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

Feb 27, 2014

Australia and New Zealand Banking Group Limited

• New Zealand Branch Disclosure Statement

FOR THE THREE MONTHS ENDED 31 DECEMBER 2013 | NUMBER 21 ISSUED FEBRUARY 2014

Australia and New Zealand Banking Group Limited - New Zealand Branch

Disclosure Statement

For the three months ended 31 December 2013

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' and New Zealand Chief Executive Officer's
Statement	15

Glossary of Terms

In this 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 Funds Pty Limited, which is the immediate parent company of 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 8, 1 Victoria Street, Wellington, New Zealand, which is also ANZ New Zealand’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 (Overseas Incorporated Registered Banks) Order (No 2) 2013; 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

2

General Disclosures

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

Credit Rating Information

The Ultimate Parent Bank has three credit ratings, which are applicable to its long-term senior unsecured obligations.

The Ultimate Parent Bank’s credit ratings are:

The Ultimate Parent Bank’s	credit ratings are:
	Current Credit
Rating Agency	Rating Qualification
Standard & Poor’s	AA- Outlook Stable
Moody’s Investors Service	Aa2 Outlook Stable
Fitch Ratings	AA- Outlook Stable

Guarantors

No obligations of the NZ Branch are guaranteed as at 27 February 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 31 December 2013 of $4,041 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.

Financial Statements of the Ultimate Parent Bank and Overseas Banking Group

Copies of the most recent publicly available financial statements of the Ultimate Parent Bank and Overseas Banking Group will be provided immediately, free of charge, to any person requesting a copy where the request is made at the Registered Office. The most recent publicly available financial statements for the Ultimate Parent Bank and Overseas Banking Group can also be accessed at the internet address anz.com.

Directorate

Dr Gregory Clark and David Meiklejohn retired on 18 December 2013.

David Gonski became a Director of the Ultimate Parent Bank on 27 February 2014.

Auditor

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

3

Income Statement

Income Statement
	Unaudited Unaudited Audited
	3 months to 3 months to Year to
$ millions	Note 31/12/2013 31/12/2012 30/09/2013
Interest income	1,630 1,639 6,461
Interest expense	942 984 3,820
Net interest income	688 655 2,641
Net trading gains	64 38 163
Net funds management and insurance income	68 66 234
Other operating income	2 75 85 391
Share of associates' profit	1 3 7
Operating income	896 847 3,436
Operating expenses	372 398 1,513
Profit before provision for credit impairment and income tax	524 449 1,923
Provision for credit impairment	5 (19) 44 66
Profit before income tax	543 405 1,857
Income tax expense	150 109 488
Profit after income tax	393 296 1,369
Statement of Comprehensive Income
	Unaudited Unaudited Audited
	3 months to 3 months to Year to
$ millions	31/12/2013 31/12/2012 30/09/2013
Profit after income tax	393 296 1,369
Items that will not be reclassified to profit or loss
Actuarial gain on defined benefit schemes	- - 71
Income tax credit / (expense) relating to items not reclassified	- - (20)
Total items that will not be reclassified to profit or loss	- - 51
Items that may be reclassified subsequently to profit or loss
Unrealised losses recognised directly in equity	(19) (11) (138)
Realised gains transferred to income statement	(11) (6) (21)
Income tax credit relating to items that may be reclassified	8 5 45
Total items that may be reclassified subsequently to profit or loss	(22) (12) (114)
Total comprehensive income for the period	371 284 1,306

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

4

Statement of Changes in Equity

Statement of Changes in Equity
$ millions Share capital and head office account	Available- for-sale revaluation reserve		Cash flow		Retained earnings		Total equity
			hedging
			reserve
As at 1 October 2012 (Audited) 6,424	(3)		141		2,615		9,177
Restatement (Note 1) -	-		-		(21)		(21)
As at 1 October 2012 (Restated) 6,424	(3)		141		2,594		9,156
Profit after income tax -	-		-		296		296
Unrealised gains / (losses) recognised directly in equity -	1		(12)		-		(11)
Realised gains transferred to the income statement -	-		(6)		-		(6)
Income tax credit on items recognised directly in equity -	-		5		-		5
Total comprehensive income for the period -	1		(13)		296		284
As at 31 December 2012 (Unaudited) 6,424	(2)		128		2,890		9,440
As at 1 October 2012 (Audited) 6,424	(3)		141		2,615		9,177
Restatement (Note 1) -	-		-		(21)		(21)
As at 1 October 2012 (Restated) 6,424	(3)		141		2,594		9,156
Profit after income tax -	-		-		1,369		1,369
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)		1,420		1,306
Ordinary dividend paid -	-		-		(720)		(720)
As at 30 September 2013 (Audited) 6,424	(2)		26		3,294		9,742
Profit after income tax -	-		-		393		393
Unrealised gains / (losses) recognised directly in equity -	3		(22)		-		(19)
Realised gains transferred to the income statement -	-		(11)		-		(11)
Income tax credit / (expense) on items recognised directly in equity -	(1)		9		-		8
Total comprehensive income for the period -	2		(24)		393		371
As at 31 December 2013 (Unaudited) 6,424	-		2		3,687		10,113

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

5

Balance Sheet

Balance Sheet
		Unaudited	Unaudited	Audited
$ millions	Note	31/12/2013	31/12/2012	30/09/2013
Assets
Liquid assets		3,249	3,148	2,496
Due from other financial institutions		1,699	3,230	1,711
Trading securities		11,498	11,638	10,320
Derivative financial instruments		7,670	10,764	9,508
Current tax assets		-	7	1
Available-for-sale assets		1,115	47	782
Net loans and advances	4	101,192	96,820	99,765
Investments backing insurance policy liabilities		180	154	172
Insurance policy assets		408	416	399
Investments in associates		89	98	98
Other assets		614	598	735
Deferred tax assets		20	92	42
Premises and equipment		377	331	376
Goodwill and other intangible assets		3,446	3,503	3,448
Total assets		131,557	130,846	129,853
Interest earning and discount bearing assets		118,673	114,342	115,297
Liabilities
Due to other financial institutions		11,041	11,020	9,871
Deposits and other borrowings	8	81,073	77,080	77,696
Due to Immediate Parent Company		1,766	1,766	1,766
Derivative financial instruments		9,017	11,649	11,208
Payables and other liabilities		1,498	1,531	1,492
Current tax liabilities		28	-	-
Provisions		218	308	229
Bonds and notes		15,381	16,882	16,407
Loan capital		1,422	1,170	1,442
Total liabilities (excluding head office account)		121,444	121,406	120,111
Net assets (excluding head office account)		10,113	9,440	9,742
Represented by:
Share capital and head office account		6,424	6,424	6,424
Reserves		2	126	24
Retained earnings		3,687	2,890	3,294
Total equity and head office account		10,113	9,440	9,742
Interest and discount bearing liabilities		104,518	102,035	101,470

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

6

Condensed Cash Flow Statement

Condensed Cash Flow Statement
	Unaudited	Unaudited	Audited
	3 months to	3 months to	Year to
$ millions	31/12/2013	31/12/2012	30/09/2013
Cash flows from operating activities
Interest received	1,601	1,621	6,432
Interest paid	(959)	(993)	(3,859)
Other cash inflows provided by operating activities	225	231	852
Other cash outflows used in operating activities	(519)	(556)	(1,932)
Cash flows from operating profits before changes in operating assets and liabilities	348	303	1,493
Net changes in operating assets and liabilities	2,104	3,311	1,141
Net cash flows provided by operating activities	2,452	3,614	2,634
Cash flows from investing activities
Cash inflows provided by investing activities	10	1	69
Cash outflows used in investing activities	(21)	(30)	(142)
Net cash flows used in investing activities	(11)	(29)	(73)
Cash flows from financing activities
Cash inflows provided by financing activities	1,179	-	2,479
Cash outflows used in financing activities	(2,582)	(1,847)	(5,331)
Net cash flows used in financing activities	(1,403)	(1,847)	(2,852)
Net increase / (decrease) in cash and cash equivalents	1,038	1,738	(291)
Cash and cash equivalents at beginning of the period	3,002	3,293	3,293
Cash and cash equivalents at end of the period	4,040	5,031	3,002

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

Australia and New Zealand Banking Group Limited - New Zealand Branch

7

Notes to the Financial Statements

1. Significant Accounting Policies

(i) Reporting entity and statement of compliance

These interim financial statements are for ANZ New Zealand for the three months ended 31 December 2013. 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 ANZ New Zealand’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

ANZ New Zealand has applied the following new accounting standards and amendments in the preparation of these interim financial statements:

• 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).

Adoption of these standards has not resulted in any material change to ANZ New Zealand’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 13, 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.

(vi) Principles of consolidation

The consolidated financial statements of ANZ New Zealand comprise the financial statements of the NZ Branch and all the New Zealand businesses of all the subsidiaries of the Ultimate Parent Bank (those entities where it is determined that the Ultimate Parent Bank has capacity to control).

2. Other Operating Income

Other operating income includes a fair value loss of $28 million (31/12/2012 $23 million; 30/09/2013 $55 million) on hedging activities and the revaluation of financial liabilities designated at fair value. Other operating income excluding these fair value adjustments is $103 million (31/12/2012 $108 million; 30/09/2013 $446 million).

Australia and New Zealand Banking Group Limited - New Zealand Branch

8

Notes to the Financial Statements

3. Segmental Analysis

For segment reporting purposes, ANZ New Zealand is organised into four major business segments - 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 ANZ New Zealand’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. ANZ New Zealand'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 includes private banking and investment services provided to high net worth individuals, the ANZ wealth management and OnePath insurance businesses, and other investment products.

Institutional

Institutional provides financial services through a number of specialised units to large multi-banked corporations, often global, who 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 analysis[1 ]

$ millions	Retail Commercial Wealth Institutional Other2 Total
Unaudited 3 months to 31/12/2013
External operating income	363 709 23 211 (410) 896
Intersegment operating income	(38) (343) 38 (36) 379 -
Total operating income	325 366 61 175 (31) 896
Profit before income tax	162 256 27 134 (36) 543
Unaudited 3 months to 31/12/2012
External operating income	353 686 17 218 (427) 847
Intersegment operating income	(56) (328) 37 (62) 409 -
Total operating income	297 358 54 156 (18) 847
Profit before income tax	119 206 20 98 (38) 405
Audited year to 30/09/2013
External operating income	1,412 2,757 45 802 (1,580) 3,436
Intersegment operating income	(175) (1,313) 148 (194) 1,534 -
Total operating income	1,237 1,444 193 608 (46) 3,436
Profit before income tax	528 968 59 389 (87) 1,857

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

2 This segment has negative external operating income as this segment incurs funding costs on behalf of ANZ New Zealand and is reimbursed internally.

Australia and New Zealand Banking Group Limited - New Zealand Branch

9

Notes to the Financial Statements

4. Net Loans and Advances

	Unaudited Unaudited Audited
$ millions	Note 31/12/2013 31/12/2012 30/09/2013
Overdrafts	1,496 1,789 1,841
Credit card outstandings	1,541 1,455 1,458
Term loans - housing	59,826 56,191 58,849
Term loans - non-housing	38,519 37,835 37,832
Finance lease receivables	868 816 849
Gross loans and advances	102,250 98,086 100,829
Provision for credit impairment	5 (798) (1,082) (849)
Unearned finance income	(287) (263) (278)
Fair value hedge adjustment	(81) 19 (35)
Deferred fee revenue and expenses	(67) (62) (64)
Capitalised brokerage/mortgage origination fees	175 122 162
Total net loans and advances	101,192 96,820 99,765

5. Provision for Credit Impairment

	Retail Other retail Non retail
$ millions	mortgages exposures exposures Total
Unaudited 31/12/2013
Collective provision	113 110 306 529
Individual provision	75 22 172 269
Total provision for credit impairment	188 132 478 798
Collective provision credit	(2) (7) (18) (27)
Individual provision charge / (credit)	(6) 24 (10) 8
Total charge / (credit) in income statement	(8) 17 (28) (19)
Unaudited 31/12/2012
Collective provision	128 118 375 621
Individual provision	114 31 316 461
Total provision for credit impairment	242 149 691 1,082
Collective provision charge / (credit)	8 (7) - 1
Individual provision charge	5 11 27 43
Total charge in income statement	13 4 27 44
Audited 30/09/2013
Collective provision	115 117 324 556
Individual provision	83 22 188 293
Total provision for credit impairment	198 139 512 849
Collective provision credit	(5) (8) (51) (64)
Individual provision charge	15 67 48 130
Total charge / (credit) in income statement	10 59 (3) 66

Australia and New Zealand Banking Group Limited - New Zealand Branch

10

Notes to the Financial Statements

6. Impaired and Past Due Assets

	Retail Other retail Non retail
$ millions	mortgages exposures exposures Total
Unaudited 31/12/2013
Total impaired assets	195 49 599 843
Loans that are at least 90 days past due but not impaired	108 37 65 210
Unaudited 31/12/2012
Total impaired assets	336 48 923 1,307
Loans that are at least 90 days past due but not impaired	125 38 64 227
Audited 30/09/2013
Total impaired assets	214 49 666 929
Loans that are at least 90 days past due but not impaired	108 40 76 224

7. Financial Assets Pledged as Collateral

	Unaudited	Unaudited	Audited
$ millions	31/12/2013	31/12/2012	30/09/2013
Cash collateral given on derivative financial instruments	623	1,076	1,002
Trading securities encumbered through repurchase agreements	748	787	108
Residential mortgages pledged as security for covered bonds	6,364	4,896	5,857
Total assets of UDC Finance Limited pledged as collateral for secured stock	2,266	2,139	2,162
Total financial assets pledged as collateral	10,001	8,898	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.

ANZ New Zealand 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	Note	31/12/2013	31/12/2012	30/09/2013
Certificates of deposit		1,594	2,369	2,364
Term deposits		34,254	33,545	33,862
Demand deposits bearing interest		30,948	27,629	29,687
Deposits not bearing interest		6,135	5,737	5,526
Secured debenture stock	7	1,575	1,457	1,492
Commercial paper		6,567	6,343	4,765
Total deposits and other borrowings		81,073	77,080	77,696

9. Related Party Transactions

9. Related Party Transactions
	Unaudited Unaudited Audited
$ millions	31/12/2013 31/12/2012 30/09/2013
Total due from related parties	1,647 2,480 2,325
Total due to related parties	16,229 16,281 16,247

Australia and New Zealand Banking Group Limited - New Zealand Branch

11

Notes to the Financial Statements

10. Capital Adequacy

Adoption of Basel III capital framework

Effective 1 January 2013, APRA has adopted the majority of Basel III capital reforms in Australia. The Basel III reforms include: increased capital deductions from common equity tier one capital, an increase in capitalisation rates (including prescribed minimum capital buffers, fully effective 1 January 2016), tighter requirements around new tier one and tier two securities and transitional arrangements for existing tier one and tier two securities that do not conform to the new regulations. Other changes include capital requirements for counterparty credit risk and an increase in the asset value correlation with respect to exposures to large and unregulated financial institutions.

correlation with respect to exposures to large and unregulated financial institutions.	correlation with respect to exposures to large and unregulated financial institutions.
Ultimate Parent Bank
Overseas Banking Group (Extended Licensed Entity)
31/12/2013 31/12/2012 30/09/2013 30/09/2013 30/09/2012
Basel III Basel II Basel III Basel II	I Basel II
Common equity tier one capital 7.9% n/a 8.5% 8.5% n/a
Tier one capital 9.6% 10.9% 10.4% 10.6% 11.4%
Total capital 11.2% 12.1% 12.2% 12.5% 12.7%

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has accredited the Overseas Banking Group to use the Advanced Internal Ratings Based methodology for calculation of credit risk weighted assets and the Advanced Measurement Approach for the operational risk weighted asset equivalent.

Under prudential regulations, the Overseas Banking Group is required to maintain Prudential Capital Requirements ("PCRs"), which are at least equal to that specified under Basel III (previously Basel II), as determined by APRA. The Overseas Banking Group exceeded the PCRs set by APRA as at 31 December 2013 and for the comparative prior periods.

The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 31 December 2013. The Overseas Banking Group’s Pillar 3 disclosure document for the quarter ended 31 December 2013, in accordance with APS 330: Public Disclosure of Prudential Information, discloses capital adequacy ratios and other prudential information. This document can be accessed at the website anz.com.

Market risk

ANZ New Zealand’s aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B.

BS2B.
		Implied risk ihtd Ntil
Unaudited 31/12/2013
$ millions		wege exposure oona capital charge
Interest rate risk		5,243 419
Foreign currency risk		11 1
Equity risk		2 -
		5,256 420

Residential 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 ANZ New Zealand'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.

Unaudited 31/12/2013	On-balance	Off-balance
$ millions	sheet	sheet	Total
LVR range
0% - 59%	20,126	3,202	23,328
60% - 69%	9,680	830	10,510
70% - 79%	15,005	1,067	16,072
Less than 80%	44,811	5,099	49,910
80% - 89%	8,530	453	8,983
Over 90%	4,536	308	4,844
Total	57,877	5,860	63,737

Australia and New Zealand Banking Group Limited - New Zealand Branch

12

Notes to the Financial Statements

11. Liquidity Portfolio

ANZ New Zealand holds a diversified portfolio of cash and high quality liquid securities to support liquidity risk management. The size of ANZ New Zealand’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 Condensed Cash Flow Statement.

	Unaudited
$ millions	31/12/2013
Balances with central banks	1,703
Securities purchased under agreement to resell	236
Certificates of deposit	180
Government, local body stock and bonds	7,076
Government treasury bills	373
Other bonds	5,091
Total liquidity portfolio	14,659

12. Concentrations of Credit Risk to Individual Counterparties

ANZ New Zealand 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 three months ended 31 December 2013 there were no individual counterparties (excluding connected parties, governments and banks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or peak endof-day credit exposure equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of the period).

This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

13. Fair Value of Financial Assets and Financial Liabilities

Comparison of fair values and carrying amounts

The following table shows the fair values and carrying amounts for financial assets and financial liabilities that are not carried at fair value and the carrying amount is not a reasonable approximation of fair value.

Unaudited	31/12/2013
$ millions	Carrying amount	Fair value
Assets
Net loans and advances	101,192	101,220
Liabilities
Due to other financial institutions	11,041	11,159
Deposits and other borrowings	81,073	81,082
Bonds and notes	15,381	15,584
Loan capital	1,422	1,341

Valuation hierarchy for financial instruments held at fair value

ANZ New Zealand 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:

“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

ANZ New Zealand 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.

Australia and New Zealand Banking Group Limited - New Zealand Branch

13

Notes to the Financial Statements

Valuation hierarchy
$millions	Level 1	Level 2	Level 3	Total
Unaudited 31/12/2013
Trading securities	11,386	112	-	11,498
Derivative financial instruments	12	7,658	-	7,670
Available-for-sale assets	1,113	-	2	1,115
Investments backing insurance policy liabilities	125	55	-	180
Total financial assets held at fair value	12,636	7,825	2	20,463
Due to other financial institutions	41	-	-	41
Deposits and other borrowings	-	6,567	-	6,567
Derivative financial instruments	4	9,013	-	9,017
Payables and other liabilities	160	-	-	160
Total financial liabilities held at fair value	205	15,580	-	15,785

14. Insurance business

ANZ New Zealand 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 $796 million (31/12/2012: $785 million; 30/09/2013 $779 million), which is 0.6% (31/12/2012: 0.6%; 30/09/2013 0.6%) of the total consolidated assets of ANZ New Zealand.

15. Credit Related Commitments, Guarantees, Contingent Asset and Liabilities

	Face or contract value	Face or contract value
	Unaudited	Unaudited	Audited
$ millions	31/12/2013	31/12/2012	30/09/2013
Credit related commitments
Commitments with certain drawdown due within one year	724	856	817
Commitments to provide financial services	25,064	24,837	24,250
Total credit related commitments	25,788	25,693	25,067
Guarantees and contingent liabilities
Financial guarantees	982	696	997
Standby letters of credit	40	50	32
Transaction related contingent items	1,179	888	1,059
Trade related contingent liabilities	97	136	113
Total guarantees and contingent liabilities	2,298	1,770	2,201

ANZ New Zealand 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 advised the Bank that it intends to issue proceedings against the Bank (and two other banks) under the Fair Trading Act 1986 in relation to the marketing and sale of interest rate swaps to rural customers. The Commission has said that it aims to file proceedings in March 2014. The potential outcome of any proceedings which may be issued cannot be determined with any certainty at this stage.

In March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action against banks in New Zealand for certain fees charged to New Zealand customers over the past six years. Proceedings were filed against the Bank in June 2013. The potential outcome of this litigation cannot be determined with any certainty at this stage.

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

Contingent asset

In December 2013, the Bank reached a conditional agreement with insurers to settle its claim in relation to the Bank’s former involvement in the ING Diversified Yield Fund and the ING Regular Income Fund for payment of AUD85 million, which would be subject to taxation.

Australia and New Zealand Banking Group Limited - New Zealand Branch

14

Notes to the Financial Statements

16. Additional Disclosures

NZ Branch Funding		Unaudited
$ millions		31/12/2013
Total liabilities of the NZ Branch less amounts due to related parties		26
Overseas Banking Group Profitability and Size		Audited
AUD millions		30/09/2013
Net profit after tax for the year1		6,282
Net profit after tax for the year as a percentage of average total assets		0.93%
Total assets		702,991
Percentage change in total assets over the preceding year		9.5%
1Net profit after tax for the year includes $10 million of profit attributable to non-controlling interests.
Overseas Banking Group asset quality		Audited
AUD millions		30/09/2013
Gross impaired assets		4,264
Gross impaired assets as a percentage of total assets		0.61%
Total individually assessed provisions for impairment		1,467
Individually assessed provisions for impairment as a percentage of gross impaired assets		34.4%
Collective provision for credit impairment		2,887

Australia and New Zealand Banking Group Limited - New Zealand Branch

15

Directors’ and New Zealand Chief Executive Officer’s Statement

As at the date on which this Disclosure Statement is signed, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branch believes that:

• (i) The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order (No 2) 2013; and

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

Over the three months ended 31 December 2013, after due enquiry, each Director of the Ultimate Parent Bank and the Chief Executive Officer – NZ Branch believes that:

• (i) The Ultimate Parent Bank has complied with all Conditions of Registration that applied during that period;

• (ii) The NZ Branch had systems in place to monitor and control adequately the material risks of Relevant Members of ANZ New Zealand including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and other business risks, and that those systems were being properly applied.

This Disclosure Statement is dated 27 February 2014, and has been signed by the Chairman of the Ultimate Parent Bank, on behalf of all Directors, and by the Chief Executive Officer – NZ Branch.

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John Morschel Chairman, on behalf of the Directors:

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Anthony Bradshaw

Chief Executive Officer – NZ Branch

Paula Dwyer David Gonski, AC Peter Hay Lee Hsien Yang Graeme Liebelt Ian Macfarlane, AC Michael Smith, OBE Alison Watkins