Australia and New Zealand Banking Group Ltd. - Annual Report 2012

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Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Full Year 30 September 2012

Consolidated Financial Report Dividend Announcement and Appendix 4E

The Consolidated Financial Report and Dividend Announcement constitutes the preliminary final report and contains information required by Appendix 4E of the Australian Securities Exchange Listing Rules. It should be read in conjunction with ANZ’s 2012 Annual Report when released, and is lodged with the Australian Securities Exchange under listing rule 4.3A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

APPENDIX 4E

Name of Company: Australia and New Zealand Banking Group Limited ABN 11 005 357 522

Report for the full year ended 30 September 2012

Operating Results1				A$ million
Operating income	�	5%	to	17,711
Net statutory profit attributable to shareholders	�	6%	to	5,661
Underlying profit 2	�	6%	to	6,011
Dividends 3	Cents			Franked
		per		amount 4
	share			per share
Proposed final dividend		79		100%
Interim dividend		66		100%
Record date for determining entitlements to the proposed final dividend				14 November 2012
Payment date for the proposed final dividend				19 December 2012

Dividend Reinvestment Plan and Bonus Option Plan

Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2012 final dividend. For the 2012 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of fully paid ANZ ordinary shares sold on the ASX during the seven trading days commencing on 16 November 2012, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2012 final dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Daylight Time) on 14 November 2012. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in Great Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling and New Zealand dollars respectively at an exchange rate calculated at 5.00 pm (Australian Eastern Daylight Time) on 16 November 2012.

1 Compared to year ended 30 September 2011

2 Reported profit is adjusted to exclude certain non-core items to arrive at underlying profit, and has been provided to assist readers to understand the results for the ongoing activities of the Group. The net after tax adjustment was a gain of $350 million made up of several items. Refer pages 76 to 79 of the ANZ Consolidated Financial Report and Dividend Announcement for the full year 30 September 2012 for further details.

3 There is no foreign conduit income attributed to the dividends

4 30% tax rate

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4E

Full year ended 30 September 2012

*CONTENTS*	*PAGE*
Section 1 – Media release	1
Section 2 – Snapshot	5
Section 3 – CEO Overview	9
Section 4 – CFO Overview	11
Section 5 – Segment review	35
Section 6 – Geographic review	67
Section 7 – Profit reconciliation	75
Section 8 – Condensed consolidated financial statements	85
Section 9 – Supplementary information	105
Definitions	117
Alphabetical Index	120

This Consolidated Financial Report and Dividend Announcement has been prepared for Australia and New Zealand Banking Group Limited (the “Company”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “us”, “we” or “our”.

All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based is in the process of being audited by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors. The signing of these Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 24 October 2012.

When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

For Release: 25 October 2012

Media Release

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ANZ 2012 Full Year Result

- productivity, super regional strategy drive higher profit and dividend -

ANZ today announced a statutory profit[1] after tax of $5.7 billion and an underlying profit[2] of $6.0 billion for the financial year ended 30 September 2012, both up 6% over the prior year (YOY).

The proposed final dividend of 79 cents per share (cps) fully franked is 4% higher YOY. The total dividend for 2012 is $1.45 per share.

Group Balance Sheet and Performance Highlights[3]

Profit before provisions (PBP) increased 5% YOY (4% HOH) reflecting Group-wide productivity gains, improved performance from the Australia Division in the second half, early benefits from the New Zealand simplification program, growth in International and Institutional Banking particularly in Asia and an improving contribution from the Global Wealth and Private Banking Division.
The Group invested $1.3 billion in targeted growth initiatives in 2012 with productivity improvements driving flat expenses HOH and positive revenue/cost jaws YOY and HOH.
ANZ continues to increase the diversity of its revenue base with 21% of Group revenues derived outside of Australia and New Zealand during 2012. Global Markets revenue increased 14% to $1.9 billion with customer sales income up 10% to represent 61% of total income.
Net interest margin excluding Global Markets declined 3 basis points (bps) from the end of the first half[4] reflecting increased funding costs in particular from deposits, as well as asset pricing pressure in Institutional.
Deposits grew 12% with lending up 8% (FX adjusted).
ANZ continues to have the lowest wholesale funding requirement of its domestic peers. Customer funding comprises 61% of total funding.
The Group is well positioned for the implementation of Basel 3 from January 2013. As at 30 September 2012, ANZ’s Common Equity Tier 1 ratio (CET1) was 10.0% on a Basel 3 harmonised basis[5] or 8.0% under the Australian Prudential Regulation Authority’s (APRA) Basel 3 standards.
Return on Equity reduced by 60 bps to 15.6%. Benefits from the Group’s capital efficiency focus were somewhat offset by higher regulatory capital holdings and reduced earnings on capital in a lower interest rate environment.
The provision charge was $1.25 billion broadly in line with 2011. Gross impaired assets declined 7% YOY while the collective provision coverage ratio remains strong at 1.08%.
ANZ was awarded Bank of the Year, Mortgage Lender of the Year and Business Bank of the Year during 2012. The Group was also recognised as a top 5 Corporate Bank in Asia[6] and was ranked the most sustainable bank globally in the 2012 Dow Jones Sustainability Index

ANZ Chief Executive Officer Mike Smith said: “This result continues our track record of delivering on our promises to shareholders, customers, staff and to the community.

“Our super regional strategy, with its focus on significant organic growth opportunities in Asia Pacific and building strong domestic businesses in Australia and New Zealand, together with an increased emphasis on productivity improvements, has seen us deliver a good performance in 2012.

“Just as important is our strategic progress. Over the past five years we have systematically worked in every area of the bank to transform ANZ, delivering on our regional growth aspirations and emerging from the global financial crisis as a stronger, more international bank.

1 The Financial Report is in the process of being audited.

2 The statutory profit is adjusted to exclude certain non-core items to arrive at underlying profit.

3 All comparisons are FY12 versus FY11 (YOY) and on an underlying basis unless otherwise noted.

4 Comparison of 270 bps Group NIM (Ex Markets) as per slide 26 of the HY12 results pack to 267 bps Group NIM (Ex Markets) for the second half 2012. 5 ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel III: A global regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006).

6 Money Magazine Bank of the Year and Home Lender of the year; Capital-Business Bank of the Year 2012, Top 5 Corporate bank Greenwich Associates survey 2012.

MEDIA RELEASE

“Our results also show that management has been proactively responding to fast changing and challenging conditions in different markets to drive both growth and productivity.

“The Asia Pacific Europe and America (APEA) network now drives 21% of Group revenue[7] ; Greater China is now our third largest market in terms of earnings,” Mr. Smith said.

Commenting on the 2012 result, Mr Smith said: “Our performance was consistent with the expectations we outlined at the Half Year result and in our August trading update. The results demonstrate continued progress with our super regional strategy while also adapting ANZ to the lower growth environment where tight management of costs and capital is increasingly important.

“While we have continued to invest in our strategy, the increasing focus on productivity has delivered lower cost growth, particularly in the second half where the cost to income ratio fell 110 basis points to 45.1%.

“Performance in the Australia Division improved during the second half. This saw us produce a good result based on market share gains, tight management of margins and a strong productivity focus. Retail performed well across all segments and Commercial saw customer numbers increase, particularly in Small Business Banking.

“The International and Institutional Banking Division delivered significant growth in a number of priority segments based on the connectivity of our network. This included strong performances in Natural Resources, Trade and Supply Chain and Global Markets particularly in Foreign Exchange, although performances in Agriculture and Infrastructure were more subdued. Commercial in Asia achieved good growth. We also made progress in adapting the business to the new operating environment, particularly in Australia where subdued trading conditions and significant margin pressure are necessitating continuing change.

“The New Zealand Division delivered another good performance. The credit environment continues to improve and business simplification is showing benefits through productivity gains, good customer satisfaction outcomes, market share growth in key segments and higher staff engagement. We have also announced we will move to one brand and this weekend we will complete the move to one technology platform.

“Profits from the newly-formed Global Wealth and Private Banking Division were flat reflecting market conditions but importantly, having put a new management focus on this business, we saw an improving contribution in the second half with better insurance results, higher investment earnings and productivity improvements. We will be updating investors on the direction of this business next month,” Mr Smith said.

Mr Smith added: “With the global economy softening, it’s clear that the post-GFC lower growth business environment will be with us for the foreseeable future, as will the requirement to operate with higher levels of regulatory capital and higher funding and liquidity costs. ANZ has the right strategy focused on regional growth markets and we have been making the necessary structural adjustments, including a shift to emphasise productivity improvements and capital efficiency.

“Although the operating environment in 2013 looks more challenging with stronger headwinds in a number of areas, our unique growth strategy and the momentum we have in adapting to the new environment means we are well placed to deliver value and performance to shareholders in 2013,” Mr Smith said.

PERFORMANCE BY DIVISION[8]

AUSTRALIA

Divisional profit grew 4% (up 10% HOH) with PBP up 2% (up 11% HOH). Market share gains in traditional banking, affluent retail and household deposits and lending have been a feature of the 2012 performance with ANZ recognised with a number of awards including Bank of the Year, Home Lender of the Year and Business Bank of the Year.

Retail lending grew 7% with mortgage lending growing above system. ANZ’s share of household deposits has grown consistently over the past three years, up 30 bps in 2012. Commercial lending grew 9% driven by increased customer numbers and share of wallet. The Commercial business is harnessing ANZ’s regional connectivity with trade finance revenues attributable to Commercial Clients up 20% YOY and Global Markets revenues up 40% YOY.

The Australia Division is transforming its cost base. Costs fell HOH while revenue/cost jaws were positive both YOY and HOH. Further productivity improvements will be driven by greater use of digital platforms, automation and simplification of products and processes. The branch transformation program, part of the recently announced “Banking on Australia” program will deliver an improved customer experience and a more flexible lower cost footprint.

Despite recovering 4 bps HOH the Divisional margin declined YOY reflecting the ongoing impact of elevated funding costs, in particular for deposits.

7 APEA network revenue is total revenue derived from outside Australia and New Zealand regardless of booking point. 8 Comparisons are all FY12 compared to FY11 (YOY) and on an underlying basis unless otherwise noted.

MEDIA RELEASE

Credit quality is performing to expectations. Mortgage delinquencies have continued to decline across all bands (30, 60 and 90 days) however softening economic conditions, particularly in regional Australia, drove increased provision charges.

INTERNATIONAL AND INSTITUTIONAL BANKING DIVISION (IIB)

Profit from International and Institutional Banking grew 3% with PBP up 7%. IIB continues to grow and diversify earnings by priority geography, product and customer, reducing its historical reliance on Institutional lending and interest rate trading.

Transaction Banking profit increased 23%, Trade and Supply Chain profit was up 47% and Global Markets profit grew 22%. In line with our strategy, around two thirds of Global Markets revenue is now from customer sales and more than half of sales revenue now comes from Foreign Exchange. Overall, 43% of the Division’s revenue and 54% of deposits are now derived from outside Australia and New Zealand.

An 11% increase in lending volumes was driven predominantly by APEA where the lending book is dominated by shorter duration trade finance which grew 30%. Challenging macro conditions and tightening margins which declined 19 bps during the second half saw Global Loans profit decline 17%. The difficult margin outcome, particularly in Australia, reflected increased funding and liquidity costs, asset pricing competition and the shift to shorter duration, lower risk assets. Deposits increased 10% YOY with APEA Retail deposits up 17% to $13.4 billion.

Revenue to cost jaws were neutral, with expenses declining 1% in the second half.

Institutional's gross impaired assets reduced 4% due to a combination of repayments, upgrades and write-offs. The impairment charge was up 46% with losses on a few legacy loans in Australia partially offset by collective provision releases from associated concentration risk provisions.

NEW ZEALAND (all figures in NZD)

New Zealand Division profit increased 11% with PBP up 4%. The credit environment continues to improve in New Zealand and the Division’s simplification focus is delivering benefits including productivity gains and market share growth in key segments. The cost to income ratio fell by 100 bps to 43.9%.

Lending volumes increased 3% with momentum particularly evident in the second half reflecting an increased focus on mortgages in the Auckland region and on the Small Business segment. Deposits increased 9% with good growth in Retail and in Small Business Banking deposits.

In Retail, strong underlying profit growth was driven by balance sheet growth and strong cost control which helped mitigate a tightening margin environment. In Commercial the business is leveraging ANZ’s super regional strategy with revenues from Trade Finance up 21% YOY.

In late September ANZ announced it would be merging the ANZ and National Bank brands using the ANZ brand. There is a comprehensive brand and customer management program in place that will run over the coming months.

Credit quality has continued to strengthen. Delinquency rates have declined and gross impaired assets have decreased by 21%. The provision charge declined 12% YOY and 12% HOH.

GLOBAL WEALTH AND PRIVATE BANKING[9]

Despite flat profit growth YOY the Global Wealth and Private Banking Division’s performance improved half on half, reflecting better performance in insurance and investment earnings and a decline in costs as productivity benefits emerged. The cost to income ratio improved significantly HOH down 350 bps to 56.3%.

Funds under management (FUM) increased 6% with New Zealand performing strongly up 15%. Favourable claims experience partially offset higher lapse rates with net insurance income increasing 4% during the second half and annual individual in-force premiums up 11% YOY and 7% HOH.

BALANCE SHEET, CAPITAL, LIQUIDITY AND FUNDING

ANZ is managing returns to shareholders with a focus on executing the Group’s strategy in the most capital efficient way.

The Group has raised around $11 billion of additional capital since 2007 to strengthen the balance sheet and is well positioned for the implementation of the new Basel 3 capital rules from January 2013. ANZ’s CET1 ratio stands at 10.0% on a Basel 3 fully harmonised basis or 8.0% under the APRA Basel 3 requirements. The CET1 increase of 55 bps in FY12 was driven by organic capital generation before dividends of 106 bps and capital optimisation initiatives of 28 bps. With the capital strengthening phase now largely complete, ANZ will be removing the 1.5% discount on the Dividend Reinvestment Plan effective as of the forthcoming final dividend.

9 ANZ announced the formation of the Global Wealth and Private Banking business in February 2012. It encompasses Wealth Management, Insurance, Private Banking and E*Trade online broking and services more than two million customers across ANZ’s key regions.

MEDIA RELEASE

ANZ’s 2012 wholesale funding task of $21 billion was completed ahead of schedule and one third of the 2013 requirement has already been funded. Having the lowest wholesale funding requirement amongst our major domestic peers provides ANZ with additional flexibility in terms of funding strategy. In 2012, 41% of our issuance was domestically sourced and our global investor base has been further diversified driven by the issuance of covered bonds in a range of currencies.

Liquid assets exceed all wholesale debt maturing in the next 12 months and also exceed the Group’s total offshore wholesale debt portfolio.

ADJUSTMENTS TO STATUTORY PROFIT - NON-CORE ITEMS

ANZ adjusts statutory profit for certain non-core items to calculate underlying profit. A net $296 million after tax of non-core adjustments was recognised in the second half. Included in this amount were the $224 million gain from the sale of Visa Inc. shares announced in September, economic and revenue hedge mark to market adjustments of $217 million, $59 million for the New Zealand simplification program and $220 million in impairment of software assets.

CREDIT QUALITY

Credit quality is in line with expectations and ANZ remains appropriately provided for with the total provision coverage ratio at 1.78% and the collective provision ratio at 1.08%.

Gross impaired assets reduced both YOY and HOH. New impaired assets declined HOH with impaired loans 13% lower. All Divisions saw HOH decreases in new impaired assets with the exception of Australia, with increases predominantly in regional agri-business.

The provision charge of $1.25 billion was broadly in line with last year, albeit the mix of collective and individual provisions differed. Increased individual provisions reflected losses associated with a few legacy loans. There were related releases in collective provision management overlays raised in prior periods.

For media enquiries contact:

Paul Edwards Group GM, Corporate Communications Tel: +61-3-8654 9999 or +61-434-070101 Email: [email protected]

Stephen Ries Senior Manager, Media Relations Tel: +61-3-8654 3659 or +61-409-655551 Email: [email protected]

For investor and analyst enquiries contact:

Jill Craig Group GM, Investor Relations Tel: +61-3-8654 7749 or +61-412-047448 Email: [email protected]

Ben Heath

Senior Manager, Investor Relations Tel: +61-3-8654 7793 or +61-435-655033 Email: [email protected]

SNAPSHOT

Section 2 – Snapshot

Statutory Results Underlying Results Key Balance Sheet Metrics

SNAPSHOT

Statutory Results

		Half Year Full Year


Net interest income	6,126 5,984 2% 12,110 11,500 5%
Other operating income	2,768 2,833 -2% 5,601 5,432 3%
Operating income	8,894 8,817 1% 17,711 16,932 5%
Operating expenses	(4,386) (4,133) 6% (8,519) (8,023) 6%
Profit before credit impairment and income tax	4,508 4,684 -4% 9,192 8,909 3%
Provision for credit impairment	(660) (538) 23% (1,198) (1,237) -3%
Profit before income tax	3,848 4,146 -7% 7,994 7,672 4%
Income tax expense	(1,104) (1,223) -10% (2,327) (2,309) 1%
Non-controlling interests	(2) (4) -50% (6) (8) -25%
Profit attributable to shareholders of the Company	2,742 2,919 -6% 5,661 5,355 6%

Earnings per ordinary share (cents)	Half Year Full Year
Reference	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Page
Basic 96	102.6 110.8 -7% 213.4 208.2 2%
Diluted 96	99.1 106.2 -7% 205.6 198.8 3%
		Half Year Full Year Sep 12 Mar 12 Sep 12 Sep 11 n/a 66 66 64 79 n/a 79 76 79 66 145 140 78.5% 60.8% 69.3% 68.6% 4 7 11 12 13.7% 15.6% 14.6% 15.3% 0.85% 0.95% 0.90% 0.94% 2.28% 2.35% 2.31% 2.42% 2.67% 2.74% 2.71% 2.80% 49.3% 46.9% 48.1% 47.4% 1.37% 1.35% 1.36% 1.40% 887 690 1,577 1,230 (227) (152) (379) 7 660 538 1,198 1,237 0.42% 0.34% 0.38% 0.32% 0.31% 0.27% 0.29% 0.32%

	Reference
Ordinary share dividends (cents)	Page
Interim - 100% franked	95
Final - 100% franked	95
Total - 100% franked1	95
Ordinary share dividend payout ratio1	95

Preference share dividend ($M)
Dividend paid2	95

Profitability ratios
Return on average ordinary shareholders' equity3
Return on average assets
Net interest margin
Net interest margin (excluding Global Markets)

Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets

Credit impairment provisioning/(release)
Individual provision charge ($M)	98
Collective provision charge/(release) ($M)	98
Total provision charge ($M)	98
Individual provision charge as a % of average
net advances
Total provision charge as a % of average net advances

Dividend payout ratio is calculated using 31 March 2011 interim, 30 September 2011 final, and the 31 March 2012 interim dividends and the proposed 30 September 2012 final dividend 2. Represents dividends paid on Euro Trust Securities issued on 13 December 2004

3. Average ordinary shareholders’ equity excludes non-controlling interests and preference shares

SNAPSHOT

Underlying Results1	Half Year Full Year Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt 6,127 5,984 2% 12,111 11,498 5% 2,748 2,720 1% 5,468 5,314 3% 8,875 8,704 2% 17,579 16,812 5% (4,002) (4,020) 0% (8,022) (7,718) 4% 4,873 4,684 4% 9,557 9,094 5% (681) (565) 21% (1,246) (1,211) 3% 4,192 4,119 2% 8,311 7,883 5% (1,152) (1,142) 1% (2,294) (2,222) 3% (2) (4) -50% (6) (9) -33% 3,038 2,973 2% 6,011 5,652 6%



Net interest income
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Provision for credit impairment
Profit before income tax
Income tax expense
Non-controlling interests
Underlying profit1

Earnings per ordinary share (cents)	Half Year Full Year
Reference	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Page
Basic 25	113.1 112.2 1% 225.3 218.4 3%
Diluted 25	108.8 107.4 1% 216.5 208.1 4%


	Reference
Ordinary share dividends (cents)	Page
Ordinary share dividend payout ratio2	26

Profitability ratios
Return on average ordinary shareholders' equity3
Return on average assets
Net interest margin	14
Net interest margin (excluding Global Markets)	14
Profit per average FTE ($)

Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets

Credit impairment provisioning/(release)
Individual provision charge ($M)	19
Collective provision charge/(release) ($M)	20
Total provision charge ($M)	19
Individual provision charge as a % of average
net advances
Total provision charge as a % of average net advances

Underlying profit by division/geography


Australia
International and Institutional Banking
New Zealand
Global Wealth and Private Banking
Group Centre
Underlying profit by division


Australia
Asia Pacific, Europe & America
New Zealand
Underlying profit by geography

1. Reported profit has been adjusted to exclude non-core items to arrive at underlying profit, and has been provided to assist readers to understand the result for the ongoing business activities of the Group. Refer to page 12 for the reconciliation between statutory and underlying profit

Dividend payout ratio is calculated using 31 March 2011 interim, 30 September 2011 final, and the 31 March 2012 interim dividends and the proposed 30 September 2012 final dividend 3. Average ordinary shareholders’ equity excludes non-controlling interests and preference shares

SNAPSHOT

Key Balance Sheet Metrics
	As at Movement
Reference	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Page
Capital adequacy ratio (%)
Common Equity Tier 1
- APRA Basel 2 30	8.8% 8.9% 8.5%
- APRA Basel 3 30	8.0% 7.8% 7.5%
- International Fully Harmonised Basel 3	10.0% 9.8% 9.5%
Credit risk weighted assets ($B) 107	254.9 250.2 248.8 2% 2%
Total risk weighted assets ($B) 107	300.1 284.8 280.0 5% 7%
Balance Sheet: Key Items


Net loans & advances ($B)	427.8 412.6 397.3 4% 8%
Total assets ($B)	642.1 612.2 604.2 5% 6%
Customer deposits ($B)	327.9 308.3 296.8 6% 10%
Total equity ($B)	41.2 39.4 37.9 5% 9%
Impaired assets


Gross impaired assets ($M) 22	5,196 5,343 5,581 -3% -7%
Net impaired assets ($M) 22	3,423 3,629 3,884 -6% -12%
Net impaired assets as a % of net advances	0.80% 0.88% 0.98% -9% -18%
Net impaired assets as a % of shareholders' equity	8.3% 9.2% 10.2% -10% -19%

Individual provision ($M) 98	1,773 1,714 1,697 3% 4%
Individual provision as a % of gross impaired assets	34.1% 32.1% 30.4% 6% 12%
Collective provision ($M) 98	2,765 2,994 3,176 -8% -13%
Collective provision as a % of credit risk weighted assets	1.08% 1.20% 1.28% -10% -16%
Net Assets


Net tangible assets per ordinary share ($)1	12.22 11.74 11.44 4% 7%
Net tangible assets attributable to ordinary shareholders ($B)1	33.2 31.5 30.1 5% 10%

Other information
Full time equivalent staff (FTE)	48,239 49,509 50,297 -3% -4%
Assets per FTE ($M)	13.3 12.4 12.0 7% 11%
Share price
- high2	$25.12 $23.68 $24.49 6% 3%
- low2	$20.26 $18.60 $17.63 9% 15%
- closing	$24.75 $23.26 $19.52 6% 27%
Market capitalisation of ordinary shares ($B)	67.3 62.3 51.3 8% 31%

1. Equals shareholders’ equity less preference share capital, non-controlling interests, goodwill and other intangibles

2. During the half year reporting period

Net loans & advances by division/geography	As at ($B) Movement
	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11

Australia	244.7 238.8 228.5 2% 7%
International and Institutional Banking	107.6 102.2 97.2 5% 11%
New Zealand	70.1 67.2 67.2 4% 4%
Global Wealth and Private Banking	5.4 5.2 5.1 4% 6%
Group Centre	- (0.8) (0.7) -100% -100%
Net loans & advances by division	427.8 412.6 397.3 4% 8%

Australia	305.8 298.0 285.0 3% 7%
Asia Pacific, Europe & America	45.3 40.7 38.8 11% 17%
New Zealand	76.7 73.9 73.5 4% 4%
Net loans & advances by geography	427.8 412.6 397.3 4% 8%

CEO OVERVIEW

CEO Overview[1]

Strategy and Performance

ANZ is executing a focused strategy to build the best connected, most respected bank across the Asia Pacific region.

The bank is pursuing significant organic growth opportunities in the Asia Pacific region and with our strong domestic businesses in Australia and New Zealand, our distinctive footprint and super regional connectivity we are uniquely positioned to meet the needs of customers, who are increasingly linked to regional capital, trade and wealth flows.

Management has proactively responded to the fast changing and challenging conditions in different markets, and is driving performance with innovative market and productivity initiatives.

In 2012 our differentiated strategy delivered a record underlying profit of $6 billion, with a Return on Equity of 15.6%, earnings per share of $2.25 and a total dividend per share of $1.45. Underlying net profit increased 6% year on year (YOY) and 2% half on half (HOH), with positive jaws YOY and HOH and an improving cost trend through the second half.

APEA network revenues[2] represented 21% of total Group revenue. Significantly, Greater China is now our third largest market in terms of earnings.

Group Strategic Aspiration

ANZ’s aspiration is to have 25-30% of profit driven by network revenue, that is revenue sourced from the Asia Pacific region, by 2017. We have made good progress towards this aspiration. Central to delivery of this goal will be ongoing productivity improvements including a 2% reduction in the cost to income ratio over the next two years, greater capital efficiency and increasing earnings stream differentiation.

Strategic progress 2012

While economic conditions across the Asia Pacific region remain more robust by comparison to much of the rest of the world, conditions for banking remain challenging characterised by deleveraging and lower credit growth in our core Australian and New Zealand markets and heightened competition for customer deposits. The impact of these macro-conditions has been compounded by increased levels of regulatory capital and higher funding costs.

As growth opportunities shift from the developed economies of the West to Asian economies, China in particular, ANZ’s super regional strategy linked to growing trade, investment and people flows within the region is more appropriate today than ever. The Group has also continued to adapt to both structural and cyclical changes in the market, working to fundamentally change our business model, focusing on improving productivity, driving capital efficiency and managing our risk profile.

The scale of transformation achieved at ANZ over the past five years has been significant, with a systematic and coordinated program of action across every area of the bank to deliver on the super regional strategy, and while more needs to be done to reposition the bank, 2012 has seen us deliver a good performance.

In our major domestic market of Australia, we delivered a good result based on market share gains, tighter management of margins and a strong productivity focus. Retail performed well across all segments and Commercial saw customer numbers increase particularly in Small Business Banking while driving productivity improvements with jaws positive HOH and YOY. The Division is continuing to build and leverage the bank’s super regional capabilities. For example, in the Commercial business, where trade finance revenues generated by Commercial clients increased 20% YOY and Global Markets revenues (e.g. foreign exchange) grew 40% YOY. ANZ recently announced a five year $1.5 billion “Banking on Australia” program funded from the existing cost base that incorporates a longer term branch transformation program that will deliver an improved customer experience and a more flexible lower cost footprint. This includes a focus on new consumer technologies and channels such as our leading mobile banking application for iPhone and Android users with 780,000 registered users now using the service in the Australian market.
Our New Zealand business delivered another solid performance in 2012. The business simplification program is delivering early benefits with productivity improvements including a new integrated management structure and a 56% reduction in product numbers with the cost to income ratio down 100 bps YOY. At the same time, the simplification of the business has seen customer satisfaction gains, market share growth in key segments and higher staff engagement. We also announced a move to one brand in New Zealand – the ANZ brand – which will take place progressively over the next two years, and from late October the bank will operate on one banking platform assisting the delivery of further productivity improvements.
The International and Institutional Banking Division is growing and diversifying its earnings by priority geography, product and customer. In 2012, 43% of Divisional revenues and 54% of deposits were derived from outside Australia and New Zealand.
While annual growth trends were solid in 2012, the second half was impacted by more subdued trading conditions and in Australia, by significant margin pressure as well as individual provisions relating to a few legacy customers. The Division has continued to transition away from its historical reliance on institutional lending and interest rate trading. Growth was significant in many of our priority segments based on the connectivity of our network – Transaction Banking profit increased 23% with profit from Trade and Supply Chain up 47%. Global Markets profit grew 22% with around two thirds of revenue from customer sales with foreign exchange now a major contributor to revenue.
The newly-formed Global Wealth and Private Banking Division improved performance in the second half with better insurance results, higher investment earnings and productivity improvements. The Division has been focused on regaining earnings momentum through increasing the depth of customer relationships with ANZ customers through the provision of wealth solutions and implementing productivity improvements through greater standardisation of processes. Costs in the business reduced 3% HOH while sales through ANZ branded channels have increased.
Operations - The Group’s earnings growth has been supported by improved leverage of our operational hubs. Having reached sufficient scale in our hubs we are now focussed on realising further service and efficiency benefits. This is reducing Group unit costs, strengthening operating risk management and providing our increasingly global customer base with ‘follow-the-sun’ servicing.

1 CEO Overview is reported on an underlying basis.

2 APEA network revenue is total revenue derived from outside Australia and New Zealand regardless of booking point.

CEO OVERVIEW

The Group has generated around $11 billion of additional capital since 2007 to strengthen the balance sheet and is well positioned for the implementation of Basel 3 from January 2013. The Group’s Common Equity Tier 1 ratio was 10.0% at 30 September 2012 on a Basel 3 harmonised basis or 8.0% under APRA’s Basel 3 standards. Customer funding was 61% of total funding.
Risk – Gross impaired assets reduced both HOH and YOY and the Group’s coverage ratios remain strong with CP to CRWA at 1.08% and the total provision ratio at 1.78%.

Medium to Long Term Strategic Goals

ANZ is committed to delivering above-peer earnings growth with strong capital and expense disciplines, targeting a 200 bps improvement in the Group cost to income ratio over the next two years while increasing our ROE from current levels. The target dividend payout ratio remains at around 65% of underlying profit which we believe to be a sustainable level in a Basel 3 environment.

To do this we will:

Further strengthen our position in our core markets of Australia and New Zealand by driving productivity benefits, leveraging the super regional strategy and using technology to drive improved functionality.
In Australia we are investing to transform the business through improved channel management (branch network reconfiguration, digital platforms), improving sales effectiveness and lowering cost to serve in our commercial business, and investing in customer insights and understanding.
In New Zealand we will work under one brand on one platform with more efficient market coverage.
Focus our Asian expansion primarily on Institutional Banking, supporting our Australian and New Zealand customers, targeting profitable markets and segments in which we have expertise which are connected through trade and capital flows while continuing to efficiently build our niche Commercial and Retail businesses.
Achieve greater efficiency and control through the use of scalable common infrastructure and platforms.
Maintain strong liquidity and actively manage capital to enhance ROE.
Build on our Super Regional capabilities – utilising our management bench-strength and continuing to deepen our international talent pool.
Apply strict acquisition criteria when reviewing inorganic opportunities.

Summary

ANZ’s financial goal is to deliver top quartile total shareholder return (TSR) performance and above-peer EPS growth through the cycle, by building a position as the best connected, most respected bank in the Asia Pacific region.

CFO OVERVIEW

Section 4 – CFO Overview

Underlying profit Divisional performance

Review of Group results

Income and expenses Credit risk Income tax expense Impact of exchange rate movements/revenue hedges Earnings per share Dividends Economic profit Balance sheet, liquidity and capital Deferred acquisition costs and deferred income Software capitalisation

CFO OVERVIEW

Non-IFRS information

The Group provides two additional measures of performance in the Results Announcement which are prepared on a basis other than in accordance with the accounting standards; namely underlying profit and economic profit. The guidance provided in Australian Securities and Investments Commission Regulatory Guide 230 has been followed when presenting this information.

Underlying profit

Profit has been adjusted to exclude non-core items to arrive at underlying profit, the result for the ongoing business activities of the Group. These adjustments have been determined on a consistent basis with those made in prior periods. The adjustments made in arriving at underlying profit are included in statutory profit which is subject to audit within the context of the Group statutory audit opinion. The Financial Report is in the process of being audited. Underlying profit is not audited, however, the external auditor has informed the Audit Committee that the adjustments, and the presentation thereof, are based on the guidelines released by the Australian Institute of Company Directors (AICD) and the Financial Services Institute of Australasia (FINSIA), and have been determined on a consistent basis with those made in prior periods.

The CFO Overview section is reported on an underlying basis.

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Statutory profit attributable to shareholders of the Company	2,742 2,919 -6% 5,661 5,355 6%
Adjustments between statutory profit and underlying profit1	296 54 large 350 297 18%
Underlying profit	3,038 2,973 2% 6,011 5,652 6%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Adjustments between statutory profit

and underlying profit1

Gain on sale of Visa shares	(224) - n/a (224) - n/a
New Zealand Simplification programme	59 46 28% 105 86 22%
Acquisition related adjustments	13 28 -54% 41 126 -67%
Treasury shares adjustment	26 70 -63% 96 (41) large
Changes in New Zealand tax legislation	- - n/a - (2) -100%
Economic hedging - fair value (gains)/losses	207 22 large 229 117 96%
Revenue and net investment hedges (gains)/losses	10 (63) large (53) 51 large
Capitalised software impairment	220 - n/a 220 - n/a
NZ managed funds impacts	- 1 -100% 1 (39) large
Non continuing businesses	(15) (50) -70% (65) (1) large
	296 54 large 350 297 18%
Total adjustments between
statutory profit and underlying profit1

1. Refer to pages 76 to 79 for analysis of the reconciliation of statutory profit to underlying profit


	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Net interest income	6,127 5,984 2% 12,111 11,498 5%
Other operating income	2,748 2,720 1% 5,468 5,314 3%
Operating income	8,875 8,704 2% 17,579 16,812 5%
Operating expenses	(4,002) (4,020) 0% (8,022) (7,718) 4%
Profit before credit impairment and income tax	4,873 4,684 4% 9,557 9,094 5%
Provision for credit impairment	(681) (565) 21% (1,246) (1,211) 3%
Profit before income tax	4,192 4,119 2% 8,311 7,883 5%
Income tax expense	(1,152) (1,142) 1% (2,294) (2,222) 3%
Non-controlling interests	(2) (4) -50% (6) (9) -33%
Underlying profit	3,038 2,973 2% 6,011 5,652 6%

CFO OVERVIEW

Divisional performance

Divisional performance
		Half Year		Full Year

			Sep 12 Sep 11		Movt
Underlying profit by division			$M $M
Australia	1,305 1,187 10%		2,492 2,390 4%
International and Institutional Banking	1,137 1,235 -8%		2,372 2,301 3%
New Zealand	378 365 4%		743 662 12%
Global Wealth and Private Banking	245 206 19%		451 457 -1%
Group Centre	(27) (20) 35%		(47) (158) -70%
Underlying profit by division	3,038 2,973 2%		6,011 5,652 6%

Underlying profit by division – September 2012 Half Year v March 2012 Half Year

2,973 (98) 118 1H12 Underlying profit Australia International and Institutional Banking $m	2,973 (98) 118 1H12 Underlying profit Australia International and Institutional Banking $m	39 13	3,038 (7) Group Centre 2H12 Underlying profit	3,038 (7) Group Centre 2H12 Underlying profit	3,038 (7) Group Centre 2H12 Underlying profit
	2,973 (98)		(7)
	1H12 Underlying profit Australia International and Institutional Banking	New Zealand Global Wealth and Private Banking

September 2012 v March 2012

Australia

Profit increased 10% driven by an uplift in Retail net interest income (with both higher mortgage volumes and improved net interest margin) and a reduction in expenses, partly offset by an uplift in provision charges in Commercial.

International and Institutional Banking

Profit decreased 8% due to continued margin compression (as the impact of the Global Financial Crisis repricing partially reversed), strong competition on deposits, lower global markets revenues (after a very strong first half) and higher individual provision charges relating to a few legacy customers in Australia, partially offset by related collective provision releases.

New Zealand

Profit increased 4% due to fee income growth and lower provision charges.

Global Wealth and Private Banking

Profit was up 19% due to improved insurance results, higher investment earnings and a reduction in operating expenses.

Group Centre

The loss was $7 million higher mainly due to increased investment in technology infrastructure, partially offset by higher income on surplus capital and higher realised revenue hedge gains.
September 2012 v September 2011

Australia

Profit increased 4% driven by net interest income growth, with solid balance sheet growth partially offset by lower margins, and lower provision charges.

International and Institutional Banking

Profit increased 3% with strong Global Markets revenues (particularly in the March 2012 half) and strong Transaction Banking volumes, offset by higher provision charges and declining margins in Global Loans.

New Zealand

Profit increased 12% on the back of margin improvement and lower provisions.

Global Wealth and Private Banking

Profit decreased 1% due to adverse investor sentiment and subdued market returns negatively impacting volumes, partially offset by higher investment earnings.

Group Centre

The loss was $111 million lower than the full year of 2011 mainly due to higher earnings on centrally held capital and lower provision charges.

Refer to Section 5 – Segment Review on pages 35 to 66 for further details.

CFO OVERVIEW

Review of Group results

Income and expenses

Net interest income

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Group	$M $M $M $M
Underlying net interest income	6,127 5,984 2% 12,111 11,498 5%
Average interest earning assets	538,161 508,762 6% 523,461 474,302 10%
Net interest margin (%) - underlying	2.28 2.35 -3% 2.31 2.42 -5%

Group (excluding Global Markets)
Underlying net interest income	5,765 5,636 2% 11,401 10,860 5%
Average interest earning assets	431,049 410,917 5% 420,964 388,407 8%
Net interest margin (%) - underlying	2.67 2.74 -2% 2.71 2.80 -3%

	Half Year Full Year
	Sep 12 % Mar 12 % Movt Sep 12 % Sep 11 % Movt
Underlying net interest margin by division
(excluding Global Wealth and Private Banking)
Australia	2.49 2.45 2% 2.47 2.59 -5%
International and Institutional Banking	1.76 1.95 -10% 1.85 2.09 -11%
New Zealand	2.59 2.66 -3% 2.62 2.52 4%

Group net interest margin – September 2012 Half Year v March 2012 Half Year

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235
(2) (2) 9 228
(1)
bps
(11)
1H12 Funding and asset Funding costs Deposits Assets Other 2H12
Net interest margin mix Net interest margin
Underlying Underlying
----- End of picture text -----

September 2012 v March 2012 (including Global Markets)

The increase in net interest income was driven by an increase in average interest earning assets partially offset by a decline in the net interest margin.

Average interest earning assets (+$29.4 billion or 6%)

Australia (+ $9.9 billion or 4%): Mortgages up $7.7 billion and Commercial up $2.3 billion, primarily in Business Banking and Regional Commercial Banking.
IIB (+$16.8 billion or 8%): Global Markets up $9.3 billion reflecting growth in liquid assets, trading and investment securities, Transaction Banking up $3.6 billion with an increase in trade finance loans in the APEA region and Global Loans was up $3.1 billion with growth mainly in corporate customer lending.

Average deposits and other borrowings (+$17.1 billion or 5%)

Australia (+ $7.5 billion or 6%): reflecting increased customer deposits in Retail from higher volumes on Progress, Online and Business Premium Saver products and term deposits, along with growth in deposits in Commercial.
IIB (+$6.9 billion or 5%): increased customer deposits, with growth concentrated in the APEA region.
New Zealand (+$3.1 billion or 8%): an uplift in customer deposits in Small Business Banking and Retail.
Net interest margin (-7 basis points)
Funding and asset mix (-2 bps): adverse due to relative growth in lower margin Trade loan assets and in the lower margin Asian geography.
Funding costs (-2 bps): lower returns on capital, while wholesale funding costs were broadly flat.
Deposit costs (-11 bps): reflecting strong competition for retail and commercial deposits and some mix impact from growth in lower margin term deposits.
Assets (+9 bps): primarily benefits of re-pricing mortgages in Australia, partially offset by margin compression in Global Loans.

CFO OVERVIEW

Income and expenses, cont’d

Net interest income, cont’d

September 2012 v September 2011 (including Global Markets)
The increase in net interest income was driven by an increase in average interest earning assets partially offset by a decline in the net interest margin.

Average interest earning assets (+$49.2 billion or 10%)

Australia (+ $16.3 billion or 7%). Mortgages up $13.0 billion and Commercial up $3.1 billion, primarily in Business Banking.
IIB (+$32.3 billion or 18%): Global Markets increased $16.6 billion due to growth in liquid assets, trading and investment securities, combined with a $7.6 billion growth in Global Loans and a $6.3 billion uplift in trade finance lending in Transaction Banking.
Average deposits and other borrowings (+$45.3 billion or 13%)
Australia (+ $13.9 billion or 12%): reflecting increased customer deposits in Retail from higher volumes on Progress, Online and Business Premium Saver products and term deposits, along with growth in deposits in Commercial.
IIB (+$15.8 billion or 12%): mainly due to increased customer deposits within the APEA region.
Group Centre (+$11.3 billion or 25%): represents increased wholesale funding raised during the period.
Net interest margin (-11 basis points):
Funding and asset mix (+1 bps): reduced the reliance on more expensive wholesale funding due to increased customer deposits, partially offset by unfavourable asset mix with higher growth in lower margin products (for example Trade Loans).
Funding costs (-8 bps): increased wholesale funding costs and lower returns on capital due to declining interest rate environment in Australia and New Zealand.
Deposit costs (-10 bps): reflecting strong competition for retail and commercial deposits, predominantly in Australia.
Assets (+6 bps): primarily benefits of re-pricing mortgages in Australia, partially offset by margin compression in Global Loans.

CFO OVERVIEW

Income and expenses, cont’d

Other operating income
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Fee income1	1,136 1,156 -2% 2,292 2,257 2%
Foreign exchange earnings1	152 128 19% 280 297 -6%
Net income from wealth management	589 560 5% 1,149 1,146 0%
Share of associates' profit	230 169 36% 399 419 -5%
Other1	94 33 large 127 143 -11%
Global Markets other operating income	547 674 -19% 1,221 1,052 16%
Underlying other operating income	2,748 2,720 1% 5,468 5,314 3%
1. Excluding Global Markets

Global Markets income
Underlying net interest income	362 348 4% 710 638 11%
Other operating income	547 674 -19% 1,221 1,052 16%
Underlying Global Markets income	909 1,022 -11% 1,931 1,690 14%

	Half Year Full Year
	Sep 12 % Mar 12 % Movt Sep 12 % Sep 11 % Movt
Underlying other operating income by division
Australia	608 586 4% 1,194 1,185 1%
International and Institutional Banking	1,355 1,395 -3% 2,750 2,523 9%
New Zealand	166 159 4% 325 316 3%
Global Wealth and Private Banking	691 664 4% 1,355 1,350 0%
Group Centre	(72) (84) -14% (156) (60) large
Underlying other operating income	2,748 2,720 1% 5,468 5,314 3%

Other operating income – September 2012 Half Year v March 2012 Half Year

										61	61
		2,720				24		29							2,748
$m				(20)									(127)
		1H12	Fee income		Foreign exchange		Net income from			Share of	Other	Global Markets			2H12
	Other operating					earnings		wealth	associates' profit			other operating		Other operating
		income					management						income		income

September 2012 v March 2012

Fee income (excluding Global Markets)

Global Institutional decreased $17 million due to lower Corporate Advisory activity.

Foreign Exchange (excluding Global Markets)

Group Centre increased $15 million mainly due to higher realised revenue hedge gains.
Consumer Cards and Unsecured Lending increased $7 million driven by higher volumes as a result of seasonality.

Net Income from Wealth Management

Global Wealth and Private Banking increased $24 million primarily due to the impact of interest and inflation rates on insurance and annuity reserves, higher sales from Asian operations as well as favourable insurance results, partially offset by lower funds management and advice income.

CFO OVERVIEW

Income and expenses, cont’d

Other operating income, cont’d

Share of associates profit

P.T. Bank Pan Indonesia (Panin Bank) increased $27 million due to underlying business growth and an $8 million adjustment from aligning accounting policies.
Shanghai Rural Commercial Bank (SRCB) increased $18 million mainly as a result of lower provision charges in the second half of 2012.
AMMB Holdings Berhad (AMMB) increased $12 million as a result of underlying business growth.

Other income (excluding Global Markets)

The first half of 2012 included a $31 million write-down of the investment in Saigon Securities Inc (SSI).
Global Loans increased $12 million due mainly to a gain on restructuring a transaction.
Mortgages increased $7 million due to the gain on sale of the Origin business.
Global Wealth and Private Banking increased $4 million mainly due to an impairment charge in the E*Trade business in the first half of 2012.

Total Global Markets income is affected by mix impacts between the categories within other operating income and net interest income. Total Global Markets income decreased $113 million or 11%. Refer page 49 for further information.

September 2012 v September 2011

Fee income (excluding Global Markets)

Transaction Banking increased $34 million driven by volume growth.

Foreign Exchange (excluding Global Markets)

Group Centre decreased $43 million mainly due to lower realised revenue hedge gains.
Transaction Banking increased $15 million driven by higher volumes.
Consumer Cards and Unsecured Lending increased $6 million driven by pricing initiatives and increased travel card volumes.

Net Income from Wealth Management

Global Wealth and Private Banking increased $43 million primarily due to the impact of interest and inflation rates on insurance and annuity reserves, higher advice income and higher income from Asian operations, partially offset by lower funds management income.
Retail Asia Pacific increased $11 million mainly due to improved performance in Taiwan, Indonesia and Singapore.
Group Centre decreased $53 million due to an increase in the elimination on consolidation of OnePath investments in ANZ products.

Share of associates profit

SRCB decreased $63 million mainly as a result of one-off adjustments included in the prior year and higher provision charges in 2012.
Panin Bank increased $18 million mainly due to underlying business growth.
Bank of Tianjin (BoT) increased $18 million as a result of underlying business growth.

Other income (excluding Global Markets)

Group Centre decreased $21 million due to the profit on sale of 20 Martin Place (Sydney) in 2011.
Global Wealth and Private Banking decreased $19 million mainly driven by adverse investor sentiment and the uncertain economic environment which negatively impacted on E*Trade brokerage volumes.
Global Institutional decreased $10 million due to mark-to-market movements on credit default swap bought protection.
$10 million gain on sale of Sacombank and $10 million dilution gain relating to the Bank of Tianjin investment.
Global Loans increased $11 million mainly due to a gain on restructuring a transaction.
Mortgages increased $9 million mainly due to the gain on sale of the Origin business.

Total Global Markets income is affected by mix impacts between the categories within other operating income and net interest income. Total Global Markets income increased $241 million or 14%. Refer page 49 for further information.

CFO OVERVIEW

Income and expenses, cont’d

Income and expenses, cont’d

Expenses
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Personnel expenses	2,355 2,419 -3% 4,774 4,687 2%
Premises expenses	363 353 3% 716 681 5%
Computer expenses	554 551 1% 1,105 1,021 8%
Restructuring expenses	52 74 -28% 126 23 large
Other expenses	678 623 9% 1,301 1,306 0%
Total underlying operating expenses	4,002 4,020 0% 8,022 7,718 4%
Total full time equivalent staff (FTE) - underlying1	47,833 49,383 -3% 47,833 49,902 -4%

1. Excludes FTE associated with non continuing business and New Zealand Simplification programme


	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Australia	1,437 1,456 -1% 2,893 2,836 2%
International and Institutional Banking	1,457 1,476 -1% 2,933 2,757 6%
New Zealand	461 460 0% 921 906 2%
Global Wealth and Private Banking	422 435 -3% 857 853 0%
Group Centre	225 193 17% 418 366 14%
Total underlying operating expenses	4,002 4,020 0% 8,022 7,718 4%

Operating expenses – September 2012 Half Year v March 2012 Half Year

==> picture [503 x 151] intentionally omitted <==

----- Start of picture text -----

4,020
53 4,002
10 3
$m
(64)
(20)
1H12 Personnel expenses Premises expenses Computer expenses Restructuring Other expenses 2H12
Underlying operating expenses Underlying operating
expenses expenses
----- End of picture text -----

September 2012 v March 2012
Personnel expenses reduced $64 million (-3%) as a result of reduced staff numbers. There were reductions in staff numbers across all divisions on the back of productivity initiatives.
Premises expenses increased $10 million (3%) due to rent increases and higher maintenance costs.
Other expenses increased $53 million (8%) due to higher consultant fees relating to infrastructure projects, together with the impact of a GST refund in March 2012 half.
Restructuring expenses reduced $20 million (-27%) due to lower provisions in Australia division and IIB.
September 2012 v September 2011
Personnel expenses increased $87 million (2%) as a result of annual salary increases and the continued build out of our regional capability, partly offset by a 4% reduction in staff numbers.
Premises expenses increased $35 million (5%) reflecting rent increases and our regional expansion.
Computer expenses increased $84 million (8%) due to increased depreciation and amortisation from increased investment in technology.
Restructuring expenses increased $102 million as a result of productivity initiatives being undertaken across the Group.

CFO OVERVIEW

Credit risk

Overall asset quality has improved during the year, with gross impaired assets reducing by $385 million (7%) to $5,196 million at 30 September 2012. The Group continues to maintain a prudent approach to provisioning, with total provisions for impairment losses of $4,538 million as at 30 September 2012, down $335 million (7%) on 30 September 2011.

The total credit impairment charge increased $35 million (3%) year on year and by $116 million (21%) in the second half, with an increased individual provision charge in the second half relating to a few legacy Institutional Banking loans, partially offset by an associated release of collective provisions held against such exposures.

Provision for credit impairment charge

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Australia	357 309 16% 666 719 -7%
International and Institutional Banking1	252 175 44% 427 293 46%
New Zealand	70 78 -10% 148 166 -11%
Global Wealth and Private Banking	2 2 0% 4 (8) large
Group Centre	- 1 -100% 1 41 -98%
Provision for credit impairment charge	681 565 21% 1,246 1,211 3%

Includes impairment of $35 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million; Sep 11 full year: $37 million)

Individual provision charge

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt


Australia	384 320 20% 704 671 5%
International and Institutional Banking1	437 290 51% 727 278 large
New Zealand	89 104 -14% 193 256 -25%
Global Wealth and Private Banking	2 3 -33% 5 (2) large
Total individual provision charge/(release)	912 717 27% 1,629 1,203 35%

Includes impairment of $35 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million; Sep 11 full year: $37 million)

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
New and increased provisions	$M $M $M $M
Australia	516 489 6% 1,005 940 7%
International and Institutional Banking	593 398 49% 991 639 55%
New Zealand	182 190 -4% 372 458 -19%
Global Wealth and Private Banking	3 6 -50% 9 3 large
New and increased provisions for loans and advances	1,294 1,083 19% 2,377 2,040 17%


Recoveries and writebacks
Australia	(132) (169) -22% (301) (269) 12%
International and Institutional Banking	(156) (108) 44% (264) (361) -27%
New Zealand	(93) (86) 8% (179) (202) -11%
Global Wealth and Private Banking	(1) (3) -67% (4) (5) -20%
Recoveries and writebacks	(382) (366) 4% (748) (837) -11%
Total individual provision charge/(release)	912 717 27% 1,629 1,203 35%

CFO OVERVIEW

Credit risk, cont’d

Individual provision charge, cont’d

� September 2012 v March 2012

The total individual provision charge increased $195 million (27%) over the half due to increases in IIB and Australia divisions, partly offset by decreases in New Zealand division. The increase in IIB was driven by a few legacy loans. The increase in Australia division reflects a slight deterioration in the Commercial portfolio.

� September 2012 v September 2011

The total individual provision charge increased $426 million (35%) over the year primarily due to increased provisions in IIB, partially offset by a provision decrease in New Zealand division. The increase in IIB of $449 million reflects an increase in provisions on a few legacy loans and lower levels of recoveries and writebacks than in 2011.

Collective provision charge/(release)

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Collective provision charge by source
Lending growth	74 74 0% 148 131 13%
Risk profile1	(22) (174) -87% (196) (91) large
Portfolio mix	(11) (1) large (12) (20) -40%
Economic cycle and concentration risk adjustment1	(272) (51) large (323) (12) large
Collective provision charge/(release)	(231) (152) 52% (383) 8 large

1. Risk profile release in March 2012 includes $60 million transferred to Economic cycle and concentration risk adjustment

Collective provision charge/(release) by division
Australia	(27)	(11)	large	(38)	48	large
International and Institutional Banking	(185)	(115)	61%	(300)	15	large
New Zealand	(19)	(26)	-27%	(45)	(90)	-50%
Global Wealth and Private Banking	-	(1)	-100%	(1)	(6)	-83%
Group Centre	-	1	-100%	1	41	-98%
Collective provision charge/(release)	(231)	(152)	52%	(383)	8	large

� September 2012 v March 2012

There was a net release from the collective provision in the second half. The $27 million release in Australia division was primarily driven by releases from the economic cycle balance partially offset by growth, mostly in the Commercial Business. The $185 million release in IIB followed the crystallisation of individual provisions on a few legacy exposures that triggered a release from the concentration risk provision that was held against such exposures, partially offset by underlying growth across the portfolio. The release in New Zealand of $19 million was driven by economic cycle releases and an improving risk profile, partially offset by underlying portfolio growth.

� September 2012 v September 2011

There was a net release from the collective provision in 2012. The $38 million release in Australia division was primarily driven by releases from the economic cycle balance partially offset by growth, mostly in the Commercial Business. The release of $300 million in IIB was driven by a reduction in the concentration risk provision associated with a few legacy exposures and an improved risk profile across most portfolios in 2012, partially offset by underlying growth across the portfolio. The release in New Zealand division of $45 million was driven by economic cycle releases and an improving risk profile, partially offset by portfolio growth.

CFO OVERVIEW

Credit risk, cont’d

Credit risk on impaired derivatives loss/(gain)

Credit valuation adjustments (CVA) on impaired derivatives are transferred to the individual provision charge in underlying profit (refer also page 78) so that all incurred losses are reflected as credit impairment charges.

The amounts involved are as follows:

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Credit risk on impaired derivatives loss/(gain)	28 32 -13% 60 (17) large

Expected loss

Management believe that disclosure of modelled expected loss data for individual provisions will assist in assessing the longer term expected loss rates on the lending portfolio as it removes the volatility in reported earnings created by the use of IFRS credit loss provisioning. The expected loss methodology is used internally for return on equity analysis and economic profit reporting.

The expected loss on the current portfolio as at the end of the period was $1,655 million, a decrease of $24 million over the March 2012 half year. This reflects volume growth offset by lower risk profiles of productive lending in IIB following the migration of a few legacy loans to impaired assets, and continued improvement in the risk profile of productive lending in the New Zealand portfolio.

continued improvement in the risk profile of productive lending in the New Zealand portfolio.
	% of Group		As at
	exposure at
Expected loss as a percentage of exposure at default	default	Sep 12	Mar 12	Sep 11
Australia	43%	0.31%	0.32%	0.31%
International and Institutional Banking	44%	0.19%	0.21%	0.24%
New Zealand	12%	0.23%	0.25%	0.25%
Global Wealth and Private Banking	1%	0.15%	0.14%	0.08%
Total	100%	0.24%	0.26%	0.27%
Annual expected loss ($million)		1,655	1,679	1,697
	% of		As at
	Group
	gross lending
Expected loss as a percentage of gross lending assets	assets	Sep 12	Mar 12	Sep 11
Australia	57%	0.36%	0.36%	0.35%
International and Institutional Banking	26%	0.51%	0.60%	0.70%
New Zealand	16%	0.26%	0.29%	0.29%
Global Wealth and Private Banking	1%	0.16%	0.17%	0.16%
Total	100%	0.38%	0.40%	0.42%

CFO OVERVIEW

Credit risk, cont’d

	As at ($M) Movement
	Sep 12 Sep 12
Gross impaired assets	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Impaired loans	4,364 4,664 4,650 -6% -6%
Restructured items	525 340 700 54% -25%
Non-performing commitments and contingencies	307 339 231 -9% 33%

Gross impaired assets	5,196 5,343 5,581 -3% -7%

Individual provisions
Impaired loans	(1,729) (1,701) (1,687) 2% 2%
Non-performing commitments and contingencies	(44) (13) (10) large large
Net impaired assets	3,423 3,629 3,884 -6% -12%

Gross impaired assets

� September 2012 v March 2012

Gross impaired assets decreased by 3% over the half, driven by a reduction in impaired loans in New Zealand, partially offset by an increase in restructured items associated with a few customers in IIB.

� September 2012 v September 2011

Gross impaired assets decreased by 7% over the year, driven by a reduction in impaired loans in the second half of the 2012 year and a reduction in restructured items, offset by an increase in non-performing commitments and contingencies.

Net impaired assets

Net impaired assets decreased by 6% during the half and 12% year on year. The Group has an individual provision coverage ratio on impaired loans of 41% at 30 September 2012.

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
New impaired assets	$M $M $M $M
Impaired loans	1,657 1,913 -13% 3,570 3,569 0%
Restructured items	54 249 -78% 303 688 -56%
Non-performing commitments and contingencies	136 194 -30% 330 22 large
Total new impaired assets	1,847 2,356 -22% 4,203 4,279 -2%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
New impaired assets by division
Australia	858 764 12% 1,622 1,654 -2%
International and Institutional Banking	645 1,115 -42% 1,760 1,419 24%
New Zealand	340 447 -24% 787 1,167 -33%
Global Wealth and Private Banking	4 9 -56% 13 20 -35%
Underlying new impaired assets	1,847 2,335 -21% 4,182 4,260 -2%
Adjustments between statutory and underlying	- 21 -100% 21 19 11%
Total new impaired assets	1,847 2,356 -22% 4,203 4,279 -2%

� September 2012 v March 2012

New impaired assets decreased by 22% over the half, driven by a reduction in new impaired loans in IIB and New Zealand, partially offset by increased new impaired loans in Australia associated with the Commercial portfolio.

� September 2012 v September 2011

New impaired assets decreased by 2% over the year, with reductions in new impaired assets in New Zealand and Australia, partially offset by increases in IIB.

CFO OVERVIEW

Credit risk, cont’d
Net impaired assets, cont’d
	As at ($M) Movement
Impaired and Restructured Items by size of exposure	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Less than $10 million	2,311 2,468 2,490 -6% -7%
$10 million to $100 million	1,731 1,903 2,123 -9% -18%
Greater than $100 million	1,154 972 968 19% 19%
Gross impaired assets1	5,196 5,343 5,581 -3% -7%
Less: Individually assessed provisions for impairment	(1,773) (1,714) (1,697) 3% 4%
Net impaired assets	3,423 3,629 3,884 -6% -12%

1. Includes $525 million restructured items (Mar 2012: $340 million; Sep 2011: $700 million)

		Movement

Ageing analysis of net advances		Sep 12 Sep 12
that are past due but not impaired		v. Mar 12 v. Sep 11
1-5 days	2,285 2,847 3,028	-20% -25%
6-29 days	4,926 4,837 4,540	2% 9%
30-59 days	1,478 1,966 1,584	-25% -7%
60-89 days	733 958 865	-23% -15%
>90 days	1,713 1,876 1,834	-9% -7%
Total	11,135 12,484 11,851	-11% -6%

CFO OVERVIEW

Income tax expense

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Income tax expense on underlying profit	1,152 1,142 1% 2,294 2,222 3%
Effective tax rate (underlying profit)	27.5% 27.7% 27.6% 28.2%

September 2012 v March 2012

The effective tax rate was virtually unchanged, down 0.2%.

� September 2012 v September 2011

The effective tax rate decreased 0.6% primarily due to a favourable increase in the overseas tax rate differential, including the reduction in the New Zealand corporate tax rate.

Impact of exchange rate movements/revenue hedges

The Group uses derivative instruments to economically hedge against the adverse impact on future offshore revenue streams from exchange rate movements.

Movements in average exchange rates, net of associated revenue hedges, resulted in an increase of $25 million in the Group’s underlying profit after tax for the September 2012 half. This included the impact on earnings (underlying basis) from associated revenue and cost hedges, which increased by $15 million (before tax) over the March 2012 half (September 2012 full year: decrease of $31 million). Hedge revenue is booked in the Group Centre.

	Half Year Sep 2012 v. Half Year Mar 2012 Full Year Sep 2012 v. Full Year Sep 2011

	FX FX FX FX

	unadjusted % FX adjusted Impact unadjusted % FX adjusted Impact

	growth % growth $M growth % growth $M
Net interest income	2% 2% 16 5% 5% 28
Other operating income	1% 0% 24 3% 3% (9)
Operating income	2% 1% 40 5% 4% 19
Operating expenses	0% -1% (5) 4% 4% 11
Profit before credit impairment and income tax	4% 3% 35 5% 5% 30
Provision for credit impairment	21% 21% - 3% 3% 1
Profit before income tax	2% 1% 35 5% 5% 31
Income tax expense	1% 0% (10) 3% 3% (9)
Non-controlling interests	-50% -50% - -33% -33% -
Underlying profit	2% 1% 25 6% 6% 22

The Group’s underlying profit adjusted for exchange rate movements is as follows:

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt


Net interest income	6,127 6,000 2% 12,111 11,526 5%
Other operating income	2,748 2,744 0% 5,468 5,305 3%
Operating income	8,875 8,744 1% 17,579 16,831 4%
Operating expenses	(4,002) (4,025) -1% (8,022) (7,707) 4%
Profit before credit impairment and income tax	4,873 4,719 3% 9,557 9,124 5%
Provision for credit impairment	(681) (565) 21% (1,246) (1,210) 3%
Profit before income tax	4,192 4,154 1% 8,311 7,914 5%
Income tax expense	(1,152) (1,152) 0% (2,294) (2,231) 3%
Non-controlling interests	(2) (4) -50% (6) (9) -33%
Underlying profit (exchange rate adjusted)	3,038 2,998 1% 6,011 5,674 6%

CFO OVERVIEW

Earnings related hedges

The Group has taken out economic hedges against New Zealand dollar and US dollar (and USD linked) revenue and expense streams. New Zealand dollar exposure relates to the New Zealand geography (refer page 73) and the debt component of New Zealand dollar intra-group funding of this business, which amounted to NZD1.766 billion at 30 September 2012. Most of our US dollar earnings are in APEA (refer page 71). Details of these hedges are set out below.

	Half Year Full Year
	Sep 12 Mar 12 Sep 12 Sep 11
NZD Economic hedges	$M $M $M $M
Net open NZD position (notional principal)1	997 794 997 788
Amount taken to income (pre-tax)2	- 5 5 (3)
Amount taken to income (pre-tax underlying basis)3	- 3 3 40
USD Economic hedges
Net open USD position (notional principal)1	725 1,060 725 1,068
Amount taken to income (pre-tax)2	19 103 122 24
Amount taken to income (pre-tax underlying basis)3	40 22 62 56

1. Value in AUD at original contract rate 2.

Unrealised valuation movement plus realised revenue from closed out hedges 3.

Realised revenue from closed out hedges

As at 30 September 2012, the following hedges are in place to partially hedge future earnings against adverse movements in exchange rates:

NZD1.3 billion at a forward rate of approximately NZD1.26/AUD.
USD0.7 billion at a forward rate of approximately USD0.97/AUD.
An unrealised gain of $62 million (pre-tax) on the outstanding NZD and USD of economic hedges was booked to the income statement during the year and has been treated as an adjustment to statutory profit as these are hedges of future years’ NZD and USD revenues.
September 2012 v March 2012
NZD0.4 billion of economic hedges matured with zero impact to the income statement.
USD0.5 billion of economic hedges matured and a realised gain of $40 million (pre-tax) was booked to the income statement.
An unrealised loss of $21 million (pre-tax) on the outstanding NZD and USD of economic hedges was booked to the income statement during the half year and has been treated as an adjustment to statutory profit as these are hedges of future years’ NZD and USD revenues.
September 2012 v September 2011
NZD0.8 billion of economic hedges matured and a realised gain of $3 million (pre-tax) was booked to the income statement.
USD0.9 billion of economic hedges matured and a realised gain of $62 million (pre-tax) was booked to the income statement.

Earnings per share (cents) 1
	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt

Underlying earnings per share (cents)
Basic	113.1 112.2 1% 225.3 218.4 3%
Diluted	108.8 107.4 1% 216.5 208.1 4%

Weighted average number of ordinary shares (M)2
Basic	2,682.2 2,644.1 1% 2,663.1 2,582.8 3%
Diluted	2,910.9 2,904.0 0% 2,903.3 2,826.5 3%

Underlying profit ($M)	3,038 2,973 2% 6,011 5,652 6%
Preference share dividends ($M)3	(4) (7) -43% (11) (12) -8%
Underlying profit less preference share dividends ($M)	3,034 2,966 2% 6,000 5,640 6%

Diluted underlying profit less preference share dividends ($M)	3,167 3,119 2% 6,286 5,882 7%

1. Refer page 96 for full calculation

2. Includes Treasury shares held in OnePath Australia

The earnings per share calculation excludes the Euro Hybrid preference shares

CFO OVERVIEW

Dividends

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Dividend per ordinary share (cents)
Interim (fully franked)	n/a 66 n/a 66 64 3%
Final (fully franked)1	79 n/a n/a 79 76 4%
Total (fully franked)	79 66 20% 145 140 4%

Ordinary share dividends used in payout ratio ($M)2	2,149 1,769 21% 3,918 3,664 7%
Underlying profit ($M)	3,038 2,973 2% 6,011 5,652 6%
Less: Preference share dividends paid	(4) (7) -43% (11) (12) -8%
Ordinary share dividend payout ratio (underlying basis)2	70.8% 59.7% 65.3% 65.0%

1. Final dividend for 2012 is proposed

Dividend payout ratio is calculated using proposed 2012 final dividend of $2,149 million, which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2012 half year and September 2011 full year are calculated using actual dividend paid of $1,769 million and $3,664 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the company by the amount of preference share dividends paid

The Directors propose that a final dividend of 79 cents be paid on each eligible fully paid ANZ ordinary share on 19 December 2012. The proposed 2012 final dividend will be fully franked for Australian tax purposes.

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2012 final dividend and ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated in accordance with the DRP and BOP Terms and Conditions. Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for further details regarding the calculation of the “Acquisition Price” and the operation of the DRP and BOP.

Economic profit

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Profit attributable to shareholders of the company	2,742 2,919 -6% 5,661 5,355 6%
Adjustments between statutory profit and underlying profit	296 54 large 350 297 18%
Underlying profit	3,038 2,973 2% 6,011 5,652 6%
Economic credit cost adjustment	(111) (230) -52% (341) (383) -11%
Imputation credits	580 550 5% 1,130 1,097 3%
Economic return	3,507 3,293 6% 6,800 6,366 7%
Cost of capital	(2,197) (2,064) 6% (4,261) (3,855) 11%
Economic profit	1,310 1,229 7% 2,539 2,511 1%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is considered in determining the variable component of remuneration packages. This is used for internal management purposes and is not subject to audit.

Economic profit is calculated via a series of adjustments to underlying profit. The economic credit cost adjustment replaces the actual credit loss charge with internal expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, this is calculated using average ordinary shareholders’ equity (excluding non-controlling interests), multiplied by the cost of capital rate (currently 11%) plus the dividend on preference shares. At a business unit level, capital is allocated based on economic capital, whereby higher risk businesses attract higher levels of capital. This method is designed to help drive appropriate risk management and ensure business returns align with the relevant risk. Key risks covered include credit risk, operating risk, market risk and other risks.

Economic profit has improved half on half due to:

An increase in underlying profit;
A decrease in the economic credit cost adjustment, reflecting actual credit losses moving closer to the economic expected loss during the half;
Higher imputation credits as greater portion of credit adjusted profit is from Australian sources; and
All of the above is partially offset by higher capital being held (in non-operating units) in line with prudential requirements.

CFO OVERVIEW

Balance sheet, liquidity and capital

Condensed balance sheet

Condensed balance sheet
		As at ($B)	Movement

			Sep 12 Sep 12
	Sep 12 Mar 12 Sep 11		v. Mar 12 v. Sep 11
Assets
Liquid assets	36.6 35.8 25.6		2% 43%
Due from other financial institutions	17.1 16.3 13.3		5% 29%
Trading and available-for-sale assets	61.2 56.0 58.3		9% 5%
Derivative financial instruments	48.9 39.6 58.6		24% -17%
Net loans and advances	427.8 412.6 397.3		4% 8%
Regulatory deposits	1.5 1.4 1.5		3% -2%
Investments backing policy liabilities	29.9 30.2 29.9		-1% 0%
Other	19.1 20.3 19.7		-6% -3%
Total assets	642.1 612.2 604.2		5% 6%
Liabilities
Due to other financial institutions	30.5 29.7 27.5		3% 11%
Customer deposits	327.9 308.3 296.8		6% 10%
Other deposits and other borrowings	69.2 74.8 71.9		-7% -4%
Deposits and other borrowings	397.1 383.1 368.7		4% 8%
Derivative financial instruments	52.6 41.4 55.3		27% -5%
Bonds and notes	63.1 61.1 56.6		3% 11%
Policy liabilities/external unit holder liabilities	33.5 33.5 32.5		0% 3%
Other	24.1 24.0 25.7		0% -6%
Total liabilities	600.9 572.8 566.3		5% 6%
Total equity	41.2 39.4 37.9		5% 9%

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesale debt, or that the Group has insufficient capacity to fund increases in assets. The liquidity risk associated with the timing mismatch of cash flows is inherent in all banking operations and is closely monitored by the Group. The Group maintains a portfolio of liquid assets to manage potential stresses in funding sources. The minimum level of liquidity portfolio assets held is based on a range of ANZ specific and general market liquidity stress scenarios such that our cash flow obligations can continue to be met over the short to medium term.

The Group’s approach to liquidity risk management incorporates the following key components:

Scenario modelling of funding sources
The Global Financial Crisis highlighted the importance of differentiating between stressed and normal market conditions in a name-specific crisis, including the different behaviour that offshore and domestic wholesale funding markets can exhibit during market stress events. ANZ’s short term liquidity scenario modelling stresses cash flow projections against multiple ‘survival horizons’ over which the Group is required to remain cash flow positive. In addition, longer term scenarios are also in place that measure the structural liquidity position of the balance sheet. Scenarios modelled are either prudential requirements or Board mandated scenarios. Under these scenarios, customer and wholesale balance sheet asset/liability flows are stressed.
Liquidity portfolio

The Group holds a diversified portfolio of cash and high credit quality securities that may be sold or pledged to provide same-day liquidity. This portfolio helps protect the Group’s liquidity position by providing cash in a severely stressed environment. All assets held in the prime portfolio are securities eligible for repurchase under agreements with the applicable central bank (i.e. ‘repo eligible’).

The liquidity portfolio is well diversified by counterparty, currency and tenor. Under the liquidity policy framework, securities purchased for ANZ’s liquidity portfolio must be of a similar or better credit quality to ANZ’s external long term or short term credit ratings and continue to be central bank repo eligible.

Supplementing the prime liquid asset portfolio, the Group holds additional liquidity:

central bank deposits with the US Federal Reserve, Bank of England, Bank of Japan and European Central Bank of $18.0 billion;
Australian Commonwealth and State Government securities and gold of $12.6 billion; and
cash and other securities to satisfy local country regulatory liquidity requirements which are not included in the liquid assets.

CFO OVERVIEW

Liquidity risk, cont’d		As at
	Sep 12	Mar 12	Sep 11
Prime liquidity portfolio (Market Values)1	AUD $B	AUD $B	AUD $B
Australia	24.0	21.2	20.8
New Zealand	11.0	10.5	9.1
United States	1.4	1.4	1.4
United Kingdom	3.3	3.1	2.7
Singapore	4.5	5.0	6.4
Hong Kong	0.6	0.3	0.3
Japan	1.3	1.2	-
Total excluding internal Residential Mortgage Backed Securities	46.1	42.7	40.7
Internal Residential Mortgage Backed Securities (Australia)	34.9	24.6	26.8
Internal Residential Mortgage Backed Securities (New Zealand)	3.0	4.0	3.9
Total prime portfolio	84.0	71.3	71.4
Other eligible securities including gold and cash on deposit with central banks2	30.6	28.1	20.1
Total liquidity portfolio	114.6	99.4	91.5

1. Market value is post the repo discount applied by the applicable central bank

Mar 2012 and Sep 2011 restated to include Bank of England reserve

Regulatory Change

The Basel 3 liquidity proposals remain subject to finalisation from both the Basel Committee and APRA. The proposed changes include the introduction of two new liquidity ratios to measure liquidity risk (the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR)). A component of the liquidity required under the proposed standards will likely be met via the previously announced Committed Liquidity Facility from the Reserve Bank of Australia (RBA), however the size and availability of the facility is not yet agreed with APRA and the RBA. While ANZ has an existing stress scenario framework and structural liquidity risk metrics and limits in place, the new requirements proposed are in general more challenging. These changes may impact the future composition and size of ANZ’s liquidity portfolio, the size and composition of the Bank’s funding base and consequently could affect future profitability. APRA is proposing to release further details on its requirements during the first quarter of 2013 following an anticipated release of further information from the Basel Committee on Banking Supervision early in calendar 2013. APRA currently proposes to implement the LCR on 1 January 2015 and the NSFR on 1 January 2018 in line with the Basel Committee's timetable for liquidity risk.

Wholesale Funding

ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency. Diversification was further enhanced during the year ended September 2012 with the introduction of a covered bond funding programme.

As at September 2012, the composition of the Group’s wholesale funding profile was:

Term wholesale funding with a remaining maturity of more than one year of $68.4 billion (12% of total funding);
Term wholesale funding with a remaining maturity of one year or less of $25.4 billion (5% of total funding);
Short term wholesale funding (including central bank deposits) of $78.9 billion (14% of total funding); and
Shareholders’ equity and hybrids, of $46.3 billion (8% of total funding).

$25.8 billion of term wholesale debt (with a remaining term greater than one year as at 30 September 2012) was issued during the September 2012 financial year, of which $4.5 billion is pre-funding for the September 2013 financial year.

ANZ maintained access to all major global wholesale funding markets during 2012.

Benchmark term debt issues were completed in AUD, USD, EUR, JPY, CHF, GBP, CNH and NZD;
All short term wholesale funding needs were met;
The weighted average tenor of new term debt issuance remained relatively flat at 4.6 years (4.7 years in 2011); and
The weighted average cost of new term debt issuance increased further in 2012 as a result of volatility in global markets. Conditions improved towards the end of the year, however average portfolio costs remain substantially above pre-crisis levels and continue to increase as maturing term wholesale funding is replaced at higher spreads.

CFO OVERVIEW

Liquidity risk, cont’d

The following tables show the Group’s funding composition:

	As at ($M) Movement
	Sep 12 Sep 12
	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Customer deposits and other liabilities1
Australia	140,798 132,761 126,969 6% 11%
International and Institutional Banking	142,662 132,767 129,683 7% 10%
New Zealand	39,622 37,782 35,938 5% 10%
Global Wealth and Private Banking	9,449 9,659 8,129 -2% 16%
Group Centre	(4,655) (4,666) (3,965) 0% 17%
Customer deposits	327,876 308,303 296,754 6% 10%
Other2	9,841 9,624 11,450 2% -14%
Total customer deposits and other liabilities (funding)	337,717 317,927 308,204 6% 10%

Wholesale funding4,5
Bonds and notes6	62,693 61,107 56,551 3% 11%
Loan capital	11,914 12,605 11,993 -5% -1%
Certificates of deposit	56,838 59,603 55,554 -5% 2%
Commercial paper issued	12,164 15,084 14,333 -19% -15%
Due to other financial institutions	30,538 29,688 27,535 3% 11%
Other wholesale borrowings3	4,585 2,665 (450) 72% large
Total wholesale funding	178,732 180,752 165,516 -1% 8%
Shareholders' equity (excl preference shares)	40,349 38,572 37,083 5% 9%

Total funding	556,798 537,251 510,803 4% 9%

Wholesale funding maturity4,5
Short term wholesale funding (excluding Central Banks)	63,433 64,735 56,918 -2% 11%
Central Bank deposits	15,475 14,872 10,646 4% 45%
Long term wholesale funding4
- Less than 1 year residual maturity	25,391 22,782 27,883 11% -9%
- Greater than 1 year residual maturity	68,449 71,677 63,293 -5% 8%
Hybrid capital including preference shares	5,984 6,686 6,776 -10% -12%
Total wholesale funding and preference share capital
	178,732 180,752 165,516 -1% 8%
excluding shareholders' equity


Total funding maturity
Short term wholesale funding (excluding Central Banks)	11% 12% 11%
Central Bank deposits	3% 3% 2%
Long term wholesale funding
- Less than 1 year residual maturity	5% 4% 6%
- Greater than 1 year residual maturity	12% 13% 12%
Total customer liabilities (funding)	61% 59% 60%
Shareholders' equity and hybrid debt	8% 9% 9%
Total funding and shareholders' equity	100% 100% 100%

1. Includes term deposits, other deposits and an adjustment to the Group Centre to eliminate OnePath Australia investments in ANZ deposit products

Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in OnePath Australia

Includes net derivative balances, special purpose vehicles, other borrowings and preference share capital Euro hybrids 4.

Long term wholesale funding amounts are stated at original hedged exchange rates. Movements due to currency fluctuations in actual amounts borrowed are classified as short term wholesale funding

Liability for acceptances have been removed as they do not provide net funding

6. Excludes term debt issued externally by OnePath

CFO OVERVIEW

Capital Management

APRA Capital Ratios

			at
		Basel 3		Basel 2
	Sep 12 Mar 12 Sep 11		Sep 12 Mar 12 Sep 11
Common Equity Tier 11	8.0% 7.8% 7.5%		8.8% 8.9% 8.5%
Tier 12	9.7% 9.7% 9.6%		10.8% 11.3% 10.9%
Tier 22	2.0% 2.1% 1.9%		1.4% 1.3% 1.2%
Total capital	11.7% 11.8% 11.5%		12.2% 12.6% 12.1%
Risk weighted assets ($B)	315.4 303.7 295.7		300.1 284.8 280.0

1. Common Equity Tier 1 is Tier 1 excluding hybrid Tier 1 capital instruments 2.

Basel 3 ratios include the application of a 10% ‘hair cut’ to the face value of the additional Tier 1 and Tier 2 securities on issue at those dates

Further details of the components of capital and the capital adequacy calculation are set out on pages 105 to 109

Basel 2

The Basel 2 Accord principles took effect from 1 January 2008. For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel 2 Accord, ANZ has been accredited by Australian Prudential Regulation Authority (APRA) to use Advanced Internal Ratings Based (AIRB) methodology for credit risk weighted assets and Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.

Basel 3

APRA released its new prudential capital standards in September 2012 detailing the implementation of the majority of Basel 3 capital reforms in Australia. APRA is adopting the Basel 3 reforms with increased capital deductions from Common Equity Tier 1 (“CET1”) capital, an increase in capitalisation rates (including prescribed minimum capital buffers), tighter requirements around new Tier 1 and Tier 2 securities and transitional arrangements for existing Tier 1 and Tier 2 securities that do not conform to the new regulations.

Based upon the APRA Basel 3 standards, ANZ would have reported a 55 bps increase in the CET1 capital ratio for the year ended 30 September 2012, with underlying earnings and capital initiatives (including divestments) outweighing dividends, incremental RWAs and deductions.

With a CET1 capital ratio of 8.02% (Basel 3 international fully harmonised 10.0%), and strong capital generation under APRA Basel 3 capital standards, ANZ is well placed to meet APRA’s early adoption of the Basel 3 capital reforms on 1 January 2013, and the implementation of the capital conservation measures, including the Capital Conservation Buffer, on 1 January 2016. As such, ANZ has removed the 1.5% discount on the Dividend Reinvestment and Bonus Option Plans for the proposed final 2012 dividend.

APRA Basel 3 Common Equity Tier 1 – September 2012 v September 2011

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203
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bps
up 55 bps
FY11 Underlying RWA usage Non-RWA Dividends Capital initiatives Other FY12
APRA Basel 3 NPAT business usage (net DRP) and divestments APRA Basel 3
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CFO OVERVIEW

Capital Management, cont’d

International Fully Harmonised Basel 3 Common Equity Tier 1 – September 2012[1]

Movement in bps	8.02 10.03 74 23 21 47 36 FY12 APRA Basel 3 10% allowance for investments in insurance entities and banking associates Up to 5% allowance for deferred tax assets Other capital items Mortgage 20% LGD floor and others IRRBB RWA (APRA Pillar 1 approach) FY12 International Fully Harmonised Basel 3

The above table provides a reconciliation of CET1 under APRA’s Basel 3 prudential capital standards to international “fully harmonised” Basel 3 standards. APRA views the Basel 3 reforms as a minimum requirement and hence has not incorporated some of the concessions proposed in the Basel 3 rules and has also set higher requirements in other areas. As a result, Australian banks’ APRA Basel 3 reported capital ratios will not be directly comparable with international peers.

In addition, APRA is proposing an accelerated implementation timetable for the Basel 3 capital reforms, particularly in relation to minimum capital ratios and deductions which will be effective 1 January 2013. Introduction of the prescribed minimum capital buffers will be fully effective 1 January 2016 and the Leverage Ratio from 1 January 2015.

APRA is still yet to finalise capital standards on the Basel 3 reforms dealing with the improvements in capital disclosures, including the leverage ratio, counterparty credit risk, contingent capital and measures to address systematic and inter-connected risks.

Level 3 Conglomerates (“Level 3”)

APRA has announced that it will proceed with implementing Level 3 Conglomerates prudential standards in 2014, with an update to the March 2010 discussion paper expected in early 2013. The standards will regulate a bancassurance group such as ANZ as a single economic entity with minimum capital requirements and additional reporting on risk exposure levels. Based upon APRA’s March 2010 Discussion Paper, ANZ is not expecting any material impact on its operations.

Life insurance And General Insurance Capital reforms (“LAGIC”)

APRA has undertaken a review of the prudential capital standards as they apply to life insurance and general insurance entities with the view to increasing the level of risk sensitivity and to more closely align the standards to the capital regulations applied to banking groups, particularly for capital targets and class of capital.

APRA released final prudential standards in October 2012 following an extensive period of industry consultation. The proposed reforms will not have a material impact on the capital requirements for ANZ.

ANZ's interpretation of the regulations documented in the Basel Committee publications; "Basel III: A global regulatory framework for more resilient banks and banking systems" (June 2011) and "International Convergence of Capital Measurement and Capital Standards" (June 2006)

CFO OVERVIEW

Deferred acquisition costs and deferred income

The Group recognises as assets deferred acquisition costs relating to the acquisition of interest earning assets. The Group also recognises deferred income that is integral to the yield of an originated financial instrument, net of any direct incremental costs. This income is deferred and recognised as net interest income over the expected life of the financial instrument under AASB 139: ‘Financial Instruments: Recognition and Measurement’. Deferred acquisition costs that do not relate to interest earning assets, for example those relating to the acquisition of life investment contracts, are excluded from this analysis.

The balances of deferred acquisition costs and deferred income were:

	Deferred Acquisition Costs1 Deferred Income
	Sep 12 Mar 12 Sep 11 Sep 12 Mar 12 Sep 11
	$M $M $M $M $M $M
Australia	704 647 597 68 66 84
International and Institutional Banking	12 6 - 309 326 299
New Zealand	80 43 32 35 30 28
Global Wealth and Private Banking	1 1 - 3 3 3
Group Centre	53 64 59 - - -
Total	850 761 688 415 425 414

1. Deferred acquisition costs largely include the amounts of brokerage capitalised and amortised in the Australia and New Zealand divisions. Deferred acquisition costs also include capitalised debt raising expenses

Deferred acquisition costs and associated amortisation during the period were:

	Full Year Sep 2012 Full Year Sep 2011

	Amortisation Charge Capitalised Costs1 Amortisation Charge Capitalised Costs1

	$M $M $M $M
Australia	356 464 314 355
International and Institutional Banking	4 16 1 -
New Zealand	25 72 31 21
Global Wealth and Private Banking	- - - -
Group Centre	21 16 19 25
Total	406 568 365 401

1. Costs capitalised during the year exclude brokerage trailer commissions paid

CFO OVERVIEW

Software capitalisation

At 30 September 2012, the Group’s intangibles included $1,762 million in relation to costs incurred in acquiring and developing software. Details are set out in the table below:

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Balance at start of period	1,743 1,572 11% 1,572 1,217 29%
Software capitalised during the period	462 324 43% 786 645 22%
Amortisation during the period	(170) (150) 13% (320) (249) 29%
Software impaired/written-off	(273) (1) large (274) (44) large
Foreign exchange differences	- (2) -100% (2) 3 large
Total capitalised software	1,762 1,743 1% 1,762 1,572 12%
Less: OnePath software (different treatment for Capital calculation)	(60) (83) -28% (60) (82) -27%
Capitalised software
	1,702 1,660 3% 1,702 1,490 14%
as per deductions from Tier 1 capital


Capitalised cost analysis by Division	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Australia	116 64 81% 180 77 large
International and Institutional Banking	195 150 30% 345 347 -1%
New Zealand	18 13 38% 31 36 -14%
Global Wealth and Private Banking	26 20 30% 46 42 10%
Group Centre	107 77 39% 184 143 29%
Total	462 324 43% 786 645 22%

Net book value by Division	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Australia	338 323 5% 338 302 12%
International and Institutional Banking	906 949 -5% 906 860 5%
New Zealand	81 72 13% 81 66 23%
Global Wealth and Private Banking	75 94 -20% 75 93 -19%
Group Centre	362 305 19% 362 251 44%
Total	1,762 1,743 1% 1,762 1,572 12%

Following the identification of impairment triggers, an impairment assessment was performed on intangible assets, including internally generated software assets. A detailed review of the recoverable amount was performed, and where the benefits associated with the asset were substantially reduced from what had originally been anticipated, the assets were written down to their recoverable amount. This resulted in the write down of $273 million (pre-tax) during the second half. Given the size and nature of the write-down and the infrequency of such large impairments, the write-down has been excluded from underlying profit.

CFO OVERVIEW

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SEGMENT REVIEW

Section 5 – Segment Review

Segment performance Australia International and Institutional Banking New Zealand Global Wealth and Private Banking Group Centre

SEGMENT REVIEW

Segment Performance

In February 2012 the Group announced that it had put in place a new senior management structure and other organisational changes designed to support our super regional aspirations, give focus to areas of growth and opportunity, and to strengthen succession planning within the senior management team.

The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand and Global Wealth and Private Banking being the major operating divisions.

Corporate Banking Australia continues to be reported within IIB, however effective 1 October 2012, Corporate Banking Australia will transfer to the Australia division.

All March 2012 and 2011 comparatives have been restated to reflect the new structure.

The Segment Review section is reported on an underlying basis.

September 2012 Half Year
		International &
		Institutional		Global Wealth &
AUD M	Australia	Banking	New Zealand	Private Banking	Group Centre	Group
Net interest income	3,050	1,898	887	59	233	6,127
Other external operating income	608	1,355	166	691	(72)	2,748
Operating income	3,658	3,253	1,053	750	161	8,875
Operating expenses	(1,437)	(1,457)	(461)	(422)	(225)	(4,002)
Profit before credit impair't and income tax	2,221	1,796	592	328	(64)	4,873
Provision for credit impairment	(357)	(252)	(70)	(2)	-	(681)
Profit before income tax	1,864	1,544	522	326	(64)	4,192
Income tax expense and non-controlling interests	(559)	(407)	(144)	(81)	37	(1,154)
Underlying profit	1,305	1,137	378	245	(27)	3,038

March 2012 Half Year

March 2012 Half Year

AUD M	Australia Banking New Zealand Private Banking Group Centre Group
Net interest income	2,874 1,944 885 64 217 5,984
Other external operating income	586 1,395 159 664 (84) 2,720
Operating income	3,460 3,339 1,044 728 133 8,704
Operating expenses	(1,456) (1,476) (460) (435) (193) (4,020)
Profit before credit impair't and income tax	2,004 1,863 584 293 (60) 4,684
Provision for credit impairment	(309) (175) (78) (2) (1) (565)
Profit before income tax	1,695 1,688 506 291 (61) 4,119
Income tax expense and
	(508) (453) (141) (85) 41 (1,146)
non-controlling interests

Underlying profit	1,187 1,235 365 206 (20) 2,973

September 2012 Half Year vs March 2012 Half Year

September 2012 Half Year vs March 2012 Half Year
International & Institutional
% Australia Banking New Zealand Private Banking Group Centre Group
Net interest income 6% -2% 0% -8% 7% 2%
Other external operating income 4% -3% 4% 4% -14% 1%
Operating income 6% -3% 1% 3% 21% 2%
Operating expenses -1% -1% 0% -3% 17% 0%
Profit before credit impair't and income tax 11% -4% 1% 12% 7% 4%
Provision for credit impairment 16% 44% -10% 0% -100% 21%
Profit before income tax 10% -9% 3% 12% 5% 2%
Income tax expense and non-controlling interests 10% -10% 2% -5% -10% 1%
Underlying profit 10% -8% 4% 19% 35% 2%

SEGMENT REVIEW

September 2012 Full Year

September 2012 Full Year

		Institutional
AUD M	Australia Banking New Zealand Private Banking Group Centre Group
Net interest income	5,924 3,842 1,772 123 450 12,111
Other external operating income	1,194 2,750 325 1,355 (156) 5,468
Operating income	7,118 6,592 2,097 1,478 294 17,579
Operating expenses	(2,893) (2,933) (921) (857) (418) (8,022)
Profit before credit impair't and income tax	4,225 3,659 1,176 621 (124) 9,557
Provision for credit impairment	(666) (427) (148) (4) (1) (1,246)
Profit before income tax	3,559 3,232 1,028 617 (125) 8,311
Income tax expense and
	(1,067) (860) (285) (166) 78 (2,300)
non-controlling interests

Underlying profit	2,492 2,372 743 451 (47) 6,011


September 2011 Full Year
	International & Institutional Global Wealth &
AUD M	Australia Banking New Zealand Private Banking Group Centre Group
Net interest income	5,782 3,667 1,701 135 213 11,498
Other external operating income	1,185 2,523 316 1,350 (60) 5,314
Operating income	6,967 6,190 2,017 1,485 153 16,812
Operating expenses	(2,836) (2,757) (906) (853) (366) (7,718)
Profit before credit impair't and income tax	4,131 3,433 1,111 632 (213) 9,094
Provision for credit impairment	(719) (293) (166) 8 (41) (1,211)
Profit before income tax	3,412 3,140 945 640 (254) 7,883
Income tax expense and
	(1,022) (839) (283) (183) 96 (2,231)
non-controlling interests

Underlying profit	2,390 2,301 662 457 (158) 5,652

September 2012 Full Year vs September 2011 Full Year	September 2012 Full Year vs September 2011 Full Year
		International &
		Institutional		Global Wealth &
%	Australia	Banking	New Zealand	Private Banking	Group Centre	Group
Net interest income	2%	5%	4%	-9%	large	5%
Other external operating income	1%	9%	3%	0%	large	3%
Operating income	2%	6%	4%	0%	92%	5%
Operating expenses	2%	6%	2%	0%	14%	4%
Profit before credit impair't and income tax	2%	7%	6%	-2%	-42%	5%
Provision for credit impairment	-7%	46%	-11%	large	-98%	3%
Profit before income tax	4%	3%	9%	-4%	-51%	5%
Income tax expense and non-controlling interests	4%	3%	1%	-9%	-19%	3%
Underlying profit	4%	3%	12%	-1%	-70%	6%

SEGMENT REVIEW

Australia

Philip Chronican

Australia division comprises Retail and Commercial businesses. Retail includes Mortgages, Credit Cards and Unsecured Lending and Deposits. Commercial includes our core banking offerings to Business Banking, Regional Commercial Banking and Small Business Banking customers and Esanda.

Underlying profit – September 2012 Half Year v March 2012 Half Year

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176 22 19
1,305
(48)
1,187 (51)
$m
1H12 Net interest income Other operating Operating expenses Provision for credit Income tax expense & 2H12
Underlying profit income impairment non-controlling Underlying profit
interests
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September 2012 v March 2012

Profit increased 10% in the half, with profit before credit impairment and income tax up 11%.

Key factors affecting the result were:

Net interest income increased 6% driven by strong growth in average net loans and advances of 4% and a 4 basis points improvement in net interest margin.
The 4% growth in average net loans and advances was driven by above system growth in Mortgages, and growth in Business Banking and Small Business Banking. Asset growth was largely self-funded with average deposit growth of 6% in the half with the majority of the deposit growth coming from savings products.
Net interest margin increased by 4 basis points as a result of disciplined margin management, partly offset by deposit pricing pressures.
Operating expenses were down 1% as result of restructuring activity in the March half driving a reduction in average FTE and benefits from operational efficiencies, procurement saves and lower discretionary spending.
Provision for credit impairment increased 16% in the half reflecting higher individual provisions partly offset by lower collective provisions. The individual provision charge was predominantly driven by softer economic conditions in a number of sectors. The collective provision reduction was driven by the release of surplus flood provisions.
September 2012 v September 2011

Profit increased 4%, with profit before credit impairment and income tax up 2%.

Key factors affecting the result were:

Net interest income increased 2% as a result of strong growth in average net loans and advances of 7% offset by a decline in net interest margin of 12 basis points.
Growth in average net loans and advances of 7% was driven by above system growth in Mortgages of 8% and growth in Business Banking of 11%. Asset growth was largely self-funded with average deposit growth of 12% in the year with the majority of the deposit growth coming from savings products.
Net interest margin declined 12 basis points over the year as a result of deposit pricing pressures and higher wholesale funding costs partly offset by benefits from asset pricing and disciplined margin management.
Operating expenses increased 2% due to higher restructuring costs and annual salary increases, partially offset by the benefits from productivity initiatives (reducing average FTE in the September half) and operational efficiencies, procurement saves and lower discretionary spending throughout the year.
Provision for credit impairment decreased 7% reflecting lower collective provisions due to the release of surplus flood provisions partly offset by an increase in individual provisions due to a large provision raised for a merchant facility and softer economic conditions.

Retail update

As a result of a targeted focus on higher value customer segments, growth in share of wallet and above system growth in both Household Lending and Household Deposits, ANZ has continued to grow Traditional Banking market share and is now ranked 2[nd] amongst peers for this measure[1] . ANZ achieved market recognition and was awarded Money Magazine’s Bank of the Year and Home Lender of the Year. As part of Australia’s transformation agenda, we are continuing to transform our distribution channels with 46 new look branches expected to be completed by end of 2012. Our digital agenda has strong momentum with increased self service capability on internet banking and we have expanded our market-leading goMoney product which has over 780,000 registered users and a new Android version.

Commercial update

Commercial continues to focus on growing the business through targeted customer acquisition, increased cross-sell and leveraging ANZ’s super regional footprint to meet the needs of our customers. As a result, customer numbers grew by a net ~30k throughout the year and the cross-sell of Institutional products increased by ~25%. Cross border referrals also grew by ~40%. ANZ is investing to enhance the customer experience and improve banker productivity. ANZ achieved market recognition and was awarded Capital CFO’s Business Bank of the Year in 2012.

Source: Roy Morgan Research: Aust Population aged 14+, rolling 12 months, Trade Banking Consumer Market (Deposits, Cards & Loans), Peers: CBA (excl Bankwest), NAB, Westpac (excl Bank of Melbourne & St George)

SEGMENT REVIEW

Australia

Philip Chronican

Australia Total

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	3,050 2,874 6% 5,924 5,782 2%
Other external operating income	608 586 4% 1,194 1,185 1%
Operating income	3,658 3,460 6% 7,118 6,967 2%
Operating expenses	(1,437) (1,456) -1% (2,893) (2,836) 2%
Profit before credit impairment and income tax	2,221 2,004 11% 4,225 4,131 2%
Provision for credit impairment	(357) (309) 16% (666) (719) -7%
Profit before tax	1,864 1,695 10% 3,559 3,412 4%
Income tax expense and non-controlling interests	(559) (508) 10% (1,067) (1,022) 4%
Underlying profit	1,305 1,187 10% 2,492 2,390 4%

Consisting of:
Retail	815 660 23% 1,475 1,417 4%
Commercial	486 531 -8% 1,017 973 5%
Other	4 (4) large - - n/a
Underlying profit	1,305 1,187 10% 2,492 2,390 4%

Balance Sheet
Net loans & advances	244,725 238,768 2% 244,725 228,547 7%
Other external assets	2,806 2,763 2% 2,806 2,566 9%
External assets	247,531 241,531 2% 247,531 231,113 7%
Customer deposits	140,798 132,761 6% 140,798 126,969 11%
Other external liabilities	13,868 11,474 21% 13,868 11,199 24%
External liabilities	154,666 144,235 7% 154,666 138,168 12%
Risk weighted assets	89,719 85,844 5% 89,719 82,060 9%
Average net loans and advances	243,093 233,264 4% 238,178 221,976 7%
Average deposits and other borrowings	136,989 129,528 6% 133,258 119,405 12%

Ratios
Return on average assets	1.06% 1.01% 1.04% 1.06%
Net interest average margin	2.49% 2.45% 2.47% 2.59%
Operating expenses to operating income	39.3% 42.1% 40.6% 40.7%
Operating expenses to average assets	1.17% 1.23% 1.20% 1.26%
Individual provision charge/(release)	384 320 20% 704 671 5%
Individual provision charge/(release) as a % of average net advances	0.32% 0.27% 0.30% 0.30%
Collective provision charge/(release)	(27) (11) large (38) 48 large
Collective provision charge/(release) as a % of average net advances	(0.02%) (0.01%) (0.02%) 0.02%
Net impaired assets	767 705 9% 767 660 16%
Net impaired assets as a % of net advances	0.31% 0.30% 0.31% 0.29%
Total full time equivalent staff (FTE)	13,982 14,390 -3% 13,982 14,635 -4%

SEGMENT REVIEW

Australia

Philip Chronican

Individual provision charge/(release)	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail	208 208 0% 416 373 12%
Mortgages	21 22 -5% 43 28 54%
Consumer Cards &
	166 148 12% 314 312 1%
Unsecured Lending

Deposits	8 7 14% 15 16 -6%
Other	13 31 -58% 44 17 large
Commercial	176 112 57% 288 298 -3%
Esanda	50 32 56% 82 81 1%
Regional Commercial Banking	62 32 94% 94 120 -22%
Business Banking	32 22 45% 54 48 13%
Small Business Banking	32 26 23% 58 49 18%
Individual provision charge/(release)	384 320 20% 704 671 5%

Collective provision charge/(release)	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail	(24) (9) large (33) 46 large
Mortgages	(12) (2) large (14) 12 large
Consumer Cards &
	(14) 1 large (13) 24 large
Unsecured Lending

Other	2 (8) large (6) 10 large
Commercial	(3) (2) 50% (5) 2 large
Esanda	10 9 11% 19 (14) large
Regional Commercial Banking	4 3 33% 7 (7) large
Business Banking	9 1 large 10 (35) large
Small Business Banking	5 9 -44% 14 5 large
Other	(31) (24) 29% (55) 53 large
Collective provision charge/(release)	(27) (11) large (38) 48 large

Total provision charge/(release)	357 309 16% 666 719 -7%

SEGMENT REVIEW

Australia

Philip Chronican

Net loans & advances	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail	192,740 189,429 2% 192,740 180,711 7%
Mortgages	182,115 178,527 2% 182,115 169,924 7%
Consumer Cards &
	7,702 8,153 -6% 7,702 8,148 -5%
Unsecured Lending

Other	2,923 2,749 6% 2,923 2,639 11%
Commercial	51,985 49,339 5% 51,985 47,836 9%
Esanda	15,847 14,957 6% 15,847 14,481 9%
Regional Commercial Banking	14,240 13,648 4% 14,240 13,575 5%
Business Banking	16,530 15,742 5% 16,530 14,954 11%
Small Business Banking	5,368 5,022 7% 5,368 4,880 10%
Other	- (30) -100% - (54) -100%
Net loans & advances	244,725 238,768 2% 244,725 228,547 7%

Customer deposits	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail	97,616 91,914 6% 97,616 87,275 12%
Mortgages	13,187 12,221 8% 13,187 11,279 17%
Consumer Cards &
	118 110 7% 118 114 4%
Unsecured Lending

Deposits	84,032 79,359 6% 84,032 75,619 11%
Other	279 224 25% 279 263 6%
Commercial	43,182 40,847 6% 43,182 39,694 9%
Esanda	96 129 -26% 96 203 -53%
Regional Commercial Banking	11,715 11,358 3% 11,715 10,776 9%
Business Banking	13,869 12,866 8% 13,869 12,852 8%
Small Business Banking	17,502 16,494 6% 17,502 15,863 10%
Customer deposits	140,798 132,761 6% 140,798 126,969 11%

SEGMENT REVIEW

Australia

Philip Chronican

Retail Business Unit

Retail Business Unit
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1,863 1,688 10% 3,551 3,468 2%
Other external operating income	471 451 4% 922 918 0%
Operating income	2,334 2,139 9% 4,473 4,386 2%
Operating expenses	(990) (995) -1% (1,985) (1,947) 2%
Profit before credit impairment and income tax	1,344 1,144 17% 2,488 2,439 2%
Provision for credit impairment	(184) (199) -8% (383) (419) -9%
Profit before tax	1,160 945 23% 2,105 2,020 4%
Income tax expense and non-controlling interests	(345) (285) 21% (630) (603) 4%
Underlying profit	815 660 23% 1,475 1,417 4%

Risk weighted assets	47,237 46,948 1% 47,237 43,765 8%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Individual provision charge/(release)
Mortgages	21 22 -5% 43 28 54%
Consumer Cards &
	166 148 12% 314 312 1%
Unsecured Lending

Deposits	8 7 14% 15 16 -6%
Other	13 31 -58% 44 17 large
Individual provision charge/(release)	208 208 0% 416 373 12%


Collective provision charge/(release)
Mortgages	(12) (2) large (14) 12 large
Consumer Cards &
	(14) 1 large (13) 24 large
Unsecured Lending

Other	2 (8) large (6) 10 large
Collective provision charge/(release)	(24) (9) large (33) 46 large

Total provision charge/(release)	184 199 -8% 383 419 -9%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Net loans & advances
Mortgages	182,115 178,527 2% 182,115 169,924 7%
Consumer Cards &
	7,702 8,153 -6% 7,702 8,148 -5%
Unsecured Lending

Other	2,923 2,749 6% 2,923 2,639 11%
Net loans & advances	192,740 189,429 2% 192,740 180,711 7%


Customer deposits
Mortgages	13,187 12,221 8% 13,187 11,279 17%
Consumer Cards &
	118 110 7% 118 114 4%
Unsecured Lending

Deposits	84,032 79,359 6% 84,032 75,619 11%
Other	279 224 25% 279 263 6%
Customer deposits	97,616 91,914 6% 97,616 87,275 12%

SEGMENT REVIEW

Australia

Philip Chronican

Commercial Business Unit

Commercial Business Unit
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1,184 1,183 0% 2,367 2,302 3%
Other external operating income	138 135 2% 273 268 2%
Operating income	1,322 1,318 0% 2,640 2,570 3%
Operating expenses	(452) (451) 0% (903) (879) 3%
Profit before credit impairment and income tax	870 867 0% 1,737 1,691 3%
Provision for credit impairment	(173) (110) 57% (283) (300) -6%
Profit before tax	697 757 -8% 1,454 1,391 5%
Income tax expense and non-controlling interests	(211) (226) -7% (437) (418) 5%
Underlying profit	486 531 -8% 1,017 973 5%

Risk weighted assets	41,809 38,475 9% 41,809 37,878 10%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Individual provision charge/(release)
Esanda	50 32 56% 82 81 1%
Regional Commercial Banking	62 32 94% 94 120 -22%
Business Banking	32 22 45% 54 48 13%
Small Business Banking	32 26 23% 58 49 18%
Individual provision charge/(release)	176 112 57% 288 298 -3%


Collective provision charge/(release)
Esanda	10 9 11% 19 (14) large
Regional Commercial Banking	4 3 33% 7 (7) large
Business Banking	9 1 large 10 (35) large
Small Business Banking	5 9 -44% 14 5 large
Other	(31) (24) 29% (55) 53 large
Collective provision charge/(release)	(3) (2) 50% (5) 2 large

Total provision charge/(release)	173 110 57% 283 300 -6%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Net loans & advances
Esanda	15,847 14,957 6% 15,847 14,481 9%
Regional Commercial Banking	14,240 13,648 4% 14,240 13,575 5%
Business Banking	16,530 15,742 5% 16,530 14,954 11%
Small Business Banking	5,368 5,022 7% 5,368 4,880 10%
Other	- (30) -100% - (54) -100%
Net loans & advances	51,985 49,339 5% 51,985 47,836 9%


Customer deposits
Esanda	96 129 -26% 96 203 -53%
Regional Commercial Banking	11,715 11,358 3% 11,715 10,776 9%
Business Banking	13,869 12,866 8% 13,869 12,852 8%
Small Business Banking	17,502 16,494 6% 17,502 15,863 10%
Customer deposits	43,182 40,847 6% 43,182 39,694 9%

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

The International and Institutional Banking (IIB) division comprises Global Institutional (including Transaction Banking, Global Loans and Global Markets), Retail Asia Pacific and Asia Partnerships, together with Relationship & Infrastructure.

Underlying profit – September 2012 Half Year v March 2012 Half Year

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1,235
19
46 1,137
(46)
(40)
(77)
$m
1H12 Net interest income Other operating Operating expenses Provision for credit Income tax expense & 2H12
Underlying profit income impairment non-controlling Underlying profit
interests
----- End of picture text -----

IIB continued to build momentum on the super regional strategy, focusing on the priority products of Foreign Exchange, Capital Markets, Cash Management and Trade and priority customer segments of Resources, Utilities and Infrastructure, Agribusiness and Financial Institutions to drive growth.

The results reflected greater customer connectivity and an increasingly diversified geographic mix. Cross-border network revenues for the September 2012 year reached $1.4 billion, up 16% compared to the prior year. The APEA based businesses produced 14% income growth for the September 2012 year, representing 43% of total IIB income. While negatively impacted by the individual provision charges relating to a small number of legacy Global Institutional customers in Australia, strong underlying credit quality has been maintained.

� September 2012 v March 2012

Profit decreased 8%, impacted by continued margin compression in lending books and higher individual provision charges in the Global Institutional business in Australia.

Key factors affecting the result were:

Net interest income declined 2% with net interest margin (excluding Global Markets) 33 basis points lower. This reflected higher funding costs and increased price competition for customer deposits and loans in Australia. The change in the funding and asset mix also lowered margin by 8 basis points with an increased proportion of wholesale funding. The above offset the benefits from the volume growth. Overall customer deposits increased 7% and net loans and advances 5%, with growth concentrated in the APEA region.
Other external operating income was 3% lower. Global Markets’ other income was 19% lower with softening in the trading conditions together with a normalised flow in capital markets. Asia Partnerships’ contribution was higher due to higher earnings, the gain arising from dilution of our Bank of Tianjin stake and the impact of the impairment charge in the March 2012 half year

relating to the carrying value of our investment in Saigon Securities Incorporation.

Operating expenses were 1% lower. Cost savings from productivity initiatives and utilisation of our hub resources were partially offset by higher amortisation charges and restructuring costs. Targeted investments continued to be made in front line capabilities and cash management platforms across Asia.
Provision charges for credit impairment increased 44%, driven by individual provision charges on a few legacy Global Institutional loans in Australia, partially offset by collective provision releases from associated concentration risk provisions.
September 2012 v September 2011

Profit increased 3%, impacted by higher individual provision charges in the Global Institutional businesses.

Key factors affecting the result were:

Net interest income increased 5%. Solid growth in APEA accounted for most of the overall increases in customer deposits (up 10%) and net loans and advances (up 11%). However, net interest margin (excluding Global Markets) declined 40 basis points reflecting the higher funding cost, margin compression in the competitive environment in Australia and the impact of the change in lending mix tilted towards Asia where margins are lower.
Other external operating income increased 9% mainly from increases in Global Institutional in APEA (in particular, Transaction Banking and Global Markets).
Operating expenses were up 6%, driven by higher amortisation charges and restructuring costs with continued re-investment in the business, partially offset by cost savings from productivity gains and greater utilisation of our hub resources.
Provision charges for credit impairment were 46% higher, driven by individual provision charges on a few legacy Global Institutional loans in Australia, partially offset by collective provision releases from associated concentration risk provisions.

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

International and Institutional Banking Total

International and Institutional Banking Total
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1,898 1,944 -2% 3,842 3,667 5%
Other external operating income	1,355 1,395 -3% 2,750 2,523 9%
Operating income	3,253 3,339 -3% 6,592 6,190 6%
Operating expenses	(1,457) (1,476) -1% (2,933) (2,757) 6%
Profit before credit impairment and income tax	1,796 1,863 -4% 3,659 3,433 7%
Provision for credit impairment	(252) (175) 44% (427) (293) 46%
Profit before income tax	1,544 1,688 -9% 3,232 3,140 3%
Income tax expense and non-controlling interests	(407) (453) -10% (860) (839) 3%
Underlying profit	1,137 1,235 -8% 2,372 2,301 3%

Consisting of:
Global Institutional	895 1,116 -20% 2,011 1,947 3%
Asia Partnerships	210 120 75% 330 318 4%
Retail Asia Pacific	76 53 43% 129 80 61%
Relationship & Infrastructure	(44) (54) -19% (98) (44) large
Underlying profit	1,137 1,235 -8% 2,372 2,301 3%

Balance Sheet
Net loans & advances	107,612 102,164 5% 107,612 97,198 11%
Other external assets	168,694 152,831 10% 168,694 162,199 4%
External assets	276,306 254,995 8% 276,306 259,397 7%
Customer deposits	142,662 132,767 7% 142,662 129,683 10%
Other deposits and borrowings	9,040 8,862 2% 9,040 11,111 -19%
Deposits and other borrowings	151,702 141,629 7% 151,702 140,794 8%
Other external liabilities	80,264 69,504 15% 80,264 82,626 -3%
External liabilities	231,966 211,133 10% 231,966 223,420 4%
Risk weighted assets	163,511 155,068 5% 163,511 153,463 7%
Average net loans and advances	106,079 100,213 6% 103,146 89,589 15%
Average deposits and other borrowings	146,780 139,909 5% 143,345 127,536 12%

Ratios
Return on average assets	0.83% 0.96% 0.89% 1.03%
Net interest average margin	1.76% 1.95% 1.85% 2.09%
Net interest average margin (excluding Global Markets)	2.82% 3.15% 2.98% 3.38%
Operating expenses to operating income	44.8% 44.2% 44.5% 44.5%
Operating expenses to average assets	1.06% 1.15% 1.10% 1.23%
Individual provision charge/(release)	437 290 51% 727 278 large
Individual provision charge/(release) as a % of average net advances	0.82% 0.58% 0.70% 0.31%
Collective provision charge/(release)	(185) (115) 61% (300) 15 large
Collective provision charge/(release) as a % of average net advances	(0.35%) (0.23%) (0.29%) 0.02%
Net impaired assets	1,961 2,053 -4% 1,961 2,244 -13%
Net impaired assets as a % of net advances	1.82% 2.01% 1.82% 2.31%
Total full time equivalent staff (FTE)	16,049 16,328 -2% 16,049 16,527 -3%

SEGMENT REVIEW

International and Institutional Banking

Alex Thursby

Individual provision charge/(release)	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Retail Asia Pacific	(13) 4 large (9) 54 large
Global Institutional	447 276 62% 723 206 large
Transaction Banking	60 (7) large 53 39 36%
Global Loans	360 215 67% 575 146 large
Global Markets	27 68 -60% 95 21 large
Relationship & Infrastructure	3 10 -70% 13 18 -28%
Individual provision charge/(release)	437 290 51% 727 278 large

Collective provision charge/(release)	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail Asia Pacific	4 (11) large (7) (18) -61%
Global Institutional	(183) (89) large (272) 43 large
Transaction Banking	4 (2) large 2 (3) large
Global Loans	(136) (80) 70% (216) 68 large
Global Markets	(51) (7) large (58) (22) large
Relationship & Infrastructure	(6) (15) -60% (21) (10) large
Collective provision charge/(release)	(185) (115) 61% (300) 15 large

Total provision charge/(release)	252 175 44% 427 293 46%

Net loans & advances	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail Asia Pacific	6,777 5,883 15% 6,777 5,327 27%
Global Institutional	100,159 95,787 5% 100,159 91,452 10%
Transaction Banking	18,956 16,333 16% 18,956 15,087 26%
Global Loans	75,632 73,370 3% 75,632 70,368 7%
Global Markets	5,571 6,084 -8% 5,571 5,997 -7%
Relationship & Infrastructure	676 494 37% 676 419 61%
Net loans & advances	107,612 102,164 5% 107,612 97,198 11%

Customer deposits	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Retail Asia Pacific	13,446 12,662 6% 13,446 11,499 17%
Global Institutional	129,078 119,956 8% 129,078 118,003 9%
Transaction Banking	63,685 59,955 6% 63,685 63,744 0%
Global Loans	2,744 2,907 -6% 2,744 2,836 -3%
Global Markets	62,649 57,094 10% 62,649 51,423 22%
Relationship & Infrastructure	138 149 -7% 138 181 -24%
Customer deposits	142,662 132,767 7% 142,662 129,683 10%

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

Global Institutional

Global Institutional
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1,635 1,694 -3% 3,329 3,193 4%
Other external operating income	933 1,058 -12% 1,991 1,768 13%
Operating income	2,568 2,752 -7% 5,320 4,961 7%
Operating expenses	(1,056) (1,031) 2% (2,087) (1,988) 5%
Profit before credit impairment and income tax	1,512 1,721 -12% 3,233 2,973 9%
Provision for credit impairment	(264) (187) 41% (451) (249) 81%
Profit before income tax	1,248 1,534 -19% 2,782 2,724 2%
Income tax expense and non-controlling interests	(353) (418) -16% (771) (777) -1%
Underlying profit	895 1,116 -20% 2,011 1,947 3%


Consisting of:
Transaction Banking	241 324 -26% 565 458 23%
Global Loans	328 443 -26% 771 934 -17%
Global Markets	326 349 -7% 675 555 22%
Underlying profit	895 1,116 -20% 2,011 1,947 3%


Balance Sheet
Net loans & advances	100,159 95,787 5% 100,159 91,452 10%
Other external assets	162,250 146,534 11% 162,250 155,771 4%
External assets	262,409 242,321 8% 262,409 247,223 6%
Customer deposits	129,078 119,956 8% 129,078 118,003 9%
Other deposits and borrowings	8,994 8,823 2% 8,994 11,077 -19%
Deposits and other borrowings	138,072 128,779 7% 138,072 129,080 7%
Other external liabilities	79,466 68,779 16% 79,466 81,717 -3%
External liabilities	217,538 197,558 10% 217,538 210,797 3%
Risk weighted assets	150,281 142,479 5% 150,281 141,420 6%

Ratios
Return on average assets	0.68% 0.91% 0.80% 0.91%
Net interest average margin	1.58% 1.77% 1.67% 1.89%
Net interest average margin (excluding Global Markets)	2.54% 2.88% 2.70% 3.09%
Operating expenses to operating income	41.1% 37.5% 39.2% 40.1%
Operating expenses to average assets	0.81% 0.84% 0.83% 0.93%
Individual provision charge/(release)	447 276 62% 723 206 large
Individual provision charge/(release) as a % of average net advances	0.90% 0.58% 0.75% 0.24%
Collective provision charge/(release)	(183) (89) large (272) 43 large
Collective provision charge/(release) as a % of average net advances	(0.37%) (0.19%) (0.28%) 0.05%
Net impaired assets	1,913 1,996 -4% 1,913 2,177 -12%
Net impaired assets as a % of net advances	1.91% 2.08% 1.91% 2.38%

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

Global Institutional by Product

Global Institutional by Product
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Transaction Banking
Net interest income	404 426 -5% 830 675 23%
Other external operating income	318 319 0% 637 589 8%
Operating income	722 745 -3% 1,467 1,264 16%
Operating expenses	(322) (302) 7% (624) (592) 5%
Profit before credit impairment and income tax	400 443 -10% 843 672 25%
Provision for credit impairment	(64) 9 large (55) (36) 53%
Profit before income tax	336 452 -26% 788 636 24%
Income tax expense and non-controlling interests	(95) (128) -26% (223) (178) 25%
Underlying profit	241 324 -26% 565 458 23%

Risk weighted assets	30,006 28,170 7% 30,006 24,789 21%

Individual provision charge/(release)	60 (7) large 53 39 36%
Collective provision charge/(release)	4 (2) large 2 (3) large
Net loans & advances	18,956 16,333 16% 18,956 15,087 26%
Customer deposits	63,685 59,955 6% 63,685 63,744 0%

Global Loans
Net interest income	869 920 -6% 1,789 1,880 -5%
Other external operating income	68 65 5% 133 127 5%
Operating income	937 985 -5% 1,922 2,007 -4%
Operating expenses	(255) (251) 2% (506) (497) 2%
Profit before credit impairment and income tax	682 734 -7% 1,416 1,510 -6%
Provision for credit impairment	(224) (135) 66% (359) (214) 68%
Profit before income tax	458 599 -24% 1,057 1,296 -18%
Income tax expense and non-controlling interests	(130) (156) -17% (286) (362) -21%
Underlying profit	328 443 -26% 771 934 -17%

Risk weighted assets	82,295 81,940 0% 82,295 84,373 -2%

Individual provision charge/(release)	360 215 67% 575 146 large
Collective provision charge/(release)	(136) (80) 70% (216) 68 large
Net loans & advances	75,632 73,370 3% 75,632 70,368 7%

Global Markets
Net interest income	362 348 4% 710 638 11%
Other external operating income	547 674 -19% 1,221 1,052 16%
Operating income	909 1,022 -11% 1,931 1,690 14%
Operating expenses	(479) (478) 0% (957) (899) 6%
Profit before credit impairment and income tax	430 544 -21% 974 791 23%
Provision for credit impairment	24 (61) large (37) 1 large
Profit before income tax	454 483 -6% 937 792 18%
Income tax expense and non-controlling interests	(128) (134) -4% (262) (237) 11%
Underlying profit	326 349 -7% 675 555 22%

Risk weighted assets	37,981 32,370 17% 37,981 32,258 18%

Individual provision charge/(release)	27 68 -60% 95 21 large
Collective provision charge/(release)	(51) (7) large (58) (22) large
Customer deposits	62,649 57,094 10% 62,649 51,423 22%

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

Analysis of Global Markets operating income
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Composition of Global Markets
underlying operating income by product class
Fixed income	365 396 -8% 761 608 25%
Foreign exchange	361 400 -10% 761 652 17%
Capital markets	89 116 -23% 205 192 7%
Other	94 110 -15% 204 238 -14%
Underlying Global Markets operating income	909 1,022 -11% 1,931 1,690 14%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Composition of Global Markets
underlying operating income by geography
Australia	431 491 -12% 922 831 11%
Asia Pacific, Europe & America	373 403 -7% 776 617 26%
New Zealand	105 128 -18% 233 242 -4%
Underlying Global Markets operating income	909 1,022 -11% 1,931 1,690 14%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Composition of Global Markets
underlying operating income by activity
Sales1	543 642 -15% 1,185 1,082 10%
Trading2	174 229 -24% 403 331 22%
Balance sheet3	192 151 27% 343 277 24%
Underlying Global Markets operating income	909 1,022 -11% 1,931 1,690 14%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Composition of Global Markets' Sales underlying income
by geography1
Australia	241 316 -24% 557 543 3%
Asia Pacific, Europe & America	243 247 -2% 490 416 18%
New Zealand	59 79 -25% 138 123 12%
Underlying Global Markets' Sales income	543 642 -15% 1,185 1,082 10%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Composition of Global Markets' Trading and
Balance Sheet underlying income by geography2,3
Australia	190 175 9% 365 288 27%
Asia Pacific, Europe & America	130 156 -17% 286 201 42%
New Zealand	46 49 -6% 95 119 -20%
Underlying Global Markets'
	366 380 -4% 746 608 23%
Trading and Balance Sheet income

Sales represents direct client flow business on core products such as fixed income, FX, commodities and capital markets
2.

Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow 3.

Balance sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio

Global Market Analysis

Trading revenues were lower in the September 2012 half with fewer opportunities as the interest rate markets stabilised.

Global Markets continued to focus on the priority customers, products, and regions recording strong growth in FX and in APEA.

September 2012 v September 2011
September 2012 v March 2012

Underlying income increased 14% driven by the following key factors:

Underlying income decreased 11% during the September half, continuing the trend in recent years of being lower than the March half. Key factors that affected the result were:

FX was up 17% with strong growth across all regions.
Regionally APEA continued to grow strongly up 26% as continued focus on the super regional strategy provides a more diversified revenue base.
Sales income eased from a strong March half but was steady compared to the September 2011 half year.
Sales income increased 10% with 18% growth in APEA.
Balance sheet trading experienced solid growth with more stable markets and tightening credit spreads.
Trading and Balance Sheet results experienced strong growth as volatility reduced from 2011.

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

Market risk

Traded market risk

Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivatives trading positions for the Bank’s principal trading centres. All figures are in AUD.

99% confidence level (1 day holding period)
	As at	High for	Low for	Avg for	As at	High for	Low for	Avg for
	Sep 12	year	year	year	Sep 11	year	year	year
		Sep 12	Sep 12	Sep 12		Sep 11	Sep 11	Sep 11
	$M	$M	$M	$M	$M	$M	$M	$M
Value at Risk at 99% confidence
Foreign exchange	3.5	10.0	3.5	5.9	7.8	10.9	1.0	4.2
Interest rate	4.5	8.1	2.8	5.4	7.0	26.4	5.4	13.5
Credit	4.0	7.5	2.6	4.7	4.9	10.5	3.2	6.9
Commodities	1.8	4.8	1.5	3.3	3.2	6.5	2.4	4.1
Equity	1.2	4.0	0.7	1.6	3.4	3.5	0.6	1.3
Diversification benefit	(6.9)	n/a	n/a	(11.6)	(14.6)	n/a	n/a	(14.2)
Total VaR	8.1	13.6	5.7	9.3	11.7	29.5	8.3	15.8

Non-traded interest rate risk

Non-traded interest rate risk is managed by Global Markets and relates to the potential adverse impact of changes in market interest rates on future net interest income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis to a 1% rate shock.

99% confidence level (1 day holding period)

	As a	As a	t High for Low for Avg for
		Sep 11	year year year
			Sep 11 Sep 11 Sep 11
		$M $M $M $M
Value at Risk at 99% confidence
Australia	25.9 28.5 13.7 20.4	15.3 28.0 13.2 19.7
New Zealand	11.2 14.6 10.3 12.3	9.7 18.9 9.7 12.2
Asia Pacific, Europe & America	5.5 6.0 4.5 5.2	4.8 7.2 2.8 4.6
Diversification benefit	(14.9) n/a n/a (15.3)	(10.8) n/a n/a (12.2)
Total VaR	27.7 29.4 15.7 22.6	19.0 32.8 16.4 24.3

Impact of 1% rate shock on the next 12 months’ net interest income[1 ]

	As at
	Sep 12	Sep 11
As at period end	1.55%	1.36%
Maximum exposure	2.45%	1.51%
Minimum exposure	1.26%	0.50%
Average exposure (in absolute terms)	1.95%	1.08%

1. The impact is expressed as a percentage of net interest income. A positive result indicates that a rate increase is positive for net interest income. Conversely, a negative indicates a rate increase is negative for net interest income.

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

Institutional by Geography

Institutional by Geography
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Australia
Net interest income	1,059 1,117 -5% 2,176 2,238 -3%
Other external operating income	529 596 -11% 1,125 987 14%
Operating income	1,588 1,713 -7% 3,301 3,225 2%
Operating expenses	(608) (611) 0% (1,219) (1,218) 0%
Profit before credit impairment and income tax	980 1,102 -11% 2,082 2,007 4%
Provision for credit impairment	(200) (134) 49% (334) (190) 76%
Profit before income tax	780 968 -19% 1,748 1,817 -4%
Income tax expense and non-controlling interests	(229) (291) -21% (520) (540) -4%
Underlying profit	551 677 -19% 1,228 1,277 -4%

Risk weighted assets	85,722 82,650 4% 85,722 87,171 -2%

Individual provision charge/(release)	411 233 76% 644 145 large
Collective provision charge/(release)	(211) (99) large (310) 45 large
Net loans & advances	58,381 57,382 2% 58,381 54,705 7%
Customer deposits	55,969 55,800 0% 55,969 58,741 -5%

Asia Pacific, Europe & America
Net interest income	418 417 0% 835 644 30%
Other external operating income	337 371 -9% 708 606 17%
Operating income	755 788 -4% 1,543 1,250 23%
Operating expenses	(380) (350) 9% (730) (640) 14%
Profit before credit impairment and income tax	375 438 -14% 813 610 33%
Provision for credit impairment	(58) (55) 5% (113) (82) 38%
Profit before income tax	317 383 -17% 700 528 33%
Income tax expense and non-controlling interests	(83) (78) 6% (161) (126) 28%
Underlying profit	234 305 -23% 539 402 34%

Risk weighted assets	54,453 49,631 10% 54,453 44,430 23%

Individual provision charge/(release)	34 47 -28% 81 72 13%
Collective provision charge/(release)	24 8 large 32 10 large
Net loans & advances	36,219 32,703 11% 36,219 31,366 15%
Customer deposits	63,701 54,848 16% 63,701 50,081 27%

New Zealand
Net interest income	158 160 -1% 318 311 2%
Other external operating income	67 91 -26% 158 175 -10%
Operating income	225 251 -10% 476 486 -2%
Operating expenses	(68) (70) -3% (138) (130) 6%
Profit before credit impairment and income tax	157 181 -13% 338 356 -5%
Provision for credit impairment	(6) 2 large (4) 23 large
Profit before income tax	151 183 -17% 334 379 -12%
Income tax expense and non-controlling interests	(41) (49) -16% (90) (111) -19%
Underlying profit	110 134 -18% 244 268 -9%

Risk weighted assets	10,106 10,198 -1% 10,106 9,819 3%

Individual provision charge/(release)	2 (4) large (2) (11) -82%
Collective provision charge/(release)	4 2 100% 6 (12) large
Net loans & advances	5,559 5,702 -3% 5,559 5,381 3%
Customer deposits	9,408 9,308 1% 9,408 9,181 2%

SEGMENT REVIEW

International and Institutional Banking

Alex Thursby

Retail Asia Pacific

Retail Asia Pacific
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	272 275 -1% 547 519 5%
Other external operating income	182 170 7% 352 325 8%
Operating income	454 445 2% 899 844 7%
Operating expenses	(364) (376) -3% (740) (703) 5%
Profit before credit impairment and income tax	90 69 30% 159 141 13%
Provision for credit impairment	9 7 29% 16 (36) large
Profit before income tax	99 76 30% 175 105 67%
Income tax expense and non-controlling interests	(23) (23) 0% (46) (25) 84%
Underlying profit	76 53 43% 129 80 61%

Risk weighted assets	12,235 11,593 6% 12,235 11,036 11%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Individual provision charge/(release)	(13) 4 large (9) 54 large
Collective provision charge/(release)	4 (11) large (7) (18) -61%
Net loans & advances	6,777 5,883 15% 6,777 5,327 27%
Customer deposits	13,446 12,662 6% 13,446 11,499 17%

Asia Partnerships

Asia Partnerships
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	(28) (30) -7% (58) (57) 2%
Other external operating income	237 149 59% 386 384 1%
Operating income	209 119 76% 328 327 0%
Operating expenses	(3) (5) -40% (8) (11) -27%
Profit before credit impairment and income tax	206 114 81% 320 316 1%
Profit before income tax	206 114 81% 320 316 1%
Income tax expense and non-controlling interests	4 6 -33% 10 2 large
Underlying profit	210 120 75% 330 318 4%

SEGMENT REVIEW

International and Institutional Banking Alex Thursby

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SEGMENT REVIEW

New Zealand David Hisco

The New Zealand division comprises Retail and Commercial business units. Retail includes Mortgages, Cards and Unsecured Lending to personal customers. Commercial includes Commercial & Agri (‘CommAgri’) and Small Business Banking.

New Zealand’s results and commentary are reported in NZD. AUD results are shown on page 59.

Underlying profit – September 2012 Half Year v March 2012 Half Year

==> picture [502 x 158] intentionally omitted <==

----- Start of picture text -----

12 484
473 8 5
(3)
(11)
NZD m
1H12 Net interest income Other operating Operating expenses Provision for credit Income tax expense 2H12
Underlying profit income impairment & non-controlling Underlying profit
interests
----- End of picture text -----

� September 2012 v March 2012

Profit increased 2% as balance sheet growth, from gains in market share in Retail and Small Business Banking, together with strong cost control and credit risk management moderated the negative impact of margin contraction.

Key factors affecting the result were:

Lending volumes increased 3%, driven primarily by above system growth in mortgages.
Strong customer deposits growth (3%), primarily from Retail and Small Business Banking, resulted in loan growth being predominantly self funded in the half.
Net interest margin declined 7 basis points driven by competition for deposits, higher term funding costs and lower margins in the CommAgri lending book.
Other operating income increased 4%, with growth reflecting good transaction volumes, earthquake insurance recoveries and seasonally higher Cards income.
Operating expenses decreased 1%, reflecting productivity gains realised by simplifying the business and tight management of discretionary expenditure. The cost to income ratio is now 43.8%, reducing 30 basis points over the half.
Credit quality continues to strengthen. The individual provision loss rate is down 6 basis points to 0.26% with improvement achieved across the book. Strong credit processes have seen delinquency rates decline and recovery and rehabilitation rates improve. The collective provision release reflected continued improvement in credit quality, although at a slower rate from that in the March 2012 half.

Retail

Commercial

Profit increased 1%, with revenue impacted by net interest margin contraction. The business has focused on improving the quality of the lending book, both in new lending and rehabilitation of impaired loans, and this has driven an improvement in returns from the business. Over the second half, non-performing loans as a percentage of net advances decreased 30 basis points to 1.58%.

� September 2012 v September 2011

Profit increased by 11% driven by strong balance sheet growth, improved margins, lower provisions and a one off benefit from a lower tax rate.

Key factors affecting the result were:

Lending volumes increased 3%, driven primarily by strong growth in mortgages.
Strong customer deposits growth (9%), driven by Retail and Small Business Banking, resulted in an improvement in the funding mix year on year.
Net interest margin improved by 10 basis points, driven by a favorable lending mix, a reduction in unproductive balances and lower mortgage break costs.
Productivity initiatives enabled costs to be held flat during the year, resulting in the cost to income ratio falling 100bps to 43.9%.
Provisioning was 12% lower over the year, reflecting an improvement in the quality of the loan book and improved recovery rates. The individual provision loss rate is down 9 basis points to 0.29% and net impaired assets fell 24% to represent 1.11% of net advances.
Tax benefit of NZD26 million from the reduction in the corporate tax rate from 30% to 28% during the year.

Profit increased 5% from market share gains in mortgages, increased fee income and strong cost control from efficiency initiatives.

SEGMENT REVIEW

New Zealand David Hisco

New Zealand Total

Table reflects NZD for New Zealand AUD results shown on page 59

	Half Year	Full Year


Net interest income	1,136 1,147 -1% 2,283 2,220 3%
Other external operating income	213 205 4% 418 413 1%
Operating income	1,349 1,352 0% 2,701 2,633 3%
Operating expenses	(591) (596) -1% (1,187) (1,183) 0%
Profit before credit impairment and income tax	758 756 0% 1,514 1,450 4%
Provision for credit impairment	(89) (101) -12% (190) (217) -12%
Profit before income tax	669 655 2% 1,324 1,233 7%
Income tax expense and non-controlling interests	(185) (182) 2% (367) (370) -1%
Underlying profit	484 473 2% 957 863 11%

Consisting of:
Retail	176 168 5% 344 277 24%
Commercial	307 305 1% 612 588 4%
Operations & Support	1 - n/a 1 (2) large
Underlying profit	484 473 2% 957 863 11%

Balance Sheet
Net loans & advances	87,883 85,358 3% 87,883 85,482 3%
Other external assets	2,097 2,058 2% 2,097 2,426 -14%
External assets	89,980 87,416 3% 89,980 87,908 2%
Customer deposits	49,644 47,970 3% 49,644 45,739 9%
Other deposits and borrowings	5,445 4,458 22% 5,445 4,790 14%
Deposits and other borrowings	55,089 52,428 5% 55,089 50,529 9%
Other external liabilities	17,382 16,764 4% 17,382 16,975 2%
External liabilities	72,471 69,192 5% 72,471 67,504 7%
Risk weighted assets	49,761 46,802 6% 49,761 47,741 4%
Average net loans and advances	86,687 85,162 2% 85,924 86,973 -1%
Average deposits and other borrowings	54,093 50,747 7% 52,420 49,949 5%

Ratios
Return on average assets	1.09% 1.08% 1.09% 0.96%
Net interest average margin	2.59% 2.66% 2.62% 2.52%
Operating expenses to operating income	43.8% 44.1% 43.9% 44.9%
Operating expenses to average assets	1.33% 1.36% 1.35% 1.32%
Individual provision charge/(release)	114 135 -16% 249 334 -25%
Individual provision charge/(release) as a % of average net advances	0.26% 0.32% 0.29% 0.38%
Collective provision charge/(release)	(25) (34) -26% (59) (117) -50%
Collective provision charge/(release) as a % of average net advances	(0.06%) (0.08%) (0.07%) (0.14%)
Net impaired assets	979 1,158 -15% 979 1,295 -24%
Net impaired assets as a % of net advances	1.11% 1.36% 1.11% 1.51%
Total full time equivalent staff (FTE)	7,841 8,031 -2% 7,841 8,195 -4%

SEGMENT REVIEW

New Zealand David Hisco

Individual provision charge/(release)	Half Year Full Year
	Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Retail	36 39 -8% 75 87 -14%
Commercial	78 96 -19% 174 247 -30%
CommAgri	70 87 -20% 157 216 -27%
Small Business Banking	8 9 -11% 17 31 -45%
Individual provision charge/(release)	114 135 -16% 249 334 -25%

Collective provision charge/(release)	Half Year Full Year
	Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Retail	(5) (8) -38% (13) (9) 44%
Commercial	(20) (26) -23% (46) (108) -57%
CommAgri	(15) (27) -44% (42) (100) -58%
Small Business Banking	(5) 1 large (4) (8) -50%
Collective provision charge/(release)	(25) (34) -26% (59) (117) -50%

Total provision charge/(release)	89 101 -12% 190 217 -12%

Net loans & advances	Half Year Full Year
	Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Retail	35,506 34,754 2% 35,506 35,080 1%
Commercial	52,377 50,604 4% 52,377 50,402 4%
CommAgri	34,211 33,620 2% 34,211 34,168 0%
Small Business Banking	18,166 16,984 7% 18,166 16,234 12%
Net loans & advances	87,883 85,358 3% 87,883 85,482 3%

Customer deposits	Half Year Full Year
	Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Retail	30,538 28,883 6% 30,538 27,935 9%
Commercial	19,106 19,087 0% 19,106 17,804 7%
CommAgri	9,208 9,549 -4% 9,208 9,026 2%
Small Business Banking	9,898 9,538 4% 9,898 8,778 13%
Customer deposits	49,644 47,970 3% 49,644 45,739 9%

SEGMENT REVIEW

New Zealand David Hisco

Retail Business Unit

Retail Business Unit
		Half Year Full Year
		Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Net interest income		458 463 -1% 921 864 7%
Other external operating income		148 142 4% 290 287 1%
Operating income		606 605 0% 1,211 1,151 5%
Operating expenses		(332) (341) -3% (673) (677) -1%
Profit before credit impairment and income tax		274 264 4% 538 474 14%
Provision for credit impairment		(31) (31) 0% (62) (78) -21%
Profit before income tax		243 233 4% 476 396 20%
Income tax expense and non-controlling interests		(67) (65) 3% (132) (119) 11%
Underlying profit		176 168 5% 344 277 24%

Risk weighted assets		18,756 16,805 12% 18,756 16,867 11%

		Half Year Full Year
		Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt


Individual provision charge/(release)		36 39 -8% 75 87 -14%
Collective provision charge/(release)		(5) (8) -38% (13) (9) 44%
Net loans & advances		35,506 34,754 2% 35,506 35,080 1%
Customer deposits		30,538 28,883 6% 30,538 27,935 9%

SEGMENT REVIEW

New Zealand David Hisco

Commercial Business Unit

Commercial Business Unit
		Half Year Full Year
		Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Net interest income		666 678 -2% 1,344 1,349 0%
Other external operating income		67 65 3% 132 127 4%
Operating income		733 743 -1% 1,476 1,476 0%
Operating expenses		(251) (250) 0% (501) (496) 1%
Profit before credit impairment and income tax		482 493 -2% 975 980 -1%
Provision for credit impairment		(58) (70) -17% (128) (139) -8%
Profit before income tax		424 423 0% 847 841 1%
Income tax expense and non-controlling interests		(117) (118) -1% (235) (253) -7%
Underlying profit		307 305 1% 612 588 4%

Risk weighted assets		30,603 29,596 3% 30,603 30,290 1%

		Half Year Full Year
		Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Individual provision charge/(release)
CommAgri		70 87 -20% 157 216 -27%
Small Business Banking		8 9 -11% 17 31 -45%
Individual provision charge/(release)		78 96 -19% 174 247 -30%


Collective provision charge/(release)
CommAgri		(15) (27) -44% (42) (100) -58%
Small Business Banking		(5) 1 large (4) (8) -50%
Collective provision charge/(release)		(20) (26) -23% (46) (108) -57%

Total provision charge/(release)		58 70 -17% 128 139 -8%

		Half Year Full Year
		Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Net loans & advances
CommAgri		34,211 33,620 2% 34,211 34,168 0%
Small Business Banking		18,166 16,984 7% 18,166 16,234 12%
Net loans & advances		52,377 50,604 4% 52,377 50,402 4%


Customer deposits
CommAgri		9,208 9,549 -4% 9,208 9,026 2%
Small Business Banking		9,898 9,538 4% 9,898 8,778 13%
Customer deposits		19,106 19,087 0% 19,106 17,804 7%

SEGMENT REVIEW

New Zealand David Hisco

New Zealand Total

Table reflects AUD for New Zealand NZD results shown on page 55

	Half Year	Full Year


Net interest income	887 885 0% 1,772 1,701 4%
Other external operating income	166 159 4% 325 316 3%
Operating income	1,053 1,044 1% 2,097 2,017 4%
Operating expenses	(461) (460) 0% (921) (906) 2%
Profit before credit impairment and income tax	592 584 1% 1,176 1,111 6%
Provision for credit impairment	(70) (78) -10% (148) (166) -11%
Profit before income tax	522 506 3% 1,028 945 9%
Income tax expense and non-controlling interests	(144) (141) 2% (285) (283) 1%
Underlying profit	378 365 4% 743 662 12%

Consisting of:
Retail	137 130 5% 267 212 26%
Commercial	240 235 2% 475 451 5%
Operations & Support	1 - n/a 1 (1) large
Underlying profit	378 365 4% 743 662 12%

Balance Sheet
Net loans & advances	70,142 67,230 4% 70,142 67,166 4%
Other external assets	1,674 1,620 3% 1,674 1,906 -12%
External assets	71,816 68,850 4% 71,816 69,072 4%
Customer deposits	39,622 37,782 5% 39,622 35,938 10%
Other deposits and borrowings	4,346 3,511 24% 4,346 3,764 15%
Deposits and other borrowings	43,968 41,293 6% 43,968 39,702 11%
Other external liabilities	13,874 13,204 5% 13,874 13,337 4%
External liabilities	57,842 54,497 6% 57,842 53,039 9%
Risk weighted assets	39,715 36,862 8% 39,715 37,512 6%
Average net loans and advances	67,670 65,719 3% 66,694 66,641 0%
Average deposits and other borrowings	42,216 39,160 8% 40,688 38,272 6%

Ratios
Return on average assets	1.09% 1.08% 1.09% 0.96%
Net interest average margin	2.59% 2.66% 2.62% 2.52%
Operating expenses to operating income	43.8% 44.1% 43.9% 44.9%
Operating expenses to average assets	1.33% 1.36% 1.35% 1.32%
Individual provision charge/(release)	89 104 -14% 193 256 -25%
Individual provision charge/(release) as a % of average net advances	0.26% 0.32% 0.29% 0.38%
Collective provision charge/(release)	(19) (26) -27% (45) (90) -50%
Collective provision charge/(release) as a % of average net advances	(0.06%) (0.08%) (0.07%) (0.14%)
Net impaired assets	782 912 -14% 782 1,017 -23%
Net impaired assets as a % of net advances	1.11% 1.36% 1.11% 1.51%
Total full time equivalent staff (FTE)	7,841 8,031 -2% 7,841 8,195 -4%

SEGMENT REVIEW

Global Wealth and Private Banking Joyce Phillips

The Global Wealth and Private Banking division comprises Funds Management, Insurance and Private Banking which provides investment, superannuation, insurance products and services (including Private Banking) for customers across Australia, New Zealand and Asia.

Underlying profit – September 2012 Half Year v March 2012 Half Year

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� September 2012 v March 2012

Profit was higher by 19% mainly due to improved insurance results, higher investment earnings and a reduction in operating expenses.

Key factors affecting the result were:

Net funds management and insurance income improved by 4% as a result of favourable insurance results and improved capital investment earnings offset by lower funds management and advice income which was adversely impacted by ongoing investment market uncertainty. The Insurance business had favourable claims experience offset by higher lapses.
Operating expenses fell by 3% as a result of business simplification initiatives.

Funds Management and Insurance

Funds Management and Insurance profit increased by 15%. The key factors affecting the results were:

Net insurance income improved by 4% as a result of continued growth in the inforce book and lower insurance claims, partially offset by higher lapses.
Net funds management income decreased by 12% mainly due to adverse investor sentiment impacting volumes and margins.
Capital investment earnings improved by 69% primarily driven by the impact of interest and inflation rates on insurance and annuity reserves.
Decline in net advice income by 14% was mostly due to higher distribution related costs.
Operating expenses declined by 3% as a result of business simplification initiatives undertaken in the Australian businesses.

Private Banking

Private Banking profit increased by $9 million. The key factors affecting the results were:

Net interest income declined by 8% mainly as a result of higher funding costs, whilst other operating income improved by 5% as the March 2012 half results included a one-off asset impairment charge of $6 million.
Private Banking Asia businesses’ profit increased by $6 million mainly as a result of higher sales volume.

� September 2012 v September 2011

Profit was 1% lower driven by adverse investor sentiment and subdued market returns negatively impacting volumes and resulting in lower net interest and other operating income.

Key factors affecting the result were:

Net interest income and other operating income declined by 9% and 10% respectively as a result of challenging market conditions in 2012.
Net funds management and insurance income increased by 2% mainly due to higher capital investment earnings as a result of the positive impact of interest and inflation rates on insurance and annuity reserves.
Flat operating expenses were mainly driven by the investment in growth initiatives, partially offset by benefits realised from business simplification initiatives.

Funds Management and Insurance

Funds Management and Insurance profit increased by 1%. The key factors affecting the results were:

Higher net funds management and insurance income by 1% due to higher capital investment earnings offset by the impact of lower volume and margin compression.
Increase in operating expenses by 2% was mainly driven by investments in growth initiatives, partially offset by benefits realised from business simplification initiatives.

Private Banking

Private Banking profit decreased by 29%. The key factors affecting the results were:

Whilst the core Private Banking profits in Australia increased by 3% year on year, net interest income and other operating income declined by 9% and 10% respectively as a result of reduced volumes in the investment lending business and reduced trading volumes in E*Trade.
Private Banking Asia businesses’ profit improved by 50% mainly due to higher sales volume.
Operating expenses declined by 4% as a result of business simplification benefits.
Operating expenses were lower by 3% driven by business simplification initiatives.

SEGMENT REVIEW

Global Wealth and Private Banking Joyce Phillips

Global Wealth and Private Banking Total

Global Wealth and Private Banking Total
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	59 64 -8% 123 135 -9%
Other operating income	88 84 5% 172 191 -10%
Net funds management and insurance income	603 580 4% 1,183 1,159 2%
Operating income	750 728 3% 1,478 1,485 0%
Operating expenses	(422) (435) -3% (857) (853) 0%
Profit before credit impairment and income tax	328 293 12% 621 632 -2%
Provision for credit impairment	(2) (2) 0% (4) 8 large
Profit before income tax	326 291 12% 617 640 -4%
Income tax expense and non-controlling interests	(81) (85) -5% (166) (183) -9%
Underlying profit	245 206 19% 451 457 -1%

Consisting of:
Funds Management and Insurance1
Australia	184 167 10% 351 375 -6%
New Zealand	43 30 43% 73 44 66%
Total	227 197 15% 424 419 1%

Private Banking2
Australia	16 13 23% 29 44 -34%
New Zealand	1 1 0% 2 2 0%
Asia	1 (5) large (4) (8) -50%
Total	18 9 100% 27 38 -29%
Total Global Wealth and Private Banking	245 206 19% 451 457 -1%

Balance Sheet
Funds under management	51,667 50,981 1% 51,667 48,657 6%
Average funds under management	50,723 49,987 1% 50,355 52,226 -4%
In-force premiums	1,822 1,722 6% 1,822 1,758 4%
Average deposit FUM	9,251 9,125 1% 9,186 7,293 26%
Average lending FUM	5,399 5,093 6% 5,245 5,105 3%


Ratios
Operating expenses to operating income	56.3% 59.8% 58.0% 57.4%
Funds management expenses to average FUM
Australia	0.55% 0.57% 0.56% 0.59%
New Zealand	0.43% 0.48% 0.44% 0.53%
Insurance expenses to in-force premiums
Australia	9.2% 10.3% 9.5% 9.4%
New Zealand	34.1% 35.2% 34.1% 33.5%
Retail insurance lapse rates
Australia	14.8% 14.0% 14.5% 12.7%
New Zealand	19.3% 15.5% 17.4% 16.2%
Total full time equivalent staff (FTE)	4,042 4,435 -9% 4,042 4,564 -11%
Aligned adviser numbers3	2,109 2,164 -3% 2,109 2,183 -3%

1. Funds Management and Insurance includes OnePath Group (in Australia and New Zealand), ANZ Financial Planning, ANZ General insurance, Lender's Mortgage Insurance and Online Investment Account

2. Private Banking includes Private Bank, ANZ Trustees, E*Trade, Investment Lending, Super Concepts and Other Wealth

Includes corporate authorised representatives of dealer groups wholly or partially controlled by OnePath Group and ANZ Group financial planners

SEGMENT REVIEW

Global Wealth and Private Banking

Joyce Phillips

Geographic segments (excluding Asia)

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Australia
Net interest income	37 37 0% 74 92 -20%
Other operating income	82 74 11% 156 173 -10%
Net funds management and insurance income	501 499 0% 1,000 1,014 -1%
Operating income	620 610 2% 1,230 1,279 -4%
Operating expenses	(344) (355) -3% (699) (691) 1%
Profit before credit impairment and income tax	276 255 8% 531 588 -10%
Provision for credit impairment	(1) 2 large 1 8 -88%
Profit before income tax	275 257 7% 532 596 -11%
Income tax expense and non-controlling interests	(75) (77) -3% (152) (177) -14%
Underlying profit	200 180 11% 380 419 -9%


	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
New Zealand
Net interest income	8 11 -27% 19 13 46%
Other operating income	2 3 -33% 5 7 -29%
Net funds management and insurance income	93 79 18% 172 142 21%
Operating income	103 93 11% 196 162 21%
Operating expenses	(52) (52) 0% (104) (109) -5%
Profit before credit impairment and income tax	51 41 24% 92 53 74%
Provision for credit impairment	- (1) -100% (1) 1 large
Profit before income tax	51 40 28% 91 54 69%
Income tax expense and non-controlling interests	(7) (9) -22% (16) (8) 100%
Underlying profit	44 31 42% 75 46 63%

SEGMENT REVIEW

Global Wealth and Private Banking

Joyce Phillips

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Net funds management and insurance income
Net funds management income	172 198 -13% 370 389 -5%
Net insurance income	175 167 5% 342 356 -4%
Net advice income	70 81 -14% 151 144 5%
Capital investment earnings4	84 53 58% 137 125 10%
Australia	501 499 0% 1,000 1,014 -1%
Net funds management income	19 18 6% 37 34 9%
Net insurance income	44 43 2% 87 76 14%
Private Banking	11 10 10% 21 20 5%
Capital investment earnings4	19 8 large 27 12 large
New Zealand	93 79 18% 172 142 21%
Asia	9 2 large 11 3 large
Total	603 580 4% 1,183 1,159 2%

4. Includes yield on shareholder assets, interest and inflation rate impacts on risk and annuity reserves, and mark-to-market movement on capital-guaranteed reserves

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Net insurance income
Planned profit margin
Group & Individual	178 178 0% 356 333 7%
General Insurance	26 20 30% 46 45 2%
Experience profit5	(30) (31) -3% (61) (25) large
Assumption changes6	1 - n/a 1 3 -67%
Australia	175 167 5% 342 356 -4%
Planned profit margin
Individual	35 39 -10% 74 77 -4%
Experience profit5	2 4 -50% 6 4 50%
Assumption changes6	7 - n/a 7 (5) large
New Zealand	44 43 2% 87 76 14%
Total	219 210 4% 429 432 -1%

5. Experience profit variations are gains or losses arising from actual experience differing from plan on Group, Individual and General Insurance business

6. Assumption changes are gains or losses arising from a change in valuation methods and best estimate assumptions

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Operating expenses by business segment	$M $M $M $M
Funds Management and Insurance	306 316 -3% 622 609 2%
Private Banking	116 119 -3% 235 244 -4%
Total	422 435 -3% 857 853 0%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Operating expenses by geography
Australia	344 355 -3% 699 691 1%
New Zealand	52 52 0% 104 109 -5%
Asia	26 28 -7% 54 53 2%
Total	422 435 -3% 857 853 0%

SEGMENT REVIEW

Global Wealth and Private Banking

Joyce Phillips

	As at ($M) Movement
	Sep 12 Sep 12
Funds under management	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Funds under management - average	50,723 49,987 51,374 1% -1%
Funds under management - end of period	51,667 50,981 48,657 1% 6%

Composed of:
Australian equities	13,191 13,681 12,954 -4% 2%
Global equities	8,967 8,597 8,202 4% 9%
Cash and fixed interest	23,683 22,839 21,954 4% 8%
Property and infrastructure	3,033 3,214 3,043 -6% 0%
ANZ Trustees	2,793 2,650 2,504 5% 12%
Total	51,667 50,981 48,657 1% 6%

	As at ($M) Movement
	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Funds under management by origin
Australia	42,842 42,573 40,984 1% 5%
New Zealand	8,825 8,408 7,673 5% 15%
Total	51,667 50,981 48,657 1% 6%
	Sep 12 In- Out- Other Sep 11 $M flows flows flows7 $M 16,305 2,411 (2,864) 1,292 15,466 4,779 301 (851) 391 4,938 752 94 (371) 61 968 12,941 1,665 (1,501) 862 11,915 5,272 626 (952) 405 5,193 2,793 216 (89) 162 2,504 2,520 594 (125) 238 1,813 3,113 474 (363) 170 2,832 3,192 598 (768) 334 3,028 51,667 6,979 (7,884) 3,915 48,657

Funds Management cashflows
OneAnswer
Other Personal Investment
Mezzanine
Employer Super
Oasis
ANZ Trustees
Kiwisaver
Private Bank - New Zealand
Other New Zealand
Total

7. Other flows include investment income net of taxes, fees and charges and distributions

SEGMENT REVIEW

Global Wealth and Private Banking

Joyce Phillips

	As at ($M) Movement
	Sep 12 Sep 12
Insurance annual in-force premiums	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Group	431 408 501 6% -14%
Individual	967 906 869 7% 11%
General Insurance	424 408 388 4% 9%
Total	1,822 1,722 1,758 6% 4%

Insurance annual in-force premiums by region
Australia	1,694 1,598 1,639 6% 3%
New Zealand	128 124 119 3% 8%
Total	1,822 1,722 1,758 6% 4%

	Sep 12 $M New business $M Lapses $M Sep 11 $M
Insurance in-force book movement
Group	431 49 (119) 501
Individual	967 264 (166) 869
General Insurance	424 138 (102) 388
Total	1,822 451 (387) 1,758

Insurance in-force book movement by region
Australia	1,694 419 (364) 1,639
New Zealand	128 32 (23) 119
Total	1,822 451 (387) 1,758
	Australia New Zealand Total $M $M $M 3,342 271 3,613 246 (5) 241 315 20 335 (92) 30 (62) 3,811 316 4,127 118 15 133 (208) 39 (169) 3,721 370 4,091



Embedded value and value of new business (insurance and investments only)
Embedded value as at September 20118
Value of new business9
Expected return10
Experience deviations and assumption changes11
Sub-total embedded value before economic assumption changes
and net transfer
Economic assumptions change12
Net transfer13
Embedded value as at September 20128

8. Embedded value represents the present value of future profits, franking credits and the release of capital in respect of the funds management and insurance business in force at the valuation date. Cashflows projected using best estimate assumptions are discounted at 8.00% to 9.50%. The embedded value also includes adjusted net assets. The Lenders Mortgage Insurance business is not included. The impact of new insurance regulatory capital requirements in Australia and New Zealand will not materially impact the total value 9.

Value of new business represents the present value of future profits less the cost of capital arising from the new business written over the period 10.

Expected return represents expected increase in value over the period

11.

Experience deviations and assumption changes arise from deviations from and changes to best estimate assumptions underlying the prior year embedded value. The adverse movement for Australian business is primarily due to higher lapse assumptions on both Funds Management and Insurance business, partially offset by expense reductions for the Funds Management business. The favourable movement for New Zealand’s business is due to improvements in lapse and mortality rates in Bancassurance Business, partially offset by adverse lapse assumption changes for the adviser-based business

12. Risk discount rates have decreased by 96-125 bps over the twelve month period, leading to a positive impact

13. Net transfer represents net capital movements over the period including capital injections, transfer of cash dividends and value of franking credits. In the past 12 months, net capital of $111 million and franking credits of $58 million were transferred from the business to the ANZ Group

SEGMENT REVIEW

Group Centre

Group Centre comprises Global Services & Operations, Group Technology, Group Human Resources, Group Risk, Group Strategy, Group Corporate Affairs, Group Corporate Communications, Group Treasury, Global Internal Audit, Group Finance, Group Marketing, Innovation and Digital and Shareholder Functions.

	Half Year	Full Year


Net interest income1	233 217 7% 450 213 large
Other external operating income1	(72) (84) -14% (156) (60) large
Operating income	161 133 21% 294 153 92%
Operating expenses	(225) (193) 17% (418) (366) 14%
Profit/(Loss) before credit impairment and income tax	(64) (60) 7% (124) (213) -42%
Provision for credit impairment	- (1) -100% (1) (41) -98%
Profit/(Loss) before income tax	(64) (61) 5% (125) (254) -51%
Income tax expense and non-controlling interests	37 41 -10% 78 96 -19%
Underlying profit/(loss)	(27) (20) 35% (47) (158) -70%

Total full time equivalent staff (FTE)	5,919 6,199 -5% 5,919 5,981 -1%

1. Includes offsetting variances between net interest and other income as a result of elimination entries associated with the consolidation of OnePath Australia. This elimination has increased by $53 million in 2012

� September 2012 v March 2012

The underlying loss of $27 million was $7 million higher than the prior half, with higher expense partly offset by higher income.

Key factors affecting the result were:

Operating income improved $28 million due to higher earnings on central capital and higher realised revenue hedge profits.
Operating expenses increased $32 million largely as a result of increased investment in technology infrastructure.

� September 2012 v September 2011

The underlying loss of $47 million was $111 million lower than the prior year, with higher income and lower credit impairment charges, partially offset by higher expense.

Key factors affecting the result were:

Operating income improved $141 million largely due to higher earnings on central capital partly offset by lower realised revenue hedge profits in 2012 and the 2011 benefit from the sale of Martin Place.
Operating expenses increased $52 million largely as a result of increased investment in technology infrastructure.
Provision for credit impairment reduced $40 million due to a centrally held provision made in 2011 for emerging issues resulting from global uncertainty.

GEOGRAPHIC REVIEW

Section 6 – Geographic Review

Geographic performance Australia geography Asia Pacific, Europe & America geography New Zealand geography

GEOGRAPHIC REVIEW

Geographic Performance

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Statutory Profit 1
Australia	1,733 1,995 -13% 3,728 3,834 -3%
Asia Pacific, Europe & America	502 449 12% 951 690 38%
New Zealand	507 475 7% 982 831 18%
	2,742 2,919 -6% 5,661 5,355 6%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Underlying Profit1
Australia	1,982 1,991 0% 3,973 3,938 1%
Asia Pacific, Europe & America	521 455 15% 976 762 28%
New Zealand	535 527 2% 1,062 952 12%
	3,038 2,973 2% 6,011 5,652 6%


	As at ($M) Movement

	Sep 12 Sep 12
Net loans & advances	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Australia	305,817 298,013 284,973 3% 7%
Asia Pacific, Europe & America	45,310 40,723 38,779 11% 17%
New Zealand	76,696 73,892 73,555 4% 4%
Net loans & advances	427,823 412,628 397,307 4% 8%


	As at ($M) Movement

	Sep 12 Sep 12
Customer deposits	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Australia	194,695 186,975 183,217 4% 6%
Asia Pacific, Europe & America	80,464 70,779 64,827 14% 24%
New Zealand	52,717 50,549 48,710 4% 8%
Customer deposits	327,876 308,303 296,754 6% 10%

1. Refer to page 84 for a reconciliation of divisional to geographic region results

GEOGRAPHIC REVIEW

Australia geography

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	4,395 4,274 3% 8,669 8,412 3%
Other external operating income	1,656 1,669 -1% 3,325 3,326 0%
Operating income	6,051 5,943 2% 11,994 11,738 2%
Operating expenses	(2,652) (2,651) 0% (5,303) (5,144) 3%
Profit before credit impairment and income tax	3,399 3,292 3% 6,691 6,594 1%
Provision for credit impairment	(556) (441) 26% (997) (957) 4%
Profit before tax	2,843 2,851 0% 5,694 5,637 1%
Income tax expense and non-controlling interests	(861) (860) 0% (1,721) (1,699) 1%
Underlying profit	1,982 1,991 0% 3,973 3,938 1%
Adjustments between statutory profit and underlying profit	(249) 4 large (245) (104) large
Statutory profit	1,733 1,995 -13% 3,728 3,834 -3%

Balance Sheet
Net loans & advances	305,817 298,013 3% 305,817 284,973 7%
Other external assets	123,592 113,176 9% 123,592 124,163 0%
External assets	429,409 411,189 4% 429,409 409,136 5%
Customer deposits	194,695 186,975 4% 194,695 183,217 6%
Other deposits and borrowings	55,782 61,903 -10% 55,782 58,797 -5%
Deposits and other borrowings	250,477 248,878 1% 250,477 242,014 3%
Other external liabilities	148,506 138,841 7% 148,506 144,071 3%
External liabilities	398,983 387,719 3% 398,983 386,085 3%
Risk weighted assets	179,957 173,421 4% 179,957 174,209 3%
Average net loans and advances	305,500 292,553 4% 299,026 277,775 8%
Average deposits and other borrowings	253,904 249,597 2% 251,751 225,345 12%

Ratios
Net interest average margin	2.48% 2.51% 2.49% 2.59%
Net interest average margin (excluding Global Markets)	2.76% 2.81% 2.78% 2.90%
Operating expenses to operating income - underlying	43.8% 44.6% 44.2% 43.8%
Operating expenses to average assets - underlying	1.22% 1.27% 1.25% 1.29%
Individual provision charge/(release) - underlying	795 563 41% 1,358 830 64%
Individual provision charge/(release) as a % of
	0.52% 0.38% 0.45% 0.30%
average net advances - underlying

Collective provision charge/(release) - underlying	(239) (122) 96% (361) 127 large
Collective provision charge/(release) as a % of
	(0.16%) (0.08%) (0.12%) 0.05%
average net advances - underlying

Net impaired assets	2,419 2,408 0% 2,419 2,643 -8%
Net impaired assets as a % of net advances	0.79% 0.81% 0.79% 0.93%
Total full time equivalent staff (FTE)	21,682 23,583 -8% 21,682 24,381 -11%

GEOGRAPHIC REVIEW

Asia Pacific, Europe & America geography

Table reflects AUD for the APEA region

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	681 658 3% 1,339 1,094 22%
Other external operating income	765 717 7% 1,482 1,347 10%
Operating income	1,446 1,375 5% 2,821 2,441 16%
Operating expenses	(762) (779) -2% (1,541) (1,425) 8%
Profit before credit impairment and income tax	684 596 15% 1,280 1,016 26%
Provision for credit impairment	(49) (48) 2% (97) (111) -13%
Profit before income tax	635 548 16% 1,183 905 31%
Income tax expense and non-controlling interests	(114) (93) 23% (207) (143) 45%
Underlying profit	521 455 15% 976 762 28%
Adjustments between statutory profit and underlying profit	(19) (6) large (25) (72) -65%
Statutory profit	502 449 12% 951 690 38%


Geographic segments:
Asia	309 259 19% 568 471 21%
Europe & America	120 98 22% 218 143 52%
Pacific	92 98 -6% 190 148 28%
Underlying profit	521 455 15% 976 762 28%


Balance Sheet
Net loans & advances	45,310 40,723 11% 45,310 38,779 17%
Other external assets	65,571 62,617 5% 65,571 55,482 18%
External assets	110,881 103,340 7% 110,881 94,261 18%
Customer deposits	80,464 70,779 14% 80,464 64,827 24%
Other deposits and borrowings	7,398 7,630 -3% 7,398 7,485 -1%
Deposits and other borrowings	87,862 78,409 12% 87,862 72,312 22%
Other external liabilities	30,453 27,788 10% 30,453 26,387 15%
External liabilities	118,315 106,197 11% 118,315 98,699 20%
Risk weighted assets	69,261 63,241 10% 69,261 57,314 21%
Average net loans and advances	43,387 38,837 12% 41,112 31,954 29%
Average deposits and other borrowings	81,943 72,421 13% 77,182 60,509 28%

Ratios
Net interest average margin	1.27% 1.39% 1.33% 1.42%
Net interest average margin (excluding Global Markets)	2.27% 2.36% 2.35% 2.52%
Operating expenses to operating income - underlying	52.7% 56.7% 54.6% 58.5%
Operating expenses to average assets - underlying	1.28% 1.44% 1.36% 1.60%
Individual provision charge/(release) - underlying	26 53 -51% 79 129 -39%
Individual provision charge/(release) as a % of
	0.12% 0.27% 0.19% 0.40%
average net advances - underlying

Collective provision charge/(release) - underlying	23 (5) large 18 (18) large
Collective provision charge/(release) as a % of
	0.10% (0.03%) 0.04% (0.06%)
average net advances - underlying

Net impaired assets	319 301 6% 319 283 13%
Net impaired assets as a % of net advances	0.70% 0.74% 0.70% 0.73%
Total full time equivalent staff (FTE)	17,500 16,874 4% 17,500 16,492 6%

GEOGRAPHIC REVIEW

Asia Pacific, Europe & America geography

Table reflects USD for the APEA region

	Half Year Full Year
	Sep 12 USD M Mar 12 USD M Movt Sep 12 USD M Sep 11 USD M Movt

Net interest income	697 679 3% 1,376 1,121 23%
Other external operating income	783 740 6% 1,523 1,381 10%
Operating income	1,480 1,419 4% 2,899 2,502 16%
Operating expenses	(779) (804) -3% (1,583) (1,461) 8%
Profit before credit impairment and income tax	701 615 14% 1,316 1,041 26%
Provision for credit impairment	(50) (50) 0% (100) (114) -12%
Profit before income tax	651 565 15% 1,216 927 31%
Income tax expense and non-controlling interests	(117) (96) 22% (213) (146) 46%
Underlying profit	534 469 14% 1,003 781 28%
Adjustments between statutory profit and underlying profit	(19) (6) large (25) (76) -67%
Statutory profit	515 463 11% 978 705 39%


Geographic segments:
Asia	317 267 19% 584 484 21%
Europe & America	123 101 22% 224 146 53%
Pacific	94 101 -7% 195 151 29%
Underlying profit	534 469 14% 1,003 781 28%


Balance Sheet
Net loans & advances	47,403 42,356 12% 47,403 37,736 26%
Other external assets	68,601 65,128 5% 68,601 53,989 27%
External assets	116,004 107,484 8% 116,004 91,725 26%
Customer deposits	84,182 73,616 14% 84,182 63,084 33%
Other deposits and borrowings	7,739 7,937 -2% 7,739 7,283 6%
Deposits and other borrowings	91,921 81,553 13% 91,921 70,367 31%
Other external liabilities	31,860 28,902 10% 31,860 25,677 24%
External liabilities	123,781 110,455 12% 123,781 96,044 29%
Risk weighted assets	72,461 65,776 10% 72,461 55,772 30%
Average net loans and advances	44,433 40,077 11% 42,255 32,756 29%
Average deposits and other borrowings	83,923 74,735 12% 79,329 62,028 28%

Ratios
Net interest average margin	1.27% 1.39% 1.33% 1.42%
Net interest average margin (excluding Global Markets)	2.27% 2.36% 2.35% 2.52%
Operating expenses to operating income - underlying	52.7% 56.7% 54.6% 58.5%
Operating expenses to average assets - underlying	1.28% 1.44% 1.36% 1.60%
Individual provision charge/(release) - underlying	26 55 -53% 81 133 -39%
Individual provision charge/(release) as a % of
	0.12% 0.27% 0.19% 0.40%
average net advances - underlying

Collective provision charge/(release) - underlying	24 (5) large 19 (19) large
Collective provision charge/(release) as a % of
	0.10% (0.03%) 0.04% (0.06%)
average net advances - underlying

Net impaired assets	333 313 6% 333 276 21%
Net impaired assets as a % of net advances	0.70% 0.74% 0.70% 0.73%
Total full time equivalent staff (FTE)	17,500 16,874 4% 17,500 16,492 6%

GEOGRAPHIC REVIEW

New Zealand geography

Table reflects AUD results for the New Zealand geography

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1,051 1,052 0% 2,103 1,992 6%
Other external operating income	327 334 -2% 661 641 3%
Operating income	1,378 1,386 -1% 2,764 2,633 5%
Operating expenses	(588) (590) 0% (1,178) (1,149) 3%
Profit before credit impairment and income tax	790 796 -1% 1,586 1,484 7%
Provision for credit impairment	(76) (76) 0% (152) (143) 6%
Profit before income tax	714 720 -1% 1,434 1,341 7%
Income tax expense and non-controlling interests	(179) (193) -7% (372) (389) -4%
Underlying profit	535 527 2% 1,062 952 12%
Adjustments between statutory profit and underlying profit	(28) (52) -46% (80) (121) -34%
Statutory profit	507 475 7% 982 831 18%

Balance Sheet
Net loans & advances	76,696 73,892 4% 76,696 73,555 4%
Other external assets	25,145 23,786 6% 25,145 27,305 -8%
External assets	101,841 97,678 4% 101,841 100,860 1%
Customer deposits	52,717 50,549 4% 52,717 48,710 8%
Other deposits and borrowings	6,067 5,305 14% 6,067 5,693 7%
Deposits and other borrowings	58,784 55,854 5% 58,784 54,403 8%
Other external liabilities	24,808 22,989 8% 24,808 27,112 -8%
External liabilities	83,592 78,843 6% 83,592 81,515 3%
Risk weighted assets	50,901 48,174 6% 50,901 48,441 5%
Average net loans and advances	74,072 72,145 3% 73,109 72,763 0%
Average deposits and other borrowings	57,173 53,897 6% 55,535 53,324 4%

Ratios
Net interest average margin	2.39% 2.47% 2.43% 2.35%
Net interest average margin (excluding Global Markets)	2.57% 2.63% 2.60% 2.47%
Operating expenses to operating income - underlying	42.7% 42.5% 42.6% 43.6%
Operating expenses to average assets - underlying	1.16% 1.20% 1.18% 1.19%
Individual provision charge/(release) - underlying	90 102 -12% 192 244 -21%
Individual provision charge/(release) as a % of
	0.24% 0.28% 0.26% 0.34%
average net advances - underlying

Collective provision charge/(release) - underlying	(14) (26) -46% (40) (101) -60%
Collective provision charge/(release) as a % of
	(0.04%) (0.07%) (0.05%) (0.14%)
average net advances - underlying

Net impaired assets	790 920 -14% 790 1,027 -23%
Net impaired assets as a % of net advances	1.03% 1.25% 1.03% 1.40%
Total full time equivalent staff (FTE)1	9,057 9,052 0% 9,057 9,424 -4%

1. Includes FTE associated with the New Zealand Simplification programme

GEOGRAPHIC REVIEW

New Zealand geography

Table reflects NZD results for the New Zealand geography

	Half Year Full Year
	Sep 12 NZD M Mar 12 NZD M Movt Sep 12 NZD M Sep 11 NZD M Movt

Net interest income	1,345 1,363 -1% 2,708 2,600 4%
Other external operating income	419 433 -3% 852 837 2%
Operating income	1,764 1,796 -2% 3,560 3,437 4%
Operating expenses	(754) (764) -1% (1,518) (1,499) 1%
Profit before credit impairment and income tax	1,010 1,032 -2% 2,042 1,938 5%
Provision for credit impairment	(96) (99) -3% (195) (187) 4%
Profit before income tax	914 933 -2% 1,847 1,751 5%
Income tax expense and non-controlling interests	(230) (249) -8% (479) (507) -6%
Underlying profit	684 684 0% 1,368 1,244 10%
Adjustments between statutory profit and underlying profit	(34) (69) -51% (103) (159) -35%
Statutory profit	650 615 6% 1,265 1,085 17%


Balance Sheet
Net loans & advances	96,094 93,818 2% 96,094 93,614 3%
Other external assets	31,505 30,199 4% 31,505 34,750 -9%
External assets	127,599 124,017 3% 127,599 128,364 -1%
Customer deposits	66,051 64,179 3% 66,051 61,994 7%
Other deposits and borrowings	7,601 6,735 13% 7,601 7,244 5%
Deposits and other borrowings	73,652 70,914 4% 73,652 69,238 6%
Other external liabilities	31,083 29,189 6% 31,083 34,506 -10%
External liabilities	104,735 100,103 5% 104,735 103,744 1%
Risk weighted assets	63,775 61,165 4% 63,775 61,651 3%
Average net loans and advances	94,886 93,490 1% 94,188 94,963 -1%
Average deposits and other borrowings	73,251 69,843 5% 71,547 69,593 3%

Ratios
Net interest average margin	2.39% 2.47% 2.43% 2.35%
Net interest average margin (excluding Global Markets)	2.57% 2.63% 2.60% 2.47%
Operating expenses to operating income - underlying	42.7% 42.5% 42.6% 43.6%
Operating expenses to average assets - underlying	1.16% 1.20% 1.18% 1.19%
Individual provision charge/(release) - underlying	115 132 -13% 247 319 -23%
Individual provision charge/(release) as a % of
	0.24% 0.28% 0.26% 0.34%
average net advances - underlying

Collective provision charge/(release) - underlying	(19) (33) -42% (52) (132) -61%
Collective provision charge/(release) as a % of
	(0.04%) (0.07%) (0.05%) (0.14%)
average net advances - underlying

Net impaired assets	990 1,169 -15% 990 1,307 -24%
Net impaired assets as a % of net advances	1.03% 1.25% 1.03% 1.40%
Total full time equivalent staff (FTE)1	9,057 9,052 0% 9,057 9,424 -4%

1. Includes FTE associated with the New Zealand Simplification programme

GEOGRAPHIC REVIEW

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PROFIT RECONCILIATION

Section 7 – Profit Reconciliation

Adjustments between statutory profit and underlying profit Explanation of adjustments between statutory profit and underlying profit Reconciliation of statutory profit to underlying profit Divisional to Geographic region reconciliation matrix

PROFIT RECONCILIATION

Non-IFRS information

Adjustments between statutory profit and underlying profit

(FINSIA), and have been determined on a consistent basis with those made	in prior periods.
	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
	$M $M $M $M
Statutory profit attributable to shareholders of the Company	2,742 2,919 -6% 5,661 5,355 6%
Adjustments between statutory profit and underlying profit	296 54 large 350 297 18%
Underlying profit	3,038 2,973 2% 6,011 5,652 6%

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Adjustments between statutory profit

and underlying profit

Gain on sale of Visa shares	(224) - n/a (224) - n/a
New Zealand Simplification programme	59 46 28% 105 86 22%
Acquisition related adjustments	13 28 -54% 41 126 -67%
Treasury shares adjustment	26 70 -63% 96 (41) large
Changes in New Zealand tax legislation	- - n/a - (2) -100%
Economic hedging - fair value (gains)/losses	207 22 large 229 117 96%
Revenue and net investment hedges (gains)/losses	10 (63) large (53) 51 large
Capitalised software impairment	220 - n/a 220 - n/a
NZ managed funds impacts	- 1 -100% 1 (39) large
Non continuing businesses	(15) (50) -70% (65) (1) large
	296 54 large 350 297 18%
Total adjustments between
statutory profit and underlying profit

Explanation of adjustments between statutory profit and underlying profit

Gain on sale of Visa shares
During the period the Group disposed of its equity interest in Visa International which it has held since Visa’s initial IPO in 2008. The gain recognised on the sale has not been recognised in underlying profit as the gain is not reflective of the core business performance.

• New Zealand Simplification programme

The New Zealand Simplification programme (which commenced in 2011) will deliver a single core banking system, a single banking brand and an optimised branch network in New Zealand. This programme is expected to result in lower operational and technology costs. Costs of $59 million after tax ($83 million pre-tax) and $46 million after tax ($63 million pre-tax) were incurred in the September 2012 and March 2012 halves respectively. This includes a restructuring provision raised in September 2012 upon the announcement of the brand and branch phase of the programme. Given the size and significance of the changes to the operations in New Zealand, the associated costs have been excluded from underlying profit.

• Acquisition related adjustments

The second half includes adjustments of $13 million ($19 million pre-tax) including the following:


	Pre-tax		Net of tax

	Half Year	Full Year	Half Year Full Year
	Sep 12 $M Mar 12 $M	Sep 12 $M Sep 11 $M	Sep 12 $M Mar 12 $M Sep 12 $M Sep 11 $M


AFS reserve write-off recovery1	(1) (5)	(6) (3)	- (4) (4) (2)
Integration and transaction costs	5 12	17 110	2 10 12 89
Amortisation of acquisition related intangibles2	15 29	44 54	11 22 33 39
Total	19 36	55 161	13 28 41 126

1. Adjusted to reverse recoveries on available-for-sale assets written down through equity by OnePath Australia before obtaining control

2. The acquisition of OnePath and RBS resulted in the recognition of intangible assets which previously were not recognised in the underlying business acquired

PROFIT RECONCILIATION

Explanation of adjustments between statutory profit and underlying profit, cont’d

These items are not recognised in underlying profit as they are not representative of the Group’s expected ongoing financial performance following integration.

Treasury shares adjustment

ANZ shares held by ANZ in the consolidated managed funds and life business are deemed to be Treasury shares. Realised and unrealised gains and losses from these shares and dividends received on these shares are reversed as these are not permitted to be recognised in income for statutory reporting purposes. In deriving underlying profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares support policyholder liabilities which are revalued in deriving income. Accordingly, an adjustment to statutory profit of $26 million gain after tax ($28 million gain pre-tax) has been recognised.

• Changes in New Zealand tax legislation

In 2010 legislation was passed to reduce the New Zealand corporate tax rate from 30% to 28% and to remove the ability to claim tax depreciation on buildings with an estimated useful life greater than 50 years, effective for the 2011-2012 income tax year. A residual component relating to the impact on the value of deferred tax was recognised in 2011. There was no impact in the current year.

Economic hedging – fair value gains/(losses) and mark-to-market adjustments on revenue and net investment hedges

The Group enters into economic hedges to manage its interest rate and foreign exchange risk. The application of AASB 139: Financial Instruments – Recognition and Measurement results in fair value gains/(losses) and mark-to-market adjustments being recognised within the income statement. ANZ includes the mark-to-market adjustments relating to economic hedges as an adjustment to underlying profit as the profit or loss resulting from the transactions will reverse over time to match with the profit or loss from the economically hedged item as part of underlying profit. This includes income/(loss) arising from:

approved classes of derivatives not designated in accounting hedge relationships but which are considered to be economic hedges, including hedges of NZD and USD revenue;
the use of the fair value option (principally arising from the valuation of the ‘own name’ credit spread on debt issues designated at fair value); and
ineffectiveness from designated accounting cash flow, fair value and net investment hedges.

In the table below, funding and lending related swaps are primarily foreign exchange rate swaps which are being used to convert the proceeds of foreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt (‘funding swaps’). As these swaps do not qualify for hedge accounting, movements in the fair values are recorded in the Income Statement. The main drivers of these fair values are currency basis spreads and the Australian dollar and New Zealand dollar fluctuation against other major funding currencies. This category also includes economic hedges of select structured finance and leasing transactions that do not qualify for hedge accounting. The main drivers of these fair value adjustments are Australian and New Zealand yield curves.

Losses in the second half of 2012 from funding and lending related swaps have been strongly impacted by the falling yield curves in both Australia and New Zealand. Gains seen in the first half of 2012 from widening AUD/USD currency spreads have moderated in the second half of 2012 as basis spread volatility eased in the period. Throughout 2012 the continuing strong Australian dollar drove losses from the currency components of the Group’s offshore funding hedges, albeit principally in the first half of 2012.

Losses arising from the use of the fair value option on own name debt hedged by derivatives have been driven by contraction of credit spreads in the first half of 2012. First half losses were partially reversed as spreads widened slightly in the second half of 2012.

The gains from revenue hedges for 2012 were principally attributed to the appreciation of the AUD against the USD in the first half of 2012. This was partially reduced in the second half of 2012 as a result of the appreciation of the NZD against the AUD.

	Half Year Full Year
Impact on income statement	Sep 12 $M Mar 12 $M Sep 12 $M Sep 11 $M
Timing differences where IFRS results in asymmetry between the
hedge and hedged items
Funding and lending related swaps	(299) 105 (194) (317)
Use of the fair value option on own debt hedged by derivatives	8 (127) (119) 155
Revenue and net investment hedges	(15) 90 75 (76)
Ineffective portion of cash flow and fair value hedges	(5) (11) (16) (5)
Profit/(loss) before tax	(311) 57 (254) (243)
Profit/(loss) after tax	(217) 41 (176) (168)

Cumulative pre-tax timing differences
relating to economic hedging		As at($M)
	Sep 12	Mar 12	Sep 11
Timing differences where IFRS results in asymmetry between the
hedge and hedged items (before tax)
Funding and lending related swaps	(756)	(457)	(562)
Use of the fair value option on own debt hedged by derivatives	64	56	183
Revenue and net investment hedges	45	60	(30)
Ineffective portion of cash flow and fair value hedges	17	22	33
	(630)	(319)	(376)

PROFIT RECONCILIATION

Explanation of adjustments between statutory profit and underlying profit, cont’d

Capitalised software impairment

Following the identification of impairment triggers, an impairment assessment was performed on intangible assets, including internally generated software assets. A detailed review of the recoverable amount was performed, and where the benefits associated with the asset were substantially reduced from what had originally been anticipated, the assets were written down to their recoverable amount. This resulted in the write down of $220 million after tax ($273 million pre-tax) during the second half. Given the size and nature of the write-down and the infrequency of such large impairments, the write-down has been excluded from underlying profit.

NZ Managed Funds impacts

During 2011, the collateralised debt obligations held within the Diversified Yield Fund and the Regular Income Fund were sold and the funds wound up. This resulted in a profit after tax of $39 million ($61 million pre-tax). There was no material impact in the current year.

Credit risk on impaired derivatives (nil profit after tax impact)

Reclassification of a charge to income for credit valuation adjustments on defaulted and impaired derivative exposures to provision for credit impairment of $28 million (Mar 2012 half: $32 million; Sep 2011 full year: $17 million reversal). The reclassification has been made to reflect the manner in which the defaulted and impaired derivatives are managed.

Policyholders Tax Gross up (nil profit after tax impact)

For statutory reporting purposes policyholder income tax and other related taxes paid on behalf of policyholders are included in net income from wealth management and the Group’s income tax expense. The gross up of $63 million (Mar 2012 half: $88 million; Sep 2011 full year: $208 million) has been excluded from the underlying results as it does not reflect the underlying performance of the business which is assessed on a net of policyholder tax basis.

Non continuing businesses

In 2009, Global Institutional reviewed its existing business portfolio in light of its new strategic and business goals to determine the optimal structure for the division. As a result, new business ceased in several product areas, including the Alternative Assets and Private Equity businesses. The Group’s structured credit intermediation trades are also included within non continuing businesses and will result in the profit/(loss) fluctuating as the credit risk adjustment is impacted by market movements in credit spreads and exchange rate movements. These have been excluded from underlying earnings in line with how management assesses the performance of the underlying business. A summary of the impact of non continuing businesses including structured credit intermediation trades follows:

Non continuing businesses	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Net interest income	1 - n/a 1 (2) large
Other operating income	29 71 -59% 100 23 large
Operating income	30 71 -58% 101 21 large
Operating expenses	(7) (7) 0% (14) (14) 0%
Profit before credit impairment and income tax	23 64 -64% 87 7 large
Provision for credit impairment	(7) (5) 40% (12) (9) 33%
Profit before income tax	16 59 -73% 75 (2) large
Income tax expense	(1) (9) -89% (10) 3 large
Profit	15 50 -70% 65 1 large

PROFIT RECONCILIATION

Structured credit intermediation trades

ANZ entered into a series of structured credit intermediation trades from 2004 to 2007. The underlying structures involve credit default swaps (CDS) over synthetic collateralised debt obligations (CDOs), portfolios of external collateralised loan obligations (CLOs) or specific bonds/floating rate notes (FRNs). ANZ sold protection using credit default swaps over these structures and then to mitigate risk, purchased protection via credit default swaps over the same structures from eight US financial guarantors.

Being derivatives, both the sold protection and purchased protection are marked-to-market. Prior to the commencement of the global credit crisis, movements in valuations of these positions were not significant and largely offset each other in income. Following the onset of the credit crisis, the purchased protection has provided only a partial offset against movements in valuation of the sold protection because:

one of the counterparties to the purchased protection defaulted and many of the remaining were downgraded; and
a credit valuation adjustment is applied to the remaining counterparties to the purchased protection reflective of changes to their credit worthiness.

ANZ is actively monitoring this portfolio with a view to reducing the exposure via termination and restructuring of both the bought and sold protection if and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. Costs were incurred in prior periods managing these positions. The notional amount on the outstanding sold trades at Sep 2012 was US$8.0 billion (Mar 2012: US$8.1 billion; Sep 2011: $8.3 billion).

The cumulative costs include realised losses relating to restructuring of trades in order to reduce risks and realised losses on termination of sold protection trades. It also includes foreign exchange hedging losses.

The credit risk expense on structured credit derivatives remains volatile reflecting the impact of market movements in credit spreads and AUD/USD rates. It is likely there will continue to be volatility in this market value.

The (gain)/loss included in income for these transactions is set out below.

	Half Year	Half Year


Credit risk on intermediation trades	(21) (52) -60% (73) (4) large

		As at ($M) Movement
		Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Financial impacts on credit intermediation trades
Mark-to-market exposure to financial guarantors		359 447 803 -20% -55%
Cumulative costs relating to
financial guarantors
Credit valuation adjustment for outstanding transactions		116 139 197 -17% -41%
Realised close out and hedge costs		322 320 314 1% 3%
Cumulative life to date charges		438 459 511 -5% -14%

PROFIT RECONCILIATION

Reconciliation of statutory profit to underlying profit

September 2012 Half Year
	Statutory		Less:	Adjustments to statutory profit
	profit
					Policy-	Changes in	Economic
		Gain on	Acquisition	Treasury	holders	New Zealand	hedging - fair
		sale of Visa	related	shares	tax	tax	value gains/
		shares	adjustments	adjustment	gross up	legislation	losses
	$M	$M	$M	$M	$M	$M	$M
Net interest income	6,126	-	(1)	-	-	-	(2)
Fee income	1,194	-	-	-	-	-	-
Foreign exchange earnings	511	-	-	-	-	-	(4)
Profit on trading instruments	79	-	-	-	-	-	(14)
Net income from wealth mgmt	626	-	2	(28)	63	-	-
Other	358	291	-	-	-	-	(276)
Other operating income	2,768	291	2	(28)	63	-	(294)
Operating income	8,894	291	1	(28)	63	-	(296)
Personnel expenses	(2,338)	-	-	-	-	-	-
Premises expenses	(363)	-	-	-	-	-	-
Computer expenses	(825)	-	(3)	-	-	-	-
Restructuring expenses	(136)	-	-	-	-	-	-
Other expenses	(724)	-	(17)	-	-	-	-
Operating expenses	(4,386)	-	(20)	-	-	-	-
Profit before credit impairment and tax	4,508	291	(19)	(28)	63	-	(296)
Provision for credit impairment	(660)	-	-	-	-	-	-
Profit before income tax	3,848	291	(19)	(28)	63	-	(296)
Income tax expense	(1,104)	(67)	6	2	(63)	-	89
Non-controlling interests	(2)	-	-	-	-	-	-
Profit	2,742	224	(13)	(26)	-	-	(207)
March 2012 Half Year
	Statutory		Less:	Adjustments to statutory profit
	profit

					Policy-	Changes in	Economic
		Gain on	Acquisition	Treasury	holders	New Zealand	hedging - fair
		sale of Visa	related	shares	tax	tax	value gains/
		shares	adjustments	adjustment	gross up	legislation	losses
	$M	$M	$M	$M	$M	$M	$M
Net interest income	5,984	-	1	-	-	-	-
Fee income	1,218	-	-	-	-	-	-
Foreign exchange earnings	570	-	-	-	-	-	4
Profit on trading instruments	274	-	-	-	-	-	5
Net income from wealth mgmt	577	-	5	(76)	88	-	-
Other	194	-	-	-	-	-	(42)
Other operating income	2,833	-	5	(76)	88	-	(33)
Operating income	8,817	-	6	(76)	88	-	(33)
Personnel expenses	(2,427)	-	(1)	-	-	-	-
Premises expenses	(353)	-	-	-	-	-	-
Computer expenses	(558)	-	(7)	-	-	-	-
Restructuring expenses	(138)	-	-	-	-	-	-
Other expenses	(657)	-	(34)	-	-	-	-
Operating expenses	(4,133)	-	(42)	-	-	-	-
Profit before credit impairment and tax	4,684	-	(36)	(76)	88	-	(33)
Provision for credit impairment	(538)	-	-	-	-	-	-
Profit before income tax	4,146	-	(36)	(76)	88	-	(33)
Income tax expense	(1,223)	-	8	6	(88)	-	11
Non-controlling interests	(4)	-	-	-	-	-	-
Profit	2,919	-	(28)	(70)	-	-	(22)

PROFIT RECONCILIATION

September 2012 Half Year

	Cash		Less:	Adjustments to	statutory profit	statutory profit		Underlying
	profit							profit
						Credit risk
Revenue and		NZ	Capitalised		Non	on	Total
investment		Simplification	software	NZ managed	continuing	impaired	adjustments to
hedges - MtM		programme	impairment	funds impacts	businesses	derivatives	statutory profits
$M	$M	$M	$M	$M	$M	$M	$M	$M
-	6,129	1	-	-	1	-	(1)	6,127
-	1,194	-	-	-	1	-	1	1,193
(15)	530	-	-	-	-	-	(19)	530
-	93	-	-	-	21	(28)	(21)	100
-	589	-	-	-	-	-	37	589
-	343	-	-	-	7	-	22	336
(15)	2,749	-	-	-	29	(28)	20	2,748
(15)	8,878	1	-	-	30	(28)	19	8,875
-	(2,338)	21	-	-	(4)	-	17	(2,355)
-	(363)	-	-	-	-	-	-	(363)
-	(822)	4	(273)	-	1	-	(271)	(554)
-	(136)	(84)	-	-	-	-	(84)	(52)
-	(707)	(25)	-	-	(4)	-	(46)	(678)
-	(4,366)	(84)	(273)	-	(7)	-	(384)	(4,002)
(15)	4,512	(83)	(273)	-	23	(28)	(365)	4,873
-	(660)	-	-	-	(7)	28	21	(681)
(15)	3,852	(83)	(273)	-	16	-	(344)	4,192
5	(1,076)	24	53	-	(1)	-	48	(1,152)
-	(2)	-	-	-	-	-	-	(2)
(10)	2,774	(59)	(220)	-	15	-	(296)	3,038
March 2012 Half Year
	Cash		Less:	Adjustments to	statutory profit			Underlying
	profit							profit
						Credit risk
Revenue and		NZ	Capitalised		Non	on	Total
investment		Simplification	software	NZ managed	continuing	impaired	adjustments to
hedges - MtM		programme	impairment	funds impacts	businesses	derivatives	statutory profits
$M	$M	$M	$M	$M	$M	$M	$M	$M
-	5,983	1	-	(2)	-	-	-	5,984
-	1,218	-	-	-	-	-	-	1,218
90	476	-	-	-	-	-	94	476
-	269	-	-	-	52	(32)	25	249
-	560	-	-	-	-	-	17	560
-	236	-	-	-	19	-	(23)	217
90	2,759	-	-	-	71	(32)	113	2,720
90	8,742	1	-	(2)	71	(32)	113	8,704
-	(2,426)	(1)	-	-	(6)	-	(8)	(2,419)
-	(353)	-	-	-	-	-	-	(353)
-	(551)	-	-	-	-	-	(7)	(551)
-	(138)	(64)	-	-	-	-	(64)	(74)
-	(623)	1	-	-	(1)	-	(34)	(623)
-	(4,091)	(64)	-	-	(7)	-	(113)	(4,020)
90	4,651	(63)	-	(2)	64	(32)	-	4,684
-	(538)	-	-	-	(5)	32	27	(565)
90	4,113	(63)	-	(2)	59	-	27	4,119
(27)	(1,133)	17	-	1	(9)	-	(81)	(1,142)
-	(4)	-	-	-	-	-	-	(4)
63	2,976	(46)	-	(1)	50	-	(54)	2,973

PROFIT RECONCILIATION

September 2012 Full Year

September 2012 Full Year

	Statutory		Less:	Adjustments to statutory profit
	profit
					Policy-	Changes in	Economic
		Gain on	Acquisition	Treasury	holders	New Zealand	hedging - fair
		sale of Visa	related	shares	tax	tax	value gains/
		shares	adjustments	adjustment	gross up	legislation	losses
	$M	$M	$M	$M	$M	$M	$M
Net interest income	12,110	-	-	-	-	-	(2)
Fee income	2,412	-	-	-	-	-	-
Foreign exchange earnings	1,081	-	-	-	-	-	-
Profit on trading instruments	353	-	-	-	-	-	(9)
Net income from wealth mgmt	1,203	-	7	(104)	151	-	-
Other	552	291	-	-	-	-	(318)
Other operating income	5,601	291	7	(104)	151	-	(327)
Operating income	17,711	291	7	(104)	151	-	(329)
Personnel expenses	(4,765)	-	(1)	-	-	-	-
Premises expenses	(716)	-	-	-	-	-	-
Computer expenses	(1,383)	-	(10)	-	-	-	-
Restructuring expenses	(274)	-	-	-	-	-	-
Other expenses	(1,381)	-	(51)	-	-	-	-
Operating expenses	(8,519)	-	(62)	-	-	-	-
Profit before credit impair't and tax	9,192	291	(55)	(104)	151	-	(329)
Provision for credit impairment	(1,198)	-	-	-	-	-	-
Profit before income tax	7,994	291	(55)	(104)	151	-	(329)
Income tax expense	(2,327)	(67)	14	8	(151)	-	100
Non-controlling interests	(6)	-	-	-	-	-	-
Profit	5,661	224	(41)	(96)	-	-	(229)
September 2011 Full Year
	Statutory		Less:	Adjustments to statutory profit
	profit
					Policy-	Changes in	Economic
		Gain on	Acquisition	Treasury	holders	New Zealand	hedging - fair
		sale of Visa	related	shares	tax	tax	value gains/
		shares	adjustments	adjustment	gross up	legislation	losses
	$M	$M	$M	$M	$M	$M	$M
Net interest income	11,500	-	2	-	-	-	-
Fee income	2,391	-	-	-	-	-	-
Foreign exchange earnings	817	-	-	-	-	-	-
Profit on trading instruments	299	-	-	-	-	-	(21)
Net income from wealth mgmt	1,405	-	3	48	208	-	-
Other	520	-	-	-	-	-	(147)
Other operating income	5,432	-	3	48	208	-	(168)
Operating income	16,932	-	5	48	208	-	(168)
Personnel expenses	(4,724)	-	(24)	-	-	-	-
Premises expenses	(685)	-	(4)	-	-	-	-
Computer expenses	(1,040)	-	(19)	-	-	-	-
Restructuring expenses	(148)	-	-	-	-	-	-
Other expenses	(1,426)	-	(119)	-	-	-	-
Operating expenses	(8,023)	-	(166)	-	-	-	-
Profit before credit impair't and tax	8,909	-	(161)	48	208	-	(168)
Provision for credit impairment	(1,237)	-	-	-	-	-	-
Profit before income tax	7,672	-	(161)	48	208	-	(168)
Income tax expense	(2,309)	-	34	(7)	(208)	2	51
Non-controlling interests	(8)	-	1	-	-	-	-
Profit	5,355	-	(126)	41	-	2	(117)

PROFIT RECONCILIATION

September 2012 Full Year

	Cash		Less:	Adjustments to	statutory profit	statutory profit		Underlying
	profit							profit
						Credit risk
Revenue and		NZ	Capitalised		Non	on	Total
investment		Simplification	software	NZ managed	continuing	impaired	adjustments to
hedges - MtM		programme	impairment	funds impacts	businesses	derivatives	statutory profits
$M	$M	$M	$M	$M	$M	$M	$M	$M
-	12,112	2	-	(2)	1	-	(1)	12,111
-	2,412	-	-	-	1	-	1	2,411
75	1,006	-	-	-	-	-	75	1,006
-	362	-	-	-	73	(60)	4	349
-	1,149	-	-	-	-	-	54	1,149
-	579	-	-	-	26	-	(1)	553
75	5,508	-	-	-	100	(60)	133	5,468
75	17,620	2	-	(2)	101	(60)	132	17,579
-	(4,764)	20	-	-	(10)	-	9	(4,774)
-	(716)	-	-	-	-	-	-	(716)
-	(1,373)	4	(273)	-	1	-	(278)	(1,105)
-	(274)	(148)	-	-	-	-	(148)	(126)
-	(1,330)	(24)	-	-	(5)	-	(80)	(1,301)
-	(8,457)	(148)	(273)	-	(14)	-	(497)	(8,022)
75	9,163	(146)	(273)	(2)	87	(60)	(365)	9,557
-	(1,198)	-	-	-	(12)	60	48	(1,246)
75	7,965	(146)	(273)	(2)	75	-	(317)	8,311
(22)	(2,209)	41	53	1	(10)	-	(33)	(2,294)
-	(6)	-	-	-	-	-	-	(6)
53	5,750	(105)	(220)	(1)	65	-	(350)	6,011
September 2011 Full Year
	Cash		Less:	Adjustments to	statutory profit			Underlying
	profit							profit
						Credit risk
Revenue and		NZ	Capitalised		Non	on	Total
investment		Simplification	software	NZ managed	continuing	impaired	adjustments to
hedges - MtM		programme	impairment	funds impacts	businesses	derivatives	statutory profits
$M	$M	$M	$M	$M	$M	$M	$M	$M
-	11,498	2	-	-	(2)	-	2	11,498
-	2,391	-	-	-	3	-	3	2,388
(74)	891	-	-	(1)	-	-	(75)	892
-	320	-	-	62	4	17	62	237
-	1,146	-	-	-	-	-	259	1,146
-	667	-	-	-	16	-	(131)	651
(74)	5,415	-	-	61	23	17	118	5,314
(74)	16,913	2	-	61	21	17	120	16,812
-	(4,700)	-	-	-	(13)	-	(37)	(4,687)
-	(681)	-	-	-	-	-	(4)	(681)
-	(1,021)	-	-	-	-	-	(19)	(1,021)
-	(148)	(125)	-	-	-	-	(125)	(23)
-	(1,307)	-	-	-	(1)	-	(120)	(1,306)
-	(7,857)	(125)	-	-	(14)	-	(305)	(7,718)
(74)	9,056	(123)	-	61	7	17	(185)	9,094
-	(1,237)	-	-	-	(9)	(17)	(26)	(1,211)
(74)	7,819	(123)	-	61	(2)	-	(211)	7,883
23	(2,204)	37	-	(22)	3	-	(87)	(2,222)
-	(9)	-	-	-	-	-	1	(9)
(51)	5,606	(86)	-	39	1	-	(297)	5,652

PROFIT RECONCILIATION

Divisional to Geographic region reconciliation matrix

	Geographies
Divisions	September 2012 Half Year Asia Pacific, Europe &
	AUD M Australia America New Zealand Total
	Australia 1,304 3 (2) 1,305
	International and Institutional Banking 504 521 112 1,137
	New Zealand n/a n/a 378 378
	Global Wealth and Private Banking 200 1 44 245
	Group Centre (26) (4) 3 (27)
	Underlying profit 1,982 521 535 3,038
Divisions	Adjustments between statutory profit and underlying profit (249) (19) (28) (296)
	Statutory profit 1,733 502 507 2,742

	March 2012 Half Year
	AUD M
	Australia 1,183 2 2 1,187
	International and Institutional Banking 647 454 134 1,235
	New Zealand n/a n/a 365 365
	Global Wealth and Private Banking 180 (6) 32 206
	Group Centre (19) 5 (6) (20)
	Underlying profit 1,991 455 527 2,973
	Adjustments between statutory profit and underlying profit 4 (6) (52) (54)
	Statutory profit 1,995 449 475 2,919

	September 2012 Full Year
	AUD M
Divisions	Australia 2,487 5 - 2,492
	International and Institutional Banking 1,151 975 246 2,372
	New Zealand n/a n/a 743 743
	Global Wealth and Private Banking 380 (5) 76 451
	Group Centre (45) 1 (3) (47)
Divisions	Underlying profit 3,973 976 1,062 6,011
	Adjustments between statutory profit and underlying profit (245) (25) (80) (350)
	Statutory profit 3,728 951 982 5,661

	September 2011 Full Year
	AUD M
	Australia 2,386 3 1 2,390
	International and Institutional Banking 1,257 778 266 2,301
	New Zealand n/a n/a 662 662
	Global Wealth and Private Banking 419 (8) 46 457
	Group Centre (124) (11) (23) (158)
	Underlying profit 3,938 762 952 5,652
	Adjustments between statutory profit and underlying profit (104) (72) (121) (297)
	Statutory profit 3,834 690 831 5,355

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

*CONTENTS*	*PAGE*
Condensed Consolidated Income Statement	86
Condensed Consolidated Statement of Comprehensive Income	87
Condensed Consolidated Balance Sheet	88
Condensed Consolidated Cash Flow Statement	89
Condensed Consolidated Statement of Changes in Equity	90
Notes to Condensed Consolidated Financial Statements	91
Appendix 4E Statement	103

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited

Note	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Interest income	15,098 15,440 -2% 30,538 30,443 0%
Interest expense	(8,972) (9,456) -5% (18,428) (18,943) -3%
Net interest income 2	6,126 5,984 2% 12,110 11,500 5%
Other operating income 2	1,913 2,090 -8% 4,003 3,591 11%
Net funds management and insurance income 2	626 577 8% 1,203 1,405 -14%
Share of associates' profit 15	229 166 38% 395 436 -9%
Operating income	8,894 8,817 1% 17,711 16,932 5%
Operating expenses 3	(4,386) (4,133) 6% (8,519) (8,023) 6%
Profit before credit impairment and income tax	4,508 4,684 -4% 9,192 8,909 3%
Provision for credit impairment 8	(660) (538) 23% (1,198) (1,237) -3%
Profit before income tax	3,848 4,146 -7% 7,994 7,672 4%
Income tax expense 4	(1,104) (1,223) -10% (2,327) (2,309) 1%
Profit for the period	2,744 2,923 -6% 5,667 5,363 6%
Comprising:
Profit attributable to non-controlling interests	2 4 -50% 6 8 -25%
Profit attributable to shareholders of the Company
	2,742 2,919 -6% 5,661 5,355 6%


Earnings per ordinary share (cents)
Basic 6	102.6 110.8 -7% 213.4 208.2 2%
Diluted 6	99.1 106.2 -7% 205.6 198.8 3%
Dividend per ordinary share (cents) 5	79 66 20% 145 140 4%

The notes appearing on pages 91 to 102 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited
		Full Year
	Sep 12	Sep 11	Movt
	$M	$M
Profit for the period	5,667	5,363	6%
Other comprehensive income
Foreign currency translation adjustments
Exchange differences taken to equity	(416)	330	large
Available-for-sale assets
Valuation gain/(loss) taken to equity	259	77	large
Cumulative (gain)/loss transferred to the income statement	(246)	19	large
Cash flow hedges
Valuation gain/(loss) taken to equity	43	229	-81%
Transferred to income statement for the period	17	(9)	large
Share of associates' other comprehensive income	(31)	(15)	large
Actuarial gain/(loss) on defined benefit plans	(54)	(15)	large
Income tax on items transferred directly to/from equity
Foreign currency translation reserve	(1)	(5)	-80%
Available-for-sale reserve	(17)	(35)	-51%
Cash flow hedge reserve	(17)	(63)	-73%
Actuarial gain/(loss) on defined benefits plan	10	5	100%
Other comprehensive income net of tax	(453)	518	large
Total comprehensive income for the period	5,214	5,881	-11%
Comprising total comprehensive income attributable to:
non-controlling interests	3	8	-63%
shareholders of the Company	5,211	5,873	-11%

The notes appearing on pages 91 to 102 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

		As at ($M) Movement
		Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Assets	Note
Liquid assets1		36,578 35,771 25,627 2% 43%
Due from other financial institutions1		17,103 16,287 13,298 5% 29%
Trading securities		40,602 32,859 36,074 24% 13%
Derivative financial instruments1		48,929 39,597 58,641 24% -17%
Available-for-sale assets		20,562 23,125 22,264 -11% -8%
Net loans and advances	7	427,823 412,628 397,307 4% 8%
Regulatory deposits		1,478 1,436 1,505 3% -2%
Investment in associates		3,520 3,424 3,513 3% 0%
Current tax assets		33 116 41 -72% -20%
Deferred tax assets		785 484 599 62% 31%
Goodwill and other intangible assets		7,082 7,070 6,964 0% 2%
Investments backing policy liabilities		29,895 30,204 29,859 -1% 0%
Other assets		5,623 7,116 6,396 -21% -12%
Premises and equipment		2,114 2,095 2,125 1% -1%
Total assets1		642,127 612,212 604,213 5% 6%
Liabilities
Due to other financial institutions1		30,538 29,688 27,535 3% 11%
Deposits and other borrowings	9	397,123 383,141 368,729 4% 8%
Derivative financial instruments1		52,639 41,371 55,290 27% -5%
Current tax liabilities		781 648 1,128 21% -31%
Deferred tax liabilities		18 26 28 -31% -36%
Policy liabilities		29,537 29,003 27,503 2% 7%
External unit holder liabilities (life insurance funds)		3,949 4,528 5,033 -13% -22%
Payables and other liabilities		10,109 9,418 11,221 7% -10%
Provisions		1,201 1,234 1,248 -3% -4%
Bonds and notes		63,098 61,107 56,551 3% 12%
Loan capital	10	11,914 12,605 11,993 -5% -1%
Total liabilities1		600,907 572,769 566,259 5% 6%
Net assets		41,220 39,443 37,954 5% 9%
Shareholders' equity
Ordinary share capital		23,070 22,195 21,343 4% 8%
Preference share capital		871 871 871 0% 0%
Reserves	12	(2,498) (2,430) (2,095) 3% 19%
Retained earnings	12	19,728 18,758 17,787 5% 11%
Share capital and reserves attributable to
	12	41,171 39,394 37,906 5% 9%
shareholders of the Company

Non-controlling interests	12	49 49 48 0% 2%
Total shareholders' equity	12	41,220 39,443 37,954 5% 9%

1. Comparative amounts have changed. Refer to Note 1 for details

The notes appearing on pages 91 to 102 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited
	Full Year
	Sep 12	Sep 11
	Inflows	Inflows
	(Outflows)	(Outflows)
	$M	$M
Cash flows from operating activities
Interest received	30,421	30,310
Interest paid	(18,827)	(18,797)
Dividends received	80	84
Other operating income received	2,698	3,879
Personnel expenses paid	(4,773)	(4,547)
Other operating expenses paid	(3,062)	(2,630)
Net cash (paid)/received on derivatives	4,734	(2,038)
Income taxes (paid)/refunds received	(2,835)	(2,033)
Net cash flows from funds management and insurance business
Premiums and other income received	5,955	5,858
Investment income and policy deposits received (paid)	78	(21)
Claims and policy withdrawals paid	(4,428)	(4,531)
Commission expensepaid	(439)	(491)
Cash flows from operating activities before changes in operating assets and liabilities	9,602	5,043
Changes in operating assets and liabilities arising from
cash flow movements
(Increase)/decrease in operating assets
Liquid assets - greater than three months	435	1,593
Due from other financial institutions - greater than three months	(4,256)	(1,476)
Trading securities	(4,589)	(7,614)
Loans and advances	(32,748)	(25,568)
Net cash flows from investments backing policy liabilities
Purchase of insurance assets	(7,949)	(9,127)
Proceeds from sale/maturity of insurance assets	7,866	10,182
Increase/(decrease) in operating liabilities
Deposits and other borrowings	33,662	43,834
Due to other financial institutions	4,184	1,350
Payables and other liabilities	209	584
Change in operating assets and liabilities arising from cash flow movements	(3,186)	13,758
Net cashprovided by/(used in) operating activities	6,416	18,801
Cash flows from investing activities
Available-for-sale assets
Purchases	(30,441)	(40,657)
Proceeds from sale or maturity	31,200	39,518
Controlled entities and associates
Purchased (net of cash acquired)	(1)	(304)
Proceeds from sale (net of cash disposed)	18	74
Premises and equipment
Purchases	(319)	(319)
Proceeds from sale	20	6
Other assets	(702)	(849)
Net cashprovided by/(used in) investing activities	(225)	(2,531)
Cash flows from financing activities
Bonds and notes
Issue proceeds	24,352	12,213
Redemptions	(15,662)	(17,193)
Loan capital
Issue proceeds	2,724	1,341
Redemptions	(2,593)	(1,579)
Dividends paid	(2,219)	(2,113)
Share capital issues	60	43
On market sharepurchases	(55)	(137)
Net cashprovided by/(used in) financing activities	6,607	(7,425)
Net cash provided by/(used in) operating activities	6,416	18,801
Net cash provided by/(used in) investing activities	(225)	(2,531)
Net cashprovided by/(used in)financingactivities	6,607	(7,425)
Net increase/(decrease) in cash and cash equivalents	12,798	8,845
Cash and cash equivalents at beginning of period	30,021	20,610
Effects of exchange rate changes on cash and cash equivalents	(1,369)	566
Cash and cash equivalents at end ofperiod	41,450	30,021

The notes appearing on pages 91 to 102 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

					Shareholders'
					equity
	Ordinary				attributable to	Non-	Total
	share	Preference		Retained	Equity holders of	controlling	Shareholders'
	capital	shares	Reserves1	earnings	the Bank	interests	equity
	$M	$M	$M	$M	$M	$M	$M
As at 1 October 2010	19,886	871	(2,587)	15,921	34,091	64	34,155

Profit or loss	-	-	-	5,355	5,355	8	5,363
Other comprehensive income for the period	-	-	528	(10)	518	-	518
Total comprehensive income for the period	-	-	528	5,345	5,873	8	5,881
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(3,503)	(3,503)	-	(3,503)
Dividend income on treasury shares
held within the Group's	-	-	-	23	23	-	23
life insurance statutory funds
Dividend reinvestment plan	1,367	-	-	-	1,367	-	1,367
Transactions with non-controlling interests	-	-	(22)	-	(22)	(22)	(44)
Other equity movements:
Share based payments and exercises	-	-	(14)	-	(14)	-	(14)
Group share option scheme	43	-	-	-	43	-	43
Treasury shares OnePath Australia adjustment	2	-	-	-	2	-	2
Group employee share acquisition scheme	45	-	-	-	45	-	45
Other changes	-	-	-	1	1	(2)	(1)
As at 30 September 2011	21,343	871	(2,095)	17,787	37,906	48	37,954

Profit or loss	-	-	-	5,661	5,661	6	5,667
Other comprehensive income for the period	-	-	(406)	(44)	(450)	(3)	(453)
Total comprehensive income for the period	-	-	(406)	5,617	5,211	3	5,214
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(3,702)	(3,702)	(2)	(3,704)
Dividend income on treasury shares
held within the Group's	-	-	-	24	24	-	24
life insurance statutory funds
Dividend reinvestment plan	1,461	-	-	-	1,461	-	1,461
Transactions with non-controlling interests	-	-	(1)	-	(1)	-	(1)
Other equity movements:
Share based payments and exercises	-	-	6	-	6	-	6
Group share option scheme	60	-	-	-	60	-	60
Treasury shares OnePath Australia adjustment	78	-	-	-	78	-	78
Group employee share acquisition scheme	128	-	-	-	128	-	128
Other changes	-	-	(2)	2	-	-	-
As at 30 September 2012	23,070	871	(2,498)	19,728	41,171	49	41,220

1. Further information on other comprehensive income is disclosed in Note 12

The notes appearing on pages 91 to 102 form an integral part of the Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

These Condensed Consolidated Financial Statements:

have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (AASs);
should be read in conjunction with the ANZ Annual Report for the year ended 30 September 2012 when released and any public announcements made by the Parent Entity and its controlled entities (the Group) for the year ended 30 September 2012 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and the ASX Listing Rules;
do not include all notes of the type normally included in the annual financial report;
are presented in Australian dollars unless otherwise stated; and
were approved by the Board of Directors on 24 October 2012.

i) Accounting policies

These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies consistent with those applied in the 30 September 2011 Annual Financial Report. All new AASs and Australian Accounting Standards Board Interpretations applicable to annual reporting periods beginning on or after 1 October 2011 have been applied to the Group effective from the required date of application. The initial application of these Standards and Interpretations has not had a material impact on the financial position or the financial results of the Group. Further details of the Group’s accounting policies will be included in the ANZ Annual Report for the year ended 30 September 2012 when released.

ii) Use of estimates, assumptions and judgments

The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates and assumptions that affect reported amounts and the application of accounting policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable. Actual results may differ from these estimates and the estimates may require review in future periods.

A review of the recoverable amount of software assets indicated an impairment of certain software assets. Significant judgement was required in determining the recoverable amount of these assets before recognising an impairment of $273 million (before tax) in the September 2012 half year.

Further details of the Group’s critical estimates and judgements will be contained in the Group’s financial report for the year ended 30 September 2012 when released.

iii) Comparatives

Certain amounts in the comparative information have been reclassified to conform with current period financial statement presentations.

During the current year, the reporting treatment of collateral received on derivative asset positions and collateral posted on derivative liability positions has changed to better reflect the nature of the asset/liabilities and to be consistent with market practice. This has resulted in the following changes to previously reported balance sheet classifications, with no impact on net assets.

	Mar 12 $m Sep 11 $m	Mar 12 $m Sep 11 $m
	Previously reported Change Currently reported	Previously reported Change Currently reported
Liquid assets1 Due from other financial institutions1 Derivative financial instruments	35,771 - 35,771 10,035 6,252 16,287 36,873 2,724 39,597	24,899 728 25,627 8,824 4,474 13,298 54,118 4,523 58,641
Total assets	603,236 8,976 612,212	594,488 9,725 604,213
Due to other financial institutions Derivative financial instruments	26,964 2,724 29,688 35,119 6,252 41,371	23,012 4,523 27,535 50,088 5,202 55,290
Total liabilities	563,793 8,976 572,769	556,534 9,725 566,259

1. “Due from other financial institutions” at 30 September 2011 was also reduced by the reclassification of $728 million of “securities purchased under agreements to resell” to “liquid assets”

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Income

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Interest income	15,098 15,440 -2% 30,538 30,443 0%
Interest expense	(8,972) (9,456) -5% (18,428) (18,943) -3%
Net interest income	6,126 5,984 2% 12,110 11,500 5%

i) Fee and commission income
Lending fees	356 341 4% 697 652 7%
Non-lending fees and commissions1	1,012 1,048 -3% 2,060 2,053 0%
Total fee and commission income	1,368 1,389 -2% 2,757 2,705 2%
Fee and commission expense	(174) (171) 2% (345) (314) 10%
Net fee and commission income2	1,194 1,218 -2% 2,412 2,391 1%

ii) Other income
Net foreign exchange earnings	511 570 -10% 1,081 817 32%
Net gains from trading securities and derivatives	58 222 -74% 280 295 -5%
Credit risk on intermediation trades	21 52 -60% 73 4 large

Movement on financial instruments measured at fair
	(294) (33) large (327) (167) 96%
value through profit & loss3


Brokerage income	32 23 39% 55 61 -10%
NZ managed funds impacts	- - n/a - 61 -100%
Write-down on assets in non continuing businesses	- - n/a - (13) -100%
Gain on sale/(write-down) of investment in Sacombank	- 10 -100% 10 (35) large
Write-down of investment in SSI	- (31) -100% (31) - n/a
Private equity and infrastructure earnings	6 22 -73% 28 26 8%
Profit on sale of property	- 1 -100% 1 24 -96%
Gain on sale of Visa shares	291 - n/a 291 - n/a
Dilution gain on investment in Bank of Tianjin	10 - n/a 10 - n/a
Other	84 36 large 120 127 -6%
Total other income	719 872 -18% 1,591 1,200 33%
Other operating income	1,913 2,090 -8% 4,003 3,591 11%

iii) Net funds management and insurance income
Funds management income	408 417 -2% 825 868 -5%
Investment income	818 1,912 -57% 2,730 (511) large
Insurance premium income	647 590 10% 1,237 1,184 4%
Commission income/(expense)	(238) (200) 19% (438) (490) -11%
Claims	(289) (309) -6% (598) (548) 9%
Changes in policy liabilities4	(692) (1,757) -61% (2,449) 854 large
Elimination of treasury share (gain)/loss	(28) (76) -63% (104) 48 large
Total net funds management and insurance income	626 577 8% 1,203 1,405 -14%
Share of associates' profit	229 166 38% 395 436 -9%
Total income5	17,866 18,273 -2% 36,139 35,875 1%
Profit before income tax as a % of total income	21.54% 22.69% 22.12% 21.39%

Lending fees exclude fees treated as part of the effective yield calculation which are included in interest income 2.

Includes interchange fees paid

3. Includes fair value movements (excluding realised and accrued interest) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments and not designated as accounting hedges, ineffective portions of cashflow hedges, and fair value movements in financial assets and liabilities designated fair value

Includes policyholder tax gross up, which represents contribution tax (recovered at 15% on the super contributions made by members) debited to the policyholder account once a year in July when the statement is issued to the members at the end of the 30 June financial year

5. Total income includes external dividend income of $4 million (Mar 2012 half: $1 million; Sep 2011 full year: $11 million)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Operating expenses

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Personnel
Employee entitlements and taxes	145 143 1% 288 306 -6%
Salaries and wages	1,512 1,554 -3% 3,066 2,960 4%
Superannuation costs - defined benefit plans	5 5 0% 10 13 -23%
Superannuation costs - defined contribution plans	143 152 -6% 295 287 3%
Equity-settled share-based payments	88 101 -13% 189 165 15%
Temporary staff	106 112 -5% 218 250 -13%
Other	339 360 -6% 699 743 -6%
Total personnel expenses	2,338 2,427 -4% 4,765 4,724 1%

Premises
Depreciation and amortisation	46 44 5% 90 89 1%
Rent	207 205 1% 412 387 6%
Utilities and other outgoings	86 82 5% 168 165 2%
Other	24 22 9% 46 44 5%
Total premises expenses	363 353 3% 716 685 5%

Computer
Computer contractors	68 82 -17% 150 143 5%
Data communications	54 52 4% 106 125 -15%
Depreciation and amortisation	222 202 10% 424 348 22%
Rentals and repairs	62 69 10% 131 130 1%
Software purchased	131 122 7% 253 241 5%
Software impairment	273 1 large 274 20 large
Other	15 30 -50% 45 33 36%
Total computer expenses	825 558 48% 1,383 1,040 33%

Other
Advertising and public relations	124 105 18% 229 235 -3%
Audit and other fees	10 8 25% 18 18 0%
Depreciation of furniture and equipment	49 50 -2% 99 97 2%
Freight and cartage	32 33 -3% 65 65 0%
Loss on sale and write-off of equipment	3 5 -40% 8 4 100%
Non-lending losses	27 25 8% 52 53 -2%
Postage and stationery	70 67 4% 137 130 5%
Professional fees	144 109 32% 253 269 -6%
Telephone	36 33 9% 69 75 -8%
Travel	88 82 7% 170 208 -18%
Amortisation and impairment of intangible assets	55 55 0% 110 122 -10%
Other	86 85 1% 171 150 14%
Total other expenses	724 657 10% 1,381 1,426 -3%

Restructuring
New Zealand simplification programme	84 64 31% 148 125 18%
Other	52 74 -30% 126 23 large
Total restructuring expenses	136 138 -1% 274 148 85%
Operating expenses	4,386 4,133 6% 8,519 8,023 6%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Income tax expense

Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense charged in the Income Statement	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Profit before income tax	3,848 4,146 -7% 7,994 7,672 4%
Prima facie income tax expense at 30%	1,154 1,244 -7% 2,398 2,302 4%
Tax effect of permanent differences:
Overseas tax rate differential	(17) (31) -45% (48) (29) 66%
Rebateable and non-assessable dividends	(2) (2) 0% (4) (5) -20%
Profit from associates	(68) (50) 36% (118) (131) -10%
(Gain on sale)/write-down of investment in Sacombank	- (3) -100% (3) 11 large
Write-down of investment in SSI	- 9 -100% 9 - n/a
Offshore Banking Unit	(3) (9) -67% (12) - n/a
OnePath Australia - Policyholder income and contributions tax	44 62 -29% 106 146 -27%
Tax provisions no longer required	(47) (23) large (70) (43) 63%
Interest on Convertible Preference Shares	33 35 -6% 68 50 36%
Other	5 (6) large (1) 5 large
	1,099 1,226 -10% 2,325 2,306 1%
Income tax under/(over) provided in previous years	5 (3) large 2 3 -33%
Total income tax expense charged
	1,104 1,223 -10% 2,327 2,309 1%
in the income statement

Australia	860 964 -11% 1,823 1,845 -1%
Overseas	244 259 -6% 504 464 9%
	1,104 1,223 -10% 2,327 2,309 1%
Effective Tax Rate - Group	28.7% 29.5% 29.1% 30.1%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Dividends

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt
Dividend per ordinary share (cents)
Interim (fully franked)	n/a 66 n/a 66 64 3%
Final (fully franked)	79 n/a n/a 79 76 4%
Total	79 66 20% 145 140 4%

	$M $M % $M $M %
Ordinary share dividend
Interim dividend	1,769 - n/a 1,769 1,662 6%
Final dividend	- 2,002 n/a 2,002 1,895 6%
Bonus option plan adjustment	(33) (47) -30% (80) (66) 21%
Total1	1,736 1,955 -11% 3,691 3,491 6%
Ordinary share dividend payout ratio (%)2	78.5% 60.8% 69.3% 68.6%

1. Dividends payable are not accrued and are recorded when paid

2. Dividend payout ratio is calculated using proposed 2012 final dividend of $2,149 million (not shown in the above table). The proposed 2012 final dividend of $2,149 million is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2012 half year and September 2011 full year were calculated using actual dividend paid of $1,769 million and $3,664 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the company by the amount of preference shares dividend paid

Ordinary Shares

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2012 final dividend. For the 2012 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of fully paid ANZ ordinary shares sold on the ASX during the seven trading days commencing on 16 November 2012, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2012 final dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Daylight Time) on 14 November 2012. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in Great Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling and New Zealand dollars respectively at an exchange rate calculated at 5.00 pm (Australian Eastern Daylight Time) on 16 November 2012.

Preference Shares

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Preference share dividend
Euro Trust Securities	4 7 -43% 11 12 -8%

Dividend per preference share
Euro Trust Securities	€7.38 €10.80 -32% €18.18 €18.24 0%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Earnings per share

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt

Number of fully paid ordinary shares on issue (M)1	2,717.4 2,679.5 1% 2,717.4 2,629.0 3%


Basic
Profit attributable to shareholders of the Company ($M)	2,742 2,919 -6% 5,661 5,355 6%
Less Preference share dividends ($M)	(4) (7) -43% (11) (12) -8%
Profit less preference share dividends ($M)	2,738 2,912 -6% 5,650 5,343 6%
Weighted average number of ordinary shares (M)2	2,667.5 2,627.4 2% 2,647.4 2,565.9 3%
Basic earnings per share (cents)	102.6 110.8 -7% 213.4 208.2 2%


Diluted
Profit less preference share dividends ($M)	2,738 2,912 -6% 5,650 5,343 6%
Interest on US Stapled Trust Securities ($M)3	16 14 14% 30 28 7%
Interest on UK Hybrid Securities ($M)4	9 22 -59% 31 46 -33%
Interest on Convertible Preference Shares ($M)5	108 117 -8% 225 168 34%

Profit attributable to shareholders of the Company
excluding interest on US Stapled Trust Securities, UK Hybrid	2,871 3,065 -6% 5,936 5,585 6%
Securities and Convertible Preference Shares ($M)

Weighted average number of shares on issue (M)2	2,667.5 2,627.4 2% 2,647.4 2,565.9 3%
Weighted average number of convertible options (M)	4.4 4.6 -4% 5.3 4.5 18%
Weighted average number of convertible US Stapled Trust Securities (M)3	30.5 32.6 -6% 30.5 41.6 -27%
Weighted average number of convertible UK Hybrid Securities (M)4	14.0 31.3 -55% 24.6 38.9 -37%
Weighted average number of Convertible Preference Shares (M)5	179.8 191.4 -6% 179.8 158.7 13%
Adjusted weighted average number of shares - diluted (M)	2,896.2 2,887.3 0% 2,887.6 2,809.6 3%
Diluted earnings per share (cents)	99.1 106.2 -7% 205.6 198.8 3%

Number of fully paid ordinary shares on issue includes Treasury shares of 28.8 million at 30 September 2012 (Mar 2012: 31.6 million; Sep 2011: 30.3 million)
2.
Weighted average number of ordinary shares excludes Treasury shares held in OnePath and in ANZEST Pty Ltd for the group employee share acquisition scheme

The US Stapled Trust securities (issued on 27 November 2003) convert to ordinary shares in 2053 at the market price of ANZ ordinary shares less 5% unless redeemed or bought back prior to that date. The US Stapled Trust security issue can be de-stapled and the investor left with coupon paying preference shares at ANZ’s discretion under certain circumstances. AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS

4. UK Hybrid (issued on 15 June 2007) is a GBP denominated stapled security that was due to convert to ordinary shares on the fifth anniversary at the market price of ANZ ordinary shares less 5% (subject to certain conversion conditions). Immediately prior to conversion on 15 June 2012 the securities were redeemed by ANZ for cash at face value. AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be considered in the calculation of diluted EPS up to the date of conversion

5. There are three “Tranches” of convertible preference shares. The first are convertible preference shares issued on 30 September 2008 and convert to ordinary shares on 16 June 2014 at the market price of ANZ ordinary shares less 2.5% (subject to certain conversion conditions). The second are convertible preference shares issued on 17 December 2009 and convert to ordinary shares on 15 December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The third are convertible preference shares issued on 28 September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary shares less 1% (subject to certain conversion conditions). AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Net loans and advances

	As at ($M) Movement
	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11
Australia
Overdrafts	6,031 5,732 6,326 5% -5%
Credit card outstandings	8,632 9,084 9,062 -5% -5%
Commercial bills outstanding	18,223 18,476 17,326 -1% 5%
Term loans - housing	181,971 178,486 169,970 2% 7%
Term loans - non-housing	82,922 78,528 74,206 6% 12%
Lease receivables	1,603 1,868 1,769 -14% -9%
Hire purchase	9,880 9,498 9,549 4% 3%
Other	480 580 891 -17% -46%
	309,742 302,252 289,099 2% 7%

Asia Pacific, Europe & America
Overdrafts	892 786 739 13% 21%
Credit card outstandings	996 964 1,053 3% -5%
Commercial bills outstanding	1,246 812 1,008 53% 24%
Term loans - housing	3,981 3,374 2,850 18% 40%
Term loans - non-housing	37,668 34,761 33,012 8% 14%
Lease receivables	143 126 130 13% 10%
Other	161 168 212 -4% -24%
	45,087 40,991 39,004 10% 16%

New Zealand
Overdrafts	1,091 1,185 1,068 -8% 2%
Credit card outstandings	1,113 1,110 1,074 0% 4%
Term loans - housing	44,754 42,681 42,562 5% 5%
Term loans - non-housing	29,909 29,179 29,170 3% 3%
Lease receivables	139 168 185 -17% -25%
Hire purchase	505 462 419 9% 21%
Other	220 218 216 1% 2%
	77,731 75,003 74,694 4% 4%
Total gross loans and advances	432,560 418,246 402,797 3% 7%
Less: Provision for credit impairment (refer note 8)	(4,538) (4,708) (4,873) -4% -7%
Less: Unearned income1	(2,235) (2,283) (2,216) -2% 1%
Add: Capitalised brokerage/mortgage origination fees2	797 697 629 14% 27%
Add: Customers' liabilities for acceptances	1,239 676 970 83% 28%
	(4,737) (5,618) (5,490) -16% -14%
Total net loans and advances	427,823 412,628 397,307 4% 8%

1. Includes fees deferred and amortised using the effective interest method of $415 million (Mar 2012: $425 million; Sep 2011: $414 million)

2. Capitalised brokerage/mortgage origination fees are amortised over the term of the loan

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Provision for credit impairment

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Collective provision
Balance at start of period	2,994 3,176 -6% 3,176 3,153 1%
Charge/(credit) to income statement	(227) (152) 49% (379) 7 large
Disposal	(4) - n/a (4) - n/a
Adjustment for exchange rate fluctuations	2 (30) large (28) 16 large
Total collective provision1	2,765 2,994 -8% 2,765 3,176 -13%
Individual provision
Balance at start of period	1,714 1,697 1% 1,697 1,875 -9%
New and increased provisions	1,270 1,023 24% 2,293 2,033 13%
Write-backs	(286) (251) 14% (537) (613) -12%
Adjustment for exchange rate fluctuations	(5) (29) -83% (34) 8 large
Discount unwind	(79) (64) 23% (143) (185) -23%
Bad debts written-off	(841) (662) 27% (1,503) (1,421) 6%
Total individual provision	1,773 1,714 3% 1,773 1,697 4%
Total provision for credit impairment	4,538 4,708 -4% 4,538 4,873 -7%

1. The collective provision includes amounts for off-balance sheet credit exposures: $529 million at 30 September 2012 (Mar 2012: $545 million; Sep 2011: $572 million). The impact on the income statement for the half year ended 30 September 2012 was a $14 million release (Mar 2012 half: $22 million release; Sep 2011 full year: $7 million release)

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt
Provision movement analysis
New and increased provisions
Australia	958 772 24% 1,730 1,362 27%
Asia Pacific, Europe & America	126 61 large 187 212 -12%
New Zealand	186 190 -2% 376 459 -18%
	1,270 1,023 24% 2,293 2,033 13%
Write-backs	(286) (251) 14% (537) (613) -12%
	984 772 27% 1,756 1,420 24%
Recoveries of amounts previously written-off	(97) (117) -17% (214) (227) -6%
Individual provision charge for loans and advances	887 655 35% 1,542 1,193 29%
Impairment on available-for-sale assets1	- 35 -100% 35 37 -5%
Collective provision charge/(credit) to income statement	(227) (152) 49% (379) 7 large
Charge to income statement	660 538 23% 1,198 1,237 -3%

1. Includes impairment of $35 million on AFS assets reclassified to Net Loans & Advances (Sep 12 half: Nil; Mar 12 half: $35 million; Sep 2011 full year: $37 million)

	As at ($M) Movement
	Sep 12 Sep 12
Individual provision balance	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Australia	1,128 985 908 15% 24%
Asia Pacific, Europe & America	277 326 387 -15% -28%
New Zealand	368 403 402 -9% -8%
Total individual provision	1,773 1,714 1,697 3% 4%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Deposits and other borrowings

	As at ($M) Movement
	Sep 12 Sep 12
	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Certificates of deposit	56,838 59,603 55,554 -5% 2%
Term deposits	172,313 164,439 153,200 5% 12%
Other deposits bearing interest and other borrowings	142,753 131,183 132,812 9% 7%
Deposits not bearing interest	11,782 11,452 11,334 3% 4%
Commercial paper	12,164 15,084 14,333 -19% -15%
Borrowing corporations' debt	1,273 1,380 1,496 -8% -15%
Total deposits and other borrowings	397,123 383,141 368,729 4% 8%

10. Loan capital

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Hybrid loan capital
US Stapled Trust Securities1	752 768 -2% 752 835 -10%
UK Stapled Securities2	- 691 -100% - 720 -100%
Convertible Preference Shares (ANZ CPS)
ANZ CPS13	1,078 1,077 0% 1,078 1,075 0%
ANZ CPS24	1,958 1,956 0% 1,958 1,954 0%
ANZ CPS35	1,326 1,324 0% 1,326 1,322 0%
Perpetual subordinated notes	953 946 1% 953 964 -1%
Subordinated notes	5,847 5,843 0% 5,847 5,123 14%
Total Loan Capital	11,914 12,605 -5% 11,914 11,993 -1%

1. On 27 November 2003, ANZ issued USD750 million Trust Securities via ANZ Capital Trust II, each comprising an interest paying unsecured note issued by Samson Funding Limited (a wholly owned New Zealand subsidiary) and a preference share issued by ANZ which are stapled together. Subject to certain conditions, the securities are redeemable by the issuer on 15 December 2013. The instrument converts into ordinary shares of ANZ at a 5% discount (i) at the holder’s request, if ANZ fails to redeem the instrument on 15 December 2013, or (ii) on 15 December 2053 unless redeemed earlier. The securities constitute Tier 1 capital as defined by APRA for capital adequacy purposes

2. On 15 June 2007, ANZ issued £450 million stapled securities, each comprising an interest paying subordinated note issued by ANZ New York branch and a preference share issued by ANZ which are stapled together. ANZ bought-back and cancelled the preference shares on 15 June 2012. The securities constituted Tier 1 capital as defined by APRA for capital adequacy purposes until 27 April 2012

3. On 30 September 2008, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 16 June 2014 at a 2.5% discount (subject to certain conditions being satisfied), unless ANZ elects for a third party to purchase the convertible preference shares or they are exchanged earlier. The securities constitute Tier 1 capital as defined by APRA for capital adequacy purposes

4. On 17 December 2009, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 15 December 2016 at a 1% discount (subject to certain conditions being satisfied), unless ANZ elects for a third party to purchase the convertible preference shares or they are exchanged earlier. The securities constitute Tier 1 capital as defined by APRA for capital adequacy purpose

5. On 28 September 2011, ANZ issued convertible preference shares which will convert into ordinary shares of ANZ on 1 September 2019 at a 1% discount (subject to certain conditions being satisfied), unless they are exchanged earlier. In addition, if ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% than the convertible preference shares will immediately convert into ANZ ordinary shares subject to a maximum conversion number. Subject to certain conditions, the convertible preference shares are redeemable by ANZ on and from 1 September 2017. The securities constitute Tier 1 capital as defined by APRA for capital adequacy purposes

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Share capital

Issued and quoted securities

		Issue price	Amount paid
	Number quoted	per share	up per share
Ordinary shares
As at 30 September 2012	2,717,356,961
Issued during the year	88,322,924
Preference shares
As at 30 September 2012
Euro Trust Securities1	500,000	€1,000	€1,000

1. On 13 December 2004 the Group issued €500 million hybrid capital. The instruments consist of Floating Rate Non-cumulative Trust Securities issued by ANZ Capital Trust III each representing a unit consisting of €1,000 principal amount of subordinated floating rate notes due 2053 issued by ANZ Jackson Funding PLC stapled to a fully paid up preference share with a liquidation preference of €1,000 each, issued by Australia and New Zealand Banking Group Limited

12. Shareholders’ equity

	Half Year Full Year
	Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt

	$M $M $M $M
Share capital
Balance at start of period	23,066 22,214 4% 22,214 20,757 7%
Ordinary share capital
Dividend reinvestment plan	704 757 -7% 1,461 1,367 7%
Group employee share acquisition scheme1	83 45 84% 128 45 large
Treasury shares in OnePath Australia2	57 21 large 78 2 large
Group share option scheme	31 29 7% 60 43 40%
Total share capital	23,941 23,066 4% 23,941 22,214 8%

Foreign currency translation reserve
Balance at start of period	(2,830) (2,418) 17% (2,418) (2,742) -12%
Currency translation adjustments net of hedges after tax	(1) (412) -100% (413) 324 large
Total foreign currency translation reserve	(2,831) (2,830) 0% (2,831) (2,418) 17%

Share option reserve3
Balance at start of period	44 50 -12% 50 64 -22%
Share based payments/(exercises)	10 (4) large 6 (13) large
Transfer of options and rights lapsed to retained earnings	- (2) -100% (2) (1) 100%
Total share option reserve	54 44 23% 54 50 8%

1. As at 30 September 2012, there were 15,673,505 Treasury shares outstanding (Mar 12: 15,962,923; Sep 11: 13,795,601) . Shares in the Company which are purchased on-market by ANZEST Pty Ltd (trustee of ANZ employee share and option plans) or issued by the Company to ANZEST Pty Ltd are classified as Treasury shares (to the extent that they relate to unvested employee share-based awards)

2. On acquisition of OnePath Australia, an adjustment was made for ANZ shares held by OnePath Australia. As at 30 September 2012, there were 13,081,042 OnePath Australia Treasury shares outstanding (Mar 12: 15,587,499; Sep 11: 16,469,102). OnePath Australia purchases and holds shares in the Company to back policy liabilities in the life insurance statutory funds. These shares are also classified as Treasury shares

3. The share option reserve arises on the grant of share options/deferred share rights/performance rights (“options and rights”) to selected employees under the ANZ Share Option Plan. Amounts are transferred from the share option reserve to other equity accounts when the options and rights are exercised and to retained earnings when lapsed or forfeited after vesting. Forfeited options and rights due to termination prior to vesting are credited to the income statement

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

Available-for-sale revaluation reserve4
Balance at start of period	246 126 95% 126 80 58%
Gain/(loss) recognised after tax	85 108 -21% 193 30 large
Transferred to income statement	(237) 12 large (225) 16 large
Total available-for-sale revaluation reserve	94 246 -62% 94 126 -25%

Hedging reserve5
Balance at start of period	133 169 -21% 169 11 large
Gain/(loss) recognised after tax	68 (41) large 27 164 -84%
Transferred to income statement	7 5 40% 12 (6) large
Total hedging reserve	208 133 56% 208 169 23%

Transactions with non-controlling interests reserve
Balance at the start of the period	(23) (22) 5% (22) - n/a
Transactions with non-controlling interests	- (1) -100% (1) (22) -95%
Total transactions with non-controlling interests reserve	(23) (23) 0% (23) (22) 5%
Total reserves	(2,498) (2,430) 3% (2,498) (2,095) 19%

Retained earnings
Balance at start of period	18,758 17,787 5% 17,787 15,921 12%
Profit attributable to shareholders of the Company	2,742 2,919 -6% 5,661 5,355 6%
Transfer of options lapsed from share option reserve	- 2 -100% 2 1 100%
Total available for appropriation	21,500 20,708 4% 23,450 21,277 10%
Actuarial gain/(loss) on defined benefit plans after tax6	(42) (2) large (44) (10) large
Ordinary share dividends paid	(1,736) (1,955) -11% (3,691) (3,491) 6%
Dividend income on Treasury shares held within the
	10 14 -29% 24 23 4%
Group's life insurance statutory funds

Preference share dividends paid	(4) (7) -43% (11) (12) -8%
Retained earnings at end of period	19,728 18,758 5% 19,728 17,787 11%

Share capital and reserves attributable to
	41,171 39,394 5% 41,171 37,906 9%
shareholders of the Company

Non-controlling interests	49 49 0% 49 48 2%
Total shareholders' equity	41,220 39,443 5% 41,220 37,954 9%

4. The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset is realised and recognised in the income statement. Where a revalued financial asset is impaired, that portion of the reserve which relates to that financial asset is recognised in the income statement

5. The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts profit or loss, consistent with the applicable accounting policy

ANZ has taken the option available under AASB 119 to recognise actuarial gains/losses on defined benefit superannuation plans directly in retained earnings

101

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. Contingent liabilities and contingent assets

There are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of which cannot readily be quantified. Appropriate legal advice has been obtained and, in the light of such advice, provisions as deemed necessary have been made. In some instances we have not disclosed the estimated financial impact as this may prejudice the interests of the Group.

Refer to Note 43 of the 2012 ANZ Annual Financial Report (when released) for a description of current contingent liabilities and contingent assets.

Exception fees class action

In 2010, litigation funder IMF (Australia) Ltd commenced a class action against ANZ. The action is claimed to be on behalf of approximately 38,000 ANZ customers for more than $50 million in exception fees claimed to have been charged to those customers. The case is at an early stage. ANZ is defending it. There is a risk that further claims could emerge.

– Security recovery actions

Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets over recent years. ANZ will defend these claims and any future claims.

14. Changes in composition of the Group

There were no material entities acquired or disposed during the year ended 30 September 2012 or for the year ended 30 September 2011.

15. Investments in Associates

15. Investments in Associates
	Half Year Full Year
	Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt

	229 166 38% 395 436 -9%
Profit after income tax

Contributions to profit[1 ]

	Contribution to Group post-tax profit Ownership interest held by Group	Contribution to Group post-tax profit Ownership interest held by Group


Associates	Half Year	Full Year As at
	Sep 12 $M Mar 12 $M	Sep 12 $M Sep 11 $M Sep 12 % Mar 12 % Sep 11 %

P.T. Bank Pan Indonesia	57 30	87 69 39 39 39
Metrobank Card Corporation Inc	8 7	15 10 40 40 40
Bank of Tianjin2,3	35 37	72 54 18 20 20
AMMB Holdings Berhad	65 53	118 114 24 24 24
Shanghai Rural Commercial Bank	64 46	110 173 20 20 20
Saigon Securities Inc.3	- (1)	(1) - 18 18 18
Other associates	- (6)	(6) 16 n/a n/a n/a
Profit after income tax	229 166	395 436

1. The results differ from the published results of these entities due to the application of IFRS, Group Accounting Policies and acquisition adjustments. This amounted to a $6 million increase for the half year ended 2012 (Mar 2012 half: $18 million reduction; Sep 2011 full year: $81 million increase). Excludes gains or losses on disposal or valuation adjustments

2. During the period the Group elected not to participate in a rights issue. As a result of not participating the Group’s interest was reduced to 18%

Significant influence was established via representation on the Board of Directors

16. Significant events since balance date

There are no significant events from 30 September 2012 to the date of signing of this report.

102

APPENDIX 4E STATEMENT

The directors of Australia and New Zealand Banking Group Limited confirm that the financial information and notes of the consolidated entity set out on pages 86 to 102 are in the process of being audited.

==> picture [118 x 38] intentionally omitted <==

==> picture [65 x 29] intentionally omitted <==

John Morschel Chairman

Michael R P Smith Director

24 October 2012

103

APPENDIX 4E STATEMENT

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104

SUPPLEMENTARY INFORMATION

Capital management – APRA Basel 2

			Movement

			Sep 12 Sep 12
Qualifying Capital		Sep 12 Mar 12 Sep 11	v. Mar 12 v. Sep 11
Tier 1
Shareholders' equity and non-controlling interests		41,220 39,443 37,954	5% 9%
Prudential adjustments to shareholders' equity	Table 1	(3,857) (3,170) (3,479)	22% 11%
Fundamental Tier 1 capital		37,363 36,273 34,475	3% 8%
Deductions	Table 2	(10,839) (10,858) (10,611)	0% 2%
Common Equity Tier 1 capital		26,524 25,415 23,864	4% 11%
Non-innovative Tier 1 capital instruments	Table 11	4,390 5,081 5,111	-14% -14%
Innovative Tier 1 capital instruments	Table 11	1,587 1,592 1,641	0% -3%
Tier 1 capital		32,501 32,088 30,616	1% 6%


Tier 2
Upper Tier 2 capital	Table 3	1,185 1,173 1,228	1% -4%
Subordinated notes	Table 4	5,702 5,757 5,017	-1% 14%
Deductions	Table 2	(2,814) (3,217) (3,071)	-13% -8%
Tier 2 capital		4,073 3,713 3,174	10% 28%


		36,574 35,801 33,790
Totalqualifying capital			2% 8%

Capital adequacy ratios
Common Equity Tier 1		8.8% 8.9% 8.5%
Tier 1		10.8% 11.3% 10.9%
Tier 2		1.4% 1.3% 1.2%
Total		12.2% 12.6% 12.1%

Risk weighted assets	Table 5	300,119 284,836 279,964	5% 7%

105

SUPPLEMENTARY INFORMATION

Capital management, cont’d

			Movement

			Sep 12 Sep 12
			v. Mar 12 v. Sep 11
Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to OnePath policy holders		280 337 358	-17% -22%
Reclassification of preference share capital		(871) (871) (871)	0% 0%
Accumulated retained profits and reserves of insurance, funds
		(1,660) (1,444) (1,686)	15% -2%
management and securitisation entities and associates

Deferred fee revenue including fees deferred as
		415 425 414	-2% 0%
part of loan yields

Hedging reserve		(208) (133) (169)	56% 23%
Available-for-sale reserve		(94) (246) (126)	-62% -25%
Dividend not provided for		(2,149) (1,769) (1,999)	21% 8%
Accrual for Dividend Reinvestment Plans		430 531 600	-19% -28%
Total		(3,857) (3,170) (3,479)	22% 11%

Table 2: Deductions from Tier 1 capital
Unamortised goodwill & other intangibles
		(3,052) (3,017) (3,027)	1% 1%
(excluding OnePath Australia and New Zealand)

Intangible component of investments in
		(2,074) (2,071) (2,071)	0% 0%
OnePath Australia and New Zealand1

Capitalised software		(1,702) (1,660) (1,490)	3% 14%
Capitalised expenses including loan and lease origination fees		(850) (761) (688)	12% 24%
Applicable deferred tax assets (excluding the component relating
		(301) (92) (136)	large large
to the general reserve for impairment of financial assets)

Mark-to-market impact of own credit spread		(44) (40) (128)	10% -66%
Negative AFS reserve		(2) - -	n/a n/a
Sub-total		(8,025) (7,641) (7,540)	5% 6%
Deductions taken 50% from Tier 1 and 50% from Tier 2	Gross 50% 50% 50%
Investment in ANZ insurance subsidiaries	(599) (300) (300) (200)		0% 50%
Investment in funds management entities	(55) (27) (27) (29)		0% -7%
Investment in OnePath Australia	(1,441) (721) (922) (906)
			-22% -20%
and New Zealand

Investment in other Authorised Deposit Taking Institutions	(2,141) (1,070) (1,118) (1,151)
			-4% -7%
and overseas equivalents

Expected losses in excess of eligible provisions	(1,083) (542) (524) (475)		3% 14%
Other deductions	(309) (154) (326) (310)		-53% -50%
Sub-total	(5,628) (2,814) (3,217) (3,071)		-13% -8%
Total	(10,839) (10,858) (10,611)		0% 2%

Table 3: Upper Tier 2 capital
Perpetual subordinated notes	951 943 962		1% -1%
General reserve for impairment of financial assets net of
	234 230 266		2% -12%
attributable deferred tax asset2

Total	1,185 1,173 1,228		1% -4%
Table 4: Subordinated notes3

For capital adequacy calculation purposes, subordinated note issues are reduced by 20% of the original amount over the last four years to maturity and are limited to 50% of Tier 1 capital.

1. Calculation based on prudential requirements

Under Basel 2, this consists of the surplus of the general reserve for impairment of financial assets, net of tax and/or the provisions attributable to the standardised portfolio

The fair value adjustment is excluded for prudential purposes as the prudential standard only permits inclusion of cash received and makes no allowance for hedging

106

SUPPLEMENTARY INFORMATION

Capital management, cont’d

	As at ($M) Movement
	Sep 12 Mar 12 Sep 11 Sep 12 v. Mar 12 Sep 12 v. Sep 11


Table 5: Risk weighted assets
On balance sheet	190,210 186,122 183,039 2% 4%
Commitments	42,807 43,571 43,041 -2% -1%
Contingents	9,962 9,546 9,536 4% 4%
Derivatives	11,896 10,926 13,212 9% -10%
Total credit risk	254,875 250,165 248,828 2% 2%
Market risk - Traded	4,664 4,201 3,046 11% 53%
Market risk - IRRBB	12,455 10,465 8,439 19% 48%
Operational risk	28,125 20,005 19,651 41% 43%
Total risk weighted assets	300,119 284,836 279,964 5% 7%

	As at ($M) Movement
	Sep 12 Sep 12
	Sep 12 Mar 12 Sep 11 v. Mar 12 v. Sep 11
Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate	111,796 101,280 106,120 10% 5%
Sovereign	4,088 4,669 4,365 -12% -6%
Bank	11,077 10,195 9,456 9% 17%
Residential mortgage	42,959 42,684 41,041 1% 5%
Qualifying revolving retail (credit cards)	7,092 7,610 7,468 -7% -5%
Other retail	21,277 20,087 19,240 6% 11%
Credit risk weighted assets subject to Advanced IRB approach
	198289 186525 187690 6% 6%
	, , ,

Credit risk specialised lending exposures subject to slotting criteria
	27628 27903 27757 -1% 0%
	, , ,

Subject to Standardised approach
Corporate	18,168 24,922 22,484 -27% -19%
Residential mortgage	1,812 1,445 845 25% large
Qualifying revolving retail (credit cards)	2,028 1,933 2,344 5% -13%
Other retail	1,165 1,124 1,650 4% -29%
Credit risk weighted assets subject to Standardised approach	23,173 29,424 27,323 -21% -15%


Credit risk weighted assets relating to securitisation exposures	1,170 1,225 1,136 -4% 3%
Credit risk weighted assets relating to equity exposures	1,030 1,235 1,399 -17% -26%
Other assets	3,585 3,853 3,523 -7% 2%
Total credit risk weighted assets	254,875 250,165 248,828 2% 2%

		Regulatory Expected
		Collective Provision Loss
		As at ($M) As at ($M)
		Sep 12 Sep 11 Sep 12 Sep 11
Table 7: Collective provision and regulatory expected loss by division
Australia		1,015 1,058 2,154 1,878
International and Institutional Banking		1,282 1,610 1,446 1,450
New Zealand		413 454 814 896
Global Wealth and Private Banking		11 12 23 21
Group Centre		41 39 - -
Underlying collective provision and regulatory expected loss		2,762 3,173 4,437 4,245
Adjustments between statutory and underlying		3 3 - 16
Collective provision and regulatory expected loss		2,765 3,176 4,437 4,261

107

SUPPLEMENTARY INFORMATION

Capital management, cont’d

		Movement
Table 8: Expected loss in excess of eligible provisions
		Sep 12 Sep 12
		v. Mar 12 v. Sep 11


Basel expected loss
Defaulted	2,168 2,130 1,975	2% 10%
Non-defaulted	2,269 2,304 2,286	-2% -1%
	4,437 4,434 4,261	0% 4%

Less: Qualifying collective provision after tax
Collective provision	(2,765) (2,994) (3,176)	-8% -13%
Non-qualifying collective provision	334 312 375	7% -11%
Standardised collective provision	269 296 340	-9% -21%
Deferred tax asset	625 708 730	-12% -14%
	(1,537) (1,678) (1,731)	-8% -11%

Less: Qualifying individual provision after tax
Individual provision	(1,773) (1,714) (1,697)	3% 4%
Standardised individual provision	268 300 477	-11% -44%
Collective provision on advanced defaulted	(312) (293) (359)	6% -13%
	(1,817) (1,707) (1,579)	6% 15%

Gross deduction	1,083 1,049 951	3% 14%
50/50 deduction (refer table 2)	542 524 475	3% 14%
Table 9: APRA Basel 3 Common Equity Tier 1		Full Year Sep 12 vs Sep 11 7.47% +203bps ($6.0B) -38bps +2bps +5bps -17bps -22bps -13bps -21bps +7bps +106bps -128bps +52bps -76bps +14bps +8bps +6bps +28bps -3bps +55bps 8.02%



APRA Basel 3 Common Equity Tier 1
September 2011 APRA Basel 3 Common Equity Tier 1
Underlying profit after preference share dividends
Risk weighted assets
Portfolio growth and mix
Risk migration and Expected Losses in excess of Eligible Provisions
Portfolio data review
Non-credit risk (excluding Operational Risk model change)
Operational Risk model change
Capital retention in insurance businesses and associates
Capitalised software and intangibles (excluding software write-off)
Other items
Organic Capital Generation
Ordinary share dividends
Dividends reinvested
Ordinary share dividends net of reinvestment
ANZ OnePath Refinance
Sale of shares of VISA Inc.
Other
Capital initiatives and divestments
Other (including non-underlying profit items)
Total Common Equity Tier 1 movement
September 2012 APRA Basel 3 Common Equity Tier 1

108

SUPPLEMENTARY INFORMATION

Table 10: Capital Reconciliation

The following table reconciles the September 2012 APRA Basel 2 capital ratios to the pro forma APRA Basel 3 ratios, based on ANZ’s interpretation of APRA’s September 2012 prudential capital standards. This is then fully aligned to the Basel Committee’s framework including the December 2010 consultation paper.

consultation paper.
	Common Equity
	Tier 1 Capital	Tier 1 Capital	Total Capital
APRA September 2012 Basel 2	8.8%	10.8%	12.2%
Plus: Dividend not provided for (net of DRP)	0.5%	0.5%	0.5%
Less: Tier 2 capital deductions moved to Common Equity Tier 1
Investment in banking associates	(0.4%)	(0.4%)	-
Investment in ANZ insurance entities including OnePath	(0.3%)	(0.3%)	-
Expected losses in excess of eligible provisions1	(0.2%)	(0.2%)	-
Other	-	(0.1%)	(0.1%)
Less: 10% reduction of existing hybrid Tier 1 and Tier 2 securities2	-	(0.2%)	(0.4%)
Less: estimated increase in RWA3	(0.4%)	(0.4%)	(0.5%)
APRA September 2012 Basel 3	8.0%	9.7%	11.7%
Plus: adjustments to fully align to Basel 3
10% allowance for investments in insurance entities and banking associates	0.7%	0.7%	0.7%
Up to 5% allowance for deferred tax assets	0.2%	0.2%	0.2%
Other capital items	0.2%	0.2%	0.2%
Plus: additional APRA Basel 2 conservative RWA methodologies
Mortgage 20% LGD floor and others	0.5%	0.6%	0.6%
IRRBB RWA (APRA Pillar 1 approach)	0.4%	0.4%	0.5%
International fully harmonised September 2012 Basel 3	10.0%	11.8%	13.9%

1. APRA alignment to Basel treatment of Expected Losses in excess of Eligible Provisions, gross of associated deferred tax asset

From 1 January 2013 transitional treatment for existing securities on issue will apply. The maximum that can be included in the respective capital base is 90% of the volume of eligible transitional Tier 1 and Tier 2 securities on issue at 1 January 2013. The cap will reduce by 10 percentage points each year until 1 January 2022

Excludes potential impacts arising from APRA’s yet to be released Basel 3 liquidity reforms

Table 11: Hybrid Tier 1 Capital

ANZ raises hybrid Tier 1 capital to further strengthen the Group’s capital base and supplement its Common Equity Tier 1 capital position, ensuring compliance with APRA’s prudential capital requirements and meeting Group operating targets for Tier 1. The total amount of qualifying hybrid Tier 1 capital is currently known as Residual Tier 1 capital which is limited to 25% of Tier 1 capital. Innovative Tier 1 capital, a sub category of Residual Tier 1 capital, is limited to 15% of Tier 1 capital. On 28 September 2012, APRA released final prudential standards implementing the Basel 3 framework, with Residual Tier 1 capital replaced by additional Tier 1 capital, and the distinction between Innovative and Non-Innovative instruments abolished and the current limits removed, with effect from 1 January 2013.

As at 30 September 2012, ANZ’s hybrid Tier 1 capital usage and instrument details were as follows:

Instrument	$M	% of Net	Limit	Amount in	Accounting	Interest
		Tier 1capital		issue currency	classification	rate
ANZ Convertible						90 day BBSW + 2.50%
Preference Shares(CPS1)	1,081			$1,081 million	Debt	(grosspayequivalent)
ANZ Convertible						90 day BBSW + 3.10%
Preference Shares (CPS2)	1,969			$1,969 million	Debt	(gross pay equivalent)
ANZ Convertible						180 day BBSW + 3.10%
Preference Shares (CPS3)	1,340			$1,340 million	Debt	(gross pay equivalent)
Non-innovative instruments	4,390
Euro Trust Securities	871			€500 million	Equity	Euribor(3 month)+ 0.66%
US Stapled Trust Securities	716			USD750 million	Debt	Coupon: 5.36%
Innovative instruments	1,587	4.9%	15%
Residual Tier 1 capital	5,977	18.4%	25%

109

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest

Averages used in the following tables are predominantly daily averages. Interest income figures are presented on a tax-equivalent basis. Impaired loans are included under the interest earning asset category, ‘loans and advances’. Intra-group interest earning assets and interest bearing liabilities are treated as external assets and liabilities for the geographic segments.

	Half year Sep 12 Half year Mar 12
	Ave bal Int Rate Ave bal Int Rate
	$M $M % $M $M %
Interest earning assets
Due from other financial institutions
Australia	3,163 52 3.3% 3,403 73 4.3%
Asia Pacific, Europe & America	12,740 93 1.5% 12,181 95 1.6%
New Zealand	1,286 6 0.9% 1,732 10 1.2%
Trading and available-for-sale assets
Australia	34,044 668 3.9% 33,092 704 4.3%
Asia Pacific, Europe & America	14,778 128 1.7% 15,267 137 1.8%
New Zealand	9,626 184 3.8% 8,127 168 4.1%
Loans and advances and acceptances
Australia	308,587 10,523 6.8% 295,540 10,877 7.4%
Asia Pacific, Europe & America	44,145 915 4.1% 39,665 850 4.3%
New Zealand	74,947 2,301 6.1% 73,041 2,271 6.2%
Other assets
Australia	4,699 86 3.7% 3,733 90 4.8%
Asia Pacific, Europe & America	27,934 77 0.6% 20,726 98 0.9%
New Zealand	2,212 65 5.9% 2,255 67 5.9%
Intragroup assets
Australia	3,714 269 14.5% 4,920 307 12.5%
Asia Pacific, Europe & America	7,696 (5) -0.1% 6,891 (19) -0.6%
	549,571 15,362 520,573 15,728
Intragroup elimination	(11,410) (264) (11,811) (288)
	538,161 15,098 5.6% 508,762 15,440 6.1%
Non-interest earning assets
Derivatives
Australia	39,210 33,774
Asia Pacific, Europe & America	4,444 5,122
New Zealand	9,979 9,969
Premises and equipment	2,069 2,101
Insurance assets	29,848 30,097
Other assets	23,268 27,165
Provisions for credit impairment
Australia	(3,087) (2,987)
Asia Pacific, Europe & America	(758) (828)
New Zealand	(875) (895)
	104,098 103,518
Total average assets	642,259 612,280

110

SUPPLEMENTARY INFORMATION

	Half year Sep 12 Half year Mar 12
	Ave bal Int Rate Ave bal Int Rate
	$M $M % $M $M %
Interest bearing liabilities
Time deposits
Australia	138,964 3,354 4.8% 130,046 3,468 5.3%
Asia Pacific, Europe & America	65,372 373 1.1% 55,915 368 1.3%
New Zealand	28,188 571 4.1% 27,774 560 4.0%
Savings deposits
Australia	22,242 428 3.8% 21,316 433 4.1%
Asia Pacific, Europe & America	4,250 12 0.6% 4,311 12 0.6%
New Zealand	4,743 79 3.3% 2,772 40 2.9%
Other demand deposits
Australia	77,993 1,341 3.4% 77,169 1,505 3.9%
Asia Pacific, Europe & America	9,763 14 0.3% 9,872 15 0.3%
New Zealand	15,159 194 2.6% 15,111 197 2.6%
Due to other financial institutions
Australia	8,201 127 3.1% 6,416 133 4.1%
Asia Pacific, Europe & America	22,890 97 0.8% 20,357 84 0.8%
New Zealand	2,028 19 1.9% 1,673 13 1.6%
Commercial paper
Australia	9,376 188 4.0% 13,977 322 4.6%
New Zealand	4,176 69 3.3% 3,161 54 3.4%
Borrowing corporations' debt
Australia	158 5 6.3% 282 9 6.4%
New Zealand	1,155 27 4.7% 1,094 27 4.9%
Loan capital, bonds and notes
Australia	65,093 1,692 5.2% 62,147 1,769 5.7%
Asia Pacific, Europe & America	118 1 1.7% 59 1 3.4%
New Zealand	12,851 331 5.2% 13,706 333 4.9%
Other liabilities1
Australia	1,083 67 n/a 3,037 139 n/a
Asia Pacific, Europe & America	1,592 32 n/a 1,197 20 n/a
New Zealand	183 (49) n/a 218 (46) n/a
Intragroup liabilities
New Zealand	11,410 264 4.6% 11,811 288 4.9%
	506,988 9,236 483,421 9,744
Intragroup elimination	(11,410) (264) (11,811) (288)
	495,578 8,972 3.6% 471,610 9,456 4.0%
Non-interest bearing liabilities
Deposits
Australia	5,094 5,112
Asia Pacific, Europe & America	2,481 2,293
New Zealand	3,751 3,976
Derivatives
Australia	35,325 27,331
Asia Pacific, Europe & America	4,864 5,223
New Zealand	9,381 9,034
Insurance Liabilities	28,805 27,968
External unit holder liabilities	4,525 5,033
Other liabilities	11,649 16,379
	105,875 102,349
Total average liabilities	601,453 573,959

1. Includes foreign exchange swap costs

111

SUPPLEMENTARY INFORMATION

	Full year Sep 12 Full year Sep 11
	Ave bal Int Rate Ave bal Int Rate
	$M $M % $M $M %
Interest earning assets
Due from other financial institutions
Australia	3,283 125 3.8% 3,284 152 4.6%
Asia Pacific, Europe & America	12,461 188 1.5% 11,642 127 1.1%
New Zealand	1,509 16 1.1% 1,720 16 0.9%
Trading and available-for-sale assets
Australia	33,568 1,372 4.1% 32,685 1,520 4.7%
Asia Pacific, Europe & America	15,022 265 1.8% 11,460 192 1.7%
New Zealand	8,877 353 4.0% 7,212 336 4.7%
Loans and advances and Acceptances
Australia	302,063 21,400 7.1% 280,821 21,533 7.7%
Asia Pacific, Europe & America	41,905 1,766 4.2% 32,832 1,426 4.3%
New Zealand	73,994 4,572 6.2% 73,736 4,654 6.3%
Other assets
Australia	4,216 175 4.2% 4,370 220 5.0%
Asia Pacific, Europe & America	24,330 174 0.7% 12,305 115 0.9%
New Zealand	2,233 132 5.9% 2,235 152 6.8%
Intragroup assets
Australia	4,318 575 13.3% 2,977 574 19.3%
Asia Pacific, Europe & America	7,293 (24) -0.3% 9,073 9 0.1%
	535,072 31,089 486,352 31,026
Intragroup elimination	(11,611) (551) (12,050) (583)
	523,461 30,538 5.8% 474,302 30,443 6.4%
Non-interest earning assets
Derivatives
Australia	36,492 28,632
Asia Pacific, Europe & America	4,783 4,977
New Zealand	9,974 8,377
Premises and equipment	2,085 2,163
Insurance Assets	29,973 32,448
Other assets	25,217 26,300
Provisions for credit impairment
Australia	(3,037) (3,046)
Asia Pacific, Europe & America	(793) (877)
New Zealand	(885) (973)
	103,809 98,001
Total average assets	627,270 572,303

112

SUPPLEMENTARY INFORMATION

	Full year Sep 12 Full year Sep 11
	Ave bal Int Rate Ave bal Int Rate
	$M $M % $M $M %
Interest bearing liabilities
Time deposits
Australia	134,508 6,821 5.1% 124,080 6,862 5.5%
Asia Pacific, Europe & America	60,643 741 1.2% 46,364 549 1.2%
New Zealand	27,981 1,130 4.0% 29,310 1,305 4.5%
Savings deposits
Australia	21,779 862 4.0% 20,109 821 4.1%
Asia Pacific, Europe & America	4,280 24 0.6% 5,097 23 0.5%
New Zealand	3,757 119 3.2% 2,023 47 2.3%
Other demand deposits
Australia	77,581 2,845 3.7% 66,053 2,646 4.0%
Asia Pacific, Europe & America	9,817 29 0.3% 6,985 28 0.4%
New Zealand	15,135 391 2.6% 13,696 379 2.8%
Due to other financial institutions
Australia	7,308 260 3.6% 9,249 420 4.5%
Asia Pacific, Europe & America	21,624 181 0.8% 16,222 141 0.9%
New Zealand	1,851 32 1.7% 1,352 24 1.8%
Commercial paper
Australia	11,676 510 4.4% 7,570 378 5.0%
New Zealand	3,669 123 3.4% 3,384 111 3.3%
Borrowing corporations' debt
Australia	220 14 6.4% 519 34 6.6%
New Zealand	1,124 55 4.9% 1,190 68 5.7%
Loan capital, bonds and notes
Australia	63,620 3,461 5.4% 67,517 4,102 6.1%
Asia Pacific, Europe & America1	89 2 1.8% 39 - 0.7%
New Zealand	13,278 664 5.0% 15,042 725 4.8%
Other liabilities
Australia	2,060 206 n/a 4,260 328 n/a
Asia Pacific, Europe & America	1,394 53 n/a 745 29 n/a
New Zealand	200 (95) n/a 141 (77) n/a
Intragroup liabilities
New Zealand	11,611 551 4.7% 12,050 583 4.8%
	495,205 18,979 452,997 19,526
Intragroup elimination	(11,611) (551) (12,050) (583)
	483,594 18,428 3.8% 440,947 18,943 4.3%
Non-interest bearing liabilities
Deposits
Australia	5,103 4,947
Asia Pacific, Europe & America	2,387 2,034
New Zealand	3,863 3,718
Derivatives
Australia	31,329 23,437
Asia Pacific, Europe & America	5,044 4,055
New Zealand	9,207 7,067
Insurance Liabilities	28,386 29,285
External unit holder liabilities	4,779 5,476
Other liabilities	14,014 15,470
	104,112 95,489
Total average liabilities	587,706 536,436

1. Includes foreign exchange swap costs

113

SUPPLEMENTARY INFORMATION

	Half Year Full Year
	Sep 12 $M Mar 12 $M Sep 12 $M Sep 11 $M

Total average assets
Australia	433,578 417,450 425,515 398,297
Asia Pacific, Europe & America	118,569 108,114 113,341 89,107
New Zealand	101,522 98,527 100,025 96,949
less intragroup elimination	(11,410) (11,811) (11,611) (12,050)
	642,259 612,280 627,270 572,303
% of total average assets attributable to overseas activities	33.1% 32.6% 32.9% 30.9%

Average interest earning assets
Australia	354,207 340,688 347,448 324,137
Asia Pacific, Europe & America	107,293 94,730 101,011 77,312
New Zealand	88,071 85,155 86,613 84,903
less intragroup elimination	(11,410) (11,811) (11,611) (12,050)
	538,161 508,762 523,461 474,302

Total average liabilities
Australia	405,635 391,639 398,639 374,008
Asia Pacific, Europe & America	112,761 102,364 107,562 83,733
New Zealand	94,467 91,767 93,116 90,745
less intragroup elimination	(11,410) (11,811) (11,611) (12,050)
	601,453 573,959 587,706 536,436
% of total average liabilities attributable to overseas activities	32.6% 31.8% 32.2% 30.3%

Average interest bearing liabilities
Australia	323,110 314,390 318,752 299,357
Asia Pacific, Europe & America	103,985 91,711 97,847 75,452
New Zealand	79,893 77,320 78,606 78,188
less intragroup elimination	(11,410) (11,811) (11,611) (12,050)
	495,578 471,610 483,594 440,947

Total average shareholders' equity1
Ordinary share capital, reserves and retained earnings	39,935 37,450 38,693 34,996
Preference share capital	871 871 871 871
	40,806 38,321 39,564 35,867
Total average liabilities and shareholders' equity	642,259 612,280 627,270 572,303

1. Average shareholders’ equity includes OnePath Australia shares that are eliminated from the closing shareholders’ equity balance of $280 million for September 2012 (Mar 2012: $337 million; Sep 2011: $358 million)

114

SUPPLEMENTARY INFORMATION

	Half Year Full Year
	Sep 12 % Mar 12 % Sep 12 % Sep 11 %


Gross earnings rate1
Australia	6.55 7.07 6.81 7.40
Asia Pacific, Europe & America	2.25 2.45 2.35 2.42
New Zealand	5.81 5.91 5.86 6.07
Total Group	5.61 6.07 5.83 6.42

Interest spread and net interest average margin may be analysed as follows:

Australia
Net interest spread	2.09 2.13 2.10 2.19
Interest attributable to net non-interest bearing items	0.39 0.38 0.39 0.40
Net interest margin - Australia	2.48 2.51 2.49 2.59

Asia Pacific, Europe & America
Net interest spread	1.24 1.36 1.30 1.40
Interest attributable to net non-interest bearing items	0.03 0.03 0.03 0.02
Net interest margin - Asia Pacific, Europe & America	1.27 1.39 1.33 1.42

New Zealand
Net interest spread	2.04 2.12 2.08 2.03
Interest attributable to net non-interest bearing items	0.35 0.35 0.35 0.32
Net interest margin - New Zealand	2.39 2.47 2.43 2.35

Group
Net interest spread	1.99 2.06 2.02 2.12
Interest attributable to net non-interest bearing items	0.29 0.29 0.29 0.30
Net interest margin	2.28 2.35 2.31 2.42
Net interest margin (excluding Global Markets)	2.67 2.74 2.71 2.80

1. Average interest rate received on average interest earning assets

115

SUPPLEMENTARY INFORMATION

Exchange rates

Major exchange rates used in translation of results of offshore controlled entities and branches and investments in associates were as follows:

	Balance sheet	Profit & Loss Average
	As at	Half Year Full Year
	Sep 12 Mar 12 Sep 11	Sep 12 Mar 12 Sep 12 Sep 11
Chinese Yuan	6.5848 6.5530 6.2149	6.4923 6.5376 6.5150 6.7036
Euro	0.8092 0.7791 0.7194	0.8071 0.7758 0.7914 0.7353
Great British Pound	0.6437 0.6510 0.6243	0.6475 0.6569 0.6522 0.6386
Indian Rupee	55.171 53.414 47.599	55.756 52.143 53.949 46.258
Indonesian Rupiah	10,022.6 9,548.1 8,573.0	9,619.9 9,332.8 9,476.4 8,985.7
Malaysian Ringgit	3.2077 3.1890 3.1052	3.1927 3.2068 3.1998 3.1270
New Zealand Dollar	1.2529 1.2697 1.2727	1.2808 1.2959 1.2883 1.3051
Papua New Guinea Kina	2.1773 2.1579 2.1794	2.1191 2.2124 2.1657 2.5413
United States Dollar	1.0462 1.0401 0.9731	1.0237 1.0320 1.0278 1.0251

116

DEFINITIONS

AAS - Australian Accounting Standards.

AASB - Australian Accounting Standards Board.

Collective provision is the Provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision may only be recognised when a loss event has already occurred. Losses expected as a result of future events, no matter how likely, are not recognised.

Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations debt excluding securitisation deposits.

Economic Profit is a risk adjusted profit measure. Economic Profit is determined by adjusting underlying accounting profit with economic credit costs, the benefit of imputation credits and the cost of capital. This measure is used to evaluate business unit performance and is included in determining the variable component of remuneration packages.

Expected loss is determined based on the expected average annual loss of principal over the economic cycle for the current risk profile of the lending portfolio.

IFRS – International Financial Reporting Standards.

Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or where concessional terms have been provided because of the financial difficulties of the customer. Financial Assets are impaired if there is objective evidence of impairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on the expected future cash flows of the individual asset or portfolio of assets.

Impaired commitments and contingencies comprises undrawn facilities and contingent facilities where the customer’s status is defined as impaired.

Impaired loans comprises drawn facilities where the customer’s status is defined as impaired.

Individual provision charge is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments.

Liquid assets are cash and cash equivalent assets. Cash equivalent assets are highly liquid investments with short periods to maturity, are readily convertible to cash at ANZ’s discretion and are subject to an insignificant risk of material changes in value.

Net interest average margin is net interest income as a percentage of average interest earning assets.

Net loans and advances includes gross loans and advances and acceptances and capitalized brokerage/mortgage origination fees, less unearned income and provisions for credit impairment.

Net tangible assets equals share capital and reserves attributable to shareholders of the Group less preference share capital and unamortised intangible assets (including goodwill and software).

Operating expenses excludes the provision for impairment of loans and advances charge.

Operating income includes net interest and other operating income.

Repo discount is a discount applicable on the repurchase by a central bank of an eligible security pursuant to a repurchase agreement.

Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

Revenue includes net interest income and other operating income.

117

DEFINITIONS

Segment review description:

The Group operates and manages its underlying results on a divisional structure with Australia, International & Institutional Banking (IIB), New Zealand and Global Wealth and Private Banking.

Group Centre comprises functions that service the organisation globally.

Australia

The Australia division comprises Retail and Commercial and business units. Retail includes Mortgages, Consumer Cards and Unsecured Lending and Deposits. Commercial includes Esanda, Regional and Commercial Banking, Business Banking and Small Business Banking.

Retail
Retail Distribution delivers banking solutions to customers via the Australian branch network, ANZ Direct and specialist sales channels.
Retail Products is responsible for delivering a range of products including mortgages, credit cards, personal loans, transaction banking, savings accounts and deposits, using capabilities in product, analytics, customer research, segmentation, strategy and marketing. It also provides online and electronic payment solutions for businesses.
- Mortgages provides housing finance to consumers in Australia for both owner occupied and investment purposes.
- Cards and Payments provides consumer and commercial credit cards, personal loans and merchant services.
- Deposits provides transaction banking, savings and investment products, such as term deposits and cash management accounts.
Commercial
Esanda provides motor vehicle and equipment finance and investment products.
Regional Commercial Banking provides a full range of banking services to personal customers and to small business and agribusiness customers in rural and regional Australia, and includes the acquisition of loans and deposits from Landmark Financial Services.
Business Banking provides a full range of banking services, including risk management, to metropolitan based small to medium sized business clients with a turnover of up to A$125 million.
Small Business Banking provides a full range of banking services for metropolitan-based small businesses in Australia with lending up to A$1 million.

International and Institutional Banking

The International and Institutional Banking division comprises Global Institutional, Retail Asia Pacific and Asia Partnerships business units, together with Relationship & Infrastructure.

Global Institutional provides global financial services to government, corporate and institutional clients with a focus on solutions for clients with complex financial needs, based on a deep understanding of their businesses and industries, with particular expertise in natural resources, agriculture and infrastructure. Institutional delivers transaction banking, specialised and relationship lending and markets solutions in Australia, New Zealand, Asia Pacific, Europe and America.
Transaction Banking provides working capital solutions including deposit products, cash transaction banking management, trade finance, international payments, and clearing services principally to institutional and corporate customers.
Global Markets provides risk management services to corporate and institutional clients globally in relation to foreign exchange, interest rates, credit, commodities, debt capital markets, wealth solutions and equity derivatives. Markets provides origination, underwriting, structuring and risk management services, advice and sale of credit and derivative products globally. Markets also manages the Group’s interest rate risk position and liquidity portfolio.
Global Loans (including Corporate Banking) provides term loans, working capital facilities and specialist loan structuring. It provides specialist credit analysis, structuring, execution and ongoing monitoring of strategically significant customer transactions, including project and structured finance, debt structuring and acquisition finance, loan product structuring and management, structured asset and export finance.
Retail which provides retail and small business banking services to customers in the Asia Pacific region and also includes investment and insurance products and services for Asia Pacific customers.
Asia Partnerships which is a portfolio of strategic partnerships in Asia. This includes investments in Indonesia with PT Bank Pan Indonesia, in the Philippines with Metrobank Cards Corporation, in China with Bank of Tianjin and Shanghai Rural Commercial Bank, in Malaysia with AMMB Holdings Berhad and in Vietnam with Saigon Thuong Tin Commercial Joint-Stock (Sacombank) and Saigon Securities Incorporation. During the March 2012 half, the investment in Saigon Thuong Tin Commercial Joint-Stock (Sacombank) was sold.
Relationship & Infrastructure includes client relationship management teams for global institutional and financial institution and corporate customers in Australia and Asia, corporate advisory and central support functions. Relationship and infrastructure also includes businesses within IIB which are discontinued.

118

DEFINITIONS

Segment review description, continued:

New Zealand

The New Zealand division comprises Retail and Commercial business units, and Operations and Support which includes the central support functions (including Treasury funding).

Retail
Includes Mortgages, Credit Cards and Unsecured Lending to personal customers in New Zealand.
Commercial
Commercial & Agri (CommAgri) provides financial solutions through a relationship management model for medium-sized businesses, including agri-business, with a turnover of up to NZ$150 million. Asset Finance (including motor vehicle and equipment finance), operating leases and investment products are provided under the UDC brand.
Small Business Banking provides a full range of banking services to small enterprises, typically with turnover of less than NZ$5 million.

Global Wealth and Private Banking

Private Banking specialises in assisting individuals and families to manage, grow and preserve their wealth. The businesses within Private Banking & Other Wealth include Private Bank, ANZ Trustees, E*Trade, Investment Lending, Super Concepts and Other Wealth.
Funds Banking Management and Insurance includes OnePath Group (in Australia and New Zealand), ANZ Financial Planning, ANZ General insurance, Lender's Mortgage Insurance and Online Investment Account.

Group Centre

Group Centre comprises Global Services & Operations, Group Technology, Group Human Resources, Group Risk, Group Strategy, Group Corporate Affairs, Group Corporate Communications, Group Treasury, Global Internal Audit, Group Finance, and Group Marketing, Innovation and Digital and Shareholder functions.

Underlying profit is a measure of profit which is prepared on a basis other than in accordance with accounting standards. Underlying profit represents the directors’ assessment of the profit for the ongoing business activities of the Group, and is based on guidelines published by the Australian Institute of Company Directors (AICD) and the Financial Services Institute of Australasia (FINSIA). ANZ applies this guidance by adjusting statutory profit to exclude non-core items to arrive at underlying profit, the result for the ongoing business activities of the Group. These adjustments have been determined on a consistent basis with those made in prior periods. The adjustments made in arriving at underlying profit are included in statutory profit which is subject to audit within the context of the Group statutory audit opinion. The Financial Report is in the process of being audited. Underlying profit is not audited, however, the external auditor has informed the Audit Committee that the adjustments, and the presentation thereof, are based on the guidelines released by the Australian Institute of Company Directors (AICD) and the Financial Services Institute of Australasia (FINSIA), and have been determined on a consistent basis with those made in prior periods.

119

ALPHABETICAL INDEX

PAGE

Appendix 4E Statement ..................................................................................................................................................................................................... 103 CEO Overview ....................................................................................................................................................................................................................... 9 CFO Overview...................................................................................................................................................................................................................... 11 Basis of preparation ............................................................................................................................................................................................................. 91 Changes in composition of the Group................................................................................................................................................................................ 102 Condensed Consolidated Balance Sheet............................................................................................................................................................................. 88 Condensed Consolidated Cash Flow Statement.................................................................................................................................................................. 89 Condensed Consolidated Income Statement....................................................................................................................................................................... 86 Condensed Consolidated Statement of Comprehensive Income......................................................................................................................................... 87 Condensed Statement of Changes in Equity........................................................................................................................................................................ 90 Contingent liabilities and contingent assets ....................................................................................................................................................................... 102 Definitions .......................................................................................................................................................................................................................... 117 Deposits and other borrowings............................................................................................................................................................................................. 99 Dividends ............................................................................................................................................................................................................................. 95 Earnings per share............................................................................................................................................................................................................... 96 Geographic review ............................................................................................................................................................................................................... 67 Income ................................................................................................................................................................................................................................. 92 Income tax expense............................................................................................................................................................................................................. 94 Investments in associates .................................................................................................................................................................................................. 102 Loan capital.......................................................................................................................................................................................................................... 99 Media Release ....................................................................................................................................................................................................................... 1 Net loans and advances....................................................................................................................................................................................................... 97 Operating expenses............................................................................................................................................................................................................. 93 Profit reconciliation............................................................................................................................................................................................................... 75 Provision for credit impairment............................................................................................................................................................................................. 98 Segment review ................................................................................................................................................................................................................... 35 Shareholders’ equity .......................................................................................................................................................................................................... 100 Share capital ...................................................................................................................................................................................................................... 100 Significant events since balance date ................................................................................................................................................................................ 102 Snapshot................................................................................................................................................................................................................................ 5 Supplementary Information – Average balance sheet and related interest........................................................................................................................ 110 Supplementary Information – Capital management ........................................................................................................................................................... 105 Supplementary Information – Exchange rates ................................................................................................................................................................... 116

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Australia and New Zealand Banking Group Ltd. — Annual Report 2012

10425_rns_2012-10-24_5e2b8878-1822-4fc6-8590-a685b4982bd3.pdf

Australia and New Zealand Banking Group Limited

Report for the full year ended 30 September 2012

Dividend Reinvestment Plan and Bonus Option Plan

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4E

Media Release

ANZ 2012 Full Year Result

- productivity, super regional strategy drive higher profit and dividend -

Group Balance Sheet and Performance Highlights[3]

MEDIA RELEASE

PERFORMANCE BY DIVISION[8]

AUSTRALIA

INTERNATIONAL AND INSTITUTIONAL BANKING DIVISION (IIB)

NEW ZEALAND (all figures in NZD)

GLOBAL WEALTH AND PRIVATE BANKING[9]

BALANCE SHEET, CAPITAL, LIQUIDITY AND FUNDING

MEDIA RELEASE

ADJUSTMENTS TO STATUTORY PROFIT - NON-CORE ITEMS

CREDIT QUALITY

For media enquiries contact:

For investor and analyst enquiries contact:

CONTENTS

Section 2 – Snapshot

SNAPSHOT

Statutory Results

SNAPSHOT

SNAPSHOT

CEO Overview[1]

Strategy and Performance

Group Strategic Aspiration

Strategic progress 2012

Medium to Long Term Strategic Goals

Summary

CONTENTS

Section 4 – CFO Overview

Non-IFRS information

Underlying profit

The CFO Overview section is reported on an underlying basis.

Divisional performance

Underlying profit by division – September 2012 Half Year v March 2012 Half Year

Australia

International and Institutional Banking

New Zealand

Global Wealth and Private Banking

Group Centre

Australia

International and Institutional Banking

New Zealand

Global Wealth and Private Banking

Group Centre

Review of Group results

Income and expenses

Net interest income

Income and expenses, cont’d

Net interest income, cont’d

Income and expenses, cont’d

Fee income (excluding Global Markets)

Foreign Exchange (excluding Global Markets)

Net Income from Wealth Management

Income and expenses, cont’d

Share of associates profit

Other income (excluding Global Markets)

Fee income (excluding Global Markets)

Foreign Exchange (excluding Global Markets)

Net Income from Wealth Management

Share of associates profit

Other income (excluding Global Markets)

CFO OVERVIEW

Income and expenses, cont’d

Credit risk

Provision for credit impairment charge

Individual provision charge

Credit risk, cont’d

Individual provision charge, cont’d

� September 2012 v March 2012

� September 2012 v September 2011

Collective provision charge/(release)

� September 2012 v March 2012

Australia and New Zealand Banking Group Ltd. Annual Report 2012