Australia and New Zealand Banking Group Ltd. — Audit Report / Information 2019

Aug 16, 2019

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News Release

For release: 16 August 2019

ANZ release Pillar 3 for June quarter

ANZ today provided an update on credit quality, capital and Australian housing mortgage flows as part of the scheduled release of its Pillar 3 disclosure statement for quarter ending 30 June 2019 and associated chart pack.

Total provision charge of $209m for the June quarter remained broadly flat compared with the 1H19 quarterly average, while the individual provision increased $68m to $258m. Total loss rate was 13bp (consistent with the 1H19 loss rate of 13bp).

Group Common Equity Tier 1 ratio (APRA Level 2) was 11.8% at the end of June 2019, a ~30bp increase for the June quarter. On a pro-forma basis, inclusive of announced divestments and the recently announced capital changes, ANZ’s Level 2 CET1 ratio is 11.5%[1] .

As indicated at ANZ’s first half result presentation, expectation was for home loan volumes in Australia to decline during the June quarter, with Owner Occupied down 0.2% and Investor down 1.8% (June 2019 compared with March 2019).

Home loan applications improved in July 2019 with actions taken in recent months to clarify credit policy and reduce approval turnaround times having a positive impact.

Commenting on home loan application volumes, ANZ Group Executive Australia Retail & Commercial Mark Hand said: “We have taken action to give our customers greater certainty by improving turnaround times and providing greater clarity to our bankers, mobile lenders and mortgage brokers about our lending policies.

“We are seeing an increase in application volumes following the policy and process changes, the next stage is to maintain that and see it translate into settlements over the coming months,” Mr Hand said.

For media enquiries contact:

Stephen Ries, +61 409 655 551

1 Taking into consideration RWA impacts from APRA RWA floor on New Zealand mortgage and farm lending portfolio (~-20bp), APRA Counterparty Credit Risk (SA-CCR) changes (~-15bp), APRA operational risk capital changes (-18bp) and announced divestments (OnePath P&I, Cambodia JV and PNG Retail, Commercial and SME business) (~20bp)

Australia and New Zealand Banking Group Limited ABN 11 005 357 522

JUNE 2019 BASEL III PILLAR 3 / 3[RD] QUARTER FY19 CHART PACK

16 AUGUST 2019 AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED

CAPITAL & FUNDING

CAPITAL POSITION

• APRA Level 2 CET1 ratio was 11.8% (June 2019), ~30bp increase for the June quarter. On a pro-forma basis, ANZ’s Level 2 CET1 ratio was 11.5% (June 2019)[1]

• APRA Level 1 CET1 ratio was 11.5% (June 2019), ~30bp increase for the June quarter

• Awaiting the outcome of APRA and RBNZ regulatory reviews

• Sale of OnePath Life to Zurich completed May 2019

APRA LEVEL 2 CET1 RATIO - CAPITAL MOVEMENT

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%
0.42 11.81
11.49 0.47 0.20 ~11.5
-0.15
-0.18
-0.20
-0.57
Mar-19 Dividends Asset Organic Jun-19 SA-CCR Op. Risk NZ Risk Announced Pro-
(DRP sales Cap Gen Weights divest- forma
Neutralised) & Other ments
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TLAC

• APRA has announced that it will require D-SIBs, including ANZ, to increase their Total Capital by 3% of RWA by January 2024. This additional requirement is to be satisfied predominantly with Tier 2 capital

• Based on ANZ’s RWA of $396b as at 31 March 2019, the additional 3% equates to an incremental increase of approximately ~$12b of Tier 2 capital

• ANZ completed an AUD$1.75b Tier 2 capital issue in July 2019

APRA LEVEL 2 CET1 RATIO

%

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11.8
10.6 10.8 11.0 11.1 11.4 11.3 11.5
10.1
9.6 9.5 9.8
Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
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1. Taking into consideration RWA impacts from APRA RWA floor on New Zealand mortgage and farm lending portfolio (~-20bp), APRA Counterparty Credit Risk (SA-CCR) changes (~-15bp), APRA operational risk capital changes (-18bp) and announced divestments (OnePath P&I, Cambodia JV and PNG Retail, Commercial and SME business) (~20bp)

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PORTFOLIO MOVEMENT

RISK WEIGHTED ASSETS

TOTAL RISK WEIGHTED ASSETS BY CATEGORY

$b

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409
398 396 396 396
391 391
39
39 37 37 38 38 38
18
17 16 13 12
17 16
152 143 133 141 139 144 147
200 199 204 202 198 201 199
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19
CRWA (ex. Insto) CRWA (Insto) Mkt. & IRRBB RWA Op-RWA
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TOTAL RISK WEIGHTED ASSETS BY DIVISION[1]

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$b
409 398 391 396 391 396 396
24 22 15 12 11 10 9
60 57 56 58 57 60 59
168 159 159 166 164 167 170
157 160 161 161 159 159 158
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19
Australia Institutional New Zealand Other
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CREDIT RWA MOVEMENT DRIVERS

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$b
0.9
0.5 346.1
345.5
-0.8 0.0
Mar-19 FX Risk Lending Mvmt. Data / Jun-19
Methodology
changes
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1. Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 2017 and backdated to September 2016 for the purposes of chart time series

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PORTFOLIO MOVEMENT

CREDIT RISK WEIGHTED ASSETS & EXPOSURE AT DEFAULT (EAD)

EXPOSURE AT DEFAULT (EAD) & CRWA/EAD[1]

$b

CREDIT RWA & EAD MOVEMENT BY ASSET CLASS

$b (Jun-19 vs Mar-19) FX Adjusted

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968 971
944
930
Other
894 899 903
2.3
QRR & Other Retail
RWA drivers include
reduction from lower
volume & increase
1.2
from growth in 90+
days past due
Residential Mortgage
0.5
0.2
39.4 0.0 0.1
36.9
38.0 -0.2
37.3
35.8 35.7 35.6
Sovereign & Banks Includes volume
growth in lower risk
exposures and net
improvement in
portfolio risk profile
Corporate
-3.1
Residential Corporate Sovereign & Bank Other
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19 Jun-19 Mortgage (Housing)
CRWA/EAD % EAD Credit RWA EAD
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1. EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330

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CREDIT QUALITY

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PROVISION CHARGE IP Charge by segment ($m) 258
10
186 194 50
$m Individual Provision charge Collective Provision charge Other 14 16 8 3531 40
Corporate (Adv)
556 556 Resi. Mortgage (Adv) 148 134 158
482 437 Retail (Adv) -6
1Q19 2Q19 3Q19
362
283 243
573 448 599 236 202 206 237 209
462 159 156
319 121
325 308 246 220 210 160 183 186 194 258
43 -17 34 -43 -42 -25 -65 -10 -18 -4 -39 -24 -30 43 -49
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
3Q anualised loss rate 32bp 22bp 12bp 13bp
GROSS IMPAIRED ASSETS [1] 90+ DAYS PAST DUE LOANS [3]
$m %
0.79
4,0003,000 3,172 2,940 2,384 0.56 0.55 0.59 0.62 0.56 0.61 0.62 0.70 0.67 0.70
2,034 2,013 2,022 1,972 0.50
2,000 0.39 0.44
1,000
0
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19
Australia New Zealand Institutional Other [2] Total Group Residential Mortgage Retail (Pillar 3 QRR & Other Retail categories)
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PROVISION CHARGE

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%
0.79
0.70 0.67 0.70
0.56 0.55 0.59 0.62 0.56 0.61 0.62
0.50
0.44
0.39
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-19
Total Group Residential Mortgage Retail (Pillar 3 QRR & Other Retail categories)
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ANZ has commenced implementing revised processes for the identification of impaired assets and a more market responsive collateral valuation methodology for the home loan portfolio in Australia. From July, this will increase the number of home loans being classified as Impaired rather than Past due >= 90 days.

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1. Excluding unsecured 90 days past due; 2. Other includes Retail Asia & Pacific and Australia Wealth; 3. As a % of Exposure at Default

AUSTRALIA HOME LOANS

PORTFOLIO

ANZ MORTGAGE LENDING[1]

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% (12 month rolling growth)
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10.0 Note: ANZ’s portfolio
in July 2019 moved
7.5 -0.4% vs June 2019
5.0
2.5
0.0
-2.5
Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun-
16 17 17 17 17 18 18 18 18 19 19
ANZ total housing System total housing
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• Housing portfolio reduced 0.7% in 3Q19 with owner occupied loans down 0.2% and investor loans down 1.8%[2 ] (June 2019 vs March 2019)

• Since 1H19 results, actions have been implemented to deliver greater clarity and consistency in the home loan application and assessment process. Improved clarity and communication of our credit policies and appetite - internally and to brokers - is delivering better application input quality and volumes

• ANZ ‘Home loan offer so good’ campaign launched July 2019

• These actions have delivered improved turnaround times and higher application volume in July; this will take time to flow into home loan FUM growth

SWITCHING INTEREST ONLY TO PRINCIPAL & INTEREST

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8 4 3Q19
3
4
2
3
9 8 2 8 8
6 7 7 7 6
3 4 4 3
1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23+
Contractual conversions Early conversions Contractual (still to convert)
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1. Source: APRA Monthly banking statistics. 2. Source: ANZ internal portfolio analysis, excluding Equity Manager accounts

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AUSTRALIA HOME LOANS

CREDIT QUALITY

HOME LOAN - 90+ DAYS PAST DUE (DPD) TRENDS[1 ]

(90+ days past due calculated as percentage of Residential Mortgage GLAs, including Non Performing Loans, consistent with First Half and Full Year reporting)

• In 3Q19, 90+ DPD increased 14bp to 114bp

• On a geographic basis, ~9bp of the movement came from NSW and VIC in aggregate

• On a product basis, ~1/3 of the movement came from Interest Only home loan conversion to Principal & Interest

HOME LOANS – 30+ DAYS & 90+ DAYS PAST DUE[1]

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% 30+ DPD % 90+ Owner Occupied 90+ Investor
2.5
2.0
1.5
1.0
0.5
0.0
Sep Sep Sep Sep Sep Sep Sep Jun
12 13 14 15 16 17 18 19
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HOME LOANS – 90+ DAYS PAST DUE2 (BY VINTAGE)

HOME LOANS – 90+ DAYS PAST DUE1 (BY STATE)

%

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FY17 & FY18 vintages continue to perform better than FY15 & FY16
2.5 Note: New home loan volume [3] in FY17 & FY18 was $103b compared with FY15 & FY16 $111b
NSW increased from 27% to 30% of total Australian portfolio across FY15 & FY16
2.0
1.5
1.0
0.5
0.0
6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
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%

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90 DPD performance in While delinquency in WA
3.0 NSW and VIC is tracking remains high, WA contribution
more in line with their to the 90 DPD increase has
2.5 proportion of the portfolio reduced this quarter
2.0
1.5
1.0
0.5
0.0
VIC & TAS NSW & ACT QLD WA SA & NT Portfolio
Mar-12 Mar-14 Mar-16 Mar-18 Jun-19
Mar-13 Mar-15 Mar-17 Mar-19
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Month on book FY15 FY16 FY17 FY18

1. As a percentage of Residential Mortgage GLAs. Includes Non Performing Loans. ANZ delinquencies calculated on a missed payment basis. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances

2. Home loans 90+ dpd vintages % ratio of ever delinquent (measured by # accounts) contains at least 6 application months of that fiscal year contributing to each data point. 3. New Home loan volume includes New sales and net Other financial institution refinances

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FURTHER INFORMATION

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Our Shareholder information shareholder.anz.com

Equity Investors

Jill Campbell Cameron Davis Harsh Vardhan Group General Manager Executive Manager Manager Investor Relations Investor Relations Investor Relations +61 3 8654 7749 +61 3 8654 7716 +61 3 8655 0878 +61 412 047 448 +61 421 613 819 +61 466 848 027 jill.campbell@anz.com cameron.davis@anz.com harsh.vardhan@anz.com

Retail Investors

Debt Investors

Michelle Weerakoon Scott Gifford Mary Karavias Manager Shareholder Head of Debt Investor Associate Director Services & Events Relations Debt Investor Relations +61 3 8654 7682 +61 3 8655 5683 +61 3 8655 4318 +61 411 143 090 +61 434 076 876 michelle.weerakoon@anz.com scott.gifford@anz.com maria.karavias@anz.com

DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate

This presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ’s business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices. When used in this presentation, 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. Such statements constitute “forward-looking statements” for the purposes of the United States Private Securities Litigation Reform Act of 1995. 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 to reflect the occurrence of unanticipated events.

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