Australia and New Zealand Banking Group Ltd. — Interim / Quarterly Report 2014

Aug 14, 2014

ANZ Bank New Zealand Limited Registered Bank Disclosure Statement

FOR THE NINE MONTHS ENDED 30 JUNE 2014 | NUMBER 74 ISSUED AUGUST 2014

ANZ Bank New Zealand Limited

Registered Bank Disclosure Statement For the nine months ended 30 June 2014

Contents

Contents
General Disclosures	2
Income Statement	3
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	16

Glossary of Terms

In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:

• (a) Bank means ANZ Bank New Zealand Limited;

• (b) Banking Group means the Bank 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 Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, 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 2014; 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 Bank New Zealand Limited

2

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. The Bank’s credit ratings are:

ratings are:
	Current Credit
Rating Agency	Rating	Qualification
Standard & Poor’s	AA-	Outlook Stable
Moody’s Investors Service	Aa3	Outlook Stable
Fitch Ratings	AA-	Outlook Stable

Guarantors

No obligations of the Bank are guaranteed as at 13 August 2014.

ANZNZ Covered Bond Trust

Certain debt securities (Covered Bonds) issued by the Bank’s wholly owned subsidiary, ANZ New Zealand (Int’l) Limited, are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered Bond Trust. The Covered Bond Guarantor has guaranteed the payment of interest and principal of Covered Bonds with a carrying value as at 30 June 2014 of $3,757 million, pursuant to a guarantee which is secured over a pool of assets. The Covered Bond Guarantor’s address for service is Level 35, 48 Shortland Street, Auckland, 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.

Changes to Conditions of Registration

The conditions of registration applying to the Bank were amended on 1 July 2014 to refer to a revised version of the RBNZ document Capital Adequacy Framework (Internal Models Based Approach) (BS2B), following the RBNZ’s review of capital adequacy requirements for residential mortgage lending. Other minor updates have also been made to refer to revised versions of certain RBNZ documents, which have been updated to reflect the Financial Reporting Act 2013 coming into force on 1 April 2014.

Directorate

Nigel Williams was appointed as an alternate director for Michael Smith on 8 January 2014. Mr Williams is the Chief Risk Officer of the Ultimate Parent Bank.

Auditor

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

ANZ Bank New Zealand Limited

3

Income Statement

Income Statement
	Unaudited Unaudited Audited
	9 months to 9 months to Year to
$ millions	Note 30/06/2014 30/06/20131 30/09/20131
Interest income	4,588 4,472 5,957
Interest expense	2,551 2,534 3,344
Net interest income	2,037 1,938 2,613
Net trading gains	145 140 163
Net funds management and insurance income	232 176 234
Other operating income	2 381 347 419
Share of associates' profit	3 6 7
Operating income	2,798 2,607 3,436
Operating expenses	1,095 1,155 1,512
Profit before credit impairment and income tax	1,703 1,452 1,924
Credit impairment charge / (release)	5 (26) 45 63
Profit before income tax		1,729 1,407 1,861
Income tax expense		473 373 490
Profit after income tax		1,256 1,034 1,371

Statement of Comprehensive Income

Statement of Comprehensive Income
		Unaudited Unaudited Audited
		9 months to 9 months to Year to
$ millions		30/06/2014 30/06/20131 30/09/20131
Profit after income tax		1,256 1,034 1,371
Items that will not be reclassified to profit or loss
Actuarial gain on defined benefit schemes		25 20 71
Income tax expense relating to items that will not be reclassified		(7) (6) (20)
Total items that will not be reclassified to profit or loss		18 14 51
Items that may be reclassified subsequently to profit or loss
Unrealised losses recognised directly in equity		(7) (98) (138)
Realised gains transferred to income statement		(33) (21) (21)
Income tax credit relating to items that may be reclassified		11 33 45
Total items that may be reclassified subsequently to profit or loss		(29) (86) (114)
Total comprehensive income for the period		1,245 962 1,308

1 Comparative amounts have changed. Refer to notes 1 and 16 for details.

The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ Bank New Zealand Limited

4

Statement of Changes in Equity

Statement of Changes in Equity	Statement of Changes in Equity
Share Available- for-sale revaluation Cash flow hedging Retained Total		Available- for-sale Cash flow
$ millions Note capital reserve reserve earnings equity
As at 1 October 2012 (Audited) 6,943 (3) 141 3,851 10,932
Restatement 1 - - - (21) (21)
As at 1 October 2012 (Restated, audited) 6,943 (3) 141 3,830 10,911
Profit after income tax - - - 1,034 1,034
Unrealised losses recognised directly in equity - (1) (97) - (98)
Realised gains transferred to the income statement - - (21) - (21)
Actuarial gain on defined benefit schemes - - - 20 20
Income tax credit / (expense) on items recognised directly in equity - - 33 (6) 27
Total comprehensive income for the period - (1) (85) 1,048 962
Ordinary dividend paid - - - (465) (465)
As at 30 June 2013 (Restated, unaudited) 6,943 (4) 56 4,413 11,408
As at 1 October 2012 (Audited) 6,943 (3) 141 3,851 10,932
Restatement 1 - - - (21) (21)
As at 1 October 2012 (Restated, audited) 6,943 (3) 141 3,830 10,911
Profit after income tax - - - 1,371 1,371
Unrealised gains / (losses) recognised directly in equity - 1 (139) - (138)
Realised gains transferred to the income statement - - (21) - (21)
Actuarial gain on defined benefit schemes - - - 71 71
Income tax credit / (expense) on items recognised directly in equity - - 45 (20) 25
Total comprehensive income for the period - 1 (115) 1,422 1,308
Ordinary dividend paid - - - (1,065) (1,065)
Preference shares issued 300 - - - 300
As at 30 September 2013 (Restated, audited) 7,243 (2) 26 4,187 11,454
Profit after income tax - - - 1,256 1,256
Unrealised gains / (losses) recognised directly in equity - 3 (10) - (7)
Realised gains transferred to the income statement - - (33) - (33)
Actuarial gain on defined benefit schemes - - - 25 25
Income tax credit / (expense) on items recognised directly in equity - (1) 12 (7) 4
Total comprehensive income for the period - 2 (31) 1,274 1,245
Ordinary shares issued 10 970 - - - 970
Ordinary dividend paid	- - - (1,510) (1,510)
Preference dividend paid	- - - (6) (6)
As at 30 June 2014 (Unaudited)	8,213 - (5) 3,945 12,153

The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ Bank New Zealand Limited

5

Balance Sheet

Balance Sheet
		Unaudited	Unaudited	Audited
$ millions	Note	30/06/2014	30/06/20131	30/09/20131
Assets
Cash		3,041	5,027	2,206
Settlement balances receivable		882	230	514
Collateral paid		1,304	615	1,002
Trading securities		12,492	10,128	10,320
Investments backing insurance contract liabilities		174	169	172
Derivative financial instruments		7,653	10,889	9,518
Current tax assets		95	74	-
Available-for-sale assets		1,056	1,854	942
Net loans and advances	4	94,193	88,855	90,837
Other assets		612	580	567
Insurance contract assets		454	401	399
Investment in associates		90	98	98
Deferred tax assets		-	78	45
Premises and equipment		376	342	376
Goodwill and other intangible assets		3,452	3,469	3,448
Total assets		125,874	122,809	120,444
Interest earning and discount bearing assets		112,740	106,545	105,866
Liabilities
Settlement balances payable		1,539	1,623	1,428
Collateral received		553	1,526	438
Deposits and other borrowings	8	85,329	77,579	78,816
Derivative financial instruments		8,073	10,467	10,243
Current tax liabilities		-	-	3
Deferred tax liabilities		50	-	-
Payables and other liabilities		1,267	1,259	1,195
Provisions		205	271	229
Bonds and notes		15,573	17,514	15,494
Subordinated debt		1,132	1,162	1,144
Total liabilities		113,721	111,401	108,990
Net assets		12,153	11,408	11,454
Equity
Share capital		8,213	6,943	7,243
Reserves		(5)	52	24
Retained earnings		3,945	4,413	4,187
Total equity		12,153	11,408	11,454
Interest and discount bearing liabilities		97,357	92,930	91,061

1 Comparative amounts have changed. Refer to notes 1 and 16 for details.

The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ Bank New Zealand Limited

6

Condensed Cash Flow Statement

Condensed Cash Flow Statement
	Unaudited Unaudited Audited
	9 months to 9 months to Year to
$ millions	30/06/2014 30/06/2013 30/09/2013
Cash flows from operating activities
Interest received	4,530 4,446 5,916
Interest paid	(2,488) (2,492) (3,368)
Other cash inflows provided by operating activities	706 655 877
Other cash outflows used in operating activities	(1,505) (1,595) (1,940)
Cash flows from operating profits before changes in operating assets and liabilities	1,243 1,014 1,485
Net changes in operating assets and liabilities	763 3,068 1,192
Net cash flows provided by operating activities	2,006 4,082 2,677
Cash flows from investing activities
Cash inflows provided by investing activities	13 69 69
Cash outflows used in investing activities	(84) (89) (142)
Net cash flows used in investing activities	(71) (20) (73)
Cash flows from financing activities
Cash inflows provided by financing activities	4,686 1,105 2,678
Cash outflows used in financing activities	(5,876) (2,463) (5,676)
Net cash flows used in financing activities	(1,190) (1,358) (2,998)
Net increase / (decrease) in cash and cash equivalents	745 2,704 (394)
Cash and cash equivalents at beginning of the period	2,861 3,255 3,255
Cash and cash equivalents at end of the period	3,606 5,959 2,861

The notes to the financial statements form part of and should be read in conjunction with these financial statements

ANZ Bank New Zealand Limited

7

Notes to the Financial Statements

1. Significant Accounting Policies

(i) Reporting entity and statement of compliance

These interim financial statements are for the Banking Group for the nine months ended 30 June 2014. They have been prepared in accordance with New Zealand Generally Accepted Accounting Practice as appropriate for profit oriented entities, the requirements of NZ IAS 34 Interim Financial Reporting, 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 2013.

(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.

(iii) Changes in accounting policies

The Banking Group has applied the following new accounting standards and amendments in the preparation of these financial statements:

Adoption of these standards has not resulted in any material change to the Banking Group’s reported result or financial position.

NZ IAS 19 has been applied retrospectively, in accordance with transitional provisions, with the net impact of initial application recognised in retained earnings as at 30 September 2012 and shown in the statement of changes in equity. The balances of payables and other liabilities and the associated deferred tax asset have been restated for subsequent periods.

Amendments to NZ IAS 34 require certain fair value disclosures which have been included in Note 12, however comparative information is not required in the first year of application.

(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

In addition to restatements resulting from the initial application of NZ IAS 19, certain amounts in the comparative information have been reclassified to ensure consistency with the current year’s presentation. Further information on changes to comparative information is included in note 16.

(vi) Principles of consolidation

The financial statements consolidate the financial statements of the Bank and its subsidiaries.

• NZ IFRS 10 Consolidated Financial Statements;

• NZ IFRS 13 Fair Value Measurement;

• NZ IAS 19 Employee Benefits (amended 2011);

• NZ IAS 28 Investments in Associates and Joint Ventures (amended 2011); and

• NZ IAS 34 Interim Financial Reporting (consequential amendments).

2. Other Operating Income

	Unaudited Unaudited Audited
	9 months to 9 months to Year to
$millions	30/06/2014 30/06/2013 30/09/2013
Net fee income	306 324 423
Fair value gain / (loss) on hedging activities and financial liabilities designated at fair value	(6) 1 (35)
Insurance settlement relating to ING Diversified Yield Fund and ING Regular Income Fund	91 - -
Gain on sale of subsidiary and associate	- 13 13
Loss on sale of mortgages to NZ Branch	(23) (13) (14)
Other income	13 22 32
Total other operating income	381 347 419

ANZ Bank New Zealand Limited

8

Notes to the Financial Statements

3. Segmental Analysis

The Banking Group is organised into four major business segments for segment reporting purposes - Retail, Commercial, Wealth 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 products and services to personal customers via the branch network, mortgage specialists, the contact centre and a variety of self service channels (internet banking, phone banking, ATMs, website and mobile phone banking). Core products include current and savings accounts, unsecured lending (credit cards, personal loans and overdrafts) and home loans secured by mortgages over property. Retail distributes insurance and investment products on behalf of the Wealth 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.

Wealth

Wealth comprises the Private Wealth, Funds Management and Insurance businesses, which provide private banking, investment, superannuation and insurance products and services.

Institutional

Institutional provides financial services through a number of specialised units to large multi-banked corporations, often global, which require sophisticated product and risk management solutions. Those financial services include loan structuring, foreign exchange, wholesale money market services and transaction banking.

Other

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

**Business segment analysis1 **
$ millions Retail Commercial Wealth2 Institutional Other3 Total
Unaudited 9 months to 30/06/2014
External revenues 753 2,085 179 591 (810) 2,798
Intersegment revenues 151 (1,006) 121 (131) 865 -
Total revenues 904 1,079 300 460 55 2,798
Profit after income tax 298 543 148 236 31 1,256
Unaudited 9 months to 30/06/2013
External revenues 723 2,015 57 652 (840) 2,607
Intersegment revenues 133 (938) 111 (177) 871 -
Total revenues 856 1,077 168 475 31 2,607
Profit / (loss) after income tax 235 518 55 234 (8) 1,034
Audited year to 30/09/2013
External revenues 985 2,675 83 816 (1,123) 3,436
Intersegment revenues 173 (1,248) 149 (208) 1,134 -
Total revenues 1,158 1,427 232 608 11 3,436
Profit / (loss) after income tax 333 687 80 285 (14) 1,371

1 Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.

2 Wealth external revenue for the nine months to 30 June 2014 includes the $91 million insurance settlement relating to the Bank’s former involvement in the ING Diversified Yield Fund and the ING Regular Income Fund.

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

ANZ Bank New Zealand Limited

9

Notes to the Financial Statements

4. Net Loans and Advances

	Unaudited Unaudited Audited	Unaudited Unaudited Audited
$ millions	Note 30/06/2014 30/06/2013 30/09/2013
Overdrafts	1,689 1,741 1,841
Credit card outstandings	1,546 1,442 1,458
Term loans - housing	51,535 47,830 49,521
Term loans - non-housing	39,240 37,933 38,024
Lease receivables	103 135 128
Hire purchase	791 683 721
Other	124 135 125
Total gross loans and advances	95,028 89,899 91,818
Less: Provision for credit impairment	5 (692) (888) (826)
Less: Unearned income		(361) (333) (342)
Add: Capitalised brokerage/mortgage origination fees		189 139 156
Add: Customer liability for acceptances		29 38 31
Total net loans and advances		94,193 88,855 90,837

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of $9,743 million as at 30 June 2014 (30/06/2013 $9,916 million, 30/09/2013 $9,256 million). These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

5. Provision for Credit Impairment

	Retail Other retail Non-retail
$ millions	mortgages exposures exposures Total
Unaudited 30/06/2014
Collective provision	86 112 282 480
Individual provision	53 22 137 212
Total provision for credit impairment	139 134 419 692
Collective credit impairment release	(15) (5) (42) (62)
Individual credit impairment charge / (release)	(4) 63 (23) 36
Credit impairment charge / (release)	(19) 58 (65) (26)
Unaudited 30/06/2013
Collective provision	100 115 354 569
Individual provision	96 15 208 319
Total provision for credit impairment	196 130 562 888
Collective credit impairment release	(4) (10) (21) (35)
Individual credit impairment charge	13 47 20 80
Credit impairment charge / (release)	9 37 (1) 45
Audited 30/09/2013
Collective provision	101 117 324 542
Individual provision	74 22 188 284
Total provision for credit impairment	175 139 512 826
Collective credit impairment release	(3) (8) (51) (62)
Individual credit impairment charge	10 67 48 125
Credit impairment charge / (release)	7 59 (3) 63

ANZ Bank New Zealand Limited

10

Notes to the Financial Statements

6. Impaired Assets and Past Due Assets

	Retail Other retail Non-retail
$ millions	mortgages exposures exposures Total
Unaudited 30/06/2014
Total impaired assets	168 39 423 630
Loans that are at least 90 days past due but not impaired	101 36 77 214
Unaudited 30/06/2013
Total impaired assets	239 40 745 1,024
Loans that are at least 90 days past due but not impaired	96 51 95 242
Audited 30/09/2013
Total impaired assets	179 49 666 894
Loans that are at least 90 days past due but not impaired	92 40 76 208

7. Financial Assets Pledged as Collateral

	Unaudited Unaudited Audited
$ millions	30/06/2014 30/06/2013 30/09/2013
Cash collateral given on derivative financial instruments	1,304 615 1,002
Trading securities encumbered through repurchase agreements	1,350 1,152 108
Residential mortgages pledged as security for covered bonds	6,858 5,529 5,857
Total assets of UDC Finance Limited pledged as collateral for UDC secured investments	2,310 2,129 2,162
Total financial assets pledged as collateral	11,822 9,425 9,129

ANZNZ Covered Bond Trust (the Covered Bond Trust)

Substantially all of the assets of the 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 the Covered Bond Trust of issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ New Zealand (Int’l) Limited, from time to time. The assets of the 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 the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond Trust have been satisfied.

The Banking Group continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.

8. Deposits and Other Borrowings

		Unaudited Unaudited Audited
$ millions	Not	e 30/06/2014 30/06/2013 30/09/2013
Certificates of deposit		2,236 1,866 2,364
Term deposits		33,916 33,641 33,862
Other deposits bearing interest and other borrowings		33,314 29,048 29,687
Deposits not bearing interest		5,812 5,562 5,526
Deposits from banks		1,575 864 180
Commercial paper		6,951 4,416 4,765
UDC secured investments	7 1,519 1,492 1,492
Deposits from other members of ANZ New Zealand		6 690 940
Total deposits and other borrowings		85,329 77,579 78,816

9. Related Party Transactions

	Unaudited	Unaudited	Audited
$ millions	30/06/2014	30/06/2013	30/09/2013
Total due from related parties	2,932	3,294	2,193
Total due to related parties	3,559	5,678	5,132

ANZ Bank New Zealand Limited

11

Notes to the Financial Statements

10. Capital Adequacy

Basel III capital ratios Banking Group	Basel III capital ratios Banking Group	Basel III capital ratios Banking Group	Basel III capital ratios Banking Group
30/06/2014 30/06/2013 30/09/2013
Unaudited
Common equity tier 1 capital 11.3% 10.7% 10.4%
Tier 1 capital 11.8% 10.7% 10.8%
Total capital 13.0% 12.4% 12.4%
Buffer ratio 5.0% 4.4% 4.4%
RBNZ minimum ratios:
Common equity tier 1 capital 4.5% 4.5% 4.5%
Tier 1 capital 6.0% 6.0% 6.0%
Total capital 8.0% 8.0% 8.0%
Buffer requirement 2.5% n/a n/a
**Capital of the Banking Group **
			Unaudited
**$ millions **			30/06/2014
Common equity tier 1 capital before deductions			11,853
Less deductions from common equity tier 1 capital			(3,644)
Common equity tier 1 capital			8,209
Additional tier 1 capital			300
Total tier 1 capital			8,509
Tier 2 capital			936
Total capital			9,445
Capital requirements of the Banking Group
	Risk weighted exposure or implied risk
	Exposure at weighted Total capital
**$ millions **	default exposure1 requirement
Unaudited 30/06/2014
Corporate exposures	45,261 26,304 2,104
Sovereign exposures	10,826 201 16
Bank exposures	8,274 2,654 212
Retail mortgage exposures	56,332 15,234 1,219
Other retail exposures	9,811 7,869 630
Exposures subject to internal ratings based approach	130,504 52,262 4,181
Specialised lending exposures subject to slotting approach	8,269 7,869 629
Exposures subject to standardised approach	2,148 355 29
Equity exposures	92 389 31
Other exposures	3,695 1,315 105
Total credit risk	144,708 62,190 4,975
Operational risk	n/a 5,378 430
Market risk	n/a 4,845 387
Total	144,708 72,413 5,792

		Risk weighted
		exposure or
		implied risk
	Exposure at	weighted	Total capital
**$ millions **	default	**exposure1 **	requirement
Unaudited 30/06/2014
Corporate exposures	45,261	26,304	2,104
Sovereign exposures	10,826	201	16
Bank exposures	8,274	2,654	212
Retail mortgage exposures	56,332	15,234	1,219
Other retail exposures	9,811	7,869	630
Exposures subject to internal ratings based approach	130,504	52,262	4,181
Specialised lending exposures subject to slotting approach	8,269	7,869	629
Exposures subject to standardised approach	2,148	355	29
Equity exposures	92	389	31
Other exposures	3,695	1,315	105
Total credit risk	144,708	62,190	4,975
Operational risk	n/a	5,378	430
Market risk	n/a	4,845	387
Total	144,708	72,413	5,792

1 Total credit risk weighted exposures include a scalar of 1.06 in accordance with the Bank's Conditions of Registration.

ANZ Bank New Zealand Limited

12

Notes to the Financial Statements

Ordinary share capital issued

The Bank issued $970 million of ordinary shares to the Immediate Parent Company on 20 June 2014. The shares are included in common equity tier 1 capital and were issued at the same time as payment of a dividend of the same amount by the Bank to the Immediate Parent Company. Total common equity tier 1 capital and capital ratios were unchanged after these transactions.

All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. 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.

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 1 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 $336 million (30/06/2013 $379 million; 30/09/2013 $343 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 pension risk and business retention risk) were applied in November 2013 and prior periods were restated accordingly.

Residential mortgages by loan-to-valuation ratio

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 have been accepted by the customer.

	30/06/2014
Unaudited	On-balance Off-balance
$ millions	sheet sheet Total
LVR range
Does not exceed 60%	18,131 3,379 21,510
Exceeds 60% and not 70%	9,035 935 9,970
Exceeds 70% and not 80%	14,596 1,446 16,042
Does not exceed 80%	41,762 5,760 47,522
Exceeds 80% and not 90%	4,717 224 4,941
Exceeds 90%	3,041 278 3,319
Total	49,520 6,262 55,782

11. Liquidity Portfolio

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 those classified as operating assets in the Condensed Cash Flow Statement.

	Trading Available-for-
Unaudited 30/06/2014
$ millions	Cash Securities sale securities Total
Balances with central banks	2,000 - - 2,000
Certificates of deposit	- - 477 477
Government, local body stock and bonds	- 5,771 518 6,289
Government treasury bills	- 107 21 128
Other bonds	- 5,397 - 5,397
Total liquidity portfolio	2,000 11,275 1,016 14,291

The Bank also held unencumbered internal residential mortgage backed securities which would entitle the Banking Group to enter into repurchase transactions with a value of $5,445 million at 30 June 2014.

ANZ Bank New Zealand Limited

13

Notes to the Financial Statements

12. Fair Value Measurements

Financial assets and financial liabilities not measured at fair value

Below is a comparison of the carrying amounts as reported on the balance sheet and fair value of financial asset and liability categories other than those categories where the carrying amount is at fair value or considered a reasonable approximation of fair value:

**Unaudited **	30/06/2014
**$ millions **	Carrying amount	Fair value
Assets
Net loans and advances1	94,193	94,203
Liabilities
Deposits and other borrowings2	85,329	85,320
Bonds and notes1	15,573	15,742
Subordinated debt	1,132	1,113

• 1 Fair value hedging is applied to certain financial instruments within these categories. The resulting fair value adjustments mean that the carrying value differs from the amortised cost.

2 Includes commercial paper designated at fair value through profit or loss of $6,951million.

Financial assets and financial liabilities measured at fair value in the balance sheet

The Banking Group uses a valuation method within the following hierarchy to determine the carrying amount of assets and liabilities held at fair value, all of which are recurring fair value measurements. There are no assets or liabilities measured at fair value on a nonrecurring basis.

Level 1 - Quoted market price

Where an active market exists fair value is based on quoted market prices for identical financial instruments. The quoted market price is not adjusted for any potential impact that may be attributed to a large holding of the financial instrument.

Level 2 - Valuation technique using observable inputs

In the event that there is no quoted market price for the instruments, fair values are based on present value estimates or other market accepted valuation techniques which include data, including interest and exchange rates, from observable markets wherever possible.

Level 3 - Valuation technique with significant non observable inputs

The Banking Group holds units in an unlisted fund which does not trade in an active market. The fair value of these units is based on the estimated cashflows from the realisation of the underlying assets.

The Banking Group recognises transfers between Level 1, Level 2 and Level 3 as of the beginning of the reporting period during which the transfer has occurred. There have been no transfers between levels during the period.

**Valuation hierarchy **
**Unaudited 30/06/2014 **
$ millions	Level 1 Level 2 Level 3 Total
**Financial assets **
Trading securities	12,487 5 - 12,492
Derivative financial instruments	4 7,649 - 7,653
Available-for-sale assets	1,054 - 2 1,056
Investments backing insurance policy liabilities	119 55 - 174
Total financial assets held at fair value	13,664 7,709 2 21,375
Financial liabilities
Deposits and other borrowings	- 6,951 - 6,951
Derivative financial instruments	5 8,068 - 8,073
Payables and other liabilities	194 - - 194
Total financial liabilities held at fair value	199 15,019 - 15,218

ANZ Bank New Zealand Limited

14

Notes to the Financial Statements

13. Concentrations of Credit Risk to Individual Counterparties

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

For the three months ended 30 June 2014 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.

14. Insurance business

The Banking Group conducts insurance business through its subsidiaries OnePath Life (NZ) Limited and OnePath Insurance Services (NZ) Limited. The aggregate amount of insurance business in this group comprises assets totalling $827 million (30/06/2013: $774 million; 30/09/2013 $779 million), which is 0.7% (30/06/2013: 0.6%; 30/09/2013 0.6%) of the total consolidated assets of the Banking Group.

15. Credit Related Commitments, Guarantees and Contingent Liabilities

		Face or contract value
		Unaudited Unaudited Audited
$ millions		30/06/2014 30/06/2013 30/09/2013
Credit related commitments
Commitments with certain drawdown due within one year		990 950 817
Commitments to provide financial services		26,621 24,212 24,446
Total credit related commitments		27,611 25,162 25,263
Guarantees and contingent liabilities
Financial guarantees		841 885 997
Standby letters of credit		61 46 32
Transaction related contingent items		1,199 1,054 1,059
Trade related contingent liabilities		91 81 113
Total guarantees and contingent liabilities		2,192 2,066 2,201

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

In December 2013, the Commerce Commission announced that it intended to file proceedings against the Bank (and two other banks) under the Fair Trading Act 1986 in relation to the sale of interest rate swaps to rural customers. On 2 April 2014, the Commission stated that it anticipates making a further announcement after it has progressed discussions with each bank. The Financial Markets Authority has also commenced an investigation into this matter. The potential outcome of the investigations or any proceedings which may be issued cannot be determined with any certainty at this stage.

In June 2013, litigation funder Litigation Lending Services (NZ) Limited filed a representative action against the Bank regarding certain fees charged to New Zealand customers. The potential outcome of this litigation cannot be determined with any certainty at this stage.

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 Bank New Zealand Limited

15

Notes to the Financial Statements

16. Changes to Comparatives

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

During the period, the classification of the balance sheet has been changed to reflect the nature of the financial assets and liabilities reported. Prior to the reclassification, the balance sheet was classified according to counterparty. This has resulted in the following changes to previously reported balance sheet classifications. Minor changes in the overall total assets and total liabilities have also occurred due to the adoption of IAS19 Employee Benefits and to gross up net insurance assets for the present value of reinsurance premiums payable.

Associated amounts in the income statement, statement of comprehensive income and cash flow statement have been restated accordingly, and the impact of the changes to these statements is not material.

30/06/2013	30/09/2013
Unaudited Previously Currently	Previously Currently
$ millions reported Change reported	reported Change reported
Assets
Liquid assets 3,004 (3,004) -	2,496 (2,496) -
Due from other financial institutions 3,625 (3,625) -	1,570 (1,570) -
Cash - 5,027 5,027	- 2,206 2,206
Settlement balances receivable - 230 230	- 514 514
Collateral paid - 615 615	- 1,002 1,002
Available-for-sale assets 1,235 619 1,854	782 160 942
Net loans and advances 88,629 226 88,855	90,489 348 90,837
Insurance policy assets 299 102 401	399 - 399
Other assets 668 (88) 580	731 (164) 567
Deferred tax assets 70 8 78	39 6 45
All other assets 25,169 - 25,169	23,932 - 23,932
Total assets 122,699 110 122,809	120,438 6 120,444
Liabilities
Due to other financial institutions 3,511 (3,511) -	1,517 (1,517) -
Settlement balances payable - 1,623 1,623	- 1,428 1,428
Collateral received - 1,526 1,526	- 438 438
Deposits and other borrowings 76,026 1,553 77,579	77,697 1,119 78,816
Due to immediate parent company 689 (689) -	939 (939) -
Payables and other liabilities 1,631 (372) 1,259	1,705 (510) 1,195
All other liabilities 29,414 - 29,414	27,113 - 27,113
Total liabilities 111,271 130 111,401	108,971 19 108,990
Equity 11,428 (20) 11,408	11,467 (13) 11,454

17. Subsequent Events

On 8 August 2014 the Bank’s Board resolved to pay a preference dividend of $7 million on 1 September 2014 and to pay an ordinary dividend of $830 million no later than 30 September 2014.

ANZ Bank New Zealand Limited

16

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 2014; and

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

Over the nine months ended 30 June 2014, after due enquiry, each Director believes that:

• (i) ANZ Bank New Zealand 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 Bank New Zealand 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, 13 August 2014.

Antony Carter

Shayne Elliott

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John Judge

(also on behalf of David Hisco and Michael Smith)

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Mark Verbiest

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Nigel Williams

(alternate director for Michael Smith)

Joan Withers

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