Australia and New Zealand Banking Group Ltd. — Capital/Financing Update 2016

Oct 27, 2016

News Release

For Release: 28 October, 2016

ANZ advises of additional FY16 Specified Charges

ANZ will announce its 2016 Full Year financial results on 3 November 2016. In advance of that announcement, the Group advises it will be recording additional specified charges in relation to the following items.

Derivative Credit Valuation Adjustment (CVA) – Institutional Markets Business

ANZ has enhanced the methodology for the calculation of CVA, a valuation adjustment made to determine the fair value of derivative instruments. The refined methodology makes greater use of market credit information and more sophisticated exposure modelling and is aligned with leading market practice. A $168 million[1] charge (net of tax) will be recorded as a reduction to Institutional Markets revenue and will appear in the Specified Items table for comparative purposes. Of this, $25m relates to movements in CVA in the 2016 financial year with the remainder related to a once off adjustment for prior periods to mark to market the current derivative portfolio.

Restructuring Charge

ANZ will be recording a further $100 million (net of tax) in restructuring charges to support the evolution of the Group’s strategy, underpinning further productivity through reshaping the workforce, reducing complexity and duplication. The Group will outline the use of this charge in more detail in the FY16 results materials, and it will appear in the Specified Items table as per the restructuring charge taken in the First Half.

Total Second Half Specified Items Charges

Total Specified Items in the Second Half will be $360m (net of tax). In addition to the items outlined above this includes the second half impact of changes in the application of the Group’s software capitalisation policy and pro forma adjustments for the Esanda Dealer Finance divestment announced in ANZ Interim Results.

Tables were provided in the Consolidated Financial Report and Dividend Announcement at the First Half Result to identify the impact of Specified Items on Cash Profit in order to allow comparison with prior periods. A template in the same format, updated to include the Second Half Specified Items is included with this News Release to assist the market with its preparations ahead of the FY16 results release.

For media enquiries contact: Paul Edwards + 61-434-070101 Stephen Ries +61-409-655551

For investor & analyst enquiries contact: Jill Campbell, Tel: +61-412-047448 Cameron Davis, Tel: +61-421-613819

FOR NOTING

A specified items analysis pack was lodged with the ASX as part of the 1H16 results materials and is available on the ANZ website in the Shareholder Centre within the 1H16 Results materials section http://www.shareholder.anz.com/results-announcement and also in the Analysts Toolkit.

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1 All amounts are in Australian Dollars (AUD)

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

Cash Profit Results - Adjusted Pro-forma

Se ptember 2016 F ull Year

	September 2016 F ull Year
C ash P ro fit Net interest income Other operating income	C ash pro fit So ftware capitalisatio n changes A sian mino rity investment adjustment R estructuring Esanda D ealer F inance divest ment C VA metho do lo gy change T o tal specified items A djusted pro -fo rma
	- - - (31) - (31) - 231 - (78) 237 390
Operating income Operating expenses	- 231 - (109) 237 359 743 - 278 17 - 1,038
Profit before credit impairment and income tax Credit impairment charge	743 231 278 (92) 237 1,397 - - - 23 - 23
Profit before income tax Income tax expense Non-controlling interests	743 231 278 (69) 237 1,420 (221) - (77) 24 (69) (343) - - - - - -
C ash pro fit	522 231 201 (45) 168 1,077

Se ptember 2016 H alf Year

Se ptember 2015 F ull Year

			Esanda D ealer	T o tal
			F inance	specified	A djusted
	C ash pro fit	R estruct uring	divest ment	items	pro -fo rma
	14,616	-	(255)	(255)	14,361
	5,921	-	(51)	(51)	5,870
	20,537	-	(306)	(306)	20,231
	(9,378)	31	43	74	(9,304)
	11,159	31	(263)	(232)	10,927
	(1,205)	-	130	130	(1,075)
	9,954	31	(133)	(102)	9,852
	(2,724)	(9)	40	31	(2,693)
	(14)	-	-	-	(14)
	7,216	22	(93)	(71)	7,145

M arch 2016 H alf Year

	September 2016 H alf Year	M arch 2016 H alf Year
C ash P ro fit Net interest income Other operating income	C ash pro fit So ftware capitalisatio n changes R estructuring Esanda D ealer F inance divest ment C VA metho do lo gy change T o tal specified items A djusted pro -fo rma - - - - - - - - 237 237 - - - 237 237 114 140 6 - 260 114 140 6 237 497 - - 10 - 10 114 140 16 237 507 (33) (40) (5) (69) (147) - - - - - 81 100 11 168 360	C ash pro fit So ftware capitalisatio n changes A sian mino rity investment adjustment R estructuring Esanda D ealer F inance divest ment T o tal specified items A djusted pro -fo rma
		7,568 - - - (31) (31) 7,537 2,748 - 231 - (78) 153 2,901
Operating income Operating expenses		10,316 - 231 - (109) 122 10,438 (5,479) 629 - 138 11 778 (4,701)
Profit before credit impairment and income tax Credit impairment charge		4,837 629 231 138 (98) 900 5,737 (918) - - - 13 13 (905)
Profit before income tax Income tax expense Non-controlling interests		3,919 629 231 138 (85) 913 4,832 (1,133) (188) - (37) 29 (196) (1,329) (4) - - - - - (4)
C ash pro fit		2,782 441 231 101 (56) 717 3,499

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