Australia and New Zealand Banking Group Ltd. — Environmental & Social Information 2012

Feb 16, 2012

ANZ Basel II Pillar 3 disclosure December 2011 + 2011 BASEL II PILLAR 3 DISCLOSURE

QUARTER ENDED 31 DECEMBER 2011 APS 330: CAPITAL ADEQUACY & RISK MANAGEMENT IN ANZ

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Important notice

This document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meet its disclosure obligations under the Australian Prudential Regulation Authority (APRA) APS 330 Capital Adequacy: Public Disclosure of Prudential Information.

This disclosure was prepared as at 31 December 2011. ANZ has a continuous disclosure policy, under which ANZ will immediately notify the market of any material price sensitive information concerning the Group, in accordance with legislative and regulatory disclosure requirements.

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ANZ Basel II Pillar 3 disclosure

December 2011

Scope of application

Top corporate entity

The top corporate entity in the reporting group is Australia and New Zealand Banking Group Limited.

Table 16 Capital adequacy - Capital ratios and Risk Weighted Assets[1][2]

		Dec 11	Sep 11	Jun 11
Risk	weighted assets	$M	$M	$M
Subject to Advanced Internal Rating Based (IRB) approach
Corporate		102,726	106,120	99,938
Sovereign		4,843	4,365	3,756
Bank		10,049	9,456	7,938
Residential Mortgage		41,798	41,041	41,271
Qualifying Revolving Retail		7,612	7,468	7,525
Other Retail		19,455	19,240	18,799
Credit risk weighted assets subject to Advanced IRB approach		186,483	187,690	179,227
Credit risk Specialised Lending exposures subject to slotting approach		28,545	27,757	27,740
Subject to Standardised approach
Corporate		25,513	22,832	20,097
Residential Mortgage		1,380	1,457	1,283
Qualifying Revolving Retail		1,968	2,111	1,986
Other Retail		1,170	923	766
Credit risk weighted assets subject to Standardised approach		30,031	27,323	24,132
Credit risk weighted assets relating to securitisation exposures		1,156	1,136	1,247
Credit risk weighted assets relating to equity exposures		1,259	1,399	1,218
Other assets		3,740	3,523	4,100
Total credit risk weighted assets		251,214	248,828	237,664
Market risk weighted assets		2,800	3,046	3,291
Operational risk weighted assets		19,415	19,651	18,448
Interest rate risk in the banking book (IRRBB) risk weighted assets		9,597	8,439	9,027
Total risk weighted assets		283,026	279,964	268,430
Capital ratios (%)
Level	2 Total capital ratio	12.0%	12.1%	11.8%
Level	2 Tier 1 capital ratio	11.0%	10.9%	10.6%

Credit Risk Weighted Assets (CRWA)

Total CRWA increased by $2.4 billion (1.0%) from September 2011 to $251.2 billion. The key impacts on CRWA were an increase of $2.7 billion (9.9%) in Standardised assets driven by growth in Asian assets, and an increase of $0.8 billion (1.8%) in IRB Residential Mortgages driven by growth in the Australian business. Offsetting these increases was a decrease of $3.4 billion (3.2%) in IRB Corporate due to exchange rate impacts, methodology and credit risk changes.

Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)

The first quarter Market RWA was down 8.1% to $2.8 billion. This was driven by a decrease in VaR and a decrease in commodity standard model risk. IRRBB RWA increased over the quarter to $9.6 billion due to greater repricing and yield curve risk.

1 Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing and repayment is from the asset being financed, and includes specified commercial property development / investment lending, project finance and object finance.

2 Some prior period comparatives have been restated to reflect reclassification between asset classes.

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ANZ Basel II Pillar 3 disclosure

December 2011

Table 17 Credit risk exposures

Table 17(a): Period end and average Exposure at Default[3 4 5]

			Dec 11
			Average	Individual
	Risk		Exposure	provision	Write-offs
	Weighted	Exposure	at Default for	charge for	for three
	Assets	at Default	three months	three months	months
Advanced IRB approach	$M	$M	$M	$M	$M
Corporate	102,726	175,039	174,142	101	126
Sovereign	4,843	57,014	54,777	-	-
Bank	10,049	42,845	42,577	-	-
Residential Mortgage	41,798	237,562	236,222	18	23
Qualifying Revolving Retail	7,612	21,314	21,267	62	74
Other Retail	19,455	29,486	29,525	50	84
Total Advanced IRB approach	186,483	563,260	558,510	231	307
Specialised Lending	28,545	31,456	31,189	77	35
Standardised approach
Corporate	25,513	24,850	23,847	(9)	2
Residential Mortgage	1,380	2,945	2,850	1	-
Qualifying Revolving Retail	1,968	1,958	2,030	14	18
Other Retail	1,170	1,146	1,021	(21)	7
Total Standardised approach	30,031	30,899	29,748	(15)	27
Total	245,059	625,615	619,447	293	369

3 Exposure at Default in Table 17(a) includes Advanced IRB, Specialised Lending and Standardised exposures, however does not include Securitisation, Equities or Other Assets exposures. Exposure at Default in Table 17(a) is net of credit risk mitigation such as guarantees, credit derivatives, netting and financial collateral.

4 Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each three month period.

5 Some prior period comparatives have been restated to reflect reclassification between asset classes.

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ANZ Basel II Pillar 3 disclosure

December 2011

			Sep 11
			Average	Individual
	Risk		Exposure	provision	Write-offs
	Weighted	Exposure	at Default for	charge for	for three
	Assets	at Default	three months	three months	months
Advanced IRB approach	$M	$M	$M	$M	$M
Corporate	106,120	173,245	167,277	59	100
Sovereign	4,365	52,540	48,962	-	-
Bank	9,456	42,308	40,161	19	-
Residential Mortgage	41,041	234,882	232,919	20	28
Qualifying Revolving Retail	7,468	21,219	21,158	63	78
Other Retail	19,240	29,563	29,281	66	97
Total Advanced IRB approach	187,690	553,757	539,758	227	303
Specialised Lending	27,757	30,921	30,914	42	45
Standardised approach
Corporate	22,832	22,844	21,474	(8)	13
Residential Mortgage	1,457	2,754	2,459	4	5
Qualifying Revolving Retail	2,111	2,101	2,044	14	23
Other Retail	923	895	816	(3)	14
Total Standardised approach	27,323	28,594	26,793	7	55
Total	242,770	613,272	597,465	276	403

			Jun 11
			Average	Individual
	Risk		Exposure	provision	Write-offs
	Weighted	Exposure	at Default for	charge for	for three
	Assets	at Default	three months	three months	months
**Advanced IRBapproach **	$M	$M	$M	$M	$M
Corporate	99,938	161,308	160,110	91	51
Sovereign	3,756	45,384	41,180	-	-
Bank	7,938	38,013	36,494	13	-
Residential Mortgage	41,271	230,956	228,807	21	16
Qualifying Revolving Retail	7,525	21,096	21,058	67	76
Other Retail	18,799	28,999	28,769	84	76
Total Advanced IRB approach	179,227	525,756	516,418	276	219
Specialised Lending	27,740	30,907	30,057	43	69
Standardised approach
Corporate	20,097	20,103	20,626	14	3
Residential Mortgage	1,283	2,164	2,054	3	1
Qualifying Revolving Retail	1,986	1,986	1,995	13	18
Other Retail	766	737	657	(5)	5
Total Standardised approach	24,132	24,990	25,332	25	27
Total	231,099	581,653	571,807	344	315

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ANZ Basel II Pillar 3 disclosure

December 2011

Table 17(b): Impaired assets, Past due loans, Provisions and Write-offs[6 7 8 9]

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			Dec		11
						Individual
		Impaired	Past due	Individual		provision	Write-offs
	Impaired	loans/	loans ≥		provision	charge for	for three
	derivatives	facilities	90 days		balance	three months	months
	$M	$M	$M		$M	$M	$M
Portfolios subject to Advanced	IRB approach
Corporate	67	2,924	252		553	101	126
Sovereign	-	-	-		-	-	-
Bank	-	80	-		51	-	-
Residential Mortgage	-	540	1,068		175	18	23
Qualifying Revolving Retail	-	-	84		-	62	74
Other Retail	-	304	140		187	50	84
Total Advanced IRB approach	67	3,848	1,544		966	231	307
Specialised Lending	11	976	61		256	77	35
Portfolios subject to Standardised approach
Corporate	-	387	120		178	(9)	2
Residential Mortgage	-	23	4		15	1	-
Qualifying Revolving Retail	-	84	25		83	14	18
Other Retail	-	120	14		85	(21)	7
Total Standardised approach	-	614	163		361	(15)	27
Total	78	5,438	1,768		1,583	293	369

6 Impaired derivatives include a credit valuation adjustment (CVA) of $47 million, being a market value based assessment of the credit risk of the relevant counterparties (September 2011: $68 million; June 2011: $72 million).

7 Impaired loans / facilities include restructured items of $884 million for customer 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 2011: $700 million; June 2011: $659 million).

8 Past due loans ≥ 90 days includes $1,533 million well secured loans (September 2011: $1,593 million; June 2011: $1,971 million).

9 Some prior period comparatives have been restated to reflect reclassification between asset classes.

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ANZ Basel II Pillar 3 disclosure

December 2011

			Sep 11	Sep 11
Impaired derivatives $M Impaired loans/ facilities $M			Past due loans ≥ 90 days $M	Individual provision balance $M	Individual provision charge for three months $M	Write-offs for three months $M
Portfolios subject to Advanced IRB approach
Corporate 25		2,767	206	611	59	100
Sovereign -		-	-	-	-	-
Bank -		83	-	53	19	-
Residential Mortgage -		599	1,150	189	20	28
Qualifying Revolving Retail -		-	86	-	63	78
Other Retail -		341	153	210	66	97
Total Advanced IRB approach 25		3,790	1,595	1,063	227	303
Specialised Lending 13		1,106	75	225	42	45
Portfolios subject to Standardised approach
Corporate	-	401	120	191	(8)	13
Residential Mortgage	-	20	4	14	4	5
Qualifying Revolving Retail	-	91	27	91	14	23
Other Retail	-	135	13	113	(3)	14
Total Standardised approach	-	647	164	409	7	55
Total	38	5,543	1,834	1,697	276	403

							Jun 11
							Past due loans ≥ 90 days $M Individual provision balance $M		Individual		Write-offs for three months $M
					Impaired				provision
			Impaired		loans/				charge for
			derivatives		facilities				three months
			$M		$M				$M
	Portfolios subject to Advanced IRB approach
	Corporate 25				2,907		243 615		91		51
	Sovereign -				-		- -		-		-
	Bank -				76		- 29		13		-
	Residential Mortgage -				594		1,312 190		21		16
	Qualifying Revolving Retail -				-		102 -		67		76
	Other Retail -				372		173 239		84		76
	Total Advanced IRB approach 25				3,949		1,830 1,073		276		219
	Specialised Lending 18				1,303		100 229		43		69
	Portfolios subject to Standardised approach
	Corporate -				414		153 204		14		3
	Residential Mortgage -				20		4 10		3		1
	Qualifying Revolving Retail -				90		25 90		13		18
	Other Retail -				142		16 116		(5)		5
	Total Standardised approach -				666		198 420		25		27
	Total 43				5,918		2,128 1,722		344		315

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ANZ Basel II Pillar 3 disclosure

December 2011

Table 17(c): Specific Provision Balance and General Reserve for Credit Losses[10]

		Dec 11
	Specific Provision	General Reserve
	Balance	for Credit Losses	Total
	$M	$M	$M
Collective Provision	365	2,716	3,081
Individual Provision	1,583	-	1,583
Total Provision for Credit Impairment			4,664
		Sep 11
	Specific Provision	General Reserve
	Balance	for Credit Losses	Total
	$M	$M	$M
Collective Provision	375	2,801	3,176
Individual Provision	1,697	-	1,697
Total Provision for Credit Impairment			4,873
		Jun 11
	Specific Provision	General Reserve
	Balance	for Credit Losses	Total
	$M	$M	$M
Collective Provision	347	2,837	3,184
Individual Provision	1,722	-	1,722
Total Provision for Credit Impairment			4,906

10 Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective Provision for accounting purposes and the Specific Provision and General Reserve for Credit Losses (GRCL) for regulatory purposes. This does not impact total provisions, and essentially relates to the classification of collectively assessed provisions on defaulted accounts. The disclosures in this document are based on Individual Provision and Collective Provision, for ease of comparison with other published results.

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ANZ Basel II Pillar 3 disclosure

December 2011

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ANZ Basel II Pillar 3 disclosure

December 2011

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