Australia and New Zealand Banking Group Ltd. - Earnings Release 2016

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Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Full Year 30 September 2016

Consolidated Financial Report Dividend Announcement and Appendix 4E

The Consolidated Financial Report and Dividend Announcement contains information required by Appendix 4E of the Australian Securities Exchange (ASX) Listing Rules. It should be read in conjunction with ANZ’s 2016 Annual Report, and is lodged with the ASX 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 year ended 30 September 2016	Report for the year ended 30 September 2016
Operating Results1	AUD million
Operating income		-3%	to	20,529
Net statutory profit attributable to shareholders		-24%	to	5,709
Cash profit 2		-18%	to	5,889
Dividends3		Cents		Franked
		per		amount 4
		share		per share
Proposed final dividend		80		100%
Interim dividend		80		100%
Record date for determining entitlements to the proposed 2016 final dividend			15	November 2016
Payment date for the proposed 2016 final dividend			16	December 2016

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 2016 final dividend. For the 2016 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 all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days commencing on 18 November 2016, 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 2016 final dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Daylight Time) on 16 November 2016. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 18 November 2016.

1 Unless otherwise noted, all comparisons are to the year ended 30 September 2015.

2

Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. The non-core items are calculated consistently period on period so as not to discriminate between positive and negative adjustments and fall into one of the three categories: gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group; treasury shares, revaluation of policy liabilities, economic hedging and similar accounting items that represent timing differences that will reverse through earnings in the future; and accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up. Cash profit is not a measure of cash flow or profit determined on a cash basis. The net after tax adjustment was an addition to statutory profit of $180 million made up of several items. Refer pages 83 to 88 for further details.

3 There is no foreign conduit income attributed to the dividends. 4

It is proposed that the final dividend will be fully franked for Australian tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 9 cents per ordinary share.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

APPENDIX 4E

KPMG has audited the financial statements contained within the Australia and New Zealand Banking Group Limited Annual Report and has issued an unmodified audit opinion. The Annual Report will be available on 7 November 2016, and will include a copy of the KPMG audit report. The financial information contained in the financial statements section of this preliminary final report includes financial information extracted from the audited financial statements together with financial information that has not been audited. The cash profit results disclosed as part of this full year results announcement have not been separately audited, however KPMG has informed the Audit Committee that the adjustments have been determined on a consistent basis across each period.

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David M Gonski, AC Chairman

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Shayne C Elliott Director

2 November 2016

RESULTS FOR ANNOUNCEMENT TO THE MARKET

APPENDIX 4E

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4E

Year ended 30 September 2016

*CONTENTS*	*PAGE*
News Release	7
Summary	11
Strategic Review	21
Group Results	25
Divisional Results	53
Profit Reconciliation	83
Condensed Consolidated Financial Statements	89
Supplementary Information	109
Definitions	123
ASX Appendix 4E Cross Reference Index	126
Alphabetical Index	127

This Consolidated Financial Report, Dividend Announcement and Appendix 4E has been prepared for Australia and New Zealand Banking Group Limited (the “Company” or “Parent Entity”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “the consolidated entity”, “the Bank”, “us”, “we” or “our”.

All amounts are in Australian dollars unless otherwise stated. The Company has a formally constituted Audit Committee of the Board of Directors. The signing of the Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 2 November 2016. 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

News Release

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ANZ reports 2016 Full Year Result

ANZ today announced a Statutory Profit after tax for the Financial Year ended 30 September 2016 of $5.7 billion down 24% and a Cash Profit[1] of $5.9 billion down 18%.

The FY16 result reflects a good performance in ANZ’s core domestic franchises and significant reshaping of the business driven by ANZ’s strategic focus to create a simpler, better capitalised and more balanced bank that produces better outcomes for customers and shareholders.

The result reflects an emphasis on delivering strong capital and cost management outcomes together with $1,077 million of charges (after tax) for Specified Items primarily related to reshaping the Group to position it for improved performance in future years.

Adjusted Pro-Forma Cash Profit[2] was $7.0 billion down 3%, while Profit before Provisions increased 6% as the benefits of simplification and rebalancing initiatives began to emerge. Return on equity was stable in the second half of the financial year at 12.2% (adjusted Pro-forma Cash Profit basis).

The Final Dividend of 80 cents per share is consistent with guidance provided at the Interim Profit announcement. The Total Dividend for FY16 is 160 cents per share fully franked down 12%.

Selected Group Financial Information Half Year Full Year	Selected Group Financial Information Half Year Full Year	Selected Group Financial Information Half Year Full Year
Earnings ($m) 2H16 1H16 FY16 FY15
Statutory Profit basis Profit before credit impairment and tax 5,321 4,786 10,107 11,712 StatutoryProfit 2,971 2,738 5,709 7,493
Cash Profit basis1 Profit before credit impairment and tax 5,318 4,837 10,155 11,159 Cash Profit 3,107 2,782 5,889 7,216 Earnings Per Share (cents) 106.7 95.9 202.6 260.3 Return on Equity (%) 10.9 9.7 10.3 14.0 Net Interest Margin (%) 2.00 2.01 2.00 2.04 Total Credit Impairment Charge as a % of avg GLAs (%) 0.36% 0.32% 0.34% 0.22% Adjusted Pro-forma Cash Profit basis2 Profit before credit impairment and tax 5,815 5,737 11,552 10,927 Adjusted Pro-forma Cash Profit 3,467 3,499 6,966 7,145 Operating expenses to income (CTI, %) 44.6% 45.0% 44.8% 46.0% Earnings Per Share (cents) 119.1 120.6 239.7 257.8 Return on Equity (%) 12.2% 12.2% 12.2% 13.8%
Selected Group Financial Information
Credit Quality Sep-16 Mar-16 Sep-15
Collective Provision as a % of Credit RWA (%) Gross impaired assets as a % of GLAs (%)	0.82% 0.86%	0.85%
	0.55% 0.51%	0.47%
Balance sheet ($b) Sep-16 Mar-16 Sep-15
Gross Loans and Advances (GLAs) Total Risk Weighted Assets (RWAs) Customer Deposits Leverage Ratio (%) Common Equity Tier 1 Ratio (%) Common Equity Tier 1 Ratio Internationally Comparable Basel 3 (%)	580.0 565.9 574.3
	408.6 388.3 401.9
	449.6 446.8 444.6
	5.3% 5.1% 5.1%
	9.6% 9.8% 9.6%
	14.5% 14.0% 13.2%
Other	Sep-16 Mar-16 Sep-15
Full time equivalent staff(FTE)	46,554 48,896 50,152

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

ANZ Chief Executive Officer Shayne Elliott said: “This year we delivered another good performance in Australia and New Zealand with our consumer and small business franchises producing strong results based on a disciplined approach to market share and tight cost management.

“We also took steps to create a better experience for our customers and to compete efficiently in the digital age. This included the successful launch of Apple Pay and Android Pay in Australia and Apple Pay in New Zealand. These are market-leading initiatives that have delivered good growth in new to bank customers.

“In Institutional Banking there has also been significant progress in improving returns and building a simpler business focussed on regional trade and capital flows. This included a meaningful reduction in low yielding assets and improved productivity.

“We are also making changes to ensure we are fairer and more balanced in the way we deal with customers and to demonstrate our commitment to community responsibility. The current discussion about the banking sector in Australia however shows that we still have more to do to shift our culture and evolve the way we do business,” he said.

Strategic Priorities		FY16 Progress Highlights
Create a simpler, better		Portfolio rebalancing underway, retail and commercial RWAs
capitalised, better balanced		increased (6%)3, Institutional RWAs reduced (down 15%).
and more agile bank.		The improved composition of CRWA, up $2 billion (1%), was
Reduce operating costs and risks by removing product and management complexity, exiting low return and non-core		driven by $8 billion of lending growth in retail and commercial in Australia and New Zealand, and a $26 billion increase in Australian Mortgages from regulatory changes, largely offset by a $21 billion decrease in Institutional lending and a $5 billion decrease from the
businesses and reducing our reliance on low-returning aspects of Institutional banking in particular.	 	sale of the Esanda dealer finance portfolio. CET1 ratio 9.6% at 30 September; organic capital generation 106 bps in the second half. Further simplified and refocused the business, reducing duplication, delivered reduction in FTE (down 7% for the year).
		Sold the Esanda dealer finance portfolio, announced the sale of the
		Retail & Wealth businesses in five Asian countries.
		Pursuing a range of strategic and capital market options in relation
		to the Wealth businesses in Australia.
		Reset the 2016 dividend to provide the basis to return to a
		sustainable, fully franked payout ratio of 60-65% of Cash Profit4
		over time.
Focus our efforts on attractive		Focus on growing RWA in higher returning segments improved
areas where we can carve out		Institutional (excluding Markets) margins by 13 bps.
a winning position.		Grew the high return Institutional cash management business,
Make buying and owning a home or starting, running and growing a small business in Australia and		increasing revenue by 6%; deposit balances by $1 billion up 1%. Australia and New Zealand Retail and Commercial customer numbers increased by 262,000.
New Zealand easy. Be the best bank in the world for customers		Australia home loan lending up 7%, moved to #3 market share, maintained #1 market share position in New Zealand.
driven by the movement of goods		Small business lending in Australia up 9%, New Zealand up 11%.
and capital in our region.
Drive a purpose and values led		Revised ANZ’s Corporate Sustainability Framework with focus on
transformation of the Bank.		fair and responsible banking.
Create a stronger sense of core purpose, ethics and fairness, investing in leaders who can help sense and navigate a rapidly changing environment.	   	Supported ABA conduct and remuneration reviews. Redesigned ANZ’s performance management process to strengthen alignment to strategy and values. Reviewed approach to remuneration including new guidelines on equity clawback. Invested in MIT Digital Leadership Program and Leadership
		Pathway programs.
		Strengthened the Whistleblower Protection Policy.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

Build a superior everyday		Established new Digital Banking Division to support growth in
experience for our people and		priority areas.
Customers to compete in the		First major bank to launch Apple Pay and Android Pay in Australia
digital age.		and Apple Pay in New Zealand.
Build more convenient, engaging banking solutions to simplify the lives of customers and our people.	 	Implemented multi-channel digital platform for Australian retail banking, more than 1 million customers using goMoney apps on the new platform. Launched Digital Customer Identity Verification.

Wealth and Asia Retail & Wealth

At the 2016 Interim Result, ANZ advised that it was conducting strategic reviews of the Group’s Retail and Wealth business in Asia, and its Wealth businesses in Australia and New Zealand. The reviews considered each business within the context of the overall Group strategy including capital efficiency.

ANZ announced on 31 October 2016 that it had entered into an agreement with DBS to sell the Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia. ANZ intends to clarify plans for the remaining businesses in Retail and Wealth in Asia during FY17.

The strategic review of ANZ’s Wealth businesses in Australia and New Zealand concluded that while the distribution of high quality Wealth products and services should remain a core component of the Group’s overall customer proposition, ANZ does not need to be a manufacturer of Life and Investments products.

The initial focus will be on the Australian Wealth business where ANZ is exploring a range of possible strategic and capital market options that will maintain strong outcomes for customers. This includes the possible sale of the life insurance, advice and superannuation and investments businesses in Australia. ANZ will pursue a disciplined approach to this process and will update the market as appropriate.

The Wealth business in New Zealand will be considered separately during 2017.

Capital and Dividend

The APRA CET1 capital ratio at 30 September was 9.6% (14.5% on an Internationally Comparable basis). Organic capital generation of 106 basis points in the second half was 33 basis points higher than the second half average of the past 4 years, primarily driven by Credit RWA reduction (excluding foreign exchange impacts) of $12 billion in the Institutional business.

The Final Dividend of 80 cents per share is the same as for the first half and is in line with guidance. The total dividend for FY16 of 160 cents per share represents a Dividend Payout Ratio of 81.9% on a Statutory Profit basis and 79.4% on a Cash Profit basis.

ANZ is gradually consolidating to its historical payout range of 60-65% of annual Cash Profit which ANZ believes provides a more sustainable base reflecting the greater demands for capital arising from increased regulatory requirements. On an Adjusted Pro-forma Cash Profit basis the Dividend Payout Ratio was 67.1%.

Specified Items

In FY16 ANZ recognised the impact of a number of items collectively referred to as Specified Items which form part of the Group’s Cash Profit. The items are primarily related to initiatives undertaken to reposition the Group for stronger profit before provisions growth in the future. Adjusted ProForma Cash Profit information has also been provided to allow the market to better analyse the ongoing operations of the Group.

ANZ recorded $1,077 million (after tax) of specified items charges in Cash Profit during the Financial Year, of which almost half ($522 million) related to a change in the application of the software capitalisation policy. This change in policy effected a 24% reduction in the Capitalised Software balance year on year.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

One third of the Specified Items charges occurred in the second half, including an additional restructuring charge of $100 million (post tax) and a derivative credit valuation adjustment (CVA) of $168 million (after tax).

The restructuring charge supports the evolution of the Group’s strategy and will underpin further productivity through reshaping of the workforce to reduce complexity and duplication, and to align with the changing emphasis in Institutional. ANZ has refined the methodology for the calculation of CVA, a component of valuing derivative instruments in the Markets business. The updated methodology makes greater use of market credit information and more sophisticated exposure modelling and is in line with leading market practice.

A more detailed information pack on specified items is on www.anz.com within the FY16 results materials.

Credit Quality

The total provision charge of $1.96 billion ($1.94 billion individual provision charge and a $17 million collective provision charge) equates to a loss rate of 34 basis point of which 3 bps is attributable to the recently announced settlement of the Oswal case. Gross impaired assets increased to $3.17 billion with new impaired assets up 3% compared to the prior half.

While in aggregate the credit environment is broadly stable, pockets of weakness continue to work their way through the economy, largely reflecting stress moving through the resources and resources related sectors. The stress appears to have now largely passed through the Institutional market and is progressively moving through the Commercial and Retail sectors. ANZ therefore expects provision charges to remain broadly the same in the 2017 Financial Year as a percentage of gross lending assets.

Outlook

Commenting on the outlook Mr Elliott said: “We are pleased with the initial progress that has been made this year in reshaping our strategy and setting ANZ on a path towards a sustainable improvement in customer outcomes and shareholder returns.

“We have a clear strategy and a consistent focus on the simplification of our business and actively rebalancing our portfolio. Importantly we have the organisation aligned and we have established momentum in relation to the work that still needs to be done. This sets us up well to increase the pace of execution in 2017 and to deliver a better bank for customers and for shareholders,” he said.

Video interviews with Shayne Elliott and Chief Financial Officer Michelle Jablko discussing the 2016 Full Year result announcement are available at www.bluenotes.anz.com.

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

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

Footnotes:

Cash Profit excludes non-core items included in Statutory Profit and is provided to assist readers in understanding the results of the ongoing business activities of the Group. The net after tax adjustment was an addition to Statutory Profit of $130 million comprised of several items. All comparisons are to the full year end September 2015 unless otherwise noted.

Adjusted Pro-forma Cash Profit refers to Cash Profit adjusted to remove the impacts of Specified Items including the impact of software capitalisation policy changes, Asia Partnership impairment charge (AMMB) and gain of cessation of equity accounting (Bank of Tianjin), restructuring expenses, sale of Esanda Dealer Finance business, and derivative credit valuation adjustment. Further detail provided in the ANZ Full Year 2016 consolidated Financial Report.

Excludes the impact of increased capital requirements for Australian residential mortgages from July 2016 and the divestment of Esanda Dealer Finance. 4. Previously 65 to 70 per cent of Cash Profit.

SUMMARY

Summary

Statutory Profit Results Cash Profit Results Key Balance Sheet Metrics Cash Profit Results – FX Adjusted Cash Profit Results – Adjusted Pro-forma Other Non-financial Information

SUMMARY

Statutory Profit Results

Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 7,527 7,568 -1% 2,737 2,697 1%	Full Year
		Sep 16 $M Sep 15 $M Movt 15,095 14,616 3% 5,434 6,474 -16%
Operating income Operating expenses	10,264 10,265 0% (4,943) (5,479) -10%	20,529 21,090 -3% (10,422) (9,378) 11%
Profit before credit impairment and income tax Credit impairment charge	5,321 4,786 11% (1,025) (904) 13%	10,107 11,712 -14% (1,929) (1,179) 64%
Profit before income tax Income tax expense Non-controlling interests	4,296 3,882 11% (1,318) (1,140) 16% (7) (4) 75%	8,178 10,533 -22% (2,458) (3,026) -19% (11) (14) -21%
Profit attributable to shareholders of the Company	2,971 2,738 9%	5,709 7,493 -24%

Earnings Per Ordinary Share (cents) Reference Page Basic 101 Diluted 101	Half Year Sep 16 Mar 16 Movt 102.6 94.8 8% 98.3 89.7 10%	Half Year Sep 16 Mar 16 Movt 102.6 94.8 8% 98.3 89.7 10%	Full Year	Full Year
			Sep 16 Sep 15 Movt 197.4 271.5 -27% 189.3 257.2 -26%
Ordinary Share Dividends (cents) Interim - 100% franked1 Final - 100% franked1	Reference Page 100 100	Half Year	Mar 16 80 -	Full Year Sep 16 Sep 15 80 86 80 95 160 181 81.9% 68.6% - 1 10.0% 14.5% 0.63% 0.88% 2.00% 2.04% 50.8% 44.5% 1.15% 1.10% 1,912 1,084 17 95 1,929 1,179 0.33% 0.19% 0.34% 0.21%
		Sep 16 - 80
Total - 100% franked1 Ordinary share dividend payout ratio2 Preference Share Dividend ($M) Dividend paid3	100 100 100	80 78.8% -	80 85.2% -
Profitability Ratios Return on average ordinary shareholders' equity4 Return on average assets Net interest margin	28	10.5% 0.65% 2.00%	9.5% 0.61% 2.01%
Efficiency Ratios Operating expenses to operating income Operating expenses to average assets		48.2% 1.08%	53.4% 1.22%
Credit Impairment Charge/(Release) Individual credit impairment charge ($M) Collective credit impairment charge/(release) ($M)		1,034 (9)	878 26
Total credit impairment charge ($M) 103 Individual credit impairment charge as a % of average gross loans and advances5 Total credit impairment charge as a % of average gross loans and advances5		1,025 0.36% 0.36%	904 0.31% 0.31%

1. Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 9 cents per ordinary share for the proposed 2016 final dividend (2016 interim dividend: NZD 10 cents; 2015 final dividend: NZD 11 cents; 2015 interim dividend: NZD 10 cents).

Dividend payout ratio is calculated using the proposed 2016 final, 2016 interim, 2015 final and 2015 interim dividends.

Represents dividends paid on Euro Trust Securities (preference shares) issued on 13 December 2004. The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014.

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

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

SUMMARY

Cash Profit Results 1 Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 7,527 7,568 -1% 2,734 2,748 -1%	Half Year Sep 16 $M Mar 16 $M Movt 7,527 7,568 -1% 2,734 2,748 -1%	Full Year Sep 16 $M Sep 15 $M Movt 15,095 14,616 3% 5,482 5,921 -7% 20,577 20,537 0% (10,422) (9,378) 11% 10,155 11,159 -9% (1,956) (1,205) 62% 8,199 9,954 -18% (2,299) (2,724) -16% (11) (14) -21% 5,889 7,216 -18% Full Year	Full Year Sep 16 $M Sep 15 $M Movt 15,095 14,616 3% 5,482 5,921 -7% 20,577 20,537 0% (10,422) (9,378) 11% 10,155 11,159 -9% (1,956) (1,205) 62% 8,199 9,954 -18% (2,299) (2,724) -16% (11) (14) -21% 5,889 7,216 -18% Full Year





Operating income Operating expenses	10,261 10,316 -1% (4,943) (5,479) -10%

Profit before credit impairment and income tax Credit impairment charge	5,318 4,837 10% (1,038) (918) 13%

Profit before income tax Income tax expense Non-controlling interests	4,280 3,919 9% (1,166) (1,133) 3% (7) (4) 75%


Cash profit	3,107 2,782 12%
Earnings Per Ordinary Share (cents) Reference Page Basic 43 Diluted 43	Half Year Sep 16 Mar 16 Movt 106.7 95.9 11% 102.0 90.7 12%
			Sep 16 Sep 15 Movt 202.6 260.3 -22% 194.1 247.0 -21%
Ordinary Share Dividends Ordinary share dividend payout ratio2	Reference Page 44	Half Year		Full Year Sep 16 Sep 15 79.4% 71.2% 10.3% 14.0% 0.65% 0.85% 2.00% 2.04% 121,091 141,621 50.6% 45.7% 1.15% 1.10% 1,939 1,110 17 95 1,956 1,205 0.34% 0.20% 0.34% 0.22%
Profitability Ratios Return on average ordinary shareholders' equity3 Return on average assets Net interest margin Profit per average FTE ($)	28	10.9% 9.7% 0.68% 0.62% 2.00% 2.01% 65,426 55,889
Efficiency Ratios Operating expenses to operating income Operating expenses to average assets		48.2% 53.1% 1.08% 1.22%
Credit Impairment Charge/(Release) Individual credit impairment charge ($M) Collective credit impairment charge/(release) ($M)	37 37	1,047 892 (9) 26
Total credit impairment charge ($M) 37 Individual credit impairment charge as a % of average gross loans and advances4 Total credit impairment charge as a % of average gross loans and advances4		1,038 918 0.36% 0.31% 0.36% 0.32%

Cash Profit/(Loss) By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 1,794 1,779 1% 425 632 -33% 626 641 -2% 159 168 -5% 95 57 67% 8 (495) large	Full Year
		Sep 16 $M Sep 15 $M Movt 3,573 3,413 5% 1,057 1,967 -46% 1,267 1,254 1% 327 428 -24% 152 139 9% (487) 15 large
Cash profit by division	3,107 2,782 12%	5,889 7,216 -18%

1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the results of the ongoing business activities of the Group. Refer to pages 83 to 88 for the reconciliation between statutory and cash profit.

Dividend payout ratio is calculated using the proposed 2016 final, 2016 interim, 2015 final and 2015 interim dividends. 3. Average ordinary shareholders’ equity excludes non-controlling interests and preference shares. 4.

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

SUMMARY

Key Balance Sheet Metrics

Reference Page Capital Management Common Equity Tier 1 - APRA Basel 3 48 - Internationally Comparable Basel 31 48 Credit risk weighted assets ($B)2 112 Total risk weighted assets ($B)2 48 Leverage Ratio 51	As at Sep 16 Mar 16 Sep 15 9.6% 9.8% 9.6% 14.5% 14.0% 13.2% 352.0 334.3 349.8 408.6 388.3 401.9 5.3% 5.1% 5.1%	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 5% 1% 5% 2%
Balance Sheet: Key Items Gross loans and advances ($B)3 Net loans and advances ($B)3 Total assets ($B) Customer deposits ($B) Total equity ($B)	580.0 565.9 574.3 575.9 561.8 570.2 914.9 895.3 889.9 449.6 446.8 444.6 57.9 56.5 57.4	3% 1% 3% 1% 2% 3% 1% 1% 3% 1%
Liquidity Risk Reference Page Liquidity Coverage Ratio 46	Half Year Average Sep 16 Mar 16 Sep 15 125% 126% 124%	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -1% 1%
Reference Page Impaired Assets Gross impaired assets ($M) 39 Gross impaired assets as a % of gross loans and advances3 Net impaired assets ($M) 39 Net impaired assets as a % of shareholders' equity Individual provision ($M) 38 Individual provision as a % of gross impaired assets Collective provision ($M) 38 Collective provision as a % of credit risk weighted assets	As at Sep 16 Mar 16 Sep 15 3,173 2,883 2,719 0.55% 0.51% 0.47% 1,866 1,645 1,658 3.2% 2.9% 2.9% 1,307 1,238 1,061 41.2% 42.9% 39.0% 2,876 2,862 2,956 0.82% 0.86% 0.85%	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 10% 17% 13% 13% 6% 23% 0% -3%
Net Assets Net tangible assets attributable to ordinary shareholders ($B) Net tangible assets per ordinary share ($)	50.1 48.8 48.9 17.13 16.72 16.86	3% 2% 2% 2%
Net Loans And Advances By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	As at Sep 16 $B Mar 16 $B Sep 15 $B 327.1 321.4 315.1 125.9 125.6 142.2 107.9 99.2 97.0 2.0 1.9 1.9 13.4 13.9 14.5 (0.4) (0.2) (0.5)	Movement Sep 16 v. Mar 16 Sep 16 v. Sep 15 2% 4% 0% -11% 9% 11% 5% 5% -4% -8% 100% -20% 3% 1%







Net loans and advances by division3	575.9 561.8 570.2

1. See page 50 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.

Includes $25.9 billion increase in credit risk weighted assets associated with increased capital requirements for Australian residential mortgages introduced in July 2016. 3.

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

SUMMARY

Cash Profit Results – FX Adjusted

The following tables present the Group’s cash profit results neutralised for the impact of foreign currency translation. Comparative data has been adjusted to remove the translation impact of foreign exchange movements by retranslating prior period comparatives at current period foreign exchange rates. Refer to page 41 for further details on the impact of exchange rate movements.

Cash Profit - September 2016 Full Year vs September 2015 Full Year

Net interest income Other operating income	Full Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Sep 15 $M Sep 15 $M Sep 15 $M 15,095 14,616 96 14,712 5,482 5,921 225 6,146	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Sep 15 Sep 16 v. Sep 15 Sep 16 v. Sep 15 3% 0% 3% -7% 4% -11%
Operating income Operating expenses	20,577 20,537 321 20,858 (10,422) (9,378) (114) (9,492)	0% 1% -1% 11% 1% 10%
Profit before credit impairment and income tax Credit impairment charge	10,155 11,159 207 11,366 (1,956) (1,205) (9) (1,214)	-9% 2% -11% 62% 1% 61%
Profit before income tax Income tax expense Non-controlling interests	8,199 9,954 198 10,152 (2,299) (2,724) (56) (2,780) (11) (14) (1) (15)	-18% 1% -19% -16% 1% -17% -21% 6% -27%
Cash profit	5,889 7,216 141 7,357	-18% 2% -20%

Cash Profit - September 2016 Half Year vs March 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Mar 16 $M Mar 16 $M Mar 16 $M 7,527 7,568 (7) 7,561 2,734 2,748 (25) 2,723	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Mar 16 Sep 16 v. Mar 16 Sep 16 v. Mar 16 -1% -1% 0% -1% -1% 0%
Operating income Operating expenses	10,261 10,316 (32) 10,284 (4,943) (5,479) 35 (5,444)	-1% -1% 0% -10% -1% -9%
Profit before credit impairment and income tax Credit impairment charge	5,318 4,837 3 4,840 (1,038) (918) 7 (911)	10% 0% 10% 13% -1% 14%
Profit before income tax Income tax expense Non-controlling interests	4,280 3,919 10 3,929 (1,166) (1,133) (6) (1,139) (7) (4) - (4)	9% 0% 9% 3% 1% 2% 75% 0% 75%
Cash profit	3,107 2,782 4 2,786	12% 0% 12%

SUMMARY

Cash Profit Results – Adjusted Pro-forma

During the year, the Group recognised the impact of a number of items collectively referred to as ‘specified items’ which form part of the Group’s cash profit. The tables on the following pages present the Group’s cash profit adjusted for these items to assist readers to understand the estimated growth rates of the ongoing business performance of the Group. The “Cash Profit Results - Adjusted Pro-forma” is not subject to review or audit by the external auditor.

 Software capitalisation changes

During the March 2016 half, the Board resolved to amend the application of the Group’s software capitalisation policy by increasing the threshold for capitalisation of software development costs to $20 million, reflecting the increasingly shorter useful life of smaller items of software, and directly expensing more project related costs.

For software assets at 1 October 2015 with an original cost below the revised threshold, the carrying values were expensed through an accelerated amortisation charge of $556 million in the March half (recognised in TSO and Group Centre). Of this, $183 million (September half: $95 million; March half: $88 million) would otherwise have been amortised in the September 2016 full year (i.e. the full year amortisation charge increased by $373 million).

In addition, application of the software capitalisation changes also increased operating expenses by $370 million for the September 2016 full year (September half: $209 million; March half: $161 million) relating to software development costs that would otherwise have been capitalised and amortised in future periods.

Going forward, these changes will result in higher project expenditure being expensed in the profit and loss which will be offset by lower amortisation charges.

Operating expense increase/(decrease) by division Australia Institutional New Zealand1 Wealth Australia1 Asia Retail & Pacific TSO and Group Centre	September 2016 Full Year
	Accelerated amortisation Amortisation benefit Application of policy to new project expenditure Total impact $M $M $M $M - (42) 123 81 - (54) 78 24 - (17) 51 34 - (28) 37 9 - (7) 3 (4) 556 (35) 78 599
Total	556 (183) 370 743

Operating expense increase/(decrease) by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	September 2016 Half Year
	Accelerated amortisation Amortisation benefit Application of policy to new project expenditure Total impact $M $M $M $M - (29) 74 45 - (28) 48 20 - (10) 31 21 - (14) 21 7 - (3) 3 - - (11) 32 21
Total	- (95) 209 114

Operating expense increase/(decrease) by division Australia Institutional New Zealand1 Wealth Australia1 Asia Retail & Pacific TSO and Group Centre	March 2016 Half Year
	Accelerated amortisation Amortisation benefit Application of policy to new project expenditure Total impact $M $M $M $M - (13) 49 36 - (26) 30 4 - (7) 20 13 - (14) 16 2 - (4) - (4) 556 (24) 46 578
Total	556 (88) 161 629

1. The impact of software capitalisation changes previously reported for the New Zealand and Global Wealth divisions in the March 2016 half have changed due to restatements resulting from the Global Wealth organisational changes.

SUMMARY

 Asian minority investments adjustments

During the March 2016 half year, the Group recognised a $260 million impairment to its equity accounted investment in AMMB Holdings Berhad (Ambank) bringing the carrying value in line with value-in-use calculation (refer Note 1 (iii) of the Condensed Consolidated Financial Statements).

On 30 March 2016, Bank of Tianjin (BoT), an equity accounted investment, completed a capital raising and listing on the Hong Kong Stock Exchange through an Initial Public Offering (IPO). As the Group did not participate in the capital raising, its ownership interest decreased from 14% to 12%. As a consequence, the Group ceased equity accounting for the investment in BoT and commenced accounting for it as an available-for-sale asset. A net gain of $29 million was recognised in relation to the remeasurement of the investment to fair value and recycling the associated equity accounted reserves.

 Restructuring

The Group is in the process of reshaping the workforce in response to its evolving strategy. This includes simplification of the Institutional and Wealth businesses, restructure of Asia Retail & Pacific, and simplification and digitisation in Australia, New Zealand and TSO and Group Centre. A restructuring expense of $278 million was recognised in the September 2016 full year.

Restructuring expense by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M 27 22 39 51 16 2 7 13 - 12 51 38	Full Year
		Sep 16 $M Sep 15 $M 49 2 90 8 18 3 20 1 12 - 89 17
Total	140 138	278 31

 Esanda Dealer Finance divestment

On 1 November 2015, the Group sold the Esanda Dealer Finance portfolio with the majority of the business transferred by 31 December 2015. Proforma results have been prepared on the assumption that the sale which occurred during the March 2016 half took effect from 1 October 2014, effectively restating the Group’s cash profit for the March 2016 half and the September 2015 full year.

 Derivative CVA methodology change

In determining the fair value of a derivative, the Group recognises a derivative credit valuation adjustment (CVA) to reflect the probability that the counterparty may default and the Group may not receive the full market value of outstanding transactions. It represents an estimate of the credit adjustment a market participant would include when deriving a purchase price to acquire the exposure. During the September half, the Group revised its methodology for determining the derivative credit valuation adjustment to make greater use of market information and enhanced modelling, and to align with leading market practice. The impact to cash profit before income tax associated with this methodology change is an incremental derivative credit valuation adjustment charge of $237 million.

September 2016 Full Year September 2015 Full Year Sep 16 v. Sep 15 Cash profit Software capitalisation changes Asian minority investment adjust Restruct- uring Esanda Dealer Finance divest- ment CVA methodo- logy change Total specified items Adjusted pro-forma Cash profit Restruct- uring Esanda Dealer Finance divest- ment Total specified items Adjusted pro-forma Adjusted pro-forma, FX unadj Adjusted pro-forma, FX adj Cash Profit Net interest income 15,095 - - - (31) - (31) 15,064 14,616 - (255) (255) 14,361 5% 4% Other operating income 5,482 - 231 - (78) 237 390 5,872 5,921 - (51) (51) 5,870 0% -4%	September 2016 Full Year September 2015 Full Year Sep 16 v. Sep 15 Cash profit Software capitalisation changes Asian minority investment adjust Restruct- uring Esanda Dealer Finance divest- ment CVA methodo- logy change Total specified items Adjusted pro-forma Cash profit Restruct- uring Esanda Dealer Finance divest- ment Total specified items Adjusted pro-forma Adjusted pro-forma, FX unadj Adjusted pro-forma, FX adj Cash Profit Net interest income 15,095 - - - (31) - (31) 15,064 14,616 - (255) (255) 14,361 5% 4% Other operating income 5,482 - 231 - (78) 237 390 5,872 5,921 - (51) (51) 5,870 0% -4%	20,231 3% 2% (9,304) 1% 0%	10,927 6% 4% (1,075) 80% 78%	9,852 -2% -4% (2,707) -2% -4%	6,966 7,216 22 (93) (71) 7,145 -3% -4%
Total specified items	(255) (51)	(306) 74	(232) 130	(102) 31
		Operating income 20,577 - 231 - (109) 237 359 20,936 20,537 - (306) Operating expenses (10,422) 743 - 278 17 - 1,038 (9,384) (9,378) 31 43	Profit before credit impairment and income tax 10,155 743 231 278 (92) 237 1,397 11,552 11,159 31 (263) Credit impairment charge (1,956) - - - 23 - 23 (1,933) (1,205) - 130	Profit before income tax 8,199 743 231 278 (69) 237 1,420 9,619 9,954 31 (133) Income tax expense & non-controlling interests (2,310) (221) - (77) 24 (69) (343) (2,653) (2,738) (9) 40
					1,077
					Cash profit 5,889 522 231 201 (45) 168

Cash Profit Results - Adjusted Pro-forma September 2016 Half Year March 2016 Half Year Sep 16 v. Mar 16 Cash profit Software capital- isation changes Restruct- uring Esanda Dealer Finance divest- ment CVA methodo- logy change Total specified items Adjusted pro-forma Cash profit Software capital- isation changes Asian minority investment adjust Restruct- uring Esanda Dealer Finance divest- ment Total specified items Adjusted pro-forma Adjusted pro-forma FX unadj Adjusted pro-forma, FX adj Cash Profit Net interest income 7,527 - - - - - 7,527 7,568 - - - (31) (31) 7,537 0% 0% Other operating income 2,734 - - - 237 237 2,971 2,748 - 231 - (78) 153 2,901 2% 3%	Operating income 10,261 - - - 237 237 10,498 10,316 - 231 - (109) 122 10,438 1% 1% Operating expenses (4,943) 114 140 6 - 260 (4,683) (5,479) 629 - 138 11 778 (4,701) 0% 0%	Profit before credit impairment and income tax 5,318 114 140 6 237 497 5,815 4,837 629 231 138 (98) 900 5,737 1% 1% Credit impairment charge (1,038) - - 10 - 10 (1,028) (918) - - - 13 13 (905) 14% 14%	Profit before income tax 4,280 114 140 16 237 507 4,787 3,919 629 231 138 (85) 913 4,832 -1% -1% Income tax expense (1,166) (33) (40) (5) (69) (147) (1,313) (1,133) (188) - (37) 29 (196) (1,329) -1% -2% Non-controlling interests (7) - - - - - (7) (4) - - - - - (4) 75% 75%	Cash profit 3,107 81 100 11 168 360 3,467 2,782 441 231 101 (56) 717 3,499 -1% -1%	September 2016 Half Year March 2016 Half Year Sep 16 v. Mar 16 Cash profit Software capital- isation changes Restruct- uring Esanda Dealer Finance divest- ment CVA methodo- logy change Total specified items Adjusted pro-forma Cash profit Software capital- isation changes Asian minority investment adjust Restruct- uring Esanda Dealer Finance divest- ment Total specified items Adjusted pro-forma Adjusted pro-forma FX unadj Adjusted pro-forma, FX adj Profit before income tax by division Australia 2,556 45 27 16 - 88 2,644 2,543 36 - 22 (19) 39 2,582 2% 2% Institutional 618 20 39 - 237 296 914 881 4 - 51 - 55 936 -2% -1% New Zealand 863 21 16 - - 37 900 882 13 - 2 - 15 897 0% -1% Wealth Australia 221 7 7 - - 14 235 237 2 - 13 - 15 252 -7% -7% Asia Retail & Pacific 117 - - - - - 117 71 (4) - 12 - 8 79 48% 50% TSO and Group Centre1 (95) 21 51 - - 72 (23) (695) 578 231 38 (66) 781 86 large large	Profit before income tax 4,280 114 140 16 237 507 4,787 3,919 629 231 138 (85) 913 4,832 -1% -1% Income tax expense & non-controlling interests (1,173) (33) (40) (5) (69) (147) (1,320) (1,137) (188) - (37) 29 (196) (1,333) -1% -1%	3,499 -1% -1%	1. Cash profit for TSO and Group Centre in the March 2016 half includes the accelerated amortisation for all divisions resulting from the software capitalisation changes and the net gain on divestment of the Esanda Dealer Finance portfolio.
							717
							3,467 2,782 441 231 101 (56)
							360
							Cash profit 3,107 81 100 11 168

SUMMARY

Other Non-financial Information

Full time equivalent staff information Full time equivalent staff (FTE) Assets per FTE ($M)	As at	Movement
	Sep 16 Mar 16 46,554 48,896 19.7 18.3	Sep 16 v. Mar 16 Sep 16 v. Sep 15 -5% -7% 8% 11%
Shareholder value - ordinary shares Share price ($) - high - low - closing Closing market capitalisation of ordinary shares ($B) Total shareholder returns (TSR)		Full Year

Credit Ratings Moody's Investor Services Standard & Poor's Fitch Ratings	As at Sep 16
	Short-Term Long-Term Outlook P-1 Aa2 Negative A-1+ AA- Negative F1+ AA- Stable

STRATEGIC REVIEW

Our Purpose

ANZ’s Purpose is: To shape a world where people and communities thrive. That’s why we strive to create a balanced, sustainable economy in which everyone can take part and build a better life.

Our Vision

Our vision is to build the best connected and most respected bank in the region – loved by customers and famous for:

Delivering value from innovative and convenient banking services that help customers get ahead in life.
Being Australia’s only truly regional bank, delivering a seamless regional banking proposition to those who require one.
Attracting the best and most diverse team of people, and creating astute, inspiring leaders, regardless of where they ultimately work; where having ANZ on your CV is recognised as a door-opener around the world.
Showing leadership on important issues, and doing the right thing, even when it comes at a cost.
Delivering consistently strong financial results for our investors, with an ‘unquestionably strong’, well-funded balance sheet, and a balance between growth and return, short and long-term results.

Strategy

Our strategy is to use our strong Australian and New Zealand foundations, distinctive geographic footprint, and market-leading service and insights to better meet the needs of customers and capture opportunities linked to regional trade and capital flows. In doing this, ANZ provides shareholders with access to a unique combination of high-returning franchises and direct exposure to long-term Asian growth.

Our strategy has three elements – creating the best bank in Australia and New Zealand for Home Owners and Small Business customers, building the best bank in the world for clients driven by regional trade and capital flows, and establishing common, digital-ready infrastructure to provide great customer experience, scale and control. The strategy is underpinned by strong expense, capital and risk management disciplines and the quality of our people.

Strategic Progress

The Financial Services industry is being reshaped by a set of forces that make it more difficult to achieve the performance levels of the past, with lower economic growth, heightened consumer expectations, increased competitive intensity and greater regulatory, legal and political scrutiny.

Left unchecked, these forces will lower sector growth, reduce profitability and increase commoditisation of the industry. In response, we are creating a simpler, better capitalised bank that is more focused, more innovative and more values-based.

Over the course of the year, we made significant progress in each of these areas, with highlights described in the table below:

Strategic Priorities	2016 Progress Highlights
Create a simpler, better capitalised, better balanced and more agile bank. Reduce operating costs and risks by removing product and management complexity, exiting low return and non-core businesses and reducing our reliance on low-returning aspects of Institutional banking in particular.	 Portfolio rebalancing underway, retail and commercial RWAs increased (+6%1), Institutional RWAs reduced (-15%).  The improved composition of CRWA, up $2 billion (+1%), was driven by $8 billion of lending growth in retail and commercial in Australia and New Zealand, and a $26 billion increase in Australian Mortgages from regulatory changes, largely offset by a $21 billion decrease in Institutional lending and a $5 billion decrease from the sale of the Esanda dealer finance portfolio.  CET1 ratio 9.6% at 30 September; organic capital generation +106 bps in the second half.  Further simplified and refocused the business, reducing duplication, delivered reduction in FTE (down 7% for the year).  Sold the Esanda dealer finance portfolio, announced the sale of the Retail & Wealth businesses in five Asian countries.  Pursuing a range of strategic and capital market options in relation to the Wealth businesses in Australia.  Reset the 2016 dividend to provide the basis to return to a sustainable, fully franked payout ratio of 60-65% of Cash Profit over time.
Focus our efforts on attractive areas where we can carve out a winning position. Make buying and owning a home or starting, running and growing a small business in Australia and New Zealand easy. Be the best bank in the world for customers driven by the movement of goods and capital in our region.	 Focus on growing RWA in higher returning segments improved Institutional (excluding Markets) margins by 13 bps.  Grew the high return Institutional cash management business, increasing revenue by +6%; deposit balances by $1 billion (+1%).  Australia and New Zealand Retail and Commercial customer numbers increased by 262,000.  Australia home loan lending up +7%, moved to #3 market share, maintained #1 market share position in New Zealand.  Small business lending in Australia up +9%, New Zealand up +11%.

Strategic Priorities

2016 Progress Highlights

Create a simpler, better capitalised, better balanced and more agile
bank.
Reduce operating costs and risks by removing product and management
complexity, exiting low return and non-core businesses and reducing our
reliance on low-returning aspects of Institutional banking in particular.


Portfolio rebalancing underway, retail and commercial RWAs
increased (+6%1), Institutional RWAs reduced (-15%).

The improved composition of CRWA, up $2 billion (+1%), was driven
by $8 billion of lending growth in retail and commercial in Australia
and New Zealand, and a $26 billion increase in Australian Mortgages
from regulatory changes, largely offset by a $21 billion decrease in
Institutional lending and a $5 billion decrease from the sale of the
Esanda dealer finance portfolio.

CET1 ratio 9.6% at 30 September; organic capital generation +106
bps in the second half.

Further simplified and refocused the business, reducing duplication,
delivered reduction in FTE (down 7% for the year).

Sold the Esanda dealer finance portfolio, announced the sale of the
Retail & Wealth businesses in five Asian countries.

Pursuing a range of strategic and capital market options in relation to
the Wealth businesses in Australia.

Reset the 2016 dividend to provide the basis to return to a
sustainable, fully franked payout ratio of 60-65% of Cash Profit over
time.

Focus our efforts on attractive areas where we can carve out a
winning position.
Make buying and owning a home or starting, running and growing a small
business in Australia and New Zealand easy. Be the best bank in the world
for customers driven by the movement of goods and capital in our region.


Focus on growing RWA in higher returning segments improved
Institutional (excluding Markets) margins by 13 bps.

Grew the high return Institutional cash management business,
increasing revenue by +6%; deposit balances by $1 billion (+1%).

Australia and New Zealand Retail and Commercial customer
numbers increased by 262,000.

Australia home loan lending up +7%, moved to #3 market share,
maintained #1 market share position in New Zealand.

Small business lending in Australia up +9%, New Zealand up +11%.

STRATEGIC REVIEW

Drive a purpose and values led transformation of the Bank. Create a stronger sense of core purpose, ethics and fairness, investing in leaders who can help sense and navigate a rapidly changing environment.	 Revised ANZ’s Corporate Sustainability Framework with focus on fair and responsible banking.  Supported ABA conduct and remuneration reviews.  Redesigned ANZ’s performance management process to strengthen alignment to strategy and values.  Reviewed approach to remuneration including new guidelines on equity clawback.  Invested in MIT Digital Leadership Program and Leadership Pathway programs.  Strengthened the Whistleblower Protection Policy.
Build a superior everyday experience for our people and Customers to compete in the digital age. Build more convenient, engaging banking solutions to simplify the lives of customers and our people.	 Established new Digital Banking Division to support growth in priority areas.  First major bank to launch Apple PayTMand Android PayTMin Australia and New Zealand.  Implemented multi-channel digital platform for Australian retail banking, more than 1 million customers using goMoneyTMapps on the new platform.  Launched Digital Customer Identity Verification.

Drive a purpose and values led transformation of the Bank.
Create a stronger sense of core purpose, ethics and fairness, investing in
leaders who can help sense and navigate a rapidly changing environment.


Revised ANZ’s Corporate Sustainability Framework with focus on fair
and responsible banking.

Supported ABA conduct and remuneration reviews.

Redesigned ANZ’s performance management process to strengthen
alignment to strategy and values.

Reviewed approach to remuneration including new guidelines on
equity clawback.

Invested in MIT Digital Leadership Program and Leadership Pathway
programs.

Strengthened the Whistleblower Protection Policy.

Build a superior everyday experience for our people and Customers
to compete in the digital age.
Build more convenient, engaging banking solutions to simplify the lives of
customers and our people.


Established new Digital Banking Division to support growth in priority
areas.

First major bank to launch Apple PayTMand Android PayTMin
Australia and New Zealand.

Implemented multi-channel digital platform for Australian retail
banking, more than 1 million customers using goMoneyTMapps on
the new platform.

Launched Digital Customer Identity Verification.

Financial Performance

This year, as we transitioned to our new strategy, we reported a reduction in cash profit of 18% to $5,889 million, impacted by a $1,077 million charge primarily relating to initiatives to reposition the Group for stronger future earnings. Adjusting for these specified items, profit before credit impairment and income tax increased by 6%, while higher credit impairment charges resulted in Adjusted Pro-forma[2] cash profit declining 3% and earnings per share declining 7% to 239.7 cents.

Our clear strategy and consistent focus on the simplification of the business resulted in a particularly strong expense management outcome, with operating cost growth contained to 1% on an Adjusted Pro-forma basis and FTE reductions of 7% year on year. Active rebalancing of the portfolio contributed to a decline in Institutional risk weighted assets of 15%, and increase in retail and commercial risk weighted assets of 6%[1] .

Focus on improving capital efficiency, including reallocating capital to higher returning areas of the Group contributed to a 12.2% return on equity on an Adjusted Pro-forma basis.

Inclusive of a final fully franked dividend of 80 cents per share, the total dividend of 160 cents per share and dividend payout ratio of 67.1% (on an Adjusted Pro-forma basis) reflects the revised dividend strategy targeting a conservative, sustainable fully franked payout ratio of 60-65%.

Our Common Equity Tier 1 ratio strengthened to 9.6% at the end of September.

Strategic Priorities & Outlook[3]

In 2017, we expect that lower regional growth and subdued credit growth in our home markets of Australia and New Zealand will result in modest growth in key business lines, with likely higher funding costs placing pressure on margins and higher provisions in the medium-term. In response to these conditions, we will continue our simplification and productivity agenda, and target further reductions in Institutional RWAs. Key risks to the downside include further regulatory changes and the impact of lower China growth on funding markets.

In response, we will prioritize our efforts in the following areas:

Strategic Priorities	2017 Priorities
Create a simpler, better capitalised, better balanced and more agile bank. Reduce operating costs and risks by removing product and management complexity, exiting low return and non-core businesses and reducing our reliance on low-returning aspects of Institutional banking in particular.	 Progress the sale of non-core businesses and minority investments.  Continue the repositioning of the Institutional business, targeting further reductions in RWAs in 2017.  Drive out costs through a focused and coordinated program across the Bank.
Focus our efforts on attractive areas where we can carve out a winning position. Make buying and owning a home or starting, running and growing a small business in Australia and New Zealand easy. Be the best bank in the world for customers driven by the movement of goods and capital in our region.	 Maintain momentum in our home loan and small business franchises, to deliver consistent above system growth in housing.  Invest in retail and commercial propositions in NSW, deliver sales growth in excess of group national average.  Build out Institutional’s regional trade, cash management and markets platforms.  Focus on and serve key Institutional clients connected to the region via trade and capital flows.

Strategic Priorities

2017 Priorities


Progress the sale of non-core businesses and minority investments.

Continue the repositioning of the Institutional business, targeting
further reductions in RWAs in 2017.

Drive out costs through a focused and coordinated program across
the Bank.


Maintain momentum in our home loan and small business franchises,
to deliver consistent above system growth in housing.

Invest in retail and commercial propositions in NSW, deliver sales
growth in excess of group national average.

Build out Institutional’s regional trade, cash management and
markets platforms.

Focus on and serve key Institutional clients connected to the region
via trade and capital flows.

STRATEGIC REVIEW

Drive a purpose and values led transformation of the Bank. Create a stronger sense of core purpose, ethics and fairness, investing in leaders who can help sense and navigate a rapidly changing environment.	 Embed our purpose throughout the organisation.  Deliver evidence of further cultural and reputational improvement.
Build a superior everyday experience for our people and Customers to compete in the digital age. Build more convenient, engaging banking solutions to simplify the lives of customers and our people.	 Effectively integrate the Digital Division, with clear accountabilities and momentum aligned with business priorities.

1. Excludes the impact of the Australian mortgage risk weight change and the divestment of Esanda Dealer Finance. 2. Adjusted Pro-forma refers to Cash Profit adjusted to remove the impact of ‘Specified items’ including the impact of software capitalisation policy changes, Asia Partnership impairment charge (AMMB) and gain of cessation of equity accounting (Bank of Tianjin), restructuring expenses, divestment of the Esanda Dealer Finance business, and the derivative credit valuation adjustment methodology change. Further details provided on page 16.

3. The statements in this “Strategic Priorities and Outlook” section, including those related to our growth strategies and our expected or potential future cash flow from operations, capital investment, divestment proceeds and production, are based on management’s current expectations and certain material assumptions and, accordingly, involve risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein.

STRATEGIC REVIEW

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GROUP RESULTS

Group Results

Group performance Net interest income Other operating income Operating expenses Technology infrastructure spend Software capitalisation Credit risk Income tax expense Impact of foreign currency translation Earnings related hedges Earnings per share Dividends Economic profit Condensed balance sheet Liquidity risk Funding Capital management Leverage ratio Other regulatory developments

GROUP RESULTS

Non-IFRS information

The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information.

Cash profit

Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit (refer to Definitions for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to audit within the context of the Group statutory audit opinion. Cash profit is not audited by the external auditor, however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis across each period presented.

The Group Results section is reported on a cash profit basis.

The Group Results section is reported on a cash profit basis.
Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit1 Treasury shares adjustment Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades	Half Year Sep 16 $M Mar 16 $M Movt 2,971 2,738 9% 73 (29) large (40) (14) large (26) 128 large 131 (39) large (2) (2) 0%	Full Year
		Sep 16 $M Sep 15 $M Movt 5,709 7,493 -24% 44 (16) large (54) (73) -26% 102 (179) large 92 (3) large (4) (6) -33%
Total adjustments between statutory profit and cash profit1	136 44 large	180 (277) large
Cash Profit	3,107 2,782 12%	5,889 7,216 -18%

1. Refer to pages 83 to 88 for analysis of the adjustments between statutory profit and cash profit.

Group Performance Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 7,527 7,568 -1% 2,734 2,748 -1%	Full Year
		Sep 16 $M Sep 15 $M Movt 15,095 14,616 3% 5,482 5,921 -7%
Operating income Operating expenses	10,261 10,316 -1% (4,943) (5,479) -10%	20,577 20,537 0% (10,422) (9,378) 11%
Profit before credit impairment and income tax Credit impairment charge	5,318 4,837 10% (1,038) (918) 13%	10,155 11,159 -9% (1,956) (1,205) 62%
Profit before income tax Income tax expense Non-controlling interests	4,280 3,919 9% (1,166) (1,133) 3% (7) (4) 75%	8,199 9,954 -18% (2,299) (2,724) -16% (11) (14) -21%
Cash profit	3,107 2,782 12%	5,889 7,216 -18%

Cash Profit/(Loss) By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 1,794 1,779 1% 425 632 -33% 626 641 -2% 159 168 -5% 95 57 67% 8 (495) large	Full Year Sep 16 $M Sep 15 $M Mov 3,573 3,413 5% 1,057 1,967 -46% 1,267 1,254 1% 327 428 -24% 152 139 9% (487) 15 large
Cash profit	3,107 2,782 12%	5,889 7,216 -18%

GROUP RESULTS

Group Cash Profit – September 2016 Full Year v September 2015 Full Year

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September 2016 v September 2015

Cash profit decreased 18% compared to the September 2015 full year mainly due to a number of specified items: software capitalisation changes, Asian minority investments adjustments, restructuring expenses, the Esanda Dealer Finance divestment and the derivative CVA methodology change. Excluding these items, cash profit decreased 3% (adjusted for foreign currency translation -4%).

Net interest income increased $479 million (+3%) with 5% growth in average interest earning assets, partly offset by a 4 basis point decrease in net interest margin. Adjusting for the $96 million favourable impact of foreign currency translation and the $224 million impact of the Esanda Dealer Finance divestment, net interest income increased by $607 million (+4%) and net interest margin fell by 1 basis point. Average interest earning assets increased by $37.1 billion (+5%) reflecting a $10.2 billion increase due to foreign currency translation impact, lending growth of $13.7 billion, an $8.5 billion increase in trading securities and available-for-sale assets and a $3.8 billion increase in collateral paid. Loan growth occurred primarily in Australia and New Zealand home loans, partially offset by a decrease in Institutional as the result of the strategic repositioning of that business to improve capital efficiency and returns. The net interest margin decline was primarily due to increased wholesale funding costs, growth in the lower margin liquidity portfolio and lower earnings from financial market activities, partially offset by improved Australian home loan margins.
Other operating income decreased $439 million (-7%) with foreign currency translation having a $225 million favourable impact. Adjusting for this, other operating income decreased by $664 million (-11%). This decrease was mainly due to the $260 million impairment of the investment in Ambank, the $237 million derivative CVA methodology change and a $261 million decrease in Institutional as a result of the strategic repositioning of that business to improve capital efficiency and returns, along with lower sales revenue in Markets. This was partially offset by a $157 million reduction in realised revenue hedge losses during the year.
Operating expenses increased $1,044 million (+11%) with foreign currency translation having a $114 million unfavourable impact. Adjusting for this, operating expenses increased $930 million (+10%) mainly due to a $743 million increase related to software capitalisation changes, a $247 million increase in restructuring charges and the Esanda Dealer Finance divestment. Excluding specified items and foreign currency translation impacts, operating expenses were broadly flat with personnel expenses decreasing by $211 million (-4%) due to a 7% FTE reduction (-5% average) and lower incentive expenses, offset by higher technology expenses which increased $191 million (+13%) from higher depreciation and amortisation of digital-enabling and other core infrastructure, as well as higher licencing and outsourced services costs.
Credit impairment charges increased $751 million (+62%) with foreign currency translation having a $9 million unfavourable impact. Adjusting for this, individual credit impairment charges increased by $820 million (+74%) predominantly from a small number of Australian and multinational resource related exposures in Institutional; increased provisions in the Australia division due to growth in Small Business Banking and higher delinquencies in the retail and commercial portfolios in Queensland and Western Australia; as well as the settlement of the Oswal legal dispute in Institutional. This was partially offset by a $78 million (-82%) decrease in the collective credit impairment charge.
September 2016 v March 2016

Cash profit increased 12% compared to the March 2016 half mainly due to the specified items outlined above. Excluding these items, cash profit decreased 1% (adjusted for foreign currency translation -1%).

Net interest income decreased $41 million (-1%) with average interest earning assets broadly flat and a 1 basis point contraction in net interest margin. Adjusting for the $7 million unfavourable impact of foreign currency translation and the $31 million impact of the Esanda Dealer Finance divestment, net interest income decreased by $3 million (0%). Average interest earning assets decreased by $0.5 billion (0%), with foreign currency translation having no significant impact. Loan growth was broadly flat with good growth within the Australia and New Zealand home loan portfolios offset by a decrease in Institutional as the result of the strategic repositioning of that business to improve capital efficiency and returns. The net interest margin decline was primarily due to increased wholesale funding costs, higher deposit competition in Australia and lower earnings from financial market activities, partially offset by improved Australian home loan margins.
Other operating income decreased by $14 million (-1%) with foreign currency translation having a $25 million unfavourable impact. Adjusting for this, other operating income increased marginally. The $260 million impairment of our investment in Ambank was recorded in the March half and the $237 million derivative CVA methodology change was recorded in the September half.
Operating expenses decreased $536 million (-10%) with foreign currency translation having a $35 million favourable impact. Adjusting for this, operating expenses decreased $501 million (-9%) mainly due to a $515 million decrease related to software capitalisation changes and the Esanda Dealer Finance divestment. Excluding specified items and foreign currency translation impacts, operating expenses were broadly flat with personnel expenses decreasing by $57 million (-2%) due to a 5% FTE reduction (-5% average), offset by higher technology expenses from higher depreciation and amortisation of digital-enabling and other core infrastructure, as well as higher licencing and outsourced services costs.
Credit impairment charges increased $120 million (+13%) with foreign currency translation having a $7 million favourable impact. Adjusting for this, individual credit impairment charges increased by $164 million (+18%) predominantly from a small number of Australian and multinational resource related exposures in Institutional, and the settlement of the Oswal legal dispute in Institutional. This was partially offset by a $37 million (-142%) decrease in the collective credit impairment charge.

GROUP RESULTS

Net interest income

Group Cash net interest income1 Average interest earning assets Average deposits and other borrowings Net interest margin (%) - cash	Half Year Sep 16 $M Mar 16 $M Movt 7,527 7,568 -1% 753,928 754,391 0% 585,672 587,235 0% 2.00 2.01 -1 bps	Full Year
		Sep 16 $M Sep 15 $M Movt 15,095 14,616 3% 754,160 717,012 5% 586,453 559,779 5% 2.00 2.04 -4 bps
Group (excluding Markets) Cash net interest income1 Average interest earning assets Average deposits and other borrowings Net interest margin (%) - cash	7,054 7,006 1% 557,435 556,107 0% 453,424 453,137 0% 2.53 2.52 1 bps	14,060 13,509 4% 556,771 537,883 4% 453,280 428,813 6% 2.53 2.51 2 bps

Cash net interest margin by major division Australia1 Net interest margin (%) Average interest earning assets Average deposits and other borrowings Institutional Net interest margin (%) Average interest earning assets Average deposits and other borrowings New Zealand Net interest margin (%) Average interest earning assets Average deposits and other borrowings	Half Year Sep 16 $M Mar 16 $M Movt 2.54 2.56 -2 bps 325,065 318,959 2% 185,159 181,050 2% 1.11 1.15 -4 bps 297,974 312,961 -5% 232,109 233,729 -1% 2.35 2.40 -5 bps 105,658 100,674 5% 77,659 73,175 6%	Full Year
		Sep 16 $M Sep 15 $M Movt 2.55 2.55 0 bps 322,012 302,074 7% 183,104 170,857 7% 1.13 1.20 -7 bps 305,468 299,426 2% 232,919 229,563 1% 2.38 2.50 -12 bps 103,166 95,207 8% 75,417 68,079 11%

1. The September 2016 full year included $31 million (September 2016 half: nil; March 2016 half: $31 million; September 2015 full year: $255 million) related to the Esanda Dealer Finance assets divested to Macquarie in the March 2016 half.

Group net interest margin – September 2016 Full Year v September 2015 Full Year

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September 2016 v September 2015

Net interest margin (-4 bps)

Asset and funding mix (+1 bps): favourable mix impact from a higher proportion of capital and run-off of lower margin trade loans was partially offset by adverse asset mix impact from the Esanda Dealer Finance divestment.
Funding costs (-1 bps): impact from unfavourable wholesale funding costs.
Deposit competition (0 bps): minimal pricing impacts across the portfolio.
Asset competition and risk mix (+4 bps): improved Australian Home Loan margins following repricing was partially offset by lending margin compression in New Zealand and lower spreads within Institutional and Commercial Lending.

GROUP RESULTS

Markets and treasury (-8 bps): adverse impact of lower earnings on capital from lower interest rates, growth in liquidity portfolio and lower earnings from financial market activities.

Average interest earning assets (+$37.1 billion or +5%)

Average gross loans and advances (+$18.7 billion or +3%): excluding the impact of foreign currency translation, growth was +$13.7 billion or +2% driven by growth in Australia and New Zealand Home Loans. This was partially offset by a decline in Institutional lending due to the strategic repositioning of that business, as well as the Esanda Dealer Finance divestment.
Average collateral paid (+$4.1 billion or +49%): excluding the impact of foreign currency translation, increase was +$3.8 billion or +44% due to mark-to-market declines on positions with collateralised derivative counterparties.
Average trading and available-for-sale assets (+$9.7 billion or +11%): excluding the impact of foreign currency translation, growth was +$8.5 billion or +9% driven by growth in the liquidity portfolio.
Average cash (+$2.6 billion or +6%): excluding the impact of foreign currency translation, growth was +$0.9 billion or +2% driven by management of liquidity requirements.

Average deposits and other borrowings (+$26.7 billion or +5%)

Average deposits and other borrowings (+$26.7 billion or +5%): excluding the impact of foreign currency translation, growth was +$16.7 billion or +3% driven by customer deposits growth across Australia and New Zealand businesses.

Group net interest margin – September 2016 Half Year v March 2016 Half Year

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September 2016 v March 2016

Net interest margin (-1 bps)

Asset and funding mix (0 bps): adverse asset mix impact resulting from the Esanda Dealer Finance divestment as part of de-risking the portfolio offset by favourable mix impact from a lower reliance of wholesale funding and the run-off of lower margin trade loans.
Funding costs (-2 bps): impact of unfavourable wholesale funding costs.
Deposit competition (-1 bps): lower margin from increased competition in Australia partly offset by benefit from deposit repricing in New Zealand and Asia.
Asset competition and risk mix (+5 bps): improved lending margins, particularly in Australian Home Loans following repricing actions.
Markets and treasury (-3 bps): adverse impact of lower earnings on capital from lower interest rates and lower earnings from financial market activities.

Average interest earning assets (-$0.5 billion or 0%)

Average gross loans and advances (+$1.1 billion or 0%): excluding the impact of foreign currency translation, growth was +$1.7 billion or 0% driven by growth in Australia and New Zealand Home Loans. This was largely offset by a decline in Institutional lending due to the strategic repositioning of that business.
Average collateral paid (+$3.3 billion or +31%): excluding the impact of foreign currency translation, increase was +$3.5 billion or +34% due to mark-to-market declines on positions with collateralised derivative counterparties.
Average trading and available-for-sale assets (+$1.6 billion or +2%): excluding the impact of foreign currency translation, growth was +$2.4 billion or +2% driven by growth in the liquidity portfolio.
Average cash (-$5.0 billion or -10%) excluding the impact of foreign currency translation, decline was -$3.8 billion or -8% driven by management of liquidity requirements.

Average deposits and other borrowings (-$1.6 billion or 0%)

Average deposits and other borrowings (-$1.6 billion or 0%): excluding the impact of foreign currency translation, growth was +$1.4 billion or 0% driven by customer deposits growth across both the Australia and New Zealand businesses, largely offset by a decline in Treasury deposits.

GROUP RESULTS

Other operating income

Net fee and commission income1 Net funds management and insurance income1 Markets other operating income2 Share of associates' profit1 Net foreign exchange earnings1 Other1,3	Half Year Sep 16 $M Mar 16 $M Movt 1,193 1,227 -3% 747 771 -3% 365 400 -9% 243 301 -19% 149 141 6% 37 (92) large	Full Year
		Sep 16 $M Sep 15 $M Movt 2,420 2,527 -4% 1,518 1,504 1% 765 1,062 -28% 544 625 -13% 290 123 large (55) 80 large
Cash other operating income	2,734 2,748 -1%	5,482 5,921 -7%
Markets income Net interest income Other operating income2	Half Year Sep 16 $M Mar 16 $M Movt 473 562 -16% 365 400 -9%	Full Year
		Sep 16 $M Sep 15 $M Movt 1,035 1,107 -7% 765 1,062 -28%
Cash Markets income	838 962 -13%	1,800 2,169 -17%
Other operating income by division Australia Institutional2 New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre3	Half Year Sep 16 $M Mar 16 $M Movt 598 610 -2% 812 911 -11% 327 312 5% 605 639 -5% 234 243 -4% 158 33 large	Full Year
		Sep 16 $M Sep 15 $M Movt 1,208 1,214 0% 1,723 2,177 -21% 639 604 6% 1,244 1,265 -2% 477 480 -1% 191 181 6%
Cash other operating income	2,734 2,748 -1%	5,482 5,921 -7%

Excluding Markets.

2. Markets other operating income for the September 2016 half includes a charge of $237 million related to the derivative CVA methodology change.

Other income for the March 2016 half includes the $260 million impairment of investment in Ambank, $29 million gain on cessation of equity accounting of BoT and $66 million gain on Esanda Dealer Finance divestment.

Other operating income – September 2016 Full Year v September 2015 Full Year

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GROUP RESULTS

September 2016 v September 2015

Other operating income decreased $439 million (-7%). Excluding specified items (impairment of investment in Ambank, gain on cessation of equity accounting of BoT, gain on the Esanda Dealer Finance divestment and the derivative CVA methodology change) and the impact of foreign currency translation, Other operating income decreased by 4%.

Net fee and commission income

Decreased by $107 million (-4%). Key factors include:

$24 million favourable impact due to foreign currency translation.
$16 million increase in New Zealand mainly due to volume driven growth.
$105 million decrease in Institutional as a result of exiting lower returning business and a slowdown in natural resource related projects.
$19 million decrease in Asia Retail & Pacific due to lower demand for investment and insurance products in Asia.
$17 million decrease in fees in Australia resulting from the Esanda Dealer Finance divestment, partially offset by volume driven growth in home loans.

Net funds management and insurance income

Increased by $14 million (+1%). Key factors include:

$7 million favourable impact of foreign currency translation.
$24 million increase driven by higher premiums in life insurance.
$14 million increase in management fees, mainly in KiwiSaver driven by an increase in volumes.
$23 million decrease in revenue due to the non-reoccurrence of a GST recovery on Adviser service fees in 2015.

Markets operating income

Decreased by $369 million (-17%). Key factors include:

$47 million favourable impact of foreign currency translation.
$237 million charge due to the derivative CVA methodology change.
$130 million (-11%) decrease in Sales income driven by lower rates and foreign exchange income as a result of lower demand for hedging products, as well as decreased commodities income due to lower demand for gold financing from Asian customers.
$32 million (-8%) decrease in Balance sheet income primarily as a result of higher funding valuation adjustments, partly offset by the benefit of narrowing credit spreads in 2016.
$17 million (-3%) decrease in Trading income primarily as a result of higher funding valuation adjustments, partly offset by higher credit trading income.

Share of associates’ profit

Decreased by $81 million (-13%). Key factors include:

$6 million favourable impact of foreign currency translation.
$36 million increase in Shanghai Rural Commercial Bank primarily driven by higher investment and fee income.
$6 million increase in Metro Card Corporation Inc. driven by lending growth and expense management.
$76 million decrease in BoT mainly due to cessation of equity accounting in the March 2016 half.
$36 million decrease in Ambank due to margin contraction, lower fee income and subdued Malaysian economic conditions.
$17 million decrease in P.T. Bank Pan Indonesia mainly due to higher credit provisions.

Net foreign exchange earnings

Increased by $167 million due to:

Lower losses in 2016 on realised USD and NZD revenue hedges ($157 million) compared with 2015.

Other

Decreased by $135 million. Key factors include:

$5 million favourable impact due to foreign currency translation.
$66 million increase due to a gain on the Esanda Dealer Finance divestment.
$29 million increase due to a gain on cessation of equity accounting for BoT.
$26 million increase due to a cash dividend from BoT.
$260 million decrease due to the impairment of investment in Ambank.

GROUP RESULTS

September 2016 v March 2016

Other operating income decreased by $14 million (-1%). Excluding specified items (impairment of investment in Ambank, gain on cessation of equity accounting of BoT, and gain on the Esanda Dealer Finance divestment and derivative CVA methodology change), and the impact of foreign currency translation, Other operating income increased by 3%.

Net fee and commission income

Decreased by $34 million (-3%). Key factors include:

$5 million unfavourable impact of foreign currency translation.
$26 million decrease in fee income in Institutional due to subdued demand for loans and the exiting of lower returning business.

Net funds management and insurance income

Decreased by $24 million (-3%). Key factors include:

$2 million favourable impact of foreign currency translation.
$8 million increase in management fees, mainly in KiwiSaver driven by an increase in volumes.
$38 million decrease in Wealth Australia mainly due to higher claims in the Insurance business, reduced fee income from ongoing rationalisation of legacy platforms and lower investment gains.

Markets operating income

Decreased by $124 million (-13%). Key factors include:

$17 million unfavourable impact of foreign currency translation.
$237 million charge due to the derivative CVA methodology change.
$95 million (+69%) increase in Balance sheet income reflecting growth in the liquidity portfolio and tightening credit spreads.
$36 million (+7%) increase in Sales income driven by increased debt capital markets activity, partially offset by decreased foreign exchange income from lower demand for structured products.

Share of associates’ profit

Decreased by $58 million (-19%). Key factors include:

$30 million increase in P.T. Bank Pan Indonesia mainly due to higher credit provisions in the March 2016 half.
$8 million increase in Ambank due to improved net interest margin, higher insurance and fee income and expense initiatives.
$2 million increase in Metro Card Corporation Inc. due to improved revenue driven by lending growth.
$83 million decrease in BoT due to cessation of equity accounting in the March 2016 half.
$11 million decrease in Shanghai Rural Commercial Bank due to a decline in net interest margin and higher expenses, partly offset by an increase in fee income.

Net foreign exchange earnings

Increased by $8 million (+6%) due to:

Lower losses on realised USD revenue hedges in the September 2016 half ($6 million) as foreign currency rates stabilised.

Other

Increased by $129 million (large %). Key factors include:

$2 million unfavourable impact due to foreign currency translation.
$260 million increase due to the impairment of investment in Ambank in the March 2016 half.
$26 million increase due to a cash dividend from BoT in the September 2016 half.
$66 million decrease due to a gain on the Esanda Dealer Finance divestment in the March 2016 half.
$29 million decrease due a gain on cessation of equity accounting for BoT in the March 2016 half.
$16 million decrease due to lower unrealised gains on foreign currency balances held in Institutional.
$17 million decrease due to the non-reoccurrence of gain on sales (property and operating lease asset sales) in the March 2016 half and losses on loan sell downs in Institutional in the September 2016 half.

GROUP RESULTS

Operating Expenses

Operating Expenses
Personnel expenses1,2 Premises expenses Technology expenses1,2 Restructuring expenses Other expenses1,2	Half Year Sep 16 $M Mar 16 $M Movt 2,740 2,801 -2% 470 458 3% 826 1,324 -38% 140 138 1% 767 758 1%	Full Year
		Sep 16 $M Sep 15 $M Movt 5,541 5,479 1% 928 922 1% 2,150 1,462 47% 278 31 large 1,525 1,484 3%
Total cash operating expenses	4,943 5,479 -10%	10,422 9,378 11%
Full time equivalent staff (FTE)	46,554 48,896 -5%	46,554 50,152 -7%
Average full time equivalent staff (FTE)	47,489 49,777 -5%	48,633 50,953 -5%

1. The $743 million charge associated with the software capitalisation changes (March 2016 half: $629 million) included in the September 2016 full year comprises $213 million of personnel expenses (March 2016 half: $98 million), $492 million of technology expenses (March 2016 half: $513 million), and $38 million of other expenses (March 2016 half: $18 million). Refer to page 36 for further details.

2. The $26 million benefit associated with the Esanda Dealer Finance divestment included in the September 2016 full year comprises $19 million of personnel expenses (March 2016 half: -$3 million), $2 million of technology expenses (March 2016 half: $nil), and $5 million of other expenses (March 2016 half: $8 million). Refer to page 17 for further details.

Expenses by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 1,708 1,681 2% 1,426 1,509 -6% 630 595 6% 388 408 -5% 381 432 -12% 410 854 -52%	Full Year
		Sep 16 $M Sep 15 $M Movt 3,389 3,193 6% 2,935 2,806 5% 1,225 1,197 2% 796 751 6% 813 834 -3% 1,264 597 large
Total cash operating expenses	4,943 5,479 -10%	10,422 9,378 11%

Operating expenses – September 2016 Full Year v September 2015 Full Year

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1. Technology expenses presented in the chart above exclude the impact of software policy changes to facilitate comparison with the prior period.

September 2016 v September 2015

Operating expenses increased 11% compared to the September 2015 full year due to a number of specified items (software capitalisation, restructuring and the Esanda Dealer Finance divestment). Excluding these, and the impact of foreign currency translation, operating expenses were slightly down.

Personnel expenses increased $62 million (+1%). Excluding an unfavourable foreign currency translation impact of $79 million and $213 million due to software capitalisation changes (personnel expenses that would have otherwise been capitalised), along with the $19 million favourable impact of the Esanda Dealer Finance divestment, personnel expenses decreased $211 million (-4%) due to a 7% decrease in FTE (-5% on average), primarily managed through restructuring activities across the Group and natural attrition, and lower incentive expenses, partially offset by annual salary inflation.
Premises expenses increased $6 million (+1%). Excluding an unfavourable foreign currency translation impact of $9 million, premises expenses decreased by $3 million (0%) driven by lower repairs and maintenance costs, partially offset by annual inflationary rent increases.
Technology expenses increased $688 million (+47%). Excluding an unfavourable foreign currency translation impact of $7 million, $492 million due to software capitalisation changes (comprising $373 million of accelerated amortisation for software assets and $119 million of expenditure which would otherwise have been capitalised) and the Esanda Dealer Finance divestment, technology expenses increased $191

GROUP RESULTS

million (+13%) driven by higher depreciation and amortisation of digital-enabling and other core infrastructure, as well as higher licensing and outsourced services costs.

Restructuring expenses increased $247 million. The Group is in the process of reshaping the workforce in response to its evolving strategy. This includes simplification of the Institutional and Wealth businesses, restructure of Asia Retail & Pacific, and simplification and digitisation in Australia, New Zealand, and TSO and Group Centre.
Other expenses increased $41 million (+3%). Excluding an unfavourable foreign currency translation impact of $16 million, $38 million due to software capitalisation changes (other expenses that would otherwise have been capitalised) and the Esanda Dealer Finance divestment, other expenses decreased $8 million (-1%) with lower discretionary expenses offsetting higher professional fees and non-lending losses.
September 2016 v March 2016

Operating expenses decreased 10% compared to the March 2016 half year due to a number of specified items (software capitalisation, restructuring and the Esanda Dealer Finance divestment). Excluding these, and the impact of foreign currency translation, operating expenses were flat.

Personnel expenses decreased $61 million (-2%). Excluding a favourable foreign currency translation impact of $24 million, $17 million due to software capitalisation changes (personnel expenses that would otherwise have been capitalised) and the Esanda Dealer Finance divestment, personnel expenses decreased $57 million (-2%) driven by a 5% decrease in FTE (-5% on average), primarily managed through restructuring activities across the Group and natural attrition.
Premises expenses increased $12 million (+3%). Excluding the unfavourable foreign currency translation impact of $3 million, premises expenses increased $9 million (+2%) due to write-offs.
Technology expenses decreased $498 million (-38%). Excluding a favourable foreign currency translation impact of $5 million and a decrease of $534 million due to software capitalisation changes (comprising $563 million of decreased amortisation for software assets and $29 million increase in expenditure which would otherwise have been capitalised), technology expenses increased $41 million (+5%) driven by higher depreciation and amortisation as well as higher licensing and outsourced services costs.
Restructuring expenses remained broadly consistent with the first half, increasing $2 million (+1%), reflecting the ongoing reshaping of the workforce in response to its evolving strategy. This includes simplification of the Institutional and Wealth businesses, and simplification and digitisation in Australia, New Zealand, and TSO and Group Centre.
Other expenses increased $9 million (+1%). Excluding a favourable foreign currency translation impact of $1 million, $2 million due to software capitalisation changes (other expenses that would have otherwise have been capitalised) and the Esanda Dealer Finance divestment, other expenses increased $16 million (+2%) with increased professional fees offsetting lower discretionary expenses.

GROUP RESULTS

Technology infrastructure spend

Technology infrastructure spend includes expenditure that develops and enhances the Group's technology infrastructure to meet business and strategic objectives and to improve capability and efficiency.

Expensed investment spend Capitalised investment spend	Half Year Sep 16 $M Mar 16 $M Movt 254 272 -7% 203 197 3%	Full Year
		Sep 16 $M Sep 15 $M Movt 526 258 large 400 739 -46%
Technology infrastructure spend	457 469 -3%	926 997 -7%
Comprising Growth Productivity Risk and compliance Infrastructure and other	Half Year Sep 16 $M Mar 16 $M Movt 147 186 -21% 84 87 -3% 114 115 -1% 112 81 38%	Full Year
		Sep 16 $M Sep 15 $M Movt 333 438 -24% 171 164 4% 229 223 3% 193 172 12%
Technology infrastructure spend	457 469 -3%	926 997 -7%
Technology infrastructure spend by division Australia Institutional New Zealand Asia Retail & Pacific Wealth Australia TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 131 143 -8% 79 96 -18% 38 37 3% 3 4 -25% 24 45 -47% 182 144 26%	Full Year
		Sep 16 $M Sep 15 $M Movt 274 294 -7% 175 245 -29% 75 67 12% 7 7 0% 69 84 -18% 326 300 9%
Technology infrastructure spend	457 469 -3%	926 997 -7%

Digitisation is central to ANZ’s business operations by reshaping how ANZ works and providing technology that enables better solutions for customers. The Group’s aim is to create a digital bank; one that allows us to streamline operations such that we deliver fast, easy and innovative solutions for our customers while also reducing the operational complexity of the organisation and thereby improving productivity and reducing risk. ANZ has invested in digital across the Group, delivering multichannel platforms that have global capabilities covering aspects like employee mobility, products (goMoney™ and MobilePay), security systems and more intuitive internet banking.

Australia division delivered its key digital foundations with the go-live of multi-channel platforms during 2016, enabling a consistent digital experience and is now focussing on continuous delivery of digital channels to improve both customer and banker experience. Investment is also continuing in simplification initiatives such as Banker Desktop which is simplifying branch processes through digitisation to enhance banker productivity.

Institutional investment focused on the multi-year development of Asia payments & collections functionality and Markets capabilities, scaling and optimising infrastructure to connect with more customers and provide seamless value. Significant investment continued in risk and compliance projects to meet increasing regulatory requirements across the region.

New Zealand has introduced new digital services for customers including Apple Pay™, goMoney™ Wallet for Android users and self-service funds transfers for KiwiSaver on internet banking.

Wealth Australia investment has focused on strategic growth initiatives to help customers better connect with, protect and grow their financial well-being. These initiatives include digital platforms, such as Grow by ANZ™, that better connect customers to their wealth.

TSO and Group Centre is investing in common platforms to drive transformation of key business activities, improve customer experience and drive down cost to serve. Investment continues in Payments Transformation to provide competitive payment services for our customers and Global Loan Management System to further transform wholesale lending capabilities.

 September 2016 v September 2015

During the September 2016 financial year, the Group continued to invest strongly with spend of $926 million. The $71 million (-7%) decrease compared to September 2015 reflects lower spend in Institutional and Wealth Australia based on revised strategies for these businesses and project delivery optimisation initiatives aimed at speeding up the delivery of projects.

 September 2016 v March 2016

The September 2016 half reflects a $12 million decrease (-3%) as project delivery optimisation initiatives flow through to the project portfolio. A number of programs also completed in March 2016 half, including MCP Mobile, Next Best Conversation, Banker Desktop (Credit Cards and Deposits) and anz.com Redesign in Australia, Asia Payments and Collections Functionality, Foundation Core-India Implementation and Liquidity Management in Institutional.

GROUP RESULTS

Software capitalisation

As at 30 September 2016, the Group’s intangible assets included $2,202 million in relation to costs incurred in acquiring and developing software. Details are set out in the table below:

are set out in the table below:
Balance at start of period Software capitalised during the period Amortisation during the period - Current period amortisation - Accelerated amortisation Software impaired/written-off Foreign exchange differences	Half Year Sep 16 $M Mar 16 $M Movt 2,249 2,893 -22% 222 209 6% (255) (245) 4% - (556) -100% (25) (2) large 11 (50) large	Full Year
		Sep 16 $M Sep 15 $M Movt 2,893 2,533 14% 431 807 -47% (500) (542) -8% (556) - n/a (27) (17) 59% (39) 112 large
Total capitalised software	2,202 2,249 -2%	2,202 2,893 -24%
Capitalised cost analysis by Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 46 56 -18% 28 40 -30% 5 1 large - - n/a 4 9 -56% 139 103 35%	Full Year
		Sep 16 $M Sep 15 $M Movt 102 214 -52% 68 177 -62% 6 46 -87% - 47 -100% 13 18 -28% 242 305 -21%
Total	222 209 6%	431 807 -47%
Net book value by Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 $M Mar 16 $M Movt 488 514 -5% 780 847 -8% 23 19 21% 20 23 -13% 63 66 -5% 828 780 6%	Full Year
		Sep 16 $M Sep 15 $M Movt 488 628 -22% 780 1,059 -26% 23 73 -68% 20 111 -82% 63 79 -20% 828 943 -12%
Total	2,202 2,249 -2%	2,202 2,893 -24%

The Group changed the application of its accounting policy for the capitalisation of expenditure on internally generated software assets effective from 1 October 2015. The change aligns the accounting policy for software assets with the rapidly changing technology landscape and the Group’s evolving digital strategy by increasing the threshold for capitalisation of software development costs, reflecting the increasingly shorter useful life of smaller items of software, and directly expensing more project related costs.

The change does not affect the total investment in technology but does affect the timing of recognition of costs in the income statement. The impact of the change on the September 2016 full year was:

Accelerated amortisation of $556 million (September half: nil; March half: $556 million) relating to software assets where the original cost was below the revised threshold at 1 October 2015. This brings forward amortisation which otherwise would have been recognised in future periods, of which $183 million (September half: $95 million; March half: $88 million) would have been recognised in the September 2016 full year (i.e. the full year amortisation charge increased by $373 million).
Higher operating expenses of $370 million (September half: $209 million; March half: $161 million) relating to software development costs which otherwise would have been capitalised and amortised in future periods.

The change in capitalised software treatment has no impact on regulatory capital ratios.

GROUP RESULTS

Credit risk

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Full Year Sep 16 Individual charge $M Collective charge $M Total charge $M 898 22 920 774 (33) 741 104 16 120 163 11 174 - 1 1	Full Year Sep 15 Individual charge $M Collective charge $M Total charge $M 761 91 852 206 (8) 198 54 1 55 86 12 98 3 (1) 2	Movement
			Sep 16 v. Sep 15
			Individual charge % Collective charge % Total charge % 18% -76% 8% large large large 93% large large 90% -8% 78% -100% large -50%
Total	1,939 17 1,956	1,110 95 1,205	75% -82% 62%

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 Individual charge $M Collective charge $M Total charge $M 469 (11) 458 435 (17) 418 61 17 78 82 1 83 - 1 1	Half Year Mar 16 Individual charge $M Collective charge $M Total charge $M 429 33 462 339 (16) 323 43 (1) 42 81 10 91 - - -	Movement
			Sep 16 v. Mar 16
			Individual charge % Collective charge % Total charge % 9% large -1% 28% 6% 29% 42% large 86% 1% -90% -9% n/a n/a n/a
Total	1,047 (9) 1,038	892 26 918	17% large 13%
Individual credit impairment charge New and increased individual credit impairments Australia Institutional New Zealand Asia Retail & Pacific		Half Year Sep 16 $M Mar 16 $M Movt 623 600 4% 490 354 38% 106 96 10% 102 101 1%	Full Year Sep 16 $M Sep 15 $M Movt 1,223 1,103 11% 844 315 large 202 190 6% 203 175 16% 2,472 1,783 39% (325) (342) -5% (70) (109) -36% (98) (136) -28% (40) (89) -55% - 3 -100% (533) (673) -21% 1,939 1,110 75%
New and increased individual credit impairments		1,321 1,151 15%
Recoveries and write-backs Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre		(154) (171) -10% (55) (15) large (45) (53) -15% (20) (20) 0% - - n/a
Recoveries and write-backs		(274) (259) 6%
Total individual credit impairment charge		1,047 892 17%

 September 2016 v September 2015

The individual credit impairment charge increased $829 million (+75%), driven by increases in new and existing provisions of $689 million (+39%), combined with a $140 million (-21%) reduction in recoveries and write-backs. New and existing provisions increased in the Institutional division from a small number of Australian and multi-national resource related exposures, continued commodity and manufacturing sector weaknesses and the settlement of the Oswal legal dispute. In the Australia division, the increase was predominantly due to growth in Small Business Banking, higher delinquencies in the retail and commercial portfolios in Queensland and Western Australia, and higher write-backs in Corporate Banking in 2015 (not repeated in 2016). In the New Zealand division, the increase was driven by new provisions in the Agri and Commercial portfolios and lower levels of write-backs.

 September 2016 v March 2016

The individual credit impairment charge increased $155 million (+17%), driven by an increase in new and existing provisions of $170 million (+15%), predominantly from the settlement of the Oswal legal dispute. In the Australia division, the increase was in the Retail portfolio, and in the New Zealand division the increase was in the Agri portfolio.

GROUP RESULTS

Collective credit impairment charge

Collective credit impairment charge
Collective credit impairment charge/(release) by source Lending growth Risk profile Economic cycle and concentration risk adjustment	Half Year Sep 16 $M Mar 16 $M Movt (59) 56 large 50 (30) large - - n/a	Full Year
		Sep 16 $M Sep 15 $M Movt (3) 104 large 20 70 -71% - (79) -100%
Total collective credit impairment charge/(release)	(9) 26 large	17 95 -82%

 September 2016 v September 2015

The collective credit impairment charge decreased $78 million (-82%) due to portfolio contraction in Institutional, lower portfolio growth in Australia division and customer migration from collective to individual provisioning in Institutional, partially offset by release of economic cycle overlay in 2015 not repeated in 2016.

 September 2016 v March 2016

The collective credit impairment charge decreased $35 million from a charge of $26 million to a release of $9 million. The decrease was driven by portfolio contraction in Institutional and lower portfolio growth in Australia division. These decreases were partially offset by a second half charge due to business downgrades in Institutional compared to first half release following customer migration from collective to individual provisioning.

Provision for credit impairment

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Full Year Sep 16 Individual provision $M Collective provision $M1 Total provision $M 606 1,188 1,794 566 1,114 1,680 117 374 491 18 196 214 - 4 4	Full Year Sep 15 Individual provision $M Collective provision $M1 Total provision $M 590 1,244 1,834 300 1,179 1,479 139 340 479 32 190 222 - 3 3	Movement
			Sep 16 v. Sep 15
			Individual provision % Collective provision % Total provision % 3% -5% -2% 89% -6% 14% -16% 10% 3% -44% 3% -4% n/a 33% 33%
Total	1,307 2,876 4,183	1,061 2,956 4,017	23% -3% 4%

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 Individual provision $M Collective provision $M1 Total provision $M 606 1,188 1,794 566 1,114 1,680 117 374 491 18 196 214 - 4 4	Half Year Mar 16 Individual provision $M Collective provision $M1 Total provision $M 547 1,204 1,751 555 1,126 1,681 114 337 451 22 192 214 - 3 3	Movement
			Sep 16 v. Mar 16
			Individual provision % Collective provision % Total provision % 11% -1% 2% 2% -1% 0% 3% 11% 9% -18% 2% 0% n/a 33% 33%
Total	1,307 2,876 4,183	1,238 2,862 4,100	6% 0% 2%

1. The collective provision includes amounts for off-balance sheet credit exposures of $631 million at 30 September 2016 (Mar 2016: $663 million; Sep 2015: $677 million). The impact on the income statement for the full year ended 30 September 2016 was a $32 million release (Mar 2016 half: $3 million charge; Sep 2015 full year: $27 million charge).

GROUP RESULTS

Gross Impaired Assets

Gross Impaired Assets
Impaired loans Restructured items1 Non-performing commitments and contingencies	As at Sep 16 $M Mar 16 $M Sep 15 $M 2,646 2,564 2,441 403 226 184 124 93 94	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 3% 8% 78% large 33% 32%
Gross impaired assets Individual provisions Impaired loans Non-performing commitments and contingencies	3,173 2,883 2,719 (1,278) (1,209) (1,038) (29) (29) (23)	10% 17% 6% 23% 0% 26%
Net impaired assets	1,866 1,645 1,658	13% 13%
Gross impaired assets by division Australia Institutional New Zealand Asia Retail & Pacific	1,170 1,093 1,194 1,403 1,281 960 346 273 338 254 236 227	7% -2% 10% 46% 27% 2% 8% 12%
Gross impaired assets	3,173 2,883 2,719	10% 17%
Gross impaired assets by size of exposure Less than $10 million $10 million to $100 million Greater than $100 million	1,784 1,597 1,748 899 970 708 490 316 263	12% 2% -7% 27% 55% 86%
Gross impaired assets	3,173 2,883 2,719	10% 17%

1. Restructured items are 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.

 September 2016 v September 2015

Gross impaired assets increased $454 million (+17%) primarily driven by Institutional ($443 million) impairments on a small number of Australian and multi-national resource and manufacturing related exposures, along with the Oswal legal dispute. The Group’s individual provision coverage ratio on impaired assets was 41.2% at 30 September 2016 (39.0% at 30 September 2015).

 September 2016 v March 2016

Gross impaired assets increased $290 million (+10%) driven by Institutional ($122 million), Australia division ($77 million) and New Zealand division ($73 million). The increase in Institutional relates to impairments on a small number of Australian and multi-national resource and manufacturing related exposures, along with the Oswal legal dispute. The Australia division increase was driven by higher delinquencies in the retail and commercial portfolios in Queensland and Western Australia. In the New Zealand division, the increase is due an increase in impairments in the Agri portfolio. The Group’s individual provision coverage ratio on impaired assets was 41.2% at 30 September 2016 (42.9% at 31 March 2016).

New Impaired Assets

Impaired loans Restructured items Non-performing commitments and contingencies	Half Year Sep 16 $M Mar 16 $M Movt 1,610 1,657 -3% 193 81 large 41 46 -11%	Full Year
		Sep 16 $M Sep 15 $M Movt 3,267 2,848 15% 274 30 large 87 102 -15%
Total new impaired assets	1,844 1,784 3%	3,628 2,980 22%
New impaired assets by division Australia Institutional New Zealand Asia Retail & Pacific	927 777 19% 498 652 -24% 290 194 49% 129 161 -20%	1,704 1,618 5% 1,150 760 51% 484 368 32% 290 234 24%
Total new impaired assets	1,844 1,784 3%	3,628 2,980 22%

GROUP RESULTS

 September 2016 v September 2015

New impaired assets increased $648 million (+22%) with increases in Institutional ($390 million) related to a small number of Australian and multinational resource related exposures and continued commodity and manufacturing sector weaknesses. The New Zealand division increase ($116 million) is driven by the deterioration in the Agri portfolio. The increase in Australia division ($86 million) was predominantly driven by delinquencies in Queensland and Western Australia.

 September 2016 v March 2016

New impaired assets increased $60 million (+3%) with increases in Australia division ($150 million) and New Zealand division ($96 million), partially offset by a decrease in Institutional ($154 million). The increase in Australia division is due to the deterioration in the Retail, Regional Business Banking and Asset Finance portfolios. The increase in New Zealand division is due to the deterioration in the Agri portfolio.

Ageing analysis of net loans and advances that are past due but not impaired1 1-5 days 6-29 days 30-59 days 60-89 days >90 days	As at Sep 16 $M Mar 16 $M Sep 15 $M 3,361 3,048 2,785 4,605 5,820 5,071 1,910 2,292 1,732 1,070 1,193 992 2,703 2,573 2,378	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 10% 21% -21% -9% -17% 10% -10% 8% 5% 14%
Total	13,649 14,926 12,958	-9% 5%

1. Greater granularity in past due loans has resulted in comparative information being restated accordingly.

 September 2016 v September 2015

The 90 days past due but not impaired increased $325 million (+14%), primarily driven by Australia division due to Home Loans portfolio growth and portfolio deterioration in Queensland and Western Australia.

 September 2016 v March 2016

The 90 days past due but not impaired increased $130 million (+5%), primarily driven by Australia division due to Home Loans portfolio growth and portfolio deterioration in Queensland and Western Australia.

Income tax expense

Income tax expense on cash profit Effective tax rate (cash profit)	Half Year Sep 16 $M Mar 16 $M Movt 1,166 1,133 3% 27.2% 28.9%	Full Year
		Sep 16 $M Sep 15 $M Movt 2,299 2,724 -16% 28.0% 27.4%

September 2016 v September 2015

The effective tax rate increased from 27.4% to 28.0%. The increase of 60 bps is primarily due to the impairment of our investment in Ambank and a lower average tax rate on decreased offshore earnings, partially offset by an increased release of tax provisions. In addition, 2015 included a one off favourable Wealth Australia tax consolidation benefit.

 September 2016 v March 2016

The effective tax rate decreased from 28.9% to 27.2%. The decrease of 170 bps is primarily due to the impairment of our investment in Ambank in the March half. The September half included increased release of tax provisions offset by lower earnings from equity accounted associates.

GROUP RESULTS

Impact of foreign currency translation

The following tables present the Group’s cash profit results and net loans and advances neutralised for the impact of foreign currency translation. Comparative data has been adjusted to remove the translation impact of foreign currency movements by retranslating prior period comparatives at current period foreign exchange rates.

Cash Profit - September 2016 Full Year vs September 2015 Full Year

Net interest income Other operating income	Full Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Sep 15 $M Sep 15 $M Sep 15 $M 15,095 14,616 96 14,712 5,482 5,921 225 6,146	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Sep 15 Sep 16 v. Sep 15 Sep 16 v. Sep 15 3% 0% 3% -7% 4% -11%
Operating income Operating expenses	20,577 20,537 321 20,858 (10,422) (9,378) (114) (9,492)	0% 1% -1% 11% 1% 10%
Profit before credit impairment and income tax Credit impairment charge	10,155 11,159 207 11,366 (1,956) (1,205) (9) (1,214)	-9% 2% -11% 62% 1% 61%
Profit before income tax Income tax expense Non-controlling interests	8,199 9,954 198 10,152 (2,299) (2,724) (56) (2,780) (11) (14) (1) (15)	-18% 1% -19% -16% 1% -17% -21% 6% -27%
Cash profit	5,889 7,216 141 7,357	-18% 2% -20%

Cash Profit by Division - September 2016 Full Year vs September 2015 Full Year

Cash Profit by Division - September 2016 Full Year vs	September 2015 Full Year
Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Full Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Sep 15 $M Sep 15 $M Sep 15 $M 3,573 3,413 - 3,413 1,057 1,967 26 1,993 1,267 1,254 6 1,260 327 428 - 428 152 139 4 143 (487) 15 105 120	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Sep 15 Sep 16 v. Sep 15 Sep 16 v. Sep 15 5% 0% 5% -46% 1% -47% 1% 0% 1% -24% 0% -24% 9% 3% 6% large large large
Cash profit by division	5,889 7,216 141 7,357	-18% 2% -20%

Net loans and advances by Division - September 2016 Full Year vs September 2015 Full Year

	As at Actual FX unadjusted FX impact FX adjusted Sep 16 $B Sep 15 $B Sep 15 $B Sep 15 $B	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Sep 15 Sep 16 v. Sep 15 Sep 16 v. Sep 15 4% 0% 4%
Australia	327.1 315.1 - 315.1
Institutional	125.9 142.2 (4.4) 137.8	-11% -2% -9%
New Zealand	107.9 97.0 4.8 101.8	11% 5% 6%
Wealth Australia	2.0 1.9 - 1.9	5% 0% 5%
Asia Retail & Pacific	13.4 14.5 (0.9) 13.6	-8% -7% -1%
TSO and Group Centre	(0.4) (0.5) - (0.5)	-20% 0% -20%
Net loans and advances by division1	575.9 570.2 (0.5) 569.7	1% 0% 1%

1. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

GROUP RESULTS

Cash Profit - September 2016 Half Year vs March 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Mar 16 $M Mar 16 $M Mar 16 $M 7,527 7,568 (7) 7,561 2,734 2,748 (25) 2,723	Movement FX unadjusted FX impact FX adjusted Sep 16 v. Mar 16 Sep 16 v. Mar 16 Sep 16 v. Mar 16 -1% -1% 0% -1% -1% 0%
Operating income Operating expenses	10,261 10,316 (32) 10,284 (4,943) (5,479) 35 (5,444)	-1% -1% 0% -10% -1% -9%
Profit before credit impairment and income tax Credit impairment charge	5,318 4,837 3 4,840 (1,038) (918) 7 (911)	10% 0% 10% 13% -1% 14%
Profit before income tax Income tax expense Non-controlling interests	4,280 3,919 10 3,929 (1,166) (1,133) (6) (1,139) (7) (4) - (4)	9% 0% 9% 3% 1% 2% 75% 0% 75%
Cash profit	3,107 2,782 4 2,786	12% 0% 12%

Cash Profit by Division - September 2016 Half Year vs March 2016 Half Year

Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Actual FX unadjusted FX impact FX adjusted Sep 16 $M Mar 16 $M Mar 16 $M Mar 16 $M 1,794 1,779 - 1,779 425 632 (7) 625 626 641 12 653 159 168 - 168 95 57 (1) 56 8 (495) - (495)	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Mar 16 Sep 16 v. Mar 16 Sep 16 v. Mar 16 1% 0% 1% -33% -1% -32% -2% 2% -4% -5% 0% -5% 67% -3% 70% large 0% large
Cash profit by division	3,107 2,782 4 2,786	12% 0% 12%

Net loans and advances by Division - September 2016 Half Year vs March 2016 Half Year

	As at Actual FX unadjusted FX impact FX adjusted Sep 16 $B Mar 16 $B Mar 16 $B Mar 16 $B	Movement
		FX unadjusted FX impact FX adjusted
		Sep 16 v. Mar 16 Sep 16 v. Mar 16 Sep 16 v. Mar 16 2% 0% 2%
Australia	327.1 321.4 - 321.4
Institutional	125.9 125.6 0.9 126.5	0% 0% 0%
New Zealand	107.9 99.2 5.7 104.9	9% 6% 3%
Wealth Australia	2.0 1.9 - 1.9	5% 0% 5%
Asia Retail & Pacific	13.4 13.9 0.2 14.1	-4% 1% -5%
TSO and Group Centre	(0.4) (0.2) - (0.2)	100% 0% 100%
Net loans and advances by division1	575.9 561.8 6.8 568.6	3% 2% 1%

1. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

GROUP RESULTS

Earnings related hedges

The Group has taken out economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar, US Dollar and US Dollar correlated). New Zealand Dollar exposure relates to the New Zealand geography and USD exposure relates to APEA. Details of these hedges are set out below.

NZD Economic hedges Net open NZD position (notional principal)1 Amount taken to income (pre-tax statutory basis)2 Amount taken to income (pre-tax cash basis)3 USD Economic hedges Net open USD position (notional principal)1 Amount taken to income (pre-tax statutory basis)2 Amount taken to income (pre-tax cash basis)3	Half Year Full Year
	Sep 16 $M Mar 16 $M Sep 16 $M Sep 15 $M 3,161 3,119 3,161 3,567 (172) (2) (174) (52) (6) (2) (8) (85) - 85 - 352 (3) 24 21 (170) (24) (34) (58) (138)

1. Value in AUD at contracted rate. 2.

Unrealised valuation movement plus realised revenue from matured or closed out hedges.
3.
Realised revenue from closed hedges.
As at 30 September 2016, the following hedges are in place to partially hedge future earnings against adverse movements in exchange rates:
NZD 3.5 billion at a forward rate of approximately NZD 1.10 / AUD.

During the September 2016 full year:

NZD 1.8 billion of economic hedges matured and a realised loss of $8 million (pre-tax) was recorded in cash profit.
USD 0.3 billion of economic hedges matured and a realised loss of $58 million (pre-tax) was recorded in cash profit.
An unrealised loss of $87 million (pre-tax) on the outstanding NZD and USD economic hedges was recorded in the statutory income statement during the year. This unrealised loss has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD and USD revenues.

During the September 2016 half year:

NZD 0.8 billion of economic hedges matured and a realised loss of $6 million (pre-tax) was recorded in cash profit.
USD 0.2 billion of economic hedges matured and a realised loss of $24 million (pre-tax) was recorded in cash profit.
An unrealised loss of $145 million (pre-tax) on the outstanding NZD and USD economic hedges was recorded in the statutory income statement during the second half. This unrealised loss has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD and USD revenues.

Earnings per share

Earnings per share
Cash earnings per share (cents) Basic Diluted Cash weighted average number of ordinary shares (M)1 Basic Diluted Cash profit ($M) Preference share dividends ($M)	Half Year Sep 16 $M Mar 16 $M Movt 106.7 95.9 11% 102.0 90.7 12% 2,911.6 2,901.4 0% 3,192.6 3,229.5 -1% 3,107 2,782 12% - - n/a	Full Year
		Sep 16 $M Sep 15 $M Movt 202.6 260.3 -22% 194.1 247.0 -21% 2,906.2 2,771.4 5% 3,187.0 3,032.2 5% 5,889 7,216 -18% - (1) -100%
Cash profit less preference share dividends ($M)	3,107 2,782 12%	5,889 7,215 -18%
Diluted cash profit less preference share dividends ($M)	3,257 2,929 11%	6,186 7,489 -17%

1 Includes Treasury shares held in Wealth Australia as the associated gains and losses are included in cash profit.

GROUP RESULTS

Dividends

Dividend per ordinary share (cents) Interim (fully franked) Final (fully franked)1	Half Year Sep 16 $M Mar 16 $M Movt - 80 n/a 80 - n/a	Full Year
		Sep 16 $M Sep 15 $M Movt 80 86 -7% 80 95 -16%
Total (fully franked) Ordinary share dividends used in payout ratio ($M)2 Cash profit ($M) Less: Preference share dividends paid3 Ordinary share dividend payout ratio (cash basis)2	80 80 0% 2,342 2,334 0% 3,107 2,782 12% - - n/a 75.4% 83.9%	160 181 -12% 4,676 5,137 -9% 5,889 7,216 -18% - (1) -100% 79.4% 71.2%

1 2016 final dividend is proposed.

2 The September 2016 half year dividend payout ratio is calculated using the proposed 2016 final dividend of $2,342 million, which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2016 half and the September 2015 full year are calculated using actual dividend paid of $2,334 million and $5,137 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the company by the amount of preference share dividends paid.

3 Represents dividends paid on Euro Trust Securities (preference shares) issued on 13 December 2004. The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014.

The Directors propose that a final dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 16 December 2016. The proposed 2016 final dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZ 9 cents per ordinary share will also be attached.

Economic profit

Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit	Half Year Sep 16 $M Mar 16 $M Movt 2,971 2,738 9% 136 44 large	Full Year
		Sep 16 $M Sep 15 $M Movt 5,709 7,493 -24% 180 (277) large
Cash Profit Economic credit cost adjustment Imputation credits	3,107 2,782 12% 23 (71) large 592 568 4%	5,889 7,216 -18% (48) (493) -90% 1,160 1,320 -12%
Economic return Cost of capital	3,722 3,279 14% (2,847) (2,876) -1%	7,001 8,043 -13% (5,723) (5,168) 11%
Economic profit	875 403 large	1,278 2,875 -56%

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 review or audit by the external auditor.

Economic profit is calculated via a series of adjustments to cash 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 to our shareholders 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 a cost of capital rate (10%) 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 decreased $1,597 million (-56%) on the September 2015 full year due to a 18% decrease in cash profit and a 11% increase in cost of capital from higher capital levels partially offset by a lower economic credit cost adjustment reflecting higher credit impairment charges.

Economic profit increased $472 million on the March 2016 half due to a 12% increase in cash profit and lower economic credit cost adjustment reflecting higher credit impairment charges.

GROUP RESULTS

Condensed balance sheet

Condensed balance sheet
Assets Cash / Settlement balances owed to ANZ / Collateral paid Trading and available-for-sale assets Derivative financial instruments Net loans and advances1 Investment backing policy liabilities Other	As at Sep 16 $B Mar 16 $B Sep 15 $B 83.3 88.0 82.5 110.3 100.5 92.7 87.5 88.7 85.6 575.9 561.8 570.2 35.7 34.5 34.8 22.2 21.8 24.1	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -5% 1% 10% 19% -1% 2% 3% 1% 3% 3% 2% -8%
Total assets	914.9 895.3 889.9	2% 3%
Liabilities Settlement balances owed by ANZ / Collateral received Deposits and other borrowings Derivative financial instruments Debt issuances Policy liabilities and external unit holder liabilities Other	17.0 20.2 19.1 588.2 578.1 570.8 88.7 91.7 81.3 91.1 81.9 93.7 39.5 38.4 38.7 32.5 28.5 28.9	-16% -11% 2% 3% -3% 9% 11% -3% 3% 2% 14% 12%
Total liabilities	857.0 838.8 832.5	2% 3%
Total equity	57.9 56.5 57.4	2% 1%

1. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

September 2016 v September 2015
Trading and available-for-sale assets increased $17.6 billion (+19%). Adjusting for a $1.5 billion decrease due to foreign currency translation, the $19.1 billion increase was driven by increased liquidity portfolio holdings due to balance sheet growth, and the reclassification of the BoT investment as an available-for-sale asset upon cessation of equity accounting.
Derivative financial assets increased $1.9 billion (+2%) and derivative financial liabilities increased $7.4 billion (+9%) respectively as foreign exchange rate and interest rate movements resulted in higher derivative fair values.
Net loans and advances increased $5.7 billion (+1%). Adjusting for a $0.5 billion decrease due to foreign currency translation, the $6.2 billion increase is primarily driven by $12.0 billion increase in Australia division due to growth in Home Loans and Business Lending, $6.1 billion increase in New Zealand division reflecting growth across both the housing and non-housing portfolios, partially offset by a $11.8 billion decrease in Institutional division as a result of the strategic repositioning of that business to improve capital efficiency and returns.
Deposits and other borrowings increased $17.4 billion (+3%). Adjusting for a $5.9 billion decrease due to foreign currency translation, the $23.3 billion increase is primarily driven by $10.7 billion growth in Institutional deposits from banks and certificates of deposits, $10.3 billion increase in Australia division due to growth in term deposits and home loan offset balances and $5.1 billion increase in New Zealand division primarily driven by customer deposits.
Total equity increased $0.5 billion (+1%) primarily due to $5.7 billion profits generated over the year, partially offset by the payment (net of dividend reinvestment) of the 2015 final and 2016 interim dividends of $5.0 billion.
September 2016 v March 2016
Trading and available-for-sale assets increased $9.8 billion (+10%). Adjusting for a $0.9 billion increase due to foreign currency translation, the $8.9 billion increase was driven by increased liquidity portfolio holdings due to balance sheet growth.
Net loans and advances increased $14.1 billion (+3%). Adjusting for a $6.8 billion increase due to foreign currency translation, the $7.3 billion increase is primarily driven by $5.6 billion increase in Australia division due to growth in Home Loans and Business Lending, $3.0 billion increase in New Zealand division reflecting growth across both the housing and non-housing portfolios, partially offset by a $0.6 billion decrease in Institutional division as a result of the strategic repositioning of that business to improve capital efficiency and returns.
Deposits and other borrowings increased $10.1 billion (+2%). Adjusting for a $7.1 billion increase due to foreign currency translation, the $3.0 billion increase is driven by an increase in Australia division term deposits.
Debt issuances increased $9.2 billion (+11%). Adjusting for a $1.0 billion increase due to foreign currency translation, the $8.2 billion increase is driven by new debt issuance in Australia, US and New Zealand.
Total equity increased $1.4 billion (+2%) primarily due to $3.0 billion profits generated over the year and an increase in the foreign currency translation reserve of $0.6 billion, partially offset by the payment (net of dividend reinvestment) of the 2016 interim dividend of $2.3 billion.

GROUP RESULTS

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 timing mismatch of cash flows and the related liquidity risk is inherent in all banking operations and is closely monitored by the Group and managed in accordance with the risk appetite set by the Board.

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

Scenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by the ability to meet a range of regulatory requirements and internal liquidity metrics mandated by the Board. The metrics cover a range of scenarios of varying duration and level of severity. This framework:
Provides protection against shorter-term extreme market dislocations and stresses.
Maintains structural strength in the balance sheet by ensuring an appropriate amount of longer-term assets are funded with longer-term funding.
Ensures no undue timing concentrations exist in the Group’s funding profile.

A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated under APRA regulatory requirements. As part of meeting the LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). The CLF has been established as a solution to a High Quality Liquid Asset (HQLA) shortfall in the Australian marketplace and provides an alternative form of RBA-qualifying liquid assets. The total amount of the CLF available to a qualifying ADI is set annually by APRA.

Liquid assets

The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed environment, as well as to meet regulatory requirements. High quality liquid assets comprise three categories, with the definitions consistent with Basel 3 LCR:

Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide same-day liquidity.
High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and eligible securities listed by the Reserve Bank of New Zealand (RBNZ).

The Group monitors and manages the composition of liquid assets to ensure diversification by asset class, counterparty, currency and tenor. Minimum levels of liquid assets held are set annually based on a range of ANZ specific and general market liquidity stress scenarios such that potential cash flow obligations can be met over the short to medium term, and holdings are appropriate to existing and future business activities, regulatory requirements and in line with the approved risk appetite.

Market Values Post Discount1 HQLA12 HQLA2 Internal Residential Mortgage Backed Securities (Australia)2 Internal Residential Mortgage Backed Securities (New Zealand)3 Other ALA4	Half Year Average Sep 16 $B Mar 16 $B Sep 15 $B 119.7 117.2 98.2 4.1 3.3 3.1 35.3 35.1 37.9 1.2 1.5 1.3 17.7 18.6 17.4	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 2% 22% 24% 32% 1% -7% -20% -8% -5% 2%
Total Liquid Assets	178.0 175.7 157.9	1% 13%
Cash flows modelled under stress scenario Cash outflows Cash inflows	182.9 181.0 170.2 40.2 42.1 42.6	1% 7% -5% -6%
Net cash outflows	142.7 138.9 127.6	3% 12%

Liquidity Coverage Ratio5	125% 126% 124%	-1% 1%

1. Half year average basis, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements. 2.

RBA open repo arrangement netted down from CLF, with a corresponding increase in HQLA. 3.

New Zealand LCR surplus is excluded from NZ internal RMBS, consistent with APS 330 treatment.

Comprised of assets qualifying as collateral for the CLF, excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the RBNZ's Liquidity Policy - Annex: Liquidity Assets - Prudential Supervision Department Document BS13A12.

All currency Group LCR.

GROUP RESULTS

Funding

ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.

$32.1 billion of term wholesale debt (excluding Additional Tier 1 Capital) with a remaining term greater than one year as at 30 September 2016 was issued during the year ended 30 September 2016 (2015: $18.8 billion). The weighted average tenor of new term debt was 5.5 years (Sep 15: 4.9 years). In addition, $2.9 billion of Additional Tier 1 Capital issuance took place during the financial year. The following tables show the Group’s total funding composition: As at Movement

The following tables show the Group’s total funding composition: Customer deposits and other liabilities1 Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre1	As at Sep 16 $M Mar 16 $M Sep 15 $M 187,640 184,202 177,293 171,122 176,126 183,040 72,818 67,951 64,890 343 362 367 22,814 23,534 24,355 (5,114) (5,397) (5,361)	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 2% 6% -3% -7% 7% 12% -5% -7% -3% -6% -5% -5%
Customer deposits Other funding liabilities2	449,623 446,778 444,584 14,531 16,127 14,346	1% 1% -10% 1%
Total customer liabilities (funding)	464,154 462,905 458,930	0% 1%
Wholesale funding3 Debt issuances4 Subordinated debt Certificates of deposit Commercial paper Other wholesale borrowings5,6	91,080 81,947 93,347 21,964 17,557 17,009 61,429 65,077 63,446 19,349 21,065 22,987 65,442 56,391 44,558	11% -2% 25% 29% -6% -3% -8% -16% 16% 47%
Total wholesale funding	259,264 242,037 241,347	7% 7%
Shareholders' Equity (excl. preference shares)	57,927 56,464 57,353	3% 1%
Total Funding	781,345 761,406 757,630	3% 3%

Funded Assets Other short term assets & trade finance assets7 Liquids6	As at Sep 16 $M Mar 16 $M Sep 15 $M 65,800 68,015 78,879 161,302 147,419 135,496	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -3% -17% 9% 19%
Short term funded assets Lending & fixed assets8	227,102 215,434 214,375 554,243 545,972 543,255	5% 6% 2% 2%
Total Funded Assets	781,345 761,406 757,630	3% 3%
Funding Liabilities3,4,6 Other short term liabilities Short term funding9 Term funding < 12 months9 Other customer and central bank deposits1,10	48,806 40,360 27,863 69,028 73,559 73,261 23,668 22,224 28,138 79,597 87,632 88,288	21% 75% -6% -6% 6% -16% -9% -10%
Total short term funding liabilities	221,099 223,775 217,550	-1% 2%
Stable customer deposits1,11 Term funding > 12 months Shareholders' equity and hybrid debt	402,146 392,151 387,988 90,708 81,589 87,316 67,392 63,891 64,776	3% 4% 11% 4% 5% 4%
Total Stable Funding	560,246 537,631 540,080	4% 4%
Total Funding	781,345 761,406 757,630	3% 3%

1. Includes term deposits, other deposits and an adjustment recognised in Group Centre to eliminate Wealth Australia investments in ANZ deposit products. 2.

Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth Australia. 3. Excludes liability for acceptances as they do not provide net funding.

Excludes term debt issued externally by Wealth Australia which matured during the September 2016 full year. 5.

Includes borrowings from banks, net derivative balances, special purpose vehicles and other borrowings. 6.

RBA open-repo arrangement netted down by the exchange settlement account cash balance.

Includes short-dated assets such as trading securities, available-for-sale securities, trade dated assets and trade finance loans. 8.

Excludes trade finance loans.

Prior periods restated to reclassify items between Short term funding and Term funding <12 months.

10. Total customer liabilities (funding) plus Central Bank deposits less Stable customer deposits.

11. Stable customer deposits represent operational type deposits or those sourced from retail / business / corporate customers and the stable component of Other funding liabilities.

GROUP RESULTS

Capital Management

Capital Management
Capital Ratios Common Equity Tier 1 Tier 1 Total capital	As at
	APRA Basel 3 Sep 16 Mar 16 Sep 15 9.6% 9.8% 9.6% 11.8% 11.6% 11.3% 14.3% 13.7% 13.3%	Internationally Comparable Basel 31
		Sep 16 Mar 16 Sep 15 14.5% 14.0% 13.2% 17.4% 16.2% 15.3% 20.7% 18.7% 17.8%
Risk weighted assets ($B)	408.6 388.3 401.9	316.4 317.8 332.1

Internationally Comparable methodology aligns with APRA’s information paper entitled “International Capital Comparison Study” (13 July 2015).

APRA Basel 3 Common Equity Tier 1 (CET1) – September 2016 v September 2015

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Excludes specified items. Refer to page 16 for further details.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the capitalisation of internally generated software assets), EL versus EP shortfall and other intangibles in the period.
19.4 million ordinary shares were issued under the Dividend Reinvestment Plan and Bonus Option Plan for the 2016 interim and 2015 final dividends.
September 2016 v September 2015

ANZ’s CET1 ratio increased 2 bps to 9.6% during the year. Key drivers of the movement in the CET1 ratio were:

Net organic capital generation was +177 bps or $7.2 billion. This was primarily driven by cash profit (excluding specified items) and a net reduction in underlying RWA growth (excluding regulatory changes and other one-offs) which collectively provided +198 bps to the CET1 ratio, partially offset by other business capital deductions of -21 bps. Throughout the September 2016 full year, RWA reduction was primarily driven by a $21.1 billion decrease in Institutional Credit RWAs from a reduction in lending, due to strategic repositioning of that business.
Payment of the March 2016 Interim and September 2015 Final Dividends (net of shares issued under the DRP) reduced the CET1 ratio by -114 bps.
The increased capital requirements for Australian residential mortgage exposures reduced the CET1 ratio by -60 bps and specified items reduced the ratio by a further -9 bps. Other items increased CET1 by +8 bps reflecting the Esanda Dealer Finance divestment (+16 bps), repayment of the remaining $400 million tranche of ANZ Wealth Australia Limited debt in March 2016 (-10 bps) as well as other factors such as RWA measurement changes, movement in non-cash earnings and net foreign currency translation.

APRA Basel 3 Common Equity Tier 1 (CET1) – September 2016 v March 2016

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Excludes specified items. Refer to page 16 for further details.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the capitalisation of internally generated software assets), EL versus EP shortfall and other intangibles in the period.
9.7 million ordinary shares were issued under the Dividend Reinvestment Plan and Bonus Option Plan for the 2016 interim dividend.

GROUP RESULTS

September 2016 v March 2016

ANZ’s CET1 ratio decreased 20 bps to 9.6% during the September half. Key drivers of the movement in the CET1 ratio were:

Net organic capital generation was +106 bps or $4.1 billion. This was primarily driven by cash profit (excluding specified items) and a net reduction in underlying RWA growth (excluding regulatory changes and other one-offs) which collectively provided +112 bps to the CET1 ratio, partially offset by other business capital deductions of -6 bps. The RWA reduction was mainly driven by an $11.9 billion decrease in Institutional Credit RWAs from a reduction in lending, due to strategic repositioning of that business.
Payment of the March 2016 Interim Dividend (net of shares issued under the DRP) reduced the CET1 ratio by -54 bps.
The increased capital requirements for Australian residential mortgage exposures reduced the CET1 ratio by -60 bps and specified items reduced the ratio by a further -7 bps. Other items decreased CET1 by -5 bps reflecting movement in non-cash earnings, other net impacts from RWA measurement changes and net foreign currency translation.

Total Risk Weighted Assets (RWA) – September 2016 v September 2015

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September 2016 v September 2015

ANZ’s total RWA increased by $6.7 billion during the year driven by higher Traded Market and IRRBB RWAs of $3.7 billion and Credit RWAs of $2.2 billion. Excluding the impact of foreign currency exchange translation and the higher capital requirements for Australian mortgages of $25.9 billion, Credit RWAs decreased by $19.3 billion primarily driven by a decline in Institutional lending ($21.1 billion), the Esanda Dealer Finance divestment ($4.6 billion), partially offset by lending growth in retail and commercial and other residual impacts of $6.4 billion.

Total Risk Weighted Assets (RWA) – September 2016 v March 2016

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September 2016 v March 2016

ANZ’s total RWA increased by $20.3 billion. Excluding the impact of foreign currency translation and higher capital requirements for Australian mortgages of $25.9 billion, Credit RWAs decreased by $11.9 billion primarily driven by a decline in Institutional lending due to the strategic repositioning of that business.

GROUP RESULTS

APRA to Internationally Comparable[1] Common Equity Tier 1 (CET1) as at 30 September 2016

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ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel 3: A global regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006). Also includes differences identified in APRA’s information paper entitled “International Capital Comparison Study” (13 July 2015).

The above provides a reconciliation of the CET1 ratio under APRA’s Basel 3 prudential capital standards to Internationally Comparable 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’ Basel 3 reported capital ratios will not be directly comparable with international peers. The International Comparable Basel 3 CET1 ratio incorporates differences between APRA and both the Basel Committee Basel 3 framework (including differences identified in the March 2014 Basel Committee’s Regulatory Consistency Assessment Programme (RCAP) on Basel 3 implementation in Australia) and its application in major offshore jurisdictions.

The material differences between APRA’s Basel 3 and Internationally Comparable Basel 3 ratios include:

Deductions

Investment in insurance and banking associates – APRA requires full deduction against CET1. On an Internationally Comparable basis, these investments are subject to a concessional threshold before a deduction is required.
Deferred tax assets – A full deduction is required from CET1 for deferred tax assets (DTA) relating to temporary differences. On an Internationally Comparable basis, this is first subject to a concessional threshold before the deduction is required.

Risk Weighted Assets (RWA)

IRRBB RWA – APRA requires inclusion of Interest Rate Risk in the Banking Book (IRRBB) within the RWA base for the CET1 ratio calculation. This is not required on an Internationally Comparable basis.
Mortgages RWA – APRA imposes a floor of 20% on the downturn Loss Given Default (LGD) used in credit RWA calculations for residential mortgages. Additionally, from July 2016, APRA also requires a higher correlation factor above the Basel framework 15% requirement in order to raise the average risk weighting of Australian residential mortgages to at least 25%. The Internationally Comparable Basel 3 framework only requires a downturn LGD floor of 10% and a correlation factor of 15%.
Specialised Lending - APRA requires the supervisory slotting approach to be used in determining credit RWA for specialised lending exposures. The Internationally Comparable basis allows for the advanced internal ratings based approach to be used when calculating RWA for these exposures.
Unsecured Corporate Lending LGD – Adjustment to align ANZ’s unsecured corporate lending LGD to 45% to be consistent with banks in other jurisdictions. The 45% LGD rate is also used in the Foundation Internal Ratings-Based approach (FIRB).
Undrawn Corporate Lending Exposure at Default (EAD) – To adjust ANZ’s credit conversion factors (CCF) for undrawn corporate loan commitments to 75% (used in FIRB approach) to align with banks in other jurisdictions.

GROUP RESULTS

Leverage Ratio

At 30 September 2016, the Group’s APRA Leverage Ratio was 5.3% which is above the 3% minimum currently proposed by the BCBS. APRA has not finalised a minimum leverage ratio requirement for Australian ADIs. The following table summarises the Group’s Leverage Ratio calculation:

Tier 1 Capital (net of capital deductions) On-balance sheet exposures (excluding derivatives and securities financing transaction exposures) Derivative exposures Securities financing transaction (SFT) exposures Otheroff-balance sheetexposures	As at Sep 16 $M Mar 16 $M Sep 15 $M 48,285 45,062 45,484 744,359 733,935 733,756 30,600 30,542 38,115 31,417 21,420 17,297 98,460 102,953 107,817	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 7% 6% 1% 1% 0% -20% 47% 82% -4% -9%
Total exposure measure	904,836 888,850 896,985	2% 1%
APRA Leverage Ratio1	5.3% 5.1% 5.1%	5% 5%
Internationally Comparable Leverage Ratio1	6.0% 5.7% 5.7%	5% 5%

Leverage ratio includes Additional Tier 1 securities subject to Basel 3 transitional relief, net of any transitional adjustments.

September 2016 v September 2015

ANZ’s leverage ratio increased +27 bps during the year mainly driven by benefits from the net issuance of $2.1 billion of Additional Tier 1 capital instruments and capital generation from cash earnings (net of dividend payments). This was partially offset by increased holdings of High Quality Liquid Assets and lending growth in Australian mortgages, which contributed to growth in the exposure measure.

September 2016 v March 2016

ANZ’s leverage ratio increased +27 bps in the September half mainly driven by benefits from the net issuance of $2.1 billion of Additional Tier 1 capital instruments and capital generation from cash earnings (net of dividend payments). This was partially offset by increased holdings of High Quality Liquid Assets which contributed to growth in the exposure measure.

Other regulatory developments

Financial System Inquiry (FSI)

The Australian Government completed a comprehensive inquiry into Australia’s financial system and the FSI final report was released on 7 December 2014. The contents of the report are wide-ranging and key recommendations that may have an impact on regulatory capital levels include:

Setting capital standards such that Australian Authorised Deposit-taking Institutions’ (ADIs) capital ratios are unquestionably strong;
Raising the average internal ratings-based (IRB) mortgage risk weight to narrow the difference between average mortgage risk-weight for ADIs using IRB models and those using standardised risk weights;
Implementing a framework for minimum loss absorbing and recapitalisation capacity in line with emerging international practice;
Developing a common reporting template that improves the transparency and comparability of capital ratios of Australian ADIs; and
Introducing a leverage ratio that acts as a backstop to ADIs risk-based capital requirements, in line with the Basel framework.

APRA responded to parts of the FSI inquiry with the following announcements made in connection to the key recommendations:

In July 2015, APRA released an information paper entitled “International capital comparison study” (APRA Study) which supported the FSI’s recommendation that the capital ratios of Australian ADIs should be unquestionably strong. In an update to the APRA study published in July 2016, APRA acknowledged that the relative capital positions of major Australian ADIs have improved since July 2015 and are now broadly consistent with the benchmark suggested by the FSI. The results of the APRA Study will inform but not determine APRA’s approach for setting capital adequacy requirements.
Effective 1 July 2016, APRA has required increased capital holdings for Australian residential mortgage exposures by ADIs accredited to use the internal ratings-based (IRB) approach to credit risk. These new requirements increased the average risk weighting for mortgage portfolios to at least 25%. For ANZ, the impact is a -60 bps reduction to the 30 September 2016 CET1 ratio. Ahead of the increased capital requirements for Australian residential mortgages ANZ raised $3.2 billion of ordinary share capital during the last quarter of 2015. Furthermore, APRA will also require refinements to residential mortgages risk models which will take effect in the financial year 2017. The exact impact of the model refinements has not been confirmed, pending review and approval from APRA. However, any change is expected to increase the average credit risk weighting of ANZ’s residential mortgages exposures to be within the 25% to 30% range.
Reporting of the Leverage Ratio commenced from 1 July 2015. However, APRA have yet to announce details of the minimum requirement which will apply to impacted Australian ADIs.

The Australian Government released its response to the FSI in October 2015 which agrees with all of the above capital related recommendations. The Australian Government supports and endorses APRA to implement the recommendations. However, apart from the above, APRA has not made any announcements on the other key recommendations. Therefore, the final outcomes from the FSI, including any impacts and the timing of these impacts on ANZ remain uncertain.

GROUP RESULTS

Net Stable Funding Ratio (NSFR)

The Basel 3 NSFR standard was released in October 2014. APRA released their NSFR consultation packages and draft standards in March and September 2016 which confirmed that the NSFR will become a minimum requirement on 1 January 2018. In the draft standards, APRA also proposed that they may require an ADI to maintain a higher minimum than the stated 100% NSFR minimum where APRA considers it appropriate to do so. As part of managing future liquidity requirements, ANZ monitors the NSFR in its internal reporting and believe the Group is well placed to meet this requirement by the implementation date.

Level 3 Conglomerates (Level 3)

APRA is extending its prudential supervision framework to Conglomerate Groups via the Level 3 framework which will regulate a bancassurance group such as ANZ as a single economic entity with minimum capital requirements and additional monitoring of risk exposure levels.

In August 2016, APRA confirmed the deferral of capital requirements for Conglomerate Groups until 2019 at the earliest, to allow for the final capital requirements arising from FSI recommendations as well as from international initiatives that are in progress.

The non-capital components of the Level 3 framework relating to group governance, risk exposures, intragroup transactions and other risk management and compliance requirements will become effective on 1 July 2017. ANZ is not expecting any material impact on its operations based upon the current version of these standards.

Current Proposals from the Basel Committee on Banking Supervision (BCBS) on RWA

As part of the BCBS agenda to simplify RWA measurement and reduce their variability amongst banks, the BCBS has issued a number of consultation documents associated with:

Standardised approach to RWA for credit risk;
Revisions to Standardise Measurement Approach to Operational Risk;
Fundamental Review of the Trading Book;
Interest Rate Risk in the Banking Book;
Framework on the imposition of capital floors based on standardised RWA approaches; and
Additional constraints on the use of internal models for credit RWA.

Apart from the review of the Trading Book standard which has been finalised, BCBS is still currently consulting with the industry on the other proposals. The impacts of these changes on ANZ are subject to the final form of these BCBS proposals that APRA will implement for Australian ADIs.

DIVISIONAL RESULTS

Divisional Results

Divisional performance Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific Technology, Services and Operations (TSO) and Group Centre

DIVISIONAL RESULTS

Divisional Performance

The Group operates on a divisional structure with six divisions: Australia, Institutional, New Zealand, Wealth Australia, Asia Retail & Pacific and Technology Services & Operations (“TSO”) and Group Centre. This divisional structure reflects the changes announced by the Group in March 2016 relating to the former Global Wealth division. These changes included repositioning the New Zealand funds management and insurance businesses to the New Zealand division, as well as reorganising the Private Bank business along geographic lines under the Australia, New Zealand and Asia Retail & Pacific divisions. The residual Global Wealth business has been renamed Wealth Australia. Comparative information has been restated.

In addition, certain structured finance businesses within Markets and Transaction Banking were transferred to Loans & Specialised Finance during the September 2016 half. Comparative information has been restated. The TSO organisational changes announced in September 2016 will not take effect until 1 October 2016. For further information on the composition of divisions refer to the Definitions on page 125.

Other than those described above, there have been no significant structural changes. However, certain prior period comparatives have been restated to align with current period presentation due to continued realignment of support functions.

The Divisional Results section is reported on a cash profit basis.

AUD M
				Wealth	Asia Retail	TSO and Group
September 2016 Full Year	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	8,200	3,452	2,451	10	698	284	15,095
Other operating income	1,208	1,723	639	1,244	477	191	5,482
Operating income	9,408	5,175	3,090	1,254	1,175	475	20,577
Operating expenses	(3,389)	(2,935)	(1,225)	(796)	(813)	(1,264)	(10,422)
Profit before credit impairment and income tax	6,019	2,240	1,865	458	362	(789)	10,155
Credit impairment charge	(920)	(741)	(120)	-	(174)	(1)	(1,956)
Profit before income tax	5,099	1,499	1,745	458	188	(790)	8,199
Income tax expense and non-controlling interests	(1,526)	(442)	(478)	(131)	(36)	303	(2,310)
Cash profit/(loss)	3,573	1,057	1,267	327	152	(487)	5,889

				Wealth	Asia Retail	TSO and Group
September 2015 Full Year	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	7,698	3,585	2,381	8	643	301	14,616
Other operating income	1,214	2,177	604	1,265	480	181	5,921
Operating income	8,912	5,762	2,985	1,273	1,123	482	20,537
Operating expenses	(3,193)	(2,806)	(1,197)	(751)	(834)	(597)	(9,378)
Profit before credit impairment and income tax	5,719	2,956	1,788	522	289	(115)	11,159
Credit impairment charge	(852)	(198)	(55)	-	(98)	(2)	(1,205)
Profit before income tax	4,867	2,758	1,733	522	191	(117)	9,954
Income tax expense and non-controlling interests	(1,454)	(791)	(479)	(94)	(52)	132	(2,738)
Cash profit/(loss)	3,413	1,967	1,254	428	139	15	7,216

September 2016 Full Year vs September 2015 Full Year	September 2016 Full Year vs September 2015 Full Year
				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	7%	-4%	3%	25%	9%	-6%	3%
Other operating income	0%	-21%	6%	-2%	-1%	6%	-7%
Operating income	6%	-10%	4%	-1%	5%	-1%	0%
Operating expenses	6%	5%	2%	6%	-3%	large	11%
Profit before credit impairment and income tax	5%	-24%	4%	-12%	25%	large	-9%
Credit impairment charge	8%	large	large	n/a	78%	-50%	62%
Profit before income tax	5%	-46%	1%	-12%	-2%	large	-18%
Income tax expense and non-controlling interests	5%	-44%	0%	39%	-31%	large	-16%
Cash profit/(loss)	5%	-46%	1%	-24%	9%	large	-18%

DIVISIONAL RESULTS

Cash profit by division – September 2016 full year v September 2015 full year

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AUD M
				Wealth	Asia Retail	TSO and Group
September 2016 Half Year	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	4,124	1,650	1,244	4	347	158	7,527
Other operating income	598	812	327	605	234	158	2,734
Operating income	4,722	2,462	1,571	609	581	316	10,261
Operating expenses	(1,708)	(1,426)	(630)	(388)	(381)	(410)	(4,943)
Profit before credit impairment and income tax	3,014	1,036	941	221	200	(94)	5,318
Credit impairment charge	(458)	(418)	(78)	-	(83)	(1)	(1,038)
Profit before income tax	2,556	618	863	221	117	(95)	4,280
Income tax expense and non-controlling interests	(762)	(193)	(237)	(62)	(22)	103	(1,173)
Cash profit/(loss)	1,794	425	626	159	95	8	3,107

				Wealth	Asia Retail	TSO and Group
March 2016 Half Year	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	4,076	1,802	1,207	6	351	126	7,568
Other operating income	610	911	312	639	243	33	2,748
Operating income	4,686	2,713	1,519	645	594	159	10,316
Operating expenses	(1,681)	(1,509)	(595)	(408)	(432)	(854)	(5,479)
Profit before credit impairment and income tax	3,005	1,204	924	237	162	(695)	4,837
Credit impairment charge	(462)	(323)	(42)	-	(91)	-	(918)
Profit before income tax	2,543	881	882	237	71	(695)	3,919
Income tax expense and non-controlling interests	(764)	(249)	(241)	(69)	(14)	200	(1,137)
Cash profit/(loss)	1,779	632	641	168	57	(495)	2,782

September 2016 Half Year vs March 2016 Half Year

				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	1%	-8%	3%	-33%	-1%	25%	-1%
Other operating income	-2%	-11%	5%	-5%	-4%	large	-1%
Operating income	1%	-9%	3%	-6%	-2%	99%	-1%
Operating expenses	2%	-6%	6%	-5%	-12%	-52%	-10%
Profit before credit impairment and income tax	0%	-14%	2%	-7%	23%	-86%	10%
Credit impairment charge	-1%	29%	86%	n/a	-9%	n/a	13%
Profit before income tax	1%	-30%	-2%	-7%	65%	-86%	9%
Income tax expense and non-controlling interests	0%	-22%	-2%	-10%	57%	-49%	3%
Cash profit/(loss)	1%	-33%	-2%	-5%	67%	large	12%

DIVISIONAL RESULTS

Australia Fred Ohlsson

Cash profit – September 2016 Full Year v September 2015 Full Year

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1. The Esanda Dealer Finance divestment had a negative impact of $130 million on Australia division’s profit before income tax. This amount is comprised of $224 million of net interest income, $39 million of other operating income, $26 million of operating expenses and $107 million of credit impairment charges.

Strategic Priorities	2016 Progress Highlights
Create a simpler, better capitalised and better balanced bank: Reduce operating costs and risks by removing product and management complexity, exiting lower returning and non-core businesses.	Completed the sale of Esanda Dealer Finance. Increased operational efficiencies (volume growth +3%, operations costs down 5% year on year). Optimised branch network and head office functions. Excluding specified items, cost to income improved from 36.6% to 34.6% year on year.
Focus our efforts on attractive areas: Provide the best home buying, owning and selling experience. Make starting, running and growing a small business easier.	No. 3 Market Share in Home Loans. Invested in streamlining Home Loan origination, decisioning and fulfilment. Launched ANZ Business Ready for start-ups. Invested in NSW which is outperforming other states.
Build a superior everyday experience for our people and customers: Build more intuitive, engaging and secure channels, particularly mobile and digital. Automating and digitising to make banking easier for customers and staff.	First Australian bank to launch Apple PayTMand Android PayTM. Rolled out a further 36 digital branches across the network in the year. Invested in Banker desktop tools to simplify and reduce processing times for customer account applications. Implementation of multi-channel platform for Australian Retail banking to support improved customer experience.
 September 2016 v September 2015 Cash profit increased 5%. Excluding specified items1, cash profit increased 10% driven by a 9% increase in operating income, partially offset by a 3% increase in operating expenses and a 24% increase in credit impairment charges.	 September 2016 v March 2016 Cash profit increased 1%. Excluding specified items1, cash profit increased 2% driven by a 2% increase in operating income partially offset by a 1% increase in operating expenses and flat credit impairment charges.

 September 2016 v September 2015 Cash profit increased 5%. Excluding specified items[1] , cash profit increased 10% driven by a 9% increase in operating income, partially offset by a 3% increase in operating expenses and a 24% increase in credit impairment charges.

Key factors affecting the result were:

Net interest income increased $48 million (+1%). Excluding specified items[1] , net interest income increased 2% driven by growth in Home Loans and Business lending. Net interest margin declined 2 bps reflecting the impact of competition on lending and deposit margins.
Net interest income increased $502 million (+7%). Excluding specified items[1] , net interest income increased 10%, driven by growth in Home Loans, Business lending and Retail deposits. Net interest margin was stable.
Other operating income decreased $12 million (-2%). Excluding specified items[1] , other operating income was flat half on half with higher fee income growth in Small Business Banking and Cards, offset by customer remediation provisions raised in the September half.
Other operating income decreased $6 million (0%). Excluding specified items[1] , other operating income increased 3% primarily due to fee income growth in Small Business Banking, Home Loans and Deposits and Payments.
Operating expenses increased $196 million (+6%). Excluding specified items[1] , operating expenses increased 3% driven by investments supporting our growth strategy (particularly in priority areas of Home Loans, Small Business and Digital) and wage inflation, partially offset by productivity initiatives that resulted in a 3% decrease in FTE during the year.
Operating expenses increased $27 million (+2%). Excluding specified items[1] , operating expenses increased 1% driven by investments supporting our priority growth segments (Home Loans, Small business and Digital), partially offset by productivity initiatives that resulted in a 3% decrease in FTE during the half.
Credit impairment charges decreased by $4 million (-1%). Excluding specified items[1] , credit impairment charges were flat half on half. The increase in individual impairment charges of $44 million (+11%) was mainly due to seasonal factors in Retail. The decrease in the collective impairment charge of $45 million (-132%) reflects slower growth in Home Loans, Personal Loans and Small Business, as well as a methodology change in Commercial.
Credit impairment charges increased $68 million (+8%). Excluding specified items[1] , credit impairment charges increased by 24%. Individual impairment charges increased $233 million (+36%) predominantly due to growth in Small Business Banking, higher delinquencies in the retail and commercial portfolios in Queensland and Western Australia, and higher write-backs in Corporate Banking in 2015 (not repeated in 2016). The decrease in collective impairment charge of $59 million (-72%) reflects lower growth in Home Loans, Consumer Cards and Commercial in comparison to 2015. The 2015 collective impairment charge also included methodology changes.

Specified items relevant to Australia division are the Esanda Dealer Finance divestment, software capitalisation changes and restructuring.

DIVISIONAL RESULTS

Australia Fred Ohlsson

Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 4,124 4,076 1% 598 610 -2%	Full Year
		Sep 16 $M Sep 15 $M Movt 8,200 7,698 7% 1,208 1,214 0%
Operating income Operating expenses	4,722 4,686 1% (1,708) (1,681) 2%	9,408 8,912 6% (3,389) (3,193) 6%
Profit before credit impairment and income tax Credit impairment charge	3,014 3,005 0% (458) (462) -1%	6,019 5,719 5% (920) (852) 8%
Profit before income tax Income tax expense and non-controlling interests	2,556 2,543 1% (762) (764) 0%	5,099 4,867 5% (1,526) (1,454) 5%
Cash profit	1,794 1,779 1%	3,573 3,413 5%
Consisting of: Retail Corporate & Commercial Banking	1,228 1,195 3% 566 584 -3%	2,423 2,118 14% 1,150 1,295 -11%
Cash profit	1,794 1,779 1%	3,573 3,413 5%
Balance Sheet Net loans and advances1 Other external assets	327,108 321,436 2% 2,932 3,064 -4%	327,108 315,080 4% 2,932 2,916 1%
External assets	330,040 324,500 2%	330,040 317,996 4%
Customer deposits Other external liabilities	187,640 184,202 2% 11,674 12,335 -5%	187,640 177,293 6% 11,674 12,394 -6%
External liabilities	199,314 196,537 1%	199,314 189,687 5%
Risk weighted assets2 Average gross loans and advances Average deposits and other borrowings Ratios Return on assets Net interest margin Operating expenses to operating income Operating expenses to average assets	157,381 130,623 20% 326,138 318,960 2% 185,159 181,050 2% 1.10% 1.11% 2.54% 2.56% 36.2% 35.9% 1.04% 1.05%	157,381 129,899 21% 322,549 302,069 7% 183,104 170,857 7% 1.10% 1.13% 2.55% 2.55% 36.0% 35.8% 1.05% 1.05%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	469 429 9% 0.29% 0.27% (11) 33 large (0.01%) 0.02% 1,170 1,093 7% 0.36% 0.34%	898 761 18% 0.28% 0.25% 22 91 -76% 0.01% 0.03% 1,170 1,194 -2% 0.36% 0.38%
Total full time equivalent staff (FTE)	8,864 9,198 -4%	8,864 9,161 -3%

1. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

2. Risk weighted assets at 30 September 2016 includes APRA’s revised average mortgage risk weight targets.

DIVISIONAL RESULTS

Australia Fred Ohlsson

Individual credit impairment charge/(release) Retail Home Loans Cards and Personal Loans Deposits and Payments1 Private Bank Corporate & Commercial Banking3 Corporate Banking Asset Finance3 Regional Business Banking Business Banking Small Business Banking	Half Year Sep 16 $M Mar 16 $M Movt 235 200 18% 36 17 large 189 172 10% 10 11 -9% - - n/a 234 229 2% 14 19 -26% 42 44 -5% 51 53 -4% 25 20 25% 102 93 10%	Full Year
		Sep 16 $M Sep 15 $M Movt 435 354 23% 53 16 large 361 318 14% 21 20 5% - - n/a 463 407 14% 33 (18) large 86 193 -55% 104 55 89% 45 46 -2% 195 131 49%
Individual credit impairment charge	469 429 9%	898 761 18%

Collective credit impairment charge/(release) Retail Home Loans Cards and Personal Loans Deposits and Payments2 Private Bank Corporate & Commercial Banking3 Corporate Banking Asset Finance3 Regional Business Banking Business Banking Small Business Banking	Half Year Sep 16 $M Mar 16 $M Movt 6 23 -74% 6 15 -60% 3 5 -40% (3) 3 large - - n/a (17) 10 large 3 - n/a 3 2 50% (7) (3) large (11) 3 large (5) 8 large	Full Year
		Sep 16 $M Sep 15 $M Movt 29 43 -33% 21 26 -19% 8 13 -38% - 5 -100% - (1) -100% (7) 48 large 3 (12) large 5 21 -76% (10) 6 large (8) 8 large 3 25 -88%
Collective credit impairment charge	(11) 33 large	22 91 -76%
Total credit impairment charge	458 462 -1%	920 852 8%

1. Represents individual credit impairment charge/(release) on overdraft balances.

Represents collective credit impairment charge/(release) on overdraft balances. 3.

The September 2016 full year includes the impact from Esanda Dealer Finance portfolio to the date of divestment.

DIVISIONAL RESULTS

Australia Fred Ohlsson

Net loans and advances Retail Home Loans Cards and Personal Loans Deposits and Payments1 Private Bank Corporate & Commercial Banking4 Corporate Banking Asset Finance4 Regional Business Banking Business Banking Small Business Banking	As at Sep 16 $M Mar 16 $M Sep 15 $M 259,329 255,516 243,741 246,743 242,861 231,206 11,020 11,151 11,049 95 91 78 1,471 1,413 1,408 67,779 65,920 71,339 14,004 12,800 12,996 8,384 8,802 15,917 14,284 13,879 13,827 15,536 15,375 14,249 15,571 15,064 14,350	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 1% 6% 2% 7% -1% 0% 4% 22% 4% 4% 3% -5% 9% 8% -5% -47% 3% 3% 1% 9% 3% 9%
Net loans and advances	327,108 321,436 315,080	2% 4%

Customer deposits Retail Home Loans2 Cards and Personal Loans Deposits and Payments Private Bank Corporate & Commercial Banking Corporate Banking3 Regional Business Banking Business Banking Small Business Banking	As at Sep 16 $M Mar 16 $M Sep 15 $M 135,135 131,515 126,446 24,131 23,619 21,861 246 228 258 102,592 99,238 96,314 8,166 8,430 8,013 52,505 52,687 50,847 2,915 3,067 3,162 5,836 6,209 5,739 10,416 10,941 10,157 33,338 32,470 31,789	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 3% 7% 2% 10% 8% -5% 3% 7% -3% 2% 0% 3% -5% -8% -6% 2% -5% 3% 3% 5%
Customer deposits	187,640 184,202 177,293	2% 6%

1. Net loans and advances for the Deposits and Payments business represent amounts in overdraft. 2.

Customer deposit amounts for the Home Loans business represent balances in offset accounts. 3.

Some Corporate Banking deposits are included in Institutional Division deposits. 4.

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

DIVISIONAL RESULTS

Australia Fred Ohlsson

Australia Fred Ohlsson
AUD M
			Australia
September 2016 Full Year	Retail	C&CB1	Total
Net interest income	5,474	2,726	8,200
Other operating income	787	421	1,208
Operating income	6,261	3,147	9,408
Operating expenses	(2,343)	(1,046)	(3,389)
Profit before credit impairment and income tax	3,918	2,101	6,019
Credit impairment (charge)/release	(464)	(456)	(920)
Profit before income tax	3,454	1,645	5,099
Income tax expense and non-controlling interests	(1,031)	(495)	(1,526)
Cash profit	2,423	1,150	3,573
Individual credit impairment charge/(release)	435	463	898
Collective credit impairment charge/(release)	29	(7)	22
Net loans and advances	259,329	67,779	327,108
Customer deposits	135,135	52,505	187,640
Risk weighted assets2	93,279	64,102	157,381
September 2015 Full Year
Net interest income	4,788	2,910	7,698
Other operating income	774	440	1,214
Operating income	5,562	3,350	8,912
Operating expenses	(2,153)	(1,040)	(3,193)
Profit before credit impairment and income tax	3,409	2,310	5,719
Credit impairment (charge)/release	(397)	(455)	(852)
Profit before income tax	3,012	1,855	4,867
Income tax expense and non-controlling interests	(894)	(560)	(1,454)
Cash profit	2,118	1,295	3,413
Individual credit impairment charge/(release)	354	407	761
Collective credit impairment charge/(release)	43	48	91
Net loans and advances	243,741	71,339	315,080
Customer deposits	126,446	50,847	177,293
Risk weighted assets2	63,349	66,550	129,899
September 2016 Full Year vs September 2015 Full Year
Net interest income	14%	-6%	7%
Other operating income	2%	-4%	0%
Operating income	13%	-6%	6%
Operating expenses	9%	1%	6%
Profit before credit impairment and income tax	15%	-9%	5%
Credit impairment (charge)/release	17%	0%	8%
Profit before income tax	15%	-11%	5%
Income tax expense and non-controlling interests	15%	-12%	5%
Cash profit	14%	-11%	5%
Individual credit impairment charge/(release)	23%	14%	18%
Collective credit impairment charge/(release)	-33%	large	-76%
Net loans and advances	6%	-5%	4%
Customer deposits	7%	3%	6%
Risk weighted assets2	47%	-4%	21%

The September 2016 full year includes the contribution from Esanda Dealer Finance portfolio to the date of divestment.

Risk weighted assets at 30 September 2016 includes APRA’s revised average mortgage risk weight targets.

DIVISIONAL RESULTS

Australia Fred Ohlsson

Australia Fred Ohlsson
AUD M
			Australia
September 2016 Half Year	Retail	C&CB1	Total
Net interest income	2,771	1,353	4,124
Other operating income	390	208	598
Operating income	3,161	1,561	4,722
Operating expenses	(1,173)	(535)	(1,708)
Profit before credit impairment and income tax	1,988	1,026	3,014
Credit impairment (charge)/release	(241)	(217)	(458)
Profit before income tax	1,747	809	2,556
Income tax expense and non-controlling interests	(519)	(243)	(762)
Cash profit	1,228	566	1,794
Individual credit impairment charge/(release)	235	234	469
Collective credit impairment charge/(release)	6	(17)	(11)
Net loans and advances	259,329	67,779	327,108
Customer deposits	135,135	52,505	187,640
Risk weighted assets2	93,279	64,102	157,381
March 2016 Half Year
Net interest income	2,703	1,373	4,076
Other operating income	397	213	610
Operating income	3,100	1,586	4,686
Operating expenses	(1,170)	(511)	(1,681)
Profit before credit impairment and income tax	1,930	1,075	3,005
Credit impairment (charge)/release	(223)	(239)	(462)
Profit before income tax	1,707	836	2,543
Income tax expense and non-controlling interests	(512)	(252)	(764)
Cash profit	1,195	584	1,779
Individual credit impairment charge/(release)	200	229	429
Collective credit impairment charge/(release)	23	10	33
Net loans and advances	255,516	65,920	321,436
Customer deposits	131,515	52,687	184,202
Risk weighted assets2	66,001	64,622	130,623
September 2016 Half Year vs March 2016 Half Year
Net interest income	3%	-1%	1%
Other operating income	-2%	-2%	-2%
Operating income	2%	-2%	1%
Operating expenses	0%	5%	2%
Profit before credit impairment and income tax	3%	-5%	0%
Credit impairment (charge)/release	8%	-9%	-1%
Profit before income tax	2%	-3%	1%
Income tax expense and non-controlling interests	1%	-4%	0%
Cash profit	3%	-3%	1%
Individual credit impairment charge/(release)	18%	2%	9%
Collective credit impairment charge/(release)	-74%	large	large
Net loans and advances	1%	3%	2%
Customer deposits	3%	0%	2%
Risk weighted assets2	41%	-1%	20%

The March 2016 half includes the contribution from Esanda Dealer Finance portfolio to the date of divestment.

Risk weighted assets at 30 September 2016 includes APRA’s revised average mortgage risk weight targets.

DIVISIONAL RESULTS

Institutional Mark Whelan

Cash profit – September 2016 Full Year v September 2015 Full Year

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Strategic Priorities

Create a simpler, better capitalised and better balanced bank:

Simplify and streamline the organisation’s structure by delayering and moving decision-making closer to the customer.
Shift from being “everything in every country” to having a targeted focus in each country. Align in-country service levels and product capabilities with each market’s unique characteristics.

2016 Progress Highlights

14% FTE reduction in 2016, 16% reduction in senior management, as a result of organisational simplification.
The focus of the geographic footprint has been sharpened, with differentiated roles for each country to support our priority customers and sectors.
$28 billion reduction in CRWAs during 2016.
Reduce CRWAs and lift returns by focusing on priority customers and high returning products. Align product offering to the needs of our target customers.

Focus our efforts on attractive areas:

Focus coverage and capital on customers in priority sectors which are linked to regional flows and home markets where we can carve out a winning position.

Build a superior everyday experience for our people and customers:

Enhance customer and staff experience in order to compete in the digital age.
Consolidate and harmonise our technology platforms.
September 2016 v September 2015

Cash profit decreased 46%. Excluding specified items[1] , cash profit decreased 34% driven by a 10% decrease in other operating income, 4% decrease in net interest income and higher credit impairment charges.

Key factors affecting the result were:

Net interest income decreased $133 million (-4%) driven by decreases in Markets, Loans and Transaction Banking. Markets net interest income fell due to reduced gold financing and lower Balance Sheet earnings in Asia. The Loans reduction was due to a continued focus on improving capital efficiency and the exit of lower returning business. Net interest margin decreased 7 bps driven by growth in lower margin liquidity portfolios in Markets. Excluding Markets, net interest margin increased 13 bps reflecting the impact of exiting lower returning assets and an improved funding mix.
Other operating income decreased $454 million (-21%). Excluding specified items[1] , other operating income decreased 10%. Loans and Transaction Banking decreased due to the exit of low returning business as well as a slowdown in natural resource related projects. The reduction in Markets was primarily driven by Sales income, due to lower demand for interest rate products and gold financing from Asian customers.
Operating expenses increased $129 million (+5%). Excluding specified items[1] , operating expenses increased 1% reflecting the part year benefit of the 14% FTE reduction arising from productivity and organisational changes.
Credit impairment charges increased $543 million driven by higher individual impairment charges in Loans and Transaction Banking, reflecting a return to historical averages and the settlement of the Oswal legal dispute.
Progress made to exit economically unprofitable clients through a combination of asset sales and run-off.
More efficient coverage model developed to service our priority clients and tailored to each country’s role.
Alignment of Cash Management, Trade and Markets platforms is underway to make it easier and faster for customers to do business with us.
Digital transformation plan in place to simplify products and systems, focus on where we add the most value, and enhance connectivity with clients’ systems and their customers and suppliers.
September 2016 v March 2016

Cash profit decreased 33%. Excluding specified items[1] , cash profit decreased 6% driven by an 8% decrease in net interest income and a 29% increase in credit impairment charges, partially offset by a 15% increase in other operating income and a 6% decrease in operating expenses.

Key factors affecting the result were:

Net interest income decreased $152 million (-8%) driven by a decrease in Markets due to movements in Rates product positions during the period where an offsetting gain is recognised in Markets other operating income; and Loans due to a continued focus on improving capital efficiency and the exit of lower returning business. Net interest margin decreased 4 bps driven by growth in lower margin liquidity portfolios in Markets. Excluding Markets, net interest margin increased 4 bps reflecting the impact of exiting lower returning assets as well as an improved funding mix.
Other operating income decreased $99 million (-11%). Excluding specified items[1] , other operating income increased 15% driven by Markets due to movements in Rates product positions during the period where an offsetting loss is recognised in Markets net interest income, and Balance Sheet trading as credit spreads tightened.
Operating expenses decreased $83 million (-6%) (-6% excluding specified items[1] ) due to a 10% FTE reduction from productivity and organisational changes.
Credit impairment charges increased $95 million (+29%) mainly due to an increase in individual impairment charges from the settlement of the Oswal legal dispute, partially offset by reduced charges in Transaction Banking.
1 Specified items relevant to Institutional are the derivative CVA methodology change, software capitalisation changes and restructuring.

DIVISIONAL RESULTS

Institutional Mark Whelan

Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 1,650 1,802 -8% 812 911 -11%	Full Year
		Sep 16 $M Sep 15 $M Movt 3,452 3,585 -4% 1,723 2,177 -21%
Operating income Operating expenses	2,462 2,713 -9% (1,426) (1,509) -6%	5,175 5,762 -10% (2,935) (2,806) 5%
Profit before credit impairment and income tax Credit impairment charge	1,036 1,204 -14% (418) (323) 29%	2,240 2,956 -24% (741) (198) large
Profit before income tax Income tax expense and non-controlling interests	618 881 -30% (193) (249) -22%	1,499 2,758 -46% (442) (791) -44%
Cash profit	425 632 -33%	1,057 1,967 -46%
Consisting of: Transaction Banking Loans & Specialised Finance Markets Central Functions	212 175 21% 120 264 -55% 187 193 -3% (94) - n/a	387 574 -33% 384 802 -52% 380 618 -39% (94) (27) large
Cash profit	425 632 -33%	1,057 1,967 -46%
Balance Sheet Net loans and advances Other external assets	125,940 125,610 0% 281,475 275,658 2%	125,940 142,196 -11% 281,475 261,308 8%
External assets	407,415 401,268 2%	407,415 403,504 1%
Customer deposits Other deposits and borrowings	171,122 176,126 -3% 56,341 48,991 15%	171,122 183,040 -7% 56,341 41,855 35%
Deposits and other borrowings Other external liabilities	227,463 225,117 1% 121,058 121,768 -1%	227,463 224,895 1% 121,058 109,584 10%
External liabilities	348,521 346,885 0%	348,521 334,479 4%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings Ratios Return on assets Net interest margin Net interest margin (excluding Markets) Operating expenses to operating income Operating expenses to average assets	168,254 181,889 -7% 128,480 138,972 -8% 232,109 233,729 -1% 0.21% 0.31% 1.11% 1.15% 2.20% 2.16% 57.9% 55.6% 0.69% 0.74%	168,254 197,880 -15% 133,725 144,862 -8% 232,919 229,563 1% 0.26% 0.51% 1.13% 1.20% 2.19% 2.06% 56.7% 48.7% 0.72% 0.73%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	435 339 28% 0.68% 0.49% (17) (16) 6% (0.03%) (0.02%) 1,403 1,281 10% 1.10% 1.01%	774 206 large 0.58% 0.14% (33) (8) large (0.02%) (0.01%) 1,403 960 46% 1.10% 0.67%
Total full time equivalent staff (FTE)	3,640 4,044 -10%	3,640 4,218 -14%

DIVISIONAL RESULTS

Institutional Mark Whelan

Institutional by Geography

Australia Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 887 987 -10% 280 308 -9%	Full Year
		Sep 16 $M Sep 15 $M Movt 1,874 1,987 -6% 588 779 -25%
Operating income Operating expenses	1,167 1,295 -10% (649) (663) -2%	2,462 2,766 -11% (1,312) (1,192) 10%
Profit before credit impairment and income tax Credit impairment (charge)/release	518 632 -18% (181) (112) 62%	1,150 1,574 -27% (293) (17) large
Profit before income tax Income tax expense and non-controlling interests	337 520 -35% (101) (157) -36%	857 1,557 -45% (258) (466) -45%
Cash profit	236 363 -35%	599 1,091 -45%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	206 124 66% (25) (12) large 65,938 63,867 3% 65,361 66,634 -2% 80,629 87,904 -8%	330 40 large (37) (23) 61% 65,938 64,784 2% 65,361 65,875 -1% 80,629 89,433 -10%
Asia Pacific, Europe, and America Net interest income Other operating income	575 657 -12% 487 543 -10%	1,232 1,313 -6% 1,030 1,064 -3%
Operating income Operating expenses	1,062 1,200 -12% (697) (757) -8%	2,262 2,377 -5% (1,454) (1,439) 1%
Profit before credit impairment and income tax Credit impairment (charge)/release	365 443 -18% (223) (207) 8%	808 938 -14% (430) (164) large
Profit before income tax Income tax expense and non-controlling interests	142 236 -40% (53) (57) -7%	378 774 -51% (110) (207) -47%
Cash profit	89 179 -50%	268 567 -53%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	208 212 -2% 15 (5) large 52,991 55,226 -4% 91,448 96,168 -5% 74,829 82,295 -9%	420 152 large 10 12 -17% 52,991 70,489 -25% 91,448 104,907 -13% 74,829 96,063 -22%
New Zealand Net interest income Other operating income	188 158 19% 45 60 -25%	346 285 21% 105 334 -69%
Operating income Operating expenses	233 218 7% (80) (89) -10%	451 619 -27% (169) (175) -3%
Profit before credit impairment and income tax Credit impairment (charge)/release	153 129 19% (14) (4) large	282 444 -36% (18) (17) 6%
Profit before income tax Income tax expense and non-controlling interests	139 125 11% (39) (35) 11%	264 427 -38% (74) (118) -37%
Cash profit	100 90 11%	190 309 -39%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	21 3 large (7) 1 large 7,011 6,499 8% 14,313 13,324 7% 12,796 11,690 9%	24 14 71% (6) 3 large 7,011 6,923 1% 14,313 12,258 17% 12,796 12,384 3%

DIVISIONAL RESULTS

Institutional

Mark Whelan

Individual credit impairment charge/(release) Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Sep 16 $M Mar 16 $M Movt 75 103 -27% 342 223 53% 15 11 36% 3 2 50%	Half Year Sep 16 $M Mar 16 $M Movt 75 103 -27% 342 223 53% 15 11 36% 3 2 50%	Full Year	Full Year
			Sep 16 $M Sep 15 $M Movt 178 60 large 565 97 large 26 47 -45% 5 2 large
Individual credit impairment charge	435 339 28%		774 206 large
Collective credit impairment charge/(release) Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Sep 16 $M Mar 16 $M Movt (7) 4 large (7) (21) -67% (3) 1 large - - n/a		Full Year
			Sep 16 $M Sep 15 $M Movt (3) (35) -91% (28) 23 large (2) 1 large - 3 -100%
Collective credit impairment charge	(17) (16) 6%		(33) (8) large
Total credit impairment charge	418 323 29%		741 198 large
Net loans and advances Transaction Banking Loans & Specialised Finance Markets Central Functions		As at	Sep 15 $M 24,000 94,491 23,368 337	Movement Sep 16 v. Mar 16 Sep 16 v. Sep 15 -9% -42% -6% -12% 32% 21% -10% -37% 0% -11% Movement Sep 16 v. Mar 16 Sep 16 v. Sep 15 1% -3% -9% 13% -7% -10% -8% -22% -3% -7%
		Sep 16 $M Mar 16 $M 13,810 15,231 83,537 88,653 28,380 21,489 213 237
Net loans and advances		125,940 125,610 142,196
Customer deposits Transaction Banking Loans & Specialised Finance Markets Central Functions		As at Sep 16 $M Mar 16 $M Sep 15 $M 91,019 90,230 94,188 884 975 784 78,871 84,541 87,622 348 380 446
Customer deposits		171,122 176,126 183,040

DIVISIONAL RESULTS

Institutional

Mark Whelan

Institutional Mark Whelan	Institutional Mark Whelan
AUD M
			Loans &
		Transaction	Specialised		Central	Institutional
September 2016 Full Year		Banking	Finance	Markets	Functions	Total
Net interest income		881	1,498	1,035	38	3,452
	Other operating income	766	157	765	35	1,723
	Operating income	1,647	1,655	1,800	73	5,175
Operating expenses		(905)	(583)	(1,287)	(160)	(2,935)
Profit before credit impairment and income tax		742	1,072	513	(87)	2,240
Credit impairment (charge)/release		(175)	(537)	(24)	(5)	(741)
	Profit before income tax	567	535	489	(92)	1,499
Income tax expense and non-controlling interests		(180)	(151)	(109)	(2)	(442)
	Cash profit	387	384	380	(94)	1,057
Individual credit impairment charge/(release)		178	565	26	5	774
	Collective credit impairment charge/(release)	(3)	(28)	(2)	-	(33)
Net loans and advances		13,810	83,537	28,380	213	125,940
Customer deposits		91,019	884	78,871	348	171,122
Risk weighted assets		24,919	89,619	52,285	1,431	168,254
September 2015 Full Year
Net interest income		905	1,549	1,107	24	3,585
	Other operating income	820	246	1,062	49	2,177
	Operating income	1,725	1,795	2,169	73	5,762
Operating expenses		(907)	(587)	(1,279)	(33)	(2,806)
Profit before credit impairment and income tax		818	1,208	890	40	2,956
Credit impairment (charge)/release		(25)	(120)	(48)	(5)	(198)
	Profit before income tax	793	1,088	842	35	2,758
Income tax expense and non-controlling interests		(219)	(286)	(224)	(62)	(791)
	Cash profit	574	802	618	(27)	1,967
Individual credit impairment charge/(release)		60	97	47	2	206
	Collective credit impairment charge/(release)	(35)	23	1	3	(8)
Net loans and advances		24,000	94,491	23,368	337	142,196
Customer deposits		94,188	784	87,622	446	183,040
Risk weighted assets		34,140	102,630	59,725	1,385	197,880
September 2016 Full Year vs September 2015 Full Year
Net interest income		-3%	-3%	-7%	58%	-4%
Other operating income		-7%	-36%	-28%	-29%	-21%
	Operating income	-5%	-8%	-17%	0%	-10%
Operating expenses		0%	-1%	1%	large	5%
Profit before credit impairment and income tax		-9%	-11%	-42%	large	-24%
Credit impairment (charge)/release		large	large	-50%	0%	large
	Profit before income tax	-28%	-51%	-42%	large	-46%
Income tax expense and non-controlling interests		-18%	-47%	-51%	-97%	-44%
	Cash profit	-33%	-52%	-39%	large	-46%
Individual credit impairment charge/(release)		large	large	-45%	large	large
	Collective credit impairment charge/(release)	-91%	large	large	-100%	large
	Net loans and advances	-42%	-12%	21%	-37%	-11%
	Customer deposits	-3%	13%	-10%	-22%	-7%
Risk weighted assets		-27%	-13%	-12%	3%	-15%

DIVISIONAL RESULTS

Institutional

Mark Whelan

Institutional Mark Whelan	Institutional Mark Whelan
AUD M
			Loans &
		Transaction	Specialised		Central	Institutional
September 2016 Half Year		Banking	Finance	Markets	Functions	Total
Net interest income		436	720	473	21	1,650
	Other operating income	378	61	365	8	812
	Operating income	814	781	838	29	2,462
Operating expenses		(438)	(273)	(596)	(119)	(1,426)
Profit before credit impairment and income tax		376	508	242	(90)	1,036
Credit impairment (charge)/release		(68)	(335)	(12)	(3)	(418)
	Profit before income tax	308	173	230	(93)	618
Income tax expense and non-controlling interests		(96)	(53)	(43)	(1)	(193)
	Cash profit	212	120	187	(94)	425
Individual credit impairment charge/(release)		75	342	15	3	435
	Collective credit impairment charge/(release)	(7)	(7)	(3)	-	(17)
Net loans and advances		13,810	83,537	28,380	213	125,940
Customer deposits		91,019	884	78,871	348	171,122
Risk weighted assets		24,919	89,619	52,285	1,431	168,254
March 2016 Half Year
Net interest income		445	778	562	17	1,802
	Other operating income	388	96	400	27	911
	Operating income	833	874	962	44	2,713
Operating expenses		(467)	(310)	(691)	(41)	(1,509)
Profit before credit impairment and income tax		366	564	271	3	1,204
Credit impairment (charge)/release		(107)	(202)	(12)	(2)	(323)
	Profit before income tax	259	362	259	1	881
Income tax expense and non-controlling interests		(84)	(98)	(66)	(1)	(249)
	Cash profit	175	264	193	-	632
Individual credit impairment charge/(release)		103	223	11	2	339
	Collective credit impairment charge/(release)	4	(21)	1	-	(16)
Net loans and advances		15,231	88,653	21,489	237	125,610
Customer deposits		90,230	975	84,541	380	176,126
Risk weighted assets		27,794	98,010	54,571	1,514	181,889
September 2016 Half Year vs March 2016 Half Year
Net interest income		-2%	-7%	-16%	24%	-8%
Other operating income		-3%	-36%	-9%	-70%	-11%
	Operating income	-2%	-11%	-13%	-34%	-9%
Operating expenses		-6%	-12%	-14%	large	-6%
Profit before credit impairment and income tax		3%	-10%	-11%	large	-14%
Credit impairment (charge)/release		-36%	66%	0%	50%	29%
Profit before income tax		19%	-52%	-11%	large	-30%
Income tax expense and non-controlling interests		14%	-46%	-35%	0%	-22%
	Cash profit	21%	-55%	-3%	n/a	-33%
Individual credit impairment charge/(release)		-27%	53%	36%	50%	28%
Collective credit impairment charge/(release)		large	-67%	large	n/a	6%
Net loans and advances		-9%	-6%	32%	-10%	0%
Customer deposits		1%	-9%	-7%	-8%	-3%
Risk weighted assets		-10%	-9%	-4%	-5%	-7%

DIVISIONAL RESULTS

Institutional Mark Whelan

Analysis of Markets operating income

Composition of Markets operating income by business activity Sales1 Trading2 Balance Sheet3	Half Year Sep 16 $M Mar 16 $M Movt 544 516 5% 296 303 -2% 235 143 64%	Full Year
		Sep 16 $M Sep 15 $M Movt 1,060 1,168 -9% 599 603 -1% 378 398 -5%
Markets operating income pre-credit valuation adjustment	1,075 962 12%	2,037 2,169 -6%
Derivative CVA methodology change4	(237) - n/a	(237) - n/a
Markets operating income	838 962 -13%	1,800 2,169 -17%

1. Sales represents direct client flow business on core products such as fixed income, foreign exchange, 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.
4.

Refer to page 17 for further details.

Composition of Markets operating income by geography Australia Asia Pacific, Europe & America New Zealand	Half Year Sep 16 $M Mar 16 $M Movt 446 368 21% 505 521 -3% 124 73 70%	Full Year
		Sep 16 $M Sep 15 $M Movt 814 842 -3% 1,026 1,000 3% 197 327 -40%
Markets operating income pre-credit valuation adjustment	1,075 962 12%	2,037 2,169 -6%
Derivative CVA methodology change	(237) - n/a	(237) - n/a
Markets operating income	838 962 -13%	1,800 2,169 -17%

September 2016 v September 2015

Excluding the specified item[1] , Markets operating income decreased $132 million (-6%).

Key factors affecting the result were:

Sales income decreased $108 million (-9%) driven by lower Rates and Foreign Exchange income due to higher demand in 2015 for hedging products compared with 2016 as well as decreased Commodities income due to higher demand in 2015 for gold financing from Asian customers.
Trading income decreased $4 million (-1%) primarily as a result of higher funding valuation adjustments partly offset by higher Credit trading income.
Balance Sheet income decreased $20 million (-5%) primarily as a result of higher funding valuation adjustments partly offset by the benefit of narrowing credit spreads in the September 2016 half.
September 2016 v March 2016

Excluding the specified item[1] , Markets operating income increased $113 million (+12%).

Key factors affecting the result were:

Sales income increased $28 million (+5%) driven by greater debt capital markets activity, partially offset by decreased Foreign Exchange income from lower demand for structured products.
Trading income decreased $7 million (-2%) primarily as a result of funding valuation adjustments partly offset by higher Rates income.
Balance Sheet income increased $92 million (+64%) reflecting growth in the liquidity portfolio and tightening credit spreads.
1 The specified item relevant to Markets operating income is the derivative CVA methodology change.

DIVISIONAL RESULTS

Institutional Mark Whelan

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) Value at Risk at 99% confidence Foreign exchange Interest rate Credit Commodities Equity Diversification benefit	High for Low for Avg for As at year year year Sep 16 $M Sep 16 $M Sep 16 $M Sep 16 $M 4.0 11.4 2.2 5.2 4.7 20.1 4.1 9.1 3.3 4.6 2.2 3.2 2.5 2.8 1.1 1.7 0.5 2.0 0.1 0.2 (6.8) n/a n/a (6.2)	High for Low for Avg for As at year year year
		Sep 15 $M Sep 15 $M Sep 15 $M Sep 15 $M 5.0 18.2 2.8 7.9 10.1 20.2 4.8 9.3 3.5 5.4 2.9 3.8 1.6 3.6 1.3 2.4 2.5 6.3 0.1 1.1 (6.0) n/a n/a (13.2)
Total VaR	8.2 25.4 6.1 13.2	16.7 19.7 6.9 11.3

Non-traded interest rate risk

Non-traded interest rate risk is managed by 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)

Value at Risk at 99% confidence Australia New Zealand Asia Pacific, Europe & America Diversification benefit	High for Low for Avg for As at year year year Sep 16 $M Sep 16 $M Sep 16 $M Sep 16 $M 38.4 40.6 28.0 33.7 11.4 11.4 8.8 10.0 14.7 17.3 14.4 15.8 (24.0) n/a n/a (22.9)	High for Low for Avg fo As at year year yea Sep 15 $M Sep 15 $M Sep 15 $M Sep 15 $M 25.4 38.5 21.2 27.2 9.7 11.4 8.9 10.2 14.4 14.4 7.9 10.4 (16.8) n/a n/a (14.8
Total VaR	40.5 44.7 31.3 36.6	32.7 37.4 28.6 33.0

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

As at period end Maximum exposure Minimum exposure Average exposure (in absolute terms)	As at Sep 16 Sep 15 0.37% 0.61% 0.48% 1.36% 0.00% 0.45% 0.21% 0.93%

DIVISIONAL RESULTS

New Zealand David Hisco

New Zealand’s result and commentary are reported in NZD. AUD results are shown on page 75.

Cash profit – September 2016 Full Year v September 2015 Full Year

==> picture [543 x 136] intentionally omitted <==

Strategic Priorities

Focus our efforts on attractive areas:

Continue to grow our customer satisfaction and brand consideration.
Provide the best home buying experience.
Make starting, running and growing a small business easier.
Continue to leverage our leading position in migrant banking.

2016 Progress Highlights

Surpassed 2 million Retail customers for the first time in July with strong net customer growth in 2016 (17% higher than in 2015).
Grew our pipeline of future home and business owners with strong consideration growth in migrants[1] (+9 percentage points) and young adult segments[1] (+8 percentage points).
Continued to invest in service training, helped drive a 9 percentage point uplift in Net Promoter Score[1] .
Customers now able to view balances and transfer funds into any of ANZ’s KiwiSaver schemes though goMoney[TM] .

Build a superior everyday experience for our people and customers:

Building a digital bank with a human touch:
Customer led digital solutions.
Attract, develop and retain the best staff.
Now delivering digital improvements around every six weeks in goMoney[TM] .
First bank in NZ to launch Apple Pay[TM] following the success of goMoney[TM] Wallet (first bank in NZ to launch an Android operating system payment solution).
Modernised our payment processing to enable faster payment and receipt of money for customers.
Achieved an 83% Employee Engagement score, our highest score to date.
September 2016 v September 2015

Cash profit increased 1%. Excluding specified items[2] , cash profit increased 3% primarily driven by lending volume growth and disciplined cost management, partially offset by higher credit impairment charges.

Key factors affecting the result were:

Net interest income increased by NZD 64 million (+2%) driven by 8% growth in average gross loans and advances, with growth across both the housing and non-housing portfolios. This was partially offset by a decrease in net interest margin of 12 bps, driven by competition for lending assets, unfavourable lending mix with customers continuing to favour lower margin fixed rate products, and the impact of capital notes issued in March 2015 and June 2016.
Other operating income increased by NZD 20 million (+6%) driven by the gain on sale of a fixed asset, volume driven growth in fee income, and rebates and dividends received, partially offset by loss on sale of the medical insurance business (nil impact after tax).
Net funds management and insurance income increased by NZD 15 million (+4%) driven by 24% growth in KiwiSaver funds under management.
Operating expenses increased by NZD 24 million (+2%). Excluding specified items[2] , operating expenses decreased 2% with disciplined cost management and productivity gains more than offsetting inflationary impacts.
Credit impairment charges increased by NZD 70 million. The individual impairment charges increased NZD 54 million due to higher new provisions in the Agri and Commercial portfolios and lower write-backs. The collective impairment charges increased NZD 16 million driven by a deteriorating Agri risk profile.
September 2016 v March 2016

Cash profit decreased 4%. Excluding specified items[2] , cash profit decreased 2% driven by higher credit impairment charges.

Key factors affecting the result were:

Net interest income increased by NZD 16 million (+1%), driven by 3% growth in average gross loans and advances, with growth across both the housing and non-housing portfolios. This was partially offset by a decrease in net interest margin of 5 bps, driven by unfavourable lending and deposit mix, with customers favouring lower margin products, and the impact of capital notes issued in June 2016.
Other operating income increased by NZD 1 million (+1%) mainly due to volume driven growth in fee income.
Net funds management and insurance income increased by NZD 9 million (+5%) driven by 11% growth in KiwiSaver funds under management.
Operating expenses increased by NZD 27 million (+4%). Excluding specified items[2] , operating expenses remained flat with disciplined cost management and productivity gains offsetting inflationary and investment impacts.
Credit impairment charges increased NZD 37 million (+80%). The individual impairment charges increased NZD 18 million due to higher new provisions in the Agri portfolio and lower write-backs. The collective impairment charges increased NZD 19 million driven by the Commercial portfolio.

1. Camorra Retail Market Monitor (RMM) rolling 6 month score as at September 2016. 2. Young adults are the population between the age 20-34.Specified items relevant to New Zealand division are software capitalisation changes and restructuring.

DIVISIONAL RESULTS

New Zealand David Hisco

Table reflects NZD for New Zealand AUD results shown on page 75

Net interest income Other operating income Net funds management and insurance income	Half Year Sep 16 NZD M Mar 16 NZD M Movt 1,324 1,308 1% 165 164 1% 183 174 5%	Full Year
		Sep 16 NZD M Sep 15 NZD M Movt 2,632 2,568 2% 329 309 6% 357 342 4%
Operating income Operating expenses	1,672 1,646 2% (671) (644) 4%	3,318 3,219 3% (1,315) (1,291) 2%
Profit before credit impairment and income tax Credit impairment (charge)/release	1,001 1,002 0% (83) (46) 80%	2,003 1,928 4% (129) (59) large
Profit before income tax Income tax expense and non-controlling interests	918 956 -4% (253) (261) -3%	1,874 1,869 0% (514) (516) 0%
Cash profit	665 695 -4%	1,360 1,353 1%
Consisting of: Retail Commercial Central Functions	477 464 3% 192 221 -13% (4) 10 large	941 872 8% 413 478 -14% 6 3 100%
Cash profit	665 695 -4%	1,360 1,353 1%
Balance Sheet Net loans and advances Other external assets	113,145 110,028 3% 4,398 3,906 13%	113,145 106,747 6% 4,398 3,858 14%
External assets	117,543 113,934 3%	117,543 110,605 6%
Customer deposits Other deposits and borrowings	76,361 75,379 1% 5,358 5,440 -2%	76,361 71,395 7% 5,358 4,940 8%
Deposits and other borrowings Other external liabilities	81,719 80,819 1% 21,397 18,984 13%	81,719 76,335 7% 21,397 21,132 1%
External liabilities	103,116 99,803 3%	103,116 97,467 6%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings	62,215 61,161 2% 112,321 108,798 3% 82,674 79,274 4%	62,215 60,008 4% 110,559 102,278 8% 80,974 73,424 10%
In-force premiums1 Funds under management Average funds under management	190 186 2% 26,485 24,835 7% 25,751 23,808 8%	190 210 -10% 26,485 22,740 16% 24,775 21,669 14%
Ratios Return on assets Net interest margin Operating expenses to operating income Operating expenses to average assets	1.15% 1.24% 2.35% 2.40% 40.1% 39.1% 1.16% 1.15%	1.19% 1.28% 2.38% 2.50% 39.6% 40.1% 1.15% 1.22%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	65 47 38% 0.12% 0.09% 18 (1) large 0.03% (0.00%) 363 302 20% 0.32% 0.27%	112 58 93% 0.10% 0.06% 17 1 large 0.02% 0.00% 363 372 -2% 0.32% 0.35%
Life insurance expenses to Life in-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM2	31.9% 33.2% 15.7% 15.2% 0.44% 0.27%	32.2% 31.5% 15.3% 15.5% 0.36% 0.29%
Total full time equivalent staff (FTE)	5,240 5,321 -2%	5,240 5,359 -2%

1. In-force premiums reflect the disposal of the New Zealand medical business in the March 2016 half and September 2016 full year.

2. Funds Management expense and FUM only relates to the Pensions & Investments business.

DIVISIONAL RESULTS

New Zealand David Hisco

Individual credit impairment charge/(release) Retail Home Loans Other Commercial	Half Year Sep 16 NZD M Mar 16 NZD M Movt 26 26 0% (2) (2) 0% 28 28 0% 39 21 86%	Full Year
		Sep 16 NZD M Sep 15 NZD M Movt 52 54 -4% (4) 6 large 56 48 17% 60 4 large
Individual credit impairment charge/(release)	65 47 38%	112 58 93%
Collective credit impairment charge/(release) Retail Home Loans Other Commercial	Half Year Sep 16 NZD M Mar 16 NZD M Movt 1 2 -50% 1 (2) large - 4 -100% 17 (3) large	Full Year
		Sep 16 NZD M Sep 15 NZD M Movt 3 4 -25% (1) (4) -75% 4 8 -50% 14 (3) large
Collective credit impairment charge/(release)	18 (1) large	17 1 large
Total credit impairment charge/(release)	83 46 80%	129 59 large

Net loans and advances Retail Home Loans Other Commercial		As at Sep 16 NZD M Mar 16 NZD M Sep 15 NZD M 72,730 69,891 67,413 68,706 65,855 63,380 4,024 4,036 4,033 40,415 40,137 39,334	As at Sep 16 NZD M Mar 16 NZD M Sep 15 NZD M 72,730 69,891 67,413 68,706 65,855 63,380 4,024 4,036 4,033 40,415 40,137 39,334
Net loans and advances		113,145 110,028 106,747
Customer deposits Retail Commercial		As at Sep 16 NZD M Mar 16 NZD M Sep 15 NZD M 63,110 62,233 59,113 13,251 13,146 12,282
Customer deposits		76,361 75,379 71,395
Net funds management and insurance income Insurance Insurance income Insurance volume related expenses Funds Management Funds management income Funds management volume related expenses

Total net funds management and insurance income	183 174 5%		357 342 4%

DIVISIONAL RESULTS

New Zealand David Hisco

NZD M

NZD M
	Retail Commercial Central Functions New Zealand Total 1,729 889 14 2,632 306 15 8 329 356 1 - 357
September 2016 Full Year
Net interest income Other operating income Net funds management and insurance income
Operating income Operating expenses	2,391 905 22 3,318 (1,045) (256) (14) (1,315)
Profit before credit impairment and income tax Credit impairment (charge)/release	1,346 649 8 2,003 (55) (74) - (129)
Profit before income tax Income tax expense and non-controlling interests	1,291 575 8 1,874 (350) (162) (2) (514)
Cash profit	941 413 6 1,360
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	52 60 - 112 3 14 - 17 72,730 40,415 - 113,145 63,110 13,251 - 76,361 29,580 31,950 685 62,215


September 2015 Full Year
Net interest income Other operating income Net funds management and insurance income	1,644 904 20 2,568 296 16 (3) 309 341 1 - 342
Operating income Operating expenses	2,281 921 17 3,219 (1,023) (256) (12) (1,291)
Profit before credit impairment and income tax Credit impairment (charge)/release	1,258 665 5 1,928 (58) (1) - (59)
Profit before income tax Income tax expense and non-controlling interests	1,200 664 5 1,869 (328) (186) (2) (516)
Cash profit	872 478 3 1,353
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	54 4 - 58 4 (3) - 1 67,413 39,334 - 106,747 59,113 12,282 - 71,395 30,013 29,224 771 60,008
September 2016 Full Year vs September 2015 Full Year Net interest income Other operating income Net funds management and insurance income	5% -2% -30% 2% 3% -6% large 6% 4% 0% n/a 4%
Operating income Operating expenses	5% -2% 29% 3% 2% 0% 17% 2%
Profit before credit impairment and income tax Credit impairment (charge)/release	7% -2% 60% 4% -5% large n/a large
Profit before income tax Income tax expense and non-controlling interests	8% -13% 60% 0% 7% -13% 0% 0%
Cash profit	8% -14% 100% 1%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	-4% large n/a 93% -25% large n/a large 8% 3% n/a 6% 7% 8% n/a 7% -1% 9% -11% 4%

DIVISIONAL RESULTS

New Zealand David Hisco

New Zealand David Hisco
NZD M
			Central	New Zealand
September 2016 Half Year	Retail	Commercial	Functions	Total
Net interest income	873	444	7	1,324
Other operating income	163	8	(6)	165
Net funds management and insurance income	183	-	-	183
Operating income	1,219	452	1	1,672
Operating expenses	(536)	(128)	(7)	(671)
Profit before credit impairment and income tax	683	324	(6)	1,001
Credit impairment (charge)/release	(27)	(56)	-	(83)
Profit before income tax	656	268	(6)	918
Income tax expense and non-controlling interests	(179)	(76)	2	(253)
Cash profit	477	192	(4)	665
Individual credit impairment charge/(release)	26	39	-	65
Collective credit impairment charge/(release)	1	17	-	18
Net loans and advances	72,730	40,415	-	113,145
Customer deposits	63,110	13,251	-	76,361
Risk weighted assets	29,580	31,950	685	62,215
March 2016 Half Year
Net interest income	856	445	7	1,308
Other operating income	143	7	14	164
Net funds management and insurance income	173	1	-	174
Operating income	1,172	453	21	1,646
Operating expenses	(509)	(128)	(7)	(644)
Profit before credit impairment and income tax	663	325	14	1,002
Credit impairment (charge)/release	(28)	(18)	-	(46)
Profit before income tax	635	307	14	956
Income tax expense and non-controlling interests	(171)	(86)	(4)	(261)
Cash profit	464	221	10	695
Individual credit impairment charge/(release)	26	21	-	47
Collective credit impairment charge/(release)	2	(3)	-	(1)
Net loans and advances	69,891	40,137	-	110,028
Customer deposits	62,233	13,146	-	75,379
Risk weighted assets	30,144	30,452	565	61,161
September 2016 Half Year vs March 2016 Half Year
Net interest income	2%	0%	0%	1%
Other operating income	14%	14%	large	1%
Net funds management and insurance income	6%	-100%	n/a	5%
Operating income	4%	0%	-95%	2%
Operating expenses	5%	0%	0%	4%
Profit before credit impairment and income tax	3%	0%	large	0%
Credit impairment (charge)/release	-4%	large	n/a	80%
Profit before income tax	3%	-13%	large	-4%
Income tax expense and non-controlling interests	5%	-12%	large	-3%
Cash profit	3%	-13%	large	-4%
Individual credit impairment charge/(release)	0%	86%	n/a	38%
Collective credit impairment charge/(release)	-50%	large	n/a	large
Net loans and advances	4%	1%	n/a	3%
Customer deposits	1%	1%	n/a	1%
Risk weighted assets	-2%	5%	21%	2%

DIVISIONAL RESULTS

New Zealand David Hisco

Table reflects AUD for New Zealand NZD results shown on page 71

Net interest income Other operating income Net funds management and insurance income	Half Year Sep 16 $M Mar 16 $M Movt 1,244 1,207 3% 155 151 3% 172 161 7%	Full Year
		Sep 16 $M Sep 15 $M Movt 2,451 2,381 3% 306 287 7% 333 317 5%
Operating income Operating expenses	1,571 1,519 3% (630) (595) 6%	3,090 2,985 4% (1,225) (1,197) 2%
Profit before credit impairment and income tax Credit impairment (charge)/release	941 924 2% (78) (42) 86%	1,865 1,788 4% (120) (55) large
Profit before income tax Income tax expense and non-controlling interests	863 882 -2% (237) (241) -2%	1,745 1,733 1% (478) (479) 0%
Cash profit	626 641 -2%	1,267 1,254 1%
Consisting of: Retail Commercial Central Functions	449 428 5% 181 204 -11% (4) 9 large	877 808 9% 385 443 -13% 5 3 67%
Cash profit	626 641 -2%	1,267 1,254 1%
Balance Sheet Net loans and advances Other external assets	107,893 99,185 9% 4,195 3,521 19%	107,893 97,020 11% 4,195 3,507 20%
External assets	112,088 102,706 9%	112,088 100,527 12%
Customer deposits Other deposits and borrowings	72,818 67,951 7% 5,109 4,903 4%	72,818 64,890 12% 5,109 4,490 14%
Deposits and other borrowings Other external liabilities	77,927 72,854 7% 20,403 17,114 19%	77,927 69,380 12% 20,403 19,206 6%
External liabilities	98,330 89,968 9%	98,330 88,586 11%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings	59,327 55,134 8% 105,517 100,427 5% 77,659 73,175 6%	59,327 54,540 9% 102,972 94,832 9% 75,417 68,079 11%
In-force premiums1 Funds under management Average funds under management	181 167 8% 25,256 22,388 13% 24,189 21,976 10%	181 191 -5% 25,256 20,668 22% 23,075 20,092 15%
Ratios Return on assets Net interest margin Operating expenses to operating income Operating expenses to average assets	1.15% 1.24% 2.35% 2.40% 40.1% 39.2% 1.16% 1.15%	1.19% 1.28% 2.38% 2.50% 39.6% 40.1% 1.15% 1.22%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	61 43 42% 0.12% 0.09% 17 (1) large 0.03% (0.00%) 346 273 27% 0.32% 0.27%	104 54 93% 0.10% 0.06% 16 1 large 0.02% 0.00% 346 338 2% 0.32% 0.35%
Life insurance expenses to Life in-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM2	31.9% 33.2% 15.7% 15.2% 0.44% 0.27%	32.2% 31.5% 15.3% 15.5% 0.36% 0.29%
Total full time equivalent staff (FTE)	5,240 5,321 -2%	5,240 5,359 -2%

1. In-force premiums reflect the disposal of the New Zealand medical business in the March 2016 half and September 2016 full year.

Funds Management expense and FUM only relates to the Pensions & Investments business.

DIVISIONAL RESULTS

Wealth Australia Alexis George

Cash profit – September 2016 Full Year v September 2015 Full Year

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Strategic Priorities

Create a simpler, better capitalised and better balanced bank:

Execute our plan to transition super and investment platforms to industry leading solutions.

2016 Progress Highlights

Entered into an outsource agreement for Wrap platform administration services, enabling ANZ to launch Grow Wrap to the market, targeted at aligned and open market advisers.
Rationalised index fund management solutions for $15 billion of Funds Under Management.

Focus our efforts on attractive areas:

Seamless integration of insurance, super and investment solutions into our bank customers’ journeys (e.g. buying a home or owning a business).
Refresh ANZ’s Life insurance proposition and leverage scale and position in the market to drive value.
Continued to expand the Grow by ANZ[TM] iPad and iPhone app capability, enabling customers to bring Wealth and banking together in one place.
Launched direct life insurance on the Grow by ANZ[TM] app, which allows customers to view, manage and buy all of their insurance needs in one place.
$1.6 billion in Life Insurance in-force premiums, with a No. 3 market share in individual in-force with 13% market share[2] and annual growth of 6%.

Build a superior everyday experience for our people and customers:

Provide advisers tools and access to high quality platforms to facilitate financial planning and improve customer’s experience.
Launched Grow for Advice, a digital solution for Financial Planners to improve productivity and automate production of consistent, scalable insurance advice.
Ranked No. 1 out of the big four banks for ANZ Financial Planning productivity in annualised new sales for individual life risk[3] .

 September 2016 v September 2015

Cash profit decreased 24%. Excluding the specified items[1] and the $56 million one-off tax consolidation benefit in September 2015, cash profit decreased 7%. Overall, the embedded value increased by 12% pretransfers.

Key factors affecting the result were:

Insurance operating income increased $34 million (+6%), reflecting favourable retail and group lapse experience, partially offset by adverse claims experience. This experience relates to actual experience differing from plan.
Funds Management operating income decreased $44 million (-9%), driven by the business’s strategy to rationalise legacy platforms which adversely impacted margins.
Operating expenses increased by $45 million (+6%). Excluding specified items[1] , operating expenses increased by 2%, due to wage inflation and higher spend on regulatory, compliance and remediation projects, partially offset by productivity initiatives that resulted in a 10% decrease in FTE during the year.

 September 2016 v March 2016

Cash profit decreased 5%. Excluding the specified items[1] , cash profit decreased by 6%.

Key factors affecting the result were:

Insurance operating income decreased $11 million (-4%) reflecting higher claims costs and lower relative favourable lapse experience. This experience relates to actual experience differing from plan.
Funds Management operating income decreased by $14 million (-6%), driven by the business’s strategy to rationalise legacy platforms which impacted margins.
Operating expenses decreased by $20 million (-5%). Excluding specified items[1] , operating expenses decreased 5% due to productivity initiatives that resulted in a 4% decrease in FTE in the half, partially offset by additional regulatory, compliance and remediation costs.
1 Specified items relevant to Wealth Australia are software capitalisation changes and restructuring.
2 Source: Plan for Life, Individual & Group Risk Premium Inflows, year ended 30 June 2016.
3 Source: NMG, Q2, 2016 Bank Channel Risk Distribution Monitor- OnePath.

DIVISIONAL RESULTS

Wealth Australia Alexis George

Net interest income Other operating income Net funds management and insurance income	Half Year Sep 16 $M Mar 16 $M Movt 4 6 -33% 46 42 10% 559 597 -6%	Full Year
		Sep 16 $M Sep 15 $M Movt 10 8 25% 88 87 1% 1,156 1,178 -2%
Operating income Operating expenses	609 645 -6% (388) (408) -5%	1,254 1,273 -1% (796) (751) 6%
Profit before income tax Income tax expense and non-controlling interests	221 237 -7% (62) (69) -10%	458 522 -12% (131) (94) 39%
Cash profit	159 168 -5%	327 428 -24%
Consisting of: Business Units Insurance Funds Management Corporate and Other1	128 127 1% 49 40 23% (18) 1 large	255 243 5% 89 130 -32% (17) 55 large
Total Wealth Australia	159 168 -5%	327 428 -24%
Income from invested capital2	47 63 -25%	110 107 3%
Key metrics In-force premiums Life Insurance General Insurance3 Average in-force premiums Life Insurance General Insurance3 Funds under management Average funds under management Risk weighted assets	1,603 1,569 2% 226 335 -33% 1,587 1,543 3% 280 422 -34% 48,251 46,630 3% 48,060 47,182 2% 415 512 -19%	1,603 1,516 6% 226 510 -56% 1,560 1,440 8% 367 505 -27% 48,251 46,801 3% 47,621 48,048 -1% 415 526 -21%
Ratios Operating expenses to operating income Life insurance expenses to Life in-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM4	63.7% 63.3% 11.1% 12.3% 15.0% 13.0% 0.48% 0.58%	63.5% 59.0% 11.6% 11.2% 14.0% 13.3% 0.53% 0.51%
Total full time equivalent staff (FTE)	1,379 1,436 -4%	1,379 1,532 -10%
Aligned adviser numbers5	1,545 1,618 -5%	1,545 1,688 -8%

1. Corporate and Other includes a one-off tax consolidation benefit of $56 million in September 2015. 2.

Income from invested capital represents after tax revenue generated from investing all Insurance and Funds Management business's capital balances held for regulatory purposes. The invested capital as at 30 September 2016 was $3.4 billion (Mar 16: $3.4 billion, Sep 15: $3.3 billion), which comprises fixed interest securities of 48% and cash deposits of 52% (Mar 16: 45% fixed interest securities and 55% cash deposits, Sep 15: 47% fixed interest securities and 53% cash deposits). 3.

General insurance in-force premiums reflect the impact of ceasing the underwriting of new home, content, travel and motor insurance in September 2015. 4.

Funds Management expense and FUM only relates to the Pensions & Investments business. 5.

Includes corporate authorised representatives of dealer groups wholly or partially owned by ANZ Wealth Australia and ANZ employed financial planners.

DIVISIONAL RESULTS

Wealth Australia

Alexis George

Major business units

Major business units
Insurance Net interest income Insurance income Insurance volume related expenses	Half Year Sep 16 $M Mar 16 $M Movt 11 12 -8% 408 420 -3% (134) (136) -1%	Full Year
		Sep 16 $M Sep 15 $M Movt 23 22 5% 828 813 2% (270) (288) -6%
Operating income Operating expenses	285 296 -4% (104) (115) -10%	581 547 6% (219) (201) 9%
Profit before income tax Income tax expense and non-controlling interests	181 181 0% (53) (54) -2%	362 346 5% (107) (103) 4%
Cash profit	128 127 1%	255 243 5%
Funds Management Net interest income Other operating income Funds management income Funds management volume related expenses	Half Year Sep 16 $M Mar 16 $M Movt 14 16 -13% 36 36 0% 340 352 -3% (169) (169) 0%	Full Year
		Sep 16 $M Sep 15 $M Movt 30 31 -3% 72 72 0% 692 765 -10% (338) (368) -8%
Operating income Operating expenses	221 235 -6% (150) (178) -16%	456 500 -9% (328) (319) 3%
Profit before income tax Income tax expense and non-controlling interests	71 57 25% (22) (17) 29%	128 181 -29% (39) (51) -24%
Cash profit	49 40 23%	89 130 -32%

Insurance metrics Insurance operating margin Life Insurance Planned profit margin Group & Individual Experience profit/(loss)1 General Insurance operating profit margin	Half Year Sep 16 $M Mar 16 $M Movt 79 72 10% (10) 4 large 59 51 16%	Full Year
		Sep 16 $M Sep 15 $M Movt 151 141 7% (6) 5 large 110 97 13%
Total	128 127 1%	255 243 5%

1. Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan, predominantly driven by lapses, claims and expenses.

Insurance annual in-force premiums Group Individual General Insurance1 Total Insurance in-force book movement Group Individual General Insurance1 Total	As at Sep 16 $M Mar 16 $M Sep 15 $M 445 439 423 1,158 1,130 1,093 226 335 510	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 1% 5% 2% 6% -33% -56%
	1,829 1,904 2,026	-4% -10%
	Sep 15 $M New business $M 423 54 1,093 176 510 85	Lapses $M Sep 16 $M (32) 445 (111) 1,158 (369) 226
	2,026 315	(512) 1,829

1. Lapses for General Insurance include the impact of ceasing the underwriting of new home, content, travel and motor insurance in September 2015.

DIVISIONAL RESULTS

Wealth Australia Alexis George

Funds Management metrics

Funds Management metrics
Funds under management Australian equities International equities Cash and fixed interest Property and infrastructure	As at Sep 16 $M Mar 16 $M Sep 15 $M 15,248 14,496 14,793 11,044 10,618 11,250 18,582 18,356 17,897 3,377 3,160 2,861	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 5% 3% 4% -2% 1% 4% 7% 18%
Total	48,251 46,630 46,801	3% 3%
Funds Management cash flows by product Open solutions OneAnswer Frontier ANZ Smart Choice Wrap (Voyage and Grow) Closed solutions Retail Employer	Sep 15 In- Out- $M flows flows 8,677 1,598 (1,084) 4,254 2,378 (1,010) 1,708 542 (210) 20,223 857 (2,837) 11,939 224 (1,450)	Other1 Sep 16 $M 767 9,958 5,568 11,190 120 2,160 785 19,028 (4,798) 5,915
Total	46,801 5,599 (6,591)	2,442 48,251

1. Other includes investment income net of taxes, fees and charges and distributions. It also includes the transition of funds under management from Employer to ANZ Smart Choice of approximately $5 billion, as a result of regulatory changes in the industry.

Embedded value and value of new business (insurance and investments only)	$M
Embedded value as at September 20151	4,012
Value of new business2	131
Expected return3	317
Experience deviations and assumption changes4	8
Embedded value before economic assumption changes and net transfer	4,468
Economic assumptions change5	37
Net transfer6	31
Embedded value as at September 2016	4,536

Embedded value represents the present value of future profits and releases of capital arising from the business in-force at the valuation date, and adjusted net assets. It is determined using best estimate assumptions with franking credits included at 70% of face value. Projected cash flows have been discounted using capital asset pricing model risk discount rates of 7.0%-8.5%. ANZ Lenders Mortgage Insurance business is not included in the valuation.

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

Expected return represents the expected increase in value over the period.

Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Positive experience was primarily driven by favourable lapse experience and continued growth in in-force business from Retail insurance.

5. Interest rate movements have led to a positive value impact.

6. Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends and value of franking credits. There was a $400 million capital injection from the parent entity, partially offset by $273 million of cash dividends and $96 million of franking credits transferred to the parent entity.

DIVISIONAL RESULTS

Asia Retail & Pacific David Hisco

Cash Profit – September 2016 Full Year v September 2015 Full Year

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Strategic Priorities 2016 Progress Highlights

Create a simpler, better capitalised and better balanced bank:

 September 2016 v September 2015

Cash profit increased 9%. Excluding specified items[1] , cash profit increased 13%.

Key factors affecting the result were:

Net interest income increased $55 million (+9%) driven by 7% growth in average gross loans and advances due to increases in non-housing portfolios. Net interest margin increased 12 bps driven by changes in product mix.
Other operating income decreased $3 million (-1%) with lower investment and insurance income in Asia Retail.
Operating expenses decreased $21 million (-3%). Excluding specified items[1] , operating expenses decreased 3% due to disciplined cost management and benefits from restructuring that resulted in a 17% decrease in FTE over the year.
Credit impairment charges increased $76 million (+78%) due to increased Asia Retail individual impairment charges and a provision release of $53 million in 2015 which was not repeated.
On 31 October 2016, the Group announced it had entered into an agreement to sell its Retail and Wealth businesses in Singapore, China, Hong Kong, Taiwan and Indonesia to DBS Bank Limited. At this stage, our Retail and Wealth businesses in Vietnam, the Philippines and Japan remain under review.
The division continues to work on improving profitability through simplification and disciplined cost management.
September 2016 v March 2016

Cash profit increased 67%. Excluding specified items[1] , cash profit increased 52%.

Key factors affecting the result were:

Net interest income decreased $4 million (-1%) driven by 4% decrease in average gross loans and advances due to reduction in housing portfolios. This was partially offset by an increase in net interest margin of 15 bps driven by changes in product mix.
Other operating income decreased $9 million (-4%), with lower credit card and personal loan fee income in Asia and lower trade and FX income in the Pacific.
Operating expenses decreased $51 million (-12%). Excluding specified items[1] , operating expenses decreased 10% due to disciplined cost management and benefits from restructuring that resulted in a 13% decrease in FTE during the half.
Credit impairment charges decreased $8 million (-9%) driven by lower collective impairment charges in Asia Retail.

1 Specified items relevant to Asia Retail & Pacific are software capitalisation changes and restructuring.

DIVISIONAL RESULTS

Asia Retail & Pacific David Hisco

Net interest income Other operating income	Half Year Sep 16 $M Mar 16 $M Movt 347 351 -1% 234 243 -4%	Full Year
		Sep 16 $M Sep 15 $M Movt 698 643 9% 477 480 -1%
Operating income Operating expenses	581 594 -2% (381) (432) -12%	1,175 1,123 5% (813) (834) -3%
Profit before credit impairment and income tax Credit impairment (charge)/release	200 162 23% (83) (91) -9%	362 289 25% (174) (98) 78%
Profit before income tax Income tax expense and non-controlling interests	117 71 65% (22) (14) 57%	188 191 -2% (36) (52) -31%
Cash profit/(loss)	95 57 67%	152 139 9%
Balance Sheet Net loans and advances Customer deposits Risk weighted assets	13,379 13,885 -4% 22,814 23,534 -3% 13,306 13,115 1%	13,379 14,556 -8% 22,814 24,355 -6% 13,306 13,345 0%
Ratios Return on assets Net interest margin Operating expenses to operating income Operating expenses to average assets	0.83% 0.47% 3.16% 3.01% 65.6% 72.7% 3.32% 3.59%	0.65% 0.62% 3.09% 2.97% 69.2% 74.3% 3.46% 3.72%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	82 81 1% 1.17% 1.11% 1 10 -90% 0.01% 0.14% 254 236 8% 1.87% 1.67%	163 86 90% 1.14% 0.64% 11 12 -8% 0.08% 0.09% 254 227 12% 1.87% 1.54%
Total full time equivalent staff (FTE)	2,925 3,368 -13%	2,925 3,518 -17%

DIVISIONAL RESULTS

Technology, Services & Operations and Group Centre

		Half Year			Full Year
	Sep 16	Mar 16		Sep 16	Sep 15
	$M	$M	Movt	$M	$M	Movt
Operating income (minority investments in Asia)	262	73	large	335	615	-46%
Operating income (other)	54	86	-37%	140	(133)	large
Operating income	316	159	99%	475	482	-1%
Operating expenses	(410)	(854)	-52%	(1,264)	(597)	large
Profit before credit impairment and income tax	(94)	(695)	-86%	(789)	(115)	large
Credit impairment (charge)/release	(1)	-	n/a	(1)	(2)	-50%
Profit before income tax	(95)	(695)	-86%	(790)	(117)	large
Income tax expense and non-controlling interests	103	200	-49%	303	132	large
Cash profit/(loss)	8	(495)	large	(487)	15	large
Risk weighted assets	9,023	6,264	44%	9,023	4,739	90%
Total full time equivalent staff (FTE)	24,506	25,529	-4%	24,506	26,364	-7%

Strategic Priorities

2016 Progress Highlights

Create a simpler, better capitalised and better balanced bank:
Deliver ‘Enterprise Transformation‘ priorities – across payments,
wholesale lending, consumer finance, home loans, contact centre,
consumer digital, wholesale digital, Markets and data.

Delivered the new digital banking platform (MCP) as a major
foundational component of our Digital strategy.
First major Australian bank to launch Apple PayTMand Android PayTM.
New ANZ website with redesigned Home Loan pages optimised for any
device, improving customer experience.
Over 1.3 million customers using goMoneyTMapps.
65% of new savings account customers are now verified digitally rather
than having to be verified in branch.
Enhanced GrowTMwith Wealth products and Apple Touch Id and Watch
support.
Upgraded NZ core system to support intra-day payments.

Build a superior everyday experience for our people and customers:
Excellent operational and service execution through industrialised
operations, digitised processes, supported by project and change
delivery excellence.
Provision of secure and resilient systems for all of our customers and
staff.

Increased adoption of Agile change delivery methodologies to improve
quality and time to market:
o
Asia Internet Banking - 10 countries in 16 weeks;
o
Apple Watch – Idea to production in 10 weeks;
o
anz.com – automated test coverage at 90%;
o
Bankers Desktop – 190 cases in 4 hours (from 30 days).
MIT Digital Executive Education roll-out to 100+ senior executives.
Reduced the major incident rate for our systems by 24% year-on-year,
driven by greater focus on addressing the root causes of incidents.

September 2016 v September 2015
Key factors affecting the result were:
Operating income from minority investments in Asia decreased $280 million (-46%) primarily due to the impairment of the investment in Ambank of $260 million and lower equity accounted earnings from minority investments in Asia, driven primarily by the cessation of equity accounting for BoT.
Operating income (other) increased $273 million primarily due to lower realised revenue hedge losses and a $66 million gain from the Esanda Dealer Finance divestment.
Operating expenses increased by $667 million. Excluding specified items[1] , operating expenses decreased $4 million (-1%) due to productivity initiatives that resulted in a 7% decrease in FTE during the year, partially offset by an increase in professional fees, depreciation and amortisation as well as licences and outsourced services costs.
The decrease in FTE is primarily due to productivity initiatives in TSO and Finance, partially offset by the build out of the Compliance function.
September 2016 v March 2016

Key factors affecting the result were:

Operating income from minority investments in Asia increased $189 million primarily due to the impairment of the investment in Ambank of $260 million in the first half of 2016, partially offset by lower equity accounted earnings from minority investments in Asia, driven primarily by the cessation of equity accounting for BoT.
Operating income (other) decreased $32 million (-37%) primarily driven by the $66 million gain from the Esanda Dealer Finance divestment in the first half of 2016, partially offset by higher income generated from increased capital held in Group Centre.
Operating expenses decreased $444 million (-52%). Excluding specified items[1] , operating expenses increased $99 million (+42%) due to an increase in professional fees, depreciation and amortisation as well as licences and outsourced services costs, partially offset by productivity initiatives that resulted in a 4% decrease in FTE during the half.
The decrease in FTE is primarily due to productivity initiatives in TSO and Finance, partially offset by the build out of the Compliance function.
1 Specified items relevant to TSO and Group Centre are software capitalisation changes, Asian minority investment adjustment, restructuring and the Esanda Dealer Finance divestment.

PROFIT RECONCILIATION

Profit Reconciliation

Adjustments between statutory profit and cash profit Explanation of adjustments between statutory profit and cash profit Other reclassifications between statutory profit and cash profit Reconciliation of statutory profit to cash profit

PROFIT RECONCILIATION

Non-IFRS information

The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in ASIC’s RG230 has been followed when presenting this information.

Adjustments between statutory profit and cash profit

Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit Treasury shares adjustment Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades	Half Year Sep 16 $M Mar 16 $M Movt 2,971 2,738 9% 73 (29) large (40) (14) large (26) 128 large 131 (39) large (2) (2) 0%	Full Year
		Sep 16 $M Sep 15 $M Movt 5,709 7,493 -24% 44 (16) large (54) (73) -26% 102 (179) large 92 (3) large (4) (6) -33%
Total adjustments between statutory profit and cash profit	136 44 large	180 (277) large
Cash Profit	3,107 2,782 12%	5,889 7,216 -18%

Explanation of adjustments between statutory profit and cash profit

 Treasury shares adjustment

ANZ shares held by the Group in Wealth Australia are deemed to be Treasury shares for accounting purposes. Dividends and realised and unrealised gains and losses from these shares are reversed as these are not permitted to be recognised as income for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement. Accordingly, the full year gain of $44 million after tax ($46 million pre-tax) reversed for statutory accounting purposes has been added back to cash profit.

 Revaluation of policy liabilities

When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation, with the impact of changes in the market discount rate each period being reflected in the income statement. ANZ includes the impact on the remeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.

PROFIT RECONCILIATION

Economic hedging and revenue 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 and losses being recognised within the income statement. ANZ removes the mark-tomarket adjustments from cash profit since the profit or loss resulting from the hedge transactions will reverse over time to match with the profit or loss from the economically hedged item as part of cash profit. This includes gains and losses arising from approved classes of derivatives not designated in accounting hedge relationships but which are considered to be economic hedges, including hedges of larger foreign exchange denominated revenue and expense streams, primarily NZD and USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.

Economic hedging comprises:

Funding related swaps (primarily cross currency interest rate swaps) that are used to convert the proceeds of foreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt. 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 fluctuations against other major funding currencies.
Economic hedges of select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers of these fair value adjustments are movements in the Australian and New Zealand term structure of interest rates.
Ineffectiveness from designated accounting hedge relationships.

The majority of the full year gains/loss in economic hedging related to funding related swaps, most notably in the first half where losses were impacted from the significant strengthening in AUD against a number of major currencies, most notably the USD and EUR.

Losses on revenue hedges in the September 2016 half were principally attributable to weakening of AUD against the NZD exchange rate. For the full year these losses were partially offset from gains resulting from the recycling of prior period losses on USD positions that settled during the first half.

Adjustments to the income statement Timing differences where IFRS results in asymmetry between the hedge and hedged items Economic hedging Revenue hedges	Half Year Sep 16 $M Mar 16 $M (1) 181 148 (55)	Full Year
		Sep 16 $M Sep 15 $M 180 (256) 93 (4)
Increase/(decrease) to cash profit before tax	147 126	273 (260)
Increase/(decrease) to cash profit after tax	105 89	194 (182)

Cumulative increase/(decrease) to cash profit pre-tax Timing differences where IFRS results in asymmetry between the hedge and hedged items Economic hedging1 Revenue hedges	As at
	Sep 16 $M Mar 16 $M Sep 15 $M 442 443 294 125 (23) 32
Total	567 420 326

1. A reduction of $32 million was made to the cumulative economic hedging balance on 1 October 2015. The reduction related to balances not recycled into cash profit between 2008 and 2014.

PROFIT RECONCILIATION

Structured credit intermediation trades

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

Being derivatives, both the sold protection and purchased protection are measured at fair value and marked-to-model. Prior to the commencement of the global financial crisis, movements in valuations of these positions were not significant and largely offset each other. Following the onset of the global financial 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 counterparties were downgraded; and
the derivative credit valuation adjustment applied to the counterparties to the purchased protection is impacted by changes relating to their credit worthiness.

ANZ is monitoring this portfolio with a view to reducing the exposures via termination and restructuring of both the purchased and sold protection if and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. As at 30 September 2016, ANZ’s remaining exposure is against two financial guarantors. The bought and sold notional protection are offsetting, with the notional amount on the outstanding bought CDSs acquired to offset the outstanding sold CDSs at 30 September 2016 both amounting to $0.7 billion (Mar 16: $0.7 billion; Sep 15: $0.7 billion). The profit and loss impact of credit risk on the bought CDSs is driven by market movements in credit spreads and AUD/USD and NZD/USD rates.

The (gain)/loss on structured credit intermediation trades is included as an adjustment to cash profit as it relates to a legacy business where, unless terminated early, the fair value movements are expected to reverse to zero in future periods.

Increase/(decrease) to cash profit Profit before income tax Income tax expense	Half Year Sep 16 $M Mar 16 $M Movt (3) (3) 0% 1 1 0%	Full Year
		Sep 16 $M Sep 15 $M Movt (6) (8) -25% 2 2 0%
Profit after income tax	(2) (2) 0%	(4) (6) -33%

Financial impacts of credit intermediation trades Mark-to-market exposure to financial guarantors (excluding CVA)	As at Sep 16 $M Mar 16 $M Sep 15 $M 67 63 69	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 6% -3%
Cumulative costs relating to financial guarantors1 CVA for outstanding transactions Realised close out and hedge costs	11 14 17 372 372 372	-21% -35% 0% 0%
Cumulative life to date charges	383 386 389	-1% -2%

1. The cumulative costs in managing the positions 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.

Other reclassifications between statutory profit and cash profit

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

The charge to income for derivative credit valuation adjustments of $27 million on defaulted and impaired derivative exposures has been reclassified to cash credit impairment charges in the September 2016 full year (Mar 16 half: $14 million charge; Sep 15 full year: $26 million charge). 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, policyholders income tax and other related taxes paid on behalf of policyholders are included in both net funds management and insurance income and the Group’s income tax expense. The gross up of $217 million for the September 2016 full year (Mar 16 half: $32 million gross up; Sep 15 full year: $186 million gross up) has been excluded from the cash results as it does not reflect the underlying performance of the business which is assessed on a net of policyholders tax basis.

Statutory Adjustments to statutory profit Cash profit Treasury shares adjustment Policyholders tax gross up Revaluation of policy liabilities Economic hedging Revenue hedges Structured credit intermediation trades Credit risk on impaired derivatives Total adjustments to statutory profit profit $M $M $M $M $M $M $M $M $M $M September 2016 Full Year Net interest income 15,095 - - - - - - - - 15,095	Net fee and commission income 2,528 - - - - - - - - 2,528 Net foreign exchange earnings 939 - - - (6) 93 - - 87 1,026 Profit on trading instruments (101) - - - 30 - (6) 27 51 (50) Net funds management and insurance income 1,764 46 (217) (75) - - - - (246) 1,518 Other 304 - - - 156 - - - 156 460	Other operating income 5,434 46 (217) (75) 180 93 (6) 27 48 5,482	Operating income 20,529 46 (217) (75) 180 93 (6) 27 48 20,577 Operating expenses (10,422) - - - - - - - - (10,422)	10,155 (1,956)	8,199 (2,299) (11)	5,889	September 2015 Full Year Net interest income 14,616 - - - - - - - - 14,616	Net fee and commission income 2,631 - - - - - - - - 2,631 Net foreign exchange earnings 1,005 - - - 3 (4) - - (1) 1,004 Profit on trading instruments (120) - - - (9) - (8) 26 9 (111) Net funds management and insurance income 1,815 (21) (186) (104) - - - - (311) 1,504 Other 1,143 - - - (250) - - - (250) 893	Other operating income 6,474 (21) (186) (104) (256) (4) (8) 26 (553) 5,921	Operating income 21,090 (21) (186) (104) (256) (4) (8) 26 (553) 20,537 Operating expenses (9,378) - - - - - - - - (9,378)	11,159 (1,205)	9,954 (2,724) (14)	7,216
				Profit before credit impairment and tax 10,107 46 (217) (75) 180 93 (6) 27 48 Credit impairment charge (1,929) - - - - - - (27) (27)	Profit before income tax 8,178 46 (217) (75) 180 93 (6) - 21 Income tax expense (2,458) (2) 217 21 (78) (1) 2 - 159 Non-controlling interests (11) - - - - - - - -	Profit 5,709 44 - (54) 102 92 (4) - 180					Profit before credit impairment and tax 11,712 (21) (186) (104) (256) (4) (8) 26 (553) Credit impairment charge (1,179) - - - - - - (26) (26)	Profit before income tax 10,533 (21) (186) (104) (256) (4) (8) - (579) Income tax expense (3,026) 5 186 31 77 1 2 - 302 Non-controlling interests (14) - - - - - - - -	Profit 7,493 (16) - (73) (179) (3) (6) - (277)

Statutory Adjustments to statutory profit Cash profit Treasury shares adjustment Policyholders tax gross up Revaluation of policy liabilities Economic hedging Revenue hedges Structured credit intermediation trades Credit risk on impaired derivatives Total adjustments to statutory profit profit $M $M $M $M $M $M $M $M $M $M September 2016 Half Year Net interest income 7,527 - - - - - - - - 7,527	1,260 484 (25) 747 268	2,734	10,261 (4,943)	5,318 (1,038)	4,280 (1,166) (7)	3,107	March 2016 Half Year Net interest income 7,568 - - - - - - - - 7,568	1,268 542 (25) 771 192	2,748	10,316 (5,479)	4,837 (918)	3,919 (1,133) (4)	2,782
	Net fee and commission income 1,260 - - - - - - - - Net foreign exchange earnings 337 - - - (1) 148 - - 147 Profit on trading instruments (15) - - - (20) - (3) 13 (10) Net funds management and insurance income 907 80 (185) (55) - - - - (160) Other 248 - - - 20 - - - 20	Other operating income 2,737 80 (185) (55) (1) 148 (3) 13 (3)	Operating income 10,264 80 (185) (55) (1) 148 (3) 13 (3) Operating expenses (4,943) - - - - - - - -	Profit before credit impairment and tax 5,321 80 (185) (55) (1) 148 (3) 13 (3) Credit impairment charge (1,025) - - - - - - (13) (13)	Profit before income tax 4,296 80 (185) (55) (1) 148 (3) - (16) Income tax expense (1,318) (7) 185 15 (25) (17) 1 - 152 Non-controlling interests (7) - - - - - - - -	Profit 2,971 73 - (40) (26) 131 (2) - 136		Net fee and commission income 1,268 - - - - - - - - Net foreign exchange earnings 602 - - - (5) (55) - - (60) Profit on trading instruments (86) - - - 50 - (3) 14 61 Net funds management and insurance income 857 (34) (32) (20) - - - - (86) Other 56 - - - 136 - - - 136	Other operating income 2,697 (34) (32) (20) 181 (55) (3) 14 51	Operating income 10,265 (34) (32) (20) 181 (55) (3) 14 51 Operating expenses (5,479) - - - - - - - -	Profit before credit impairment and tax 4,786 (34) (32) (20) 181 (55) (3) 14 51 Credit impairment charge (904) - - - - - - (14) (14)	Profit before income tax 3,882 (34) (32) (20) 181 (55) (3) - 37 Income tax expense (1,140) 5 32 6 (53) 16 1 - 7 Non-controlling interests (4) - - - - - - - -	Profit 2,738 (29) - (14) 128 (39) (2) - 44

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

*CONTENTS*	*PAGE*
Condensed Consolidated Income Statement	90
Condensed Consolidated Statement of Comprehensive Income	91
Condensed Consolidated Balance Sheet	92
Condensed Consolidated Cash Flow Statement	93
Condensed Consolidated Statement of Changes in Equity	94
Notes to Condensed Consolidated Financial Statements	95

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited

Note Interest income Interest expense	Half Year Sep 16 $M Mar 16 $M Movt 14,861 15,090 -2% (7,334) (7,522) -2%	Full Year
		Sep 16 $M Sep 15 $M Movt 29,951 30,526 -2% (14,856) (15,910) -7%
Net interest income 2 Other operating income 2 Net funds management and insurance income 2 Share of associates' profit 2,13	7,527 7,568 -1% 1,590 1,539 3% 907 857 6% 240 301 -20%	15,095 14,616 3% 3,129 4,034 -22% 1,764 1,815 -3% 541 625 -13%
Operating income Operating expenses 3	10,264 10,265 0% (4,943) (5,479) -10%	20,529 21,090 -3% (10,422) (9,378) 11%
Profit before credit impairment and income tax Credit impairment charge 9	5,321 4,786 11% (1,025) (904) 13%	10,107 11,712 -14% (1,929) (1,179) 64%
Profit before income tax Income tax expense 4	4,296 3,882 11% (1,318) (1,140) 16%	8,178 10,533 -22% (2,458) (3,026) -19%
Profit for the period	2,978 2,742 9%	5,720 7,507 -24%
Comprising: Profit attributable to non-controlling interests Profit attributable to shareholders of the Company	7 4 75% 2,971 2,738 9%	11 14 -21% 5,709 7,493 -24%
Earnings per ordinary share (cents) Basic 6 Diluted 6 Dividend per ordinary share (cents) 5		197.4 271.5 -27% 189.3 257.2 -26% 160 181 -12%
	102.6 94.8 8% 98.3 89.7 10% 80 80 0%

The notes appearing on pages 95 to 108 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited

Profit for the period Other comprehensive income Items that will not be reclassified subsequently to profit or loss Remeasurement gain/(loss) on defined benefit plans1 Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities designated at fair value Income tax on items that will not be reclassified subsequently to profit or loss Remeasurement gain/(loss) on defined benefit plans Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities designated at fair value Items that may be reclassified subsequently to profit or loss Foreign currency translation reserve Exchange differences taken to equity2 Exchange differences transferred to income statement Available-for-sale revaluation reserve Valuation gain/(loss) taken to equity Transferred to income statement Cash flow hedge reserve Valuation gain/(loss) taken to equity Transferred to income statement Income tax on items that may be reclassified subsequently to profit or loss Available-for-sale assets revaluation reserve Cash flow hedge reserve Share of associates' other comprehensive income3	Full Year
	Sep 16 $M Sep 15 $M Movt 5,720 7,507 -24% (72) (6) large (10) 52 large 11 4 large 3 (15) large (456) 1,736 large (126) (4) large 42 (40) large (48) (71) -32% 64 160 -60% 17 (15) large 7 36 -81% (21) (45) -53% 4 59 -93%
Other comprehensive income net of tax	(585) 1,851 large
Total comprehensive income for the period	5,135 9,358 -45%
Comprising total comprehensive income attributable to: Non-controlling interests Shareholders of the Company	4 30 -87% 5,131 9,328 -45%

1. Includes a foreign exchange loss for GBP denominated defined benefit plans of $15 million (Sep 15 full year: nil). 2.

Includes foreign currency translation differences attributable to non-controlling interests of $7 million loss (Sep 15 full year: $16 million gain).

3. Share of associates’ other comprehensive income includes the following items that may be reclassified subsequently to profit or loss: an Available-for-sale revaluation reserve gain of $10 million (Sep 15 full year: $53 million gain) and a Foreign currency translation reserve of nil (Sep 15 full year: $8 million gain), as well as items that will not be reclassified subsequently to profit or loss comprised of the remeasurement gain or loss on defined benefit plans of $6 million loss (Sep 15 full year: $2 million loss).

The notes appearing on pages 95 to 108 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

Assets Note Cash Settlement balances owed to ANZ Collateral paid Trading securities Derivative financial instruments Available-for-sale assets Net loans and advances 8 Regulatory deposits Investment in associates Current tax assets Deferred tax assets Goodwill and other intangible assets Investments backing policy liabilities Premises and equipment Other assets Esanda dealer finance assets held for sale 8	As at Sep 16 $M Mar 16 $M Sep 15 $M 48,675 49,144 53,903 21,951 26,048 18,596 12,723 12,783 9,967 47,188 50,073 49,000 87,496 88,747 85,625 63,113 50,377 43,667 575,852 561,768 562,173 2,296 2,135 1,773 4,272 4,213 5,440 126 289 90 623 578 402 7,672 7,585 8,312 35,656 34,541 34,820 2,205 2,188 2,221 5,021 4,809 5,846 - - 8,065	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -1% -10% -16% 18% 0% 28% -6% -4% -1% 2% 25% 45% 3% 2% 8% 29% 1% -21% -56% 40% 8% 55% 1% -8% 3% 2% 1% -1% 4% -14% n/a -100%
Total assets	914,869 895,278 889,900	2% 3%
Liabilities Settlement balances owed by ANZ Collateral received Deposits and other borrowings 10 Derivative financial instruments Current tax liabilities Deferred tax liabilities Policy liabilities External unit holder liabilities (life insurance funds) Provisions Payables and other liabilities Debt issuances Subordinated debt	10,625 13,626 11,250 6,386 6,615 7,829 588,195 578,071 570,794 88,725 91,706 81,270 188 129 267 227 286 249 36,145 35,159 35,401 3,333 3,265 3,291 1,209 1,202 1,074 8,865 9,251 10,366 91,080 81,947 93,747 21,964 17,557 17,009	-22% -6% -3% -18% 2% 3% -3% 9% 46% -30% -21% -9% 3% 2% 2% 1% 1% 13% -4% -14% 11% -3% 25% 29%
Total liabilities	856,942 838,814 832,547	2% 3%
Net assets	57,927 56,464 57,353	3% 1%
Shareholders' equity Ordinary share capital Reserves Retained earnings	28,765 28,625 28,367 1,078 377 1,571 27,975 27,361 27,309	0% 1% large -31% 2% 2%
Share capital and reserves attributable to shareholders of the Company 11 Non-controlling interests	57,818 56,363 57,247 109 101 106	3% 1% 8% 3%
Total shareholders' equity 11	57,927 56,464 57,353	3% 1%

The notes appearing on pages 95 to 108 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
Note Cash flows from operating activities Interest received Interest paid Dividends received Other operating income received Other operating expenses paid Income taxes paid Net cash flows from funds management and insurance business Premiums, other income and life investment deposits received Investment income and policy deposits received Claims and policy liability payments Commission expensepaid	Full Year
	Inflows Inflows (Outflows) (Outflows) Sep 16 $M Sep 15 $M 29,992 30,667 (15,038) (15,458) 120 231 1,770 18,237 (8,725) (8,592) (2,840) (3,082) 6,795 7,681 135 286 (5,604) (5,955) (545) (648)
Cash flows from operating activities before changes in operating assets and liabilities	6,060 23,367
Changes in operating assets and liabilities arising from cash flow movements (Increase)/decrease in operating assets Collateral paid Trading securities Net loans and advances Net cash flows from investments backing policy liabilities Purchase of insurance assets Proceeds from sale/maturity of insurance assets Increase/(decrease) in operating liabilities Deposits and other borrowings Settlement balances owed by ANZ Collateral received Payables and other liabilities	(3,183) (3,585) 332 2,870 (14,797) (32,280) (16,614) (7,065) 17,461 7,239 23,128 30,050 (589) 781 (1,027) 1,073 70 (974)
Change in operating assets and liabilities arising from cash flow movements	4,781 (1,891)
Net cashprovided by operating activities	10,841 21,476
Cash flows from investing activities Available-for-sale assets Purchases Proceeds from sale or maturity Controlled entities and associates Proceeds on sale of businesses Premises and equipment Purchases Proceeds from sale Esanda Dealer Finance divestment Other assets	(44,182) (24,236) 23,745 15,705 - 4 (337) (321) 17 - 6,682 - (335) (928)
Net cash(used in) investing activities	(14,410) (9,776)
Cash flows from financing activities Debt issuances Issue proceeds Redemptions Subordinated debt Issue proceeds Redemptions Dividends paid Share capital issues Preference shares bought back	29,204 16,637 (27,959) (15,966) 6,177 2,683 (900) - (4,564) (3,763) - 3,207 - (755)
Net cash(used in) /provided by financing activities	1,958 2,043
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effects of exchange rate changes on cash and cash equivalents	(1,611) 13,743 69,278 48,229 (1,447) 7,306
Cash and cash equivalents at end of period 7	66,220 69,278

The notes appearing on pages 95 to 108 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 capital	Preference shares	Reserves1	Retained earnings	Equity holders of the Bank	controlling interests	Shareholders' equity
	$M	$M	$M	$M	$M	$M	$M
As at 1 October 2014	24,031	871	(239)	24,544	49,207	77	49,284
Profit or loss	-	-	-	7,493	7,493	14	7,507
Other comprehensive income for theperiod	-	-	1,802	33	1,835	16	1,851
Total comprehensive income for the period	-	-	1,802	7,526	9,328	30	9,358
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(4,907)	(4,907)	(1)	(4,908)
Dividend income on treasury shares
held within the Group's	-	-	-	22	22	-	22
life insurance statutory funds
Dividend reinvestment plan	1,122	-	-	-	1,122	-	1,122
Preference share bought back	-	(871)	-	-	(871)	-	(871)
Other equity movements:
Share based payments/(exercises)	-	-	16	-	16	-	16
Share Placement and Purchase Plan	3,206	-	-	-	3,206	-	3,206
Group share option scheme	2	-	-	-	2	-	2
Treasury shares Wealth Australia adjustment	5	-	-	-	5	-	5
Group employee share acquisition scheme	1	-	-	-	1	-	1
Transfer of options/rights lapsed	-	-	(8)	8	-	-	-
Foreign exchange gains on preference shares brought back	-	-	-	116	116	-	116
As at 30 September 2015	28,367	-	1,571	27,309	57,247	106	57,353
Profit or loss	-	-	-	5,709	5,709	11	5,720
Other comprehensive income for theperiod	-	-	(504)	(74)	(578)	(7)	(585)
Total comprehensive income for the period	-	-	(504)	5,635	5,131	4	5,135
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(5,001)	(5,001)	(1)	(5,002)
Dividend income on treasury shares
held within the Group's	-	-	-	24	24	-	24
life insurance statutory funds
Dividend reinvestment plan	413	-	-	-	413	-	413
Preference share bought back	-	-	-	-	-	-	-
Other equity movements:
Share based payments/(exercises)	-	-	19	-	19	-	19
Share Placement and Purchase Plan	-	-	-	-	-	-	-
Group share option scheme	-	-	-	-	-	-	-
Treasury shares Wealth Australia adjustment	(153)	-	-	-	(153)	-	(153)
Group employee share acquisition scheme	138	-	-	-	138	-	138
Transfer of options/rights lapsed	-	-	(8)	8	-	-	-
As at 30 September 2016	28,765	-	1,078	27,975	57,818	109	57,927

1. Further information on reserves is disclosed on page 106.

The notes appearing on pages 95 to 108 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 ANZ’s Annual Financial Statements for the year ended 30 September 2016 and any public announcements made by the Parent Entity and its controlled entities (the Group) for the year ended 30 September 2016 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 ANZ’s Annual Financial Statements;
are presented in Australian dollars unless otherwise stated; and
were approved by the Board of Directors on 2 November 2016.

i) Accounting policies

Except as outlined below, these Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods of computation consistent with those applied in the 2016 ANZ Annual Financial Statements.

Software

In the year, the Group made a number of changes to the way in which it applies its accounting policy relating to the capitalisation of internally generated software assets by increasing the threshold for capitalisation of software development spend, reflecting the increasingly shorter useful life of smaller items of software, and direct expensing of more project related costs. The impact of the change was an accelerated amortisation charge of $556 million relating to previously capitalised software balances (of this, $183 million would otherwise have been amortised during the September 2016 full year) and higher operating expenses during the period of $370 million relating to development costs that would otherwise have been capitalised. These costs would otherwise have been amortised to the Income Statement in future periods of up to 5 years.

Derivative CVA methodology change

In determining the fair value of a derivative, the Group recognises a derivative credit valuation adjustment (CVA) to reflect the probability that a counterparty may default at some point over the life of the transaction. It is calculated by applying a probability of default (PD) on the potential estimated future positive exposure of the counterparty after taking into account the impact of collateral arrangements. At 30 September 2016, the Group revised its methodology for estimating CVA to align with industry best practice. The revised methodology makes greater use of market information for determining the PD and enhanced exposure modelling. At 30 September 2016 the effect of the changes in fair value as a result of the revisions to the methodology was to increase the CVA applicable to derivative positions by $237 million with a corresponding charge recognised in other operating income. It is impracticable to estimate the effect of the changes in fair value estimate on future periods.

ii) Basis of measurement

The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are stated at their fair value:

derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;
available-for-sale financial assets;
financial instruments held for trading; and
assets and liabilities designated at fair value through profit and loss.

In accordance with AASB 1038 Life Insurance Contracts , life insurance liabilities are measured using the Margin on Services model.

In accordance with AASB 119 Employee Benefits , defined benefit obligations are measured using the Projected Unit Credit method.

iii) 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. Discussion of the critical accounting estimates and judgements, which include complex or subjective decisions or assessments are covered in Note 2 of the 2016 Annual Financial Statements. Such estimates and judgements are reviewed on an ongoing basis.

At 31 March 2016 and 30 September 2016, the impairment assessment of non-lending assets identified that two of the Group’s associate investments (AMMB Holdings Berhad (Ambank) and PT Bank Pan Indonesia (PT Panin)) had indicators of impairment; specifically their market value (based on share price) was below their carrying value. The Group performed value in use (VIU) calculations to assess if the carrying value of the investments were impaired.

At 31 March 2016, the VIU calculations continue to support the carrying value of the investment in PT Panin, however the VIU did not support the carrying value of the Group’s investment in Ambank. As a consequence, the Group recorded an impairment charge of $260 million in the March half. The associate investment in Ambank forms part of the TSO and Group Centre operating segment. At 30 September 2016, the VIU calculations continue to support the carrying values of both investments and no impairment was recognised in the September half.

The VIU calculation is sensitive to a number of key assumptions, including discount rate, long term growth rates, future profitability and capital levels. The key assumptions used in the value in use calculations are outlined below:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pre-tax discount rate Terminal growth rate Expected NPAT growth (compound annual growth rate – 5 years) Core equitytier 1 rate	As at 30 Sep 16
	Ambank PT Panin 10.1% 12.8% 5.0% 6.0% 4.0% 8.5% 10% to 12.1% 11.3%

iv) Rounding of amounts

The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except where otherwise indicated, as permitted by Australian Securities and Investments Commission Corporations Instrument 2016/191.

v) Comparatives

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Income

Interest income Interest expense	Half Year Sep 16 $M Mar 16 $M Movt 14,861 15,090 -2% (7,334) (7,522) -2%	Full Year
		Sep 16 $M Sep 15 $M Movt 29,951 30,526 -2% (14,856) (15,910) -7%
Net interest income	7,527 7,568 -1%	15,095 14,616 3%
i) Fee and commission income Lending fees1 Non-lending fees and commissions2,3	388 391 -1% 1,460 1,451 1%	779 833 -6% 2,911 2,885 1%
Total fee and commission income2,3 Fee and commission expense2,4	1,848 1,842 0% (588) (574) 2%	3,690 3,718 -1% (1,162) (1,087) 7%
Net fee and commission income2,3	1,260 1,268 -1%	2,528 2,631 -4%
ii) Net funds management and insurance income Funds management income3 Investment income Insurance premium income3 Commission (expense) Claims3 Changes in policy liabilities5 Elimination of treasury share (gain)/loss	486 446 9% 1,880 470 large 782 780 0% (265) (192) 38% (376) (358) 5% (1,520) (323) large (80) 34 large	932 942 -1% 2,350 1,848 27% 1,562 1,633 -4% (457) (452) 1% (734) (743) -1% (1,843) (1,434) 29% (46) 21 large
Total net funds management and insurance income3	907 857 6%	1,764 1,815 -3%
iii) Share of associates' profit	240 301 -20%	541 625 -13%
iv) Other income Net foreign exchange earnings3 Net (loss) from trading securities and derivatives3 Credit risk on credit intermediation trades Movement on other financial instruments measured at fair value through profit & loss6 Brokerage income Impairment of Ambank Gain on cessation of equity accounting of investment in Bank of Tianjin (BoT) Gain on Esanda Dealer Finance divestment Derivative CVA methodology change7 Other2,3	574 602 -5% (16) (85) -81% 3 3 0% (59) (155) -62% 25 25 0% - (260) -100% - 29 -100% - 66 -100% (237) - n/a 40 46 -13%	1,176 1,005 17% (101) (125) -19% 6 8 -25% (214) 241 large 50 58 -14% (260) - n/a 29 - n/a 66 - n/a (237) - n/a 86 216 -60%
Total other income2,3	330 271 22%	601 1,403 -57%
Total other operating income2,3,8	2,737 2,697 1%	5,434 6,474 -16%
Total income2,3	17,598 17,787 -1%	35,385 37,000 -4%

Lending fees exclude fees treated as part of the effective yield calculation in interest income.

Certain card related fees integral to the generation of income have been reclassified within operating income and operating expenses to better reflect the nature of the items. Comparatives have been restated.

Income from certain insurance and other wealth related products have been reclassified within operating income to better reflect the nature of the items. Comparatives have been restated.

Includes interchange fees paid.

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

Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk on funding instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss. 7. Represents a $237 million charge due to the derivative CVA methodology change applied to the Group’s derivatives portfolio. 8. Total other operating income includes external dividend income of $27.3 million (Mar 16 half: nil; Sep 15 full year: $0.8 million).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Operating expenses

Personnel Salaries and related costs1 Superannuation costs - defined benefit plans Superannuation costs - defined contribution plans Equity-settled share-based payments Other	Half Year Sep 16 $M Mar 16 $M Movt 2,412 2,467 -2% 4 - n/a 164 169 -3% 90 92 -2% 70 73 -4%	Full Year
		Sep 16 $M Sep 15 $M Movt 4,879 4,749 3% 4 7 -43% 333 324 3% 182 216 -16% 143 183 -22%
Total personnel expenses	2,740 2,801 -2%	5,541 5,479 1%
Premises Depreciation of buildings and integrals Rent Utilities and other outgoings Other	97 97 0% 240 245 -2% 86 84 2% 47 32 47%	194 192 1% 485 479 1% 170 180 -6% 79 71 11%
Total premises expenses	470 458 3%	928 922 1%
Technology Data communications Depreciation and amortisation1 Licences and outsourced services Rentals and repairs Software impairment Other	53 68 -22% 328 870 -62% 322 275 17% 79 89 -11% 25 2 large 19 20 -5%	121 115 5% 1,198 675 77% 597 447 34% 168 158 6% 27 17 59% 39 50 -22%
Total technology expenses	826 1,324 -38%	2,150 1,462 47%

Restructuring	140 138 1%	278 31 large
Other Advertising and public relations2 Audit and other fees Non-lending losses, frauds and forgeries Professional fees Travel and entertainment expenses Amortisation and impairment of other intangible assets Freight, stationery, postage and telephone Other1, 2	129 132 -2% 12 10 20% 50 62 -19% 227 186 22% 72 86 -16% 40 43 -7% 142 135 5% 95 104 -9%	261 325 -20% 22 21 5% 112 66 70% 413 324 27% 158 205 -23% 83 88 -6% 277 263 5% 199 192 4%
Total other expenses	767 758 1%	1,525 1,484 3%
Total operating expenses	4,943 5,479 -10%	10,422 9,378 11%

2. Certain cards related fees that are integral to the generation of income have been reclassified from operating expenses to other operating income to better reflect the nature of the items. Comparatives have been restated and $19 million of card related fees have been reclassified from other operating income to operating expenses.

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

Profit before income tax Prima facie income tax expense at 30% Tax effect of permanent differences: Overseas tax rate differential Share of associates' profit Offshore Banking Units Wealth Australia - policyholders income and contributions tax Wealth Australia - tax consolidation benefit Wrtite down of investment in Ambank Gain on cessation of equity accounting for BoT Tax provisions no longer required Interest on Convertible Instruments Other	Half Year Sep 16 $M Mar 16 $M Movt 4,296 3,882 11% 1,288 1,165 11% (20) (25) -20% (72) (90) -20% - - n/a 129 23 large - - n/a - 78 -100% - (9) -100% (43) (28) 54% 35 35 0% 14 1 large	Full Year
		Sep 16 $M Sep 15 $M Movt 8,178 10,533 -22% 2,453 3,160 -22% (45) (95) -53% (162) (187) -13% - (1) -100% 152 130 17% - (56) -100% 78 - n/a (9) - n/a (71) (17) large 70 72 -3% 15 20 -25%
Income tax over provided in previous years	1,331 1,150 16% (13) (10) 30%	2,481 3,026 -18% (23) - n/a
Total income tax expense charged in the income statement	1,318 1,140 16%	2,458 3,026 -19%
Australia Overseas	953 799 19% 365 341 7%	1,752 2,144 -18% 706 882 -20%
	1,318 1,140 16%	2,458 3,026 -19%
Effective Tax Rate - Group	30.7% 29.4%	30.1% 28.7%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Dividends

5. Dividends
Dividend per ordinary share (cents) Interim (fully franked) Final (fully franked)	Half Year Sep 16 Mar 16 Movt - 80 n/a 80 - n/a	Full Year
		Sep 16 Sep 15 Movt 80 86 -7% 80 95 -16%
Total	80 80 0%	160 181 -12%
Ordinary share dividend ($M)1 Interim dividend Final dividend Bonus option plan adjustment	2,334 - n/a - 2,758 n/a (44) (47) -6%	2,334 2,379 -2% 2,758 2,619 5% (91) (92) -1%
Total2	2,290 2,711 -16%	5,001 4,906 2%
Ordinary share dividend payout ratio (%)3	78.8% 85.2%	81.9% 68.6%

1. Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders for the September 2016 half of nil (Mar 16 half: $1.4 million; Sep 15 full year: $1 million).

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

Dividend payout ratio is calculated using proposed 2016 final dividend of $2,342 million (not shown in the above table). The proposed 2016 final dividend of $2,342 million is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2016 half and September 2015 full year are calculated using actual dividends paid of $2,334 million and $5,137 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the Company by the amount of preference share dividends paid.

Ordinary Shares

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2016 final dividend. For the 2016 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 all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days commencing on 18 November 2016, 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 2016 final dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Daylight Time) on 16 November 2016.

Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 18 November 2016.

Preference Shares

The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014. During the period from 1 October 2014 to 15 December 2014, $1 million of preference share dividends were paid to security holders (€1.88 per preference share).

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Earnings per share

Number of fully paid ordinary shares on issue (M)1	Half Year Sep 16 Mar 16 Movt 2,927.5 2,917.6 0%	Full Year
		Sep 16 Sep 15 Movt 2,927.5 2,902.7 1%
Basic Profit attributable to shareholders of the Company ($M) Less Preference share dividends ($M)	2,971 2,738 9% - - n/a	5,709 7,493 -24% - 1 -100%
Profit less preference share dividends ($M) Weighted average number of ordinary shares (M)2 Basic earnings per share (cents)3	2,971 2,738 9% 2,894.7 2,889.3 0% 102.6 94.8 8%	5,709 7,492 -24% 2,891.7 2,759.0 5% 197.4 271.5 -27%
Diluted Profit less preference share dividends ($M) Interest on ANZ Convertible Preference Shares ($M)4 Interest on ANZ Capital Notes ($M)5 Interest on ANZ NZ Capital Notes ($M)6	2,971 2,738 9% 62 62 0% 76 73 4% 12 12 0%	5,709 7,492 -24% 124 128 -3% 149 134 11% 24 12 100%
Profit less preference share dividends and interest on ANZ Convertible Preference Shares, ANZ Capital Notes and ANZ NZ Capital Notes ($M) Weighted average number of shares on issue (M)2 Weighted average number of convertible options (M) Weighted average number of ANZ Convertible Preference Shares (M)4 Weighted average number of convertible ANZ Capital Notes (M)5 Weighted average number of convertible ANZ NZ Capital Notes (M)6	3,121 2,885 8% 2,894.7 2,889.3 0% 6.7 6.9 -3% 120.3 142.5 -16% 136.6 159.3 -14% 17.4 19.4 -10%	6,006 7,766 -23% 2,891.7 2,759.0 5% 6.8 6.2 10% 120.6 123.4 -2% 135.9 122.7 11% 17.4 8.5 large
Adjusted weighted average number of shares - diluted (M)	3,175.7 3,217.4 -1%	3,172.4 3,019.8 5%
Diluted earnings per share (cents)3	98.3 89.7 10%	189.3 257.2 -26%

1. Number of fully paid ordinary shares on issue includes Treasury shares of 28.5 million at 30 September 2016 (Mar 16: 23.0 million; Sep 15: 23.0 million), comprised of 10.8 million in ANZEST Pty Ltd (Mar 16: 11.0 million; Sep 15: 11.4 million) and 17.7 million held in Wealth Australia (Mar 16: 12.0 million; Sep 15: 11.6 million). Number of fully paid ordinary shares also includes 80.8 million resulting from the Institutional share placement on 13 August 2015 and 27.3 million resulting from the Retail share purchase plan on 17 September 2015.

2. Weighted average number of ordinary shares excludes 10.9 million weighted average number of ordinary Treasury shares for the half year ended 30 September 2016 and 11.1 million for the full year ended 30 September 2016 held in ANZEST Pty Ltd for the group employee share acquisition scheme (half year ended Mar 16: 10.7 million; full year ended Sep 15: 11.8 million); and excludes 16.9 million weighted average number of ordinary Treasury shares for the half year ended 30 September 2016 and 14.5 million for the full year ended 30 September 2016 held in Wealth Australia (half year ended Mar 16: 12.1 million; full year ended Sep 15: 12.4 million).

3. As a result of the Institutional share placement and the Retail share purchase plan in the September 2015 half, the weighted average number of ordinary shares increased by 108.0 million for for the full year ended 30 September 2016 (Sep 15: 11.9 million). This reduced basic earnings per share by 7.7 cents for the full year ended 30 September 2016 (Sep 15: 1.2 cents per share). Diluted earnings per share was reduced by 6.7 cents for the full year ended 30 September 2016 (Sep 15: 1.0 cent).

There are two “tranches” of convertible preference shares. The first are convertible preference shares (CPS2) issued on 17 December 2009 that convert to ordinary shares on 15 December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). On 27 September 2016, 9.0 million CPS2 were cancelled and re-invested in ANZ Capital Notes 4 (CN4) issued on that date. The second are convertible preference shares (CPS3) issued on 28 September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).

5. There are four “tranches” of ANZ Capital Notes. The first are ANZ Capital Notes 1 (CN1) issued on 7 August 2013 which convert to ANZ ordinary shares on 1 September 2023 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The second are ANZ Capital Notes 2 (CN2) issued on 31 March 2014 which convert to ANZ ordinary shares on 24 March 2024 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The third are ANZ Capital Notes 3 (CN3) issued on 5 March 2015 which convert to ANZ ordinary shares on 24 March 2025 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The fourth are ANZ Capital Notes 4 (CN4) issued on 27 September 2016 which convert to ANZ ordinary shares on 20 March 2026 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).

6. ANZ Bank New Zealand Limited issued ANZ NZ Capital Notes on 31 March 2015 which convert to ANZ ordinary shares on 25 May 2022 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).

7. Note to the Cash Flow Statement

Cash and cash equivalents at the end of the period as shown in the Cash Flow Statement are reflected in the related items in the Balance Sheet as follows:

Cash Settlement balances owed to ANZ	As at
	Sep 16 $M Sep 15 $M 48,675 53,903 17,545 15,375
Total cash and cash equivalents	66,220 69,278

101

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Net loans and advances

Australia Overdrafts Credit card outstandings Commercial bills outstanding Term loans - housing Term loans - non-housing1 Lease receivables Hire purchase Other	As at Sep 16 $M Mar 16 $M Sep 15 $M 6,248 6,175 6,284 8,864 8,872 8,950 9,868 10,439 10,420 246,351 242,426 230,879 123,006 118,456 124,051 1,158 1,255 1,346 829 957 1,111 81 255 114	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 1% -1% 0% -1% -5% -5% 2% 7% 4% -1% -8% -14% -13% -25% -68% -29%
Total Australia	396,405 388,835 383,155	2% 3%
Asia Pacific, Europe & America Overdrafts Credit card outstandings Commercial bills outstanding Term loans - housing Term loans - non-housing Lease receivables Other	825 1,175 1,616 1,396 1,446 1,445 2,724 2,692 3,781 6,866 7,226 7,846 54,567 56,429 69,669 232 254 341 448 341 137	-30% -49% -3% -3% 1% -28% -5% -12% -3% -22% -9% -32% 31% large
Total Asia Pacific, Europe & America	67,058 69,563 84,835	-4% -21%
New Zealand Overdrafts Credit card outstandings Term loans - housing Term loans - non-housing Lease receivables Hire purchase	1,080 1,017 1,055 1,586 1,517 1,535 69,927 63,649 61,743 41,625 39,003 38,973 215 206 214 1,048 901 860	6% 2% 5% 3% 10% 13% 7% 7% 4% 0% 16% 22%
Total New Zealand	115,481 106,293 104,380	9% 11%

Sub-total	578,944 564,691 572,370	3% 1%
Unearned income Capitalised brokerage/mortgage origination fees2 Customer liability for acceptances	(544) (596) (739) 1,064 1,013 1,253 571 760 1,371	-9% -26% 5% -15% -25% -58%
Gross loans and advances (including assets classified as held for sale)	580,035 565,868 574,255	3% 1%
Provision for credit impairment (refer Note 9)	(4,183) (4,100) (4,017)	2% 4%
Net loans and advances (including assets classified as held for sale)	575,852 561,768 570,238	3% 1%
Esanda Dealer Finance assets held for sale1	- - (8,065)	n/a -100%
Net loans and advances	575,852 561,768 562,173	3% 2%

1. Term loans – non-housing as at 31 March 2016 included $766 million of Esanda Dealer Finance bailment facilities which migrated to Macquarie Group Limited during the September 2016 half. These assets formed part of the $8,065 million classified as held for sale as at 30 September 2015.

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

102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Provision for credit impairment

Individual provision Balance at start of period New and increased provisions Write-backs Adjustment for exchange rate fluctuations and transfers Discount unwind Bad debts written-off Esanda Dealer Finance divestment	Half Year Sep 16 $M Mar 16 $M Movt 1,238 1,061 17% 1,308 1,137 15% (151) (160) -6% 17 (26) large (39) (26) 50% (1,066) (656) 63% - (92) -100%	Full Year
		Sep 16 $M Sep 15 $M Movt 1,061 1,176 -10% 2,445 1,757 39% (311) (434) -28% (9) 40 large (65) (54) 20% (1,722) (1,424) 21% (92) - n/a
Total individual provision	1,307 1,238 6%	1,307 1,061 23%
Collective provision Balance at start of period Charge/(release) to income statement Adjustment for exchange rate fluctuations and transfers Esanda Dealer Finance divestment	2,862 2,956 -3% (9) 26 large 28 (47) large (5) (73) -93%	2,956 2,757 7% 17 95 -82% (19) 104 large (78) - n/a
Total collective provision1	2,876 2,862 0%	2,876 2,956 -3%

Total provision for credit impairment	4,183 4,100 2%	4,183 4,017 4%

1. The collective provision includes amounts for off-balance sheet credit exposures of $631 million at 30 September 2016 (Mar 2016: $663 million; Sep 2015: $677 million). The impact on the income statement for the full year ended 30 September 2016 was a $32 million release (Mar 2016 half: $3 million charge; Sep 2015 full year: $27 million charge).

Provision movement analysis New and increased individual provisions Write-backs	Half Year Sep 16 $M Mar 16 $M Movt 1,308 1,137 15% (151) (160) -6%	Full Year
		Sep 16 $M Sep 15 $M Movt 2,445 1,757 39% (311) (434) -28%
Recoveries of amounts previously written-off	1,157 977 18% (123) (99) 24%	2,134 1,323 61% (222) (239) -7%
Individual credit impairment charge Collective credit impairment charge	1,034 878 18% (9) 26 large	1,912 1,084 76% 17 95 -82%
Credit impairment charge	1,025 904 13%	1,929 1,179 64%

103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. Deposits and other borrowings

Australia Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Securities sold under repurchase agreements	As at Sep 16 $M Mar 16 $M Sep 15 $M 52,295 56,513 57,390 69,740 68,427 66,394 169,773 169,268 164,009 8,729 8,116 7,782 34,368 24,532 19,692 13,842 15,106 15,511 151 653 177	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -7% -9% 2% 5% 0% 4% 8% 12% 40% 75% -8% -11% -77% -15%
Total Australia	348,898 342,615 330,955	2% 5%
Asia Pacific, Europe & America Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Securities sold under repurchase agreements	7,001 6,888 5,379 84,583 90,112 96,487 24,968 25,010 27,663 4,745 4,586 5,126 22,837 19,340 19,249 393 1,045 2,965 330 495 601	2% 30% -6% -12% 0% -10% 3% -7% 18% 19% -62% -87% -33% -45%
Total Asia Pacific, Europe & America	144,857 147,476 157,470	-2% -8%
New Zealand Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Borrowing corporation debt	2,133 1,675 677 37,824 33,871 31,795 40,360 39,276 37,662 7,418 6,552 6,103 73 127 43 5,114 4,913 4,511 1,518 1,566 1,578	27% large 12% 19% 3% 7% 13% 22% -43% 70% 4% 13% -3% -4%
Total New Zealand	94,440 87,980 82,369	7% 15%
Total deposits and other borrowings	588,195 578,071 570,794	2% 3%

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Shareholders’ equity

Issued and quoted securities Ordinary share capital Closing balance Issued during the period1,2 Preference share capital Bought back duringtheperiod3	Half Year Sep 16 No. Mar 16 No. 2,927,476,660 2,917,560,098 9,916,562 14,845,737 - -	Full Year
		Sep 16 No. Sep 15 No. 2,927,476,660 2,902,714,361 24,762,299 146,086,590 - 500,000

1. The Company issued 9.7 million shares under the Dividend Reinvestment Plan and Bonus Option Plan for the 2016 interim dividend (9.7 million shares for the 2015 final dividend; 28.6 million shares for the 2015 interim dividend) and 0.2 million shares to satisfy obligations under the Group’s Employee share acquisition plans during the September 2016 half (March 2016 half: 5.1 million shares; September 2015 full year: nil).

The Company issued 80.8 million ordinary shares under the Institutional Share Placement and 27.3 million ordinary shares under the Retail Share Purchase Plan in the September 2015 full year.

All 500,000 Euro Trust Securities on issue were bought back by ANZ for cash at face value (€1,000 per security) and cancelled on 15 December 2014.

Share capital Balance at start of period Ordinary share capital movements Dividend reinvestment plan Share placement and Share purchase plan Group employee share acquisition scheme1 Treasury shares in Wealth Australia2 Group share option scheme Preference share capital movements Preference shares bought back3	Half Year Sep 16 $M Mar 16 $M Movt 28,625 28,367 1% 198 215 -8% - - n/a 82 56 46% (140) (13) large - - n/a - - n/a	Full Year
		Sep 16 $M Sep 15 $M Movt 28,367 24,902 14% 413 1,122 -63% - 3,206 -100% 138 1 large (153) 5 large - 2 -100% - (871) -100%
Total share capital	28,765 28,625 0%	28,765 28,367 1%

1. As at 30 September 2016, there were 10.8 million ANZEST Treasury shares outstanding (Mar 16: 11.0 million; Sep 15: 11.4 million) . Shares in the Company which are purchased onmarket 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. As at 30 September 2016, there were 17.7 million Treasury shares outstanding (Mar 16: 12.0 million; Sep 15: 11.6 million). The Group’s Wealth Australia business purchases and holds shares in the Company to back policy liabilities. These shares are classified as Treasury shares.

All 500,000 Euro Trust Securities on issue were bought back by ANZ for cash at face value (€1,000 per security) and cancelled on 15 December 2014.

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reserves Foreign currency translation reserve Balance at start of period Transfer to the income statement Currency translation adjustments net of hedges	Half Year Sep 16 $M Mar 16 $M Movt (9) 1,119 large - (126) -100% 553 (1,002) large	Full Year
		Sep 16 $M Sep 15 $M Movt 1,119 (605) large (126) (4) large (449) 1,728 large
Total foreign currency translation reserve	544 (9) large	544 1,119 -51%
Share option reserve1 Balance at start of period Share based payments/(exercises) Transfer of options/rights lapsed to retained earnings	69 68 1% 10 9 11% - (8) -100%	68 60 13% 19 16 19% (8) (8) 0%
Total share option reserve	79 69 14%	79 68 16%
Available-for-sale revaluation reserve2 Balance at start of period Gain/(loss) recognised Transferred to income statement	101 138 -27% 52 (9) large (4) (28) -86%	138 160 -14% 43 27 59% (32) (49) -35%
Total available-for-sale revaluation reserve	149 101 48%	149 138 8%
Cash flow hedge reserve3 Balance at start of period Gain/(loss) recognised Transferred to income statement	239 269 -11% 88 (40) large 2 10 -80%	269 169 59% 48 111 -57% 12 (11) large
Total hedging reserve	329 239 38%	329 269 22%
Transactions with non-controlling interests reserve Balance at start of period Transfer to the income statement	(23) (23) 0% - - n/a	(23) (23) 0% - - n/a
Total transactions with non-controlling interests reserve	(23) (23) 0%	(23) (23) 0%
Total reserves	1,078 377 large	1,078 1,571 -31%

1. 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.

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

The cash flow hedge 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.

Retained earnings Balance at start of period Profit attributable to shareholders of the Company Transfer of options/rights lapsed from share option reserve	Half Year Sep 16 $M Mar 16 $M Movt 27,361 27,309 0% 2,971 2,738 9% - 8 -100%	Full Year
		Sep 16 $M Sep 15 $M Movt 27,309 24,544 11% 5,709 7,493 -24% 8 8 0%
Total available for appropriation Remeasurement gain/(loss) on defined benefit plans Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities designated at fair value Ordinary share dividend paid Dividend income on Treasury shares held within the Group's life insurance statutory funds Preference share dividend paid Foreign exchange gains on preference shares bought back1	30,332 30,055 1% (64) (3) large (15) 8 large (2,290) (2,711) -16% 12 12 0% - - n/a - - n/a	33,026 32,045 3% (67) (4) large (7) 37 large (5,001) (4,906) 2% 24 22 9% - (1) -100% - 116 -100%
Retained earnings at end of period	27,975 27,361 2%	27,975 27,309 2%
Share capital and reserves attributable to shareholders of the Company Non-controlling interests	57,818 56,363 3% 109 101 8%	57,818 57,247 1% 109 106 3%
Total shareholders' equity	57,927 56,464 3%	57,927 57,353 1%

1. The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014. The foreign exchange gain between the issue date and 15 December 2014 was recognised directly in retained earnings.

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. Changes in composition of the Group

There were no acquisitions or disposals of material controlled entities for the year ended 30 September 2016 or for the year ended 30 September 2015.

13. Investments in Associates

Share of associates'profit		Full Year Sep 16 $M Sep 15 $M Movt 541 625 -13% Ownership interest held by Group
Contributions to profit1 Associates P.T. Bank Pan Indonesia AMMB Holdings Berhad Shanghai Rural Commercial Bank Bank of Tianjin (up to 30 March 2016)2 Other associates1	Contribution to Group post-tax profit Half Year Full Year Sep 16 $M Mar 16 $M Sep 16 $M Sep 15 $M 47 17 64 78 51 43 94 138 122 137 259 218 - 86 86 155 20 18 38 36 240 301 541 625
	Half Year Sep 16 $M Mar 16 $M 47 17 51 43 122 137 - 86 20 18	As at
		Sep 16 % Mar 16 % Sep 15 % 39 39 39 24 24 24 20 20 20 12 12 14 n/a n/a n/a







Share of associates' profit	240 301

1. Contributions to profit reflect the IFRS equivalent results adjusted to align with the Group’s financial year end which may differ from the published results of these entities. Excludes gains or losses on disposal or valuation adjustments.

On 30 March 2016, the Bank of Tianjin (BoT) completed a capital raising and initial public offering (IPO) on the Hong Kong Stock Exchange. As a result, the Group’s equity interest reduced from 14% to 12% and the Group ceased equity accounting the investment due to losing the ability to appoint directors to the Board of BoT at this date. From 31 March 2016, the investment is classified as an available-for-sale asset on the balance sheet.

14. Contingent liabilities and contingent assets

There are outstanding court proceedings, claims and possible claims for and against the Group. Where relevant, expert legal advice has been obtained and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice the interests of the Group.

Note 41 of the 2016 ANZ Annual Financial Statements (when released) will contain a description of contingent liabilities and contingent assets as at 30 September 2016.

A summary of some of those contingent liabilities is set out below.

Bank fees litigation

Litigation funder IMF Bentham Limited commenced a class action against ANZ in 2010, followed by a second similar class action in March 2013. The applicants contended that certain exception fees (honour, dishonour and non-payment fees on transaction accounts and late payment and overlimit fees on credit cards) were unenforceable penalties (at law and in equity) and that various of the fees were also unenforceable under statutory provisions governing unconscionable conduct, unfair contract terms and unjust transactions. In August 2014, IMF Bentham Limited commenced a separate class action against ANZ challenging late payment fees charged to ANZ customers in respect of commercial credit cards and other ANZ products (at this stage not specified). This action is expressed to apply to all relevant customers, rather than being limited to those who have signed up with IMF Bentham Limited.

In the second class action, all the applicants' claims have failed. The claims in relation to all fees were dismissed by the Full Federal Court. That decision was appealed to the High Court only in relation to credit card late payment fees (the other claims were not appealed). On 27 July 2016 the High Court dismissed the appeal and upheld the judgment in favour of ANZ in respect of credit card late payment fees.

The applicants are presently considering the implications of the High Court's decision for the remaining class actions, which have been on hold pending the outcome of the second class action. ANZ believes that the remaining class actions are likely to be discontinued or dismissed.

–

Proceedings in relation to Bank Bill Swap Rate (BBSW)

On 4 March 2016, ASIC commenced court proceedings against ANZ. ASIC is seeking declarations and civil penalties for alleged market manipulation, unconscionable conduct, misleading or deceptive conduct, and alleged breaches by ANZ of certain statutory obligations as a financial services licensee. ASIC has subsequently initiated similar proceedings against two other Australian banks. ASIC’s case against ANZ concerns transactions in the Australian interbank BBSW market in the period from March 2010 to May 2012. ANZ is defending the proceedings. The potential civil penalty or other financial impact is uncertain.

In August 2016, a class action complaint was brought in the United States District Court against two international broking houses and 17 banks, including ANZ. The class action is brought by two US-based investment funds and an individual derivatives trader. The action is expressed to apply to persons and entities that engaged in US-based transactions in financial instruments that were priced, benchmarked, and/or settled based on BBSW, from 1 January 2003 onwards. The claimants seek damages or compensation in amounts not specified, and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

allege that the defendant banks, including ANZ, violated US anti-trust laws, anti-racketeering laws, the Commodity Exchange Act, and unjust enrichment principles. ANZ is defending the proceedings. The action is at an early stage.

– Regulator investigations into foreign exchange trading

Since 2014, each of ASIC and the Australian Competition and Consumer Commission (ACCC) have been investigating foreign exchange trading conduct of various banks including ANZ. ASIC’s and the ACCC’s investigations are ongoing and the range of potential outcomes include civil penalties and other actions under the relevant legislation.

Other regulatory reviews

In recent years there have been significant increases in the nature and scale of regulatory investigations and reviews, enforcement actions (whether by court action or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions both in Australia and globally. The nature of these investigations and reviews can be wide ranging and, for example, currently include a range of matters including responsible lending practices, wealth advice and product suitability, conduct in financial markets and capital market transactions. During the year, ANZ has received various notices and requests for information from its regulators as part of both industry-wide and ANZspecific reviews. The outcomes and total costs associated with such reviews remain uncertain.

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.

15. Subsequent events since balance date

On 31 October 2016, the Group announced it had entered into an agreement to sell its Retail and Wealth businesses in Singapore, China, Hong Kong, Taiwan, and Indonesia to DBS Bank Limited for a premium of approximately $110 million over the book value of net assets, which principally comprised approximately $11 billion of gross lending assets and $17 billion of deposits as at 30 September 2016. The final purchase price will be based on the net assets at completion.

The transaction is subject to regulatory approval in each country, with completion occurring on a rolling country by country basis from mid financial year 2017 with all countries expected to be completed with 18 months.

The Group anticipates the transaction will generate a net loss of approximately $265 million (post-tax) including write-downs of software, goodwill and fixed assets, as well as separation and transaction costs.

The assets associated with the Retail Asia and Wealth businesses were assessed for impairment as at 30 September 2016 on the basis of the businesses being a continuing operation and no impairment was identified. Additionally, the assets did not meet the conditions for ‘held for sale’ classification under AASB 5 – Non-Current Assets Held for Sale and Discontinued Operations.

Other than this matter, no other material events have occurred between the end of the reporting period (30 September 2016) and the date of this preliminary final report.

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SUPPLEMENTARY INFORMATION

Supplementary Information

Capital management Average balance sheet and related interest Funds management and insurance income analysis (Group) Select geographical disclosures Full time equivalent staff Exchange rates Definitions

109

SUPPLEMENTARY INFORMATION

Capital management

Qualifying Capital Tier 1 Shareholders' equity and non-controlling interests Prudential adjustments to shareholders' equity Table 1	As at Sep 16 $M Mar 16 $M Sep 15 $M 57,927 56,464 57,353 (481) (584) (387)	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 3% 1% -18% 24%
Gross Common Equity Tier 1 capital Deductions Table 2	57,446 55,880 56,966 (18,179) (17,778) (18,440)	3% 1% 2% -1%
Common Equity Tier 1 capital Additional Tier 1 capital Table 3	39,267 38,102 38,526 9,018 6,960 6,958	3% 2% 30% 30%
Tier 1 capital	48,285 45,062 45,484	7% 6%
Tier 2 capital Table 4	10,328 8,076 7,951	28% 30%
Total qualifying capital	58,613 53,138 53,435	10% 10%
Capital adequacy ratios Common Equity Tier 1 Tier 1 Tier 2	9.6% 9.8% 9.6% 11.8% 11.6% 11.3% 2.5% 2.1% 2.0%
Total	14.3% 13.7% 13.3%
Risk weighted assets Table 5	408,582 388,335 401,937	5% 2%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 1: Prudential adjustments to shareholders' equity Treasury shares attributable to ANZ Wealth Australia policyholders Accumulated retained profits and reserves of insurance and funds management entities Deferred fee revenue including fees deferred as part of loan yields Available-for-sale reserve attributable to deconsolidated subsidiaries Other	As at Sep 16 $M Mar 16 $M Sep 15 $M 395 254 242 (875) (931) (791) 238 290 380 (110) (98) (113) (129) (99) (105)	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 56% 63% -6% 11% -18% -37% 12% -3% 30% 23%
Total	(481) (584) (387)	-18% 24%
Table 2: Deductions from Common Equity Tier 1 capital Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and New Zealand) Intangible component of investments in ANZ Wealth Australia and New Zealand Capitalised software Capitalised expenses including loan and lease origination fees Applicable deferred net tax assets Expected losses in excess of eligible provisions Table 8 Investment in other insurance and funds management subsidiaries Investment in ANZ Wealth Australia and New Zealand Investment in banking associates and minority interests Other deductions	(3,913) (3,767) (4,109) (2,103) (2,091) (2,093) (2,139) (2,190) (2,832) (1,148) (1,078) (1,320) (899) (793) (694) (700) (600) (479) (297) (297) (297) (1,752) (1,749) (1,349) (4,674) (4,708) (4,734) (554) (505) (533)	4% -5% 1% 0% -2% -24% 6% -13% 13% 30% 17% 46% 0% 0% 0% 30% -1% -1% 10% 4%
Total	(18,179) (17,778) (18,440)	2% -1%
Table 3: Additional Tier 1 capital Convertible Preference Shares ANZ CPS2 ANZ CPS3 ANZ Capital Notes 1 ANZ Capital Notes 2 ANZ Capital Notes 3 ANZ Capital Notes 4 ANZ Bank NZ Capital Notes ANZ Capital Securities Regulatory adjustments and deductions	1,068 1,969 1,969 1,340 1,338 1,336 1,115 1,113 1,112 1,602 1,600 1,598 962 961 959 1,604 - - 473 446 449 1,329 - - (475) (467) (465)	-46% -46% 0% 0% 0% 0% 0% 0% 0% 0% n/a n/a 6% 5% n/a n/a 2% 2%
Total	9,018 6,960 6,958	30% 30%
Table 4: Tier 2 capital General reserve for impairment of financial assets Perpetual subordinated notes Subordinated debt Regulatory adjustments and deductions Transitional adjustments	267 255 252 1,190 1,145 1,188 11,281 8,985 8,398 (936) (660) (717) (1,474) (1,649) (1,170)	5% 6% 4% 0% 26% 34% 42% 31% -11% 26%
Total	10,328 8,076 7,951	28% 30%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 5: Risk weighted assets On balance sheet Commitments Contingents Derivatives	As at Sep 16 $M Mar 16 $M Sep 15 $M 259,356 235,875 245,542 58,167 62,223 61,965 13,295 14,489 15,929 21,215 21,721 26,315	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 10% 6% -7% -6% -8% -17% -2% -19%
Total credit risk Table 6 Market risk - Traded Market risk - IRRBB Operational risk	352,033 334,308 349,751 6,188 6,059 6,868 11,700 10,280 7,433 38,661 37,688 37,885	5% 1% 2% -10% 14% 57% 3% 2%
Total risk weighted assets	408,582 388,335 401,937	5% 2%

Table 6: Credit risk weighted assets by Basel asset class Subject to Advanced IRB approach Corporate Sovereign Bank Residential mortgage Qualifying revolving retail (credit cards) Other retail	As at Sep 16 $M Mar 16 $M Sep 15 $M 130,799 139,643 150,165 6,634 6,185 6,664 14,884 15,061 17,445 84,275 57,218 54,996 7,334 7,744 7,546 31,360 30,681 32,990	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 -6% -13% 7% 0% -1% -15% 47% 53% -5% -3% 2% -5%
Credit risk weighted assets subject to Advanced IRB approach	275,286 256,532 269,806	7% 2%

Credit risk specialised lending exposures subject to slotting criteria	36,100 35,066 32,240	3% 12%
Subject to Standardised approach Corporate Residential mortgage Other retail (includes credit cards)	20,459 22,149 25,341 2,493 2,616 2,882 3,277 3,550 3,625	-8% -19% -5% -13% -8% -10%
Credit risk weighted assets subject to Standardised approach	26,229 28,315 31,848	-7% -18%

Credit Valuation Adjustment and Qualifying Central Counterparties	9,371 9,147 11,046	2% -15%
Credit risk weighted assets relating to securitisation exposures Other assets	1,203 1,194 1,156 3,844 4,054 3,655	1% 4% -5% 5%
Total credit risk weighted assets	352,033 334,308 349,751	5% 1%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 7: Total provision for credit impairment and expected loss by division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Collective Provision and Individual Provision Sep 16 $M Mar 16 $M Sep 15 $M 1,794 1,751 1,834 1,680 1,681 1,479 491 451 479 214 214 222 4 3 3	Basel Expected Loss1
		Sep 16 $M Mar 16 $M Sep 15 $M 2,654 2,608 2,643 1,404 1,410 1,299 802 717 722 7 5 1 1 - -
Total provision for credit impairment and expected loss	4,183 4,100 4,017	4,868 4,740 4,665

1. Only applicable to Advanced Internal Ratings based portfolios.

Table 8: APRA Expected loss in excess of eligible provisions APRA Basel 3 expected loss: non-defaulted Less: Qualifying collective provision Collective provision Non-qualifying collective provision Standardised collective provision	As at Sep 16 $M Mar 16 $M Sep 15 $M 2,959 2,894 2,850 (2,876) (2,862) (2,956) 350 313 333 267 255 252	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 2% 4% 0% -3% 12% 5% 5% 6%
Non-defaulted excess included in deduction APRA Basel 3 expected loss: defaulted Less: Qualifying individual provision Individual provision Additional individual provision for partial write offs Standardised individual provision Collective provision on advanced defaulted	700 600 479 1,909 1,846 1,815 (1,307) (1,238) (1,061) (509) (528) (633) 195 171 107 (304) (265) (286)	17% 46% 3% 5% 6% 23% -4% -20% 14% 82% 15% 6%
Shortfall in expected loss not included in deduction	(16) (14) (58) 16 14 58	14% -72% 14% -72%
Defaulted excess included in deduction	- - -	n/a n/a
Gross deduction	700 600 479	17% 46%

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SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1

Loans and advances2 Overdrafts and credit cards Commercial bills outstanding Term loans - housing Term loans - non-housing Lease financing Other loans and advances Individual provision for credit impairment	Full Year Sep 16 Avg bal Int Rate $M $M % 20,324 2,146 10.6% 12,781 238 1.9% 314,067 14,424 4.6% 217,777 9,466 4.3% 8,230 542 6.6% 2,267 26 1.1% (1,113) - 0.0%	Full Year Sep 15
		Avg bal Int Rate $M $M % 21,554 2,132 9.9% 13,974 272 1.9% 285,998 13,957 4.9% 221,635 10,351 4.7% 9,406 708 7.5% 4,201 95 2.3% (1,135) - 0.0%
Total	574,333 26,842 4.7%	555,633 27,515 5.0%
Other interest earning assets Cash Settlement Balances owed to ANZ Collateral Paid Trading and available-for-sale assets Regulatory Deposits Other assets	48,565 503 1.0% 17,962 46 0.3% 12,389 74 0.6% 99,676 2,316 2.3% 1,226 16 1.3% 9 154 n/a	45,992 485 1.1% 15,917 67 0.4% 8,292 60 0.7% 89,989 2,353 2.6% 1,178 8 0.7% 11 38 n/a
Total	179,827 3,109 1.7%	161,379 3,011 1.9%
Total interest earning assets3	754,160 29,951 4.0%	717,012 30,526 4.3%
Non-interest earning assets Derivatives Premises and equipment Insurance assets Other assets Collective provision for credit impairment	84,908 2,211 34,910 34,583 (2,863)	68,352 2,181 35,239 31,125 (2,873)
Total	153,749	134,024
Total average assets	907,909	851,036
Interest bearing deposits and other borrowings Certificates of deposit Term deposits On demand and short term deposits Deposits from banks Commercial paper Securities sold under agreements to repurchase Borrowing corporations' debt	62,717 1,505 2.4% 198,440 3,837 1.9% 228,998 4,163 1.8% 51,038 639 1.3% 22,918 571 2.5% 996 8 0.8% 1,574 64 4.0%	62,683 1,690 2.7% 194,835 4,210 2.2% 207,433 4,574 2.2% 53,624 683 1.3% 21,229 515 2.4% 870 12 1.4% 1,505 70 4.7%
Total	566,681 10,787 1.9%	542,179 11,754 2.2%
Other interest bearing liabilities Settlement Balances owed by ANZ Collateral Received Debt issuances & subordinated debt Other liabilities	4,888 32 0.7% 6,449 39 0.6% 103,596 3,773 3.6% 5,195 225 4.3%	3,391 35 1.0% 5,460 29 0.5% 95,704 3,748 3.9% 8,199 344 4.2%
Total	120,128 4,069 3.4%	112,754 4,156 3.7%
Total interest bearing liabilities3	686,809 14,856 2.2%	654,933 15,910 2.4%
Non-interest bearing liabilities Deposits Derivatives Insurance Liabilities External unit holder liabilities (life insurance funds) Other liabilities	19,772 88,888 35,559 3,278 16,462	17,600 71,398 35,816 3,337 16,217
Total	163,959	144,368
Total average liabilities	850,768	799,301

1. Averages used are predominantly daily averages.

2. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

3. Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

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SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1 (cont’d)

Loans and advances2 Australia Asia Pacific, Europe & America New Zealand	Full Year Sep 16 Avg bal Int Rate $M $M % 389,928 18,786 4.8% 74,244 2,437 3.3% 110,161 5,619 5.1%	Full Year Sep 15
		Avg bal Int Rate $M $M % 366,823 18,737 5.1% 86,530 2,554 3.0% 102,280 6,224 6.1%
Total	574,333 26,842 4.7%	555,633 27,515 5.0%
Trading and available-for-sale assets Australia Asia Pacific, Europe & America New Zealand	57,448 1,371 2.4% 28,041 462 1.6% 14,187 483 3.4%	51,719 1,445 2.8% 25,765 423 1.6% 12,505 485 3.9%
Total	99,676 2,316 2.3%	89,989 2,353 2.6%
Total interest earning assets3 Australia Asia Pacific, Europe & America New Zealand	472,771 20,569 4.4% 152,508 3,085 2.0% 128,881 6,297 4.9%	439,228 20,565 4.7% 158,843 3,096 1.9% 118,941 6,865 5.8%
Total	754,160 29,951 4.0%	717,012 30,526 4.3%
Total average assets Australia Asia Pacific, Europe & America New Zealand	576,893 179,431 151,585	538,153 180,258 132,625
Total average assets	907,909	851,036
% of total average assets attributable to overseas activities Interest bearing deposits and other borrowings Australia Asia Pacific, Europe & America New Zealand	36.5% 333,039 7,350 2.2% 148,751 1,077 0.7% 84,891 2,360 2.8%	36.8% 315,861 7,939 2.5% 149,186 995 0.7% 77,132 2,820 3.7%
Total	566,681 10,787 1.9%	542,179 11,754 2.2%
Total interest bearing liabilities3 Australia Asia Pacific, Europe & America New Zealand	411,105 10,224 2.5% 170,146 1,439 0.8% 105,558 3,193 3.0%	392,289 10,817 2.8% 165,867 1,232 0.7% 96,777 3,861 4.0%
Total	686,809 14,856 2.2%	654,933 15,910 2.4%
Total average liabilities Australia Asia Pacific, Europe & America New Zealand	525,213 193,029 132,526	502,529 183,457 113,315
Total	850,768	799,301
% of total average liabilities attributable to overseas activities Total average shareholder's equity Ordinary share capital, reserves, retained earnings and non-controlling interests Preference share capital	38.3% 57,141 -	37.1% 51,553 182
Total	57,141	51,735
Total average liabilities and shareholder's equity	907,909	851,036

Averages used are predominantly daily averages.

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

115

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1 (cont’d)

Average balance sheet and related interest 1 (cont’d)
Loans and advances2 Overdrafts and credit cards Commercial bills outstanding Term loans - housing Term loans - non-housing Lease financing Other loans and advances Individual provision for credit impairment	Half Year Sep 16 Avg bal Int Rate $M $M % 20,109 1,084 10.8% 12,325 126 2.0% 319,327 7,221 4.5% 213,827 4,576 4.3% 8,096 263 6.5% 2,292 - 0.0% (1,238) - 0.0%	Half Year Mar 16
		Avg bal Int Rate $M $M % 20,539 1,062 10.3% 13,237 112 1.7% 308,808 7,203 4.7% 221,728 4,890 4.4% 8,365 279 6.7% 2,239 26 2.3% (988) - 0.0%
Total	574,738 13,270 4.6%	573,928 13,572 4.7%
Other interest earning assets Cash Settlement Balances owed to ANZ Collateral Paid Trading and available-for-sale assets Regulatory Deposits Other assets	46,076 256 1.1% 17,403 12 0.1% 14,042 48 0.7% 100,467 1,182 2.4% 1,192 9 1.5% 10 84 n/a	51,054 247 1.0% 18,521 34 0.4% 10,737 26 0.5% 98,884 1,134 2.3% 1,259 7 1.1% 8 70 n/a
Total	179,190 1,591 1.8%	180,463 1,518 1.7%
Total interest earning assets3	753,928 14,861 3.9%	754,391 15,090 4.0%
Non-interest earning assets Derivatives Premises and equipment Insurance assets Other assets Collective provision for credit impairment	90,011 2,200 34,974 36,770 (2,813)	79,804 2,222 34,846 32,399 (2,914)
Total	161,142	146,357
Total average assets	915,070	900,748
Interest bearing deposits and other borrowings Certificates of deposit Term deposits On demand and short term deposits Deposits from banks Commercial paper Securities sold under agreements to repurchase Borrowing corporations' debt	61,712 724 2.3% 199,583 1,895 1.9% 230,969 1,970 1.7% 50,770 312 1.2% 20,053 283 2.8% 800 4 1.0% 1,573 31 3.9%	63,722 781 2.5% 197,297 1,942 2.0% 227,027 2,193 1.9% 51,307 327 1.3% 25,783 288 2.2% 1,191 4 0.7% 1,576 33 4.2%
Total	565,460 5,219 1.8%	567,903 5,568 2.0%
Other interest bearing liabilities Settlement Balances owed by ANZ Collateral Received Debt issuances & subordinated debt Other liabilities	5,298 17 0.6% 7,093 25 0.7% 105,685 1,954 3.7% 5,282 119 4.5%	4,478 15 0.7% 5,806 14 0.5% 101,507 1,819 3.6% 5,109 106 4.1%
Total	123,358 2,115 3.4%	116,900 1,954 3.3%
Total interest bearing liabilities3	688,818 7,334 2.1%	684,803 7,522 2.2%
Non-interest bearing liabilities Deposits Derivatives Insurance Liabilities External unit holder liabilities (life insurance funds) Other liabilities	20,212 92,110 35,662 3,265 18,189	19,332 85,666 35,456 3,291 14,735
Total	169,438	158,480
Total average liabilities	858,256	843,283

1. Averages used are predominantly daily averages.

2. Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

3. Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

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SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1 (cont’d)

Average balance sheet and related interest 1 (cont’d)
Loans and advances2 Australia Asia Pacific, Europe & America New Zealand	Half Year Sep 16 Avg bal Int Rate $M $M % 392,821 9,357 4.8% 69,355 1,141 3.3% 112,562 2,772 4.9%	Half Year Mar 16
		Avg bal Int Rate $M $M % 387,035 9,429 4.9% 79,132 1,296 3.3% 107,761 2,847 5.3%
Total	574,738 13,270 4.6%	573,928 13,572 4.7%
Trading and available-for-sale assets Australia Asia Pacific, Europe & America New Zealand	58,696 710 2.4% 26,882 229 1.7% 14,889 243 3.3%	56,200 661 2.4% 29,199 233 1.6% 13,485 240 3.6%
Total	100,467 1,182 2.4%	98,884 1,134 2.3%
Total interest earning assets3 Australia Asia Pacific, Europe & America New Zealand	479,508 10,277 4.3% 142,512 1,473 2.1% 131,908 3,111 4.7%	466,032 10,292 4.4% 162,505 1,612 2.0% 125,854 3,186 5.1%
Total	753,928 14,861 3.9%	754,391 15,090 4.0%
Total average assets Australia Asia Pacific, Europe & America New Zealand	584,543 169,939 160,588	569,243 188,923 142,582
Total average assets	915,070	900,748
% of total average assets attributable to overseas activities Interest bearing deposits and other borrowings Australia Asia Pacific, Europe & America New Zealand	36.1% 332,337 3,561 2.1% 145,807 530 0.7% 87,316 1,128 2.6%	36.8% 333,740 3,789 2.3% 151,696 547 0.7% 82,467 1,232 3.0%
Total	565,460 5,219 1.8%	567,903 5,568 2.0%
Total interest bearing liabilities3 Australia Asia Pacific, Europe & America New Zealand	412,396 5,086 2.5% 168,031 725 0.9% 108,391 1,523 2.8%	409,816 5,138 2.5% 172,261 714 0.8% 102,726 1,670 3.3%
Total	688,818 7,334 2.1%	684,803 7,522 2.2%
Total average liabilities Australia Asia Pacific, Europe & America New Zealand	523,928 192,679 141,649	526,500 193,380 123,403
Total	858,256	843,283
% of total average liabilities attributable to overseas activities Total average shareholder's equity Ordinary share capital, reserves, retained earnings and non-controlling interests	39.0% 56,814	37.6% 57,465
Total	56,814	57,465
Total average liabilities and shareholder's equity	915,070	900,748

1. Averages used are predominantly daily averages. 2.

Loans and advances as at 30 September 2015 include Esanda Dealer Finance assets divested to Macquarie Group Limited in the March 2016 half.

3. Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

117

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest (cont’d)

Gross earnings rate1 Australia Asia Pacific, Europe & America New Zealand Group	Half Year Sep 16 % Mar 16 % 4.52 4.51 1.86 1.91 4.72 5.06 3.94 4.00	Full Year
		Sep 16 % Sep 15 % 4.51 4.78 1.89 1.83 4.89 5.77 3.97 4.25
Net interest spread and net interest margin may be analysed as follows:

Australia1 Net interest spread Interest attributable to net non-interest bearing items	Half Year Sep 16 % Mar 16 % 2.05 1.99 0.23 0.28	Full Year
		Sep 16 % Sep 15 % 2.02 2.02 0.25 0.28
Net interest margin - Australia	2.28 2.27	2.27 2.30
Asia Pacific, Europe & America1 Net interest spread Interest attributable to net non-interest bearing items	1.00 1.08 0.03 0.03	1.04 1.08 0.03 0.03
Net interest margin - Asia Pacific, Europe & America	1.03 1.11	1.07 1.11
New Zealand1 Net interest spread Interest attributable to net non-interest bearing items	1.85 1.81 0.34 0.38	1.83 1.82 0.36 0.43
Net interest margin - New Zealand	2.19 2.19	2.19 2.25
Group Net interest spread Interest attributable to net non-interest bearing items	1.82 1.80 0.18 0.21	1.81 1.82 0.19 0.22
Net interest margin	2.00 2.01	2.00 2.04
Net interest margin (excluding Markets)	2.53 2.52	2.53 2.51

1. Geographic gross earnings rate, net interest spread and net interest margin are calculated gross of intra group items (Intra-group interest earning assets and associated interest income and intra-group interest bearing liabilities and associated interest expense).

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Funds management and insurance income analysis (Group)

The tables below supplements the Wealth Australia disclosures provided on pages 76 to 79 to present the Group’s overall funds management and insurance businesses by incorporating the relevant Australia division, New Zealand division and Asia Retail & Pacific division funds management and insurance businesses.

Reference Page Net funds management and insurance income - statutory basis 90 Adjustments between cash and statutory profit (pre-tax) Treasury shares adjustment 87 - 88 Policyholders tax gross up 87 - 88 Revaluation of policy liabilities 87 - 88	Half Year Sep 16 $M Mar 16 $M Movt 907 857 6% 80 (34) large (185) (32) large (55) (20) large	Full Year
		Sep 16 $M Sep 15 $M Movt 1,764 1,815 -3% 46 (21) large (217) (186) 17% (75) (104) -28%
Net funds management and insurance income - cash basis 84 Wealth Australia - Funds management and insurance income Australia - Funds management and insurance income New Zealand - Funds management and insurance income Asia Retail & Pacific - Funds management and insurance income Inter-divisional eliminations	747 771 -3% 559 597 -6% 22 25 -12% 172 161 7% 59 60 -2% (65) (72) -10%	1,518 1,504 1% 1,156 1,178 -2% 47 49 -4% 333 317 5% 119 115 3% (137) (155) -12%
Net funds management and insurance income - cash basis 30	747 771 -3%	1,518 1,504 1%
Insurance operating margin Life Insurance Planned profit margin Group & Individual Experience profit/(loss)1 General Insurance operating profit margin	Half Year Sep 16 $M Mar 16 $M Movt 79 72 10% (10) 4 large 59 51 16%	Full Year
		Sep 16 $M Sep 15 $M Movt 151 141 7% (6) 5 large 110 97 13%




Wealth Australia	128 127 1%	255 243 5%
Life Insurance Planned profit margin Individual Experience profit/(loss)1	20 20 0% 9 4 large	40 47 -15% 13 6 large


New Zealand	29 24 21%	53 53 0%
Total	157 151 4%	308 296 4%

1. Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan, predominantly driven by lapses, claims and expenses.

Insurance annual in-force premiums Group Individual2 General Insurance3	As at Sep 16 $M Mar 16 $M Sep 15 $M 445 439 423 1,339 1,297 1,284 226 335 510	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 1% 5% 3% 4% -33% -56%
Total	2,010 2,071 2,217	-3% -9%
Insurance in-force book movement Group Individual2 General Insurance3	Sep 15 $M New business $M1 423 54 1,284 205 510 85	Lapses $M Sep 16 $M (32) 445 (150) 1,339 (369) 226
Total	2,217 344	(551) 2,010

1. New business includes the impact of foreign currency gains/ (losses) on translation.

Lapses for Individual include the impact of the disposal of the New Zealand medical business in the March 2016 half.

Lapses for General Insurance and Wealth Australia include the impact of ceasing the underwriting new home, content, travel and motor insurance in September 15.

119

SUPPLEMENTARY INFORMATION

Funds management and insurance income analysis (Group) (cont’d)

Funds under management Funds under management - average Funds under management - end of period	As at Sep 16 $M Mar 16 $M Sep 15 $M 74,347 71,313 71,198 75,918 71,216 69,542	Movement
		Sep 16 v. Mar 16 Sep 16 v. Sep 15 4% 4% 7% 9%
Composed of: Australian equities International equities Cash and fixed interest Property and infrastructure	16,963 15,988 16,093 18,422 16,784 17,210 35,800 33,979 32,206 4,733 4,465 4,033	6% 5% 10% 7% 5% 11% 6% 17%
Total	75,918 71,216 69,542	7% 9%
Funds Management cash flows by product Wealth Australia Division Open Solutions OneAnswer Frontier ANZ Smart Choice Wrap (Voyage and Grow) Closed Solutions Retail Employer Australia Division Private Bank New Zealand Division KiwiSaver Retail Private Bank Bonus Bonds Other New Zealand	Sep 15 In- Out- $M flows flows 8,677 1,598 (1,084) 4,254 2,378 (1,010) 1,708 542 (210) 20,223 857 (2,837) 11,939 224 (1,450) 2,073 634 (346) 6,825 1,589 (526) 2,210 3,034 (2,806) 5,471 1,160 (734) 2,979 1,180 (906) 3,183 849 (934)	Other1 Sep 16 $M 767 9,958 5,568 11,190 120 2,160 785 19,028 (4,798) 5,915 50 2,411 976 8,864 303 2,741 785 6,682 144 3,397 474 3,572
Total	69,542 14,045 (12,843)	5,174 75,918

1. Other includes investment income net of taxes, fees and charges, distributions and the impact of foreign currency translations. It also includes the transition of funds under management from Employer Super to ANZ Smart Choice of approximately $5 billion, as a result of regulatory changes in the industry.

	Wealth Australia	New Zealand	Total
Embedded value and value of new business (insurance and investments only)	$M	$M	$M
Embedded value as at September 20151	4,012	554	4,566
Value of new business2	131	28	159
Expected return3	317	50	367
Experience deviations and assumption changes4	8	9	17
Embedded value before economic assumption changes and net transfer	4,468	641	5,109
Economic assumptions change5	37	66	103
Net transfer6	31	(91)	(60)
Embedded value as at September 2016	4,536	616	5,152

Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period. 3.

Expected return represents the expected increase in value over the period.

Interest rate movements have led to a positive value impact.

Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends and value of franking credits. For Wealth Australia there was a $400 million capital injection from the parent entity, partially offset by $273 million of cash dividends and $96 million of franking credits transferred to the parent entity. For New Zealand there were $91 million of cash dividends.

120

SUPPLEMENTARY INFORMATION

Select geographical disclosures

Asia Pacific, Europe & America geography
AUD M		Europe &		APEA
	Asia	America	Pacific	Total
September 2016 Full Year
Statutory profit	297	183	161	641
Cash profit	299	206	161	666
Net loans and advances	54,303	8,441	3,636	66,380
Customer deposits	60,634	48,138	5,491	114,263
Risk weighted assets	59,130	21,698	7,725	88,553
September 2015 Full Year
Statutory profit	909	142	161	1,212
Cash profit	909	165	161	1,235
Net loans and advances	73,236	7,697	4,129	85,062
Customer deposits	73,495	50,129	5,639	129,263
Risk weighted assets	76,295	25,956	7,591	109,842
September 2016 Half Year
Statutory profit	218	119	67	404
Cash profit	220	120	67	407
Net loans and advances	54,303	8,441	3,636	66,380
Customer deposits	60,634	48,138	5,491	114,263
Risk weighted assets	59,130	21,698	7,725	88,553
March 2016 Half Year
Statutory profit	79	64	94	237
Cash profit	79	86	94	259
Net loans and advances	57,532	7,882	3,726	69,140
Customer deposits	64,412	49,888	5,404	119,704
Risk weighted assets	64,112	24,212	7,546	95,870

New Zealand geography (in NZD) Net interest income Other operating income	Half Year Sep 16 NZD M Mar 16 NZD M Movt 1,536 1,493 3% 393 402 -2%	Full Year
		Sep 16 NZD M Sep 15 NZD M Movt 3,029 2,880 5% 795 1,005 -21%
Operating income Operating expenses	1,929 1,895 2% (765) (815) -6%	3,824 3,885 -2% (1,580) (1,478) 7%
Profit before credit impairment and income tax Credit impairment (charge)/release	1,164 1,080 8% (99) (50) 98%	2,244 2,407 -7% (149) (76) 96%
Profit before income tax Income tax expense and non-controlling interests	1,065 1,030 3% (287) (279) 3%	2,095 2,331 -10% (566) (644) -12%
Cash profit Adjustments between statutory profit and cash profit	778 751 4% 1 12 -92%	1,529 1,687 -9% 13 84 -85%
Statutory profit	779 763 2%	1,542 1,771 -13%
Individual credit impairment charge/(release) - cash Collective credit impairment charge/(release) - cash Net loans and advances Customer deposits Risk weighted assets Total full time equivalent staff (FTE)	88 50 76% 11 - n/a 120,651 117,470 3% 91,360 90,148 1% 76,005 74,537 2% 7,869 8,063 -2%	138 73 89% 11 3 large 120,651 114,376 5% 91,360 84,870 8% 76,005 74,008 3% 7,869 8,104 -3%

121

SUPPLEMENTARY INFORMATION

Full time equivalent staff

At 30 September 2016, ANZ employed 46,554 people worldwide (Mar 16: 48,896; Sep 15: 50,152) on a full-time equivalent basis ("FTEs").

Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Sep 16 Mar 16 Movt 8,864 9,198 -4% 3,640 4,044 -10% 5,240 5,321 -2% 1,379 1,436 -4% 2,925 3,368 -13% 24,506 25,529 -4%	Full Year
		Sep-16 Sep 15 Movt 8,864 9,161 -3% 3,640 4,218 -14% 5,240 5,359 -2% 1,379 1,532 -10% 2,925 3,518 -17% 24,506 26,364 -7%
Total	46,554 48,896 -5%	46,554 50,152 -7%
Average FTE	47,489 49,777 -5%	48,633 50,953 -5%

Exchange rates

Major exchange rates used in the translation of foreign subsidiaries, branches, investments in associates and issued debt are as follows:

Chinese Renminbi Euro Pound Sterling Indian Rupee Indonesian Rupiah Japanese Yen Malaysian Ringgit New Taiwan Dollar New Zealand Dollar Papua New Guinean Kina United States Dollar	Balance sheet As at Sep 16 Mar 16 Sep 15 5.0809 4.9471 4.4573 0.6789 0.6760 0.6229 0.5874 0.5335 0.4625 50.764 50.741 46.142 9,900 10,164 10,281 76.844 85.951 84.072 3.1576 3.0015 3.1176 23.895 24.640 23.066 1.0487 1.1093 1.1003 2.4143 2.3724 2.0123 0.7617 0.7651 0.7013	Profit & Loss Average	Profit & Loss Average
		Half Year Sep 16 Mar 16 4.9507 4.6622 0.6694 0.6558 0.5432 0.4886 50.258 48.101 9,939 9,835 78.750 85.328 3.0295 3.0565 24.100 23.708 1.0640 1.0834 2.3648 2.1565 0.7510 0.7212	Full Year
			Sep 16 Sep 15 4.8064 4.8803 0.6626 0.6838 0.5159 0.5074 49.179 49.522 9,887 10,199 82.039 93.515 3.0430 2.8761 23.904 24.543 1.0737 1.0785 2.2606 2.0940 0.7361 0.7839

122

DEFINITIONS

AASB – Australian Accounting Standards Board. The term “AASB” is commonly used when identifying Australian Accounting Standards issued by the AASB.

ADI – Authorised Deposit-taking Institution.

APRA – Australian Prudential Regulation Authority.

APS – ADI Prudential Standard.

BCBS – Basel Committee on Banking Supervision.

Cash and cash equivalents comprise coins, notes, money at call, balances held with central banks, liquid settlement balances (readily convertible to known amounts of cash which are subject to insignificant risk of changes in value) and securities purchased under agreements to resell (“reverse repos”) in less than three months.

Cash profit is an additional measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit as noted below. These items are calculated consistently period on period so as not to discriminate between positive and negative adjustments.

Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories:

gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group;
treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences that will reverse through earnings in the future; and
accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up.

Cash profit is not a measure of cash flow or profit determined on a cash accounting basis.

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

Credit risk is the risk of financial loss resulting from the failure of ANZ’s customers and counterparties to honour or perform fully the terms of a loan or contract.

Credit risk weighted assets represent assets which are weighted for credit risk according to a set formula (APS 112/113).

Derivative credit valuation adjustment (CVA) – Over the life of a derivative instrument, ANZ uses a CVA model to adjust fair value to take into account the impact of counterparty credit quality. The methodology calculates the present value of expected losses over the life of the financial instrument as a function of probability of default, loss given default, expected credit risk exposure and an asset correlation factor. Impaired derivatives are also subject to a CVA.

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

Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company, adjusted for the amount of preference share dividends paid.

Gross loans and advances (GLA) is made up of loans and advances, acceptances and capitalised brokerage/mortgage origination fees less unearned income.

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 loans comprise drawn facilities where the customer’s status is defined as impaired.

Individual provision 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.

Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates on ANZ’s future net interest income. The risk generally arises from:

Repricing and yield curve risk - the risk to earnings or market value as a result of changes in the overall level of interest rates and/or the relativity of these rates across the yield curve;
Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking book items; and
Optionality risk - the risk to earnings or market value arising from the existence of stand-alone or embedded options in banking book items.

Internationally comparable ratios are ANZ’s interpretation of the regulations documented in the Basel Committee publications; “Basel 3: A global regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006). They also include differences identified in APRA’s information paper entitled International Capital Comparison Study (13 July 2015).

Net interest margin (NIM) is net interest income as a percentage of average interest earning assets.

Net loans and advances represent gross loans and advances less provisions for credit impairment.

Net tangible assets equal share capital and reserves attributable to shareholders of the Company less preference share capital and unamortised intangible assets (including goodwill and software).

Operating expenses include personnel expenses, premises expenses, technology expenses, restructuring expenses, and other operating expenses (excluding credit impairment charges).

123

DEFINITIONS

Operating income includes net interest income, net fee and commission income, net funds management and insurance income, share of associates’ profit and other income.

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.

Return on average assets is the profit attributable to shareholders of the Company, adjusted for the amount of preference share dividends paid, divided by average total assets.

Return on average ordinary shareholders’ equity is the profit attributable to shareholders of the Company, adjusted for the amount of preference share dividends paid, divided by average ordinary shareholders’ equity.

Regulatory deposits are mandatory reserve deposits lodged with local central banks in accordance with statutory requirements.

Risk weighted assets (RWA) – Assets (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default and what the likely losses would be in the case of default. In the case of non asset backed risks (i.e. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5.

Settlement balances owed to / by ANZ represent financial assets and/or liabilities which are in the course of being settled. These may include trade dated assets and liabilities, nostro / vostro accounts and securities settlement accounts.

124

DEFINITIONS

Description of divisions

The Group operates on a divisional structure with six divisions: Australia, Institutional, New Zealand, Wealth Australia, Asia Retail & Pacific and Technology Services & Operations (“TSO”) and Group Centre. This divisional structure reflects the changes announced by the Group in March 2016 relating to the former Global Wealth division. These changes included repositioning the New Zealand funds management and insurance businesses to the New Zealand division as well as reorganising the Private Bank business along geographic lines under the Australia, New Zealand and Asia Retail & Pacific divisions. The residual Global Wealth business has been renamed Wealth Australia.

In addition, certain structured finance businesses within Markets and Transaction Banking were transferred across to Loans & Specialised Finance during the September 2016 half.

The TSO organisational changes announced in September 2016 will take effect from 1 October 2016.

Australia

The Australia division comprises the Retail and Corporate & Commercial Banking (C&CB) business units.

Retail provides products and services to consumer and private banking customers in Australia via the branch network, mortgage specialists, the contact centre and a variety of self-service channels (internet banking, phone banking, ATMs, website and digital banking).
C&CB provides a full range of banking services including traditional relationship banking and sophisticated financial solutions, including asset financing through dedicated managers focusing on privately owned small, medium and large enterprises as well as the agricultural business segment.

Institutional

The Institutional division services global institutional and business customers located in Australia, New Zealand, Asia, Europe, America, Papua New Guinea and the Middle East across three product sets: Transaction Banking, Loans & Specialised Finance and Markets.

Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing as well as cash management solutions, deposits, payments and clearing.
Loans & Specialised Finance provides specialised loan structuring and execution, loan syndication, project and export finance, debt structuring and acquisition finance, structured asset finance, structured trade finance and corporate advisory.
Markets provides risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets and wealth solutions in addition to managing the Group’s interest rate exposure and liquidity position.

New Zealand

The New Zealand division comprises the Retail and Commercial business units.

Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact centres.
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions (including asset financing) through dedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment.

Wealth Australia

The Wealth Australia division comprises the Insurance and Funds Management business units, which provide insurance, investment and superannuation solutions intended to make it easier for customers to connect with, protect and grow their wealth.

Insurance includes life insurance, general insurance and ANZ Lenders Mortgage Insurance.
Funds Management includes the Pensions and Investments business and ANZ Share Investing.

Asia Retail & Pacific

The Asia Retail & Pacific division comprises the Asia Retail and Pacific business units, connecting customers to specialists for their banking needs.

Asia Retail provides general banking and wealth management services to affluent and emerging affluent retail customers across nine Asian countries via relationship managers, branches, contact centres and a variety of self-service digital channels (internet and mobile banking, phone and ATMs). Core products offered include deposits, credit cards, loans, investments and insurance.
Pacific provides products and services to retail customers, small to medium-sized enterprises, institutional customers and Governments located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticated financial solutions provided to business customers through dedicated managers.

Technology, Services & Operations and Group Centre

TSO and Group Centre provide support to the operating divisions, including technology, operations, shared services, property, risk management, financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes Group Treasury, Shareholder Functions and minority investments in Asia. The TSO organisational changes announced in September 2016 will take effect from 1 October 2016.

125

ASX APPENDIX 4E – CROSS REFERENCE INDEX

Page Details of the reporting period and the previous corresponding period (4E Item 1) ................................................................................................................ 2 Results for Announcement to the Market (4E Item 2) ............................................................................................................................................................ 2 Statement of Comprehensive Income (4E Item 3) ......................................................................................................................................................... 90, 91 Statement of Financial Position (4E Item 4) ......................................................................................................................................................................... 92 Statement of Cash Flows (4E Item 5) .................................................................................................................................................................................. 93 Statement of Changes in Equity (4E Item 6) ........................................................................................................................................................................ 94 Dividends and dividend dates (4E Item 7) .............................................................................................................................................................................. 2 Dividend Reinvestment Plan (4E Item 8) ............................................................................................................................................................................... 2 Net Tangible Assets per security (4E Item 9) ....................................................................................................................................................................... 14 Details of entities over which control has been gained or lost (4E Item 10) ....................................................................................................................... 107 Details of associates and joint venture entities (4E Item 11) .............................................................................................................................................. 107 Other significant information (4E Item 12) .......................................................................................................................................................................... 108 Accounting standards used by foreign entities (4E Item 13) .............................................................................................................................. Not applicable Commentary on results (4E Item 14) ................................................................................................................................................................................... 25 Statement that accounts are being audited (4E Item 15) ....................................................................................................................................................... 3

126

ALPHABETICAL INDEX

PAGE

Appendix 4E Cross Reference Index ................................................................................................................................................................................. 126 Appendix 4E Statement ......................................................................................................................................................................................................... 2 Average Balance Sheet and Related Interest .................................................................................................................................................................... 114 Basis of Preparation ............................................................................................................................................................................................................. 95 Capital Management .......................................................................................................................................................................................................... 110 Changes in Composition of the Group ............................................................................................................................................................................... 107 Condensed Consolidated Balance Sheet ............................................................................................................................................................................. 92 Condensed Consolidated Cash Flow Statement .................................................................................................................................................................. 93 Condensed Consolidated Income Statement ....................................................................................................................................................................... 90 Condensed Consolidated Statement of Changes in Equity .................................................................................................................................................. 94 Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 91 Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 107 Definitions .......................................................................................................................................................................................................................... 123 Deposits and Other Borrowings ......................................................................................................................................................................................... 104 Dividends ........................................................................................................................................................................................................................... 100 Divisional Results ................................................................................................................................................................................................................. 53 Earnings Per Share ............................................................................................................................................................................................................ 101 Exchange Rates ................................................................................................................................................................................................................. 122 Full Time Equivalent Staff .................................................................................................................................................................................................. 122 Funds Management and Insurance Income Analysis (Group) ........................................................................................................................................... 119 Group Results ...................................................................................................................................................................................................................... 25 Income Tax Expense ........................................................................................................................................................................................................... 99 Income ................................................................................................................................................................................................................................. 97 Investments In Associates.................................................................................................................................................................................................. 107 Net Loans and Advances ................................................................................................................................................................................................... 102 News Release ........................................................................................................................................................................................................................ 7 Note to the Cash Flow Statement ...................................................................................................................................................................................... 101 Operating Expenses ............................................................................................................................................................................................................. 98 Profit Reconciliation ............................................................................................................................................................................................................. 83 Provision for Credit Impairment .......................................................................................................................................................................................... 103 Select Geographical Disclosures ....................................................................................................................................................................................... 121 Shareholders’ Equity .......................................................................................................................................................................................................... 105 Strategic Review .................................................................................................................................................................................................................. 21 Subsequent Events since Balance Date ............................................................................................................................................................................ 108 Summary .............................................................................................................................................................................................................................. 11

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AI assistant

Australia and New Zealand Banking Group Ltd. — Earnings Release 2016

10425_rns_2016-11-02_079e338e-8b13-4fac-9f3f-6931da6f1d43.pdf

Australia and New Zealand Banking Group Limited

Dividend Reinvestment Plan and Bonus Option Plan

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4E

News Release

ANZ reports 2016 Full Year Result

Wealth and Asia Retail & Wealth

Capital and Dividend

Specified Items

Credit Quality

Outlook

Footnotes:

CONTENTS

Summary

SUMMARY

Statutory Profit Results

SUMMARY

SUMMARY

Cash Profit Results – FX Adjusted

SUMMARY

Cash Profit Results – Adjusted Pro-forma

 Software capitalisation changes

 Asian minority investments adjustments

 Restructuring

 Esanda Dealer Finance divestment

 Derivative CVA methodology change

SUMMARY

Other Non-financial Information

Our Purpose

Our Vision

Strategy

Strategic Progress

STRATEGIC REVIEW

Financial Performance

Strategic Priorities & Outlook[3]

STRATEGIC REVIEW

CONTENTS

Group Results

Non-IFRS information

Cash profit

The Group Results section is reported on a cash profit basis.

GROUP RESULTS

Group Cash Profit – September 2016 Full Year v September 2015 Full Year

GROUP RESULTS

Net interest income

Group net interest margin – September 2016 Full Year v September 2015 Full Year

Net interest margin (-4 bps)

GROUP RESULTS

Average interest earning assets (+$37.1 billion or +5%)

Average deposits and other borrowings (+$26.7 billion or +5%)

Group net interest margin – September 2016 Half Year v March 2016 Half Year

Net interest margin (-1 bps)

Average interest earning assets (-$0.5 billion or 0%)

Average deposits and other borrowings (-$1.6 billion or 0%)

GROUP RESULTS

Other operating income

Other operating income – September 2016 Full Year v September 2015 Full Year

GROUP RESULTS

Net fee and commission income

Net funds management and insurance income

Markets operating income

Share of associates’ profit

Net foreign exchange earnings

Other

GROUP RESULTS

Net fee and commission income

Net funds management and insurance income

Markets operating income

Share of associates’ profit

Net foreign exchange earnings

Other

GROUP RESULTS

Operating Expenses

Operating expenses – September 2016 Full Year v September 2015 Full Year

GROUP RESULTS

GROUP RESULTS

Technology infrastructure spend

 September 2016 v September 2015

Australia and New Zealand Banking Group Ltd. Earnings Release 2016