Group’s ECL methodology as these criteria determine if a forward-looking 12 month or lifetime allowance is recorded.
OPINION
We have audited the accompanying consolidated financial statements of ANZ Bank New Zealand Limited (the Bank) and its subsidiaries (the
Banking Group) on pages 4 to 66 which comprise:
•the consolidated balance sheet as at 30 September 2024;
•the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the year then ended; and
•notes, including material accounting policy information and other explanatory information.
In our opinion, the accompanying consolidated financial statements:
•give a true and fair view of the Banking Group’s financial position as at 30 September 2024 and its financial performance and cash flows for
the year ended on that date; and
•comply with New Zealand Generally Accepted Accounting Practice, which in this instance means New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards Board and International Financial Reporting
Standards issued by the International Accounting Standards Board
.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
ASSURANCE REPORT
68
How the matter was addressed in our audit
Our audit procedures for the allowance for ECL and disclosures included assessing the Banking Group’s significant accounting policies against the
requirements of the accounting standard. Credit risk and economic specialists were used in ECL audit procedures as a core part of our audit team.
We tested key controls in relation to:
•The Banking Group’s ECL model governance and validation processes which involved assessment of model performance;
•The Banking Group’s assessment and approval of the forward-looking macro-economic assumptions and scenario weightings through
challenge applied by the Banking Group’s internal governance processes;
•Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;
•Counterparty risk grading for wholesale loans (larger customer exposures are monitored individually). We tested the approval of new lending
facilities against the Banking Group’s lending policies, and controls over the monitoring of counterparty credit quality; and
•IT system controls which record retail loans lending arrears, group exposures into delinquency buckets and recalculate individual allowances.
We tested automated calculation and change management controls and evaluated the oversight of the portfolios, with a focus on controls over
delinquency monitoring.
We tested relevant General Information Technology Controls over the key IT applications used by the Banking Group in measuring ECL allowances, as
detailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:
•Re-performing credit assessments for a sample of wholesale loans controlled by the Banking Group’s specialist workout and recovery team, who
assessed them as higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Banking Group as showing
signs of deterioration, or in areas of emerging risk (assessed against external market).
•For each loan sampled, we challenged the Banking Group’s CCR and Security Indicator, assessment of loan recoverability, valuation of security
and the impact on the credit allowance. To do this, we reviewed the information on the Banking Group’s loan file, understood the facts and
circumstances of the case with the relationship manager, and performed our own assessment of recoverability.
•Exercising our judgement, our procedures included using our understanding of relevant industries and the macro-economic environment, and
comparing data and assumptions used by the Banking Group in recoverability assessments to externally sourced evidence, such as commodi
ty
p
rices and external property sale information. Where relevant, we assessed the forecast timing of future cash flows in the context of underlying
valuations and approved business plans and challenged key assumptions in the valuations
;
•O
btaining an understanding of the Banking Group’s processes to determine ECL allowances, evaluating the Banking Group’s ECL model
methodologies against established market practices and criteria in the accounting standards;
•Working with our credit risk specialists, we assessed the accuracy of the Banking Group’s ECL model estimates by re-performing, for a sample of
loans, the ECL allowance using our independently driven calculation tools and comparing this to the amount recorded by the Banking Group;
•Working with our economic specialists, we challenged the Banking Group’s forward-looking macro-economic assumptions and scenarios
incorporated in the Banking Group’s ECL models. We compared the Banking Group’s forecast GDP and unemployment rates, to relevant publicly
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
identify contradictory indicators;
•Testing the implementation of the Banking Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
consideration movements in the CCR from loan origination and comparing our expectation to actual staging applied on an individual account
level in the Banking Group’s ECL model; and
•Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
source systems.
We also challenged key assumptions in the components of the Banking Group’s post-model adjustments. This included:
•Assessing the requirement for post-model adjustments considering the Banking Group’s ECL model and data deficiencies identified by the
Banking Group’s ECL model validation processes;
•Comparing underlying data used in concentration risk and economic cycle allowances to underlying loan portfolio characteristics of recent loss
experience, current market conditions and specific risks inherent in the Banking Group’s loan portfolios;
•Assessing certain post-model adjustments identified against internal and external information; and
•Assessing the completeness of post-model adjustments by checking the consistency of risks we identified in the portfolios against the Banking
Group’s assessment.
We assessed the appropriateness of the Banking Group’s disclosures in the consolidated financial statements using our understanding obtained from
our testing and against the requirements of NZ IFRS.
ASSURANCE REPORT
69
VALUATION OF FINANCIAL INSTRUMENTS
Fair value of Level 2 financial instruments in asset positions $13,968 million, in liability positions $13,563 million
Refer to Note 16 of the consolidated financial statements.
The key audit matter
The fair value of the Banking Group’s Level 2 financial instruments is determined by the Banking Group through the application of valuation
techniques which often involve the exercise of judgement and the use of assumption and estimates.
The valuation of Level 2 financial instruments held at fair value is a key audit matter due to the complexity associated with the valuation methodology
and models of certain more complex Level 2 financial instruments including fair value adjustments (FVAs) leading to an increase in subjectivity and
estimation uncertainty. Level 2 financial instruments represent 45% of the Banking Group’s financial assets carried at fair value and 97% of the Banking
Group’s financial liabilities carried at fair value.
How the matter was addressed in our audit
Our audit procedures for the valuation of financial instruments held at fair value included:
Performing an assessment of the population of financial instruments held at fair value to identify portfolios that have a higher risk of misstatement
arising from significant judgment over valuation either due to unobservable inputs or complex models.
We tested the design and operating effectiveness of key controls relating specifically to these financial instruments, including:
•Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;
•model validation at inception and periodically, including assessment of model limitation and assumptions;
•review and challenge of daily profit and loss by a control function;
•collateral management process, including review of margin reconciliations with clearing houses; and
•review and approval of FVAs, including exit price and portfolio level adjustments.
In relation to the valuation of Level 2 financial instruments, with the assistance of our valuation specialists:
•Assessing the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives;
•Comparing the Banking Group’s valuation methodology to industry practice and the criteria in the accounting standards; and
•Independently revaluing a selection of financial instruments and FVAs. This involved sourcing independent inputs from comparable data in the
market and available alternatives. We challenged and assessed any differences.
We assessed the Banking Group’s consolidated financial statement disclosures, including key judgements and assumptions using our understanding
obtained from our testing and against NZ IFRS.
INFORMATION TECHNOLOGY (IT) SYSTEMS AND CONTROLS
The key audit matter
As a major New Zealand bank, the Banking Group’s businesses utilise a large number of complex, interdependent IT systems to process and record a
high volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial information and the preparation
of a financial report which provides a true and fair view of the Banking Group’s financial position and performance. The IT systems and controls, as they
impact the financial recording and reporting of transactions, is a key audit matter and our audit approach could significantly differ depending on the
effective operation of the Banking Group’s IT controls.
How the matter was addressed in our audit
We tested the control environment for key IT applications used in processing significant transactions and recording balances in the general ledger. We
also tested automated controls embedded within these systems which support the effective operation of technology-enabled business processes.
Our IT specialists were used throughout the engagement as a core part of our audit team.
Our audit procedures included:
•Assessing the governance and higher-level controls in place across the IT environment, including the approach to the Banking Group policy
design, review and awareness;
•Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on- boarded,
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles and
functions are managed across each IT application and the supporting infrastructure;
•Design and operating effectiveness testing of controls in place over change management, including how changes are initiated, documented,
approved, tested and authorised prior to migration into the production environment of critical IT applications. We also assessed the
appropriateness of users with access to make changes to IT applications across the Banking Group;
•Design and operating effectiveness testing of controls used by the Banking Group’s technology teams to schedule system jobs and monitor
system integrity;
•Design and operating effectiveness testing of controls related to significant IT application programs per the ANZ Delivery Framework; and
•Design and operating effectiveness testing of automated business process controls including those that enforce segregation of duties between
conflicting roles within IT applications, configurations in place to perform calculations, mappings, and flagging of financial transactions,
automated reconciliation controls (both between systems, and intra-system) and data integrity of critical system reporting used by us in our
audit to select samples and analysis data used by management to generate financial reporting.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
ASSURANCE REPORT
70
CARRYING VALUE OF GOODWILL ($3,006 MILLION)
Refer to Note 19 of the consolidated financial statements.
The key audit matter
Carrying value of goodwill is a key audit matter due to a number of judgements required in the determination of the recoverable amount of goodwill,
and because the carrying value of goodwill is financially significant at the reporting date.
the Banking Group uses a value-in -use (VIU) approach to estimate the recoverable amount of each Cash Generating Unit (CGU) to which goodwill is
allocated. The reasonableness of the recoverable amounts was assessed using an implied market-multiples approach.
The ongoing effects and uncertainties associated with the environment continue to increase the potential for impairment and our audit effort in this
area remains elevated. There is increased judgement in forecasting cash flows and assumptions used in the discounted cash flow models and market-
multiples used in the reasonableness assessment. The risk is most pronounced for the Institutional CGU.
How the matter was addressed in our audit
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
Working with our valuation specialists, our procedures included:
•In accordance with accounting standards, assessing the reasonableness of the amounts allocated to the CGUs to which the Banking Group
allocated goodwill;
•Considering the appropriateness of the valuation method applied by the Banking Group to perform their annual test for impairment against the
requirements of the accounting standards;
•Assessing the integrity of the VIU model used by the Banking Group, including the accuracy of the underlying calculation formulae;
•Assessing the accuracy of previous the Banking Group forecasts to inform our evaluation of forecasts incorporated in the VIU model;
•For each CGU, stress testing key VIU assumptions to consider reasonably possible alternatives;
•For the Institutional CGU, assessing the Banking Group’s key assumptions used in the VIU model, including discount rates, revenue growth rates,
and terminal growth rates comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice;
•Comparing the forecast cash flows contained in the model to the revised Operational forecast, reflecting the current economic environment
and the increased regulatory minimum capital requirements;
•Assessing key assumptions used in the market-multiples reasonableness assessment, which we assessed as being equivalent to a fair value less
costs of disposal approach. These assumptions included future maintainable earnings, the control premium comparing the implied multiples
from comparable market transactions to the implied multiples used in the VIU model;
•Assessing the reasonableness of the Banking Group’s review for potential internal and external indicators of impairment. This review considered
the period from the annual impairment test as at 29 February 2024 up to financial year end; and
•Assessing the disclosures in the financial statements against the requirements of the accounting standards.
OTHER INFORMATION
The Directors, on behalf of the Banking Group, are responsible for the other information. The other information comprises the Banking Group’s general
disclosures in section B1 required to be included in the Banking Group’s Disclosure Statement in accordance with schedule 2 of the Registered Bank
Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 but does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other information and in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
USE OF THIS INDEPENDENT AUDITOR’S REPORT
This independent auditor’s report is made solely to the shareholder of the Bank. Our audit work has been undertaken so that we might state to the
shareholder those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent
permitted by law, none of KPMG, any entities directly or indirectly controlled by KPMG, or any of their respective members or employees, accept or
assume responsibility and deny all liability to anyone other than the shareholder for our audit work, this independent auditor’s report, or any of the
opinions or conclusions we have formed.
ASSURANCE REPORT
71
RESPONSIBILITIES OF DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors, on behalf of the Banking Group, are responsible for:
•the preparation and fair presentation of the consolidated financial statements in accordance Clause 24 of the Order;
•implementing necessary internal control to enable the preparation of consolidated financial statements that are fairly presented and free from
material misstatement, whether due to fraud or error; and
•assessing the ability of the Banking Group to continue as a going concern. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objective is:
•to obtain reasonable assurance about whether the consolidated financial statements including the financial statements prepared in accordance
with Clause 24 of the Order as a whole are free from material misstatement, whether due to fraud or error; and
•to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB)
website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Jamie Munro.
For and on behalf of:
KPMG
Auckland
7 November 2024
72
REGISTERED BANK
DISCLOSURES
This section contains the additional disclosures required by the Registered Bank Disclosure Statements
(New Zealand Incorporated Registered Banks) Order 2014.
Section Order reference Page
B1. General disclosures Schedule 2 73
B2. Additional financial disclosures Schedule 4 83
B3. Asset quality Schedule 7 84
B4. Capital adequacy under the internal models based approach, Schedule 11 93
and regulatory liquidity ratios
B5. Concentration of credit exposures to individual counterparties Schedule 13 100
B6. Credit exposures to connected persons Schedule 14 101
B7. Insurance business, securitisation, funds management, other fiduciary activities, Schedule 15 102
and marketing and distribution of insurance products
B8. Risk management policies Schedule 17 104
REGISTERED BANK DISCLOSURES
73
B1. GENERAL DISCLOSURES (UNAUDITED)
Details of ultimate parent bank and ultimate non-bank holding company
The ultimate parent bank of the Bank is Australia and New Zealand Banking Group Limited (Ultimate Parent Bank). The address for service of the
Ultimate Parent Bank is ANZ Centre, Melbourne, Level 9, 833 Collins Street, Docklands, Victoria 3008, Australia.
The ultimate non-bank holding company is ANZ Group Holdings Limited. The address for service is ANZ Centre, Melbourne, Level 9, 833 Collins Street,
Docklands, Victoria 3008, Australia.
Restrictions on the Ultimate Parent Bank’s ability to provide financial support
Effect of APRA’s Prudential Standards
The Banking Group is subject to extensive prudential regulation by APRA. APRA’s current or future requirements may have an adverse effect on the
Bank’s business, results of operations, liquidity, capital resources or financial condition.
APRA Prudential Standard APS 222 Associations with Related Entities (APS 222) sets minimum requirements for authorised deposit-taking institutions
(ADIs) in Australia, including the Ultimate Parent Bank, in relation to the monitoring, management and control of risks which arise from associations
with related entities and also includes maximum limits on intra-group financial exposures.
Under APS 222, the Ultimate Parent Bank’s ability to provide financial support to the Bank is subject to the following restrictions:
•the Ultimate Parent Bank should not undertake any third party dealings for the purpose of supporting the business of the Bank;
•the Ultimate Parent Bank must not hold unlimited exposures (i.e. should be limited as to specified time or amount) in the Bank (e.g. not provide
a general guarantee covering any of the Bank’s obligations);
•the Ultimate Parent Bank must not agree to cross-default clauses whereby a default by the Bank on an obligation (whether financial or
otherwise) triggers or is deemed to trigger a default by the Ultimate Parent Bank on its obligations; and
•the level of exposure, net of exposures deducted from capital, of the Ultimate Parent Bank’s level 1 tier 1 c apital base to the Bank should not
exceed: (A) 25% on an individual exposure basis; or (B) 75% in aggregate (being exposures to all similar regulated ADI equivalent entities related
to the Ultimate Parent Bank).
In addition, since 1 January 2021, no more than 5% of the Ultimate Parent Bank’s level 1 tier 1 capital base can comprise non-equity exposures to its
New Zealand operations (including its subsidiaries incorporated in New Zealand, such as the Banking Group and the New Zealand Branch) during
ordinary times. This limit does not include holdings of capital instruments or eligible secured contingent funding support provided to the Bank during
times of financial stress.
APRA has also confirmed that contingent funding support by the Ultimate Parent Bank to the Bank during times of financial stress must be provided
on terms that are acceptable to APRA. At present, only covered bonds meet APRA’s criteria for contingent funding.
Effect of the level 3 framework
In addition, certain requirements of APRA’s level 3 framework relating to, among other things, group governance and risk exposures became effective
on 1 July 2017. This framework also requires that the Ultimate Parent Bank must limit its financial and operational exposures to subsidiaries (including
the Bank).
In determining the acceptable level of exposure to a subsidiary, the Board of the Ultimate Parent Bank should have regard to:
•the exposures that would be approved for third parties of broadly equivalent credit status;
•the potential impact on the Ultimate Parent Bank’s capital and liquidity positions; and
•the Ultimate Parent Bank’s ability to continue operating in the event of a failure by the Bank.
These requirements are not expected to place additional restrictions on the Ultimate Parent Bank’s ability to provide financial or operational support
to the Bank.
Other APRA powers
The Ultimate Parent Bank may not provide financial support in breach of the Australian Banking Act 1959 (the Banking Act). Under the Banking Act:
•APRA must exercise its powers and functions for the protection of a bank’s depositors in Australia and for the promotion of financial system
stability in Australia; and
•in the event of a bank becoming unable to meet its obligations or suspending payment, the assets of the bank in Australia are to be available to
meet that bank’s deposit liabilities in Australia in priority to all other liabilities of the bank.
The requirements of the Banking Act and the exercise by APRA of its powers have the potential to impact the management of the liquidity of the
Bank.
Interests in 5% or more of voting securities of the Bank
The Immediate Parent Company holds 100% of the voting securities of the Bank. The Immediate Parent Company has the direct ability to appoint
100% of the Directors of the Bank, subject to RBNZ advising that it has no objection to the appointment in accordance with the Bank’s conditions of
registration. RBNZ also has the power under section 113B of the Banking (Prudential Supervision) Act 1989, after obtaining the consent of the Minister
of Finance, to remove, replace, or appoint directors in certain circumstances.
Priority of creditors’ claims
In the event that the Bank was put into liquidation or ceased to trade, claims of secured creditors and those creditors set out in Schedule 7 of the
Companies Act 1993 would rank ahead of the claims of unsecured creditors. Customer deposits are unsecured and rank equally with other unsecured
liabilities of the Bank, and such liabilities rank ahead of any subordinated instruments issued by the Bank.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
74
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Guarantees
No material obligations of the Bank are guaranteed as at 7 November 2024.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Directors
Any document or communication may be sent to any Director at the Registered Office. The document or communication should be marked for the
attention of that Director.
Transactions with Directors
No Director has disclosed that he/she or any immediate relative or professional associate has any dealing with the Banking Group which has been
either entered into on terms other than those which would in the ordinary course of business be given to any other person of like circumstances or
means or which could otherwise be reasonably likely to influence materially the exercise of the Director’s duties as a Director of the Bank.
Board Audit Committee
There is a Board Audit Committee which covers audit matters. The committee has five members. Each member is a non-executive Director, and each
satisfy the criteria for independence.
Policy of the Board of Directors for avoiding or dealing with conflicts of interest
In order to ensure that members of the Board are reminded of their disclosure obligations under the Companies Act 1993, the Board has adopted a
protocol setting out the procedures for Directors to follow to disclose and manage conflicts of interest. This protocol will be reviewed biennially. In
addition:
• at least once in each year, Directors are requested to confirm and disclose, in terms of section 140(1) of the Companies Act 1993, any interests
which they have with the Bank itself. Directors are reminded at this time of their obligation under the Companies Act 1993 to disclose promptly
any transaction or proposed transaction with the Bank in which they have an interest.
• Directors are also requested to confirm and make a general disclosure of their interest in other entities in terms of section 140(2) of the
Companies Act 1993.
In addition to the disclosures referred to above, Directors disclose relevant interests which they have before discussion of particular business items.
Disclosures are entered into the Bank’s Interests Register. The Companies Act 1993 allows a Director with an interest in a transaction to participate in
discussions and to vote on all matters relating to that particular transaction. However, under the protocol the Board has adopted a guideline whereby
a Director with an interest in a transaction should not be present during any discussions, and should not vote, on any matter pertaining to that
particular transaction.
Directors of the Bank as at 7 November 2024
Scott St John Antonia Watson Shayne Elliott
Position
Independent Non-Executive Director
and Chair
Chief Executive Officer and Director Non-Executive Director
Occupation
Company Director Chief Executive Officer New Zealand
and Group Executive
ANZ Group Chief Executive Officer
Qualifications
BCom, Diploma of Business BCom (Hons), GAICD BCom
Resides
Auckland, New Zealand Auckland, New Zealand Melbourne, Australia
Other company
directorships
ANZ Group Holdings Ltd, ANZ BH Pty Ltd,
Australia and New Zealand Banking Group
Ltd,
Captain Cook Nominees Ltd, Hutton
Wilson Nominees Ltd, Mercury NZ Ltd,
Te Awanga Terraces Ltd
Banking Ombudsman Scheme Ltd ANZ Group Holdings Ltd, ANZ BH Pty
Ltd, ANZ NBH Pty Ltd, Australia and New
Zealand Banking Group Ltd, Elliott No. 3
Pty Ltd, Financial Markets Foundation for
Children, Norfina Ltd, SBGH Ltd
REGISTERED BANK DISCLOSURES
75
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Gerard Florian Alison Gerry Nagaja Sanatkumar
Position
Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director
Occupation
Group Executive, Technology & Group
Services, Australia and New Zealand
Banking Group Ltd
Company Director Company Director
Qualifications
Electronic Engineering Certificate BMS (Hons), MAppFin, CFInstD B.Tech, MBA, MSDG, CMInstD
Resides
Sydney, Australia Queenstown, New Zealand Auckland, New Zealand
Other company
directorships
Floco Industries Pty Ltd Air New Zealand Ltd, Glendora
Avocados Ltd, Glendora Holdings Ltd,
Infratil Ltd, On Being Bold Ltd,
Sharesies Ltd, Sharesies AU Group Ltd,
Sharesies Financial Ltd,
Sharesies Group Ltd, Sharesies
Investment Management Ltd,
Sharesies Nominee Ltd
First Fibre Bidco NZ Ltd,
First Fibre Midco Ltd, Imagen8 Ltd,
Meridian Energy Ltd, NTS Digital
Advisory Ltd, Southern Cross
Healthcare Ltd, Tuatahi First Fibre Ltd,
UFF Holdings Ltd
Mark Tume Dame Joan Withers, DNZ
Position
Independent Non-Executive Director Independent Non-Executive Director
Occupation
Company Director Company Director
Qualifications
BBS, PGDipBank MBA, CFInstD
Resides
Auckland, New Zealand Auckland, New Zealand
Other company
directorships
Arc Innovations Ltd, Bluecurrent
Holdings NZ Ltd, Bluecurrent Assets
NZ Ltd, Bluecurrent NZ Ltd, Bluecurrent
No.2 NZ Ltd, Bluecurrent No.3 NZ Ltd,
Bluecurrent Services NZ Ltd,
Bluecurrent Holdings (Australia) Pty Ltd,
Bluecurrent Assets (Australia) Pty Ltd,
Bluecurrent (Australia) Pty Ltd,
Bluecurrent No.2 (Australia) Pty Ltd,
Bluecurrent No.3 (Australia) Pty Ltd,
Booster Financial Services Ltd,
Long Board Ltd, Mariu Ltd,
Precinct Properties New Zealand Ltd,
Precinct Properties Investments Ltd,
Te Atiawa Iwi Holdings Management
Ltd, Te Atiawa (Taranaki) Holdings Ltd,
Welltest Ltd, Yeo Family Trustee Ltd
On Being Bold Ltd, Origin Energy Ltd.
Sky Network Television Ltd,
The Warehouse Group Ltd,
The Warehouse Planit Trustees Ltd,
The Warehouse Management Trustee
Company Ltd, The Warehouse
Management Trustee Company No.2 Ltd
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
76
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Conditions of registration
The following conditions of registration were applicable as at 30 September 2024, and have applied from 1 July 2024.
The registration of ANZ Bank New Zealand Limited (“the bank”) as a registered bank is subject to the following conditions:
1. That—
(a) the Total capital ratio of the banking group is not less than 9%;
(b) the Tier 1 capital ratio of the banking group is not less than 7%;
(c) the Common Equity Tier 1 capital ratio of the banking group is not less than 4.5%;
(d) the Total capital of the banking group is not less than $30 million.
For the purposes of this condition of registration,—
“Total capital ratio”, “Tier 1 capital ratio”, and “Common Equity Tier 1 capital ratio” have the same meaning as in Subpart B2 of BPR100: Capital Adequacy, except that
in the formulae for calculating the ratios, the term “total capital requirement for operational risk” has the same meaning as in BPR150: Standardised Operational Risk;
“Total capital” has the same meaning as in BPR110: Capital Definitions.
1A. That—
(a) the bank has an internal capital adequacy assessment process (“ICAAP”) that accords with the requirements set out in Part D of BPR100: Capital Adequacy;
(b) under its ICAAP the bank identifies and measures its “other material risks” defined in Part D of BPR100: Capital Adequacy; and
(c) the bank determines an internal capital allocation for each identified and measured “other material risk”.
1B. That the bank must—
(a) comply with the minimum requirements for using the IRB approach set out in BPR134: IRB Minimum System Requirements;
(b) comply with the minimum qualitative requirements for using the AMA approach for operational risk set out in subpart B1 of BPR151: AMA Operational Risk;
(c) follow the process in Part E of BPR120: Capital Adequacy Process Requirements for obtaining Reserve Bank approval for any changes to any IRB credit risk
model;
(d) maintain a compendium of approved models in accordance with the requirements of section E1.5 of BPR120: Capital Adequacy Process requirements.
1C. That, if the Prudential Capital Buffer (PCB) ratio of the banking group is 4.5% or less, the bank must—
(a) according to the following table, limit the aggregate distributions of the bank’s earnings, other than discretionary payments payable to holders of Additional
Tier 1 capital instruments, to the percentage limit on distributions that corresponds to the banking group’s PCB ratio; and
Banking group's
PCB ratio
Percentage limit on
distributions of the
bank's earnings
Capital Buffer Response Frame work
stage
0% - 0.5% 0% Stage 3
>0.5 - 1% 30% Stage 2
>1 - 2% 60% Stage 1
>2 - 4.5% 100% None
(b) comply with the Capital Buffer Response Framework requirements as set out in Part D of BPR120: Capital Adequacy Process Requirements.
For the purposes of this condition of registration,—
“prudential capital buffer ratio”, “distributions”, and “earnings” have the same meaning as in Subpart B2 of BPR100: Capital Adequacy, except that in the formula for
calculating the buffer ratio, the term “total capital requirement for operational risk” has the same meaning as in BPR150: Standardised Operational Risk;
an Additional Tier 1 capital instrument is an instrument that meets the requirements of B2.2(2)(a), (c) or (d) of BPR110: Capital Definitions.
1CA. That the bank must not make any distribution on a transitional AT1 capital instrument on or after the date on which on any conversion or write-off provision in the
terms and conditions of the instrument is triggered due to either a loss absorption trigger event or a non-viability trigger event.
For the purposes of this condition of registration, “transitional AT1 capital instrument” has the meaning given in section A2.3 of BPR110: Capital Definitions and “loss
absorption trigger event” and “non-viability trigger event” have the meanings given in sub-section C2.2(3) of BPR120: Capital Adequacy Requirements.
1D. That:
(a) the bank must not include the amount of an Additional Tier 1 capital instrument or Tier 2 capital instrument issued on or after 1 July 2021 in the calculation of
its capital ratios unless it has completed the notification requirements in Part B of BPR120: Capital Adequacy Process Requirements in respect of the
instrument; and
(b) the bank meets the requirements of Part C of BPR120: Capital Adequacy Process Requirements in respect of regulatory capital instruments.
For the purposes of this condition of registration,—
an Additional Tier 1 capital instrument is an instrument that meets the requirements of subsection B2.2(2)(a) or (c) of BPR110: Capital Definitions;
a Tier 2 capital instrument is an instrument that meets the requirements of subsection B3.2(2)(a) or (c) of BPR110: Capital Definitions.
REGISTERED BANK DISCLOSURES
77
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
1E. That for the purposes of LGD estimates for farm lending exposures covered by a Deed of Indemnity from the Crown under the North Island Weather Events Loan
Guarantee Scheme, the bank may choose to apply either the relevant minimum LGD in Table C3.2 of BPR133, or an LGD of 8.5%.
For the purposes of this condition of registration, “LGD” (loss given default) has the meaning given in BPR001: Glossary.
2. That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total activities.
In this condition of registration, the meaning of “material” is based on generally accepted accounting practice.
3. That the banking group’s insurance business is not greater than 1% of its total consolidated assets.
For the purposes of this condition of registration, the banking group’s insurance business is the sum of the following amounts for entities in the banking group:
(a) if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of another entity in the banking group whose
business predominantly consists of insurance business, the amount of the insurance business to sum is the total consolidated assets of the group headed by
the entity; and
(b) if the entity conducts insurance business and its business does not predominantly consist of insurance business and the entity is not a subsidiary of another
entity in the banking group whose business predominantly consists of insurance business, the amount of the insurance business to sum is the total liabilities
relating to the entity’s insurance business plus the equity retained by the entity to meet the solvency or financial soundness needs of its insurance business.
In determining the total amount of the banking group’s insurance business—
(a) all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting practice; and
(b) if products or assets of which an insurance business is comprised also contain a non-insurance component, the whole of such products or assets must be
considered part of the insurance business.
For the purposes of this condition of registration,—
“insurance business” means the undertaking or assumption of liability as an insurer under a contract of insurance:
“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential Supervision) Act 2010.
4. The bank must comply with all the requirements set out in the following document: BS8 Connected Exposures 1 October 2023.
5. That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment, tenor, interest rates, amortisation
schedules and requirement for collateral) than corresponding exposures to non-connected persons.
6. That the bank complies with the following corporate governance requirements:
(a) the board of the bank must have at least five directors;
(b) the majority of the board members must be non-executive directors;
(c) at least half of the board members must be independent directors;
(d) an alternate director,—
(i) for a non-executive director must be non-executive; and
(ii) for an independent director must be independent;
(e) at least half of the independent directors of the bank must be ordinarily resident in New Zealand;
(f) the chairperson of the board of the bank must be independent; and
(g) the bank’s constitution must not include any provision permitting a director, when exercising powers or performing duties as a director, to act other than in
what he or she believes is the best interests of the company (i.e. the bank).
For the purposes of this condition of registration, “non-executive” and “independent” have the same meaning as in the Reserve Bank of New Zealand document
entitled “Corporate Governance” (BS14) dated July 2014.
7. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief executive officer, is made in respect of
the bank unless:
(a) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
(b) the Reserve Bank has advised that it has no objection to that appointment.
8. That a person must not be appointed as chairperson of the board of the bank unless:
(a) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
(b) the Reserve Bank has advised that it has no objection to that appointment.
9. That the bank has a board audit committee, or other separate board committee covering audit matters, that meets the following requirements:
(a) the mandate of the committee must include: ensuring the integrity of the bank’s financial controls, reporting systems and internal audit standards;
(b) the committee must have at least three members;
(c) every member of the committee must be a non-executive director of the bank;
(d) the majority of the members of the committee must be independent; and
(e) the chairperson of the committee must be independent and must not be the chairperson of the bank.
For the purposes of this condition of registration, “non-executive” and “independent” have the same meaning as in the Reserve Bank of New Zealand document
entitled “Corporate Governance” (BS14) dated July 2014.
10. That a substantial proportion of the bank’s business is conducted in and from New Zealand.
11. That the bank must comply with the Reserve Bank of New Zealand document “Outsourcing Policy” (BS11) dated September 2022.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
78
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
12.That:
(a)the business and affairs of the bank are managed by, or under the direction or supervision of, the board of the bank;
(b)the employment contract of the chief executive officer of the bank or person in an equivalent position (together “CEO”) is with the bank, and the terms and
conditions of the CEO’s employment agreement are determined by, and any decisions relating to the employment or termination of employment of the CEO
are made by, the board of the bank; and
(c)all staff employed by the bank shall have their remuneration determined by (or under the delegated authority of) the board or the CEO of the bank and be
accountable (directly or indirectly) to the CEO of the bank.
13.T
hat the banking group complies with the following quantitative requirements for liquidity-risk management:
(a)the one-week mismatch ratio of the banking group is not less than zero per cent at the end of each business day;
(b)the one-month mismatch ratio of the banking group is not less than zero per cent at the end of each business day; and
(c)the one-year core funding ratio of the banking group is not less than 75 per cent at the end of each business day.
For the purposes of this condition of registration, the ratios identified must be calculated in accordance with the Reserve Bank of New Zealand documents entitled
“Liquidity Policy” (BS13) dated July 2022 and “Liquidity Policy Annex: Liquid Assets” (BS13A) dated July 2022.
14.T
hat the bank has an internal framework for liquidity risk management that is adequate in the bank’s view for managing the bank’s liquidity risk at a prudent level,
and that, in particular:
(a)is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity and liquidity risk;
(b)identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity risk management;
(c)identifies the principal methods that the bank will use for measuring, monitoring and controlling liquidity risk; and
(d)considers the material sources of stress that the bank might face, and prepares the bank to manage stress through a contingency funding plan.
15.T
hat no more than 10% of total assets may be beneficially owned by a SPV.
For the purposes of this condition,—
“total assets” means all assets of the banking group plus any assets held by any SPV that are not included in the banking group’s assets:
“SPV” means a person—
(a)to whom any member of the banking group has sold, assigned, or otherwise transferred any asset;
(b)who has granted, or may grant, a security interest in its assets for the benefit of any holder of any covered bond; and
(c)who carries on no other business except for that necessary or incidental to guarantee the obligations of any member of the banking group under a covered
bond:
“covered bond” means a debt security issued by any member of the banking group, for which repayment to holders is guaranteed by a SPV, and investors retain an
unsecured claim on the issuer.
16.T
hat—
(a)no member of the banking group may give effect to a qualifying acquisition or business combination that meets the notification threshold, and does not
meet the non-objection threshold, unless:
(i)the bank has notified the Reserve Bank in writing of the intended acquisition or business combination and at least 10 working days have passed; and
(ii)at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the Reserve Bank with the information
required under the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December
2011; and
(b)no member of the banking group may give effect to a qualifying acquisition or business combination that meets the non-objection threshold unless:
(i)the bank has notified the Reserve Bank in writing of the intended acquisition or business combination;
(ii)at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the Reserve Bank with the information
required under the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December
2011; and
(iii)the Reserve Bank has given the bank a notice of non-objection to the significant acquisition or business combination.
For the purposes of this condition of registration, “qualifying acquisition or business combination”, “notification threshold” and “non-objection threshold” have the
same meaning as in the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December 2011.
17.T
hat the bank is pre-positioned for Open Bank Resolution and in accordance with a direction from the Reserve Bank, the bank can—
(a)close promptly at any time of the day and on any day of the week and that effective upon the appointment of the statutory manager—
(i)all liabilities are frozen in full; and
(ii)no further access by customers and counterparties to their accounts (deposits, liabilities or other obligations) is possible;
(b)apply a
de minimis to relevant customer liability accounts;
(c)apply a partial freeze to the customer liability account balances;
(d)reopen by no later than 9am the next business day following the appointment of a statutory manager and provide customers access to their unfrozen funds;
(e)maintain a full freeze on liabilities not pre-positioned for open bank resolution; and
(f)reinstate customers’ access to some or all of their residual frozen funds.
For the purposes of this condition of registration, “
de minimis”, “partial freeze”, “customer liability account”, and “frozen and unfrozen funds” have the same meaning
as in the Reserve Bank of New Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
REGISTERED BANK DISCLOSURES
79
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
18. That the bank has an Implementation Plan that—
(a) is up-to-date; and
(b) demonstrates that the bank’s prepositioning for Open Bank Resolution meets the requirements set out in the Reserve Bank document: “Open Bank Resolution
Pre-positioning Requirements Policy” (BS17) dated June 2022.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New Zealand document “Open Bank
Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
19. That the bank has a compendium of liabilities that—
(a) at the product-class level lists all liabilities, indicating which are—
(i) pre-positioned for Open Bank Resolution; and
(ii) not pre-positioned for Open Bank Resolution;
(b) is agreed to by the Reserve Bank; and
(c) if the Reserve Bank’s agreement is conditional, meets the Reserve Bank’s conditions.
For the purposes of this condition of registration, “compendium of liabilities”, and “pre-positioned and non pre-positioned liabilities” have the same meaning as in
the Reserve Bank of New Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
20. That on an annual basis the bank tests all the component parts of its Open Bank Resolution solution that demonstrates the bank’s prepositioning for Open Bank
Resolution as specified in the bank’s Implementation Plan.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New Zealand document “Open Bank
Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
21. That, for a loan-to-valuation measurement period ending on or after 30 September 2024, the total of the bank’s qualifying new mortgage lending amount in
respect of property-investment residential mortgage loans with a loan-to-valuation ratio of more than 70%, must not exceed 5% of the total of the qualifying new
mortgage lending amount in respect of property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
22. T
hat, for a loan-to-valuation measurement period ending on or after 30 September 2024, the total of the bank’s qualifying new mortgage lending amount in
respect of non property-investment residential mortgage loans with a loan-to-valuation ratio of more than 80%, must not exceed 20% of the total of the qualifying
new mortgage lending amount in respect of non property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
23. T
hat, for a debt-to-income measurement period, the total of the bank’s qualifying new mortgage lending amount in respect of property-investment residential
mortgage loans with a debt-to-income ratio of more than 7, must not exceed 20% of the total of the qualifying new mortgage lending amount in respect of
property-investment residential mortgage loans arising in the debt-to-income measurement period.
24. T
hat, for a debt-to-income measurement period, the total of the bank’s qualifying new mortgage lending amount in respect of non property-investment residential
mortgage loans with a debt-to-income ratio of more than 6, must not exceed 20% of the total of the qualifying new mortgage lending amount in respect of non
property-investment residential mortgage loans arising in the debt-to-income measurement period.
25. T
hat the bank must not make a residential mortgage loan unless the terms and conditions of the loan contract or the terms and conditions for an associated
mortgage require that a borrower obtain the registered bank’s agreement before the borrower can grant to another person a charge over the residential property
used as security for the loan.
In these conditions of registration,—
“banking group” means ANZ Bank New Zealand Limited (as reporting entity) and all other entities included in the group as defined in section 6(1) of the Financial
Markets Conduct Act 2013 for the purposes of Part 7 of that Act.
“generally accepted accounting practice” has the same meaning as in section 8 of the Financial Reporting Act 2013.
In these conditions of registration, the version dates of the Reserve Bank of New Zealand Banking Prudential Requirement (BPR) documents that are referred to in the
capital adequacy conditions 1 to 1E, or are referred to in turn by those documents or by Banking Supervision Handbook (BS) documents, are—
BPR document Version date
BPR100: Capital adequacy 1 July 2024
BPR110: Capital definitions 1 October 2023
BPR120: Capital adequacy process requirements 1 October 2023
BPR130: Credit risk RWAs overview 1 July 2024
BPR131: Standardised credit risk RWAs 1 July 2024
BPR132: Credit risk mitigation 1 July 2024
BPR133: IRB credit risk RWAs 1 July 2024
BPR134: IRB minimum system requirements 1 July 2024
BPR140: Market risk exposure 1 July 2024
BPR150: Standardised operational risk 1 July 2024
BPR151: AMA operational risk 1 July 2024
BPR160: Insurance, securitisation, and loan transfers 1 July 2024
BPR001: Glossary 1 October 2023
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
80
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
In conditions of registration 21 to 22,—
“loan-to-valuation ratio”, “non property-investment residential mortgage loan”, “property-investment residential mortgage loan”, “qualifying new mortgage lending
amount in respect of property-investment residential mortgage loans”, and “qualifying new mortgage lending amount in respect of non property-investment
residential mortgage loans” have the same meaning as in the Reserve Bank of New Zealand document entitled “Framework for Restrictions on High-LVR Residential
Mortgage Lending” (BS19) dated October 2021:
“loan-to-valuation measurement period” means a rolling period of three calendar months ending on the last day of the third calendar month.
In conditions of registration 23 to 24,—
“debt-to-income ratio”, “debt-to-income measurement period”, “non property-investment residential mortgage loan”, “property-investment residential mortgage
loan”,
“qualifying new mortgage lending amount in respect of property-investment residential mortgage loans”, and “qualifying new mortgage lending amount in
respect of non property-investment residential mortgage loans” have the same meaning as in the Reserve Bank of New Zealand document entitled “Framework for
Restrictions on High Debt-To-Income Residential Mortgage lending” (BS20) dated 3 April 2023:
“debt-to-income measurement period” means—
(a)the initial period of six calendar months from the date of this conditions of registration (1 July 2024) ending on 31 December 2024; and
(b)thereafter, a rolling period of three calendar months ending on the last day of the third calendar month, the first of which ends on 31 January 2025 and covers
the months of November and December 2024 and January 2025.
In condition of registration 25,—
“residential mortgage loan” has the same meaning as in the Reserve Bank of New Zealand document entitled “Framework for Restrictions on High Debt-To-Income
Residential Mortgage lending” (BS20) dated 3 April 2023.
Changes to the Bank’s conditions of registration since the last disclosure statement (for the six months ended 31 March 2024)
The Bank’s conditions of registration have been amended to:
•remove a redundant Condition and incorporate changes regarding outsourcing, connected exposures and risk weights for residential mortgage
loans underwritten by Kāinga Ora. (effective 1 April 2024).
•remove the Bank’s residential mortgage risk weight floor (effective 27 June 2024); and
•incorporate changes regarding minimum capital ratios, activate Debt-to-Income restrictions, implement changes to Loan-to-Value Ratio
restrictions, clarify the risk weighting treatment on certain exposures, removal of a redundant Condition and update legislative references in
BPRs (effective 1 July 2024).
Other matters relevant to the conditions of registration
There are other matters currently under review where there may be more than one valid interpretation of the respective policy wording or
requirement. Where there may be some uncertainty about the interpretation the Bank has applied, where appropriate it has sought guidance from,
and will be liaising with, RBNZ. In addition, there are some matters where an assessment of materiality has not been completed prior to approval of
this Disclosure Statement. Where that is the case, the Bank will complete materiality assessments as soon as practicable and will liaise with RBNZ in
accordance with the Bank’s usual breach reporting processes.
Other material matters
Climate Statements
The Bank is a climate reporting entity (CRE) and is required to produce group climate statements under the Financial Markets Conduct Act 2013
(FMCA). The Banking Group will issue its first mandatory climate statement under the FMCA and the Aotearoa New Zealand Climate Standards (NZ CS)
for the financial year ending 30 September 2024. The Banking Group’s climate statement will be accessible at the website anz.co.nz no later than 31
January 2025.
RBNZ capital requirements
RBNZ has revised the capital adequacy requirements applying to New Zealand locally incorporated registered banks, which are set out in RBNZ’s
Banking Prudential Requirements documents. As a result, the Banking Group is materially increasing the level of capital it holds over the transition
period from October 2021 to July 2028. The key requirements still being implemented are:
•The Banking Group’s total capital requirement will progressively increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to
2.5% of the tier 1 capital requirement can be made up of additional tier 1 (AT1) capital, with the remainder of the tier 1 requirement made up of
common equity tier 1 (CET1) capital. AT1 capital must consist of perpetual preference shares, which may be redeemable. The total capital
requirement can also include tier 2 capital of up to 2% of RWA. Tier 2 capital must consist of long-term subordinated debt.
•The capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include: a 2% domestic systemically important bank
capital buffer; a 1.5% 'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or temporarily
increased, and a 5.5% capital conservation buffer.
•Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 30 September 2024, the Bank had NZ$938 million of
AT1 instruments that will progressively lose eligible regulatory capital treatment over the transition period to July 2028.
REGISTERED BANK DISCLOSURES
81
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Credit rating
The Bank has credit ratings that apply to its long-term senior unsecured obligations payable in New Zealand in New Zealand dollars.
As at 7 November 2024, the Bank’s credit ratings are:
Rating agency Credit rating Qualification
S&P Global Ratings AA- Outlook Stable
Fitch Ratings A+ Outlook Stable
Moody’s Investors Service
A1 Outlook Stable
The following table describes the credit rating grades available. The descriptions are from S&P Global Ratings. Credit ratings from S&P Global Ratings
and Fitch Ratings may be modified by the addition of "+" or "-" to show the relative standing within the “AA” to “B” categories. Moody's Investors
Service applies numerical modifiers 1, 2, and 3 to each of the “Aa” to “Caa” classifications, with 1 indicating the higher end and 3 the lower end of the
rating category.
S&P Global
Ratings
Moody's
Investors
Service Fitch Ratings
Investment grade:
Extremely strong capacity to meet financial commitments. Highest rating.
AAA Aaa AAA
Very strong capacity to meet financial commitments.
AA Aa AA
Strong ability to meet financial commitments, but somewhat susceptible to adverse economic conditions and
changes in circumstances.
A A A
Adequate capacity to meet financial commitments, but more subject to adverse economic conditions. BBB Baa BBB
Speculative grade:
Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic
conditions.
BB Ba BB
More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet
financial commitments.
B B B
Currently vulnerable and dependent on favourable business, financial and economic conditions to meet financial
commitments.
CCC Caa CCC
Highly vulnerable; default has not yet occurred, but is expected to be a virtual certainty. CC to C Ca CC to C
Payment default on a financial commitment or breach of an imputed promise; also used when a bankruptcy petition
has been filed or similar action taken.
D C RD & D
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
82
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Historical summary of financial statements
Income statement
2024 2023 2022 2021 2020
For the year ended 30 September NZ$m NZ$m NZ$m NZ$m NZ$m
Interest income
11,914
10,215 5,811 4,600 5,568
Interest expense
(7,512)
(5,922) (2,035) (1,176) (2,306)
Net interest income
4,402
4,293 3,776 3,424 3,262
Non-interest income
480
619 1,087 765 807
Operating income
4,882
4,912 4,863 4,189 4,069
Operating expenses (1,760) (1,663) (1,653) (1,621) (1,752)
Credit impairment release / (charge)
(44) (183) (39) 114 (403)
Profit before income tax
3,078 3,066 3,171 2,682 1,914
Income tax expense
(870)
(849) (882) (743) (541)
Profit after income tax 2,208
2,217 2,289 1,939 1,373
Balance sheet
2024 2023 2022 2021 2020
As at 30 September NZ$m NZ$m NZ$m NZ$m NZ$m
Total assets
199,176
194,289 201,134 184,769 179,744
Total individually impaired assets
370
287 146 155 361
Total liabilities
180,366
175,868 183,350 167,877 163,875
Equity
18,810 18,421 17,784 16,892 15,869
Dividends paid or provided for included in Equity
Ordinary dividends paid
7,125
1,400 1,915 900 -
Preference dividends paid
51
44 9 8 9
The amounts included in this summary have been taken from the audited financial statements of the Banking Group.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effect
on the Bank or the Banking Group is included in Note 27 Commitments and contingent liabilities.
REGISTERED BANK DISCLOSURES
83
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
2024 2023
NZ$m NZ$m
Total interest earning and discount bearing assets 183,117 180,498
Total interest and discount bearing liabilities 148,373 146,760
Additional information on interest rate sensitivity
The following table represents the interest rate sensitivity of the Banking Group's assets, liabilities and off-balance sheet instruments by showing the
periods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.
Total
Up to
3 months
Over 3 to
6 months
Over 6 to
12 months
Over 1 to
2 years
Over
2 years
Not bearing
interest
1
2024 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets
Cash and cash equivalents
11,634 11,378 - - - - 256
Settlement balances receivable 574 - - - - - 574
Collateral paid
1,041 1,041 - - - - -
Trading securities
5,576 430 163 512 741 3,730 -
Derivative financial instruments
10,181 - - - - - 10,181
Investment securities
13,295 - 76 805 502 11,907 5
Net loans and advances
151,666 69,722 25,403 31,021 20,532 5,154 (166)
Other financial assets
1,113 - - - - - 1,113
Total financial assets
195,080 82,571 25,642 32,338 21,775 20,791 11,963
Liabilities
Settlement balances payable
5,367 2,855 - - - - 2,512
Collateral received
525 525 - - - - -
Deposits and other borrowings
142,645 85,930 20,147 14,925 3,805 1,966 15,872
Derivative financial instruments
11,179 - - - - - 11,179
Debt issuances
17,623 2,061 1,610 404 2,967 10,581 -
Lease liabilities 225 12 12 24 46 131 -
Other financial liabilities 1,839 372 - - - - 1,467
Total financial liabilities 179,403 91,755 21,769 15,353 6,818 12,678 31,030
Hedging instruments - (3,208) 4,456 1,364 (6,638) 4,026 -
Interest sensitivity gap 15,677 (12,392) 8,329 18,349 8,319 12,139 (19,067)
1 Excludes non-coupon bearing discounted financial assets and financial liabilities which are shown as repricing on their maturity date.
Reconciliation of mortgage related amounts
As at 30 September 2024
Note NZ$m
Term loans - housing
1
11
110,807
Less: housing loans made to corporate customers
(1,392)
Add: unsettled re-purchases of mortgages from the NZ Branch
2
On-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
109,417
Add: off-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis) B3, B4
9,636
Total residential mortgage exposures subject to the IRB approach (per LVR analysis)
B4
119,053
1 Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
84
B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements included in Note 1, Note 12 and Note 15 to the financial
statements.
Movements in components of loss allowance – to
tal
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - total NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2023 193 398 79 60 730
Transfer between stages
36 (40)(1)5 -
New and increased provisions (net of collective provision releases)
(42)12 26 99 95
Write-backs --- (49)(49)
Recoveries of amounts previously written off --- (11)(11)
Credit impairment charge / (release) (6)(28)25 44 35
Bad debts written-off (excluding recoveries)
--- (41)(41)
Add back recoveries of amounts previously written off
--- 11 11
Discount unwind
--- (10)(10)
As at 30 September 2024 187 370 104 64 725
Off-balance sheet credit related commitments - total
As at 1 October 2023 80 39 3 5 127
Transfer between stages
4 (4)-- -
New and increased provisions (net of collective provision releases)
(10)21 -(2)9
Credit impairment charge / (release) (6)17 -(2)9
As at 30 September 2024 74 56 3 3 136
Impacts of changes in gross financial assets on loss allowances - total
Gross loans and advances - total
As at 1 October 2023 137,342 11,101 890 287 149,620
Net transfers in to each stage
-1,951496 143 2,590
Amounts drawn from new or existing facilities
32,902 1,694100 255 34,951
Additions 32,902 3,645 596 398 37,541
Net transfers out of each stage (2,590) - - - (2,590)
Amounts repaid (29,301) (2,826) (233)(274)(32,634)
Deletions
(31,891) (2,826) (233)(274)(35,224)
Amounts written off
- - - (41)(41)
As at 30 September 2024 138,353 11,920 1,253 370 151,896
Loss allowance as at 30 September 2024 187 370 104 64 725
Off-balance sheet credit related commitments - total
As at 1 October 2023 27,759 1,137 15 13 28,924
Net transfers in to each stage -3018 15 324
New and increased facilities and drawn amounts repaid
6,095 38911 1 6,496
Additions
6,095 690 19 16 6,820
Net transfers out of each stage
(324)-- -(324)
Reduced facilities and amounts drawn
(6,462) (284)(8)(19)(6,773)
Deletions
(6,786) (284)(8)(19)(7,097)
As at 30 September 2024 27,068 1,543 26 10 28,647
Loss allowance as at 30 September 2024 74 56 3 3 136
Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances are 0.48% of gross balances as at 30 September 2024, unchanged from 30 September 2023. The NZ$4 million (0.5 %) increase
in loss allowances was driven by an increase in the proportion of gross balances in Stage 2 and Stage 3, and changes in the forward-looking economic
scenarios as described in Note 12 Allowance for expected credit losses, offset by a release of management temporary adjustments.
REGISTERED BANK DISCLOSURES
85
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – total
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - total NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
199 311 59 77 646
Transfer between stages 19 (19) - - -
New and increased provisions (net of collective provision releases) (25) 106 20 94 195
Write-backs - - - (22) (22)
Recoveries of amounts previously written off - - - (12) (12)
Credit impairment charge / (release) (6) 87 20 60 161
Bad debts written-off (excluding recoveries) - - - (86) (86)
Add back recoveries of amounts previously written off - - - 12 12
Discount unwind - - - (3) (3)
As at 30 September 2023
193 398 79 60 730
Off-balance sheet credit related commitments - total
As at 1 October 2022
66 31 3 5 105
Transfer between stages 2 (2) - - -
New and increased provisions (net of collective provision releases) 12 10 - - 22
Credit impairment charge / (release) 14 8 - - 22
As at 30 September 2023
80 39 3 5 127
Impacts of changes in gross financial assets on loss allowances - total
Gross loans and advances - total
As at 1 October 2022
139,681 6,897 588 146 147,312
Net transfers in to each stage - 4,639 413 218 5,270
Amounts drawn from new or existing facilities 30,013 1,122 78 103 31,316
Additions 30,013 5,761 491 321 36,586
Net transfers out of each stage (5,270) - - - (5,270)
Amounts repaid (27,082) (1,557) (189) (94) (28,922)
Deletions (32,352) (1,557) (189) (94) (34,192)
Amounts written off - - - (86) (86)
As at 30 September 2023
137,342 11,101 890 287 149,620
Loss allowance as at 30 September 2023
193 398 79 60 730
Off-balance sheet credit related commitments - total
As at 1 October 2022
29,277 995 14 6 30,292
Net transfers in to each stage - 237 8 4 249
New and increased facilities and drawn amounts repaid 6,228 298 3 17 6,546
Additions 6,228 535 11 21 6,795
Net transfers out of each stage (249) - - - (249)
Reduced facilities and amounts drawn (7,497) (393) (10) (14) (7,914)
Deletions (7,746) (393) (10) (14) (8,163)
As at 30 September 2023 27,759 1,137 15 13 28,924
Loss allowance as at 30 September 2023 80 39 3 5 127
Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances are 0.48% of gross balances as at 30 September 2023, up from 0.42% as at 30 September 2022. The NZ$106 million (14.1%)
increase in loss allowances was driven by an increase in the proportion of gross balances in Stage 2, partially offset by changes in the forward-looking
economic scenarios.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
86
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2023 42 131 48 14 235
Transfer between stages
17 (16)(1)- -
New and increased provisions (net of collective provision releases) (18)(29)-11 (36)
Write-backs --- (7)(7)
Recoveries of amounts previously written off -----
Credit impairment charge / (release)
(1)(45)(1)4 (43)
Bad debts written-off (excluding recoveries)
--- (1)(1)
Add back recoveries of amounts previously written off
-----
Discount unwind
-----
As at 30 September 2024 41 86 47 17 191
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2023 - - - - -
Transfer between stages
- - - - -
New and increased provisions (net of collective provision releases) - - - - -
Credit impairment charge / (release)
- - - - -
As at 30 September 2024 - - - - -
Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2023 100,579 4,451 661 40 105,731
Net transfers in to each stage
-742293 31 1,066
Amounts drawn from new or existing facilities 24,838 54356 31 25,468
Additions 24,838 1,285 349 62 26,534
Net transfers out of each stage (1,066) - - - (1,066)
Amounts repaid
(20,601) (957)(177)(46)(21,781)
Deletions
(21,667) (957)(177)(46)(22,847)
Amounts written off
- - - (1)(1)
As at 30 September 2024 103,750 4,779 833 55 109,417
Loss allowance as at 30 September 2024 41 86 47 17 191
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2023 9,528 73 1 -9,602
Net transfers in to each stage
-10 - - 10
New and increased facilities and drawn amounts repaid
1,671 15 - - 1,686
Additions
1,671 25 - - 1,696
Net transfers out of each stage
(10)-- -(10)
Reduced facilities and amounts drawn
(1,634) (18)-- (1,652)
Deletions
(1,644) (18)-- (1,662)
As at 30 September 2024 9,555 80 1 -9,636
Loss allowance as at 30 September 2024 - - - - -
Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$44 million (18.7%) decrease in loss allowances on residential mortgage exposures is primarily driven by changes in the forward-looking
economic scenarios as described in Note 12 Allowance for expected credit losses and a release of management temporary adjustments, partially
offset by an increase in the proportion of gross balances in Stage 2 and Stage 3. Overall loss allowances and individually impaired exposures remain
low, reflecting that approximately 93% of on-balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80% (refer to
page 95).
REGISTERED BANK DISCLOSURES
87
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – residential mortgages
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - residential mortgages NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
63 81 32 10 186
Transfer between stages 13 (13) - - -
New and increased provisions (net of collective provision releases) (34) 63 16 8 53
Write-backs - - - (3) (3)
Recoveries of amounts previously written off - - - - -
Credit impairment charge / (release) (21) 50 16 5 50
Bad debts written-off (excluding recoveries) - - - (1) (1)
Add back recoveries of amounts previously written off - - - - -
Discount unwind - - - - -
As at 30 September 2023
42 131 48 14 235
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2022
- - - - -
Transfer between stages - - - - -
New and increased provisions (net of collective provision releases) - - - - -
Credit impairment charge / (release) - - - - -
As at 30 September 2023
- - - - -
Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2022
99,203 2,963 392 15 102,573
Net transfers in to each stage - 1,623 326 27 1,976
Amounts drawn from new or existing facilities 21,283 444 29 11 21,767
Additions 21,283 2,067 355 38 23,743
Net transfers out of each stage (1,976) - - - (1,976)
Amounts repaid (17,931) (579) (86) (12) (18,608)
Deletions (19,907) (579) (86) (12) (20,584)
Amounts written off - - - (1) (1)
As at 30 September 2023
100,579 4,451 661 40 105,731
Loss allowance as at 30 September 2023
42 131 48 14 235
Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2022
9,049 58 1 - 9,108
Net transfers in to each stage - 18 - - 18
New and increased facilities and drawn amounts repaid 1,861 9 - - 1,870
Additions 1,861 27 - - 1,888
Net transfers out of each stage (18) - - - (18)
Reduced facilities and amounts drawn (1,364) (12) - - (1,376)
Deletions (1,382) (12) - - (1,394)
As at 30 September 2023 9,528 73 1 - 9,602
Loss allowance as at 30 September 2023 - - - - -
Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$49 million (26.3%) increase in loss allowances on residential mortgage exposures is primarily driven by an increase in the proportion of gross
balances in Stage 2 and Stage 3. Overall loss allowances and individually impaired exposures remain low, reflecting that approximately 93% of on-
balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80%.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
88
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2023 5 31 19 2 57
Transfer between stages
4 (3) (1) - -
New and increased provisions (net of collective provision releases) (7) 17 (3) 41 48
Write-backs - - - (4) (4)
Recoveries of amounts previously written off - - - (8) (8)
Credit impairment charge / (release)
(3) 14 (4) 29 36
Bad debts written-off (excluding recoveries)
- - - (36) (36)
Add back recoveries of amounts previously written off
- - - 8 8
Discount unwind
- - - - -
As at 30 September 2024 2 45 15 3 65
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2023 13 9 3 - 25
Transfer between stages
2 (2) - - -
New and increased provisions (net of collective provision releases) 3 (1) (1) - 1
Credit impairment charge / (release)
5 (3) (1) - 1
As at 30 September 2024 18 6 2 - 26
Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2023 2,191 116 32 5 2,344
Net transfers in to each stage
- 20 13 2 35
Amounts drawn from new or existing facilities 476 19 4 46 545
Additions 476 39 17 48 580
Net transfers out of each stage (35) - - - (35)
Amounts repaid
(431) (31) (17) (11) (490)
Deletions
(466) (31) (17) (11) (525)
Amounts written off
- - - (36) (36)
As at 30 September 2024 2,201 124 32 6 2,363
Loss allowance as at 30 September 2024 2 45 15 3 65
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2023 4,605 28 9 - 4,642
Net transfers in to each stage
- 5 4 - 9
New and increased facilities and drawn amounts repaid
250 3 2 - 255
Additions
250 8 6 - 264
Net transfers out of each stage
(9) - - - (9)
Reduced facilities and amounts drawn
(369) (9) (6) - (384)
Deletions
(378) (9) (6) - (393)
As at 30 September 2024 4,477 27 9 - 4,513
Loss allowance as at 30 September 2024 18 6 2 - 26
Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
The NZ$9 million (11.0%) increase in loss allowances is driven by changes in the forward-looking economic scenarios as described in Note 12
Allowance for expected credit losses, partially offset by a release of management temporary adjustments.
REGISTERED BANK DISCLOSURES
89
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – other retail exposures
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - other retail exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
10 43 17 5 75
Transfer between stages 3 (3) - - -
New and increased provisions (net of collective provision releases) (8) (9) 2 33 18
Write-backs - - - (5) (5)
Recoveries of amounts previously written off - - - (8) (8)
Credit impairment charge / (release) (5) (12) 2 20 5
Bad debts written-off (excluding recoveries) - - - (31) (31)
Add back recoveries of amounts previously written off - - - 8 8
Discount unwind - - - - -
As at 30 September 2023
5 31 19 2 57
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2022
13 10 3 - 26
Transfer between stages 2 (2) - - -
New and increased provisions (net of collective provision releases) (2) 1 - - (1)
Credit impairment charge / (release) - (1) - - (1)
As at 30 September 2023
13 9 3 - 25
Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2022
2,194 111 31 8 2,344
Net transfers in to each stage - 15 12 1 28
Amounts drawn from new or existing facilities 455 18 3 36 512
Additions 455 33 15 37 540
Net transfers out of each stage (28) - - - (28)
Amounts repaid (430) (28) (14) (9) (481)
Deletions (458) (28) (14) (9) (509)
Amounts written off - - - (31) (31)
As at 30 September 2023
2,191 116 32 5 2,344
Loss allowance as at 30 September 2023
5 31 19 2 57
Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2022
4,759 27 10 - 4,796
Net transfers in to each stage - 7 6 - 13
New and increased facilities and drawn amounts repaid 270 4 1 - 275
Additions 270 11 7 - 288
Net transfers out of each stage (13) - - - (13)
Reduced facilities and amounts drawn (411) (10) (8) - (429)
Deletions (424) (10) (8) - (442)
As at 30 September 2023 4,605 28 9 - 4,642
Loss allowance as at 30 September 2023 13 9 3 - 25
Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
The NZ$19 million (18.8%) decrease in loss allowances is driven by changes in the management temporary adjustments and forward-looking
economic scenarios as described in Note 12 Allowance for expected credit losses.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
90
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – corporate exposures
1
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2023 146 236 12 44 438
Transfer between stages
15 (21) 1 5 -
New and increased provisions (net of collective provision releases) (17) 24 29 47 83
Write-backs - - - (38) (38)
Recoveries of amounts previously written off - - - (3) (3)
Credit impairment charge / (release)
(2) 3 30 11 42
Bad debts written-off (excluding recoveries)
- - - (4) (4)
Add back recoveries of amounts previously written off
- - - 3 3
Discount unwind
- - - (10) (10)
As at 30 September 2024 144 239 42 44 469
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2023 67 30 - 5 102
Transfer between stages
2 (2) - - -
New and increased provisions (net of collective provision releases) (13) 22 1 (2) 8
Credit impairment charge / (release)
(11) 20 1 (2) 8
As at 30 September 2024 56 50 1 3 110
Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2023 34,572 6,534 197 242 41,545
Net transfers in to each stage
- 1,189 190 110 1,489
Amounts drawn from new or existing facilities 7,588 1,132 40 178 8,938
Additions 7,588 2,321 230 288 10,427
Net transfers out of each stage (1,489) - - - (1,489)
Amounts repaid
(8,269) (1,838) (39) (217) (10,363)
Deletions
(9,758) (1,838) (39) (217) (11,852)
Amounts written off
- - - (4) (4)
As at 30 September 2024 32,402 7,017 388 309 40,116
Loss allowance as at 30 September 2024 144 239 42 44 469
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2023 13,626 1,036 5 13 14,680
Net transfers in to each stage
- 286 4 15 305
New and increased facilities and drawn amounts repaid
4,174 371 9 1 4,555
Additions
4,174 657 13 16 4,860
Net transfers out of each stage
(305) - - - (305)
Reduced facilities and amounts drawn
(4,459) (257) (2) (19) (4,737)
Deletions
(4,764) (257) (2) (19) (5,042)
As at 30 September 2024 13,036 1,436 16 10 14,498
Loss allowance as at 30 September 2024 56 50 1 3 110
1 Also includes all other non-retail exposure classes in net loans and advances and off balance sheet credit related commitments to reconcile to the respective totals for the Banking Group.
Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$39 million (7.2%) increase in loss allowances is driven by an increase in the proportion of gross balances in Stage 2 and Stage 3, and changes
in the forward-looking economic scenarios as described in Note 12 Allowance for expected credit losses, offset by a release of management
temporary adjustments.
REGISTERED BANK DISCLOSURES
91
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – corporate exposures
1
Stage 3
Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
Net loans and advances - corporate exposures NZ$m NZ$m NZ$m NZ$m NZ$m
As at 1 October 2022
126 187 10 62 385
Transfer between stages 3 (3) - - -
New and increased provisions (net of collective provision releases) 17 52 2 53 124
Write-backs - - - (14) (14)
Recoveries of amounts previously written off - - - (4) (4)
Credit impairment charge / (release) 20 49 2 35 106
Bad debts written-off (excluding recoveries) - - - (54) (54)
Add back recoveries of amounts previously written off - - - 4 4
Discount unwind - - - (3) (3)
As at 30 September 2023
146 236 12 44 438
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2022
53 21 - 5 79
Transfer between stages - - - --
New and increased provisions (net of collective provision releases) 14 9 - -23
Credit impairment charge / (release) 14 9 - - 23
As at 30 September 2023
67 30 -
5 102
Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2022
38,284 3,823 165 123 42,395
Net transfers in to each stage - 3,001 75 190 3,266
Amounts drawn from new or existing facilities 8,275 660 46 56 9,037
Additions 8,275 3,661 121 246 12,303
Net transfers out of each stage (3,266) - - - (3,266)
Amounts repaid (8,721) (950) (89) (73) (9,833)
Deletions (11,987) (950) (89) (73) (13,099)
Amounts written off - - - (54) (54)
As at 30 September 2023
34,572 6,534 197 242 41,545
Loss allowance as at 30 September 2023
146 2
36 12 44 438
Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2022
15,469 910 3 6 16,388
Net transfers in to each stage - 212 2 4 218
New and increased facilities and drawn amounts repaid 4,097 285 2 17 4,401
Additions 4,097 497 4 21 4,619
Net transfers out of each stage (218) - - - (218)
Reduced facilities and amounts drawn (5,722) (371) (2) (14) (6,109)
Deletions (5,940) (371) (2) (14) (6,327)
As at 30 September 2023 13,626 1,036 5 13 14,680
Loss allowance as at 30 September 2023 67 30 - 5 102
1 Also includes all other non-retail exposure classes in net loans and advances and off balance sheet credit related commitments to reconcile to the respective totals for the Banking Group.
E
xplanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$76 million (16.4%) increase in loss allowances is driven by an increase in the proportion of gross balances in Stage 2, partially offset by changes
in the forward-looking economic scenarios.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
92
B3. ASSET QUALITY (continued)
Past due assets
2024 2023
Residential
mortgages
Other
retail
exposures
Non-retail
exposures Total
Residential
mortgages
Other
retail
exposures
Non-retail
exposures Total
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Less than 30 days past due
718 89 264 1,071
610 81 603 1,294
At least 30 days but less than 60 days past due
321 12 125 458
201 13 115 329
At least 60 days but less than 90 days past due
336 8 12 356
243 7 194 444
At least 90 days past due 759 21 158 938 598 21 39 658
Total past due but not individually impaired 2,134 130 559 2,823
1,652 122 951 2,725
Other asset quality information
Undrawn facilities with impaired customers - - 10 10 - - 13 13
Other assets under administration 4 1 - 5 7 1 - 8
Asset quality for financial assets designated at fair value
The Banking Group does not have any loans and advances designated at fair value.
REGISTERED BANK DISCLOSURES
93
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
RBNZ capital ratios
RBNZ minimum Banking Group
Bank
(Solo Consolidated)
2024 2023 2024 2023 2024 2023
Common equity tier 1 capital ratio 4.5% 4.5% 12.6% 12.5% 12.4% 12.3%
Tier 1 capital ratio 7.0% 6.0% 15.1% 14.1% 14.9% 13.9%
Total capital ratio 9.0% 8.0%
17.2%
15.5%
17.0%
15.2%
Prudential capital buffer ratio 4.5% 4.5%
8.1%
7.5%
n/a
n/a
Capital
As at 30 September 2024 NZ$m
Tier 1 capital
Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
15,988
Retained earnings (net of appropriations)
1
1,099
Accumulated other comprehensive income and other disclosed reserves
2
24
Less deductions from CET1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
(3,094)
Deferred tax assets less deferred tax liabilities relating to temporary differences
(439)
Cash flow hedge reserve
(52)
Defined benefit superannuation plan surplus
(24)
Expected losses to the extent greater than total eligible allowances for impairment
(371)
CET 1 capital
13,131
Additional tier 1 (AT1) capital
NZD 1,692m perpetual preference shares
3
1,692
Transitional AT1 capital instruments
NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN)
4
938
AT1 capital 2,630
Total tier 1 capital 15,761
Tier 2 capital
NZD 600m subordinated notes
4
600
USD 1,000m subordinated notes
4
1,570
Tier 2 capital
2,170
Total capital
17,931
1 Includes a deduction for dividends on AT1 capital instruments approved by the Bank’s board, but not yet paid as at 30 September 2024, as required by BPR110 Capital Definitions. These
dividends are not recognised under NZ GAAP because the payment of the dividends remains at the Bank’s discretion until payment is made.
2 Includes the cash flow hedging reserve of NZ$52 million less the FVOCI reserve of NZ$28 million as at 30 September 2024.
3 Classified as equity on the balance sheet under NZ GAAP.
4 Classified as a liability on the balance sheet under NZ GAAP.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
94
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
Total capital requirements of the Banking Group
Total exposure
after credit risk
mitigation
Risk weighted
exposure or
implied risk
weighted
exposure
Total capital
requirement
1
As at 30 September 2024 NZ$m NZ$m NZ$m
Exposures subject to the internal ratings based approach
170,850 66,125 5,951
Specialised lending exposures subject to the slotting approach
10,430 10,337 930
Exposures subject to the standardised approach
36,439 4,768 428
Output floor balancing item
n/a 5,857 527
Total credit risk
217,719 87,087 7,836
Market risk
n/a 5,186 467
Operational risk
n/a 11,970 1,077
Total n/a 104,243 9,380
1 The total capital requirement increased from 8% to 9% of risk weighted exposure or implied risk weighted exposure from 1 July 2024 in accordance with the Bank’s conditions of
registration and BPR100:
Capital Adequacy.
Credit risk subject to the Internal Ratings Based (IRB) approach
IRB credit exposures by exposure class and customer credit rating
Probability
of default Total value
Exposure at
default
Exposure-
weighted
LGD used for
the capital
calculation
Exposure-
weighted
risk weight
Risk
weighted
assets
As at 30 September 2024 % NZ$m NZ$m % % NZ$m
Corporate
0 - 2 0.05 68,086 7,122 57 28 2,410
3 - 4
0.37 45,240 17,055 37 41 8,329
5
1.01 14,263 12,351 31 55 8,088
6
2.27 5,412 4,792 32 74 4,249
7 - 8
16.01 3,544 2,544 37 162 4,947
Default
100.00 330 335 31 145 582
Total corporate exposures 2.36 136,875 44,199 38 54 28,605
Residential mortgages
0 - 3 0.15 40,890 41,342 16 6 2,770
4
0.43 24,325 24,375 18 14 4,150
5
0.89 26,427 26,502 19 25 7,921
6
2.18 20,940 20,971 20 45 11,382
7 - 8
5.73 5,575 5,581 20 77 5,137
Default
100.00 896 894 19 11 123
Total residential mortgage exposures 1.73 119,053 119,665 18 22 31,483
Other retail
0 - 2 0.10 498 500 77 49 296
3 - 4
0.25 3,990 4,062 78 55 2,702
5
1.06 1,031 1,017 78 83 1,011
6
2.72 575 599 84 109 781
7 - 8
8.04 744 768 87 135 1,240
Default
100.00 38 40 80 13 7
Total other retail exposures 2.00 6,876 6,986 79 72 6,037
Total credit risk exposures subject to the IRB approach 1.91 262,804 170,850 26 32 66,125
REGISTERED BANK DISCLOSURES
95
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
IRB credit exposures include the following undrawn commitments and other off-balance sheet contingent liabilities:
Total value
Exposure
at default
As at 30 September 2024 NZ$m NZ$m
Undrawn commitments and other off-balance sheet contingent liabilities
Corporate
11,714 10,593
Residential mortgages
9,636 10,091
Other retail
4,513 4,563
Counterparty credit risk on derivatives and securities financing transactions
Corporate
93,074 1,205
Total 118,937 26,452
Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off-balance sheet exposures include undrawn and partially drawn residential mortgage loans as well
as commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance
sheet
Off-balance
sheet
Total
As at 30 September 2024 NZ$m NZ$m NZ$m
LVR range
Does not exceed 60% 57,352 7,295 64,647
Exceeds 60% and not 70%
20,109 1,048 21,157
Exceeds 70% and not 80%
24,034 1,034 25,068
Does not exceed 80%
101,495 9,377 110,872
Exceeds 80% and not 90%
6,257 112 6,369
Exceeds 90%
1,665 147 1,812
Total 109,417 9,636 119,053
Specialised lending subject to the slotting approach
Exposures
after
credit risk
mitigation Risk weight
Risk
weighted
assets
As at 30 September 2024 NZ$m % NZ$m
On-balance sheet exposures
Strong
5,688 70 4,778
Good
2,708 90 2,924
Satisfactory
749 115 1,034
Weak
369 250 1,111
Default
383 - -
Off-balance sheet exposures by average risk weight
Undrawn commitments and other off-balance sheet exposures
533 77 490
Total exposures subject to the slotting approach 10,430 83 10,337
The supervisory categories of specialised lending above are associated with specific risk weights. These categories broadly correspond to the
following external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
96
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
Credit risk exposures subject to the standardised approach
Exposure or
principal
amount
Average
credit
conversion
factor
Exposure
after credit
risk
mitigation
Risk
weight
Risk
weighted
assets
As at 30 September 2024 NZ$m % NZ$m % NZ$m
On-balance sheet exposures by separate risk weight
Cash and gold bullion 130 - -
Sovereign and central banks
19,339 - -
Multilateral development banks and other international organisations
5,276 - -
Public sector entities
1,690 20 338
Banks - 20% risk weight
564 20 113
Banks - 50% risk weight 1,114 50 557
Banks - 100% risk weight 5 100 5
Equity exposures not deducted from capital
Unlisted equity holdings
5 400 22
Other on-balance sheet exposures by average risk weight
Corporate
47 100 47
Past due assets - 150 -
Other assets 1,421 100 1,421
Off-balance sheet exposures by average risk weight
Total off balance sheet exposures
2,207 59 1,297 43 560
Counterparty credit risk by average risk weight
Foreign exchange contracts
285,971 3,208 21 676
Interest rate contracts
702,975 1,089 19 207
Other
4,492 53 20 11
Credit valuation adjustment
632
Trades settled on Qualifying Central Counterparties (QCCP) by average risk weight
Bank as QCCP clearing member, clearing own trades 990 18 175
Collateral posted for clearing own trades
211 2 4
Total exposures subject to the standardised approach
36,439 13 4,768
Credit valuation adjustment
The IRB and standardised tables above include a Credit Valuation Adjustment (CVA) capital charge of NZ$82 million, and implied risk weighted
exposures for the CVA of NZ$1,020 million.
Credit risk mitigation
As at 30 September 2024, under the IRB approach, the Banking Group had NZ$281 million of corporate exposures covered by guarantees where the
presence of the guarantees was judged to reduce the underlying credit risk of the exposures. Information on the value of other exposures covered by
financial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk
exposures is not considered to be material.
REGISTERED BANK DISCLOSURES
97
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
Impact of the standardised floor on total credit risk RWAs
Risk weighted assets
Calculated for
compliance
purposes
Recalculated using
the standardised
approach
As at 30 September 2024 NZ$m NZ$m
Total IRB and supervisory slotting exposures
1
76,462 96,846
Standardised floor at 85% of standardised equivalents
n/a
82,319
Output floor adjusting item
5,857
n/a
IRB and slotting RWAs with floor applied
82,319
n/a
RWAs for standardised exposures
4,768
n/a
Total credit risk RWAs 87,087
n/a
1 RWA calculated for compliance purposes includes a scalar of 1.2 as required by BPR 130 Credit Risk RWAs Overview.
Information about RWA recalculated using the standardised approach is in section Standardised equivalents of IRB risk weighted assets on page 99.
In accordance with BPR 130
Credit Risk RWAs Overview, IRB and Slotting RWA with the standardised floor is calculated as the greater of RWA for
compliance purposes, and 85% of the total RWA for such exposures calculated using the standardised approach.
Market risk
The aggregate capital charge below has been calculated in accordance with BPR140:
Market Risk. Implied risk weighted exposures are equal to 12.5 x
aggregate capital charge in accordance with BPR100:
Capital Adequacy and as prescribed by the Order. The peak end-of-day market risk exposures are
for the six months ended 30 September 2024.
The total capital requirement for market risk exposure calculated at 9% of implied risk weighted exposure is disclosed on page 94.
Implied risk weighted
exposure Aggregate capital charge
Period end Peak Period end Peak
As at 30 September 2024 NZ$m NZ$m NZ$m NZ$m
Interest rate risk 5,151 6,444 412 516
Foreign currency risk 30 98 2 8
Equity risk 5 5 - -
Operational risk
As required by the Bank’s c onditions of registration, the Banking Group uses the standardised approach to calculate the total operational risk capital
requirement in accordance with BPR150:
Standardised Operational Risk.
As at 30 September 2024, the Banking Group had an implied risk weighted exposure of NZ$11,970 million and a total operational risk capital
requirement of NZ$958 million. The implied risk weighted exposure is equal to 12.5 x total operational risk capital requirement in accordance with
BPR100:
Capital Adequacy and as prescribed by the Order.
The total capital requirement for operational risk calculated at 9% of implied risk weighted exposure is disclosed on page 94.
Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions of
Registration. The Banking Group's ICAAP identifies and measures all "other material risks", which are those material risks that are not explicitly captured
in the calculation of the Banking Group's tier 1 and total capital ratios. Other material risks identified by the Banking Group include fixed asset risk,
deferred acquisition cost risk, credit concentration risk and climate change risk. As at 30 September 2024, the Banking Group's internal capital
allocation for these other material risks is NZ$392 million (2023: NZ$447 million, updated from NZ$270 million for revised methodology).
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
98
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
Overseas Banking Group
Ultimate Parent Bank
(Extended Licensed Entity)
2024 2023 2024 2023
Common equity tier 1 capital ratio
12.2%
13.3%
12.6%
13.1%
Tier 1 capital ratio
14.0%
15.2%
14.9%
15.4%
Total capital ratio
20.6%
21.0%
22.7%
22.2%
The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA’s capital framework, which is
at least equal to that specified under the internationally agreed Basel III framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
•the Internal Ratings Based (IRB) methodology for calculation of credit risk weighted assets. Where the Overseas Banking Group is not accredited
to use the IRB methodology the Overseas Banking Group applies the standardised approach.
•the Standardised Measurement Approach (SMA) for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 30 September 2024 and for the comparative prior
periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2024. The Overseas Banking Group’s Pillar
3 disclosure document for the quarter ended 30 September 2024, in accordance with APS 330:
Public Disclosure of Prudential Information, discloses
capital adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risk. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1-
month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. The minimum amount of core funding is 75% of a
bank’s total loans. The Banking Group must maintain its core funding ratio above the regulatory minimum on a daily basis. This measure of the core
funding ratio is averaged over the quarter.
For the three months ended 30 Sep 24 30 Jun 24
Quarterly average 1-week mismatch ratio
8.4%
8.7%
Quarterly average 1-month mismatch ratio 7.3% 7.3%
Quarterly average core funding ratio 90.2% 89.9%
REGISTERED BANK DISCLOSURES
99
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORY
LIQUIDITY RATIOS (UNAUDITED)
(continued)
STANDARDISED EQUIVALENTS OF IRB RISK WEIGHTED ASSETS
Background
During the year, RBNZ made changes to the Order to implement dual reporting disclosures for IRB accredited banks for reporting periods from 30
June 2024. This section contains the additional information required by the Order about RWAs and the resulting capital ratios recalculated as if the
Bank were subject to the standardised approach for capital adequacy.
Capital adequacy information calculated in accordance with the Bank’s conditions of registration is presented in the section above.
Historical comparison with standardised capital ratios and risk weights
2024 2023
As at 30 September % %
Total capital ratio 17.2 15.5
Total capital ratio recalculated as if the Bank were not an IRB bank 15.4 14.4
Actual average risk weight for all modelled credit risk exposures 42.2 49.5
Standardised equivalent average risk weight for all modelled credit risk exposures 57.5 58.8
In the table above:
•Total capital ratio is the Banking Group’s actual capital ratio, calculated in accordance with the Bank’s conditions of registration.
•Total capital ratio recalculated as if the Bank were not an IRB bank is calculated in accordance with the standardised approach.
•Actual average risk weight for all modelled credit risk exposures is calculated as the ratio of total risk weighted assets for all exposures that are
subject to the IRB modelling approach or the supervisory slotting approach, including any applicable scalar and credit risk supervisory
adjustments, to total exposure at default for all such exposures.
•Standardised equivalent average risk weight for all modelled credit risk exposures is calculated as the ratio of total risk weighted assets for all
exposures subject to the IRB modelling approach or the supervisory slotting approach recalculated as if the Bank was a standardised bank, to
total on-balance sheet exposures and credit equivalent amounts for all such exposures, defined in accordance with the standardised risk-
weighting approach in BPR131
Standardised Credit Risk RWAs.
Standardised equivalent capital ratios
As at 30 September 2024 CET 1 capital Tier 1 capital Total capital
Standardised equivalent capital amount NZ$m 13,502 16,132 18,302
Standardised equivalent total RWAs NZ$m 118,743 118,743 118,743
Ratio 11.4% 13.6% 15.4%
The standardised equivalent of the Banking Group capital and the Banking Group reported capital amounts are different due to 'Expected losses to
the extent greater than total eligible allowances for impairment' which only applies under the IRB approach.
The standardised equivalent of the Banking Group total RWAs and the Banking Group reported total RWAs amounts are different due to (i) credit
RWAs as the Banking Group is accredited to report under BPR133
IRB Credit Risk RWAs whereas credit RWAs are recalculated under BPR131
Standardised Credit Risk RWAs for dual reporting purposes and (ii) CVA for credit risk exposures subject to the standardised approach.
Credit risk: standardised equivalents of IRB risk weighted assets
IRB approach Standardised equivalent
Exposure
Risk-
weighted
assets Exposure
Risk-
weighted
assets
As at 30 September 2024 NZ$m NZ$m NZ$m NZ$m
Corporate
44,199 28,605 39,280 37,344
Residential mortgages
119,665 31,483 114,532 44,584
Other retail
6,986 6,037 4,655 4,669
Specialised lending subject to the slotting approach
10,430 10,337 10,064 10,248
Total 181,280 76,462 168,531 96,845
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
100
B5. CONCENTRATION OF CREDIT EXPOSURES TO INDIVIDUAL COUNTERPARTIES
The Banking Group measures its concentration of credit exposures to individual counterparties at the reporting date on the basis of actual exposures.
Peak end-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting
date for the previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:
•connected persons (i.e. other members of the Overseas Banking Group and Directors of the Bank);
•the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and
•any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.
As at
Peak end of
day over 6
months to
30 Sep 24 30 Sep 24
Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capital
- -
with a long-term credit rating of A- or A3 or above, or its equivalent
- -
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent - -
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1 capital
2 2
with a long-term credit rating of A- or A3 or above, or its equivalent
2 2
- 10% to less than 15% of CET1 capital
2 2
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
--
REGISTERED BANK DISCLOSURES
101
B6. CREDIT EXPOSURES TO CONNECTED PERSONS
Connected persons
Non-bank connected
persons
Amount % of tier 1 Amount % of tier 1
NZ$m capital NZ$m capital
As at 30 September 2024
Gross amount, before netting
16,253 103.1% 13 0.1%
Amount netted
12,350 78.4% -0.0%
Aggregate credit exposure (on partial bilateral net basis)
3,903 24.8% 13 0.1%
Peak end-of day aggregate credit exposure over the year ended 30 September 2024
Gross amount, before netting 13,091 83.1% 2 0.0%
Amount netted
8,210 52.1% -0.0%
Aggregate credit exposure (on partial bilateral net basis)
4,881 31.0% 2 0.0%
Credit exposures to connected persons
The information on credit exposure to connected persons has been derived in accordance with the RBNZ Banking Supervision Handbook document
Connected Exposures Policy (BS8), is net of individual credit impairment allowances and excludes advances to connected persons of a capital nature.
Peak end-of-day aggregate exposure
Peak end-of-day aggregate credit exposure to connected persons as a ratio to tier 1 capital for the full year accounting period is derived by
determining the maximum end-of-day aggregate amount of credit exposure over the accounting period and then dividing that amount by the
Banking Group’s tier 1 capital as at the reporting date.
Rating contingent limit
The rating-contingent limit that applied to the Banking Group as at 30 September 2024 was 60%. No limit changes have occurred over the year to 30
September 2024. Within the overall rating-contingent limit, there is a sub-limit of 15% of tier 1 capital that applies to the aggregate credit exposure to
non-bank connected persons.
Additional requirements for aggregate credit exposure to connected persons
Aggregate credit exposure to connected persons has been calculated on a partial bilateral net basis. The gross amounts and amounts netted off
under a bilateral netting agreement are included in the table above.
Unfunded contingent credit protection provided by connected persons
NZ$249 million of contingent exposures of the Banking Group to connected persons arose from unfunded contingent credit protection arrangements
provided by any connected persons in respect of credit exposures to counterparties (excluding counterparties that are connected persons) as at 30
September 2024.
Loss allowance for credit-impaired credit exposures to connected persons
There were no loss allowances provided against credit exposures to connected persons as at 30 September 2024.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
102
B7. INSURANCE BUSINESS, SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES
AND MARKETING AND DISTRIBUTION OF INSURANCE PRODUCTS
Insurance business
The Banking Group does not conduct any insurance business.
Banking Group’s involvement in securitisation, funds management, other fiduciary activities, and marketing and distribution of insurance
products
a) Banking Group’s involvement in the establishment, marketing, or sponsorship of trust, custodial, funds management, and other fiduciary activities
Activity Details
Custodial
The Banking Group operates two custodians as at 30 September 2024:
•ANZ Custodial Services New Zealand Limited, which is the appointed custodian for private banking’s (ANZ Private)
Discretionary Investment Management Service, Wholesale Investment Services and Trading Service; and
•ANZ New Zealand Investments Nominees Limited, which is the appointed custodian for direct holdings of securities by
various wholesale customer portfolios managed by ANZ New Zealand Investments Limited (ANZ Investments).
Funds
management
The Banking Group provides the following funds management services:
•Managed Investment Schemes (MIS): The Banking Group’s subsidiaries ANZ Investments and ANZ Investment Services
(New Zealand) Limited (ANZIS) act as manager for a number of managed investment schemes. ANZ Investments holds an
MIS Manager licence and is the issuer and manager of ANZ and OneAnswer-branded KiwiSaver, retail and wholesale
schemes. ANZIS is the issuer and manager of the ANZ PIE Fund. ANZ National Staff Superannuation Limited, also a
subsidiary of the Banking Group, is the trustee and manager of the ANZ National Retirement Scheme, which is a restricted
workplace savings scheme.
•
Discretionary Investment Management Service (DIMS): The Bank is a licensed DIMS provider. This service is offered to ANZ
Private customers.
•
Other investment portfolios: ANZ Investments also manages investment portfolios for a number of schemes where the
scheme manager or trustee has outsourced investment management services to ANZ Investments. These schemes are
typically corporate superannuation schemes.
Other fiduciary
activities
ANZ Investments, through its subsidiary OneAnswer Nominees Limited, offers the OneAnswer Portfolio Service. The associated
administration and custody services are provided by FNZ Limited and FNZ Custodians Limited respectively (together FNZ).
FNZ is not a member or related party of the Banking Group.
b) Banking Group’s involvement in the origination of securitised assets, and the marketing or servicing of securitisation schemes
The Banking Group originates securitised assets in the form of residential mortgage backed securities held for potential repurchase transactions with
RBNZ, and covered bonds. Refer to Note 24 Structured entities for further details about these programmes. Other than these activities, the Banking
Group is not involved in the marketing or servicing of securitisation schemes.
c) Banking Group’s involvement in marketing and distribution of insurance products
The Banking Group markets and distributes life insurance, other personal and business insurance products provided by or arranged through a number
of insurance partners. None of these insurance partners are affiliated insurance entities or affiliated insurance groups. Our insurance partners are:
•Vero Insurance New Zealand Limited for home, contents, motor vehicle, boat, and lifestyle block insurance;
•AWP Services New Zealand Limited, trading as Allianz Partners, for premium card travel insurance. Policies are underwritten by The Hollard
Insurance Company Pty Limited (incorporated in Australia);
•Chubb Life Insurance New Zealand Limited for life & living, and business insurance; and
•Arthur J. Gallagher & Co (NZ) Limited (formerly Crombie Lockwood (NZ) Limited) for business insurance.
Arrangements to ensure no adverse impacts arising from the above activities
Arrangements have been put in place to ensure that difficulties arising from the activities in a), b) and c) above would not impact adversely on the
Banking Group. The policies and procedures in place include comprehensive and prominent disclosure of information regarding products, and formal
and regular review of operations and policies by management.
REGISTERED BANK DISCLOSURES
103
B7. INSURANCE BUSINESS, SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES
AND MARKETING AND DISTRIBUTION OF INSURANCE PRODUCTS
(continued)
Amounts represented by funds management and securitisation activities
2024 2023
NZ$m NZ$m
Funds under management:
KiwiSaver
1
21,768 18,957
Other managed funds
1
3,370 3,286
ANZ PIE Fund
2
5,994
3,741
DIMS
3
7,621
7,259
Other investment portfolios
4
910
3,865
Total funds under management
5
39,663
37,108
Funds under custodial arrangements
7,635
7,277
Other funds held or managed subject to fiduciary responsibilities
6
2,004 1,820
Outstanding securitised assets originated by the Banking Group - carrying amount of covered bonds
2,156 3,373
1 Managed by ANZ Investments.
2 Managed by ANZIS and wholly invested in deposits of the Bank.
3 Managed by the Bank.
4 Comprises portfolios managed by ANZ Investments, and the ANZ National Retirement Scheme managed by ANZ National Staff Superannuation Limited.
5 The Bonus Bonds Scheme’s registration under the FMCA was cancelled on 7 March 2024. All distributions were paid to bondholders (2023: NZ$58 million of distributions payable to
bondholders).
6 Not included in funds under management.
Financial services provided to entities conducting the above activities
Financial services provided by any member of the Banking Group to entities that conduct the activities in a) or b) above are provided on arm’s length
terms and conditions and at fair value.
Assets purchased from entities conducting the above activities
Over the year ended 30 September 2024, any assets purchased by any member of the Banking Group from entities that conduct the activities in a), b)
or c) above have been purchased on arm’s length terms and conditions and at fair value.
Funding provided to entities in aggregate and individually
The peak end-of day aggregate amount of funding provided to entities that provide services relating to the Banking Group’s involvement in the above
activities over the year ended 30 September 2024 was NZ$0.1 million (2023: NZ$0.2 million) which was 0.0% (2023: 0.0%) of the Banking Group’s tier 1
capital and 0.1% (2023: 0.1%) of the total assets of the individual entity.
Method for deriving peak end-of-day amount of funding in aggregate and individually
The peak end-of-day aggregate amount of funding is the maximum end-of-day aggregate amount of funding over the full year accounting period,
divided by the Banking Group’s tier 1 capital as at the balance date, and the total assets as at the balance date of the individual entity to which the
Banking Group has provided funding. Where financial statements for the individual entity are not publicly available, total assets from the publicly
available financial statements of the group of which the entity is a member have been used.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
104
B8. RISK MANAGEMENT POLICIES
Information about risk
Constant changes and uncertainties in the macroeconomic environment, climate change and evolving geopolitical tensions continue to pose
challenges to our operating conditions. We understand that our customers are similarly affected by these as well as additional challenges such as
experiencing increasing fraud and scams activities. We will continue to strengthen our risk management framework and practices to meet such
challenges.
The Board is ultimately responsible for establishing and overseeing the Banking Group’s Risk Management Framework (RMF), which is
supported by the Banking Group’s underlying systems, structures, policies, procedures, processes and people. The Board has delegated
authority to the Bank’s Board Risk Committee (BRC) to develop and monitor compliance with the Banking Group’s risk management
policies. The Committee reports regularly to the Board on its activities. The key pillars of the Banking Group’s RMF include:
•The Risk Management Strategy (RMS) is a critical element of the Banking Group’s RMF. The RMS includes: how the risk function is
structured to support the Banking Group’s purpose and strategy; the values, attitudes and behaviours that support risk decision
making in delivering on strategic priorities and a Board approved target risk culture; a description of each material risk; and an
overview of how the RMS addresses each material risk, with reference to the relevant policies, standards and procedures. It also
includes information on how the Banking Group identifies, measures, evaluates, monitors, reports and controls or mitigates th
e
m
aterial risks and the oversight mechanism and/or committees in place.
•The Risk Appetite Statement (RAS), conveys, for each material risk, the maximum level of risk the Banking Group is willing to accept in
pursuing its strategic objectives and its operating plans considering its shareholders’, depositors’ and customers’ interests.
•Risk Principles support the RMF and outline the behaviours and practices that are expected to be applied to guide risk management and
help to instil an appropriate risk culture across the Banking Group.
Material risks
The material risks facing the Banking Group per our RMS, and how these risks are managed, are summarised below.
During the year, the Banking Group elevated Climate risk to material risk status. A dedicated Climate risk management team, with oversight from the
material risk owners, are working to integrate and embed Climate risk into the Banking Group’s RMF through existing policies, processes and
governance frameworks.
Each material risk has an associated RAS component, and where applicable, is measured by appropriate metric(s) and associated tolerance(s)
representing the maximum level of risk appropriate to execute the Banking Group’s strategic agenda. Metrics are reviewed at least annually. A risk
appetite dashboard is prepared and reviewed by senior management monthly, and presented to the BRC at each meeting.
Risk type Description Managing the risk
Capital
adequacy
risk
The risk of loss arising from the Banking 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
Banking 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. The ICAAP also operates as part of the management
framework for 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 loss.
Includes:
•concentrations of credit risk;
•intra-day credit risk;
•credit risk to bank counterparties; and
•related party credit risk
Our Credit risk framework is top down, being defined by credit
principles, policies and requirements. 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.
The effectiveness of the Credit risk framework is assessed through
various compliance and monitoring processes. These, together with
portfolio selection, define and guide the credit process, organisation
and staff.
Liquidity
and
funding risk
The risk that the Banking Group is unable to meet its
payment obligations as they fall due, including:
•repaying depositors or maturing wholesale debt; or
•the Banking Group having insufficient capacity to fund
increases in assets.
The Banking Group recognises the inherent liquidity and funding risk
in the balance sheet and has established a set of key principles, to
mitigate and control liquidity and funding risk.
Our framework is top down, being defined by liquidity principles and
policies. A liquidity limit framework is in place with liquidity limits set
based on a liquidity stress testing framework.
Market
risk
The risk stems from our trading and balance sheet activities
and is the risk to the Banking Group’s earnings arising from:
•changes in any interest rates, foreign exchange rates,
credit spreads, volatility, and correlations; or
•fluctuations in bond, commodity or equity prices.
We have a detailed market risk management and control framework
which includes incorporating an independent risk measurement
approach to quantify the magnitude of market risk within the trading
and balance sheet portfolios. This approach identifies the range of
possible outcomes, that can be expected over a given period of
time, and establishes the likelihood of those outcomes and allocates
an appropriate amount of capital to support these activities.
The Banking Group’s key tools to measure and manage Market risk
on a daily basis include value at risk, earnings at risk, interest rate
sensitivities, market value loss limits and stress testing.
REGISTERED BANK DISCLOSURES
105
B8. RISK MANAGEMENT POLICIES (continued)
Risk type Description Managing the risk
Strategic
risk
Strategic risk is defined as the risk that the Banking Group is
prevented from achieving the key strategic goals that are
core to its operations through ineffective strategic choices,
failure to execute the strategy effectively, or a failure to
adapt the strategy in response to changing environments
and requirements.
Strategic risk may arise from factors such as poor strategic
choices, failure to achieve strategic targets through
ineffective execution and failure to review the strategy or
reallocate resources in response to changes in the
operating environment.
Strategic risks are discussed and managed by the New Zealand
Leadership Team (NZLT) through the Banking Group strategic
planning process. Additionally, we monitor delivery risk associated
with High Impact change initiatives and undertake risk assessments
prior to execution of our strategic changes.
Climate risk
Climate risk is the risk that arises from the changing climate
and from the transition to a low-emissions, climate-resilient
global and domestic economy. The key elements of climate
risk are:
•Physical risk – risk related to the physical impacts of
climate change. This includes changes to the frequency
and magnitude of extreme weather events (acute risk)
as well as longer-term changes in climate (chronic risk).
Physical risks will primarily impact our customers, which
in turn will impact us. Physical risks will also impact our
office locations and branches.
•Transition risk – risk related to the transition to a lower-
emissions, climate-resilient economy. Moving towards
a lower-emissions economy can create both transition
risks and opportunities for us and our customers.
Following the elevation of climate risk to material risk during the year
we have identified and qualitatively assessed the specific climate
risks to the Banking Group. Work is progressing to integrate and
embed climate risk into the Banking Group’s RMF through existing
policies, processes and governance frameworks.
Climate risk is classified as a ‘cross cutting’ risk that can amplify other
material risks across the Banking Group. For example, while climate
risk can be a driver of credit risk through lending to our customers, it
may also result in other financial risks, e.g. market risk.
Climate risks can also be a driver of non-financial risks including
conduct risk, regulatory risk and operational resilience risk.
Climate-related financial and non-financial risks are managed
through the risk management strategies associated with these risks.
Non-
financial risk
(operational
risk)
Non-financial risk (NFR), is the risk of loss and/or non-
compliance (including failure to act in accordance with
laws, regulations, industry standards and codes, and
internal policies) resulting from inadequate or failed
internal processes, people, system and/or data, or from
external events.
The Banking Group’s strategy for evolving NFR management
provides a planned and proactive approach to improving the
Banking Group’s NFR management. The NFR strategy is being
operationalised through the NFR Framework, which has been
designed to enable the Banking Group to holistically, consistently
and effectively identify, assess, remediate, monitor and report on
NFR. The Banking Group manages NFR in accordance with the
industry-wide Operational Risk Exchange (ORX) taxonomy, of 16 ‘Risk
Themes’, noting some of these present a higher inherent risk to the
Banking Group such as Technology, Conduct, Financial Crime, Data
and Information Security (including Cyber).
Refer to Note 15 Financial risk management for the disclosures required under NZ IFRS 7 Financial Instruments: Disclosures.
Other material risks
Other material risks do not require the same degree of active or transactional management as the material risks and are managed and monitored as
part of the Banking Group’s business, strategic and capital management process. The maximum level of risk is set as part of the Banking Group’s
ICAAP.
Refer to Note 22 Capital management for more information about the Banking Group’s ICAAP, and the section ‘Capital for other material risks’ in Note
B4 for the capital held for these risks.
Other material risks not explicitly captured in the calculation of the Banking Group’s tier 1 and total capital include:
Fixed asset
risk
The risk of financial loss arising from the negative revaluation of fixed assets owned and leased by the Banking Group, caused by
adverse changes in business and/or economic conditions. Residual Value Risk is included in the definition of Fixed Assets, which is
the risk that the market value of the underlying assets of operating leases may fall below the anticipated residual value.
Deferred
acquisition
cost risk
The risk of loss arising from the failure of the benefits associated with the acquisition of interest earning assets to arise due to
impairment, transfer, or prepayment.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
REGISTERED BANK DISCLOSURES
106
B8. RISK MANAGEMENT POLICIES (continued)
Capital adequacy
Refer to Note 22 Capital management for the disclosures required under NZ IAS 1
Presentation of financial statements.
Reviews of the Banking Group’s risk management systems
Refer to Note 15 Financial risk management for details of the Internal Audit Function’s reviews of the Banking Group’s RMF. These reviews are not
conducted by a party external to the Banking Group or the Ultimate Parent Bank.
Internal Audit Function of the Banking Group
The Banking Group has an Internal Audit Function, refer to Note 15 Financial risk management for details.
The nature and scope of the responsibilities of the Audit Committee, to which Internal Audit reports, are to assist the Board of Directors by providing
oversight and review of:
•the Banking Group's financial reporting principles and policies, controls, systems and procedures;
•the effectiveness of the Banking Group’s internal control and risk management framework;
•the work and internal audit standards of Internal Audit which reports directly and solely to the Chair of the Audit Committee;
•the integrity of the Banking Group's financial statements, climate related disclosures and, where applicable, the independent audit thereof, and
the Banking Group’s compliance with legal and regulatory requirements in relation thereto;
•any due diligence procedures;
•prudential supervision procedures and other regulatory requirements to the extent relating to financial and climate reporting; and
•any other matters referred to it by the Board.
The Audit Committee is also responsible for:
•the appointment, annual evaluation and oversight of the external auditor;
•annual review of the independence, fitness and propriety, and qualifications of the external auditor;
•compensation of the external auditor; and
•where deemed appropriate, replacement of the external auditor.
In carrying out its responsibilities and duties, the Audit Committee will aim to seek fair customer outcomes and financial market integrity in its
deliberations.
Measurement of impaired assets
Refer to Note 12 Allowance for expected credit losses and Note 15 Financial risk management for details of the Banking Group’s approach to
measurement of impaired assets. Further to this, impairment is assessed monthly, with individual allowances for credit impairment also updated
monthly and collective allowances for credit impairment updated quarterly.
Credit risk mitigation
Refer to Note 18 Offsetting for the policies and processes for, and extent of, on-balance sheet netting. The same policies and processes apply to off-
balance sheet credit related commitments. No off-balance sheet credit related commitments or guarantees meet the criteria for netting.
As an IRB bank, the Banking Group uses the comprehensive method to measure the mitigating effects of collateral.
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment. The Banking
Group generally takes collateral security in the form of real property or a security interest in personal property, except for major government, bank and
corporate counterparties of strong financial standing. Longer term consumer finance, in the form of housing loans, is generally secured against real
estate while short term revolving consumer credit is generally unsecured.
REGISTERED BANK DISCLOSURES
107
B8. RISK MANAGEMENT POLICIES (continued)
Additional information about credit risk
Implementation of the advanced internal ratings based approach to credit risk measurement
The Banking Group adheres to the standards of risk grading and risk quantification as set out for IRB banks in the RBNZ Banking Prudential
Requirements ( BPRs). Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers and
exposures, by way of the primary components of:
•Probability of Default (PD): An estimate of the level of risk of borrower default graded by way of rating models used both at loan origination and
for ongoing monitoring.
•Exposure at Default (EAD): The expected facility exposure at default.
•Loss Given Default (LGD): An estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default and
expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn LGDs according to
loan to value (LVR) bands as set out in BPR133:
IRB Credit Risk RWAs. For farm lending exposures the Banking Group is required to adopt RBNZ
prescribed downturn LVR based LGDs, along with a minimum maturity of 2.5 years and the removal of the firm-size adjustment as set out in
BPR133:
IRB Credit Risk RWAs.
For exposures classified under Specialised Lending, the Banking Group uses slotting tables approved by RBNZ rather than internal estimates.
The exceptions to IRB treatment are Sovereign, Bank, Equity, Other, Qualifying Central Counterparty (QCCP) and two minor corporate exposure types
where, due to systems constraints, determining these IRB risk estimates is not currently feasible or appropriate. Risk weights for these exposures are
calculated under a separate treatment as set out in the RBNZ document BPR131: Standardised Credit Risk RWAs.
Internal ratings based approach
IRB Asset Class Borrower Type Rating Approach
Corporate Corporation, partnerships or proprietorships that do not fit any other asset classification IRB - Advanced
Corporate Small to Medium Enterprises (SME) with turnover of less than NZ$50 million IRB - Advanced
Retail Mortgages Individuals' borrowings against residential property IRB - Advanced
Other Retail Other lending to individuals (including credit cards) IRB - Advanced
SME business borrowers IRB - Advanced
Corporate sub-class
- Specialised lending
Project finance IRB - Slotting
Income producing real estate IRB - Slotting
Standardised approach
Exposure Class Exposure Type Reason for Standardised Approach Future Treatment
Sovereign Crown Required by BPRs Standardised
RBNZ Required by BPRs Standardised
Any other sovereign and its central bank Required by BPRs Standardised
Bank Required by BPRs Standardised
Equity Required by BPRs Standardised
Other All other assets not falling within any of the above classes Required by BPRs Standardised
Corporate QCCP Required by BPRs Standardised
Merchant card prepayment exposures System constraints Move to IRB
Corporate credit cards System constraints Move to IRB
Controls surrounding credit risk rating systems
The term “Rating Systems” covers all of the methods, processes, controls, data collection and technology that support the assessment of credit risk, the
assignment of internal credit risk ratings and the quantification of associated default and loss estimates.
All material aspects of the Rating Systems and risk estimate processes are governed by the BRC. Risk grades are an integral part of reporting to senior
management and executives. Management and staff of credit risk functions, in conjunction with the relevant Retail and Wholesale Risk committees,
regularly assess the performance of the rating systems, identify any areas for improvement and monitor progress on previously identified
development work needed.
The Banking Group's Rating Systems are governed by a comprehensive framework of controls that operate at the business unit and support centres,
and through central audit and validation processes. All policies, model designs, model reviews, methodologies, validations, responsibilities, systems
and processes supporting the ratings systems are fully documented.
The Banking Group's Retail and Wholesale ratings functions work closely with the Ultimate Parent Bank's risk ratings functions, are independent of
operational lending activities and are responsible for the ratings strategies and ongoing management of credit risk models within New Zealand. The
annual review of models used across the Banking Group is a function undertaken by the ANZ Credit Model Validation Unit, which is also independent
of credit risk operational functions and is responsible for overseeing the design, implementation and performance of all rating models in the Banking
Group.
The target approach to modelling for the Banking Group is to deploy the model most suitable for the environment. At present this involves an
approach to modelling that combines models developed in New Zealand and models developed by the Ultimate Parent Bank, tested and validated
for use in New Zealand, as appropriate.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
DIRECTORS' STATEMENT
108
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:
•The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014; and
•The Disclosure Statement is not false or misleading.
Over the year ended 30 September 2024, after due enquiry, each Director believes that:
•ANZ Bank New Zealand Limited has complied in all material respects with each condition of registration that applied during that period
1
;
•Credit exposures to connected persons were not contrary to the interests of the Banking Group; and
•ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that those
systems were being properly applied.
1 In accordance with the Order, ANZ Bank New Zealand Limited has complied in all material respects with each of its conditions of registration that applied during the period if RBNZ has not
published any information about a breach on its website, and has not notified ANZ Bank New Zealand Limited of any material breach.
This D
isclosure Statement is dated, and has been signed by all Directors of the Bank on, 7 November 2024.
Shayne Elliott
Gera
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Ali
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Sco
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Mark
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Ant
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Dam
e Joan Withers, DNZ
ASSURANCE REPORTS
109
INDEPENDENT AUDITOR’S REPORTS
TO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
REPORT ON THE AUDIT OF THE REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5, B6, B7 AND B8
OP
INION
We have audited the accompanying registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 (excluding supplementary information
relating to Capital Adequacy and Regulatory Liquidity Requirements) (the registered bank disclosures) which comprise the supplementary
information that is required to be disclosed in accordance with schedules 4, 7, 13, 14, 15 and 17 of the Registered Bank Disclosure Statements
(New Zealand Incorporated Registered Banks) Order 2014 (the Order).
In our opinion, the accompanying registered bank disclosures that are required to be disclosed in accordance with schedules 4, 7, 13, 14, 15 and 17
of the Order of ANZ Bank New Zealand Limited (the Bank) and its subsidiaries (the Banking Group) on pages 83 to 92 and 100 to 107:
•presents fairly the matters to which they relate;
•are disclosed in accordance with those schedules; and
•have been prepared, in all material respects, in accordance with any conditions of registration relating to the disclosure requirements,
imposed under section 74(4)(c) of the Banking (Prudential Supervision) Act 1989 and any conditions of registration.
B
ASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)). We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Banking Group in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand)
issued by the New Zealand Auditing and Assurance Standards Board
and the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International
Independence Standards)
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code.
Our responsibilities under ISAs (NZ) are further described in the
Auditor’s responsibilities for the audit of the registered bank disclosures in sections B2,
B3, B5, B6, B7 and B8
section of our report.
Our firm has provided services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus assurance or
reviews, agreed upon procedures engagements and other assurance engagements. Subject to certain restrictions, partners and employees of our firm
may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These
matters have not impaired our independence as auditor of the Banking Group. The firm has no other relationship with, or interest in, the Banking
Group.
OTHER INFORMATION
The Directors, on behalf of the Banking Group, are responsible for the other information. The other information comprises the Banking Group’s general
disclosures in section B1, but does not include the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 and our auditor’s report thereon.
Our opinion on the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 does not cover any other Information and we do not express any
form of assurance conclusion thereon. In connection with our audit of the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 our
responsibility is to read the o ther information and in doing so, consider whether the other information is materially inconsistent with the registered
bank disclosures in sections B2, B3, B5, B6, B7 and B8 or our knowledge obtained in the audit or otherwise appears materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that
fact. We have nothing to report in this regard.
USE OF THIS INDEPENDENT AUDITOR’S REPORT
This independent auditor’s report is made solely to the shareholder. Our audit work has been undertaken so that we might state to the shareholder
those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law,
none of KPMG, any entities directly or indirectly controlled by KPMG, or any of their respective members or employees, accept or assume responsibility
and deny all liability to anyone other than the shareholder for our audit work, this independent auditor’s report, or any of the opinions we have
formed.
RESPONSIBILITIES OF THE DIRECTORS FOR THE REGISTERED BANK DISCLOSURES IN SECTIONS B1, B2, B3, B5, B6,
B7 AND B8
The Directors, on behalf of the Banking Group, are responsible for:
•the preparation and fair presentation of the registered bank disclosures in accordance in sections B1, B2, B3, B5, B6, B7 and B8 (excluding the
supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements) in accordance with schedules 2, 4, 7, 13, 14, 15
and 17 of the Order; and
•implementing necessary internal control to enable the preparation of registered bank disclosures that is free from material misstatement, whether
due to fraud or error.
ANZ BANK NEW ZEALAND LIMITED 2024 ANNUAL REPORT
ASSURANCE REPORTS
110
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5,
B6, B7 AND B8
Our objective is:
•to obtain reasonable assurance about whether the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8, (excluding the supplementary
information relating to Capital Adequacy and Regulatory Liquidity Requirements) in accordance with schedules 4, 7, 13, 14, 15 and 17 of the Order
as a whole are free from material misstatement, whether due to fraud or error; and
•to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8.
For and on behalf of:
KPMG
Auckland
7 November 2024
INDEPENDENT LIMITED ASSURANCE REPORT TO ANZ BANK NEW ZEALAND LIMITED (THE BANK)
C
ONCLUSION ON THE SUPPLEMENTARY INFORMATION RELATING TO THE CAPITAL ADEQUACY AND
REGULATORY LIQUIDITY REQUIREMENTS IN SECTION B4
Our limited assurance conclusion has been formed on the basis of the matters outlined in this report.
Based on our limited assurance engagement, which is not a reasonable assurance engagement or audit, nothing has come to our attention that
would lead us to believe that the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements, disclosed in
section B4 on pages 93 to 99 to the disclosure statement, is not, in all material respects disclosed in accordance with schedule 11 of the Registered
Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended) (the Order).
INFORMATION SUBJECT TO ASSURANCE
We have reviewed the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements, as disclosed in section B4 of
the disclosure statement as at and for the six months ended 30 September 2024.
The supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements comprises the information that is required to
be disclosed in accordance with Schedule 11 of the Order.
STANDARDS WE FOLLOWED
We conducted our limited assurance engagement in accordance with Standard on Assurance Engagements 3100 (Revised)
Compliance
Engagements
(SAE 3100 (Revised)) issued by the New Zealand Auditing and Accounting Standards Board. We believe that the evidence we have
obtained is sufficient and appropriate to provide a basis for our conclusion. In accordance with the SAE 3100 (Revised), we have:
•used our professional judgement to plan and perform the engagement to obtain limited assurance that the supplementary information relating
to Capital Adequacy and Regulatory Liquidity Requirements, is free from material misstatement and non-compliance, whether due to fraud or
error;
•considered relevant internal controls when designing our assurance procedures, however we do not express a conclusion on the effectiveness of
these controls;
•ensured that the engagement team possesses the appropriate knowledge, skills and professional competencies.
•obtained an understanding of the process, models, data and internal controls implemented over the preparation of the information relating to
Capital Adequacy and Regulatory Liquidity Requirements
;
•p
erformed inquiry and analytical review procedures over the Capital Adequacy and Regulatory Liquidity Requirements
;
•obtained an understanding of the Bank’s compliance framework and internal control environment over the information relating to Capital
Adequacy and Regulatory Liquidity Requirements, including the Bank’s assessment of any matters of non-compliance with the Reserve Bank of
New Zealand’s Prudential Requirements; and
•agreed the information relating to Capital Adequacy and Regulatory Liquidity Requirements, extracted from the Bank’s models, accounting
records or other supporting documentation to the Disclosure Statement.
HOW TO INTERPRET LIMITED ASSURANCE AND MATERIAL MISSTATEMENT AND NON-COMPLIANCE
In a limited assurance engagement, the assurance practitioner performs procedures, primarily consisting of discussion and enquiries of
management and others within the entity, as appropriate, and observation and walk-throughs, and evaluates the evidence obtained. The
procedures selected depend on our judgement, including identifying areas where the risk of material misstatement and non-compliance with
schedule 11 of the Order.
ASSURANCE REPORTS
111
The procedures performed in a limited assurance engagement vary in nature and timing from and are less in extent than for a reasonable assurance
engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would
have been obtained had a reasonable assurance engagement been performed.
Misstatements, including omissions, within the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements and
non-compliance are considered material if, individually or in the aggregate, they could reasonably be expected to influence the relevant decisions of
the intended users taken on the basis of the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements.
INHERENT LIMITATIONS
Because of the inherent limitations of an assurance engagement, together with the internal control structure it is possible that fraud, error or non-
compliance with compliance requirements may occur and not be detected.
A limited assurance engagement as at and for the six months ended 30 September 2024 does not provide assurance on whether compliance with
schedule 11 of the Order will continue in the future.
USE OF THIS ASSURANCE REPORT
Our report is made solely for the Bank’s shareholder. Our assurance work has been undertaken so that we might state to the Bank’s shareholder
those matters we are required to state to them in the assurance report and for no other purpose.
Our report is released to the Bank’s shareholder on the basis that it shall not be copied, referred to or disclosed, in whole or in part, without our prior
written consent. No other third party is intended to receive our report.
Our report should not be regarded as suitable to be used or relied on by anyone other than the Bank and the Bank’s shareholder for any purpose or
in any context. Any other person who obtains access to our report or a copy thereof and chooses to rely on our report (or any part thereof) will do so
at its own risk.
To the fullest extent permitted by law, none of KPMG, any entities directly or indirectly controlled by KPMG, or any of their respective members or
employees accept or assume any responsibility and deny all liability to anyone other than the Bank and the Bank’s shareholder for our work, for this
independent assurance report, and/or for the opinions or conclusions we have reached.
Our conclusion is not modified in respect of this matter.
ANZ BANK NEW ZEALAND LIMITED’S RESPONSIBILITY FOR THE SUPPLEMENTARY INFORMATION RELATING TO
THE CAPITAL ADEQUACY AND REGULATORY LIQUIDITY REQUIREMENTS
The Directors of the Bank are responsible for the disclosure of the preparation of the supplementary information relating to Capital Adequacy and
Regulatory Liquidity Requirements in accordance with schedule 11 of the Order, which the Directors have determined to meet the needs of the
Bank. This responsibility includes such internal control as the Directors determine is necessary to compliance and to monitor ongoing compliance
and to enable the disclosure of the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements that is free from
material misstatement and non-compliance whether due to fraud or error.
OUR RESPONSIBILITY
Our responsibility is to express a conclusion to the Bank on whether anything has come to our attention that would lead us to believe that, in all
material respects, the supplementary information relating to Capital Adequacy and Regulatory Liquidity Requirements has not been disclosed in
accordance with schedule 11 of the Order as at and for the six months ended 30 September 2024.
OUR INDEPENDENCE AND QUALITY MANAGEMENT
We have complied with the independence and other ethical requirements of Professional and Ethical Standard 1
International Code of Ethics for
Assurance Practitioners (Including International Independence Standards) (New Zealand)
(PES 1) issued by the New Zealand Auditing and Assurance
Standards Board, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
The firm applies Professional and Ethical Standard 3
Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements
(PES 3) , which requires the firm to design, implement and operate a system of quality control including
policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Our firm has also provided services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus assurance or
reviews, agreed upon procedures engagements and other assurance engagements. Subject to certain restrictions, partners and employees of our firm
may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These
matters have not impaired our independence as auditor of the Banking Group. The firm has no other relationship with, or interest in, the Banking
Group.
K
PMG
Auckland
7 November 2024
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