Australia and New Zealand Banking Group Ltd. — Interim / Quarterly Report 2012

May 14, 2012

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ANZ National Bank Limited Disclosure Statement

FOR THE SIX MONTHS ENDED 31 MARCH 2012 | NUMBER 65 ISSUED MAY 2012

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ANZ National Bank Limited

Disclosure Statement

For the six months ended 31 March 2012

Contents

General Disclosures 2

Income Statement and Statement of Comprehensive Income 3 Statement of Changes in Equity 4 Balance Sheet 5 Condensed Cash Flow Statement 6 Notes to the Financial Statements 7 Directors’ Statement 26 Auditors’ Report 27

Glossary of Terms

In this Disclosure Statement unless the context otherwise requires:

• (a) “Bank” means ANZ National Bank Limited;

• (b) “Banking Group” means ANZ National Bank Limited and all its controlled entities;

• (c) “Immediate Parent Company” means ANZ Holdings (New Zealand) Limited;

• (d) “Ultimate Parent Bank” means Australia and New Zealand Banking Group Limited;

• (e) “Overseas Banking Group” means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled entities;

• (f) “New Zealand business” means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it were conducted by a company formed and registered in New Zealand;

• (g) “NZ Branch” means the New Zealand business of the Ultimate Parent Bank;

• (h) “ANZ New Zealand” means the New Zealand business of the Overseas Banking Group;

• (i) “Registered Office” is Level 10, 170-186 Featherston Street, Wellington 6011, New Zealand, which is also the Banking Group’s address for service;

• (j) “RBNZ” means the Reserve Bank of New Zealand;

• (k) “APRA” means the Australian Prudential Regulation Authority;

• (l) “the Order” means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2012; and

• (m) Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by the Order.

ANZ National Bank Limited

General Disclosures

This Disclosure Statement has been issued in accordance with the Order.

Credit Rating Information

The Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New Zealand in New Zealand dollars.

On 24 February 2012, Fitch changed the Outlook on the Bank’s long-term senior unsecured debt and deposit ratings from negative to stable.

The Bank’s Credit Ratings are:

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Current
Rating Agency Credit Rating Qualifi cation
Standard & Poor’s AA- Outlook Stable
Moody’s Investors Service Aa3 Outlook Stable
Fitch Ratings AA- Outlook Stable
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Guarantors

As at the date of signing of this Disclosure Statement the Bank has debt securities with a carrying value as at 31 March 2012 of $331 million for which the Crown has issued a Guarantee Eligibility Certificate under the New Zealand Wholesale Funding Guarantee Facility (“Crown Wholesale Guarantee”). The Crown closed the Crown Wholesale Guarantee to new debt securities on 30 April 2010. The closure did not affect debt securities previously issued with the benefit of Crown Wholesale Guarantee.

Copies of the Wholesale Deed, and any Guarantee Eligibility Certificate issued by the Crown in respect of the Bank, are available on the Treasury website treasury.govt.nz. The address for service for any demand on the Crown under the Crown Wholesale Guarantee is The Treasurer, New Zealand Debt Management Office, 1 The Terrace, Wellington. Further information on the Crown Wholesale Guarantee is provided in the Disclosure Statement for the year ended 30 September 2011 which is available at no charge:

Certain debt securities (“Covered Bonds”) issued by the Bank or its wholly owned subsidiary, ANZ National (Int’l) Limited, are guaranteed by the ANZNZ Covered Bond Trust Limited, solely in its capacity as trustee of the ANZNZ Covered Bond Trust (the “Covered Bond Guarantor”). The Covered Bond Guarantor has guaranteed the payment of interest and principal of Covered Bonds with a carrying value as at 31 March 2012 of $1,898 million, pursuant to a guarantee which is secured over a pool of assets. The Covered Bond Guarantor’s address for service is Level 10, 141 Willis Street, Wellington, New Zealand. The Covered Bond Guarantor is not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations payable in New Zealand dollars. The Covered Bonds have been assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Details of the pool of assets that secure this guarantee are provided in Note 7.

Other material obligations of the Bank are not guaranteed.

Directorate

As at 11 May 2012 there have been no changes to the Directors of ANZ National Bank Limited since 30 September 2011, the balance date of the last full year Disclosure Statement.

Mr P R Marriott has announced his intention to resign as a Director of ANZ National Bank on 31 May 2012.

Sir Dryden Spring has announced his intention to retire as Director and Chairman of ANZ National Bank Limited on 22 June 2012. Mr J F Judge will take over as Chairman on 23 June 2012.

Auditors

The Banking Group’s auditors are KPMG, Chartered Accountants, Level 9, 10 Customhouse Quay, Wellington, New Zealand.

• a) on the Bank’s websites anz.co.nz and nationalbank.co.nz; and

• b) within two working days of a request, if a request is made at the Registered Office or at any branch of ANZ or The National Bank of New Zealand.

ANZ National Bank Limited

Income Statement

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Unaudited Unaudited Audited
6 months to 6 months to Year to
$ millions Note 31/03/2012 31/03/2011 30/09/2011
Interest income 2,995 3,162 6,179
Interest expense 1,649 1,899 3,620
Net interest income 1,346 1,263 2,559
Net trading gains 79 140 228
Net funds management and insurance income 139 126 265
Other operating income 2 269 141 361
Share of profit of equity accounted associates and jointly controlled entities 1 1 2
Operating income 1,834 1,671 3,415
Operating expenses 2 863 910 1,686
Profit before provision for credit impairment and income tax 971 761 1,729
Provision for credit impairment 6 95 78 178
Profit before income tax 876 683 1,551
Income tax expense 233 192 452
Profit for the period 643 491 1,099
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Statement of Comprehensive Income

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Unaudited Unaudited Audited
6 months to 6 months to Year to
$ millions 31/03/2012 31/03/2011 30/09/2011
Profit for the period 643 491 1,099
Unrealised gains recognised directly in equity 11 7 72
Realised gains transferred to income statement (7) (36) (38)
Actuarial gain / (loss) on defined benefit schemes (2) 8 (64)
Income tax credit on items recognised directly in equity 5 6 11
Total comprehensive income for the period 650 476 1,080
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The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Statement of Changes in Equity

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Available- Total equity
Ordinary for-sale Cash fl ow attributable to Non-
share revaluation hedging Retained owners of the controlling
$ millions capital reserve reserve earnings parent entity entities Total equity
As at 1 October 2010 6,943 58 102 3,342 10,445 1 10,446
Profit after income tax attributable to parent - - - 491 491 - 491
Valuation gain / (losses) recognised in other
- 11 (4) - 7 - 7
comprehensive income
Losses / (gains) transferred to income statement - (42) 6 - (36) - (36)
Actuarial gain on defined benefit schemes - - - 8 8 - 8
Income tax credit / (expense) on items
- 8 - (2) 6 - 6
recognised directly in equity
Total comprehensive income for the period - (23) 2 497 476 - 476
Ordinary dividend paid - - - (430) (430) - (430)
As at 31 March 2011 (Unaudited) 6,943 35 104 3,409 10,491 1 10,492
As at 1 October 2010 6,943 58 102 3,342 10,445 1 10,446
Profit after income tax attributable to parent - - - 1,099 1,099 - 1,099
Valuation gain recognised in other
- 21 51 - 72 - 72
comprehensive income
Losses / (gains) transferred to income statement - (42) 4 - (38) - (38)
Actuarial loss on defined benefit schemes - - - (64) (64) - (64)
Income tax credit / (expense) on items
- 9 (16) 18 11 - 11
recognised directly in equity
Total comprehensive income for the period - (12) 39 1,053 1,080 - 1,080
Ordinary dividend paid - - - (700) (700) - (700)
Movement in non-controlling interests - - - - - (1) (1)
As at 30 September 2011 (Audited) 6,943 46 141 3,695 10,825 - 10,825
Profit after income tax attributable to parent - - - 643 643 - 643
Valuation gain / (losses) recognised in other
- 26 (15) - 11 - 11
comprehensive income
Gains transferred to income statement - - (7) - (7) - (7)
Actuarial loss on defined benefit schemes - - - (2) (2) - (2)
Income tax credit / (expense) on items
- (1) 6 - 5 - 5
recognised directly in equity
Total comprehensive income for the period - 25 (16) 641 650 - 650
Ordinary dividend paid - - - (550) (550) - (550)
As at 31 March 2012 (Unaudited) 6,943 71 125 3,786 10,925 - 10,925
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The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Balance Sheet

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Unaudited Unaudited Audited
$ millions Note 31/03/2012 31/03/2011 30/09/2011
Assets
Liquid assets 2,355 1,799 2,455
Due from other financial institutions 1,958 3,257 3,685
Trading securities 10,904 7,373 9,466
Derivative financial instruments 9,959 9,553 14,160
Current tax assets 76 61 -
Available-for-sale assets 252 793 411
Net loans and advances 4 84,467 85,369 83,610
Investments backing insurance policyholder liabilities 165 82 97
Insurance policy assets 231 169 200
Shares in associates and jointly controlled entities 100 145 100
Other assets 935 1,621 854
Deferred tax assets 91 228 139
Premises and equipment 320 331 325
Goodwill and other intangible assets 3,500 3,532 3,510
Total assets 115,313 114,313 119,012
Interest earning and discount bearing assets 99,210 97,442 98,214
Liabilities
Due to other financial institutions 924 1,651 2,236
Deposits and other borrowings 8 70,914 68,349 69,238
Due to Immediate Parent Company 555 11 174
Derivative financial instruments 10,318 9,795 14,174
Current tax liabilities - - 17
Payables and other liabilities 2,040 2,263 2,645
Provisions 338 377 309
Bonds and notes 17,562 18,948 17,406
Loan capital 1,737 2,427 1,988
Total liabilities 104,388 103,821 108,187
Net assets 10,925 10,492 10,825
Represented by:
Share capital 6,943 6,943 6,943
Reserves 196 139 187
Retained earnings 3,786 3,409 3,695
Parent shareholder’s equity 10,925 10,491 10,825
Non-controlling interests - 1 -
Total equity 10,925 10,492 10,825
Interest and discount bearing liabilities 86,303 86,139 85,728
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The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Condensed Cash Flow Statement

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Unaudited Unaudited Audited
6 months to 6 months to Year to
$ millions 31/03/2012 31/03/2011 30/09/2011
Cash flows from operating activities
Interest received 2,964 3,088 6,074
Interest paid (1,659) (1,842) (3,573)
Other cash inflows provided by operating activities 470 455 913
Other cash outflows used in operating activities (1,094) (996) (1,892)
Cash flows from operating profits before changes in operating assets and liabilities 681 705 1,522
Net changes in operating assets and liabilities (3,215) (1,327) 1,712
Net cash flows provided by / (used in) operating activities (2,534) (622) 3,234
Cash flows from investing activities
Cash inflows provided by investing activities 16 - 69
Cash outflows used in investing activities (38) (62) (119)
Net cash flows used in investing activities (22) (62) (50)
Cash flows from financing activities
Cash inflows provided by financing activities 2,798 3,617 4,172
Cash outflows used in financing activities (2,426) (1,956) (4,793)
Net cash flows provided by / (used in) financing activities 372 1,661 (621)
Net increase / (decrease) in cash and cash equivalents (2,184) 977 2,563
Cash and cash equivalents at beginning of the period 6,140 3,577 3,577
Cash and cash equivalents at end of the period 3,956 4,554 6,140
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The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Notes to the Financial Statements

1. Significant Accounting Policies

(i) Reporting entity and statement of compliance

These financial statements are for the Banking Group for the six months ended 31 March 2012. They have been prepared in accordance with the requirements of NZ IAS 34 Interim Financial Reporting and the Order, and should be read in conjunction with the Banking Group’s financial statements for the year ended 30 September 2011.

(ii) Basis of measurement

These financial statements have been prepared on a going concern basis in accordance with historical cost concepts except that the following assets and liabilities are stated at their fair value:

• derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying exposure;

• financial instruments held for trading;

• financial assets treated as available-for-sale; and

• financial instruments designated at fair value through profit and loss.

Insurance policy assets are measured using the Margin on Services model, and defined benefit obligations are measured using the Projected Unit Credit method.

(iii) Changes in accounting policies

The accounting policies adopted by the Banking Group are consistent with those adopted and disclosed in the previous full year Disclosure Statement.

(iv) Presentation currency and rounding

The amounts contained in the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.

(v) Comparatives

• Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation. This includes reclassifying certain investment assets that relate to the insurance business from due from other financial institutions and available-for-sale assets to investments backing insurance policyholder liabilities to better reflect the purpose for which the assets are held.

(vi) Principles of consolidation

• The financial statements consolidate the financial statements of the Bank and its controlled entities.

2. Other Operating Income and Expenses

Other operating income includes fair value gains of $29 million (31/03/2011 $92 million loss; 30/09/2011 $99 million loss) on the revaluation of financial assets and liabilities designated at fair value and on hedging activities. Other operating income excluding these fair value adjustments is $240 million (31/03/2011 $233 million; 30/09/2011 $460 million).

Operating expenses include costs for the six months ended 31 March 2012 of $84 million (31/03/2011 $141 million; 30/09/2011 $162 million) incurred in relation to the planned move to a single banking technology platform which is expected to deliver further operational efficiencies and improved service levels and business outcomes.

ANZ National Bank Limited

Notes to the Financial Statements

3. Segmental Analysis

For segment reporting purposes, the Banking Group is organised into three major business segments – Retail, Commercial and Institutional. Centralised back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating decision maker, being the Bank’s Chief Executive Officer.

Segmental reporting has been updated to reflect minor changes to the Banking Group’s structure. Comparative data has been adjusted to be consistent with the current period’s segment definitions.

Retail

Retail provides banking products and services to individuals through separate ANZ and The National Bank of New Zealand branded distribution channels. Personal banking customers have access to a wide range of financial services and products. Retail contains the Banking Group’s wealth businesses which include private banking and investment services provided to high net worth individuals, the OnePath wealth management and insurance businesses, and other investment products. This segment also includes other profit centres supporting the Retail segment.

Commercial

Commercial provides services to Business Banking, Commercial & Agri, and UDC customers. Business Banking services are offered to small enterprises (typically with

annual revenues of less than $5 million). Commercial & Agri customers consist of primarily privately owned medium to large enterprises. The Banking Group’s relationship with these businesses ranges from simple banking requirements with revenue from deposit and transactional facilities, and cash flow lending, to more complex funding arrangements with revenue sourced from a wider range of products. UDC is principally involved in the financing and leasing of plant, vehicles and equipment, mainly for small and medium sized businesses, as well as investment products.

Institutional

Institutional provides financial services to large multi-banked corporations, often global, who require sophisticated product and structuring solutions. The Institutional business unit includes the following specialised units:

• Markets – provides foreign exchange, interest rate and commodity trading and sales-related services, origination, underwriting, structuring, risk management and sale of credit and derivative products globally;

• Transaction Banking – provides cash management, trade finance and international payments;

• Global Loans – provides origination, credit analysis, structuring and execution of specific customer transactions.

Other

Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Business segment analysis[1]

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$ millions Retail Commercial Institutional Other [2] Total
Unaudited 6 months to 31/03/2012
External revenues 575 1,393 399 (533) 1,834
Intersegment revenues 107 (654) (67) 614 -
Total revenues 682 739 332 81 1,834
Profit before income tax 238 419 237 (18) 876
Unaudited 6 months to 31/03/2011
External revenues 644 1,495 264 (732) 1,671
Intersegment revenues 46 (751) 45 660 -
Total revenues 690 744 309 (72) 1,671
Profit before income tax 243 432 233 (225) 683
Audited year to 30/09/2011
External revenues 1,225 2,895 613 (1,318) 3,415
Intersegment revenues 118 (1,424) 27 1,279 -
Total revenues 1,343 1,471 640 (39) 3,415
Profit before income tax 436 838 491 (214) 1,551
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1 Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.

• 2 This segment has negative external revenues as this segment incurs funding costs on behalf of the Banking Group and is reimbursed internally.

ANZ National Bank Limited

Notes to the Financial Statements

4. Net Loans and Advances

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Unaudited Unaudited Audited
$ millions Note 31/03/2012 31/03/2011 30/09/2011
Overdrafts 1,986 2,083 1,847
Credit card outstandings 1,410 1,386 1,367
Term loans – housing 44,340 43,948 43,636
Term loans – non-housing 37,321 38,595 37,398
Finance lease receivables 800 749 768
Gross loans and advances 85,857 86,761 85,016
Provision for credit impairment 6 (1,119) (1,264) (1,156)
Unearned finance income (259) (263) (256)
Fair value hedge adjustment (8) 153 22
Deferred fee revenue and expenses (55) (53) (51)
Capitalised brokerage / mortgage origination fees 51 35 35
Total net loans and advances 84,467 85,369 83,610
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The Bank has sold residential mortgages to the NZ Branch with a net carrying value of $9,303 million as at 31 March 2012 (31/03/2011 $9,987 million, 30/09/2011 $9,931 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

5. Impaired Assets, Past Due Assets and Other Assets Under Administration

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Retail Other retail Non retail
$ millions mortgages exposures exposures Total
Unaudited 31/03/2012
Balance at the beginning of the period 451 61 1,194 1,706
Transfers from productive 148 61 341 550
Transfers to productive (28) (1) (92) (121)
Assets realised or loans repaid (176) (26) (243) (445)
Write offs (32) (43) (47) (122)
Total individually impaired assets 363 52 1,153 1,568
Unaudited 31/03/2011
Balance at the beginning of the period 511 81 1,403 1,995
Transfers from productive 242 71 453 766
Transfers to productive (30) - (16) (46)
Assets realised or loans repaid (188) (30) (253) (471)
Write offs (33) (51) (96) (180)
Total individually impaired assets 502 71 1,491 2,064
Audited 30/09/2011
Balance at the beginning of the period 511 81 1,403 1,995
Transfers from productive 442 158 774 1,374
Transfers to productive (77) (1) (101) (179)
Assets realised or loans repaid (356) (71) (691) (1,118)
Write offs (69) (106) (191) (366)
Total individually impaired assets 451 61 1,194 1,706
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ANZ National Bank Limited

Notes to the Financial Statements

Credit quality of financial assets that are past due but not impaired

A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the fair value of associated security should be sufficient to ensure that the Banking Group will recover the entire amount owing over the life of the facility and there is reasonable assurance that collection efforts will result in payment of the amounts due in a timely manner.

Ageing analysis of loans that are past due but not impaired

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Retail Other retail Non retail
$ millions mortgages exposures exposures Total
Unaudited 31/03/2012
1 to 5 days 386 145 525 1,056
6 to 29 days 338 102 77 517
1 to 29 days 724 247 602 1,573
30 to 59 days 180 44 282 506
60 to 89 days 44 19 58 121
90 days or over 100 47 128 275
1,048 357 1,070 2,475
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Other assets under administration

Other assets under administration are any loans, not being impaired or 90 days or more past due, where the customer is in any form of voluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management.

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Retail Other retail Non retail
$ millions mortgages exposures exposures Total
Unaudited 31/03/2012
Other assets under administration - - 9 9
Undrawn facilities with impaired customers - - 28 28
Unaudited 31/03/2011
Other assets under administration - - 12 12
Undrawn facilities with impaired customers - - 46 46
Audited 30/09/2011
Other assets under administration - - 6 6
Undrawn facilities with impaired customers - - 26 26
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ANZ National Bank Limited

Notes to the Financial Statements

6. Provision for Credit Impairment

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Retail Other retail Non retail
$ millions mortgages exposures exposures Total
Unaudited 31/12/2012
Collective provision
Balance at beginning of the period 120 147 395 662
Credit to income statement (12) (20) (8) (40)
Balance at end of the period 108 127 387 622
Individual provision (individually impaired assets)
Balance at beginning of the period 148 37 309 494
Charge to income statement 20 26 89 135
Recoveries of amounts previously written off 1 8 5 14
Bad debts written off (32) (43) (47) (122)
Discount unwind (7) (1) (16) (24)
Balance at end of the period 130 27 340 497
Total provision for credit impairment 238 154 727 1,119
Collective provision credit (12) (20) (8) (40)
Individual provision charge 20 26 89 135
Total charge to income statement 8 6 81 95
Unaudited 31/03/2011
Collective provision
Balance at beginning of the period 111 149 533 793
Charge / (credit) to income statement (5) 1 (62) (66)
Balance at end of the period 106 150 471 727
Individual provision (individually impaired assets)
Balance at beginning of the period 207 51 347 605
Charge to income statement 8 38 98 144
Recoveries of amounts previously written off - 9 1 10
Bad debts written off (33) (51) (96) (180)
Discount unwind (9) (1) (32) (42)
Balance at end of the period 173 46 318 537
Total provision for credit impairment 279 196 789 1,264
Collective provision charge / (credit) (5) 1 (62) (66)
Individual provision charge 8 38 98 144
Total charge to income statement 3 39 36 78
Audited 30/09/2011
Collective provision
Balance at beginning of the year 111 149 533 793
Charge / (credit) to income statement 9 (2) (138) (131)
Balance at end of the year 120 147 395 662
Individual provision (individually impaired assets)
Balance at beginning of the year 207 51 347 605
Charge to income statement 24 79 206 309
Recoveries of amounts previously written off 2 17 3 22
Bad debts written off (69) (106) (191) (366)
Discount unwind (16) (4) (56) (76)
Balance at end of the year 148 37 309 494
Total provision for credit impairment 268 184 704 1,156
Collective provision charge / (credit) 9 (2) (138) (131)
Individual provision charge 24 79 206 309
Total charge to income statement 33 77 68 178
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ANZ National Bank Limited

Notes to the Financial Statements

7. Financial Assets Pledged as Collateral

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Unaudited Unaudited Audited
$ millions 31/03/2012 31/03/2011 30/09/2011
Trading securities encumbered through repurchase agreements 23 396 1,219
Residential mortgages pledged as security for covered bonds 3,831 - -
Total tangible assets of UDC Finance Limited pledged as collateral for secured stock 2,105 2,164 2,007
Total financial assets pledged as collateral 5,959 2,560 3,226
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ANZNZ Covered Bond Trust

The assets of ANZNZ Covered Bond Trust are made up of certain housing loans and related securities originated by the Bank which are security for the guarantee by ANZNZ Covered Bond Trust Limited as trustee of ANZNZ Covered Bond Trust of issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ National (Int’l) Limited, from time to time. The assets of ANZNZ Covered Bond Trust are not available to creditors of the Bank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assets of ANZNZ Covered Bond Trust (if any) after all prior ranking creditors of ANZNZ Covered Bond Trust have been satisfied.

The assets of ANZNZ Covered Bond Trust do not qualify for derecognition from the Banking Group’s financial statements as the Bank retains substantially all of the risks and rewards of the transferred assets.

8. Deposits and Other Borrowings

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Unaudited Unaudited Audited
$ millions Note 31/03/2012 31/03/2011 30/09/2011
Certificates of deposit 2,277 2,666 2,454
Term deposits 33,738 35,678 33,799
Demand deposits bearing interest 23,680 20,095 21,589
Deposits not bearing interest 5,305 5,455 5,118
Secured debenture stock 7 1,456 1,584 1,488
Securities sold under agreement to repurchase - 10 -
Commercial paper 4,458 2,861 4,790
Total deposits and other borrowings 70,914 68,349 69,238
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9. Related Party Transactions

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Unaudited Unaudited Audited
$ millions 31/03/2012 31/03/2011 30/09/2011
Total due from related parties 2,212 3,211 3,000
Total due to related parties 6,839 6,063 8,427
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ANZ National Bank Limited

Notes to the Financial Statements

10. Capital Adequacy

Capital ratios under the Basel II internal models based approach (Unaudited)

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31/03/2012 31/03/2011 30/09/2011
Tier One Capital 10.85% 9.55% 10.02%
RBNZ minimum Tier One Capital ratio 4.00% 4.00% 4.00%
Total Capital 13.39% 12.87% 12.74%
RBNZ minimum Total Capital ratio 8.00% 8.00% 8.00%
Capital as at 31 March 2012 (Unaudited) $m
Tier One Capital
Ordinary share capital 6,943
Revenue and similar reserves 3,339
Current period’s profit after tax 643
Less deductions from Tier One Capital
Goodwill 3,265
Software and other intangible assets 235
Cash flow hedging reserve 125
50% of excess of expected loss over total eligible allowances for impairment 35
Total Tier One Capital 7,265
Tier Two Capital
Upper level – Perpetual subordinated debt 1,172
Lower level – Term subordinated debt 565
Less deductions from Tier Two Capital
50% of expected loss to the extent higher than total eligible allowances for
impairment 35
Total Tier Two Capital 1,702
Total Capital 8,967
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Total required capital as at 31 March 2012 (Unaudited)

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Risk weighted
exposure or implied
Exposure risk weighted Total capital
$ millions at default exposure [1] requirement
Exposures subject to internal ratings based approach 121,249 48,233 3,859
Specialised lending exposures subject to slotting approach 7,508 7,497 600
Exposures subject to standardised approach 264 250 20
Equity exposures 217 922 74
Other exposures 2,721 1,072 86
Total credit risk 131,959 57,974 4,639
Operational risk n/a 5,000 400
Market risk n/a 4,013 321
Total 131,959 66,987 5,360
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1 Total credit risk weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.

The Banking Group previously recorded a Supervisory adjustment to the risk weighted exposures of its residential mortgage portfolio as required under the Conditions of Registration applying at the time. Following RBNZ approval of the Bank’s mortgage capital model this Supervisory adjustment is no longer required.

ANZ National Bank Limited

Notes to the Financial Statements

Bank solo capital adequacy ratios under the Basel I approach (Unaudited)

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31/03/2012 31/03/2011 30/09/2011
Tier One Capital 9.74% 9.26% 9.64%
Total Capital 11.38% 11.60% 11.60%
Total risk-weighted exposures ($millions) 72,708 73,202 72,923
RBNZ minimum ratios:
Tier One Capital 4.00% 4.00% 4.00%
Total Capital 8.00% 8.00% 8.00%
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Basel I capital adequacy for the Bank has been derived in accordance with the RBNZ document entitled ‘Capital Adequacy Framework (Basel I Approach)’ (“BS2”), dated October 2010.

Implementation of the advanced internal ratings based approach to credit risk measurement

The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based (“IRB”) banks in the RBNZ document BS2B.

Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers and exposures, by way of the primary components of:

Probability of Default (“PD”): An estimate of the level of risk of borrower default graded by way of rating models used both at loan origination and for ongoing monitoring.

Exposure at Default (“EAD”): The expected facility exposure at default. Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration; and

Loss Given Default (“LGD”): An estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn LGDs according to loan to value (“LVR”) bands as set out in BS2B. For farm lending exposures the Banking Group is required to adopt RBNZ prescribed downturn LVR based LGDs, along with a minimum maturity of 2.5 years and the removal of the firm-size adjustment.

For exposures classified under Specialised Lending, the Banking Group uses slotting tables supplied by the RBNZ rather than internal estimates.

The exceptions to IRB treatment are three minor portfolios where, due to systems constraints, determining these IRB risk estimates is not currently feasible or appropriate. Risk weights for these exposures are calculated under a separate treatment as set out in the RBNZ document entitled ‘Capital Adequacy Framework (Standardised Approach)’ (“BS2A”), dated October 2010.

ANZ National Bank Limited

Notes to the Financial Statements

Capital requirements by asset class under the IRB approach (Unaudited)

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Exposure-
Total weighted LGD Exposure-
exposure used for the weighted Risk
or principal Exposure capital risk weighted Total capital
amount at default calculation weight exposure requirement
Unaudited 31/03/2012 $m $m % % $m $m
On-balance sheet exposures
Corporate 32,654 32,406 36 64 22,221 1,779
Sovereign 8,477 8,314 5 1 67 6
Bank 4,859 3,695 57 17 659 53
Retail mortgages 42,201 42,360 21 25 11,276 902
Other retail 4,320 4,410 61 74 3,441 275
Total on-balance sheet exposures 92,511 91,185 28 39 37,664 3,015
Off-balance sheet exposures
Corporate 13,177 10,600 48 46 5,229 418
Sovereign 145 147 5 1 1 -
Bank 1,121 1,017 52 12 138 11
Retail mortgages 6,504 5,628 18 14 808 65
Other retail 4,728 4,553 74 49 2,352 188
Total off-balance sheet exposures 25,675 21,945 46 37 8,528 682
Market related contracts
Corporate 72,615 2,112 60 45 1,018 81
Sovereign 8,789 442 5 1 4 -
Bank 664,849 5,565 64 17 1,019 81
Total market related contracts 746,253 8,119 60 24 2,041 162
Total credit risk exposures subject to the IRB approach 864,439 121,249 34 38 48,233 3,859
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ANZ National Bank Limited

Notes to the Financial Statements

IRB exposures by customer credit rating

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Exposure-
weighted LGD Exposure-
used for the weighted Risk
Probability Exposure capital risk weighted Total capital
of default at default calculation weight exposure requirement
Unaudited 31/03/2012 % $m % % $m $m
Corporate
0 - 2 0.05 5,239 60 22 1,246 100
3 - 4 0.33 21,005 37 40 9,009 721
5 1.00 10,231 34 60 6,463 517
6 2.24 4,751 38 85 4,300 344
7 - 8 8.20 2,651 40 143 4,025 322
Default 100.00 1,241 43 260 3,425 274
Total corporate exposures 3.85 45,118 39 60 28,468 2,278
Sovereign
0 0.01 8,874 5 1 72 6
1 - 6 0.11 29 5 1 - -
Total sovereign exposures 0.01 8,903 5 1 72 6
Bank
0 0.03 5,822 65 17 1,023 82
1 0.03 4,054 54 15 663 53
2 - 4 0.12 387 55 27 110 9
5 - 8 1.97 14 65 136 20 1
Total bank exposures 0.04 10,277 60 17 1,816 145
Retail mortgages
0 - 3 0.20 10,279 12 5 528 42
4 0.46 15,375 17 13 2,112 169
5 0.94 15,565 25 30 4,911 393
6 2.13 5,407 29 60 3,438 275
7 - 8 5.38 706 31 105 784 63
Default 100.00 656 26 45 311 25
Total retail mortgage exposures 2.18 47,988 20 24 12,084 967
Other retail
0 - 2 0.09 21 76 18 4 -
3 - 4 0.30 4,255 72 35 1,591 128
5 1.11 1,975 65 68 1,417 113
6 2.67 1,481 60 82 1,280 102
7 - 8 10.97 1,112 69 119 1,401 112
Default 100.00 119 62 79 100 8
Total other retail exposures 3.52 8,963 68 61 5,793 463
Total credit risk exposures subject to the IRB approach 2.56 121,249 33 38 48,233 3,859
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Credit risk exposures subject to the IRB approach have been derived in accordance with BS2B and other relevant correspondence with RBNZ setting out prescribed credit risk estimates.

ANZ National Bank Limited

Notes to the Financial Statements

Specialised lending subject to the slotting approach

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Exposure Risk Risk weighted Total capital
at default weight exposure requirement
Unaudited 31/03/2012 $m % $m $m
On-balance sheet exposures
Strong 1,765 70 1,310 105
Good 3,372 90 3,217 257
Satisfactory 1,195 115 1,456 117
Weak 335 250 888 71
Default 216 - - -
Total on-balance sheet exposures 6,883 94 6,871 550
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Exposure Exposure at Average risk Risk weighted Total capital
amount default weight exposure requirement
$m $m % $m $m
Off-balance sheet exposures
Undrawn commitments and other off balance sheet exposures 553 546 94 546 44
Market related contracts 1,602 79 95 80 6
Total off-balance sheet exposures 2,155 625 94 626 50
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Specialised lending exposures subject to the slotting approach have been calculated in accordance with BS2B.

The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to the following external credit assessments using Standard & Poor’s rating scale: Strong – BBB- or better; Good – BB+ or BB, Satisfactory – BB- or B+; and Weak – B to C-.

Credit risk exposures subject to the standardised approach

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Exposure Risk weighted Total capital
at default Risk weight exposure requirement
Unaudited 31/03/2012 $m % $m $m
On-balance sheet exposures
Corporates 62 100 66 5
Default 1 150 1 -
Total on-balance sheet exposures 63 100 67 5
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Average
credit
Exposure conversion Exposure Average risk Risk weighted Total capital
amount factor at default weight exposure requirement
$m % $m % $m $m
Off-balance sheet exposures
Undrawn commitments and other off balance
sheet exposures 482 42 201 86 183 15
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Credit exposures subject to the Standardised Approach have been calculated in accordance with BS2A.

Equity Exposures

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Exposure Risk Risk weighted Total capital
at default weight exposure requirement
Unaudited 31/03/2012 $m % $m $m
All other equity holdings not deducted from capital 217 400 922 74
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Equity exposures have been calculated in accordance with BS2B.

ANZ National Bank Limited

Notes to the Financial Statements

Other exposures

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Exposure Risk Risk weighted Total capital
at default weight exposure requirement
Unaudited 31/03/2012 $m % $m $m
Cash 196 - - -
New Zealand dollar denominated claims on the Crown and the RBNZ 1,513 - - -
Other assets 1,012 100 1,072 86
Total other IRB credit risk exposures 2,721 37 1,072 86
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Other exposures have been calculated in accordance with BS2B.

A risk weight of 100% applies to premises and equipment and all other exposures not otherwise defined in BS2B, except for cash, gold, New Zealand dollar denominated claims on the Crown and the RBNZ, which receive a 0% risk weight.

Credit risk mitigation

As at 31 March 2012, under the IRB approach, the Banking Group had $1,521 million of Corporate exposures covered by guarantees and $nil of Corporate exposures covered by credit derivatives, where the presence of the guarantees or credit derivatives was judged to reduce the underlying credit risk of the exposures. Information on the total value of exposures covered by financial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk exposures is not considered to be material.

Operational risk

The Banking Group uses the Advanced Measurement Approach for determining its regulatory capital requirement for operational risk calculated in accordance with BS2B. As at 31 March 2012 the Banking Group had an implied risk weighted exposure of $5,000 million for operational risk and an operational risk capital requirement of $400 million.

Market risk

The aggregate market risk exposures below have been calculated in accordance with BS2B.

The peak end-of-day market risk exposures for the period are calculated separately for each category of exposure.

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Implied risk weighted Aggregate
exposure capital charge
As at Peak As at Peak Peak
$m $m $m $m occurred on
Unaudited 31/03/2012
Interest rate risk 3,858 4,112 309 329 21/11/2011
Foreign currency risk 37 57 3 5 25/11/2011
Equity risk 118 119 9 10 15/03/2012
4,013 321
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Pillar II capital for other material risks

The Banking Group has an Internal Capital Adequacy Assessment Process (“ICAAP”) which complies with the requirements of the Bank’s Conditions of Registration.

Under the Banking Group’s ICAAP it identifies and measures all “other material risks”, which are those material risks that are not explicitly captured in the calculation of the Banking Group’s tier one and total capital ratios. The other material risks identified by the Banking Group include business risk, pension risk, insurance risk, funds management risk, lapse risk, premises and equipment risk and capitalised origination fees risk.

The Banking Group’s internal capital allocation for these other material risks is $493 million (31/03/2011 $455 million; 30/09/2011 $457 million).

The Banking Group regularly reviews the methodologies used to calculate the economic capital allocated to other material risks. Updated capital methodologies (particularly relating to insurance and funds management risks) were applied in February 2012 and prior periods have been restated accordingly.

ANZ National Bank Limited

Notes to the Financial Statements

Retail mortgages by loan-to-valuation ratio (“LVR”)

As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group’s valuation of the security property at origination of the exposure. Off balance sheet exposures include undrawn and partially drawn residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing lending which may or may not be accepted by the customer.

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Unaudited 31/03/2012 On-balance Off -balance
$ millions sheet sheet Total
LVR range
0% - 59% 17,135 3,249 20,384
60% - 69% 6,991 935 7,926
70% - 79% 9,613 1,143 10,756
Less than 80% 33,739 5,327 39,066
80% - 89% 5,014 893 5,907
Over 90% 3,448 284 3,732
Total 42,201 6,504 48,705
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Reconciliation of mortgage related amounts

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Unaudited
$ millions Note 31/03/2012
Term loans – housing 4 44,340
Plus: short term housing loans classified as overdrafts 481
Less: housing loans made to corporate customers (2,669)
Plus: unsettled re-purchases of mortgages from the NZ Branch 49
On-balance sheet retail mortgage exposures subject to the IRB approach 42,201
Off-balance sheet retail mortgage exposures subject to the IRB approach 6,504
Total retail mortgage exposures subject to the IRB approach (as per LVR analysis) 48,705
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Terms of Ordinary Share Capital

All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up of the Bank. On a show of hands every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll every member shall have one vote for each share held.

Terms of Tier Two Capital instruments

Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all creditors of the Bank. The perpetual subordinated debt qualifies as Upper Level Tier Two Capital for capital adequacy purposes. All other subordinated debt qualifies as Lower Level Tier Two Capital.

ANZ National Bank Limited

Notes to the Financial Statements

Loan capital

Loan capital
$ millions	Unaudited 31/03/2012
AUD 265,740,000 perpetual subordinated floating rate loan	337
AUD 169,520,000 term subordinated floating rate loan	215
NZD 350,000,000 term subordinated fixed rate bond	350
NZD 835,000,000 perpetual subordinated bond	835
Total loan capital	1,737

AUD 265,740,000 loan

This loan has no fixed maturity. Interest is payable half yearly in arrears based on BBSW + 0.95% p.a., with interest payments due 15 March and 15 September.

AUD 169,520,000 loan

This loan has an ultimate maturity date of 18 September 2017. The Bank may elect to repay the loan on 17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest payments due 17 March and 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW + 1.18% p.a. thereafter.

NZD 350,000,000 bond

This bond has an ultimate maturity date of 23 July 2017. The Bank may elect to redeem the bond on 23 July 2012. If the bond is not called, the Bank will continue to pay interest to maturity at the five year interest rate swap rate plus 0.62% p.a. Interest is payable half yearly in arrears at the fixed coupon rate of 8.23%.

As at 31 March 2012, these bonds carried an A- rating by Standard & Poor’s.

NZD 835,000,000 bond

The Bank may elect to redeem the bond on 18 April 2013, 18 April 2018 or any interest payment date subsequent to 18 April 2018. Interest is payable half yearly in arrears on 18 April and 18 October each year, up to and including the Second Call Date and then quarterly thereafter. If the bond is not called at the First Call Date, the coupon rate will reset to the five year interest swap rate plus 2.00%. Should the bond not be called at the Second Call Date, the Coupon Rate from the Second Call Date onwards will be set on a quarterly basis to the three month FRA rate plus 3.00%.

As at 31 March 2012, this bond carried a BBB rating by Standard and Poor’s and an A3 rating by Moody’s.

Coupon interest of 9.66% may not necessarily be paid on each interest payment date as under the terms of the bonds, the Bank has a general right and in certain specified circumstances an obligation, to defer payment of interest on the bonds.

Capital adequacy of the Ultimate Parent Bank under the Basel II approach

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Ultimate Parent Bank
Overseas Banking Group
(Extended Licensed Entity)
31/03/2012 31/03/2011 30/09/2011 31/03/2011 30/09/2011
Tier One Capital 11.3% 10.5% 10.9% 11.4% 11.5%
Total Capital 12.6% 12.1% 12.1% 12.6% 12.3%
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For calculation of minimum capital requirements under Pillar I of the Basel II Accord, APRA has accredited the Ultimate Parent Bank to use the Advanced Internal Ratings Based (“AIRB”) methodology for calculation of credit risk weighted assets and the Advanced Measurement Approach (“AMA”) for the operational risk weighted asset equivalent.

Under prudential regulations, the Ultimate Parent Bank is required to hold a minimum Prudential Capital Ratio (“PCR”) as determined by APRA. The APRA minimum PCR is at least equal to the levels specified under the Basel II (internal models based) approach. The Ultimate Parent Bank exceeded the minimum capital adequacy requirements set by APRA as at 31 March 2012 and for the comparative prior periods.

The Ultimate Parent Bank is required to publicly disclose Pillar III financial information as at 31 March 2012. The Ultimate Parent Bank’s Consolidated Financial Report, Dividend Announcement and Appendix 4E, for the six months ended to 31 March 2012, discloses capital adequacy ratios calculated under the Basel II methodology. The Ultimate Parent Bank also prepares a quarterly Basel II Pillar III disclosure document, the APS 330. All these documents can be accessed at the website anz.com.

ANZ National Bank Limited

Notes to the Financial Statements

11. Financial Risk Management

Concentrations of credit risk

Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities within the same geographic region, or when they have similar risk characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Concentrations of credit risk analysis

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Liquid Trading
assets and securities
due from and
other available- Derivative Net Other Credit
Unaudited 31/03/2012 financial for-sale financial loans and financial related
$ millions institutions assets instruments advances assets commitments Total
Industry
Agriculture - - 66 16,944 99 1,989 19,098
Forestry, fishing and mining 37 - 6 714 4 343 1,104
Business and property services 15 - 49 8,424 49 2,446 10,983
Construction - - 2 864 5 1,018 1,889
Entertainment, leisure and tourism - - 31 1,101 6 462 1,600
Finance and insurance 2,255 4,079 8,655 761 270 1,372 17,392
Government and local authority [1] 1,865 6,943 356 1,221 251 1,225 11,861
Manufacturing 27 5 106 2,967 17 3,181 6,303
Personal lending - - 36 46,226 270 9,637 56,169
Retail trade 22 3 45 1,573 9 954 2,606
Transport and storage 26 57 78 1,631 10 617 2,419
Wholesale trade 50 - 17 1,273 7 1,418 2,765
Other [2 ] 16 69 512 2,158 15 2,048 4,818
4,313 11,156 9,959 85,857 1,012 26,710 139,007
Provisions for credit impairment - - - (1,119) - - (1,119)
Fair value hedge adjustment - - - (8) - - (8)
Unearned finance income and
deferred/capitalised fees - - - (263) - - (263)
Total 4,313 11,156 9,959 84,467 1,012 26,710 137,617
Geography
New Zealand 4,079 9,080 3,001 82,947 904 26,710 126,721
Overseas 234 2,076 6,958 1,520 108 - 10,896
Total 4,313 11,156 9,959 84,467 1,012 26,710 137,617
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1 Government and local authority includes exposures to government administration and defence, education and health and community services.

• 2 Other includes exposures to electricity, gas and water, communications and personal services.

ANZ National Bank Limited

Notes to the Financial Statements

Interest rate sensitivity gap

The following table shows the interest rate sensitivity of the Banking Group’s assets, liabilities and off balance sheet instruments by disclosing the repricing periods for these instruments (that is, when interest rates applicable to each asset or liability can be changed).

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Not
Unaudited 31/03/2012 Less than 3 to 6 6 to 12 1 to 2 Beyond bearing
$ millions Total 3 months months months years 2 years interest
Assets
Liquid assets 2,355 2,159 - - - - 196
Due from other financial institutions 1,958 1,829 - - - - 129
Trading securities 10,904 1,532 458 212 3,569 5,133 -
Derivative financial instruments 9,959 - - - - - 9,959
Available-for-sale assets 252 30 3 60 - 41 118
Net loans and advances 84,467 64,792 4,043 5,557 6,275 3,352 448
Other financial assets 1,012 79 48 30 5 3 847
Total financial assets 110,907 70,421 4,552 5,859 9,849 8,529 11,697
Liabilities
Due to other financial institutions 924 562 - - - 95 267
Deposits and other borrowings 70,914 45,603 11,313 5,851 1,201 1,641 5,305
Due to Immediate Parent Company 555 555 - - - - -
Derivative financial instruments 10,318 - - - - - 10,318
Payables and other financial liabilities 1,689 45 - - 6 132 1,506
Bonds and notes 17,562 7,573 147 1,526 2,582 5,734 -
Loan capital 1,737 - 902 - 835 - -
Total financial liabilities 103,699 54,338 12,362 7,377 4,624 7,602 17,396
Hedging instruments - (1,297) (2,896) 3,041 216 936 -
Interest sensitivity gap 7,208 14,786 (10,706) 1,523 5,441 1,863 (5,699)
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ANZ National Bank Limited

Notes to the Financial Statements

Funding Composition

The Banking Group actively uses balance sheet disciplines to prudently manage its funding mix. The Banking Group employs funding metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longer-dated wholesale debt (with remaining terms exceeding one year) and equity.

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Unaudited
$ millions 31/03/2012
Funding composition
Customer deposits [1]
New Zealand 56,761
Overseas 7,418
Total customer deposits 64,179
Wholesale funding
Bonds and notes 17,562
Loan capital 1,737
Certificates of deposit 2,277
Commercial paper 4,458
Due to parent company 555
Due to other financial institutions 924
Total wholesale funding 27,513
Total funding 91,692
Concentrations of funding by industry
Households 41,247
Agriculture 2,449
Forestry, fishing and mining 571
Manufacturing 2,371
Entertainment, leisure and tourism 725
Finance and insurance 34,715
Retail trade 819
Wholesale trade 837
Business and property services 3,554
Transport and storage 529
Construction 728
Government and local authority 1,812
Other [2 ] 1,335
Total funding 91,692
Concentrations of funding by geography [3]
New Zealand 63,393
Australia 1,667
United States 13,457
Europe 7,912
Other countries 5,263
Total funding 91,692
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1 Represents term deposits, demand deposits bearing interest, deposits not bearing interest and secured debenture stock.

2 Other includes exposures to electricity, gas and water, communications and personal services.

3 Funding of the Banking Group via ANZ National (Int’l) Limited is classified as either from the United States or Europe, as the company conducts overseas funding activities through its London branch.

ANZ National Bank Limited

Notes to the Financial Statements

Liquidity portfolio management

The Banking Group holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of the Banking Group’s liquidity portfolio is based on the amount required to meet its liquidity policy and includes both items classified as cash and cash equivalents and those classified as operating assets in the Statement of Cash Flows.

Liquidity Portfolio

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31/03/2012
$ millions Unaudited
Balances with central banks 1,513
Securities purchased under agreement to resell 1,256
Certificates of deposit 368
Government, local body stock and bonds 6,899
Government treasury bills 63
Other bonds 3,727
Total liquidity portfolio 13,826
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Contractual maturity analysis of financial assets and liabilities

The table below presents the Banking Group’s financial assets and liabilities within relevant contractual maturity groupings, based on the earliest date on which the Banking Group may be required to realise an asset or settle a liability. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows and may differ to the amounts reported on the balance sheet.

Derivatives (other than those designated in a hedging relationship) and trading portfolio assets and liabilities are included at their fair value, since they will frequently be settled before contractual maturity at fair value.

The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using the earliest date at which the Banking Group can be called upon to pay. The liquidity risk of credit related commitments and contingent liabilities may be less than the contract amount, and does not necessarily represent future cash requirements as many of these facilities are expected to be only partially used or to expire unused.

The Banking Group does not manage its liquidity risk on the basis of the information below.

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Unaudited 31/03/2012 Less than 3 to 12 1 to 5 Beyond No maturity
$ millions Total At call 3 months months years 5 years specified
Financial assets
Liquid assets 2,355 2,012 343 - - - -
Due from other financial institutions 1,960 509 1,451 - - - -
Trading securities 11,806 - 412 1,036 9,184 1,174 -
Derivative financial assets (trading) 8,655 - 8,655 - - - -
Available-for-sale assets 262 - 31 64 49 - 118
Net loans and advances 114,878 - 11,769 20,683 34,603 47,823 -
Other financial assets 660 - 560 78 18 1 3
Total financial assets 140,576 2,521 23,221 21,861 43,854 48,998 121
Financial liabilities
Due to other financial institutions 948 560 258 4 20 106 -
Deposits and other borrowings 72,175 28,612 22,255 18,159 3,139 10 -
Due to Immediate Parent Company 560 - 560 - - - -
Derivative financial liabilities (trading) 9,349 - 9,349 - - - -
Other financial liabilities 1,192 - 980 7 78 127 -
Bonds and notes 18,735 - 2,782 2,427 12,514 1,012 -
Loan capital 2,726 - 35 104 691 724 1,172
Total financial liabilities 105,685 29,172 36,219 20,701 16,442 1,979 1,172
Net financial assets / (liabilities) 34,891 (26,651) (12,998) 1,160 27,412 47,019 (1,051)
Derivative financial instruments
used for balance sheet management
– gross inflows 17,522 - 2,197 3,891 10,971 463 -
– gross outflows (16,953) - (2,316) (3,684) (10,497) (456) -
Net financial assets / (liabilities) after
balance sheet management 35,460 (26,651) (13,117) 1,367 27,886 47,026 (1,051)
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ANZ National Bank Limited

Notes to the Financial Statements

Contractual maturity of off-balance sheet commitments and contingent liabilities

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Less than Beyond
$ millions Total 1 year 1 year
Unaudited 31/03/2012
Non-credit related commitments 237 89 148
Credit related commitments 23,978 23,978 -
Contingent liabilities 2,732 2,732 -
Total 26,947 26,799 148
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12. Concentrations of Credit Risk to Individual Counterparties

The Banking Group measures its concentration of credit risk in respect to bank counterparties on the basis of approved exposures, and in respect to non bank counterparties on the basis of limits.

For the six months ended 31 March 2012 there were no individual counterparties (excluding connected parties, governments and banks with long term credit ratings of A- or above) where the Banking Group’s period end or peak end-of-day credit exposure equalled or exceeded 10% of the Banking Group’s equity (as at the end of the period).

13. Insurance business

The Banking Group conducts insurance business through companies in the OnePath Insurance Holdings (NZ) Limited group. The aggregate amount of insurance business in this group comprises assets totalling $525 million (31/03/2011: $353 million; 30/09/2011 $438 million), which is 0.5% (31/03/2011: 0.3%; 30/09/2011 0.4%) of the total consolidated assets of the Banking Group.

14. Credit Related Commitments and Contingent Liabilities

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Face or contract value
Unaudited Unaudited Audited
$ millions 31/03/2012 31/03/2011 30/09/2011
Credit related commitments
Commitments with certain drawdown due within one year 904 567 527
Commitments to provide financial services 23,074 22,030 22,526
Total credit related commitments 23,978 22,597 23,053
Contingent liabilities
Financial guarantees 1,752 1,888 1,753
Standby letters of credit 55 68 60
Transaction related contingent items 829 957 882
Trade related contingent liabilities 96 60 110
Total contingent liabilities 2,732 2,973 2,805
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The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its Ultimate Parent Bank. To reflect the risk associated with these transactions, they are subjected to the same credit origination, portfolio management and collateral requirements as for customers that apply for loans. The contract amount represents the maximum potential amount that could be lost if the counterparty fails to meet its financial obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.

Other contingent liabilities

The Banking Group has other contingent liabilities in respect of actual and possible claims and court proceedings. An assessment of the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision made where deemed necessary.

ANZ National Bank Limited

Directors’ Statement

As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:

• (i) The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2012; and

• (ii) The Disclosure Statement is not false or misleading.

Over the six months ended 31 March 2012, after due enquiry, each Director believes that:

• (i) ANZ National Bank Limited has complied with all Conditions of Registration that applied during that period;

• (ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;

• (iii) ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that those systems were being properly applied.

This Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 11 May 2012. On that date, the Directors of the Bank were:

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A J Carter
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S C Elliott
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N M T Geary, CBE
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D D Hisco
J F Judge
P R Marriott
M R P Smith, OBE
Sir Dryden Spring, Kt
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ANZ National Bank Limited

Independent Auditors’ Review Report

To the Shareholder of ANZ National Bank Limited

We have reviewed pages 3 to 25 of the interim financial statements of ANZ National Bank Limited (the ‘Bank’) and its subsidiary companies (the ‘Banking Group’) prepared and disclosed in accordance with the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2012 (the ‘Order’) and the supplementary information prescribed in Schedules 3, 5, 7, 11, 13, 16 and 18 of the Order. The interim financial statements, and supplementary information, provide information about the past financial performance and cash flows of the Banking Group and its financial position as at 31 March 2012.

Directors’ responsibilities

The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of the Disclosure Statement, which includes interim financial statements prepared in accordance with Clause 25 of the Order which give a true and fair view of the financial position of the Banking Group as at 31 March 2012 and its financial performance and cash flows for the six months ended on that date. The Directors are also responsible for such internal controls as they determine are necessary to enable the preparation of the Disclosure Statement that is free from material misstatement whether due to fraud or error.

They are also responsible for the preparation of supplementary information in the Disclosure Statement which fairly states the matters to which it relates in accordance with Schedules 3, 5, 7, 11, 13, 16 and 18 of the Order.

Reviewers’ responsibilities

We are responsible for reviewing the interim financial statements and the supplementary information, disclosed in accordance with Clause 25, Schedules 3, 5, 7, 11, 13, 16 and 18 of the Order and presented to us by the Directors.

We are responsible for reviewing the interim financial statements (excluding the supplementary information) in order to report to you whether, in our opinion on the basis of the procedures described below, anything has come to our attention that would cause us to believe that the interim financial statements have not been prepared, in all material respects, in accordance with New Zealand Equivalent to International Accounting Standard 34 (“NZ IAS 34”): Interim Financial Reporting and do not present a true and fair view of the financial position of the Banking Group as at 31 March 2012 and its financial performance and cash flows for the six months ended on that date.

We are responsible for reviewing the supplementary information (excluding the supplementary information relating to capital adequacy) in order to report to you whether, in our opinion on the basis of the procedures described below, anything has come to our attention that would cause us to believe that the supplementary information does not fairly state the matters to which it relates in accordance with Schedules 5, 7, 13, 16 and 18 of the Order.

We are responsible for reviewing the supplementary information relating to capital adequacy in order to state whether, on the basis of the procedures described below, anything has come to our attention that cause us to believe that the information disclosed in accordance with Schedule 11 is not in all material respects prepared in accordance with the Bank’s Conditions of Registration and with the Bank’s internal models for credit risk and operational risk as accredited by the Reserve Bank of New Zealand and disclosed in accordance with Schedule 11 of the Order.

We have performed our review in accordance with the review engagement standard RS-1 Statement of Review Engagement Standards issued by the External Reporting Board. A review is limited primarily to enquiries of Banking Group personnel and analytical review procedures applied to the financial data, and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

KPMG has also provided other audit related services to the Banking Group. In addition, certain partners and employees of our firm may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the Banking Group. These matters have not impaired our independence as auditors of the Banking Group. We have no other relationship with, or interest in, the Banking Group.

Review Opinion

We have examined the interim financial statements including the supplementary information and based on our review, which is not an audit, nothing has come to our attention that causes us to believe that:

• (a) the interim financial statements (excluding the supplementary information) have not been prepared, in all material respects, in accordance with NZ IAS 34: Interim Financial Reporting and do not present a true and fair view of the financial position of the Banking Group as at 31 March 2012 and its financial performance and cash flows for the six months ended on that date;

• (b) the supplementary information prescribed by Schedules 5, 7, 13, 16 and 18 of the Order does not fairly state the matters to which it relates in accordance with those Schedules; and

• (c) the supplementary information relating to Capital Adequacy as required by Schedule 11 of the Order, is not in all material respects prepared in accordance with the Bank’s Conditions of Registration, with the Reserve Bank of New Zealand document Capital Adequacy Framework (Internal Models Based Approach) (BS2B), and with the Banking Group’s internal models for credit risk and operational risk as accredited by the Reserve Bank of New Zealand, and disclosed in accordance with Schedule 11 of the Order.

Our review was completed on 11 May 2012 and our review opinion is expressed as at that date.

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Wellington

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anz.co.nz