Australia and New Zealand Banking Group Ltd. - Interim / Quarterly Report 2017

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Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Half Year 31 March 2017

Consolidated Financial Report Dividend Announcement and Appendix 4D

The Consolidated Financial Report and Dividend Announcement contains information required by Appendix 4D of the Australian Securities Exchange (ASX) Listing Rules. It should be read in conjunction with ANZ’s 2016 Annual Report, and is lodged with the ASX under listing rule 4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

APPENDIX 4D

Name of Company: Australia and New Zealand Banking Group Limited ABN 11 005 357 522

Report for the half year ended 31 March 2017	Report for the half year ended 31 March 2017
Operating Results1	AUD million
Operating income		-3%	to	9,996
Net statutory profit attributable to shareholders		6%	to	2,911
Cash profit 2		23%	to	3,411
Dividends3		Cents		Franked
		per		amount 4
		share		per share
Proposed interim dividend		80		100%
Record date for determining entitlements to the proposed 2017 interim dividend				9 May 2017
Payment date for the proposed 2017 interim dividend				3 July 2017

Dividend Reinvestment Plan and Bonus Option Plan

Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2017 interim dividend. For the 2017 interim dividend, ANZ intends to neutralise shares issued under the DRP by acquiring an equivalent number of shares on market (as approved by APRA). The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days commencing on 12 May 2017, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2017 interim dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time) on 10 May 2017. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 12 May 2017.

1 Unless otherwise noted, all comparisons are to the half year ended 31 March 2016.

2

Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. The non-core items are calculated consistently period on period so as not to discriminate between positive and negative adjustments and fall into one of the three categories: gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group; treasury shares, revaluation of policy liabilities, economic hedging and similar accounting items that represent timing differences that will reverse through earnings in the future; and accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up. Cash profit is not a measure of cash flow or profit determined on a cash basis. The net after tax adjustment was an addition to statutory profit of $500 million made up of several items. Refer pages 67 to 71 for further details.

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

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

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D

Half year ended 31 March 2017

*CONTENTS*	*PAGE*
Disclosure Summary	5
Summary	7
Group Results	17
Divisional Results	43
Profit Reconciliation	67
Condensed Consolidated Financial Statements	73
Supplementary Information	105
Definitions	117
ASX Appendix 4D Cross Reference Index	120
Alphabetical Index	121

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

All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based have been reviewed by the Group’s auditors, KPMG.The Company has a formally constituted Audit Committee of the Board of Directors. The signing of the Condensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 1 May 2017.

When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

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DISCLOSURE SUMMARY

SUMMARY OF 2017 HALF YEAR RESULTS AND ASSOCIATED DISCLOSURE MATERIALS

The following disclosure items were lodged separately with the ASX and NZX and can be accessed via the ANZ Shareholder Centre on the Group website http://www.shareholder.anz.com/ within the disclosures for 2017 Half Year Financial Results.

Consolidated Financial Report, Dividend Announcement & Appendix 4D
Results Presentation Pack
Investor Discussion Pack
News Release
APS 330 Pillar III Disclosure at 31 March 2017
Key Financial Data Summary
UK DTR Submission

DISCLOSURE SUMMARY

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SUMMARY

Summary

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

SUMMARY

Statutory Profit Results

Net interest income Other operating income1	Half Year	Mar 16 $M 7,568 2,706	Movement
	Mar 17 $M Sep 16 $M 7,416 7,527 2,580 2,745		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -2% -6% -5%
Operating income Operating expenses1	9,996 10,272 (4,731) (4,951)	10,274 (5,488)	-3% -3% -4% -14%
Profit before credit impairment and income tax Credit impairment charge	5,265 5,321 (719) (1,025)	4,786 (904)	-1% 10% -30% -20%
Profit before income tax Income tax expense Non-controlling interests	4,546 4,296 (1,627) (1,318) (8) (7)	3,882 (1,140) (4)	6% 17% 23% 43% 14% 100%
Profit attributable to shareholders of the Company	2,911 2,971	2,738	-2% 6%
Earnings Per Ordinary Share (cents) Reference Page Basic 86 Diluted 86	Half Year	Mar 16 94.8 89.7	Movement
	Mar 17 Sep 16 100.2 102.6 96.7 98.3		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% -2% 8%
Ordinary Share Dividends (cents) Interim - 100% franked2 Final - 100% franked2	Reference Page 85 85		Half Year Sep 16 Mar 16 - 80 80 - 80 80 78.8% 85.2% 10.5% 9.5% 0.65% 0.61% 2.06% 2.07% 48.2% 53.4% 1.08% 1.22% 1,034 878 (9) 26 1,025 904 0.36% 0.31% 0.36% 0.31%

		Mar 17


		80
		-
Total - 100% franked2 Ordinary share dividend payout ratio3 Profitability Ratios Return on average ordinary shareholders' equity4 Return on average assets5 Net interest margin5,6	85 85 20	80
		80.7%



		10.1%
		0.64%
		2.00%
Efficiency Ratios Operating expenses to operating income1 Operating expenses to average assets1,5


		47.3%
		1.03%
Credit Impairment Charge/(Release) Individual credit impairment charge ($M) Collective credit impairment charge/(release) ($M)


		786
		(67)
Total credit impairment charge ($M) Individual credit impairment charge as a % of average gross loans and advances5 Total credit impairment charge as a % of average gross loans and advances5	89	719
		0.27%
		0.25%

1. In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to other operating expenses to more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 half: $8 million; Mar 16 half: $9 million).

2. Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 9 cents per ordinary share for the proposed 2017 interim dividend (2016 final dividend: NZD 9 cents; 2016 interim dividend: NZD 10 cents).

3. Dividend payout ratio is calculated using the proposed 2017 interim, 2016 final, and 2016 interim dividends. 4.

Average ordinary shareholders’ equity excludes non-controlling interests. 5. Loans and advances and average assets as at 31 March 2017 include assets held for sale.

6. In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Refer to page 20 for further details.

SUMMARY

Cash Profit Results[1]

Net interest income Other operating income2	Half Year	Mar 16 $M 7,568 2,757		Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -2% 5% 5% 0% 0% -4% -14% 5% 15% -31% -22% 13% 24% 23% 26% 14% 100% 10% 23% Movement
	Mar 17 $M Sep 16 $M 7,416 7,527 2,887 2,742




Operating income2 Operating expenses	10,303 10,269 (4,731) (4,951)	10,325 (5,488)

Profit before credit impairment and income tax Credit impairment charge	5,572 5,318 (720) (1,038)	4,837 (918)

Profit before income tax Income tax expense Non-controlling interests	4,852 4,280 (1,433) (1,166) (8) (7)	3,919 (1,133) (4)


Cash profit	3,411 3,107	2,782
Earnings Per Ordinary Share (cents) Reference Page Basic 33 Diluted 33	Half Year	Mar 16 95.9 90.7
	Mar 17 Sep 16 116.7 106.7 111.9 102.0			Mar 17 v. Sep 16 Mar 17 v. Mar 16 9% 22% 10% 23%
Ordinary Share Dividends Ordinary share dividend payout ratio3	Reference Page 34		Half Year Sep 16 Mar 16 75.4% 83.9% 10.9% 9.7% 0.68% 0.62% 2.06% 2.07% 48.2% 53.2% 1.08% 1.22% 1,047 892 (9) 26 1,038 918 0.36% 0.31% 0.36% 0.32% Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 2% large 61% 9% 5% -22% -26% large large -79% large 10% 23%
		Mar 17


		68.9%
Profitability Ratios Return on average ordinary shareholders' equity4 Return on average assets5 Net interest margin5,6	20


		11.8%
		0.75%
		2.00%
Efficiency Ratios Operating expenses to operating income2 Operating expenses to average assets2,5


		45.9%
		1.03%
Credit Impairment Charge/(Release) Individual credit impairment charge ($M) Collective credit impairment charge/(release) ($M)	27 27


		787
		(67)
Total credit impairment charge ($M) Individual credit impairment charge as a % of average gross loans and advances5 Total credit impairment charge as a % of average gross loans and advances5	27	720
		0.27%
		0.25%
Cash Profit/(Loss) By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year	Mar 16 $M 1,769 633 646 167 60 (493)
	Mar 17 $M Sep 16 $M 1,798 1,778 1,021 408 677 622 123 157 (217) 99 9 43






Cash profit by division	3,411 3,107	2,782

1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the results of the ongoing business activities of the Group. Refer to pages 67 to 71 for the reconciliation between statutory and cash profit. 2.

In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to other operating expenses to more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 half: $8 million; Mar 16 half: $9 million). 3.

Dividend payout ratio is calculated using the proposed 2017 interim, 2016 final and 2016 interim dividends. 4.

Average ordinary shareholders’ equity excludes non-controlling interests. 5.

Loans and advances and average assets as at 31 March 2017 include assets held for sale. 6.

In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Refer to page 20 for further details.

SUMMARY

Key Balance Sheet Metrics[1]

Reference Page Capital Management Common Equity Tier 1 - APRA Basel 3 38 - Internationally Comparable Basel 32 38 Credit risk weighted assets ($B)3 108 Total risk weighted assets ($B)3 38 Leverage Ratio 40	As at Mar 17 Sep 16 Mar 16 10.1% 9.6% 9.8% 15.2% 14.5% 14.0% 341.8 352.0 334.3 397.0 408.6 388.3 5.3% 5.3% 5.1%	As at Mar 17 Sep 16 Mar 16 10.1% 9.6% 9.8% 15.2% 14.5% 14.0% 341.8 352.0 334.3 397.0 408.6 388.3 5.3% 5.3% 5.1%	Movement
			Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% 2% -3% 2%
Balance Sheet: Key Items Gross loans and advances ($B) Net loans and advances ($B) Total assets ($B) Customer deposits ($B) Total equity ($B)	580.4 580.0 565.9 576.3 575.9 561.8 896.5 914.9 895.3 468.2 449.6 446.8 57.9 57.9 56.5		0% 3% 0% 3% -2% 0% 4% 5% 0% 2%
Liquidity Risk Reference Page Liquidity Coverage Ratio 36	Half Year Average Mar 17 Sep 16 Mar 16 135% 125% 126%		Movement
			Mar 17 v. Sep 16 Mar 17 v. Mar 16 10% 9%
Reference Page Impaired Assets Gross impaired assets ($M) 29 Gross impaired assets as a % of gross loans and advances Net impaired assets ($M) 29 Net impaired assets as a % of shareholders' equity Individual provision ($M) 28 Individual provision as a % of gross impaired assets Collective provision ($M) 28 Collective provision as a % of credit risk weighted assets	As at Mar 17 Sep 16 Mar 16 2,940 3,173 2,883 0.51% 0.55% 0.51% 1,671 1,866 1,645 2.9% 3.2% 2.9% 1,269 1,307 1,238 43.2% 41.2% 42.9% 2,785 2,876 2,862 0.81% 0.82% 0.86%		Movement
			Mar 17 v. Sep 16 Mar 17 v. Mar 16 -7% 2% -10% 2% -3% 3% -3% -3%
Net Assets Net tangible assets attributable to ordinary shareholders ($B) Net tangible assets per ordinary share ($)	50.6 50.1 48.8 17.24 17.13 16.72		1% 4% 1% 3%
Net Loans And Advances By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	As at Mar 17 $B Sep 16 $B Mar 16 $B 336.7 327.1 321.4 120.8 125.9 125.6 104.9 107.9 99.2 1.8 2.0 1.9 12.5 13.4 13.9 (0.4) (0.4) (0.2)		Movement Mar 17 . Sep 16 Mar 17 v. Mar 16 3% 5% -4% -4% -3% 6% -10% -5% -7% -10% 0% 100% 0% 3%
		v
Net loans and advances by division	576.3 575.9 561.8

1. Balance Sheet amounts and metrics include assets and liabilities held for sale.

2. See page 38 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.

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

SUMMARY

Cash Profit Results – FX Adjusted

The following tables present the Group’s cash profit results neutralised for the impact of foreign currency translation. Comparative data has been adjusted to remove the translation impact of foreign exchange movements by retranslating prior period comparatives at current period foreign exchange rates. Refer to page 31 for further details on the impact of exchange rate movements.

Cash Profit - March 2017 Half Year vs March 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Mar 16 $M Mar 16 $M Mar 16 $M 7,416 7,568 (12) 7,556 2,887 2,757 (35) 2,722	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Mar 16 Mar 17 v. Mar 16 Mar 17 v. Mar 16 -2% 0% -2% 5% -1% 6%
Operating income Operating expenses	10,303 10,325 (47) 10,278 (4,731) (5,488) 45 (5,443)	0% 0% 0% -14% -1% -13%
Profit before credit impairment and income tax Credit impairment charge	5,572 4,837 (2) 4,835 (720) (918) 8 (910)	15% 0% 15% -22% -1% -21%
Profit before income tax Income tax expense Non-controlling interests	4,852 3,919 6 3,925 (1,433) (1,133) (10) (1,143) (8) (4) 1 (3)	24% 0% 24% 26% 1% 25% 100% large large
Cash profit	3,411 2,782 (3) 2,779	23% 0% 23%

Cash Profit - March 2017 Half Year vs September 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Sep 16 $M Sep 16 $M Sep 16 $M 7,416 7,527 - 7,527 2,887 2,742 2 2,744	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Sep 16 Mar 17 v. Sep 16 Mar 17 v. Sep 16 -1% 0% -1% 5% 0% 5%
Operating income Operating expenses	10,303 10,269 2 10,271 (4,731) (4,951) 6 (4,945)	0% 0% 0% -4% 0% -4%
Profit before credit impairment and income tax Credit impairment charge	5,572 5,318 8 5,326 (720) (1,038) 2 (1,036)	5% 0% 5% -31% 0% -31%
Profit before income tax Income tax expense Non-controlling interests	4,852 4,280 10 4,290 (1,433) (1,166) (5) (1,171) (8) (7) - (7)	13% 0% 13% 23% 1% 22% 14% 0% 14%
Cash profit	3,411 3,107 5 3,112	10% 0% 10%

SUMMARY

Cash Profit Results – Adjusted Pro-forma

The Group recognised the impact of a number of items collectively referred to as ‘specified items’ which form part of the Group’s cash profit. The tables on the following pages present the Group’s cash profit adjusted for these items to assist readers to understand the estimated growth rates of the ongoing business performance of the Group. The “Cash Profit Results - Adjusted Pro-forma” is not subject to review or audit by the external auditor. The numbers shown on pages 12 and 13 are on a pre-tax basis.

Asian minority investments adjustments

Pro-forma

On 30 March 2016, Bank of Tianjin (BoT), an equity accounted investment, completed a capital raising and listing on the Hong Kong Stock Exchange through an Initial Public Offering (IPO). As the Group did not participate in the capital raising, its ownership interest decreased from 14% to 12%. As a consequence, the Group ceased equity accounting for the investment in BoT and commenced accounting for it as an available for sale asset.
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited. The agreement states COSCO and Sino-Poland Enterprise will each acquire 10% of SRCB. The sale is subject to customary closing conditions and regulatory approvals and is expected to be completed in the September 2017 half. As a consequence, the Group ceased equity accounting for the investment in SRCB and commenced accounting for it as an asset held for sale.

Pro-forma results have been prepared on the assumption that the cessation of equity accounting for the above mentioned Asia minority investments took effect from 1 October 2015, effectively restating the Group’s cash profit for the March 2016, September 2016 and March 2017 half years.

Valuation adjustments

During the March 2016 half year, the Group recognised a $260 million impairment to its equity accounted investment in AMMB Holdings Berhad (AmBank) bringing the carrying value in line with its value-in-use calculation (refer Note 1 (iv) of the Condensed Consolidated Financial Statements).
On cessation of equity accounting for BoT on 30 March 2016, a net gain of $29 million was recognised in relation to the remeasurement of the investment to fair value and recycling the associated equity accounted reserves.

Mar-16 Sep-16 Mar-17	Pro-forma	Valuation adjustments
	BoT $M SRCB $M Total	AmBank $M BoT $M Total
	(86) (137) (223) - (122) (122) - (58) (58)	260 (29) 231 - - - - - -

Reclassification of Asia Retail and Wealth to held for sale

On 31 October 2016, the Group announced it had agreed to sell its Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to Singapore’s DBS Bank. Subject to regulatory approval, the Group expects the sale to be completed in stages in 2017 and early 2018. As a result of the sale agreement, the Group recognised $324 million of charges to impair software, goodwill and fixed assets as well as providing for redundancies (detailed in Note 11 of the Condensed Consolidated Financial Statements). This business is part of the Asia Retail & Pacific division. There are no pro-forma adjustments as the business was held throughout the March 2017 half.

 Software capitalisation changes

During the March 2016 half, the Group amended the application of the Group’s software capitalisation policy by increasing the threshold for capitalisation of software development costs to $20 million, reflecting the increasingly shorter useful life of smaller items of software, and directly expensing more project related costs. For software assets at 1 October 2015 with an original cost below the revised threshold, the carrying values were expensed through an accelerated amortisation charge of $556 million in the March 2016 half (recognised in TSO and Group Centre). In 2016 reporting, the Group also recognised a $183 million amortisation benefit offset by $370 million of increased operating expenses due to the application of the software capitalisation policy change. These items are not referred to as a specified item in 2017 reporting as they are treated consistently across 2016 and 2017 financial years.

 Restructuring

The Group accelerated the process of reshaping its workforce in 2016 to build a simpler, more agile bank. A restructuring expense of $278 million was recognised as a specified item in the September 2016 full year. Restructuring expenses of $36 million in the half year ended March 2017 have not been classified as a specified item.

SUMMARY

Restructuring expense by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year
	Sep 16 $M Mar 16 $M 45 24 39 53 18 3 7 13 1 12 30 33
Total	140 138

 Esanda Dealer Finance divestment and pro-forma

On 1 November 2015, the Group sold the Esanda Dealer Finance portfolio with the majority of the business transferred by 31 December 2015. The gain on sale of the Esanda Dealer divestment was $66 million, which was recognised in the March 2016 half. Pro-forma results have been prepared on the assumption that the sale took effect from 1 October 2015, effectively restating the Group’s cash profit for the March and September 2016 half years.

 Derivative CVA methodology change

In determining the fair value of a derivative, the Group recognises a derivative credit valuation adjustment (CVA) to reflect the probability that the counterparty may default and the Group may not receive the full market value of outstanding transactions. It represents an estimate of the credit adjustment a market participant would include when deriving a purchase price to acquire the exposure. During the September 2016 half, the Group revised its methodology for determining the derivative credit valuation adjustment to make greater use of market information and enhanced modelling, and to align with leading market practice. The impact to cash profit before income tax associated with this methodology change was an incremental derivative credit valuation adjustment charge of $237 million.

SUMMARY

Cash Profit Results - Adjusted Pro-forma

Cash Profit Net interest income Other operating income	March 2017 Half Year	March 2016 Half Year	Mar 17 v. Mar 16
	Cash profit Asian minority pro-forma Reclassific- ation of Asia Retail & Wealth to held for sale Total specified items Adjusted pro-forma	Cash profit Software capital- isation changes Asian minority pro-forma Asian minority valuation adjustments Restruct- uring Esanda Dealer Finance divestment and pro-forma Derivative CVA methodo- logy change Total specified items Adjusted pro-forma	Movement
	7,416 - - - 7,416 2,887 (58) 324 266 3,153	7,568 - - - - (31) - (31) 7,537 2,757 - (223) 231 - (78) - (70) 2,687	-2% 17%
Operating income Operating expenses	10,303 (58) 324 266 10,569 (4,731) - - - (4,731)	10,325 - (223) 231 - (109) - (101) 10,224 (5,488) 556 - - 138 11 - 705 (4,783)	3% -1%
Profit before credit impairment and income tax Credit impairment charge	5,572 (58) 324 266 5,838 (720) - - - (720)	4,837 556 (223) 231 138 (98) - 604 5,441 (918) - - - - 13 - 13 (905)	7% -20%
Profit before income tax Income tax expense Non-controlling interests	4,852 (58) 324 266 5,118 (1,433) - (40) (40) (1,473) (8) - - - (8)	3,919 556 (223) 231 138 (85) - 617 4,536 (1,133) (167) - - (37) 29 - (175) (1,308) (4) - - - - - - - (4)	13% 13% 100%
Cash profit	3,411 (58) 284 226 3,637	2,782 389 (223) 231 101 (56) - 442 3,224	13%
Profit before income tax by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	March 2017 Half Year	March 2016 Half Year	Mar 17 v. Mar 16
	Cash profit Asian minority pro-forma Reclassific- ation of Asia Retail & Wealth to held for sale Total specified items Adjusted pro-forma	Cash profit Software capital- isation changes Asian minority pro-forma Asian minority valuation adjustments Restruct- uring Esanda Dealer Finance divestment and pro-forma Derivative CVA methodo- logy change Total specified items Adjusted pro-forma	Movement
	2,570 - - - 2,570 1,441 - - - 1,441 940 - - - 940 174 - - - 174 (236) - 324 324 88 (37) (58) - (58) (95)	2,529 - - - 24 (19) - 5 2,534 879 - - - 53 - - 53 932 889 - - - 3 - - 3 892 235 - - - 13 - - 13 248 75 - - - 12 - - 12 87 (688) 556 (223) 231 33 (66) - 531 (157)	1% 55% 5% -30% 1% -39%
Profit before income tax Income tax expense & non- controllinginterests	4,852 (58) 324 266 5,118 (1,441) - (40) (40) (1,481)	3,919 556 (223) 231 138 (85) - 617 4,536 (1,137) (167) - - (37) 29 - (175) (1,312)	13% 13%
Cash profit	3,411 (58) 284 226 3,637	2,782 389 (223) 231 101 (56) - 442 3,224	13%

SUMMARY

Cash Profit Results - Adjusted Pro-forma

Cash Profit Net interest income Other operating income	March 2017 Half Year	September 2016 Half Year	Mar 17 v. Sep 16
	Cash profit Asian minority pro-forma Reclassific- ation of Asia Retail & Wealth to held for sale Total specified items Adjusted pro-forma	Cash profit Software capital- isation changes Asian minority pro-forma Asian minority valuation adjustments Restruct- uring Esanda Dealer Finance divestment and pro-forma Derivative CVA methodo- logy change Total specified items Adjusted pro-forma	Movement
	7,416 - - - 7,416 2,887 (58) 324 266 3,153	7,527 - - - - - - - 7,527 2,742 - (122) - - - 237 115 2,857	-1% 10%
Operating income Operating expenses	10,303 (58) 324 266 10,569 (4,731) - - - (4,731)	10,269 - (122) - - - 237 115 10,384 (4,951) - - - 140 6 - 146 (4,805)	2% -2%
Profit before credit impairment and income tax Credit impairment charge	5,572 (58) 324 266 5,838 (720) - - - (720)	5,318 - (122) - 140 6 237 261 5,579 (1,038) - - - - 10 - 10 (1,028)	5% -30%
Profit before income tax Income tax expense Non-controlling interests	4,852 (58) 324 266 5,118 (1,433) - (40) (40) (1,473) (8) - - - (8)	4,280 - (122) - 140 16 237 271 4,551 (1,166) - - - (40) (5) (69) (114) (1,280) (7) - - - - - - - (7)	12% 15% 14%
Cash profit	3,411 (58) 284 226 3,637	3,107 - (122) - 100 11 168 157 3,264	11%
Profit before income tax by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	March 2017 Half Year	September 2016 Half Year	Mar 17 v. Sep 16
	Cash profit Asian minority pro-forma Reclassific- ation of Asia Retail & Wealth to held for sale Total specified items Adjusted pro-forma	Cash profit Software capital- isation changes Asian minority pro-forma Asian minority valuation adjustments Restruct- uring Esanda Dealer Finance divestment and pro-forma Derivative CVA methodo- logy change Total specified items Adjusted pro-forma	Movement
	2,570 - - - 2,570 1,441 - - - 1,441 940 - - - 940 174 - - - 174 (236) - 324 324 88 (37) (58) - (58) (95)	2,533 - - - 45 16 - 61 2,594 600 - - - 39 - 237 276 876 858 - - - 18 - - 18 876 219 - - - 7 - - 7 226 121 - - - 1 - - 1 122 (51) - (122) - 30 - - (92) (143)	-1% 64% 7% -23% -28% -34%
Profit before income tax Income tax expense & non- controllinginterests	4,852 (58) 324 266 5,118 (1,441) - (40) (40) (1,481)	4,280 - (122) - 140 16 237 271 4,551 (1,173) - - - (40) (5) (69) (114) (1,287)	12% 15%
Cash profit	3,411 (58) 284 226 3,637	3,107 - (122) - 100 11 168 157 3,264	11%

SUMMARY

Full time equivalent staff

As at 31 March 2017, ANZ employed 46,046 people worldwide (Sep 16: 46,554; Mar 16: 48,896) on a full-time equivalent basis ("FTEs").

Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	As at Mar 17 Sep 16 Mar 16 11,518 11,639 12,094 4,899 5,112 5,601 6,250 6,317 6,401 2,043 2,098 2,158 4,719 4,894 5,440 16,617 16,494 17,202	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -5% -4% -13% -1% -2% -3% -5% -4% -13% 1% -3%
Total	46,046 46,554 48,896	-1% -6%
Average FTE	46,462 47,489 49,777	-2% -7%
Geography Australia Asia Pacific, Europe & America New Zealand	As at Mar 17 Sep 16 Mar 16 19,722 19,957 20,808 18,563 18,728 20,025 7,761 7,869 8,063	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -5% -1% -7% -1% -4%
Total	46,046 46,554 48,896	-1% -6%

1. Full time equivalent staff have been restated to reflect organisational changes. The net impact of these organisational changes was a decrease in TSO and Group Centre of 8,012 FTE as at September 2016 (March 16: 8,327 FTE), offset by an FTE increase across other divisions. Nil impact to total Group FTE. Refer to page 44 for further details.

Other Non-financial Information

Shareholder value - ordinary shares Share price ($) - high - low - closing Closing market capitalisation of ordinary shares ($B) Total shareholder returns (TSR)	Half Year Mar 17 Sep 16 Mar 16 32.44 27.85 29.17 25.78 22.06 21.86 31.82 27.63 23.46 93.4 80.9 68.4 22.4% 21.6% -10.2%	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 16% 11% 17% 18% 15% 36% 15% 37% 4% large

Credit Ratings Moody's Investor Services Standard & Poor's Fitch Ratings	As at Mar 17
	Short-Term Long-Term Outlook P-1 Aa2 Negative A-1+ AA- Negative F1+ AA- Stable

GROUP RESULTS

Group Results

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

GROUP RESULTS

Non-IFRS information

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

Cash profit

Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit (refer to Definitions for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review or audit by the external auditor. The external auditor has informed the Audit Committee that recurring adjustments have been determined on a consistent basis across each period presented, and the additional adjustment for the reclassification of Shanghai Rural Commercial Bank to held for sale in the March 2017 half is appropriate.

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

Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit1 Treasury shares adjustment Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades Reclassification of SRCB to held for sale	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,911 2,971 2,738 76 73 (29) 36 (40) (14) 178 (26) 128 (105) 131 (39) (1) (2) (2) 316 - -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% 4% large large large large 39% large large -50% -50% n/a n/a
Total adjustments between statutory profit and cash profit	500 136 44	large large
Cash Profit	3,411 3,107 2,782	10% 23%

1. Refer to pages 67 to 71 for analysis of the adjustments between statutory profit and cash profit.

Group Performance Net interest income Other operating income	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 7,416 7,527 7,568 2,887 2,742 2,757	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -2% 5% 5%
Operating income Operating expenses	10,303 10,269 10,325 (4,731) (4,951) (5,488)	0% 0% -4% -14%
Profit before credit impairment and income tax Credit impairment charge	5,572 5,318 4,837 (720) (1,038) (918)	5% 15% -31% -22%
Profit before income tax Income tax expense Non-controlling interests	4,852 4,280 3,919 (1,433) (1,166) (1,133) (8) (7) (4)	13% 24% 23% 26% 14% 100%
Cash profit	3,411 3,107 2,782	10% 23%

Cash Profit/(Loss) By Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,798 1,778 1,769 1,021 408 633 677 622 646 123 157 167 (217) 99 60 9 43 (493)	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 2% large 61% 9% 5% -22% -26% large large -79% large
Cash profit	3,411 3,107 2,782	10% 23%

GROUP RESULTS

Group Cash Profit – March 2017 Half Year v March 2016 Half Year

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March 2017 v March 2016
Cash profit increased 23% partly reflecting a number of specified items taken in the March 2016 half. Excluding specified items, cash profit increased 13%.
Net interest income decreased $152 million (-2%) as the result of a 7 basis point decrease in net interest margin, partially offset by 2% growth in average interest earning assets. The net interest margin decline was due to higher average funding costs, deposit competition, growth in the liquidity portfolio and lower capital earnings due to the lower interest rate environment. These impacts were partially offset by repricing in Home Loans. Average interest earning assets growth reflected ANZ’s strategic focus with growth in Home Loans in Australia and New Zealand, partially offset by a reduction in Institutional lending due to portfolio rebalancing.
Other operating income increased $130 million (+5%) benefiting from a significant improvement in Markets other operating income of $485 million, the $114 million gain on sale of 100 Queen Street, Melbourne, and the $260 million impairment of the investment in AmBank in the March 2016 half. A number of sales related transactions had an unfavourable impact including a $324 million charge related to the sale of Retail and Wealth businesses in Asia, a $177 million loss of earnings from SRCB, BoT and Esanda Dealer Finance, and the $66 million gain on sale of the Esanda Dealer Finance divestment in the March 2016 half. This was additional to a $103 million reduction in funds management and insurance income in Wealth Australia and a $59 million decrease in net fee and commission income.
Operating expenses decreased $757 million (-14%), driven by a $556 million charge for software capitalisation policy changes in the March 2016 half, a $153 million (-5%) reduction in personnel expenses reflecting a 7% reduction in average FTE, and a reduction in restructuring expenses of $102 million (-74%). Excluding the impact of software capitalisation policy changes, Technology expenses increased $54 million (+7%) due to higher amortisation from software.
Credit impairment charges decreased $198 million (-22%). Individual credit impairment charges decreased by $105 million (-12%) primarily due to a reduction in resource related exposures in the Institutional division. Collective impairment charges decreased by $93 million due to an improvement in the Group’s overall risk profile, portfolio rebalancing particularly in Institutional and migration from collective to individual provisions, this was partially offset by a management adjustment for the Queensland cyclone.
March 2017 v September 2016

Cash profit increased 10% compared with the September 2016 half. Excluding specified items, cash profit increased 11%.

Net interest income decreased $111 million (-1%) as the result of a 6 basis point decrease in net interest margin, partially offset by 2% growth in average interest earning assets. The net interest margin decline was due to growth in the liquidity portfolio, lower capital earnings as the result of the lower interest rate environment, higher average funding costs and deposit competition, partially offset by repricing in Home Loans. Average interest earning assets growth was driven by Home Loan growth in Australia and New Zealand.
Other operating income increased $145 million (+5%) benefiting from a significant improvement in Markets other operating income of $284 million, the $114 million gain on sale of 100 Queen Street, Melbourne, and the $237 million derivative CVA methodology charge recognised in the September 2016 half. Two sales related transactions had an unfavourable impact, the $324 million charge related to the sale of Retail and Wealth businesses in Asia and the $64 million loss of earnings from SRCB. This was additional to a $79 million reduction in funds management and insurance income.
Operating expenses decreased $220 million (-4%) driven by a $104 million (-74%) reduction in restructuring expenses and a $92 million (-3%) reduction in personnel expenses reflecting a 2% reduction in average FTE.
Credit impairment charges decreased $318 million (-31%). Individual credit impairment charges decreased by $260 million (-25%) due to a $226 million decrease in the Institutional division. Collective impairment charges decreased $58 million due to an improvement in the Group’s overall risk profile, portfolio rebalancing particularly in Institutional and migration from collective to individual provisions, which was partially offset by a management adjustment for the Queensland cyclone.

GROUP RESULTS

Net interest income

In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. The revised calculation is in line with other major banks. Originally reported net interest margin (Sept 16 half: 2.00%; Mar 16 half: 2.01%) and total average interest earning assets (Sept 16 half: $753,928 million; Mar 16 half: $754,391 million) have been restated accordingly in March 2017 half year reporting.

Group Cash net interest income1 Average interest earning assets2,3 Average deposits and other borrowings3 Net interest margin (%) - cash2	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 7,416 7,527 7,568 743,906 730,275 731,395 597,337 585,672 587,235 2.00 2.06 2.07	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -2% 2% 2% 2% 2% -6 bps -7 bps
Group (excluding Markets) Cash net interest income1 Average interest earning assets2,3 Average deposits and other borrowings3 Net interest margin (%) - cash2	6,938 7,055 7,008 538,598 533,782 533,111 452,671 453,424 453,136 2.58 2.64 2.63	-2% -1% 1% 1% 0% 0% -6 bps -5 bps

Cash net interest margin by major division Australia1 Net interest margin (%)2 Average interest earning assets2 Average deposits and other borrowings Institutional Net interest margin (%) Average interest earning assets Average deposits and other borrowings New Zealand1 Net interest margin (%) Average interest earning assets3 Average deposits and other borrowings3	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2.69 2.74 2.75 308,391 301,516 296,012 193,671 185,274 181,118 1.05 1.11 1.15 302,578 297,889 313,003 242,402 232,143 233,775 2.30 2.35 2.40 109,664 105,659 100,674 79,190 77,661 73,175	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -5 bps -6 bps 2% 4% 5% 7% -6 bps -10 bps 2% -3% 4% 4% -5 bps -10 bps 4% 9% 2% 8%

1. Cash net interest income includes income relating to assets held for sale and income earned on assets prior to divestment.

2. In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Average home loan deposit offset balances for the March 2017 half for the Australia division were $24,979 million (Sep 16 half: $23,653 million; Mar 16 half: $22,996 million).

3. Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

Group net interest margin – March 2017 Half Year v March 2016 Half Year

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GROUP RESULTS

March 2017 v March 2016

Net interest margin (-7 bps)

Asset mix and funding mix (0 bps): favourable mix impact from a higher proportion of capital and run-off of lower margin lending products in Institutional, offset by the adverse mix impact from the Esanda Dealer Finance divestment and improved funding mix.
Funding costs (-3 bps): adverse impact due to increased wholesale funding costs.
Deposit competition (-4 bps): lower margin from increased competition in Australia and New Zealand, partially offset by improved margins in Asia.
Asset competition and risk mix (+7 bps): increase driven by Home Loans repricing.
Markets and treasury (-7 bps): adverse impact to earnings on capital as the result of lower interest rates, growth in the liquidity portfolio and lower earnings from markets activities.

Average interest earning assets (+$12.5 billion or +2%)

Average gross loans and advances (+$5.2 billion or +1%): increase driven by growth in Home Loans, partially offset by a decline in Institutional lending due to portfolio rebalancing.
Average trading and available for sale assets (+$5.7 billion or +6%): increase driven by growth in the liquidity portfolio.
Average cash (+$2.2 billion or +4%): increase as the result of management of liquidity requirements.

Average deposits and other borrowings (+$10.1 billion or +2%)

Average deposits and other borrowings (+$10.1 billion or +2%): increase driven by growth in customer deposits across Australia, Institutional and New Zealand divisions, offset by a decline in Treasury (commercial paper).

Group net interest margin – March 2017 Half Year v September 2016 Half Year

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March 2017 v September 2016

Net interest margin (-6 bps)

Asset mix and funding mix (0 bps): favourable mix impact from a higher proportion of capital and run-off of lower margin loan products in Institutional, offset by adverse mix impact from lower growth in Cards in the Australia division and improved funding mix.
Funding costs (-1 bps): adverse impact due to increased wholesale funding costs.
Deposit competition (-2 bps): lower margin from increased competition in Australia and New Zealand, partially offset by improved margins in Asia.
Asset competition and risk mix (+1 bps): driven by Home Loan repricing, partially offset by lower Institutional and Commercial lending margins.
Markets and treasury (-4 bps): adverse impact to earnings on capital as the result of lower interest rates, growth in the liquidity portfolio and lower earnings from markets activities.

Average interest earning assets (+$13.6 billion or +2%)

Average gross loans and advances (+$4.8 billion or +1%): increase driven by growth in Home Loans, partially offset by a decline in Institutional lending due to portfolio rebalancing.
Average trading and available for sale assets (+$4.1 billion or +4%): increase driven by growth in the liquidity portfolio.
Average cash (+7.2 billion or +16%): increase as the result of management of liquidity requirements.

Average deposits and other borrowings (+$11.7 billion or +2%)

Average deposits and other borrowings (+$11.7 billion or +2%): increase driven by growth in customer deposits across Australia, New Zealand and Institutional divisions, offset by a decline in Treasury (commercial paper).

GROUP RESULTS

Other operating income

Net fee and commission income1 Net funds management and insurance income1 Markets other operating income2 Share of associates' profit1 Net foreign exchange earnings1 Other1,3	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,177 1,201 1,236 668 747 771 886 365 401 173 243 301 157 149 141 (174) 37 (93)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% -5% -11% -13% large large -29% -43% 5% 11% large -87%
Cash other operating income	2,887 2,742 2,757	5% 5%

Markets income Net interest income Other operating income2	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 478 472 560 886 365 401 1,364 837 961 Half Year Mar 17 $M Sep 16 $M Mar 16 $M 602 597 609 1,357 817 916 317 329 315 539 605 639 (139) 235 243 211 159 35	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% -15% large large
Cash Markets income		63% 42%
Other operating income by division Australia Institutional2 New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre3		Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% -1% 66% 48% -4% 1% -11% -16% large large 33% large
Cash other operating income	2,887 2,742 2,757	5% 5%

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

3. Other income for the March 2017 half includes the $324 million charge related to the sale of Retail & Wealth businesses in Asia, and the $114 million gain on sale of 100 Queen Street, Melbourne. The March 2016 half includes the $260 million impairment of the investment in AmBank, the $29 million gain on cessation of equity accounting of BoT, and the $66 million gain on the Esanda Dealer Finance divestment.

Other operating income – March 2017 Half Year v March 2016 Half Year

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GROUP RESULTS

March 2017 v March 2016

Other operating income increased by $130 million (+5%). Key drivers:

Net fee and commission income (-$59 million or -5%)

$37 million decrease as the result of lower performance in Asia Retail & Pacific.
$22 million decrease in Institutional primarily due to portfolio rebalancing.

Net funds management and insurance income (-$103 million or -13%)

$104 million decrease in Wealth Australia primarily due to adverse disability claims, partially offset by favourable Lenders Mortgage Insurance experience, reduced fee income as expected from ongoing rationalisation of legacy investment platforms to SmartChoice and lower income from invested capital.

Cash Markets income (+$403 million or +42%)

$258 million increase in Franchise Trading as the result of favourable trading conditions arising from a strengthening USD and rising yield curves. Tighter credit spreads, combined with the impact of foreign exchange and interest rate movements resulted in an increase of $197 million from derivative credit and funding valuation adjustments, net of associated hedges.
$204 million increase in Balance Sheet Trading reflecting growth in the liquidity portfolio and tighter bond spreads.
$59 million decrease in Franchise Sales due to reduced client hedging activity as a result of low FX volatility and the low interest rate environment.

Share of associates’ profit (-$128 million or -43%)

$165 million decrease due to the cessation of equity accounting for BoT from March 2016 and SRCB from January 2017.
$33 million increase due to P.T. Bank Pan Indonesia.

Other (-$81 million or -87%)

$324 million decrease as a result of the sale of Retail and Wealth businesses in Asia.
$66 million decrease due to the Esanda Dealer Finance gain on divestment taken in the March 2016 half.
$29 million decrease due to a valuation gain on cessation of equity accounting for BoT in the March 2016 half.
$260 million increase due to the impairment of the investment in AmBank in the March 2016 half.
$114 million gain on sale of 100 Queen Street, Melbourne.
March 2017 v September 2016

Other operating income increased by $145 million (+5%). Key drivers:

Net fee and commission income (-$24 million or -2%)

$35 million decrease as the result of lower performance in Asia Retail & Pacific.

Net funds management and insurance income (-$79 million or -11%)

$66 million decrease in Wealth Australia primarily due to adverse disability and lump sum claims, partially offset by favourable Lenders Mortgage Insurance experience, reduced fee income as expected from ongoing rationalisation of legacy investment platforms to SmartChoice and lower returns from the guaranteed business and invested capital.

Cash Markets income (+$527 million or +63%)

Excluding the $237 million charge relating to the derivative CVA methodology change in the September 2016 half, Markets income increased $290 million.
$231 million increase in Franchise Trading primarily attributed to valuation adjustments net of associated hedges as a result of tighter credit spreads combined with the impact of foreign exchange and interest rate movements.
$118 million increase in Balance Sheet Trading due to tighter bond spreads.
$59 million decrease in Franchise Sales due to lower client flows as a result of reduced volumes of debt issuances in Asia and New Zealand.

Share of associates’ profit (-$70 million or -29%)

$64 million loss of income due to the cessation of equity accounting for SRCB from January 2017.

Other (-$211 million)

$324 million charge as the result of the sale of Retail and Wealth businesses in Asia.
$114 million gain on sale of 100 Queen Street, Melbourne.

GROUP RESULTS

Operating Expenses

Personnel expenses Premises expenses Technology expenses1 Restructuring expenses Other expenses	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,648 2,740 2,801 457 470 458 831 834 1,333 36 140 138 759 767 758	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% -5% -3% 0% 0% -38% -74% -74% -1% 0%
Total cash operating expenses	4,731 4,951 5,488	-4% -14%
Full time equivalent staff (FTE) Average full time equivalent staff (FTE)	46,046 46,554 48,896 46,462 47,489 49,777	-1% -6% -2% -7%

1. Technology expenses include a $556 million charge associated with accelerated amortisation from the software capitalisation policy changes in the March 2016 half. Refer to page 12 for further details.

Expenses by division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,693 1,731 1,695 1,379 1,445 1,513 600 635 590 370 391 410 353 379 429 336 370 851	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 0% -5% -9% -6% 2% -5% -10% -7% -18% -9% -61%
Total cash operating expenses	4,731 4,951 5,488	-4% -14%

Operating expenses – March 2017 Half Year v March 2016 Half Year

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 March 2017 v March 2016

Operating expenses decreased 14% reflecting a number of specified items taken in the March 2016 half. Excluding specified items, operating expenses were down 1%.

Personnel expenses decreased $153 million (-5%) due to a 7% reduction in average FTE, partially offset by wage inflation.
Technology expenses decreased $502 million (-38%) primarily as the result of software capitalisation policy charges of $556 million in the March 2016 half. Excluding this, Technology expenses increased $54 million (+7%) due to higher amortisation from software.
Restructuring expenses decreased $102 million (-74%) with larger investment in 2016 at the reset of the Group’s strategy.
March 2017 v September 2016

Operating expenses decreased 4%. Excluding specified items, operating expenses decreased 2%.

Personnel expenses decreased $92 million (-3%) due to a 2% reduction in average FTE, partially offset by wage inflation.
Restructuring expenses decreased $104 million (-74%) with larger investment in 2016 at the reset of the Group’s strategy.

GROUP RESULTS

Technology infrastructure spend

Technology infrastructure spend includes expenditure that develops and enhances the Group's technology infrastructure to meet business and strategic objectives and to improve capability and efficiency. The analysis below aggregates all projects over $1 million. Spend on projects less than $1 million was $84 million in the March 2017 half (Sep 16 half: $92 million; Mar 16 half $83 million).

Expensed investment spend Capitalised investment spend	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 225 254 272 160 203 197	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -11% -17% -21% -19%
Technology infrastructure spend	385 457 469	-16% -18%
Comprising Growth Productivity Risk and compliance Infrastructure and other	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 122 147 186 83 84 87 101 114 115 79 112 81	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -17% -34% -1% -5% -11% -12% -29% -2%
Technology infrastructure spend	385 457 469	-16% -18%

Technology infrastructure spend breakdown: Mar-17 $M

March 2017 v March 2016: The reduced investment in the March 2017 half reflects lower investment in Wealth Australia and Institutional as well as productivity initiatives to reduce costs of project delivery.
March 2017 v September 2016: The reduced investment in the March 2017 half reflects the recalibration of investment spend for a simpler and less complex organisation. Project delivery initiatives delivered savings across all divisions and expenditure on productivity initiatives was maintained.

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----- Start of picture text -----

Infrastructure
and other Productivity
79, (20%) 83, (22%)
Risk and
compliance Growth
101, (26%) 122, (32%)
----- End of picture text -----

Technology infrastructure spend by division Australia Institutional New Zealand Asia Retail & Pacific Wealth Australia TSO and Group Centre	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 130 131 143 60 79 96 31 38 37 1 3 4 25 24 45 138 182 144	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -9% -24% -38% -18% -16% -67% -75% 4% -44% -24% -4%
Technology infrastructure spend	385 457 469	-16% -18%

GROUP RESULTS

Software capitalisation

As at 31 March 2017, the Group’s intangible assets included $1,922 million of costs incurred to acquire and develop software. Details are set out in the table below:

table below:
Balance at start of period Software capitalised during the period Amortisation during the period - Current period amortisation - Accelerated amortisation Software impaired/written-off - Reclassification of Asia Retail & Wealth to held for sale1 - Other Foreign exchange differences	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,202 2,249 2,893 172 222 209 (295) (255) (245) - - (556) (154) (3) (1) (1) (22) (1) (2) 11 (50)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% -24% -23% -18% 16% 20% n/a -100% large large -95% 0% large -96%
Total capitalised software	1,922 2,202 2,249	-13% -15%
Net book value by Division Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific1 TSO and Group Centre	As at Mar 17 $M Sep 16 $M Mar 16 $M 459 488 514 608 782 853 26 27 24 19 20 24 - 63 67 810 822 767	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -6% -11% -22% -29% -4% 8% -5% -21% -100% -100% -1% 6%
Total	1,922 2,202 2,249	-13% -15%

1. Reclassification of Asia Retail & Wealth to held for sale includes impairment to software supporting both the Institutional and Asia Retail & Wealth businesses. There has been no impairment to software supporting the Institutional business. These impairment charges are recognised as other operating income in the Condensed Consolidated Income Statement.

GROUP RESULTS

Credit risk

Credit risk
Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Half Year Mar 17 Individual charge $M Collective charge $M Total charge $M 430 42 472 210 (85) 125 61 (24) 37 86 (11) 75 - 11 11	Half Year Mar 16 Individual charge $M Collective charge $M Total charge $M 429 33 462 340 (16) 324 43 (1) 42 80 10 90 - - -	Movement
			Mar 17 v. Mar 16
			Individual charge % Collective charge % Total charge % 0% 27% 2% -38% large -61% 42% large -12% 8% large -17% n/a n/a n/a
Total	787 (67) 720	892 26 918	-12% large -22%

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Half Year	Half Year	Movement
	Mar 17	Sep 16	Mar 17 v. Sep 16
	Individual charge $M Collective charge $M Total charge $M	Individual charge $M Collective charge $M Total charge $M 469 (11) 458 436 (17) 419 61 17 78 81 1 82 - 1 1	Individual charge % Collective charge % Total charge % -8% large 3% -52% large -70% 0% large -53% 6% large -9% n/a large large
	430 42 472
	210 (85) 125
	61 (24) 37
	86 (11) 75
	- 11 11
Total	787 (67) 720	1,047 (9) 1,038	-25% large -31%

Individual credit impairment charge

Individual credit impairment charge
New and increased individual credit impairments Australia Institutional New Zealand Asia Retail & Pacific	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 617 623 600 299 491 355 102 106 96 104 101 100	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% 3% -39% -16% -4% 6% 3% 4%
New and increased individual credit impairments	1,122 1,321 1,151	-15% -3%
Recoveries and write-backs Australia Institutional New Zealand Asia Retail & Pacific	(187) (154) (171) (89) (55) (15) (41) (45) (53) (18) (20) (20)	21% 9% 62% large -9% -23% -10% -10%
Recoveries and write-backs	(335) (274) (259)	22% 29%
Total individual credit impairment charge	787 1,047 892	-25% -12%

 March 2017 v March 2016

The individual credit impairment charge decreased $105 million (-$12%) driven by a $76 million (+29%) increase in recoveries and write-backs and a $29 million (-3%) decrease in new and existing provisions. The Institutional division individual credit impairment charge decreased $130 million (-38%) reflecting an overall net reduction in resource and commodity stresses across the portfolio and higher single name customer write-backs in the March 2017 half.

 March 2017 v September 2016

The individual credit impairment charge decreased $260 million (-25%) driven primarily by a $226 million (-52%) decrease in the Institutional division reflecting the one-off settlement of the Oswal legal dispute in the September 2016 half, and an overall net reduction in resource and commodity stresses across the portfolio in the March 2017 half. A $39 million (-8%) decrease in Australia division individual credit impairment charge is predominantly the result of higher recoveries and write-backs in the Small Business Banking portfolio.

GROUP RESULTS

Collective credit impairment charge

Collective credit impairment charge
Collective credit impairment charge/(release) by source Lending growth Risk profile Economic cycle adjustment	Half Year Mar 17 $M Sep 16 $M Mar 16 $M (30) (59) 56 (78) 50 (30) 41 - -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16
		-49% large
		large large
		n/a n/a
Total collective credit impairment charge/(release)	(67) (9) 26	large large

 March 2017 v March 2016

The collective credit impairment charge decreased $93 million driven by the Institutional division as the result of customer migration from collective to individual provisioning, and a reduction in lending assets to improve the Institutional risk profile in line with portfolio rebalancing, partially offset by a management adjustment for the Queensland cyclone.

 March 2017 v September 2016

The collective credit impairment release increased $58 million driven by the Institutional division as the result of customer migration from collective to individual provisioning, and a reduction in lending assets to improve the Institutional risk profile in line with portfolio rebalancing, partially offset by a management adjustment for the Queensland cyclone.

Provision for credit impairment

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	As at Mar 17 Individual provision $M Collective provision $M1 Total provision $M 647 1,230 1,877 470 1,024 1,494 135 335 470 17 182 199 - 14 14	As at Mar 16 Individual provision $M Collective provision $M1 Total provision $M 547 1,204 1,751 556 1,126 1,682 114 337 451 21 192 213 - 3 3	Movement
			Mar 17 v Mar 16
			Individual provision % Collective provision % Total provision % 18% 2% 7% -15% -9% -11% 18% -1% 4% -19% -5% -7% n/a large large
Total	1,269 2,785 4,054	1,238 2,862 4,100	3% -3% -1%

Division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	As at Mar 17 Individual provision $M Collective provision $M1 Total provision $M 647 1,230 1,877 470 1,024 1,494 135 335 470 17 182 199 - 14 14	As at Sep 16 Individual provision $M Collective provision $M1 Total provision $M 606 1,188 1,794 569 1,114 1,683 117 374 491 15 196 211 - 4 4	Movement
			Mar 17 v. Sep 16
			Individual provision % Collective provision % Total provision % 7% 4% 5% -17% -8% -11% 15% -10% -4% 13% -7% -6% n/a large large
Total	1,269 2,785 4,054	1,307 2,876 4,183	-3% -3% -3%

1. The collective provision includes amounts for off-balance sheet credit exposures of $574 million as at 31 March 2017 (Sep 2016: $631 million; Mar 2016: $633 million). The impact on the income statement for the half year ended 31 March 2017 was a $46 million release (Sep 2016 half: $35 million release; Mar 2016 half: $3 million charge).

GROUP RESULTS

Gross Impaired Assets

Impaired loans Restructured items1 Non-performing commitments and contingencies	As at Mar 17 $M Sep 16 $M Mar 16 $M 2,478 2,646 2,564 367 403 226 95 124 93	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -6% -3% -9% 62% -23% 2%
Gross impaired assets Individual provisions Impaired loans Non-performing commitments and contingencies	2,940 3,173 2,883 (1,253) (1,278) (1,209) (16) (29) (29)	-7% 2% -2% 4% -45% -45%
Net impaired assets	1,671 1,866 1,645	-10% 2%
Gross impaired assets by division Australia Institutional New Zealand Asia Retail & Pacific	1,227 1,170 1,093 1,061 1,405 1,282 409 346 273 243 252 235	5% 12% -24% -17% 18% 50% -4% 3%
Gross impaired assets	2,940 3,173 2,883	-7% 2%
Gross impaired assets by size of exposure Less than $10 million $10 million to $100 million Greater than $100 million	1,724 1,784 1,597 1,106 899 970 110 490 316	-3% 8% 23% 14% -78% -65%
Gross impaired assets	2,940 3,173 2,883	-7% 2%

1. Restructured items are facilities where the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

 March 2017 v March 2016

Gross impaired assets increased $57 million (+2%) driven by the Australia and New Zealand divisions offset by a decrease in Institutional. The Australia division increase of $134 million (+12%) is due to Home Loans, Small Business Banking and Corporate Banking. The New Zealand division increase of $136 million (+50%) is driven by a small number of large single name exposures in the Commercial and Agri portfolios. The Institutional decrease of $221 million (-17%) is due to higher write-offs and repayments on a small number of large exposures, including the Oswal legal dispute. The Group’s individual provision coverage ratio on impaired assets was 43.2% at 31 March 2017 (42.9% at 31 March 2016).

 March 2017 v September 2016

Gross impaired assets decreased $233 million (-7%) mainly driven by a decrease in the Institutional division of $344 million (-24%) as the result of higher write-offs and repayments on a small number of large exposures, including the Oswal legal dispute. The Australia division increase of $57 million (+5%) is due to Home Loans, Small Business Banking and Corporate Banking. The New Zealand division increase of $63 million (+18%) is due to a small number of large single name exposures in the Commercial and Agri portfolios. The Group’s individual provision coverage ratio on impaired assets was 43.2% at 31 March 2017 (41.2% at 30 September 2016).

New Impaired Assets

Impaired loans Restructured items Non-performing commitments and contingencies	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,637 1,610 1,657 88 193 81 62 41 46	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 2% -1% -54% 9% 51% 35%
Total new impaired assets	1,787 1,844 1,784	-3% 0%
New impaired assets by division Australia Institutional New Zealand Asia Retail & Pacific	816 927 777 547 499 652 296 290 194 128 128 161	-12% 5% 10% -16% 2% 53% 0% -20%
Total new impaired assets	1,787 1,844 1,784	-3% 0%

GROUP RESULTS

 March 2017 v March 2016

New impaired assets were broadly flat. The Institutional division decreased as the result of an improved risk profile from portfolio rebalancing. This was partially offset by increases in the New Zealand division as the result of a small number of large single name exposures in the Commercial and Agri portfolios, and an increase in the Australia division due to delinquencies in the Retail portfolio.

 March 2017 v September 2016

New impaired assets decrease was driven by the Australia division reflecting large single name Asset Finance impairments taken in the September 2016 half, partially offset by an increase in Institutional due to impairments on a small number of single name customer exposures.

Ageing analysis of net loans and advances that are past due but not impaired

1-29 days 30-59 days 60-89 days >90 days	As at Mar 17 $M Sep 16 $M Mar 16 $M 9,123 7,966 8,868 2,355 1,910 2,292 1,148 1,070 1,193 2,771 2,703 2,573	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 15% 3% 23% 3% 7% -4% 3% 8%
Total	15,397 13,649 14,926	13% 3%

 March 2017 v March 2016

The 90 days past due but not impaired increased by $198 million (+8%) due to Home Loans growth and portfolio deterioration predominantly in Western Australia and Queensland. There was also some deterioration in the Regional Business Banking and Small Business Banking portfolios.

 March 2017 v September 2016

The 90 days past due but not impaired increased by $68 million (+3%) primarily within the Australia division from portfolio deterioration in the Regional Business Banking and Small Business Banking portfolios.

Income tax expense

Income tax expense on cash profit Effective tax rate (cash profit)	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,433 1,166 1,133 29.5% 27.2% 28.9%	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 23% 26% 2.3% 0.6%

 March 2017 v March 2016

The effective tax rate increased from 28.9% to 29.5%. The 60 basis point increase was primarily due to reduced offshore earnings which have a lower average tax rate (+60 bps), a reduction in equity accounted earnings (+120 bps) as well as the non-recurrence of a tax provision release from the March 2016 half (+70 bps). This was partially offset by the non-tax deductible impairment of AmBank in the March 2016 half (-200 bps).

 March 2017 v September 2016

The effective tax rate increased from 27.2% to 29.5%. The 230 basis point increase was primarily due to reduced offshore earnings which have a lower average tax rate (+40 bps), a reduction in equity accounted earnings (+60 bps) as well as the non-recurrence of a tax provision release from the September 2016 half (+100 bps).

GROUP RESULTS

Impact of foreign currency translation

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

Cash Profit - March 2017 Half Year vs March 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Mar 16 $M Mar 16 $M Mar 16 $M 7,416 7,568 (12) 7,556 2,887 2,757 (35) 2,722	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Mar 16 Mar 17 v. Mar 16 Mar 17 v. Mar 16 -2% 0% -2% 5% -1% 6%
Operating income Operating expenses	10,303 10,325 (47) 10,278 (4,731) (5,488) 45 (5,443)	0% 0% 0% -14% -1% -13%
Profit before credit impairment and income tax Credit impairment charge	5,572 4,837 (2) 4,835 (720) (918) 8 (910)	15% 0% 15% -22% -1% -21%
Profit before income tax Income tax expense Non-controlling interests	4,852 3,919 6 3,925 (1,433) (1,133) (10) (1,143) (8) (4) 1 (3)	24% 0% 24% 26% 1% 25% 100% large large
Cash profit	3,411 2,782 (3) 2,779	23% 0% 23%

Cash Profit by Division - March 2017 Half Year vs March 2016 Half Year

Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Mar 16 $M Mar 16 $M Mar 16 $M 1,798 1,769 - 1,769 1,021 633 (9) 624 677 646 15 661 123 167 - 167 (217) 60 (1) 59 9 (493) (8) (501)	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Mar 16 Mar 17 v. Mar 16 Mar 17 v. Mar 16 2% 0% 2% 61% -3% 64% 5% 3% 2% -26% 0% -26% large 6% large large 0% large
Cash profit by division	3,411 2,782 (3) 2,779	23% 0% 23%

Net loans and advances by Division - March 2017 Half Year vs March 2016 Half Year

	As at Actual FX unadjusted FX impact FX adjusted Mar 17 $B Mar 16 $B Mar 16 $B Mar 16 $B	Movement FX unadjusted FX impact FX adjusted Mar 17 v. Mar 16 Mar 17 v. Mar 16 Mar 17 v. Mar 16 5% 0% 5% -4% 0% -4% 6% 2% 4% -5% 0% -5% -10% 1% -11% 100% 0% 100% 3% 1% 2%
Australia	336.7 321.4 - 321.4
Institutional	120.8 125.6 0.2 125.8
New Zealand1	104.9 99.2 1.4 100.6
Wealth Australia	1.8 1.9 - 1.9
Asia Retail & Pacific1	12.5 13.9 0.1 14.0
TSO and Group Centre	(0.4) (0.2) - (0.2)
Net loans and advances by division1	576.3 561.8 1.7 563.5

1. Net loans and advances as at 31 March 2017 include net loans and advances held for sale.

GROUP RESULTS

Cash Profit - March 2017 Half Year vs September 2016 Half Year

Net interest income Other operating income	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Sep 16 $M Sep 16 $M Sep 16 $M 7,416 7,527 - 7,527 2,887 2,742 2 2,744	Movement FX unadjusted FX impact FX adjusted Mar 17 v. Sep 16 Mar 17 v. Sep 16 Mar 17 v. Sep 16 -1% 0% -1% 5% 0% 5% 0% 0% 0% -4% 0% -4% 5% 0% 5% -31% 0% -31% 13% 0% 13% 23% 1% 22% 14% 0% 14% 10% 0% 10%
Operating income Operating expenses	10,303 10,269 2 10,271 (4,731) (4,951) 6 (4,945)
Profit before credit impairment and income tax Credit impairment charge	5,572 5,318 8 5,326 (720) (1,038) 2 (1,036)
Profit before income tax Income tax expense Non-controlling interests	4,852 4,280 10 4,290 (1,433) (1,166) (5) (1,171) (8) (7) - (7)
Cash profit	3,411 3,107 5 3,112

Cash Profit by Division - March 2017 Half Year vs September 2016 Half Year

Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre	Half Year Actual FX unadjusted FX impact FX adjusted Mar 17 $M Sep 16 $M Sep 16 $M Sep 16 $M 1,798 1,778 - 1,778 1,021 408 2 410 677 622 2 624 123 157 - 157 (217) 99 - 99 9 43 1 44	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Sep 16 Mar 17 v. Sep 16 Mar 17 v. Sep 16 1% 0% 1% large 1% large 9% 1% 8% -22% 0% -22% large 0% large -79% 1% -80%
Cash profit by division	3,411 3,107 5 3,112	10% 0% 10%

Net loans and advances by Division - March 2017 Half Year vs September 2016 Half Year

	As at Actual FX unadjusted FX impact FX adjusted Mar 17 $B Sep 16 $B Sep 16 $B Sep 16 $B	Movement
		FX unadjusted FX impact FX adjusted
		Mar 17 v. Sep 16 Mar 17 v. Sep 16 Mar 17 v. Sep 16 3% 0% 3%
Australia	336.7 327.1 - 327.1
Institutional	120.8 125.9 (0.7) 125.2	-4% 0% -4%
New Zealand1	104.9 107.9 (4.5) 103.4	-3% -4% 1%
Wealth Australia	1.8 2.0 - 2.0	-10% 0% -10%
Asia Retail & Pacific1	12.5 13.4 - 13.4	-7% 0% -7%
TSO and Group Centre	(0.4) (0.4) - (0.4)	0% 0% 0%
Net loans and advances by division1	576.3 575.9 (5.2) 570.7	0% -1% 1%

1. Net loans and advances as at 31 March 2017 include net loans and advances held for sale.

GROUP RESULTS

Earnings related hedges

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

NZD Economic hedges Net open NZD position (notional principal)1 Amount taken to income (pre-tax statutory basis)2 Amount taken to income (pre-tax cash basis)3 USD Economic hedges Net open USD position (notional principal)1 Amount taken to income (pre-tax statutory basis)2 Amount taken to income (pre-tax cash basis)3	Half Year
	Mar 17 $M Sep 16 $M Mar 16 $M 3,347 3,161 3,119 125 (172) (2) (19) (6) (2) - - 85 - (3) 24 - (24) (34)

1. Value in AUD at contracted rate. 2.

Unrealised valuation movement plus realised revenue from matured or closed out hedges.
3. Realised revenue from closed hedges.

As at 31 March 2017, the following hedges were in place to partially hedge future earnings against adverse movements in exchange rates:

NZD 3.7 billion at a forward rate of approximately NZD 1.09 / AUD.

There were no USD hedges in place or impacting income for the March 2017 half.

During the March 2017 half:

NZD 0.9 billion of economic hedges matured and a realised loss of $19 million (pre-tax) was recorded in cash profit.
An unrealised gain of $144 million (pre-tax) on the outstanding NZD economic hedges was recorded in the statutory income statement during the half. This unrealised gain has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD revenues.

Earnings per share

Earnings per share
Cash earnings per share (cents) Basic Diluted Cash weighted average number of ordinary shares (M)1 Basic Diluted Cash profit ($M) Cash profit used in calculating diluted cash earnings per share ($M)	Half Year Mar 17 Sep 16 Mar 16 116.7 106.7 95.9 111.9 102.0 90.7 2,923.7 2,911.6 2,901.4 3,180.8 3,192.6 3,229.5 3,411 3,107 2,782 3,559 3,257 2,929	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 9% 22% 10% 23% 0% 1% 0% -2% 10% 23% 9% 22%

1 Cash weighted average number of ordinary shares included treasury shares held in Wealth Australia as the associated gains and losses were included in cash profit.

GROUP RESULTS

Dividends

Dividend per ordinary share (cents) Interim (fully franked)1 Final (fully franked)	Half Year Mar 17 Sep 16 Mar 16 80 - 80 - 80 -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 n/a 0% n/a n/a
Total (fully franked) Ordinary share dividends used in payout ratio ($M)2 Cash profit ($M) Ordinary share dividend payout ratio (cash basis)2	80 80 80 2,349 2,342 2,334 3,411 3,107 2,782 68.9% 75.4% 83.9%	0% 0% 0% 1% 10% 23% -8.6% -17.9%

1 Interim dividend for 2017 is proposed.

2 Dividend payout ratio is calculated using proposed 2017 interim dividend of $2,349 million, which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September and March 2016 half were calculated using actual dividend paid of $2,342 million and $2,334 million respectively.

The Directors propose that an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 3 July 2017. The proposed 2017 interim dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZD 9 cents per ordinary share will also be attached.

Economic profit

Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,911 2,971 2,738 500 136 44	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% large large
Cash Profit Economic credit cost adjustment Imputation credits	3,411 3,107 2,782 (211) 23 (71) 721 592 568	10% 23% large large 22% 27%
Economic return Cost of capital	3,921 3,722 3,279 (2,610) (2,563) (2,589)	5% 20% 2% 1%
Economic profit	1,311 1,159 690	13% 90%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is considered in determining the variable component of remuneration packages. This is used for internal management purposes and is not subject to audit.

Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the actual credit loss charge with internal expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At the ANZ Group level, this is calculated using average ordinary shareholders’ equity (excluding non-controlling interests) multiplied by the cost of capital rate (currently 9% and applied across comparative periods). At a business unit level, capital is allocated based on economic capital, whereby higher risk businesses attract higher levels of capital. This method is designed to help drive appropriate risk management and ensure business returns align with the relevant credit, operational, market and other risks.

Economic profit increased by $621 million (+90%) against the March 2016 half due to a 23% increase in cash profit, partially offset by higher economic credit costs.

Economic profit increased by $152 million (+13%) against the September 2016 half due to a 10% increase in cash profit, partially offset by higher economic credit costs.

GROUP RESULTS

Condensed balance sheet

Condensed balance sheet
Assets Cash / Settlement balances owed to ANZ / Collateral paid Trading and available for sale assets Derivative financial instruments Net loans and advances1 Investment backing policy liabilities Assets held for sale Other1	As at Mar 17 $B Sep 16 $B Mar 16 $B 89.3 83.3 88.0 108.8 110.3 100.5 63.9 87.5 88.7 564.0 575.9 561.8 37.6 35.7 34.5 14.1 - - 18.8 22.2 21.8	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 7% 1% -1% 8% -27% -28% -2% 0% 5% 9% n/a n/a -15% -14%
Total assets	896.5 914.9 895.3	-2% 0%
Liabilities Settlement balances owed by ANZ / Collateral received Deposits and other borrowings1 Derivative financial instruments Debt issuances Policy liabilities and external unit holder liabilities Liabilities held for sale Other1	14.9 17.0 20.2 581.4 588.2 578.1 65.1 88.7 91.7 88.8 91.1 81.9 41.3 39.5 38.4 17.2 - - 29.9 32.5 28.5	-12% -26% -1% 1% -27% -29% -3% 8% 5% 8% n/a n/a -8% 5%
Total liabilities	838.6 857.0 838.8	-2% 0%
Total equity	57.9 57.9 56.5	0% 2%

1. Balance as at 31 March 2017 exclude assets and liabilities reclassified to held for sale.

March 2017 v March 2016
Trading and available for sale assets increased $8.3 billion (+8%), primarily driven by increased liquidity portfolio holdings due to balance sheet growth in Markets.
Derivative financial assets and liabilities decreased $24.8 billion (-28%) and $26.6 billion (-29%) respectively as foreign exchange rate and interest rate movements resulted in lower derivative fair values.
Net loans and advances increased $2.2 billion (flat). Adjusting for a reclassification of $12.3 billion to assets held for sale, the $14.5 billion increase was primarily driven by home loan growth across Australia (+$15.3 billion) and New Zealand (+$5.7 billion) divisions, partially offset by a $4.8 billion decrease in Institutional division as a result of portfolio rebalancing and a $1.3 billion reduction in Asia Retail & Pacific.
Settlement balances owed by ANZ / Collateral received decreased by $5.3 billion (-26%), driven by a decrease in settlement balances held by Markets (-$2.6 billion) and Treasury (-$2.6 billion).
Deposits and other borrowings increased $3.3 billion (+1%). Adjusting for a reclassification of $17.0 billion to liabilities held for sale, the $20.3 billion increase was driven by growth in customer deposits largely across Australia, New Zealand and Institutional (+$21.4 billion), growth in deposits from banks and other borrowings (+$18.1 billion), partially offset by reduction in commercial paper and certificates of deposit (-$19.2 billion).
Debt issuances increased $6.9 billion (+8%) driven by new issuances.
March 2017 v September 2016
Cash / Settlement balances owed to ANZ / Collateral paid increased by $6.0 billion (+7%), primarily driven by increased cash and settlement balances held by Markets and Treasury.
Derivative financial assets and liabilities both decreased by $23.6 billion (-27%) as foreign exchange rate and interest rate movements resulted in lower derivative fair values.
Net loans and advances decreased $11.9 billion (-2%). Adjusting for a reclassification of $12.3 billion to assets held for sale and a significant $5.2 billion decrease due to foreign currency translation, the $5.6 billion increase was primarily driven by home loan growth across Australia (+$9.6 billion) and New Zealand (+$1.5 billion) divisions, partially offset by a $4.4 billion decrease in the Institutional division as a result of portfolio rebalancing and a $0.8 billion decrease in Asia Retail & Pacific.
Deposits and other borrowings decreased $6.8 billion (-1%). Adjusting for a reclassification of $17.0 billion to liabilities held for sale and a significant $5.7 billion decrease due to foreign currency translation, the $15.9 billion increase was driven by growth in customer deposits largely across Australia, New Zealand and Institutional (+$23.8 billion), growth in deposits from banks and other borrowings (+$5.7 billion), partially offset by reduction in commercial paper and certificates of deposit (-$13.5 billion).

Assets and liabilities held for sale as at 31 March 2017 reflect the reclassification of Asia Retail and Wealth businesses, UDC Finance and Shanghai Rural Commercial Bank assets and liabilities to held for sale. Refer to Note 11 to the financial statements for further details.

GROUP RESULTS

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesale debt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent in all banking operations and is closely monitored by the Group and managed in accordance with the risk appetite set by the Board.

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

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

A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking regulators including APRA. As part of meeting LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form of contingent liquidity. The total amount of the CLF available to a qualifying ADI is set annually by APRA.

Liquid assets
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent with Basel 3 LCR:
Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide same-day liquidity.
High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and other eligible securities listed by the Reserve Bank of New Zealand (RBNZ).

The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements and the risk appetite set by the Board.

Market Values Post Discount1 HQLA12 HQLA2 Internal Residential Mortgage Backed Securities (Australia)2 Internal Residential Mortgage Backed Securities (New Zealand)3 Other ALA4	Half Year Average Mar 17 $B Sep 16 $B Mar 16 $B 127.1 119.7 117.2 4.3 4.1 3.3 33.7 35.3 35.1 0.6 1.2 1.5 15.6 17.7 18.6	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 6% 8% 5% 30% -5% -4% -50% -60% -12% -16%
Total Liquid Assets	181.3 178.0 175.7	2% 3%
Cash flows modelled under stress scenario Cash outflows Cash inflows	172.7 182.9 181.0 38.2 40.2 42.1	-6% -5% -5% -9%
Net cash outflows	134.5 142.7 138.9	-6% -3%

Liquidity Coverage Ratio5	135% 125% 126%	10% 9%

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

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

New Zealand LCR surplus is excluded from NZ internal RMBS, consistent with APS 330 treatment. 4.

Comprised of assets qualifying as collateral for the CLF, excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the RBNZ's Liquidity Policy - Annex: Liquidity Assets - Prudential Supervision Department Document BS13A12. 5. All currency Level 2 LCR.

GROUP RESULTS

Funding

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

$15.5 billion of term wholesale debt with a remaining term greater than one year as at 31 March 2017 was issued during the half year ended 31 March 2017. The weighted average tenor of new term debt was 5.1 years.

The following tables show the Group’s total funding composition:

Customer deposits and other liabilities1 Australia Institutional New Zealand Wealth Australia Asia Retail & Pacific TSO and Group Centre1	As at Mar 17 $M Sep 16 $M Mar 16 $M 197,632 187,667 184,226 179,326 171,155 176,157 74,266 72,818 67,951 326 343 362 21,867 22,782 23,496 (5,202) (5,142) (5,414)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 5% 7% 5% 2% 2% 9% -5% -10% -4% -7% 1% -4%
Customer deposits Other funding liabilities2	468,215 449,623 446,778 15,362 14,531 16,127	4% 5% 6% -5%
Total customer liabilities (funding)	483,577 464,154 462,905	4% 4%
Wholesale funding3 Debt issuances Subordinated debt Certificates of deposit Commercial paper Other wholesale borrowings4,5	88,778 91,080 81,947 20,297 21,964 17,557 57,428 61,429 65,077 9,482 19,349 21,065 66,433 65,442 56,391	-3% 8% -8% 16% -7% -12% -51% -55% 2% 18%
Total wholesale funding	242,418 259,264 242,037	-6% 0%
Shareholders' equity	57,908 57,927 56,464	0% 3%
Total funding	783,903 781,345 761,406	0% 3%

Funded assets Other short term assets & trade finance assets6 Liquids5	As at Mar 17 $M Sep 16 $M Mar 16 $M 60,008 65,800 68,015 168,030 161,302 147,419	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -9% -12% 4% 14%
Short term funded assets Lending & fixed assets7	228,038 227,102 215,434 555,865 554,243 545,972	0% 6% 0% 2%
Total funded assets	783,903 781,345 761,406	0% 3%
Funding liabilities3,5 Other short term liabilities Short term funding Term funding < 12 months Other customer and central bank deposits1,8	48,022 48,806 40,360 53,495 69,028 73,559 20,968 23,668 22,224 84,880 79,597 87,632	-2% 19% -23% -27% -11% -6% 7% -3%
Total short term funding liabilities	207,365 221,099 223,775	-6% -7%
Stable customer deposits1,9 Term funding > 12 months Shareholders' equity and hybrid debt	416,775 402,146 392,151 93,556 90,708 81,589 66,207 67,392 63,891	4% 6% 3% 15% -2% 4%
Total stable funding	576,538 560,246 537,631	3% 7%
Total funding	783,903 781,345 761,406	0% 3%

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

Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth Australia. 3.

Excludes liability for acceptances as they do not provide net funding. 4.

Includes borrowings from banks, net derivative balances, special purpose vehicles and other borrowings. 5.

Includes RBA open-repo arrangement netted down by the exchange settlement account cash balance. 6.

Includes short-dated assets such as trading securities, available for sale securities, trade dated assets and trade finance loans. 7. Excludes trade finance loans.

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

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

GROUP RESULTS

Capital Management

Capital Ratios Common Equity Tier 1 Tier 1 Total capital	As a	t
	APRA Basel 3 Mar 17 Sep 16 Mar 16 10.1% 9.6% 9.8% 12.1% 11.8% 11.6% 14.5% 14.3% 13.7%	Internationally Comparable Basel 31
		Mar 17 Sep 16 Mar 16 15.2% 14.5% 14.0% 18.2% 17.4% 16.2% 21.3% 20.7% 18.7%
Risk weighted assets ($B)	397.0 408.6 388.3	309.4 316.4 317.8

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

APRA Basel 3 Common Equity Tier 1 (CET1) – March 2017 v September 2016

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Excludes specified items. Refer to page 12 for further details.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software (excluding accounting changes relating to the capitalisation of internally generated software assets), EL versus EP shortfall and other intangibles in the period.
8.6 million ordinary shares were issued under the Dividend Reinvestment Plan and Bonus Option Plan for the 2016 final dividend.
March 2017 v September 2016

ANZ’s CET1 ratio increased 52 bps to 10.1% during the March 2017 half. Key drivers of the movement in the CET1 ratio were:

Net organic capital generation was 119 bps or $4.8 billion. This was primarily driven by cash profit (excluding specified items) and a net reduction in underlying RWA (excluding foreign exchange impacts, regulatory changes and other one-offs). The RWA reduction was mainly driven by a $8.7 billion decrease in Institutional Credit RWAs from lower lending, due to portfolio rebalancing.
Payment of the September 2016 Final Dividend (net of shares issued under the DRP) reduced the CET1 ratio by 51 bps.
Other items decreased CET1 by 16 bps reflecting net impacts from other RWA measurement changes, movement in non-cash earnings and net foreign currency translation.

Total Risk Weighted Assets (RWA) – March 2017 v September 2016

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March 2017 v September 2016
ANZ’s total RWA decreased by $11.6 billion. Excluding the impact of foreign currency translation, Credit RWAs decreased by $7.2 billion primarily driven by a decline in Institutional lending. Non-credit RWA decreased by $1.4 billion mainly driven by lower risk profile in IRRBB RWA.

GROUP RESULTS

APRA to Internationally Comparable[1] Common Equity Tier 1 (CET1) as at 31 March 2017

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

The above provides a reconciliation of the CET1 ratio under APRA’s Basel 3 prudential capital standards to Internationally Comparable Basel 3 standards. APRA views the Basel 3 reforms as a minimum requirement and hence has not incorporated some of the concessions proposed in the Basel 3 rules and has also set higher requirements in other areas. As a result, Australian banks’ Basel 3 reported capital ratios will not be directly comparable with international peers. The International Comparable Basel 3 CET1 ratio incorporates differences between APRA and both the Basel Committee Basel 3 framework (including differences identified in the March 2014 Basel Committee’s Regulatory Consistency Assessment Programme (RCAP) on Basel 3 implementation in Australia) and its application in major offshore jurisdictions.

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

Deductions

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

Risk Weighted Assets (RWA)

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

GROUP RESULTS

Leverage Ratio

At 31 March 2017, the Group’s APRA Leverage Ratio was 5.3% which is above the 3% minimum currently proposed by the Basel Committee on Banking Supervision (BCBS). APRA has not finalised a minimum leverage ratio requirement for Australian ADIs. The following table summarises the Group’s Leverage Ratio calculation:

Tier 1 Capital (net of capital deductions) On-balance sheet exposures (excluding derivatives and securities financing transaction exposures) Derivative exposures Securities financing transaction (SFT) exposures Other off-balance sheet exposures	As at Mar 17 $M Sep 16 $M Mar 16 $M 48,091 48,285 45,062 747,708 744,359 733,935 30,968 30,600 30,542 30,286 31,417 21,420 97,492 98,460 102,953	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% 7% 0% 2% 1% 1% -4% 41% -1% -5%
Total exposure measure	906,454 904,836 888,850	0% 2%
APRA Leverage Ratio1	5.3% 5.3% 5.1%	0 bps 20 bps
Internationally Comparable Leverage Ratio1	6.0% 6.0% 5.7%	0 bps 30 bps

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

 March 2017 v September 2016

ANZ’s leverage ratio is broadly flat relative to September 2016 due to capital generation from cash earnings (net of dividend payments) being offset by the buyback and cancellation of remaining CPS2 Additional Tier 1 Capital instruments of $1.1 billion not reinvested in CN4, and increased holdings of High Quality Liquid Assets.

Other regulatory developments

Financial System Inquiry (FSI)

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

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

APRA supported the FSI’s recommendation that the capital ratios of ADIs should be unquestionably strong and, with effect from July 2016, APRA increased the capital requirements for Australian residential mortgage exposures for ADIs accredited to use the IRB approach to credit risk (including ANZ). APRA has also announced that further guidance regarding unquestionably strong capital requirements will be released in the middle of 2017. Further changes to the unquestionably strong framework may result in higher capital requirements for ADIs. Apart from the above, APRA has not made any announcements regarding the other key FSI recommendations. Therefore, the final outcomes from the FSI, including any impacts and the timing of these impacts on ANZ, remain uncertain.

Net Stable Funding Ratio (NSFR)

APRA has finalised its NSFR requirements for Australian ADIs and confirmed that the NSFR will become a minimum requirement on 1 January 2018. As part of managing future liquidity requirements, ANZ monitors the NSFR in its internal reporting and believe the Group is well placed to meet this requirement by the implementation date.

Level 3 Conglomerates (Level 3)

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

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

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

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

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

Standardised approach to RWA for credit risk;
Revisions to Standardised Measurement Approach to Operational Risk;

GROUP RESULTS

Fundamental Review of the Trading Book;
Interest Rate Risk in the Banking Book;
Framework on the imposition of capital floors based on standardised RWA approaches; and
Additional constraints on the use of internal models for credit RWA.

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

GROUP RESULTS

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DIVISIONAL RESULTS

Divisional Results

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

DIVISIONAL RESULTS

Divisional Performance

During the March 2017 half, the Group made changes to the Group’s operating model for technology, operations and shared services to accelerate delivery of its technology and digital roadmap, bring operations closer to its customers and continue operational efficiency gains. As a result of these organisational changes, divisional operations from Technology, Services & Operations (“TSO”) and Group Centre have been realigned to divisions. The residual TSO and Group Centre now contains Group Technology, Group Hubs, Enterprise Services and Group Property and the Group Centre. The Group operates on a divisional structure with six divisions: Australia, New Zealand, Institutional, Asia Retail & Pacific, Wealth Australia and Technology, Services & Operations and Group Centre. For further information on the composition of divisions refer to the Definitions on page 119.

Other than the changes described above, there have been no other significant structural changes in the March 2017 half. However, certain prior period comparatives have been restated to align with current period presentation. The divisions reported below are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.

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

				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
March 2017 Half Year	$M	$M	$M	$M	$M	$M	$M
Net interest income	4,133	1,588	1,260	5	331	99	7,416
Other operating income	602	1,357	317	539	(139)	211	2,887
Operating income	4,735	2,945	1,577	544	192	310	10,303
Operating expenses	(1,693)	(1,379)	(600)	(370)	(353)	(336)	(4,731)
Profit before credit impairment and income tax	3,042	1,566	977	174	(161)	(26)	5,572
Credit impairment charge	(472)	(125)	(37)	-	(75)	(11)	(720)
Profit before income tax	2,570	1,441	940	174	(236)	(37)	4,852
Income tax expense and non-controlling interests	(772)	(420)	(263)	(51)	19	46	(1,441)
Cash profit/(loss)	1,798	1,021	677	123	(217)	9	3,411

				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
March 2016 Half Year	$M	$M	$M	$M	$M	$M	$M
Net interest income	4,077	1,800	1,206	6	351	128	7,568
Other operating income	609	916	315	639	243	35	2,757
Operating income	4,686	2,716	1,521	645	594	163	10,325
Operating expenses	(1,695)	(1,513)	(590)	(410)	(429)	(851)	(5,488)
Profit before credit impairment and income tax	2,991	1,203	931	235	165	(688)	4,837
Credit impairment charge	(462)	(324)	(42)	-	(90)	-	(918)
Profit before income tax	2,529	879	889	235	75	(688)	3,919
Income tax expense and non-controlling interests	(760)	(246)	(243)	(68)	(15)	195	(1,137)
Cash profit/(loss)	1,769	633	646	167	60	(493)	2,782

March 2017 Half Year vs March 2016 Half Year

				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	1%	-12%	4%	-17%	-6%	-23%	-2%
Other operating income	-1%	48%	1%	-16%	large	large	5%
Operating income	1%	8%	4%	-16%	-68%	90%	0%
Operating expenses	0%	-9%	2%	-10%	-18%	-61%	-14%
Profit before credit impairment and income tax	2%	30%	5%	-26%	large	-96%	15%
Credit impairment charge	2%	-61%	-12%	n/a	-17%	n/a	-22%
Profit before income tax	2%	64%	6%	-26%	large	-95%	24%
Income tax expense and non-controlling interests	2%	71%	8%	-25%	large	-76%	27%
Cash profit/(loss)	2%	61%	5%	-26%	large	large	23%

DIVISIONAL RESULTS

Cash profit by division – March 2017 Half year v March 2016 Half year

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				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
March 2017 Half Year	$M	$M	$M	$M	$M	$M	$M
Net interest income	4,133	1,588	1,260	5	331	99	7,416
Other operating income	602	1,357	317	539	(139)	211	2,887
Operating income	4,735	2,945	1,577	544	192	310	10,303
Operating expenses	(1,693)	(1,379)	(600)	(370)	(353)	(336)	(4,731)
Profit before credit impairment and income tax	3,042	1,566	977	174	(161)	(26)	5,572
Credit impairment charge	(472)	(125)	(37)	-	(75)	(11)	(720)
Profit before income tax	2,570	1,441	940	174	(236)	(37)	4,852
Income tax expense and non-controlling interests	(772)	(420)	(263)	(51)	19	46	(1,441)
Cash profit/(loss)	1,798	1,021	677	123	(217)	9	3,411

				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
September 2016 Half Year	$M	$M	$M	$M	$M	$M	$M
Net interest income	4,125	1,647	1,242	5	347	161	7,527
Other operating income	597	817	329	605	235	159	2,742
Operating income	4,722	2,464	1,571	610	582	320	10,269
Operating expenses	(1,731)	(1,445)	(635)	(391)	(379)	(370)	(4,951)
Profit before credit impairment and income tax	2,991	1,019	936	219	203	(50)	5,318
Credit impairment charge	(458)	(419)	(78)	-	(82)	(1)	(1,038)
Profit before income tax	2,533	600	858	219	121	(51)	4,280
Income tax expense and non-controlling interests	(755)	(192)	(236)	(62)	(22)	94	(1,173)
Cash profit/(loss)	1,778	408	622	157	99	43	3,107

March 2017 Half Year vs September 2016 Half Year


				Wealth	Asia Retail	TSO and Group
	Australia	Institutional	New Zealand	Australia	& Pacific	Centre	Group
Net interest income	0%	-4%	1%	0%	-5%	-39%	-1%
Other operating income	1%	66%	-4%	-11%	large	33%	5%
Operating income	0%	20%	0%	-11%	-67%	-3%	0%
Operating expenses	-2%	-5%	-6%	-5%	-7%	-9%	-4%
Profit before credit impairment and income tax	2%	54%	4%	-21%	large	-48%	5%
Credit impairment charge	3%	-70%	-53%	n/a	-9%	large	-31%
Profit before income tax	1%	large	10%	-21%	large	-27%	13%
Income tax expense and non-controlling interests	2%	large	11%	-18%	large	-51%	23%
Cash profit/(loss)	1%	large	9%	-22%	large	-79%	10%

DIVISIONAL RESULTS

Australia

Fred Ohlsson

Net interest income Other operating income	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 4,133 4,125 4,077 602 597 609	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% 1% 1% -1%
Operating income Operating expenses	4,735 4,722 4,686 (1,693) (1,731) (1,695)	0% 1% -2% 0%
Profit before credit impairment and income tax Credit impairment charge	3,042 2,991 2,991 (472) (458) (462)	2% 2% 3% 2%
Profit before income tax Income tax expense and non-controlling interests	2,570 2,533 2,529 (772) (755) (760)	1% 2% 2% 2%
Cash profit	1,798 1,778 1,769	1% 2%
Balance Sheet Net loans and advances Other external assets	336,736 327,109 321,448 2,952 2,921 3,026	3% 5% 1% -2%
External assets	339,688 330,030 324,474	3% 5%
Customer deposits Other external liabilities	197,632 187,667 184,226 11,117 11,842 12,333	5% 7% -6% -10%
External liabilities	208,749 199,509 196,559	5% 6%
Risk weighted assets1 Average gross loans and advances Average deposits and other borrowings Ratios Return on average assets Net interest margin2 Operating expenses to operating income Operating expenses to average assets	159,575 157,410 130,679 333,965 326,218 319,009 193,671 185,274 181,118 1.08% 1.09% 1.10% 2.69% 2.74% 2.75% 35.8% 36.7% 36.2% 1.01% 1.06% 1.06%	1% 22% 2% 5% 5% 7%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	430 469 429 0.26% 0.29% 0.27% 42 (11) 33 0.03% (0.01%) 0.02% 1,227 1,170 1,093 0.36% 0.36% 0.34%	-8% 0% large 27% 5% 12%
Total full time equivalent staff (FTE)	11,518 11,639 12,094	-1% -5%

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

In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Average home loan deposit offset balances for the March 2017 half for the Australia division were $24,979 million (Sep 16 half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 20 for further details.

Performance March 2017 v March 2016

Retail volumes grew in Home Loans, particularly in New South Wales, as well as Deposits. Corporate & Commercial Banking volumes grew in Corporate Banking.
Net interest margin declined as the result of higher average funding costs, and lower earnings on deposits due to the lower interest rate environment.
Other operating income decreased mainly due to the Esanda Dealer Finance divestment.
Operating expenses decreased as the result of a reduction in FTE, partially offset by inflation and continued investment in the business.
Credit impairment charges increased in line with volume growth and higher delinquency rates in mining states for Home Loans and delinquencies in Cards, partially offset by higher recoveries and write-backs.

Australia Division growth adjusting for specified items[1] :

March 2017 v March 2016: operating income +2%, expenses +2%, profit before income tax +1%, and cash profit +1%.

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1. Includes specified items related to restructuring and the Esanda Dealer Finance divestment. For specified items breakdown please refer to pages 12 to 15.

March 2017 v September 2016: operating income flat, expenses +1%, profit before income tax -1%, and cash profit -1%.

DIVISIONAL RESULTS

Australia

Fred Ohlsson

Individual credit impairment charge/(release) Retail Home Loans Cards and Personal Loans Deposits and Payments1 Private Bank Corporate & Commercial Banking Corporate Banking Asset Finance Regional Business Banking Business Banking Small Business Banking	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 238 235 200 38 36 17 187 189 172 13 10 11 - - - 192 234 229 18 14 19 21 42 44 31 51 53 20 25 20 102 102 93	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 19% 6% large -1% 9% 30% 18% n/a n/a -18% -16% 29% -5% -50% -52% -39% -42% -20% 0% 0% 10%
Individual credit impairment charge/(release)	430 469 429	-8% 0%

Collective credit impairment charge/(release) Retail Home Loans Cards and Personal Loans Deposits and Payments1 Private Bank Corporate & Commercial Banking Corporate Banking Asset Finance Regional Business Banking Business Banking Small Business Banking	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 26 6 23 8 6 15 17 3 5 1 (3) 3 - - - 16 (17) 10 7 3 - 4 3 2 3 (7) (3) - (11) 3 2 (5) 8	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 large 13% 33% -47% large large large -67% n/a n/a large 60% large n/a 33% 100% large large -100% -100% large -75%
Collective credit impairment charge/(release)	42 (11) 33	large 27%
Total credit impairment charge/(release)	472 458 462	3% 2%

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

DIVISIONAL RESULTS

Australia

Fred Ohlsson

Net loans and advances Retail Home Loans Cards and Personal Loans Deposits and Payments1 Private Bank Corporate & Commercial Banking Corporate Banking Asset Finance Regional Business Banking Business Banking Small Business Banking	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 268,695 259,330 255,528 256,174 246,743 242,861 10,918 11,021 11,163 90 95 91 1,513 1,471 1,413 68,041 67,779 65,920 14,334 14,004 12,800 8,592 8,384 8,802 13,905 14,284 13,879 15,495 15,536 15,375 15,715 15,571 15,064	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 4% 5% 4% 5% -1% -2% -5% -1% 3% 7% 0% 3% 2% 12% 2% -2% -3% 0% 0% 1% 1% 4%
Net loans and advances	336,736 327,109 321,448	3% 5%

Customer deposits Retail Home Loans2 Cards and Personal Loans Deposits and Payments Private Bank Corporate & Commercial Banking Corporate Banking3 Regional Business Banking Business Banking Small Business Banking	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 141,899 135,162 131,539 25,593 24,131 23,619 266 273 252 106,811 102,592 99,238 9,229 8,166 8,430 55,733 52,505 52,687 3,477 2,915 3,067 5,976 5,836 6,209 11,129 10,416 10,941 35,151 33,338 32,470	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 5% 8% 6% 8% -3% 6% 4% 8% 13% 9% 6% 6% 19% 13% 2% -4% 7% 2% 5% 8%
Customer deposits	197,632 187,667 184,226	5% 7%

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

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

Some Corporate Banking deposits are included in Institutional Division deposits.

DIVISIONAL RESULTS

Australia Fred Ohlsson

	Retail $M C&CB $M Australia Total $M 2,791 1,342 4,133 392 210 602
March 2017 Half Year
Net interest income Other operating income
Operating income Operating expenses	3,183 1,552 4,735 (1,167) (526) (1,693)
Profit before credit impairment and income tax Credit impairment (charge)/release	2,016 1,026 3,042 (264) (208) (472)
Profit before income tax Income tax expense and non-controlling interests	1,752 818 2,570 (526) (246) (772)
Cash profit	1,226 572 1,798
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	238 192 430 26 16 42 268,695 68,041 336,736 141,899 55,733 197,632 95,538 64,037 159,575


March 2016 Half Year
Net interest income Other operating income	2,703 1,374 4,077 396 213 609
Operating income Operating expenses	3,099 1,587 4,686 (1,175) (520) (1,695)
Profit before credit impairment and income tax Credit impairment (charge)/release	1,924 1,067 2,991 (223) (239) (462)
Profit before income tax Income tax expense and non-controlling interests	1,701 828 2,529 (511) (249) (760)
Cash profit	1,190 579 1,769
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	200 229 429 23 10 33 255,528 65,920 321,448 131,539 52,687 184,226 66,057 64,622 130,679
March 2017 Half Year vs March 2016 Half Year Net interest income Other operating income	3% -2% 1% -1% -1% -1%
Operating income Operating expenses	3% -2% 1% -1% 1% 0%
Profit before credit impairment and income tax Credit impairment (charge)/release	5% -4% 2% 18% -13% 2%
Profit before income tax Income tax expense and non-controlling interests	3% -1% 2% 3% -1% 2%
Cash profit	3% -1% 2%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	19% -16% 0% 13% 60% 27% 5% 3% 5% 8% 6% 7% 45% -1% 22%

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

DIVISIONAL RESULTS

Australia Fred Ohlsson

	Retail $M C&CB $M Australia Total $M 2,791 1,342 4,133 392 210 602
March 2017 Half Year
Net interest income Other operating income
Operating income Operating expenses	3,183 1,552 4,735 (1,167) (526) (1,693)
Profit before credit impairment and income tax Credit impairment (charge)/release	2,016 1,026 3,042 (264) (208) (472)
Profit before income tax Income tax expense and non-controlling interests	1,752 818 2,570 (526) (246) (772)
Cash profit	1,226 572 1,798
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	238 192 430 26 16 42 268,695 68,041 336,736 141,899 55,733 197,632 95,538 64,037 159,575


September 2016 Half Year
Net interest income Other operating income	2,772 1,353 4,125 389 208 597
Operating income Operating expenses	3,161 1,561 4,722 (1,189) (542) (1,731)
Profit before credit impairment and income tax Credit impairment (charge)/release	1,972 1,019 2,991 (241) (217) (458)
Profit before income tax Income tax expense and non-controlling interests	1,731 802 2,533 (514) (241) (755)
Cash profit	1,217 561 1,778
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	235 234 469 6 (17) (11) 259,330 67,779 327,109 135,162 52,505 187,667 93,308 64,102 157,410
March 2017 Half Year vs September 2016 Half Year Net interest income Other operating income	1% -1% 0% 1% 1% 1%
Operating income Operating expenses	1% -1% 0% -2% -3% -2%
Profit before credit impairment and income tax Credit impairment (charge)/release	2% 1% 2% 10% -4% 3%
Profit before income tax Income tax expense and non-controlling interests	1% 2% 1% 2% 2% 2%
Cash profit	1% 2% 1%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets1	1% -18% -8% large large large 4% 0% 3% 5% 6% 5% 2% 0% 1%

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

DIVISIONAL RESULTS

Institutional

Mark Whelan

Net interest income Other operating income1	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,588 1,647 1,800 1,357 817 916	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -4% -12% 66% 48%
Operating income Operating expenses1	2,945 2,464 2,716 (1,379) (1,445) (1,513)	20% 8% -5% -9%
Profit before credit impairment and income tax Credit impairment charge	1,566 1,019 1,203 (125) (419) (324)	54% 30% -70% -61%
Profit before income tax Income tax expense and non-controlling interests	1,441 600 879 (420) (192) (246)	large 64% large 71%
Cash profit	1,021 408 633	large 61%
Balance Sheet Net loans and advances Other external assets	120,791 125,955 125,639 258,119 281,705 275,903	-4% -4% -8% -6%
External assets	378,910 407,660 401,542	-7% -6%
Customer deposits Other deposits and borrowings	179,326 171,155 176,157 61,207 56,341 48,992	5% 2% 9% 25%
Deposits and other borrowings Other external liabilities	240,533 227,496 225,149 94,971 121,304 121,770	6% 7% -22% -22%
External liabilities	335,504 348,800 346,919	-4% -3%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings Ratios Return on average assets Net interest margin Net interest margin (excluding Markets) Operating expenses to operating income Operating expenses to average assets	159,230 168,428 182,051 125,645 128,501 139,006 242,402 232,143 233,775 0.51% 0.20% 0.31% 1.05% 1.11% 1.15% 2.17% 2.21% 2.16% 46.8% 58.6% 55.7% 0.69% 0.70% 0.74%	-5% -13% -2% -10% 4% 4%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	210 436 340 0.34% 0.68% 0.49% (85) (17) (16) (0.14%) (0.03%) (0.02%) 1,061 1,405 1,282 0.87% 1.10% 1.01%	-52% -38% large large -24% -17%
Total full time equivalent staff (FTE)	4,899 5,112 5,601	-4% -13%

1. In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more accurately reflect the nature of these items. Comparatives have been restated (Sep16 half: $8 million; Mar16 half: $9 million).

Performance March 2017 v March 2016

Volumes down due to portfolio rebalancing with average CRWAs down 15%, mainly in Transaction Banking and Loans & Specialised Finance.
Net interest margin ex-Markets increased due to higher deposit margins and portfolio mix improvements, partially offset by pricing pressure on lending margins.
Other operating income increased with Markets Trading and Balance Sheet benefiting from tightening credit spreads and positive valuation adjustments.
Operating expenses decreased with FTE down 13% due to the ongoing simplification of the business, partially offset by higher depreciation and amortisation charges and regulatory and compliance spend.
Credit impairment charges decreased due to a benign credit environment and an overall reduction in lending assets driven by portfolio rebalancing.

==> picture [255 x 153] intentionally omitted <==

2. Includes specified items related to restructuring and the derivative CVA methodology change. For specified items breakdown please refer to pages 12 to 15.

Institutional Division growth adjusting for specified items[2] :

March 2017 v March 2016: operating income +8%, expenses -6%, profit before income tax +55%, and cash profit +52%.
March 2017 v September 2016: operating income +9%, expenses -2%, profit before income tax +64%, and cash profit +69%.

DIVISIONAL RESULTS

Institutional Mark Whelan

Institutional by Geography

Australia Net interest income Other operating income1	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 865 885 985 668 289 317	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% -12% large large
Operating income Operating expenses1	1,533 1,174 1,302 (621) (662) (677)	31% 18% -6% -8%
Profit before credit impairment and income tax Credit impairment (charge)/release	912 512 625 (119) (181) (112)	78% 46% -34% 6%
Profit before income tax Income tax expense and non-controlling interests	793 331 513 (242) (99) (155)	large 55% large 56%
Cash profit	551 232 358	large 54%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	164 206 124 (45) (25) (12) 65,175 65,938 63,867 68,910 65,361 66,627 78,512 80,618 87,852	-20% 32% 80% large -1% 2% 5% 3% -3% -11%
Asia Pacific, Europe, and America Net interest income Other operating income	545 574 657 521 487 543	-5% -17% 7% -4%
Operating income Operating expenses	1,066 1,061 1,200 (674) (704) (748)	0% -11% -4% -10%
Profit before credit impairment and income tax Credit impairment (charge)/release	392 357 452 (4) (224) (208)	10% -13% -98% -98%
Profit before income tax Income tax expense and non-controlling interests	388 133 244 (105) (54) (57)	large 59% 94% 84%
Cash profit	283 79 187	large 51%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	41 209 213 (37) 15 (5) 48,148 53,006 55,273 96,684 91,481 96,206 69,719 75,014 82,509	-80% -81% large large -9% -13% 6% 0% -7% -16%
New Zealand Net interest income Other operating income	178 188 158 168 41 56	-5% 13% large large
Operating income Operating expenses	346 229 214 (84) (79) (88)	51% 62% 6% -5%
Profit before credit impairment and income tax Credit impairment (charge)/release	262 150 126 (2) (14) (4)	75% large -86% -50%
Profit before income tax Income tax expense and non-controlling interests	260 136 122 (73) (39) (34)	91% large 87% large
Cash profit	187 97 88	93% large
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	5 21 3 (3) (7) 1 7,468 7,011 6,499 13,732 14,313 13,324 10,999 12,796 11,690	-76% 67% -57% large 7% 15% -4% 3% -14% -6%

DIVISIONAL RESULTS

Institutional

Mark Whelan

Individual credit impairment charge/(release) Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 41 75 103 165 342 223 - 15 11 4 4 3	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -45% -60% -52% -26% -100% -100% 0% 33% -52% -38% Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -29% large large large large large n/a n/a large large -70% -61% Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -13% -21% -4% -10% 1% 33% -3% -17%
Individual credit impairment charge/(release)	210 436 340
Collective credit impairment charge/(release) Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Mar 17 $M Sep 16 $M Mar 16 $M (5) (7) 4 (80) (7) (21) 4 (3) 1 (4) - -
Collective credit impairment charge/(release)	(85) (17) (16)
Total credit impairment charge/(release)	125 419 324
Net loans and advances Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 12,083 13,810 15,231 79,895 83,537 88,653 28,591 28,380 21,489 222 228 266
Net loans and advances	120,791 125,955 125,639	-4% -4%
Customer deposits Transaction Banking Loans & Specialised Finance Markets Central Functions	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 89,028 91,019 90,230 943 884 975 88,947 78,871 84,541 408 381 411	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% -1% 7% -3% 13% 5% 7% -1%
Customer deposits	179,326 171,155 176,157	5% 2%

DIVISIONAL RESULTS

Institutional

Mark Whelan

	Transaction Banking $M Loans & Specialised Finance $M Markets $M Central Functions $M Institutional Total $M 432 670 478 8 1,588 365 84 886 22 1,357
March 2017 Half Year
Net interest income Other operating income
Operating income Operating expenses	797 754 1,364 30 2,945 (447) (262) (646) (24) (1,379)
Profit before credit impairment and income tax Credit impairment (charge)/release	350 492 718 6 1,566 (36) (85) (4) - (125)
Profit before income tax Income tax expense and non-controlling interests	314 407 714 6 1,441 (98) (110) (196) (16) (420)
Cash profit	216 297 518 (10) 1,021
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	41 165 - 4 210 (5) (80) 4 (4) (85) 12,083 79,895 28,591 222 120,791 89,028 943 88,947 408 179,326 23,883 82,896 51,648 803 159,230
	444 778 560 18 1,800 393 96 401 26 916

March 2016 Half Year
Net interest income Other operating income1
Operating income Operating expenses1	837 874 961 44 2,716 (475) (311) (690) (37) (1,513)
Profit before credit impairment and income tax Credit impairment (charge)/release	362 563 271 7 1,203 (107) (202) (12) (3) (324)
Profit before income tax Income tax expense and non-controlling interests	255 361 259 4 879 (82) (98) (67) 1 (246)
Cash profit	173 263 192 5 633
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	103 223 11 3 340 4 (21) 1 - (16) 15,231 88,653 21,489 266 125,639 90,230 975 84,541 411 176,157 27,793 98,011 54,571 1,676 182,051
March 2017 Half Year vs March 2016 Half Year Net interest income Other operating income	-3% -14% -15% -56% -12% -7% -13% large -15% 48%
Operating income Operating expenses	-5% -14% 42% -32% 8% -6% -16% -6% -35% -9%
Profit before credit impairment and income tax Credit impairment (charge)/release	-3% -13% large -14% 30% -66% -58% -67% -100% -61%
Profit before income tax Income tax expense and non-controlling interests	23% 13% large 50% 64% 20% 12% large large 71%
Cash profit	25% 13% large large 61%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	-60% -26% -100% 33% -38% large large large n/a large -21% -10% 33% -17% -4% -1% -3% 5% -1% 2% -14% -15% -5% -52% -13%

DIVISIONAL RESULTS

Institutional

Mark Whelan

	Transaction Banking $M Loans & Specialised Finance $M Markets $M Central Functions $M Institutional Total $M 432 670 478 8 1,588 365 84 886 22 1,357
March 2017 Half Year
Net interest income Other operating income
Operating income Operating expenses	797 754 1,364 30 2,945 (447) (262) (646) (24) (1,379)
Profit before credit impairment and income tax Credit impairment (charge)/release	350 492 718 6 1,566 (36) (85) (4) - (125)
Profit before income tax Income tax expense and non-controlling interests	314 407 714 6 1,441 (98) (110) (196) (16) (420)
Cash profit	216 297 518 (10) 1,021
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	41 165 - 4 210 (5) (80) 4 (4) (85) 12,083 79,895 28,591 222 120,791 89,028 943 88,947 408 179,326 23,883 82,896 51,648 803 159,230
	436 720 472 19 1,647 382 61 365 9 817

September 2016 Half Year
Net interest income Other operating income1
Operating income Operating expenses1	818 781 837 28 2,464 (446) (274) (595) (130) (1,445)
Profit before credit impairment and income tax Credit impairment (charge)/release	372 507 242 (102) 1,019 (68) (335) (12) (4) (419)
Profit before income tax Income tax expense and non-controlling interests	304 172 230 (106) 600 (95) (53) (43) (1) (192)
Cash profit	209 119 187 (107) 408
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	75 342 15 4 436 (7) (7) (3) - (17) 13,810 83,537 28,380 228 125,955 91,019 884 78,871 381 171,155 24,918 89,619 52,285 1,606 168,428
March 2017 Half Year vs September 2016 Half Year Net interest income Other operating income	-1% -7% 1% -58% -4% -4% 38% large large 66%
Operating income Operating expenses	-3% -3% 63% 7% 20% 0% -4% 9% -82% -5%
Profit before credit impairment and income tax Credit impairment (charge)/release	-6% -3% large large 54% -47% -75% -67% -100% -70%
Profit before income tax Income tax expense and non-controlling interests	3% large large large large 3% large large large large
Cash profit	3% large large -91% large
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	-45% -52% -100% 0% -52% -29% large large n/a large -13% -4% 1% -3% -4% -2% 7% 13% 7% 5% -4% -8% -1% -50% -5%

DIVISIONAL RESULTS

Institutional Mark Whelan

Analysis of Markets operating income

Composition of Markets operating income by business activity1 Franchise Sales2 Franchise Trading3 Balance Sheet4	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 483 542 542 525 294 267 356 238 152	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -11% -11% 79% 97% 50% large
Markets operating income pre-derivative CVA methodology change	1,364 1,074 961	27% 42%
Derivative CVA methodology change5	- (237) -	-100% n/a
Markets operating income	1,364 837 961	63% 42%

1. In deriving the fair value of derivative positions adjustments are made to the risk free value to include factors such as the impact of credit and funding and bid-offer spreads. These adjustments were previously allocated between Franchise Sales, Franchise Trading and Balance Sheet. The impact of these adjustments and where relevant the hedging of the associated exposure are now shown as part of Franchise Trading Income to better align with how these are overseen and risk managed. 2.

Franchise Sales represents direct client flow business on core products such as fixed income, foreign exchange, commodities and capital markets. 3.

Franchise Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow. Franchise Trading also includes the impact of the derivative valuation adjustments which includes credit and funding adjustments, bid-offer adjustments and associated hedges. During the period, the impact of credit and funding, net of associated hedges, contributed a gain of $162 million (Sep 16 half: loss of $67 million excluding the impact of the Derivative CVA methodology changes; Mar 16 half: loss of $35 million). 4. Balance Sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio. 5. Refer to page 13 for further details.

Composition of Markets operating income by geography Australia Asia Pacific, Europe & America New Zealand	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 634 446 368 535 504 520 195 124 73	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 42% 72% 6% 3% 57% large
Markets operating income pre-derivative CVA methodology change	1,364 1,074 961	27% 42%
Derivative CVA methodology change	- (237) -	-100% n/a
Markets operating income	1,364 837 961	63% 42%

DIVISIONAL RESULTS

Institutional Mark Whelan

Market risk

Traded market risk

Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivatives trading positions for the Bank’s principal trading centres. All figures are in AUD.

99% confidence level (1 day holding period)

Value at Risk at 99% confidence Foreign exchange Interest rate Credit Commodities Equity Diversification benefit	High for Low for Avg for As at period period period Mar 17 $M Mar 17 $M Mar 17 $M Mar 17 $M 7.9 9.2 2.6 4.8 7.6 21.4 5.4 8.8 3.9 4.2 2.0 3.1 3.1 3.9 1.5 2.2 0.2 0.5 0.2 0.3 (7.7) n/a n/a (7.8)	High for Low for Avg for As at year year year
		Sep 16 $M Sep 16 $M Sep 16 $M Sep 16 $M 4.0 11.4 2.2 5.2 4.7 20.1 4.1 9.1 3.3 4.6 2.2 3.2 2.5 2.8 1.1 1.7 0.5 2.0 0.1 0.2 (6.8) n/a n/a (6.2)
Total VaR	15.0 25.1 7.0 11.4	8.2 25.4 6.1 13.2

Non-traded interest rate risk

Non-traded interest rate risk is managed by Markets and relates to the potential adverse impact of changes in market interest rates on future net interest income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis based on a 1% shock.

99% confidence level (1 day holding period)

Value at Risk at 99% confidence Australia New Zealand Asia Pacific, Europe & America Diversification benefit	High for Low for Avg for As at period period period Mar 17 $M Mar 17 $M Mar 17 $M Mar 17 $M 33.7 37.5 30.1 33.5 11.4 15.1 11.1 12.2 15.2 19.0 14.3 16.3 (19.8) n/a n/a (20.0)	High for Low for Avg for As at year year year Sep 16 $M Sep 16 $M Sep 16 $M Sep 16 $M 38.4 40.6 28.0 33.7 11.4 11.4 8.8 10.0 14.7 17.3 14.4 15.8 (24.0) n/a n/a (22.9)
Total VaR	40.5 44.0 37.6 42.0	40.5 44.7 31.3 36.6

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

As at period end Maximum exposure Minimum exposure Average exposure (in absolute terms)	As at
	Mar 17 Sep 16 0.30% 0.37% 0.47% 0.48% 0.04% 0.00% 0.22% 0.21%

DIVISIONAL RESULTS

New Zealand David Hisco

Table reflects NZD for New Zealand (AUD results shown on page 62)

Net interest income Other operating income Net funds management and insurance income	Half Year Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 1,334 1,322 1,307 153 169 168 183 181 173	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 2% -9% -9% 1% 6%
Operating income Operating expenses	1,670 1,672 1,648 (636) (677) (639)	0% 1% -6% 0%
Profit before credit impairment and income tax Credit impairment (charge)/release	1,034 995 1,009 (39) (83) (46)	4% 2% -53% -15%
Profit before income tax Income tax expense and non-controlling interests	995 912 963 (278) (251) (263)	9% 3% 11% 6%
Cash profit	717 661 700	8% 2%
Balance Sheet1 Net loans and advances Other external assets	114,731 113,145 110,028 7,032 4,723 4,234	1% 4% 49% 66%
External assets	121,763 117,868 114,262	3% 7%
Customer deposits Other deposits and borrowings	81,238 76,362 75,380 2,949 5,358 5,439	6% 8% -45% -46%
Deposits and other borrowings Other external liabilities	84,187 81,720 80,819 22,228 21,494 19,091	3% 4% 3% 16%
External liabilities	106,415 103,214 99,910	3% 7%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings	62,421 62,523 61,480 114,087 112,321 108,798 83,884 82,676 79,274	0% 2% 2% 5% 1% 6%
Ratios1 Return on average assets Net interest margin Operating expenses to operating income Operating expenses to average assets	1.20% 1.14% 1.24% 2.30% 2.35% 2.40% 38.1% 40.5% 38.8% 1.07% 1.17% 1.14%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	64 65 47 0.11% 0.12% 0.09% (25) 18 (1) (0.04%) 0.03% (0.00%) 448 363 302 0.39% 0.32% 0.27%	-2% 36% large large 23% 48%
Total full time equivalent staff (FTE)	6,250 6,317 6,401	-1% -2%

1. Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

Performance March 2017 v March 2016

Volumes grew in Home Loans and Deposits, in addition to higher balances in Funds Management.
Net interest margin declined as the result of a higher proportion of lower margin fixed rate lending and term deposits, pricing competition and higher funding costs.
Other operating income reduced due to the gain on sale of a fixed asset in the March 2016 half. Net funds management and insurance income increased due to higher Funds under management balances.
Operating expenses decreased as the result of a reduction in FTE, partially offset by inflation.
Credit impairment charges decreased as the result of credit quality improvements across Commercial and Agri portfolios, partially offset by increases to new and existing provisions.

==> picture [267 x 151] intentionally omitted <==

1. Includes specified items related to restructuring. For specified items breakdown please refer to pages 12 to 15.

New Zealand Division growth adjusting for specified items[1] :

March 2017 v March 2016: operating income +1%, expenses flat, profit before income tax +3%, and cash profit +2%
March 2017 v September 2016: operating income flat, expenses -3% and profit before income tax +7%, and cash profit +6%

DIVISIONAL RESULTS

New Zealand David Hisco

Individual credit impairment charge/(release) Retail Home Loans Other Commercial	Half Year Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 21 26 26 (6) (2) (2) 27 28 28 43 39 21	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -19% -19% large large -4% -4% 10% large -2% 36% Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 large large large 50% n/a large large large large large -53% -15% Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 2% 6% 3% 7% -2% -2% 0% 1%
Individual credit impairment charge/(release)	64 65 47
Collective credit impairment charge/(release) Retail Home Loans Other Commercial	Half Year Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M (7) 1 2 (3) 1 (2) (4) - 4 (18) 17 (3)
Collective credit impairment charge/(release)	(25) 18 (1)
Total credit impairment charge/(release)	39 83 46
Net loans and advances1 Retail Home Loans Other Commercial	As at Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 74,379 72,730 69,891 70,439 68,706 65,855 3,940 4,024 4,036 40,352 40,415 40,137
Net loans and advances	114,731 113,145 110,028	1% 4%
Customer deposits1 Retail Commercial	As at Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 66,292 63,111 62,234 14,946 13,251 13,146	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 5% 7% 13% 14%
Customer deposits	81,238 76,362 75,380	6% 8%
1. Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

Net funds management and insurance income

Net funds management and insurance income
Insurance Insurance income Insurance volume related expenses Funds Management Funds management income Funds management volume related expenses	Half Year Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 85 84 83 91 90 90 (6) (6) (7) 98 97 90 109 109 101 (11) (12) (11)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 2% 1% 1% 0% -14% 1% 9% 0% 8% -8% 0%
Total net funds management and insurance income	183 181 173	1% 6%
In-force premiums1 Funds under management Average funds under management Life insurance expenses to Life in-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM2	192 190 186 27,146 26,485 24,835 26,383 25,751 23,808 30.1% 33.4% 34.2% 13.8% 15.4% 14.9% 0.32% 0.44% 0.27%	1% 3% 2% 9% 2% 11%

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

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

DIVISIONAL RESULTS

New Zealand David Hisco

	Retail NZD M Commercial NZD M Central Functions NZD M New Zealand Total NZD M 877 446 11 1,334 145 9 (1) 153 184 - (1) 183
March 2017 Half Year
Net interest income Other operating income Net funds management and insurance income
Operating income Operating expenses	1,206 455 9 1,670 (498) (127) (11) (636)
Profit before credit impairment and income tax Credit impairment (charge)/release	708 328 (2) 1,034 (14) (25) - (39)
Profit before income tax Income tax expense and non-controlling interests	694 303 (2) 995 (195) (84) 1 (278)
Cash profit	499 219 (1) 717
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances1 Customer deposits1 Risk weighted assets1	21 43 - 64 (7) (18) - (25) 74,379 40,352 - 114,731 66,292 14,946 - 81,238 29,358 32,086 977 62,421


March 2016 Half Year
Net interest income Other operating income Net funds management and insurance income	857 445 5 1,307 144 10 14 168 173 1 (1) 173
Operating income Operating expenses	1,174 456 18 1,648 (511) (128) - (639)
Profit before credit impairment and income tax Credit impairment (charge)/release	663 328 18 1,009 (28) (18) - (46)
Profit before income tax Income tax expense and non-controlling interests	635 310 18 963 (171) (87) (5) (263)
Cash profit	464 223 13 700
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	26 21 - 47 2 (3) - (1) 69,891 40,137 - 110,028 62,234 13,146 - 75,380 30,144 30,452 884 61,480
March 2017 Half Year vs March 2016 Half Year Net interest income Other operating income Net funds management and insurance income	2% 0% large 2% 1% -10% large -9% 6% -100% 0% 6%
Operating income Operating expenses	3% 0% -50% 1% -3% -1% n/a 0%
Profit before credit impairment and income tax Credit impairment (charge)/release	7% 0% large 2% -50% 39% n/a -15%
Profit before income tax Income tax expense and non-controlling interests	9% -2% large 3% 14% -3% large 6%
Cash profit	8% -2% large 2%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	-19% large n/a 36% large large n/a large 6% 1% n/a 4% 7% 14% n/a 8% -3% 5% 11% 2%

1. Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

DIVISIONAL RESULTS

New Zealand David Hisco

	Retail NZD M Commercial NZD M Central Functions NZD M New Zealand Total NZD M 877 446 11 1,334 145 9 (1) 153 184 - (1) 183
March 2017 Half Year
Net interest income Other operating income Net funds management and insurance income
Operating income Operating expenses	1,206 455 9 1,670 (498) (127) (11) (636)
Profit before credit impairment and income tax Credit impairment (charge)/release	708 328 (2) 1,034 (14) (25) - (39)
Profit before income tax Income tax expense and non-controlling interests	694 303 (2) 995 (195) (84) 1 (278)
Cash profit	499 219 (1) 717
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances1 Customer deposits1 Risk weighted assets1	21 43 - 64 (7) (18) - (25) 74,379 40,352 - 114,731 66,292 14,946 - 81,238 29,358 32,086 977 62,421


September 2016 Half Year
Net interest income Other operating income Net funds management and insurance income	873 444 5 1,322 165 10 (6) 169 182 1 (2) 181
Operating income Operating expenses	1,220 455 (3) 1,672 (537) (129) (11) (677)
Profit before credit impairment and income tax Credit impairment (charge)/release	683 326 (14) 995 (27) (56) - (83)
Profit before income tax Income tax expense and non-controlling interests	656 270 (14) 912 (179) (76) 4 (251)
Cash profit	477 194 (10) 661
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	26 39 - 65 1 17 - 18 72,730 40,415 - 113,145 63,111 13,251 - 76,362 29,580 31,950 993 62,523
March 2017 Half Year vs September 2016 Half Year Net interest income Other operating income Net funds management and insurance income	0% 0% large 1% -12% -10% -83% -9% 1% -100% -50% 1%
Operating income Operating expenses	-1% 0% large 0% -7% -2% 0% -6%
Profit before credit impairment and income tax Credit impairment (charge)/release	4% 1% -86% 4% -48% -55% n/a -53%
Profit before income tax Income tax expense and non-controlling interests	6% 12% -86% 9% 9% 11% -75% 11%
Cash profit	5% 13% -90% 8%
Individual credit impairment charge/(release) Collective credit impairment charge/(release) Net loans and advances Customer deposits Risk weighted assets	-19% 10% n/a -2% large large n/a large 2% 0% n/a 1% 5% 13% n/a 6% -1% 0% -2% 0%

1. Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

DIVISIONAL RESULTS

New Zealand David Hisco

Table reflects AUD for New Zealand NZD results shown on page 58

Net interest income Other operating income Net funds management and insurance income	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,260 1,242 1,206 144 159 155 173 170 160	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 4% -9% -7% 2% 8%
Operating income Operating expenses	1,577 1,571 1,521 (600) (635) (590)	0% 4% -6% 2%
Profit before credit impairment and income tax Credit impairment (charge)/release	977 936 931 (37) (78) (42)	4% 5% -53% -12%
Profit before income tax Income tax expense and non-controlling interests	940 858 889 (263) (236) (243)	10% 6% 11% 8%
Cash profit	677 622 646	9% 5%
Consisting of: Retail Commercial Central Functions	472 449 428 206 183 206 (1) (10) 12	5% 10% 13% 0% -90% large
Cash profit	677 622 646	9% 5%
Balance Sheet1 Net loans and advances Other external assets	104,884 107,893 99,185 6,429 4,505 3,816	-3% 6% 43% 68%
External assets	111,313 112,398 103,001	-1% 8%
Customer deposits Other deposits and borrowings	74,266 72,818 67,951 2,696 5,109 4,904	2% 9% -47% -45%
Deposits and other borrowings Other external liabilities	76,962 77,927 72,855 20,320 20,496 17,209	-1% 6% -1% 18%
External liabilities	97,282 98,423 90,064	-1% 8%
Risk weighted assets Average gross loans and advances Average deposits and other borrowings	57,064 59,621 55,421 107,704 105,518 100,427 79,190 77,661 73,175	-4% 3% 2% 7% 2% 8%
In-force premiums2 Funds under management Average funds under management	175 181 167 24,816 25,256 22,388 24,912 24,189 21,976	-3% 5% -2% 11% 3% 13%
Ratios1 Return on average assets Net interest margin Operating expenses to operating income Operating expenses to average assets	1.20% 1.14% 1.24% 2.30% 2.35% 2.40% 38.1% 40.4% 38.8% 1.07% 1.17% 1.14%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	61 61 43 0.11% 0.11% 0.09% (24) 17 (1) (0.04%) 0.03% (0.00%) 409 346 273 0.39% 0.32% 0.27%	0% 42% large large 18% 50%
Life insurance expenses to Life in-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM3	30.1% 33.4% 34.2% 13.8% 15.4% 14.9% 0.32% 0.44% 0.27%
Total full time equivalent staff (FTE)	6,250 6,317 6,401	-1% -2%

Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

In-force premiums reflect the disposal of the New Zealand medical business in the March 2016 half.
Funds Management expense and funds under management relates to the Pensions & Investments business.

DIVISIONAL RESULTS

Wealth Australia Alexis George

Net interest income Other operating income Net funds management and insurance income	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 5 5 6 46 46 42 493 559 597	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% -17% 0% 10% -12% -17%
Operating income Operating expenses	544 610 645 (370) (391) (410)	-11% -16% -5% -10%
Profit before income tax Income tax expense and non-controlling interests	174 219 235 (51) (62) (68)	-21% -26% -18% -25%
Cash profit	123 157 167	-22% -26%
Consisting of: Insurance Funds Management Corporate and Other	102 127 126 41 48 39 (20) (18) 2	-20% -19% -15% 5% 11% large
Total Wealth Australia	123 157 167	-22% -26%
Income from invested capital1	41 47 63	-13% -35%
Key metrics In-force premiums Life Insurance General Insurance2 Average in-force premiums Life Insurance General Insurance2 Funds under management Average funds under management	1,600 1,603 1,569 226 226 335 1,602 1,587 1,543 225 280 422 49,251 48,251 46,630 48,375 48,060 47,182	0% 2% 0% -33% 1% 4% -20% -47% 2% 6% 1% 3%
Ratios Operating expenses to operating income Insurance expenses to In-force premiums Retail Insurance lapse rates Funds Management expenses to average FUM3	68.0% 64.1% 63.6% 11.9% 11.6% 12.2% 13.8% 15.0% 13.0% 0.50% 0.48% 0.58%
Total full time equivalent staff (FTE)	2,043 2,098 2,158	-3% -5%
Aligned adviser numbers4	1,511 1,545 1,618	-2% -7%

1. Income from invested capital represents after tax revenue generated from investing all Insurance and Funds Management business's capital balances held for regulatory purposes. The invested capital as at 31 March 2017 was $3.4 billion (Sep 16: $3.4 billion; Mar 16: $3.4 billion), which comprises fixed interest securities of 48% and cash deposits of 52% (Sep 16: 48% fixed interest securities and 52% cash deposits, Mar 16: 45% fixed interest securities and 55% cash deposits). 2.

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

Funds Management expense and funds under management relates to the Pensions & Investments business and excludes ANZ Share Investing. 4.

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

Performance March 2017 v March 2016

Insurance income decreased as the result of adverse disability claims experience, a one-off experience loss due to the exit of a Group Life Insurance plan partially offset by reinsurance profit share and favourable claims experience in Lenders Mortgage Insurance.
Funds Management income decreased in line with the planned strategy to rationalise the legacy portfolio to SmartChoice, a simpler and lower risk model.
Corporate & Other income decreased as March 2016 results benefited from realised gains due to rebalancing of invested capital.
Operating expenses decreased due to productivity initiatives that resulted in a reduction in FTE, partially offset by inflation and higher regulatory compliance and remediation spend.

Wealth Australia Division performance adjusting for specified items[1] :

==> picture [256 x 153] intentionally omitted <==

  _1. Includes specified items related to restructuring expense. For specified items breakdown please refer to pages 12 to 15._

March 2017 v March 2016: operating income -16%, expenses -7%, profit before income tax -30%, and cash profit -30%
March 2017 v September 2016: operating income -11%, expenses
-4% and profit before income tax -23%, and cash profit -24%

DIVISIONAL RESULTS

Wealth Australia Alexis George

Major business units

Major business units
Insurance Net interest income Insurance income Insurance volume related expenses	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 11 12 11 354 408 420 (110) (134) (136)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -8% 0% -13% -16% -18% -19%
Operating income Operating expenses	255 286 295 (109) (106) (116)	-11% -14% 3% -6%
Profit before income tax Income tax expense and non-controlling interests	146 180 179 (44) (53) (53)	-19% -18% -17% -17%
Cash profit	102 127 126	-20% -19%

Funds Management Net interest income Other operating income Funds management income Funds management volume related expenses	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 14 14 16 40 36 36 314 340 352 (161) (169) (169)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% -13% 11% 11% -8% -11% -5% -5%
Operating income Operating expenses	207 221 235 (151) (152) (179)	-6% -12% -1% -16%
Profit before income tax Income tax expense and non-controlling interests	56 69 56 (15) (21) (17)	-19% 0% -29% -12%
Cash profit	41 48 39	-15% 5%

Insurance metrics

Insurance operating margin Life Insurance Planned profit margin Group & Individual Experience profit/(loss)1 General Insurance operating profit margin	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 64 79 72 (26) (11) 3 64 59 51	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -19% -11% large large 8% 25%
Total	102 127 126	-20% -19%

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

		As at		Movement	Movement
	Mar 17	Sep 16	Mar 16	Mar 17	Mar 17
Insurance annual in-force premiums	$M	$M	$M	v. Sep 16	v. Mar 16
Group	427	445	439	-4%	-3%
Individual	1,173	1,158	1,130	1%	4%
General Insurance	226	226	335	0%	-33%
Total	1,826	1,829	1,904	0%	-4%

		New
	Sep 16	business	Lapses	Mar 17
Insurance in-force book movement	$M	$M	$M	$M
Group	445	19	(37)	427
Individual	1,158	65	(50)	1,173
General Insurance	226	76	(76)	226
Total	1,829	160	(163)	1,826

DIVISIONAL RESULTS

Wealth Australia Alexis George

Funds Management metrics

Funds Management metrics
Funds under management Australian equities International equities Cash and fixed interest Property and infrastructure	As at Mar 17 $M Sep 16 $M Mar 16 $M 15,393 15,248 14,496 12,442 11,044 10,618 17,763 18,582 18,356 3,653 3,377 3,160	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 6% 13% 17% -4% -3% 8% 16%
Total	49,251 48,251 46,630	2% 6%
Funds Management cash flows by product Open solutions OneAnswer Frontier ANZ Smart Choice Wrap (Voyage and Grow) Closed solutions Retail Employer	Sep 16 Inflows Outflows $M $M $M 9,958 719 (631) 11,190 1,122 (629) 2,160 312 (150) 19,028 281 (1,432) 5,915 72 (324)	Other1 Mar 17 $M $M 454 10,500 3,099 14,782 635 2,957 (34) 17,843 (2,494) 3,169 1,660 49,251
Total	48,251 2,506 (3,166)

1. Other includes investment income net of taxes, fees and charges and distributions. It also includes the transition of funds under management from Employer Super to ANZ Smart Choice of approximately $2.5 billion as a result of regulatory changes in the industry.

Embedded value and value of new business (insurance and investments only)1	$M
Embedded value as at September 20162	4,536
Value of new business3	50
Expected return4	151
Experience deviations and assumption changes5	(67)
Embedded value before economic assumption changes and net transfer	4,670
Economic assumptions change6	(80)
Net transfer7	(143)
Embedded value as at March 2017	4,447

1. The product lines used are on the same basis as prior periods. This is different to the product lines that are subject to a strategic review. 2.

Embedded value represents the present value of future profits and releases of capital arising from the business in-force at the valuation date, and adjusted net assets. It is determined using best estimate assumptions with franking credits included at 70% of face value. Projected cash flows have been discounted using capital asset pricing model risk discount rates of 7.75%-9.25%. ANZ Lenders Mortgage Insurance, ANZ Financial Planning and ANZ Share Investing businesses are not included in the valuation.

Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period. 4.

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

Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Unfavourable experience was primarily driven by credit card repricing and retail life claims experience.

Interest rate movements have led to a negative value impact.

Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends paid and value of franking credits. There was $120 million of cash dividends paid, $6 million of dividends in AT1 preference shares paid and $17 million of franking credits expected to be transferred to the parent entity.

DIVISIONAL RESULTS

Asia Retail & Pacific David Hisco

Net interest income Other operating income1	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 331 347 351 (139) 235 243	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -5% -6% large large
Operating income Operating expenses1	192 582 594 (353) (379) (429)	-67% -68% -7% -18%
Profit before credit impairment and income tax Credit impairment (charge)/release	(161) 203 165 (75) (82) (90)	large large -9% -17%
Profit before income tax Income tax expense and non-controlling interests1	(236) 121 75 19 (22) (15)	large large large large
Cash profit/(loss)1	(217) 99 60	large large
Balance Sheet2 Net loans and advances Customer deposits Risk weighted assets	12,525 13,370 13,862 21,867 22,782 23,496 12,601 13,372 13,183	-6% -10% -4% -7% -6% -4%
Ratios2 Return on average assets Net interest margin Operating expenses to operating income Operating expenses to average assets	-1.89% 0.82% 0.48% 3.00% 3.00% 2.93% 183.9% 65.1% 72.2% 3.08% 3.15% 3.46%
Individual credit impairment charge/(release) Individual credit impairment charge/(release) as a % of average GLA Collective credit impairment charge/(release) Collective credit impairment charge/(release) as a % of average GLA Gross impaired assets Gross impaired assets as a % of GLA	86 81 80 1.31% 1.16% 1.09% (11) 1 10 -0.17% 0.01% 0.14% 243 252 235 1.91% 1.86% 1.67%	6% 8% large large -4% 3%
Total full time equivalent staff (FTE)	4,719 4,894 5,440	-4% -13%

1. Includes specified items related to restructuring, and the impact of reclassifying Asia Retail & Wealth businesses to held for sale. For specified items breakdown please refer to pages 12 to 15.

Balance Sheet amounts as at 31 March 2017 include assets and liabilities held for sale.

Technology, Services & Operations and Group Centre

Operating income (minority investments in Asia)1 Operating income (other)2	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 170 262 73 140 58 90	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -35% large large 56%
Operating income Operating expenses3	310 320 163 (336) (370) (851)	-3% 90% -9% -61%
Profit before credit impairment and income tax Credit impairment (charge)/release	(26) (50) (688) (11) (1) -	-48% -96% large n/a
Profit before income tax Income tax expense and non-controlling interests	(37) (51) (688) 46 94 195	-27% -95% -51% -76%
Cash profit/(loss)	9 43 (493)	-79% large
Risk weighted assets Total full time equivalent staff (FTE)	7,588 8,460 5,691 16,617 16,494 17,202	-10% 33% 1% -3%

1. Includes specified items related to Asian minority investment adjustments. For specified items breakdown please refer to pages 12 to 15.

2. Includes specified items related to the gain on sale of the Esanda Dealer Finance divestment. For specified items breakdown please refer to pages 12 to 15. The March 2017 half also includes the $114 million gain on sale of 100 Queen Street, Melbourne.

Includes specified items related to software capitalisation and restructuring. For specified items breakdown please refer to pages 12 to 15.

PROFIT RECONCILIATION

Profit Reconciliation

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

PROFIT RECONCILIATION

Non-IFRS information

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

Adjustments between statutory profit and cash profit

Statutory profit attributable to shareholders of the Company Adjustments between statutory profit and cash profit Treasury shares adjustment Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades Reclassification of SRCB to held for sale	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,911 2,971 2,738 76 73 (29) 36 (40) (14) 178 (26) 128 (105) 131 (39) (1) (2) (2) 316 - -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% 4% large large large large 39% large large -50% -50% n/a n/a
Total adjustments between statutory profit and cash profit	500 136 44	large large
Cash Profit	3,411 3,107 2,782	10% 23%

Explanation of adjustments between statutory profit and cash profit

Treasury shares adjustment

ANZ shares held by the Group in Wealth Australia are deemed to be Treasury shares for accounting purposes. Dividends and realised and unrealised gains and losses from these shares are reversed as these are not permitted to be recognised as income for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement. Accordingly, the half year gain of $76 million after tax ($82 million pre-tax) reversed for statutory accounting purposes has been added back to cash profit.

Revaluation of policy liabilities

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

Economic and revenue hedges

The Group enters into economic hedges to manage its interest rate and foreign exchange risk which in accordance with accounting standards, result in fair value gains and losses being recognised within the income statement. ANZ removes the fair value adjustments from cash profit since the profit or loss resulting from the hedge transactions will reverse over time to match with the profit or loss from the economically hedged item as part of cash profit. This includes gains and losses arising from approved classes of derivatives not designated in accounting hedge relationships but which are considered to be economic hedges, including hedges of larger foreign exchange denominated revenue and expense streams, primarily NZD and USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.

Economic hedges comprises:

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

In the March 2017 half, the majority of the loss in economic hedges related to funding related swaps, principally from tightening basis spreads on currency pairs most notably USD/EUR and from the strengthening of the AUD against a number of major currencies.

Gains on revenue hedges in the March 2017 half are the result of the strengthening of the AUD against the NZD.

PROFIT RECONCILIATION

Adjustments to the income statement Economic hedges Revenue hedges	Half Year
	Mar 17 $M Sep 16 $M Mar 16 $M 254 (1) 181 (148) 148 (55)
Increase/(decrease) to cash profit before tax	106 147 126
Increase/(decrease) to cash profit after tax	73 105 89

Cumulative increase/(decrease) to cash profit before tax Economic hedges Revenue hedges	As at
	Mar 17 $M Sep 16 $M Mar 16 $M 696 442 443 (23) 125 (23)
Total	673 567 420

Structured credit intermediation trades

ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight US financial guarantors. This involved selling credit default swaps (CDSs) as protection over specific debt structures and purchasing CDS protection over the same structures. ANZ has subsequently exited its positions with six US financial guarantors and is monitoring the remaining two portfolios with a view to reducing the exposures when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty.

The notional value of outstanding bought and sold CDSs at 31 March 2017 amounted to $0.7 billion (Sep 16: $0.7 billion; Mar 16: $0.7 billion). Both the bought and sold CDSs are measured at fair value through profit and loss. However, the associated fair value movements do not fully offset due to the impact of credit risk on the bought CDSs which is driven by market movements in credit spreads and AUD/USD and NZD/USD rates. The fair value (excluding CVA) is $65 million (Sep 16: $67 million; Mar 16: $63 million) with CVA on the bought protection of $9 million (Sep 16: $11 million; Mar 16: $14 million).

The profit and loss associated with the bought and sold protection is included as an adjustment to cash profit as it relates to a legacy business where, unless terminated early, the fair value movements are expected to reverse to zero in future periods. During the period the profit and loss associated with these trades reduced cash profit before tax by $2 million (Sep 16: $3 million; Mar 16: $3 million).

Reclassification of SRCB to held for sale

On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited. The agreement will see COSCO and Sino-Poland Enterprise each acquire 10% of SRCB. The sale is subject to customary closing conditions and regulatory approvals and is expected to be completed by mid-2017. This business is part of the Technology, Services & Operations (TSO) and Group Centre division.

In the March 2017 half, the Group recognised a $219 million impairment to the investment, $11 million of foreign exchange losses and $86 million of tax expenses, following the reclassification of the investment to held for sale. This March 2017 half loss will be largely offset by the release of foreign currency translation and available for sale reserves of $289 million on sale completion which is expected to occur in the September 2017 half. In light of the timing difference (and that these amounts largely offset), the impact is excluded from each half yearly cash profit result, however the net impact will be included within cash profit for full year reporting.

Other reclassifications between statutory profit and cash profit

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

The charge to income for derivative credit valuation adjustments of $1 million on defaulted and impaired derivative exposures has been reclassified to cash credit impairment charges in the March 2017 half (Sep 16 half: $13 million charge; Mar 16 half: $14 million charge). The reclassification has been made to reflect the manner in which the defaulted and impaired derivatives are managed.

Policyholders tax gross up (nil profit after tax impact)

For statutory reporting purposes, policyholders income tax and other related taxes paid on behalf of policyholders are included in both net funds management and insurance income and the Group’s income tax expense. The gross up of $161 million for the March 2017 half (Sep 16 half: $185 million gross up; Mar 16 half: $32 million gross up) has been excluded from the cash results as it does not reflect the underlying performance of the business which is assessed on a net of policyholders tax basis.

PROFIT RECONCILIATION

Statutory profit $M March 2017 Half Year Net interest income 7,416	Adjustments to statutory profit Cash Treasury shares adjustment Policyholders tax gross up Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades Credit risk on impaired derivatives Reclassi- fication of SRCB to held for sale Total adjustments to statutory profit profit $M $M $M $M $M $M $M $M $M $M - - - - - - - - - 7,416
Net fee and commission income 1,226 Net foreign exchange earnings 654 Profit on trading instruments 342 Net funds management and insurance income 696 Other (338)	- - - - - - - - - 1,226 - - - 32 (144) - - 11 (101) 553 - - - 26 - (2) 1 - 25 367 82 (161) 51 - - - - - (28) 668 - - - 196 (4) - - 219 411 73
Other operating income 2,580	82 (161) 51 254 (148) (2) 1 230 307 2,887
Operating income 9,996 Operating expenses (4,731)	82 (161) 51 254 (148) (2) 1 230 307 10,303 - - - - - - - - - (4,731)
Profit before credit impairment and tax 5,265 Credit impairment charge (719)	82 (161) 51 254 (148) (2) 1 230 307 5,572 - - - - - - (1) - (1) (720)
Profit before income tax 4,546 Income tax expense (1,627) Non-controlling interests (8)	82 (161) 51 254 (148) (2) - 230 306 4,852 (6) 161 (15) (76) 43 1 - 86 194 (1,433) - - - - - - - - - (8)
Profit 2,911	76 - 36 178 (105) (1) - 316 500 3,411
September 2016 Half Year Net interest income 7,527	- - - - - - - - - 7,527
Net fee and commission income 1,268 Net foreign exchange earnings 337 Profit on trading instruments (15) Net funds management and insurance income 907 Other 248	- - - - - - - - - 1,268 - - - (1) 148 - - - 147 484 - - - (20) - (3) 13 - (10) (25) 80 (185) (55) - - - - - (160) 747 - - - 20 - - - - 20 268
Other operating income 2,745	80 (185) (55) (1) 148 (3) 13 - (3) 2,742
Operating income 10,272 Operating expenses (4,951)	80 (185) (55) (1) 148 (3) 13 - (3) 10,269 - - - - - - - - - (4,951)
Profit before credit impairment and tax 5,321 Credit impairment charge (1,025)	80 (185) (55) (1) 148 (3) 13 - (3) 5,318 - - - - - - (13) - (13) (1,038)
Profit before income tax 4,296 Income tax expense (1,318) Non-controlling interests (7)	80 (185) (55) (1) 148 (3) - - (16) 4,280 (7) 185 15 (25) (17) 1 - - 152 (1,166) - - - - - - - - - (7)
Profit 2,971	73 - (40) (26) 131 (2) - - 136 3,107

PROFIT RECONCILIATION

Statutory profit $M March 2016 Half Year Net interest income 7,568	Adjustments to statutory profit Cash Treasury shares adjustment Policyholders tax gross up Revaluation of policy liabilities Economic hedges Revenue hedges Structured credit intermediation trades Credit risk on impaired derivatives Reclassi- fication of SRCB to held for sale Total adjustments to statutory profit profit $M $M $M $M $M $M $M $M $M $M - - - - - - - - - 7,568
Net fee and commission income 1,277 Net foreign exchange earnings 602 Profit on trading instruments (86) Net funds management and insurance income 857 Other 56	- - - - - - - - - 1,277 - - - (5) (55) - - - (60) 542 - - - 50 - (3) 14 - 61 (25) (34) (32) (20) - - - - - (86) 771 - - - 136 - - - - 136 192
Other operating income 2,706	(34) (32) (20) 181 (55) (3) 14 - 51 2,757
Operating income 10,274 Operating expenses (5,488)	(34) (32) (20) 181 (55) (3) 14 - 51 10,325 - - - - - - - - - (5,488)
Profit before credit impairment and tax 4,786 Credit impairment charge (904)	(34) (32) (20) 181 (55) (3) 14 - 51 4,837 - - - - - - (14) - (14) (918)
Profit before income tax 3,882 Income tax expense (1,140) Non-controlling interests (4)	(34) (32) (20) 181 (55) (3) - - 37 3,919 5 32 6 (53) 16 1 - - 7 (1,133) - - - - - - - - - (4)
Profit 2,738	(29) - (14) 128 (39) (2) - - 44 2,782

PROFIT RECONCILIATION

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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

*CONTENTS*	*PAGE*
Directors’ Report	74
Condensed Consolidated Income Statement	75
Condensed Consolidated Statement of Comprehensive Income	76
Condensed Consolidated Balance Sheet	77
Condensed Consolidated Cash Flow Statement	78
Condensed Consolidated Statement of Changes in Equity	79
Notes to Condensed Consolidated Financial Statements	80
Directors’ Declaration	102
Auditor’s Review Report and Independence Declaration	103

DIRECTORS’ REPORT

The Directors present their report on the Condensed Consolidated Financial Statements for the half year ended 31 March 2017.

Directors

The names of the Directors of the Company who held office during and since the end of the half year are:

Mr DM Gonski, AC	Chairman
Mr SC Elliott	Director and Chief Executive Officer
Ms IR Atlas	Director
Ms PJ Dwyer	Director
Ms SJ Halton, AO, PSM	Director, appointed 21 October 2016
Mr Lee Hsien Yang	Director
Mr GR Liebelt	Director
Mr IJ Macfarlane, AC	Director, retired on 16 December 2016
Mr JT Macfarlane	Director

Result

The consolidated profit attributable to shareholders of the Company was $2,911 million. Further details are contained in Group Results on pages 17 to 41 which forms part of this report, and in the Condensed Consolidated Financial Statements.

Review of operations

A review of the operations of the Group during the half year and the results of those operations are contained in the Group Results on pages 17 to 41 which forms part of this report.

Lead auditor’s independence declaration

The lead auditor’s independence declaration given under section 307C of the Corporations Act 2001 (as amended) is set out on page 103 which forms part of this report.

Rounding of amounts

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

Significant events since balance date

On 21 April 2017, the Group announced it had entered into an agreement to sell its retail business in Vietnam to Shinhan Bank Vietnam. The retail business in Vietnam included approximately $320 million in lending assets and $800 million in deposits as at 31 March 2017. The premium to book value for the sale is not material to the ANZ Group. The transaction is expected to be completed by the end of 2017.

Other than the matter above, there have been no significant events from 31 March 2017 to the date of signing of this report.

Signed in accordance with a resolution of the Directors.

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David M Gonski, AC Chairman

Shayne C Elliott Director

1 May 2017

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited

Note Interest income Interest expense	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 14,426 14,861 15,090 (7,010) (7,334) (7,522)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% -4% -4% -7%
Net interest income 2 Other operating income1 2 Net funds management and insurance income 2 Share of associates' profit 2,17	7,416 7,527 7,568 1,711 1,598 1,548 696 907 857 173 240 301	-1% -2% 7% 11% -23% -19% -28% -43%
Operating income Operating expenses1 3	9,996 10,272 10,274 (4,731) (4,951) (5,488)	-3% -3% -4% -14%
Profit before credit impairment and income tax Credit impairment charge 9	5,265 5,321 4,786 (719) (1,025) (904)	-1% 10% -30% -20%
Profit before income tax Income tax expense 4	4,546 4,296 3,882 (1,627) (1,318) (1,140)	6% 17% 23% 43%
Profit for the period	2,919 2,978 2,742	-2% 6%
Comprising: Profit attributable to non-controlling interests Profit attributable to shareholders of the Company	8 7 4 2,911 2,971 2,738	14% 100% -2% 6%
Earnings per ordinary share (cents) Basic 6 Diluted 6 Dividend per ordinary share (cents) 5	100.2 102.6 94.8 96.7 98.3 89.7 80 80 80	-2% 6% -2% 8% 0% 0%

The notes appearing on pages 80 to 101 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited

Profit for the period Other comprehensive income Items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Foreign currency translation reserve Exchange differences taken to equity1 Exchange differences transferred to income statement Other reserve movements Share of associates' other comprehensive income2	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,919 2,978 2,742 20 (73) 5 (689) 559 (1,015) - - (126) (263) 117 (56) 2 10 (6)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% large large large -32% n/a -100% large large -80% large
Other comprehensive income net of tax	(930) 613 (1,198)	large -22%
Total comprehensive income for the period	1,989 3,591 1,544	-45% 29%
Comprising total comprehensive income attributable to: Non-controlling interests Shareholders of the Company	9 8 (4) 1,980 3,583 1,548	13% large -45% 28%

1. Includes foreign currency translation differences attributable to non-controlling interests of $1 million gain (Sep 16 half: $1 million gain; Mar 16 half: $8 million loss).

2. Share of associates’ other comprehensive income includes an available for sale revaluation reserve loss of $4 million (Sep 16 half: $21 million gain; Mar 16 half: $11 million loss) and a foreign currency translation reserve gain of $6 million (Sep 16 half: $5 million loss; Mar 16 half: $5 million gain) that may be reclassified subsequently to profit or loss, and the remeasurement of defined benefit plans of $nil (Sep 16 half: $6 million loss; Mar 16 half: nil) that will not be reclassified subsequently to profit or loss.

The notes appearing on pages 80 to 101 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

Assets Note Cash Settlement balances owed to ANZ Collateral paid Trading securities Derivative financial instruments Available for sale assets Net loans and advances 8 Regulatory deposits Assets held for sale 11 Investment in associates Current tax assets Deferred tax assets Goodwill and other intangible assets Investments backing policy liabilities Premises and equipment Other Assets	As at Mar 17 $M Sep 16 $M Mar 16 $M 56,419 48,675 49,144 21,696 21,951 26,048 11,179 12,723 12,783 44,085 47,188 50,073 63,882 87,496 88,747 64,685 63,113 50,377 564,035 575,852 561,768 2,154 2,296 2,135 14,145 - - 2,286 4,272 4,213 242 126 289 572 623 578 7,053 7,672 7,585 37,602 35,656 34,541 1,979 2,205 2,188 4,497 5,021 4,809	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 16% 15% -1% -17% -12% -13% -7% -12% -27% -28% 2% 28% -2% 0% -6% 1% n/a n/a -46% -46% 92% -16% -8% -1% -8% -7% 5% 9% -10% -10% -10% -6%
Total assets	896,511 914,869 895,278	-2% 0%
Liabilities Settlement balances owed by ANZ Collateral received Deposits and other borrowings 10 Derivative financial instruments Current tax liabilities Deferred tax liabilities Liabilities held for sale 11 Policy liabilities External unit holder liabilities (life insurance funds) Provisions Payables and other liabilities Debt issuances Subordinated debt 12	9,736 10,625 13,626 5,189 6,386 6,615 581,407 588,195 578,071 65,050 88,725 91,706 185 188 129 224 227 286 17,166 - - 37,111 36,145 35,159 4,227 3,333 3,265 1,179 1,209 1,202 8,054 8,865 9,251 88,778 91,080 81,947 20,297 21,964 17,557	-8% -29% -19% -22% -1% 1% -27% -29% -2% 43% -1% -22% n/a n/a 3% 6% 27% 29% -2% -2% -9% -13% -3% 8% -8% 16%
Total liabilities	838,603 856,942 838,814	-2% 0%
Net assets	57,908 57,927 56,464	0% 3%
Shareholders' equity Ordinary share capital Reserves Retained earnings	29,036 28,765 28,625 115 1,078 377 28,640 27,975 27,361	1% 1% -89% -69% 2% 5%
Share capital and reserves attributable to shareholders of the Company 15 Non-controlling interests 15	57,791 57,818 56,363 117 109 101	0% 3% 7% 16%
Total shareholders' equity 15	57,908 57,927 56,464	0% 3%

The notes appearing on pages 80 to 101 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited
Profit after income tax Adjustments to reconcile to net cash provided by/(used in) operating activities Provision for credit impairment Depreciation and amortisation (Profit)/loss on sale of premises and equipment Net derivatives/foreign exchange adjustment Impairment of investment in AmBank Profit on Esanda Dealer Finance divestment Reclassification of SRCB to held for sale Reclassification of Asia Retail & Wealth to held for sale Other non-cash movements Net (increase)/decrease in operating assets: Trading securities Collateral paid Net loans and advances Investments backing policy liabilities Other assets Net increase/(decrease) in operating liabilities: Deposits and other borrowings Settlement balances owed by ANZ Collateral received Life insurance contract policy liabilities Other liabilities	Half Year
	Inflows Inflows Inflows (Outflows) (Outflows) (Outflows)
	Mar 17 $M Sep 16 $M Mar 16 $M 2,911 2,971 2,738 719 1,025 904 504 465 1,010 (114) 6 (10) (1,576) (1,691) 257 - - 260 - - (66) 230 - - 324 - - (85) (106) (232) 4,075 2,492 (2,160) 1,468 279 (3,462) (6,414) (8,357) (6,440) (1,450) (1,678) (384) 50 215 (656) 16,089 2,845 20,283 (831) (3,106) 2,517 (1,174) (283) (744) 1,436 1,566 355 (1,002) 2,763 (2,735)
Total adjustments	12,249 (3,565) 8,697
Net cash provided by/(used in) operating activities1	15,160 (594) 11,435
Cash flows from investing activities Available for sale assets Purchases Proceeds from sale or maturity Premises and equipment Purchases Proceeds from sale Esanda Dealer Finance divestment Other assets	(14,495) (22,696) (21,486) 12,527 10,288 13,457 (117) (151) (186) 271 (20) 37 - - 6,682 98 (640) 305
Net cash (used in) investing activities	(1,716) (13,219) (1,191)
Cash flows from financing activities Debt issuances Issue proceeds Redemptions Subordinated debt Issue proceeds Redemptions Dividends paid	15,371 18,593 10,611 (15,045) (11,143) (16,816) - 5,234 943 (1,069) (900) - (2,087) (2,079) (2,485)
Net cash (used in) / provided by financing activities	(2,830) 9,705 (7,747)
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effects of exchange rate changes on cash and cash equivalents	10,614 (4,108) 2,497 66,220 68,711 69,278 (1,649) 1,617 (3,064)
Cash and cash equivalents at end of period	75,185 66,220 68,711
Cash and cash equivalents is reflected in the related items in the Balance Sheet as follows: Cash Settlement balances owed to ANZ	56,419 48,675 49,144 18,766 17,545 19,567

1. Net cash provided by/(used in) operating activities includes income taxes paid of $1,497 million (Sep 16: $1,285 million; Mar 16 $1,555 million).

The notes appearing on pages 80 to 101 form an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

				Share capital and
	Ordinary			reserves attributable
	share		Retained	to shareholders of	Non-controlling	Total Shareholders'
	capital	Reserves	earnings	the Company	interests	equity
	$M	$M	$M	$M	$M	$M
As at 1 October 2015	28,367	1,571	27,309	57,247	106	57,353
Profit or loss	-	-	2,738	2,738	4	2,742
Other comprehensive income for theperiod	-	(1,195)	5	(1,190)	(8)	(1,198)
Total comprehensive income for the period	-	(1,195)	2,743	1,548	(4)	1,544
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	(2,711)	(2,711)	(1)	(2,712)
Dividend income on treasury shares held within the Group's life insurance statutory funds	-	-	12	12	-	12
Dividend reinvestment plan	215	-	-	215	-	215
Other equity movements:
Treasury shares Wealth adjustment	(13)	-	-	(13)	-	(13)
Other items	56	1	8	65	-	65
As at 31 March 2016	28,625	377	27,361	56,363	101	56,464
Profit or loss	-	-	2,971	2,971	7	2,978
Other comprehensive income for the period	-	691	(79)	612	1	613
Total comprehensive income for the period	-	691	2,892	3,583	8	3,591
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	(2,290)	(2,290)	-	(2,290)
Dividend income on treasury shares held within the Group's life insurance statutory funds	-	-	12	12	-	12
Dividend reinvestment plan	198	-	-	198	-	198
Other equity movements:
Treasury shares Wealth adjustment	(140)	-	-	(140)	-	(140)
Other items	82	10	-	92	-	92
As at 30 September 2016	28,765	1,078	27,975	57,818	109	57,927
Profit or loss	-	-	2,911	2,911	8	2,919
Other comprehensive income for the period	-	(951)	20	(931)	1	(930)
Total comprehensive income for the period	-	(951)	2,931	1,980	9	1,989
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	(2,300)	(2,300)	(1)	(2,301)
Dividend income on treasury shares held within the Group's life insurance statutory funds	-	-	14	14	-	14
Dividend reinvestment plan	199	-	-	199	-	199
Other equity movements:
Treasury shares Wealth adjustment	71	-	-	71	-	71
Other items	1	(12)	20	9	-	9
As at 31 March 2017	29,036	115	28,640	57,791	117	57,908

The notes appearing on pages 80 to 101 form an integral part of the Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

These Condensed Consolidated Financial Statements:

have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (“AASs”);
should be read in conjunction with ANZ’s Annual Financial Statements for the year ended 30 September 2016 and any public announcements made by the Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2017 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and the ASX Listing Rules;
do not include all notes of the type normally included in ANZ’s Annual Financial Statements;
are presented in Australian dollars unless otherwise stated; and
were approved by the Board of Directors on 1 May 2017.

i) Statement of Compliance

These Condensed Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001 and AASB 134 which ensures compliance with IAS 34 Interim Financial Reporting.

ii) Accounting policies

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

Held for Sale

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.

iii) Basis of measurement

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

derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;
available for sale financial assets;
financial instruments held for trading;
assets and liabilities designated at fair value through profit and loss; and
assets and liabilities held for sale (except those at carrying value as per note (ii)).

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

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

iv) Use of estimates, assumptions and judgments

The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates and assumptions that affect reported amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective decisions or assessments are covered in Note 2 of the 2016 Annual Financial Statements. Such estimates and judgements are reviewed on an ongoing basis.

At 31 March 2017, the impairment assessment of non-lending assets identified that two of the Group’s associate investments (AMMB Holdings Berhad (AmBank) and PT Bank Pan Indonesia (PT Panin) had indicators of impairment. Although their market value (based on share price) was below their carrying value, no impairment was recognised as the carrying value was supported by their value in use (VIU).

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

Pre-tax discount rate Terminal growth rate Expected NPAT growth (compound annual growth rate – 5 years) Core equitytier 1 ratio	As at 31 Mar 17
	AmBank PT Panin 9.5% 13.4% 5.0% 6.0% 5.3% 9.6% 10% to 12.6% 11.3%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

v) Rounding of amounts

vi) New accounting standards not yet effective

The following accounting standards relevant to the Group have been issued but are not yet effective and have not been applied in these Condensed Consolidated Financial Statements:

AASB 9 Financial Instruments (‘AASB 9’)

The Australian Accounting Standards Board (AASB) issued the final version of AASB 9 in December 2014. When operative, this standard will replace AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 addresses recognition and measurement requirements for financial assets and financial liabilities, impairment requirements that introduce an expected credit loss impairment model and general hedge accounting requirements which more closely align with risk management activities undertaken when hedging financial and non-financial risks.

AASB 9 is not mandatorily effective for the Group until 1 October 2018. The Group is in the process of assessing the impact of application of AASB 9 and is not yet able to reasonably estimate the impact on its financial statements.

The Group early adopted, in isolation, the part of AASB 9 relating to gains and losses attributable to changes in own credit risk of financial liabilities designated as fair value through profit or loss effective from 1 October 2013.

AASB 15 Revenue from Contracts with Customers (‘AASB 15’)

The AASB issued the final version of AASB 15 in December 2014. The standard is not mandatorily effective for the Group until 1 October 2018. AASB 15 contains new requirements for the recognition of revenue and additional disclosures about revenue.

While it is expected that a significant proportion of the Group’s revenue will be outside the scope of AASB 15, the Group is in the process of assessing the impact of application of AASB 15 and is not yet able to reasonably estimate the impact on its financial statements.

AASB 16 Leases (‘AASB 16’)

The AASB issued the final version of AASB 16 in February 2016. The standard is not mandatorily effective for the Group until 1 October 2019. AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. AASB 16 substantially carries forward the lessor accounting requirements in AASB 117 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The Group is in the process of assessing the impact of AASB 16 and is not yet able to reasonably estimate the impact on its financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Income

Interest income Interest expense	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 14,426 14,861 15,090 (7,010) (7,334) (7,522)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% -4% -4% -7%
Net interest income	7,416 7,527 7,568	-1% -2%
i) Fee and commission income Lending fees1 Non-lending fees and commissions2	369 388 391 1,518 1,468 1,460	-5% -6% 3% 4%
Total fee and commission income Fee and commission expense3	1,887 1,856 1,851 (661) (588) (574)	2% 2% 12% 15%
Net fee and commission income3	1,226 1,268 1,277	-3% -4%
ii) Net funds management and insurance income Funds management income Investment income Insurance premium income Commission (expense) Claims Changes in policy liabilities4 Elimination of treasury share (gain)/loss	472 486 446 1,608 1,880 470 812 782 780 (260) (265) (192) (380) (376) (358) (1,474) (1,520) (323) (82) (80) 34	-3% 6% -14% large 4% 4% -2% 35% 1% 6% -3% large 3% large
Total net funds management and insurance income	696 907 857	-23% -19%
iii) Share of associates' profit	173 240 301	-28% -43%
iv) Other income Net foreign exchange earnings and other financial instruments income Impairment of AmBank Gain on cessation of equity accounting of investment in Bank of Tianjin (BoT) Gain on the Esanda Dealer Finance divestment Derivative CVA methodology change Reclassification of Asia Retail & Wealth to held for sale Gain on sale of 100 Queen Street, Melbourne Reclassification of SRCB to held for sale Other5	867 502 365 - - (260) - - 29 - - 66 - (237) - (324) - - 114 - - (230) - - 58 65 71	73% large n/a -100% n/a -100% n/a -100% -100% n/a n/a n/a n/a n/a n/a n/a -11% -18%
Total other income6	485 330 271	47% 79%
Total other operating income7	2,580 2,745 2,706	-6% -5%
Total income	17,006 17,606 17,796	-3% -4%

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

In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from other operating income to operating expenses to more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 half: $8 million; Mar 16 half: $9 million). 3. Includes interchange fees paid.

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

Other includes Brokerage income that was presented as a separate category for 2016 financial reporting.

Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk on funding instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss. 7.

Total other operating income includes external dividend income of nil (Sep 16 half: $27.3 million; Mar 16 half: nil).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Operating expenses

Personnel Salaries and related costs Superannuation costs Other	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 2,329 2,412 2,467 163 168 169 156 160 165	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% -6% -3% -4% -3% -5%
Total personnel expenses	2,648 2,740 2,801	-3% -5%
Premises Rent Other	248 240 245 209 230 213	3% 1% -9% -2%
Total premises expenses	457 470 458	-3% 0%
Technology Depreciation and amortisation1 Licences and outsourced services2 Other	376 328 870 303 330 284 152 176 179	15% -57% -8% 7% -14% -15%
Total technology expenses	831 834 1,333	0% -38%

Restructuring	36 140 138	-74% -74%
Other Advertising and public relations Professional fees Freight, stationery, postage and telephone Other	123 129 132 189 227 186 132 142 135 315 269 305	-5% -7% -17% 2% -7% -2% 17% 3%
Total other expenses	759 767 758	-1% 0%
Total operating expenses	4,731 4,951 5,488	-4% -14%

1. The March 2016 half includes a $556 million charge for accelerated amortisation associated with software capitalisation policy changes.

In the March 2017 half, a change was made to the classification of certain fees payable. These items have been reclassified from operating income to other operating expenses to more accurately reflect the nature of these items. Comparatives have been restated accordingly (Sep 16 half: $8 million; Mar 16 half: $9 million).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Income tax expense

Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense charged in the Income Statement.

Profit before income tax Prima facie income tax expense at 30% Tax effect of permanent differences: Overseas tax rate differential Share of associates' profit Wealth Australia - policyholders income and contributions tax Write down of investment in AmBank Reclassification of SRCB to held for sale Gain on cessation of equity accounting for BoT Tax provisions no longer required Interest on Convertible Instruments Other	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 4,546 4,296 3,882 1,364 1,288 1,165 (5) (20) (25) (52) (72) (90) 113 129 23 - - 78 156 - - - - (9) - (43) (28) 35 35 35 17 14 1	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 6% 17% 6% 17% -75% -80% -28% -42% -12% large n/a -100% n/a n/a n/a -100% -100% -100% 0% 0% 21% large
Income tax under/(over) provided in previous years	1,628 1,331 1,150 (1) (13) (10)	22% 42% -92% -90%
Total income tax expense charged in the income statement	1,627 1,318 1,140	23% 43%
Australia Overseas	1,190 953 799 437 365 341	25% 49% 20% 28%
	1,627 1,318 1,140	23% 43%
Effective Tax Rate - Group	35.8% 30.7% 29.4%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Dividends

5. Dividends
Dividend per ordinary share (cents) Interim (fully franked) Final (fully franked)	Half Year Mar 17 Sep 16 Mar 16 80 - 80 - 80 -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 n/a 0% n/a n/a
Total	80 80 80	0% 0%
Ordinary share dividend ($M)1 Interim dividend Final dividend Bonus option plan adjustment	- 2,334 - 2,342 - 2,758 (42) (44) (47)	n/a n/a n/a -15% -5% -11%
Total	2,300 2,290 2,711	0% -15%
Ordinary share dividend payout ratio (%)2	80.7% 78.8% 85.2%

1. Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders for the March 2017 half of $1.3 million (Sep 16 half: nil; Mar 16 half: $1.4 million).

2. Dividend payout ratio is calculated using the proposed 2017 interim dividend of $2,349 million (not shown in the above table). The proposed 2017 interim dividend of $2,349 million is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September and March 2016 half year are calculated using actual dividends paid of $2,342 million and $2,334 million respectively.

Ordinary Shares

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2017 interim dividend. For the 2017 interim dividend, ANZ intends to neutralise shares issued under the DRP by acquiring an equivalent number of shares on market (as approved by APRA). The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days commencing on 12 May 2017, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2017 interim dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time) on 10 May 2017.

Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 12 May 2017.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Earnings per share

Earnings reconciliation Profit for the period ($M) Less: profit attributable to non-controlling interests ($M) Earnings used in calculating basic earnings per share ($M) Weighted average number of ordinary shares (M)1 Basic earnings per share (cents)	Half Year Mar 17 Sep 16 Mar 16 2,919 2,978 2,742 8 7 4 2,911 2,971 2,738 2,906.6 2,894.7 2,889.3 100.2 102.6 94.8	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 6% 14% 100% -2% 6% 0% 1% -2% 6%
Earnings reconciliation Earnings used in calculating basic earnings per share ($M) Add: interest on convertible subordinated debt ($M) Earnings used in calculating diluted earnings per share ($M)	2,911 2,971 2,738 148 150 147 3,059 3,121 2,885	-2% 6% -1% 1% -2% 6%
Weighted average number of shares on issue1 Shares used in calculating basic earnings per share (M) Add: Weighted average dilutive potential ordinary shares (M) Convertible subordinated debt (M) Share based payments (options, rights and deferred shares) (M)	2,906.6 2,894.7 2,889.3 247.1 274.3 321.2 10.0 6.7 6.9	0% 1% -10% -23% 49% 45%
Adjusted weighted average number of shares - diluted (M)	3,163.7 3,175.7 3,217.4	0% -2%
Diluted earnings per share (cents)	96.7 98.3 89.7	-2% 8%

1. Weighted average number of ordinary shares excludes the weighted average number of treasury shares held in ANZEST and Wealth Australia as summarised in the table below:

	Mar 17(Million)	Sep 16 (Million)	Mar 16 (Million)
ANZEST Pty Ltd	8.8	10.9	10.7
Wealth Australia	17.1	16.9	12.1
Total treasury shares	25.9	27.8	22.8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Segment analysis

(i) Description of segments

During the March 2017 half, the Group made changes to the Group’s operating model for technology, operations and shared services to accelerate delivery of its technology and digital roadmap, bring operations closer to its customers and continue operational efficiency gains. As a result of these organisational changes, divisional operations from Technology, Services & Operations (“TSO”) and Group Centre have been realigned to divisions. The residual TSO and Group Centre now contains Technology, Group Hubs, Enterprise Services and Group Property, and Group Centre. The Group operates on a divisional structure with six divisions: Australia, New Zealand, Institutional, Asia Retail & Pacific, Wealth Australia and Technology, Services and Operations and Group Centre. For further information on the composition of divisions refer to the Definitions on page 119.

(ii) Operating segments

Operating Income	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 4,735 4,722 4,686 2,945 2,464 2,716 1,577 1,571 1,521 544 610 645 192 582 594 310 320 163	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% 1% 20% 8% 0% 4% -11% -16% -67% -68% -3% 90%
Australia
Institutional
New Zealand
Wealth Australia
Asia Retail & Pacific1
TSO and Group Centre2
Subtotal	10,303 10,269 10,325 (307) 3 (51)	0% 0% large large
Other3
Group total	9,996 10,272 10,274	-3% -3%

Profit	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,798 1,778 1,769 1,021 408 633 677 622 646 123 157 167 (217) 99 60 9 43 (493)	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 2% large 61% 9% 5% -22% -26% large large -79% large
Australia
Institutional
New Zealand
Wealth Australia
Asia Retail & Pacific1
TSO and Group Centre2
Subtotal	3,411 3,107 2,782 (500) (136) (44)	10% 23% large large
Other3
Group total	2,911 2,971 2,738	-2% 6%

1. Includes $324 million of charges related to the reclassification of Asia Retail & Wealth businesses to held for sale in the March 2017 half.

Includes a $260 million impairment of the investment in AmBank, a $66 million gain on the Esanda Dealer Finance divestment, and the $29 million gain on cessation of equity accounting of BoT in the March 2016 half. The March 2017 half includes the $114 million gain on sale of 100 Queen Street, Melbourne.

In evaluating the performance of the operating divisions, certain items are removed from the operating division results where they are not considered integral to the ongoing performance of the segment and are evaluated separately.

(iii) Other items

The table below sets out the profit after tax impact of other items.

Item gains/(losses) Related segment Treasury shares adjustment Wealth Revaluation of policy liabilities Wealth Economic hedges Institutional, TSO and Group Centre Revenue hedges TSO and Group Centre Structured credit intermediation trades Institutional Reclassification of SRCB to held for sale TSO and Group Centre	Half Year Mar 17 $M Sep 16 $M Mar 16 $M (76) (73) 29 (36) 40 14 (178) 26 (128) 105 (131) 39 1 2 2 (316) - -	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 4% large large large large 39% large large -50% -50% n/a n/a
Total profit after tax	(500) (136) (44)	large large

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Net loans and advances

Australia Overdrafts Credit cards outstanding Commercial bills outstanding Term loans - housing Term loans - non-housing Lease receivables Hire purchase contracts Other	As at Mar 17 $M Sep 16 $M Mar 16 $M 5,786 6,248 6,175 8,846 8,864 8,872 9,232 9,868 10,439 255,721 246,351 242,426 123,464 123,006 118,456 1,084 1,158 1,255 641 829 957 415 81 255	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -7% -6% 0% 0% -6% -12% 4% 5% 0% 4% -6% -14% -23% -33% large 63%
Total Australia	405,189 396,405 388,835	2% 4%
Asia Pacific, Europe & America Overdrafts Credit cards outstanding Commercial bills outstanding Term loans - housing Term loans - non-housing Lease receivables Other	743 825 1,175 1,351 1,396 1,446 2,065 2,724 2,692 6,501 6,866 7,226 50,066 54,567 56,429 163 232 254 320 448 341	-10% -37% -3% -7% -24% -23% -5% -10% -8% -11% -30% -36% -29% -6%
Total Asia Pacific, Europe & America	61,209 67,058 69,563	-9% -12%
New Zealand Overdrafts Credit cards outstanding Term loans - housing Term loans - non-housing Lease receivables Hire purchase contracts	1,158 1,080 1,017 1,503 1,586 1,517 68,592 69,927 63,649 40,247 41,625 39,003 198 215 206 1,115 1,048 901	7% 14% -5% -1% -2% 8% -3% 3% -8% -4% 6% 24%
Total New Zealand	112,813 115,481 106,293	-2% 6%

Sub-total	579,211 578,944 564,691	0% 3%
Unearned income Capitalised brokerage/mortgage origination fees1 Customer liability for acceptances	(458) (544) (596) 1,040 1,064 1,013 565 571 760	-16% -23% -2% 3% -1% -26%
Gross loans and advances (including assets classified as held for sale)	580,358 580,035 565,868	0% 3%
Provision for credit impairment (refer to Note 9)	(4,054) (4,183) (4,100)	-3% -1%
Net loans and advances (including assets classified as held for sale)	576,304 575,852 561,768	0% 3%
Net loans and advances held for sale (refer to Note 11)	(12,269) - -	n/a n/a
Net loans and advances	564,035 575,852 561,768	-2% 0%

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Provision for credit impairment

Individual provision Balance at start of period New and increased provisions Write-backs Adjustment for exchange rate fluctuations and transfers Discount unwind Bad debts written-off Esanda Dealer Finance divestment	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,307 1,238 1,061 1,121 1,308 1,137 (221) (151) (160) (12) 17 (26) (24) (39) (26) (902) (1,066) (656) - - (92)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 6% 23% -14% -1% 46% 38% large -54% -38% -8% -15% 38% n/a -100%
Total individual provision2	1,269 1,307 1,238	-3% 3%
Collective provision Balance at start of period Charge/(release) to income statement Adjustment for exchange rate fluctuations and transfers Esanda Dealer Finance divestment	2,876 2,862 2,956 (67) (9) 26 (24) 28 (47) - (5) (73)	0% -3% large large large -49% -100% -100%
Total collective provision1,2	2,785 2,876 2,862	-3% -3%

Total provision for credit impairment	4,054 4,183 4,100	-3% -1%

1. The collective provision includes amounts for off-balance sheet credit exposures of $574 million as at 31 March 2017 (Sep 2016: $631 million; Mar 2016: $663 million). The impact on the income statement for the half year ended 31 March 2017 was a $46 million release (Sep 2016 half: $35 million release; Mar 2016 half: $3 million charge).

2. Includes credit impairment provisions related to assets held for sale as at 31 March 2017 (Individual provision $6 million; Collective provision $155 million).

Provision movement analysis New and increased individual provisions Write-backs	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 1,121 1,308 1,137 (221) (151) (160)	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -14% -1% 46% 38%
Recoveries of amounts previously written-off	900 1,157 977 (114) (123) (99)	-22% -8% -7% 15%
Individual credit impairment charge Collective credit impairment charge/(release)	786 1,034 878 (67) (9) 26	-24% -10% large large
Credit impairment charge	719 1,025 904	-30% -20%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. Deposits and other borrowings

Australia Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Securities sold under repurchase agreements	As at Mar 17 $M Sep 16 $M Mar 16 $M 51,875 52,295 56,513 72,471 69,740 68,427 179,928 169,773 169,268 9,268 8,729 8,116 34,580 34,368 24,532 6,786 13,842 15,106 3,244 151 653	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -1% -8% 4% 6% 6% 6% 6% 14% 1% 41% -51% -55% large large
Total Australia	358,152 348,898 342,615	3% 5%
Asia Pacific, Europe & America Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Securities sold under repurchase agreements	4,629 7,001 6,888 90,449 84,583 90,112 23,468 24,968 25,010 4,650 4,745 4,586 24,401 22,837 19,340 - 393 1,045 364 330 495	-34% -33% 7% 0% -6% -6% -2% 1% 7% 26% -100% -100% 10% -26%
Total Asia Pacific, Europe & America	147,961 144,857 147,476	2% 0%
New Zealand Certificates of deposit Term deposits On demand and short term deposits Deposits not bearing interest Deposits from banks Commercial paper Borrowing corporation debt	924 2,133 1,675 40,236 37,824 33,871 38,762 40,360 39,276 7,832 7,418 6,552 662 73 127 2,696 5,114 4,913 1,192 1,518 1,566	-57% -45% 6% 19% -4% -1% 6% 20% large large -47% -45% -21% -24%
Total New Zealand	92,304 94,440 87,980	-2% 5%
Total deposits and other borrowings (including liabilities classified as held for sale)	598,417 588,195 578,071	2% 4%
Deposits and other borrowings held for sale (refer to Note 11)	(17,010) - -	n/a n/a
Total deposits and other borrowings	581,407 588,195 578,071	-1% 1%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Disposal groups held for sale

The Group announced the following strategic divestments in line with the Group’s strategy to simplify the businesses and improve capital efficiency. Accordingly, they are presented as disposal groups held for sale.

Asia Retail & Wealth Businesses

On 31 October 2016, the Group announced that it had agreed to sell Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to Singapore’s DBS Bank. Subject to regulatory approval, the Group expects the sale to be completed in stages throughout 2017 and early 2018. This business is part of the Asia Retail and Pacific division.

 UDC Finance

On 11 January 2017, the Group announced that it had agreed to sell UDC Finance to HNA Group. Completion is expected late in the second half of the 2017 calendar year. The sale is subject to closing steps and conditions including engaging with investors on the replacement of the Secured Investment program and regulatory approvals. This business is part of the New Zealand division.

 Shanghai Rural Commercial Bank

On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited. This agreement will see COSCO and Sino-Poland Enterprise each acquire 10% of SRCB. The sale is subject to customary closing conditions and regulatory approvals and is expected to be completed by mid-2017. This business is part of the Technology, Services & Operations (TSO) and Group Centre division.

Impairment losses and other charges relating to the disposal group

During the March 2017 half, the Group recognised the following charges from the reclassification of assets and liabilities to held for sale:

$324 million of charges relating to the sale of Group’s Retail and Wealth businesses in Asia comprising of $225 million of software, goodwill and other assets impairment charges and $99 million of various other charges.
$316 million of charges relating to the Group’s investment in SRCB comprising of a $219 million impairment to the investment, $11 million of foreign exchange losses, and $86 million of tax expenses.

The net result of these disposals is included in ‘Other income’ (refer to Note 2 Income).

Assets and liabilities of disposal group held for sale

At 31 March 2017, the disposal groups held for sale comprised of the following assets and liabilities, which are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.

Net loans and advances Investment in associates Goodwill and other intangible assets Other assets	Asia Retail & Wealth Businesses $M UDC Finance $M Shanghai Rural Commercial Bank $M Total $M
	9,776 2,493 - 12,269 - - 1,735 1,735 - 118 - 118 - 23 - 23
Total assets held for sale	9,776 2,634 1,735 14,145
Customer deposits Current tax liabilities Payables and other liabilities Provisions	15,818 1,192 - 17,010 - 31 - 31 44 30 - 74 50 1 - 51
Total liabilities held for sale	15,912 1,254 - 17,166

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. Subordinated debt

Additional Tier 1 Capital1 Convertible Preference Shares (ANZ CPS) ANZ CPS22 ANZ CPS33 ANZ Capital Notes (ANZ CN) ANZ CN14 ANZ CN25 ANZ CN36 ANZ CN47 ANZ Capital Securities8 ANZ NZ Capital Notes9 Tier 2 Capital10 Perpetual subordinated notes Term subordinated notes	Half Year Mar 17 $M Sep 16 $M Mar 16 $M - 1,068 1,969 1,340 1,340 1,338 1,116 1,115 1,113 1,603 1,602 1,600 962 962 961 1,607 1,604 - 1,218 1,329 - 454 473 446 1,156 1,190 1,145 10,841 11,281 8,985	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -100% -100% 0% 0% 0% 0% 0% 0% 0% 0% 0% n/a -8% n/a -4% 2% -3% 1% -4% 21%
Total subordinated debt	20,297 21,964 17,557	-8% 16%

1. ANZ Capital Notes, ANZ Capital Securities and the ANZ NZ Capital Notes are Basel 3 compliant instruments. APRA has granted transitional capital treatment for ANZ CPS3 until 1 September 2019.

On 17 December 2009, ANZ issued convertible preference shares (CPS2). The CPS2, which were not reinvested into CN4, were bought back and cancelled on 15 December 2016.
3.

On 28 September 2011, ANZ issued convertible preference shares (CPS3) which will convert into ANZ ordinary shares on 1 September 2019 at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% then the convertible preference shares will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on and from 1 September 2017 the convertible preference shares are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.

4. On 7 August 2013, ANZ issued capital notes (CN1) which will convert into ANZ ordinary shares on 1 September 2023 at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 1 September 2021 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.

5. On 31 March 2014, ANZ issued capital notes (CN2) which will convert into ANZ ordinary shares on 24 March 2024 at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2022 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.

6. On 5 March 2015, ANZ acting through its New Zealand Branch issued capital notes (CN3) which will convert into ANZ ordinary shares on 24 March 2025 at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2023 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.

7. On 27 September 2016, ANZ issued capital notes (CN4) which will convert into ANZ ordinary shares on 20 March 2026 at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 20 March 2024 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.

8. On 15 June 2016, ANZ acting through its London branch issued fully-paid perpetual subordinated contingent convertible securities (ANZ Capital Securities). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the securities will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on the First Reset Date (15 June 2026) and each 5 year anniversary, ANZ has the right to redeem all of the securities at its discretion.

9. On 31 March 2015, ANZ Bank New Zealand Limited (ANZ Bank NZ) issued convertible notes (ANZ NZ Capital Notes) which will convert into ANZ ordinary shares on 25 May 2022 at a 1% discount (subject to certain conditions being satisfied). If ANZ or ANZ Bank NZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, ANZ receives a notice of nonviability from APRA, ANZ Bank NZ receives a direction from RBNZ or a statutory manager is appointed to ANZ Bank NZ and makes a determination, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 25 May 2020 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ Bank NZ.

10. The convertible dated subordinated notes are Basel 3 compliant instruments. APRA has granted transitional capital treatment for all other outstanding subordinated notes until their first call date or, in the case of the perpetual subordinated notes the earlier of the end of the transitional period (December 2021) and the first call date when a step-up event occurs. If ANZ receives a notice of non-viability from APRA, then the convertible subordinated notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. Credit risk

Financial assets maximum exposure to credit risk

For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances, there may be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity investments which are primarily subject to market risk. For contingent exposures, the maximum exposure to credit risk is the maximum amount the Group would have to pay if the instrument is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.

The following tables present the maximum exposure to credit risk of on-balance sheet and off-balance sheet financial assets before taking account of any collateral held or other credit enhancements.

As at Maximum exposure to credit risk Mar 17 $M Sep 16 $M Mar 16 $M	Movement
	Mar 17 v. Sep 16 Mar 17 v. Mar 16
Net loans and advances1 576,304 575,852 561,768	0% 3%
Other financial assets2 265,526 284,671 280,101	-7% -5%
On-balance sheet sub total 841,830 860,523 841,869	-2% 0%

Undrawn facilities 198,368 207,410 219,086	-4% -9%
Contingent facilities 37,686 37,779 38,750	0% -3%
Off-balance sheet sub total 236,054 245,189 257,836	-4% -8%
Total exposure to credit risk 1,077,884 1,105,712 1,099,705	-3% -2%

1. Net loans and advances includes individual and collective provisions for credit impairment held in respect of credit related commitments.

Certain other financial assets totalling $39.2 billion (Sep 16 half: $38.0 billion; Mar 16 half: $37.1 billion) have been excluded. These are comprised of bank notes and coins within cash, equity instruments within available for sale financial assets and investments relating to the insurance business where the credit risk is passed onto the policy holder.

Distribution of financial assets by credit quality

Neither past due nor impaired Past due but not impaired Restructured Net impaired	Net loans and advances1 As at Mar 17 $M Sep 16 $M Mar 16 $M 559,905 561,092 545,953 15,397 13,649 14,926 367 403 226 1,225 1,368 1,355	Other financial assets As at Mar 17 $M Sep 16 $M Mar 16 $M 265,516 284,657 280,082 - - - - - - 10 14 19	Credit related commitments1,2
			As at
			Mar 17 $M Sep 16 $M Mar 16 $M
			235,395 244,448 257,099
			- - -
			- - -
			69 81 45
Total	576,894 576,512 562,460	265,526 284,671 280,101	235,464 244,529 257,144

1. Individual and collective provisions for credit impairment held in respect of credit related commitments have been reallocated to credit related commitments in this table. 2.

Comprises undrawn commitments and customer contingent liabilities net of collective and individual provisions.

Credit quality of financial assets neither past due nor impaired

The credit quality of financial assets is managed by the Group using internal customer credit ratings (CCRs) based on their current probability of default. The Group’s masterscales are mapped to external rating agency scales, to enable wider comparisons.

Strong credit profile2 Satisfactory risk3 Sub-standard but not past due or impaired4	Net loans and advances As at Mar 17 $M Sep 16 $M Mar 16 $M 434,466 432,049 419,296 107,576 110,861 109,110 17,863 18,182 17,547	Other financial assets As at Mar 17 $M Sep 16 $M Mar 16 $M 260,717 279,747 275,339 4,595 4,567 4,525 204 343 218	Credit related commitments1
			As at
			Mar 17 $M Sep 16 $M Mar 16 $M
			193,358 200,510 211,147
			39,403 41,500 42,913
			2,634 2,438 3,039
Total	559,905 561,092 545,953	265,516 284,657 280,082	235,395 244,448 257,099

1. Comprises undrawn commitments and customer contingent liabilities net of collective provisions.

2. Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable to foreseeable events. This rating broadly corresponds to ratings “Aaa” to “Baa3” and “AAA” to “BBB-” of Moody’s and Standard & Poor’s respectively.

Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends or variability in earnings. This rating broadly corresponds to ratings “Ba2” to “B1” and “BB” to “B+” of Moody’s and Standard & Poor’s respectively.

4. Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly medium term. This rating broadly corresponds to ratings “B2” to “Caa” and “B” to “CCC” of Moody’s and Standard & Poor’s respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. Credit Risk, cont’d

Ageing analysis of financial assets that are past due but not impaired

Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards and personal loans) that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual basis.

A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of supporting collateral is sufficient to cover amounts outstanding.

1-29 days 30-59 days 60-89 days >90 days	As at Mar 17 $M Sep 16 $M Mar 16 $M 9,123 7,966 8,868 2,355 1,910 2,292 1,148 1,070 1,193 2,771 2,703 2,573	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 15% 3% 23% 3% 7% -4% 3% 8%
Total	15,397 13,649 14,926	13% 3%

Financial assets that are individually impaired

ANZ regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectability of a credit facility, the financial instrument (or ‘the facility’) is classified and reported as individually impaired and an individual provision is allocated against it.

As described in the summary of significant accounting policies in the 2016 Annual Financial Statements, impairment provisions are created for financial instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated as part of overall change in fair value and directly reduce the reported carrying amounts.

	Impaired instruments	Impaired instruments		Individual	provision	balances
		As at			As at
	Mar 17	Sep 16	Mar 16	Mar 17	Sep 16	Mar 16
	$M	$M	$M	$M	$M	$M
Derivative financial instruments1	10	14	19	-	-	-
Net loans and advances	2,478	2,646	2,564	1,253	1,278	1,209
Credit related commitments2	85	110	74	16	29	29
Total	2,573	2,770	2,657	1,269	1,307	1,238

Derivative financial instruments are net of credit valuation adjustments. 2.

Comprises undrawn commitments and customer contingent liabilities.

		As at		Movement	Movement
	Mar 17	Sep 16	Mar 16	Mar 17	Mar 17
	$M	$M	$M	v. Sep 16	v. Mar 16
Less than $10 million	1,724	1,784	1,597	-3%	8%
$10 million to $100 million	1,106	899	970	23%	14%
Greater than $100 million	110	490	316	-78%	-65%
Gross impaired assets1	2,940	3,173	2,883	-7%	2%
Less: Individual provision for credit impairment	(1,269)	(1,307)	(1,238)	-3%	3%
Net impaired assets	1,671	1,866	1,645	-10%	2%

1. Gross impaired assets includes $367 million of restructured items (Sep 16: $403 million; Mar 16: $226 million).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair Value Measurement

A significant number of financial instruments are carried on the balance sheet at fair value. The following disclosures set out the classification of financial assets and financial liabilities and assets held for sale measured at fair value less cost to sell and, in respect of the fair value either recognised or disclosed, the various levels within which fair value measurements are categorised, and the valuation methodologies and techniques used. The fair value disclosure does not cover those instruments that are not considered financial instruments from an accounting perspective, such as intangible assets.

(i) Assets and liabilities measured at fair value in the balance sheet

(a) Valuation methodologies

ANZ has an established control framework that ensures fair value is either determined or validated by a function independent of the party that undertakes the transaction. The control framework ensures that all models are calibrated periodically to test that outputs reflect prices from observable current market transactions in the same instrument or other available observable market data.

Where quoted market prices are used, prices are independently verified from other sources. For fair values determined using a valuation model, the control framework may include, as applicable, independent development or validation of valuation models, any inputs to those models, any adjustments required outside the valuation model and, where possible, independent validation of model outputs. In this way, continued appropriateness of the valuations is ensured.

In instances where the Group holds offsetting risk positions, the Group uses the portfolio exemption in AASB 13 – Fair Value Measurement to measure the fair value of such groups of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (that is, an asset) for a particular risk exposure or to transfer a net short position (that is, a liability) for a particular risk exposure.

The Group categorises its fair value measurements on the basis of inputs used in measuring fair value using the fair value hierarchy below:

Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices in active markets for identical financial instruments. This category includes financial instruments valued using quoted yields where available for specific debt securities.
Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted prices within Level 1 that are observable for a similar financial asset or liability, either directly or indirectly.
Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are not based on observable market data (unobservable inputs).

(b) Valuation techniques and inputs used

In the event that there is no quoted market price for the instrument, fair value is based on valuation techniques. The valuation models incorporate the impact of bid/ask spreads, counterparty credit spreads, funding costs and other factors that would influence the fair value determined by market participants.

The majority of valuation techniques employ only observable market data. However, for certain financial instruments the valuation technique may employ some data (valuation inputs or components) which is not readily observable in the current market. In these cases valuation inputs (or components of the overall value) are derived and extrapolated from other relevant market data and tested against historic transactions and observed market trends. To the extent that valuation is based on models with inputs that are not observable in the market, the determination of fair value can be more subjective, dependent on the significance of the unobservable input to the overall valuation.

The following valuation techniques have been applied to determine the fair values of financial instruments where there is no quoted price for the instrument:

For instruments classified as Trading security assets and Securities short sold, Derivative financial assets and liabilities, Available for sale debt instruments, and Investments backing policy liabilities, fair value measurements are derived by using modelled valuation techniques (including discounted cash flow models) that incorporate market prices/yields for securities with similar credit risk, maturity and yield characteristics; and/or current market yields for similar instruments.
For Net loans and advances, Deposits and other borrowings and Debt issuances, discounted cash flow techniques are used where contractual future cash flows of the instrument are discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar maturities or a yield curve appropriate for the remaining term to maturity.
The fair value of external unit holder liabilities (life insurance funds) represents the external unit holder’s share of the net assets of the consolidated investment funds, which are carried at fair value. The fair value of policy liabilities, being liabilities of the insurance business is directly linked to the performance and value of the assets backing the liabilities. These liabilities are carried at fair value using observable inputs.
For the non-financial instrument component of assets held for sale, the fair value has been derived from the agreed foreign currency sales price combined with the applicable foreign exchange rate less the costs to sell the Assets.

Further details of valuation techniques and significant unobservable inputs used in measuring fair values are described in (ii)(a) below.

There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during the current half year period.

(c) Fair value measurements

The following table provides an analysis of financial instruments carried at fair value at reporting date and assets held for sale measured at fair value less cost to sell categorised according to the lowest level input into a valuation model or a valuation component that is significant to the reported fair value. The significance of the input is assessed against the reported fair value. The fair value has been allocated in full to the category in the fair value hierarchy which most appropriately reflects the determination of the fair value.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As at March 2017 Assets Trading securities1 Derivative financial instruments Available for sale assets1 Net loans and advances (measured at fair value) Investments backing policy liabilities1 Assets held for sale2	Fair value measurements
	Level 1 $M Level 2 $M Level 3 $M Total $M 40,714 3,371 - 44,085 378 63,407 97 63,882 58,353 6,111 221 64,685 - 314 18 332 26,640 10,603 359 37,602 - 1,735 - 1,735
Total	126,085 85,541 695 212,321
Liabilities Deposits and other borrowings (designated at fair value) Derivative financial instruments Policy liabilities3 External unit holder liabilities (life insurance funds) Payables and other liabilities4 Debt issuances (designated at fair value)	- 2,771 - 2,771 600 64,352 98 65,050 - 36,847 - 36,847 - 4,227 - 4,227 2,001 126 - 2,127 - 1,786 - 1,786
Total	2,601 110,109 98 112,808
As at September 2016 Assets Trading securities Derivative financial instruments Available for sale assets Net loans and advances (measured at fair value) Investments backing policy liabilities	44,856 2,332 - 47,188 453 86,934 109 87,496 55,294 7,580 239 63,113 - 397 15 412 24,270 10,879 507 35,656
Total	124,873 108,122 870 233,865
Liabilities Deposits and other borrowings (designated at fair value) Derivative financial instruments Policy liabilities3 External unit holder liabilities (life insurance funds) Payables and other liabilities4 Debt issuances (designated at fair value)	- 5,193 - 5,193 408 88,215 102 88,725 - 35,955 - 35,955 - 3,333 - 3,333 2,294 86 - 2,380 - 2,192 - 2,192
Total	2,702 134,974 102 137,778
As at March 2016 Assets Trading securities Derivative financial instruments Available for sale assets Net loans and advances (designated at fair value) Investments backing policy liabilities	46,988 3,080 5 50,073 519 88,143 85 88,747 43,262 6,819 296 50,377 - 574 14 588 17,550 16,473 518 34,541
Total	108,319 115,089 918 224,326
Liabilities Deposits and other borrowings (designated at fair value) Derivative financial instruments Policy liabilities3 External unit holder liabilities (life insurance funds) Payables and other liabilities4 Debt issuances (designated at fair value)	- 4,986 - 4,986 635 90,988 83 91,706 - 34,854 - 34,854 - 3,265 - 3,265 2,761 201 - 2,962 - 2,823 - 2,823
Total	3,396 137,117 83 140,596

1. During the period there were transfers from Level 1 to Level 2 of $621 million (Sep 2016: $50 million; Mar 2016: $599 million) following a reassessment of available pricing information. Of the total transfers $326 million (Sep 2016: $36 million; Mar 2016: $486 million) relates to Available for sale assets, $194 million (Sep 2016: $0 million; Mar 2016: $0 million) relates to Trading Securities and $101 million (Sep 2016: $14 million; Mar 2016: $113 million) relates to Investments backing policy liabilities. During the period there were no transfers from Level 2 to Level 1 and prior period transfers from Level 2 to Level 1 were insignificant.

The amount classified as assets held for sale relate to non-financial instruments required to be measured at fair value less costs to sell in accordance with AASB 5 - Non-current Assets Held for Sale and Discontinued Operations.

Policy liabilities relate to life investment contract liabilities only as these are designated at fair value through profit or loss.
4.

Represents securities short sold.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(ii) Details of fair value measurements that incorporate unobservable market data

(a) Composition of Level 3 fair value measurements

There have been no significant changes in the composition of the balance of Level 3 instruments carried at fair value during the current or prior periods. Financial instruments which incorporate significant unobservable inputs primarily include Structured credit products relating to the structured credit intermediation trades where these trades are valued using complex models with certain inputs relating to the reference assets and derivative counterparties not being observable in the market, including credit spreads and default probabilities; Other derivative financial instruments including reverse mortgage swaps where the mortality rate cannot be observed; Asset backed securities and Illiquid corporate bonds where the effect on the fair value of issuer credit cannot be directly or indirectly observed in the market; and Investments in illiquid or suspended managed funds that are not currently redeemable.

(b) Movements in Level 3 fair value measurements

The movement in the Level 3 balances were not significant during the current or prior periods.

(c) Sensitivity to Level 3 data inputs

Where valuation techniques are employed and assumptions are required due to significant data inputs not being directly observable in the market place (Level 3 inputs), changing these assumptions changes the Group’s estimate of the instrument’s fair value. The majority of transactions in this category are ‘back-to-back’ in nature where the Group either acts as a financial intermediary or hedges the market risks. As a result, changes in the Level 3 inputs generally have a minimal impact on the income statement and net assets of the Group.

(d) Deferred fair value gains and losses

Where the fair value of a financial instrument at initial recognition is determined using unobservable data that is significant to the valuation of the instrument, the difference between the transaction price and the amount determined based on the valuation technique (day one gain or loss) is not immediately recognised in the income statement. Subsequently, the day one gain or loss is recognised in the income statement over the life of the transaction on a straight line basis or over the period until all inputs become observable. The Day 1 gains and losses deferred are not significant and predominately relate to derivative financial instruments. This is consistent with the low level of derivative transactions entered into by the Group which incorporate significant unobservable inputs.

(iii) Financial assets and financial liabilities not measured at fair value

The table below reflects the carrying amounts and the Group’s estimate of fair value of financial instruments not measured at fair value on the Group’s balance sheet where the carrying amount is not considered a close approximation of fair value.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As at March 2017 Financial assets Net loans and advances1, 2 Financial liabilities Deposits and other borrowings2 Debt issuances1 Subordinated debt1	Carrying amount in the balance sheet At amortised cost $M At fair value $M Total $M 575,972 332 576,304 595,646 2,771 598,417 86,992 1,786 88,778 20,297 - 20,297	Fair Value
		$M 576,650 598,654 89,566 20,612
	702,935 4,557 707,492	708,832
As at September 2016 Financial assets Net loans and advances1 Financial liabilities Deposits and other borrowings Debt issuances1 Subordinated debt1	575,440 412 575,852 583,002 5,193 588,195 88,888 2,192 91,080 21,964 - 21,964	576,636 588,613 91,600 22,110
	693,854 7,385 701,239	702,323
As at March 2016 Financial assets Net loans and advances1 Financial liabilities Deposits and other borrowings Debt issuances1 Subordinated debt1	561,180 588 561,768 573,085 4,986 578,071 79,124 2,823 81,947 17,557 - 17,557	562,545 578,432 81,842 17,545
	669,766 7,809 677,575	677,819

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

Net loans and advances and deposits and other borrowings include amounts reclassified to assets and liabilities held for sale (refer to Note 11).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15. Shareholders’ equity

Issued and quoted securities Ordinary share capital Closing balance Issued duringtheperiod1	Half Year
	Mar 17 No. Sep 16 No. Mar 16 No. 2,936,037,009 2,927,476,660 2,917,560,098 8,560,349 9,916,562 14,845,737

1. The Company issued 8.6 million shares under the Dividend Reinvestment Plan and Bonus Option Plan for the 2016 final dividend (9.7 million shares for the 2016 interim dividend; 9.7 million shares for the 2015 final dividend) and nil shares to satisfy obligations under the Group’s Employee share acquisition plans during the March 2017 half (Sep 16 half: 0.2 million shares; March 16 half: 5.1 million shares).

Shareholders' equity Ordinary share capital Reserves Foreign currency translation reserve Share option reserve Available for sale revaluation reserve Cash flow hedge reserve Transactions with non-controlling interests reserve	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 29,036 28,765 28,625 (140) 544 (9) 67 79 69 31 149 101 180 329 239 (23) (23) (23)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 1% 1% large large -15% -3% -79% -69% -45% -25% 0% 0%
Total reserves Retained earnings	115 1,078 377 28,640 27,975 27,361	-89% -69% 2% 5%
Share capital and reserves attributable to shareholders of the Company Non-controlling interests	57,791 57,818 56,363 117 109 101	0% 3% 7% 16%
Total shareholders' equity	57,908 57,927 56,464	0% 3%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16. Changes in composition of the Group

There were no acquisitions or disposals of material controlled entities for the half year ended 31 March 2017.

17. Investments in Associates

Share of associates'profit		Half Year	Mar 16 $M 301	Movement
		Mar 17 $M Sep 16 $M 173 240		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -28% -43%
Contributions to profit1 Associates P.T. Bank Pan Indonesia AMMB Holdings Berhad Shanghai Rural Commercial Bank2 Bank of Tianjin (up to 30 March 2016)3 Other associates	Contribution to Group profit after tax Half Year Mar 17 $M Sep 16 $M Mar 16 $M 50 47 17 48 51 43 58 122 137 - - 86 17 20 18		Ownership interest held by Group As at Mar 17 % Sep 16 % Mar 16 % 39 39 39 24 24 24 20 20 20 12 12 12 n/a n/a n/a
Share of associates' profit	173 240 301

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

2. On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited. The agreement states COSCO and Sino-Poland Enterprise will each acquire 10% of SRCB. The sale is subject to customary closing conditions and regulatory approvals and is expected to be completed in the September 2017 half. As a consequence, the Group ceased equity accounting for the investment in SRCB and commenced accounting for it as an asset held for sale.

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

18. Related party disclosure

There have been no transactions with related parties that are significant to understanding the changes in financial position and performance of the Group since 30 September 2016.

19. Contingent liabilities and contingent assets

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

Refer to Note 41 of the 2016 ANZ Annual Financial Statements for a description of contingent liabilities and contingent assets as at 30 September 2016. A summary of some of those contingent liabilities, and new contingent liabilities that have arisen in the current reporting period, is set out below.

 Bank fees litigation

A litigation funder commenced a class action against ANZ in 2010, followed by a second similar class action in March 2013. The applicants contended that certain exception fees (honour, dishonour and non-payment fees on transaction accounts and late payment and over-limit fees on credit cards) were unenforceable penalties and that various of the fees were also unenforceable under statutory provisions governing unconscionable conduct, unfair contract terms and unjust transactions. A further action, limited to late payment fees only, commenced in August 2014.

The penalty and statutory claims in the March 2013 class action failed and the claims have been dismissed. The August 2014 action was discontinued in October 2016.

The original claims in the 2010 class action have been dismissed. A new claim has been added to the 2010 class action, in relation to ANZ’s entitlement to charge certain periodical payment fees. This new claim is at an early stage.

 Benchmark/rate actions

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

In July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including ANZ – one action relating to BBSW, and one action relating to the Singapore Interbank Offered Rate (SIBOR) and the Singapore Swap Offer Rate (SOR). The class actions are expressed to apply to persons and entities that engaged in US-based transactions in financial instruments that were priced,

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

benchmarked, and/or settled based on BBSW, SIBOR, or SOR. The claimants seek damages or compensation in amounts not specified, and allege that the defendant banks, including ANZ, violated US anti-trust laws, anti-racketeering laws, the Commodity Exchange Act, and unjust enrichment principles. ANZ is defending the proceedings. The matters are at an early stage.

In February 2017, the South African Competition Commission commenced proceedings against local and international banks including ANZ alleging breaches of the cartel provisions of the South African Competition Act in respect of trading in the South African rand. The potential civil penalty or other financial impact is uncertain. The matter is at an early stage.

 Regulatory reviews and customer exposures

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

 Security recovery actions

Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets over recent years. ANZ will defend these claims.

20. Subsequent events since balance date

Other than the matter above, there have been no significant events from 31 March 2017 to the date of signing of this report.

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DIRECTORS’ DECLARATION

Directors’ Declaration

The Directors of Australia and New Zealand Banking Group Limited declare that:

in the Directors’ opinion the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements are in accordance with the Corporations Act 2001, including:
section 304, that they comply with the Australian Accounting Standards and any further requirements in the Corporations Regulations 2001; and
section 305, that they give a true and fair view of the financial position of the Group as at 31 March 2017 and of its performance for the half year ended on that date; and
in the Directors’ opinion as at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

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David M Gonski, AC Chairman

Shayne C Elliott Director

1 May 2017

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AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION

Independent Auditor’s Review Report to the shareholders of Australia and New Zealand Banking Group Limited

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Report on the half year Condensed Consolidated Financial Statements

Conclusion

We have reviewed the accompanying half year Condensed Consolidated Financial Statements of Australia and New Zealand Banking Group Limited (the Group).

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year Condensed Consolidated Financial Statements of Australia and New Zealand Banking Group Limited are not in accordance with the Corporations Act 2001 , including:

i) giving a true and fair view of the Group’s financial position as at 31 March 2017 and of its performance for the half year ended on that date; and ii) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

The half year Condensed Consolidated Financial Statements comprise:

the condensed consolidated balance sheet as at 31 March 2017;
the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, and condensed consolidated statement of cash flows for the half-year ended on 31 March 2017;
Notes 1 to 20 comprising a basis of preparation and other explanatory information; and
the Directors’ Declaration.

The Group comprises Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the half year’s end or from time to time during the half year.

Responsibilities of the Directors for the half year Condensed Consolidated Financial Statements

The Directors of the Company are responsible for:

the preparation of the half year Condensed Consolidated Financial Statements that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 ; and
such internal control as the Directors determine is necessary to enable the preparation of the half year Condensed Consolidated Financial Statements that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility for the review of the Condensed Consolidated Financial Statements

Our responsibility is to express a conclusion on the half year Condensed Consolidated Financial Statements based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half year Condensed Consolidated Financial Statements are not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 March 2017 and its performance for the half year ended on that date, and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Australia and New Zealand Banking Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of half year Condensed Consolidated Financial Statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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KPMG Alison Kitchen Melbourne Partner 1 May 2017

Lead Auditor’s Independence Declaration under section 307C of the Corporations Act 2001

To the Directors of Australia and New Zealand Banking Group Limited

I declare that, to the best of my knowledge and belief, in relation to the review of Australia and New Zealand Banking Group Limited for the half-year ended 31 March 2017, there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG Alison Kitchen Melbourne Partner 1 May 2017

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.

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104

SUPPLEMENTARY INFORMATION

Supplementary Information

Capital management Average balance sheet and related interest Funds management and insurance income analysis (Group) Select geographical disclosures Exchange rates Derivative financial instruments

105

SUPPLEMENTARY INFORMATION

Capital management

ANZ provides information as required under APRA’s prudential standard APS 330: Public Disclosure. This information is located in the Regulatory Disclosures section of ANZ’s website: shareholder.anz.com/pages/regulatory-disclosure.

This information includes disclosures detailed in the following sections of the standard, Attachment A: Capital disclosure template, Attachment B: Main features of Capital instruments, Attachment E: Leverage ratio disclosure requirements and Attachment F: Liquidity Coverage Ratio disclosure template.

Qualifying Capital Tier 1 Shareholders' equity and non-controlling interests Prudential adjustments to shareholders' equity Table 1	As at Mar 17 $M Sep 16 $M Mar 16 $M 57,908 57,927 56,464 (509) (481) (584)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% 3% 6% -13%
Gross Common Equity Tier 1 capital Deductions Table 2	57,399 57,446 55,880 (17,182) (18,179) (17,778)	0% 3% -5% -3%
Common Equity Tier 1 capital Additional Tier 1 capital Table 3	40,217 39,267 38,102 7,874 9,018 6,960	2% 6% -13% 13%
Tier 1 capital	48,091 48,285 45,062	0% 7%
Tier 2 capital Table 4	9,648 10,328 8,076	-7% 19%
Total qualifying capital	57,739 58,613 53,138	-1% 9%
Capital adequacy ratios Common Equity Tier 1 Tier 1 Tier 2	10.1% 9.6% 9.8% 12.1% 11.8% 11.6% 2.4% 2.5% 2.1%
Total	14.5% 14.3% 13.7%
Risk weighted assets Table 5	397,040 408,582 388,335	-3% 2%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 1: Prudential adjustments to shareholders' equity Treasury shares attributable to ANZ Wealth Australia policyholders Accumulated retained profits and reserves of insurance and funds management entities Deferred fee revenue including fees deferred as part of loan yields Available for sale reserve attributable to deconsolidated subsidiaries Other	As at Mar 17 $M Sep 16 $M Mar 16 $M 324 395 254 (811) (875) (931) 175 238 290 (82) (110) (98) (115) (129) (99)	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -18% 28% -7% -13% -26% -40% -25% -16% -11% 16%
Total	(509) (481) (584)	6% -13%
Table 2: Deductions from Common Equity Tier 1 capital Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and New Zealand) Intangible component of investments in ANZ Wealth Australia and New Zealand Capitalised software Capitalised expenses including loan and lease origination fees Applicable deferred net tax assets Expected losses in excess of eligible provisions Table 8 Investment in other insurance and funds management subsidiaries Investment in ANZ Wealth Australia and New Zealand Investment in banking associates and minority interests Other deductions	(3,532) (3,913) (3,767) (2,099) (2,103) (2,091) (1,887) (2,139) (2,190) (1,129) (1,148) (1,078) (902) (899) (793) (696) (700) (600) (274) (297) (297) (1,749) (1,752) (1,749) (3,826) (4,674) (4,708) (1,088) (554) (505)	-10% -6% 0% 0% -12% -14% -2% 5% 0% 14% -1% 16% -8% -8% 0% 0% -18% -19% 96% large
Total	(17,182) (18,179) (17,778)	-5% -3%
Table 3: Additional Tier 1 capital Convertible Preference Shares ANZ CPS2 ANZ CPS3 ANZ Capital Notes 1 ANZ Capital Notes 2 ANZ Capital Notes 3 ANZ Capital Notes 4 ANZ Bank NZ Capital Notes ANZ Capital Securities Regulatory adjustments and deductions	- 1,068 1,969 1,340 1,340 1,338 1,116 1,115 1,113 1,603 1,602 1,600 962 962 961 1,607 1,604 - 454 473 446 1,218 1,329 - (426) (475) (467)	-100% -100% 0% 0% 0% 0% 0% 0% 0% 0% 0% n/a -4% 2% -8% n/a -10% -9%
Total	7,874 9,018 6,960	-13% 13%
Table 4: Tier 2 capital General reserve for impairment of financial assets Perpetual subordinated notes Term subordinated debt notes Regulatory adjustments and deductions Transitional adjustments	257 267 255 1,156 1,190 1,145 10,841 11,281 8,985 (518) (936) (660) (2,088) (1,474) (1,649)	-4% 1% -3% 1% -4% 21% -45% -22% 42% 27%
Total	9,648 10,328 8,076	-7% 19%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 5: Risk weighted assets On balance sheet Commitments Contingents Derivatives	As at Mar 17 $M Sep 16 $M Mar 16 $M 253,532 259,356 235,875 56,279 58,167 62,223 12,648 13,295 14,489 19,350 21,215 21,721	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% 7% -3% -10% -5% -13% -9% -11%
Total credit risk Table 6 Market risk - Traded Market risk - IRRBB Operational risk	341,809 352,033 334,308 6,323 6,188 6,059 10,332 11,700 10,280 38,576 38,661 37,688	-3% 2% 2% 4% -12% 1% 0% 2%
Total risk weighted assets	397,040 408,582 388,335	-3% 2%

Table 6: Credit risk weighted assets by Basel asset class Subject to Advanced IRB approach Corporate Sovereign Bank Residential mortgage Qualifying revolving retail (credit cards) Other retail	As at Mar 17 $M Sep 16 $M Mar 16 $M 127,544 130,799 139,643 6,718 6,634 6,185 14,267 14,884 15,061 86,218 84,275 57,218 7,513 7,334 7,744 31,004 31,360 30,681	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 -2% -9% 1% 9% -4% -5% 2% 51% 2% -3% -1% 1%
Credit risk weighted assets subject to Advanced IRB approach	273,264 275,286 256,532	-1% 7%

Credit risk specialised lending exposures subject to slotting criteria	33,896 36,100 35,066	-6% -3%
Subject to Standardised approach Corporate Residential mortgage Other retail (includes credit cards)	16,264 20,459 22,149 2,354 2,493 2,616 3,131 3,277 3,550	-21% -27% -6% -10% -4% -12%
Credit risk weighted assets subject to Standardised approach	21,749 26,229 28,315	-17% -23%

Credit Valuation Adjustment and Qualifying Central Counterparties	8,168 9,371 9,147	-13% -11%
Credit risk weighted assets relating to securitisation exposures Other assets	1,171 1,203 1,194 3,561 3,844 4,054	-3% -2% -7% -12%
Total credit risk weighted assets	341,809 352,033 334,308	-3% 2%

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SUPPLEMENTARY INFORMATION

Capital management, cont’d

Table 7: Total provision for credit impairment and expected loss by division Australia Institutional New Zealand Asia Retail & Pacific TSO and Group Centre	Collective Provision and Individual Provision Mar 17 $M Sep 16 $M Mar 16 $M 1,877 1,794 1,751 1,494 1,683 1,682 470 491 451 199 211 213 14 4 3	Collective Provision and Individual Provision Mar 17 $M Sep 16 $M Mar 16 $M 1,877 1,794 1,751 1,494 1,683 1,682 470 491 451 199 211 213 14 4 3	Basel Expected Loss1	Basel Expected Loss1
			Mar 17 $M Sep 16 $M Mar 16 $M 2,735 2,654 2,608 1,337 1,404 1,410 766 802 717 5 7 5 - 1 -
Total provision for credit impairment and expected loss	4,054 4,183 4,100		4,843 4,868 4,740
1. Only applicable to Advanced Internal Ratings based portfolios. Table 8: APRA Expected loss in excess of eligible provisions APRA Basel 3 expected loss: non-defaulted Less: Qualifying collective provision Collective provision Non-qualifying collective provision Standardised collective provision		As at	Mar 16 $M 2,894 (2,862) 313 255	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -3% -1% -3% -3% 0% 12% -4% 1% -2% 15% 4% 7% -3% 3% 6% 2% -24% -13% 1% 16% large large -100% -100% n/a n/a -1% 16%
		Mar 17 $M Sep 16 $M 2,866 2,959 (2,785) (2,876) 349 350 257 267
Non-defaulted excess included in deduction APRA Basel 3 expected loss: defaulted Less: Qualifying individual provision Individual provision Additional individual provision for partial write offs Standardised individual provision Collective provision on advanced defaulted		687 700 1,977 1,909 (1,269) (1,307) (540) (509) 149 195 (308) (304)	600 1,846 (1,238) (528) 171 (265)
Shortfall in expected loss not included in deduction		9 (16) - 16	(14) 14
Defaulted excess included in deduction		9 -	-
Gross deduction		696 700	600

109

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1, 2, 3

Loans and advances Overdrafts and credit cards Commercial bills outstanding Term loans - housing Term loans - non-housing Lease financing Other loans and advances Individual provision for credit impairment	Half Year Mar 17 Avg bal Int Rate $M $M % 19,546 1,058 10.9% 11,877 117 2.0% 302,562 6,932 4.6% 213,423 4,399 4.1% 8,160 259 6.4% 1,533 74 n/a (1,320) - n/a	Half Year Sep 16 Avg bal Int Rate $M $M % 20,109 1,084 10.8% 12,325 126 2.0% 295,674 7,221 4.9% 213,827 4,576 4.3% 8,096 263 6.5% 2,292 - n/a (1,238) - n/a	Half Year Mar 16
			Avg bal Int Rate $M $M % 20,539 1,062 10.3% 13,237 112 1.7% 285,812 7,203 5.0% 221,728 4,890 4.4% 8,365 279 6.7% 2,239 26 n/a (988) - n/a
Total	555,781 12,839 4.6%	551,085 13,270 4.8%	550,932 13,572 4.9%
Other interest earning assets Cash Settlement Balances owed to ANZ Collateral Paid Trading and available for sale assets Regulatory Deposits Other assets	53,260 266 1.0% 16,972 22 0.3% 11,950 41 0.7% 104,548 1,150 2.2% 1,382 11 1.6% 13 97 n/a	46,076 256 1.1% 17,403 12 0.1% 14,042 48 0.7% 100,467 1,182 2.4% 1,192 9 1.5% 10 84 n/a	51,054 247 1.0% 18,521 34 0.4% 10,737 26 0.5% 98,884 1,134 2.3% 1,259 7 1.1% 8 70 n/a
Total	188,125 1,587 1.7%	179,190 1,591 1.8%	180,463 1,518 1.7%
Total interest earning assets4	743,906 14,426 3.9%	730,275 14,861 4.1%	731,395 15,090 4.1%
Non-interest earning assets Derivatives Premises and equipment Insurance assets Other assets Collective provision for credit impairment	76,087 2,100 35,688 62,939 (2,826)	90,011 2,200 34,974 60,423 (2,813)	79,804 2,222 34,846 55,395 (2,914)
Total	173,988	184,795	169,353
Total average assets	917,894	915,070	900,748
Interest bearing deposits and other borrowings Certificates of deposit Term deposits On demand and short term deposits Deposits from banks Commercial paper Securities sold under agreements to repurchase Borrowing corporations' debt	59,500 664 2.2% 205,073 1,951 1.9% 209,759 1,777 1.7% 62,179 369 1.2% 10,656 124 2.3% 2,088 10 1.0% 1,379 25 3.6%	61,712 724 2.3% 199,583 1,895 1.9% 207,316 1,970 1.9% 50,770 312 1.2% 20,053 283 2.8% 800 4 1.0% 1,573 31 3.9%	63,722 781 2.5% 197,297 1,942 2.0% 204,031 2,193 2.1% 51,307 327 1.3% 25,783 288 2.2% 1,191 4 0.7% 1,576 33 4.2%
Total	550,634 4,920 1.8%	541,807 5,219 1.9%	544,907 5,568 2.0%
Other interest bearing liabilities Settlement Balances owed by ANZ Collateral Received Debt issuances & subordinated debt Other liabilities	4,963 13 0.5% 6,019 18 0.6% 111,683 1,940 3.5% 2,902 119 n/a	5,298 17 0.6% 7,093 25 0.7% 105,685 1,954 3.7% 5,282 119 n/a	4,478 15 0.7% 5,806 14 0.5% 101,507 1,819 3.6% 5,109 106 n/a
Total	125,567 2,090 3.3%	123,358 2,115 3.4%	116,900 1,954 3.3%
Total interest bearing liabilities4	676,201 7,010 2.1%	665,165 7,334 2.2%	661,807 7,522 2.3%
Non-interest bearing liabilities Deposits 46,703 Derivatives 78,588 Insurance Liabilities 36,246 External unit holder liabilities (life insurance funds) 3,333 Other liabilities 19,024		43,865 92,110 35,662 3,265 18,189	42,328 85,666 35,456 3,291 14,735
Total 183,894		193,091	181,476
Total average liabilities 860,095		858,256	843,283

1. Averages used are predominantly daily averages.

In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Average home loan deposit offset balances for the March 2017 half for the Australia division were $24,979 million (Sep 16 half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 20 for further details.
3. Balance sheet amounts and metrics include assets and liabilities held for sale.

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

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SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1, 2, 3 (cont’d)

Loans and advances Australia Asia Pacific, Europe & America New Zealand	Half Year Mar 17 Avg bal Int Rate $M $M % 375,642 9,024 4.8% 64,699 1,093 3.4% 115,440 2,722 4.7%	Half Year Sep 16 Avg bal Int Rate $M $M % 369,168 9,357 5.1% 69,355 1,141 3.3% 112,562 2,772 4.9%	Half Year Mar 16
			Avg bal Int Rate $M $M % 364,039 9,429 5.2% 79,132 1,296 3.3% 107,761 2,847 5.3%
Total	555,781 12,839 4.6%	551,085 13,270 4.8%	550,932 13,572 4.9%
Trading and available for sale assets Australia Asia Pacific, Europe & America New Zealand	60,330 662 2.2% 29,489 264 1.8% 14,729 224 3.0%	58,696 710 2.4% 26,882 229 1.7% 14,889 243 3.3%	56,200 661 2.4% 29,199 233 1.6% 13,485 240 3.6%
Total	104,548 1,150 2.2%	100,467 1,182 2.4%	98,884 1,134 2.3%
Total interest earning assets4 Australia Asia Pacific, Europe & America New Zealand	466,147 9,912 4.3% 143,750 1,491 2.1% 134,009 3,023 4.5%	455,855 10,277 4.5% 142,512 1,473 2.1% 131,908 3,111 4.7%	443,036 10,292 4.6% 162,505 1,612 2.0% 125,854 3,186 5.1%
Total	743,906 14,426 3.9%	730,275 14,861 4.1%	731,395 15,090 4.1%
Total average assets Australia Asia Pacific, Europe & America New Zealand	593,672 170,297 153,925	584,543 169,939 160,588	569,243 188,923 142,582
Total average assets	917,894	915,070	900,748
Interest bearing deposits and other borrowings Australia Asia Pacific, Europe & America New Zealand	318,638 3,299 2.1% 143,505 590 0.8% 88,491 1,031 2.3%	308,684 3,561 2.3% 145,807 530 0.7% 87,316 1,128 2.6%	310,744 3,789 2.4% 151,696 547 0.7% 82,467 1,232 3.0%
Total	550,634 4,920 1.8%	541,807 5,219 1.9%	544,907 5,568 2.0%
Total interest bearing liabilities4 Australia Asia Pacific, Europe & America New Zealand	398,657 4,681 2.4% 167,295 871 1.0% 110,249 1,458 2.7%	388,743 5,086 2.6% 168,031 725 0.9% 108,391 1,523 2.8%	386,820 5,138 2.7% 172,261 714 0.8% 102,726 1,670 3.3%
Total	676,201 7,010 2.1%	665,165 7,334 2.2%	661,807 7,522 2.3%
Total average liabilities Australia Asia Pacific, Europe & America New Zealand	534,389 190,287 135,419	523,928 192,679 141,649	526,500 193,380 123,403
Total	860,095	858,256	843,283
Total average shareholder's equity Ordinary share capital, reserves, retained earnings and non-controlling interests	57,799	56,814	57,465
Total	57,799	56,814	57,465
Total average liabilities and shareholder's equity	917,894	915,070	900,748

1. Averages used are predominantly daily averages.

2. In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Average home loan deposit offset balances for the March 2017 half for the Australia division were $24,979 million (Sep 16 half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 20 for further details.

3. Balance sheet amounts and metrics include assets and liabilities held for sale.

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

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SUPPLEMENTARY INFORMATION

Average balance sheet and related interest1 (cont’d)

Gross earnings rate2 Australia Asia Pacific, Europe & America New Zealand Group	Half Year
	Mar 17 % Sep 16 % Mar 16 % 4.49 4.77 4.75 1.99 1.86 1.91 4.52 4.72 5.06 3.89 4.07 4.13

Net interest spread and net interest margin may be analysed as follows:

Net interest spread and net interest margin may be analysed as follows:
Australia2 Net interest spread Interest attributable to net non-interest bearing items	Half Year
	Mar 17 % Sep 16 % Mar 16 % 2.07 2.15 2.08 0.24 0.25 0.31
Net interest margin - Australia	2.31 2.40 2.39
Asia Pacific, Europe & America2 Net interest spread Interest attributable to net non-interest bearing items	0.95 1.00 1.08 0.04 0.03 0.03
Net interest margin - Asia Pacific, Europe & America	0.99 1.03 1.11
New Zealand2 Net interest spread Interest attributable to net non-interest bearing items	1.84 1.85 1.81 0.33 0.34 0.38
Net interest margin - New Zealand	2.17 2.19 2.19
Group Net interest spread Interest attributable to net non-interest bearing items	1.81 1.86 1.84 0.19 0.20 0.23
Net interest margin	2.00 2.06 2.07
Net interest margin (excluding Markets)	2.58 2.64 2.63

1. In the March 2017 half, the Group changed its calculation of net interest margin to net home loan deposit offset balances against total interest earning assets. Average home loan deposit offset balances for the March 2017 half for the Australia division were $24,979 million (Sep 16 half: $23,653 million; Mar 16 half: $22,996 million). Refer to page 20 for further details.

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

112

SUPPLEMENTARY INFORMATION

Funds management and insurance income analysis (Group)

The tables below supplement the Wealth Australia disclosures provided on pages 63 to 65 to present the Group’s overall funds management and insurance businesses by incorporating the relevant Australia division, New Zealand division and Asia Retail & Pacific division funds management and insurance businesses.

Reference Page Net funds management and insurance income - statutory basis 75 Adjustments between cash and statutory profit (pre-tax) Treasury shares adjustment 70 Policyholders tax gross up 70 Revaluation of policy liabilities 70	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 696 907 857 82 80 (34) (161) (185) (32) 51 (55) (20)	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -23% -19% 3% large -13% large large large -11% -13% -12% -17% -41% -48% 2% 8% -20% -22% -8% -18% -11% -13%
Net funds management and insurance income - cash basis 70 Wealth Australia - Funds management and insurance income Australia - Funds management and insurance income New Zealand - Funds management and insurance income Asia Retail & Pacific - Funds management and insurance income Inter-divisional eliminations	668 747 771 493 559 597 13 22 25 173 170 160 47 59 60 (58) (63) (71)
Net funds management and insurance income - cash basis 22	668 747 771

Insurance operating margin Life Insurance Planned profit margin Group & Individual Experience profit/(loss)1 General Insurance operating profit margin	Half Year Mar 17 $M Sep 16 $M Mar 16 $M 64 79 72 (26) (11) 3 64 59 51	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -19% -11% large large 8% 25% -20% -19% 80% 80% -67% -25% 34% 63% -10% -6%
Wealth Australia	102 127 126
Life Insurance Planned profit margin Individual Experience profit/(loss)1	36 20 20 3 9 4
New Zealand	39 29 24
Total	141 156 150

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

Insurance annual in-force premiums Group Individual2 General Insurance	As at Mar 17 $M Sep 16 $M Mar 16 $M 427 445 439 1,348 1,339 1,297 226 226 335	Movement Mar 17 v. Sep 16 Mar 17 v. Mar 16 -4% -3% 1% 4% 0% -33%
Total	2,001 2,010 2,071	0% -3%
Insurance in-force book movement Group Individual2 General Insurance	Sep 16 $M New business $M1 445 19 1,339 74 226 76	Lapses $M Mar 17 $M (37) 427 (65) 1,348 (76) 226
Total	2,010 169	(178) 2,001

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

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

113

SUPPLEMENTARY INFORMATION

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

Funds under management Funds under management - average Funds under management - end of period	As at Mar 17 $M Sep 16 $M Mar 16 $M 75,714 74,347 71,313 76,509 75,918 71,216	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 2% 6% 1% 7%
Composed of: Australian equities International equities Cash and fixed interest Property and infrastructure	17,104 16,963 15,988 20,207 18,422 16,784 34,203 35,800 33,979 4,995 4,733 4,465	1% 7% 10% 20% -4% 1% 6% 12%
Total	76,509 75,918 71,216	1% 7%
Funds Management cash flows by product Wealth Australia Division Open Solutions OneAnswer Frontier ANZ Smart Choice Wrap (Voyage and Grow) Closed Solutions Retail Employer Australia Division Private Bank New Zealand Division KiwiSaver Retail Private Bank Bonus Bonds Other New Zealand	Sep 16 Inflows Outflows Other1 Mar 17 $M $M $M $M $M 9,958 719 (631) 454 10,500 11,190 1,122 (629) 3,099 14,782 2,160 312 (150) 635 2,957 19,028 281 (1,432) (34) 17,843 5,915 72 (324) (2,494) 3,169 2,411 134 (196) 93 2,442 8,864 797 (385) (141) 9,135 2,741 1,707 (1,457) (96) 2,895 6,682 502 (462) (262) 6,460 3,397 492 (567) (137) 3,185 3,572 336 (664) (103) 3,141
Total	75,918 6,474 (6,897) 1,014 76,509

1. Other includes investment income net of taxes, fees and charges, distributions and the impact of foreign currency translations. In Wealth Australia it also includes the transition of funds under management from Employer Super to ANZ Smart Choice of approximately $2.5 billion, as a result of regulatory changes in the industry.

	Wealth	New
	Australia	Zealand	Total
Embedded value and value of new business (insurance and investments only)	$M1	$M	$M
Embedded value as at September 20162	4,536	616	5,152
Value of new business3	50	7	57
Expected return4	151	24	175
Experience deviations and assumption changes5	(67)	9	(58)
Embedded value before economic assumption changes and net transfer	4,670	656	5,326
Economic assumptions change6	(80)	(64)	(144)
Net transfer7	(143)	(43)	(186)
Embedded value as at March 2017	4,447	549	4,996

The product lines used are on the same basis as prior periods. This is different to the product lines that are subject to the strategic review in Wealth Australia.

Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period. 4.

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

Experience deviations and assumption changes arise from deviations and changes to best estimate assumptions underlying the prior period embedded value. Unfavorable experience in Wealth Australia was primarily driven by credit card repricing and retail life claims experience.

Interest rate movements have led to a negative value impact.

7. Net transfer represents the net capital movements over the period including capital injections, transfer of cash dividends paid and value of franking credits. For Wealth Australia there was $120 million of cash dividends paid, $6 million of dividends in AT1 preference shares paid and $17 million of franking credits expected to be transferred to the parent entity. For New Zealand there were no cash dividends paid in the March 2017 half.

114

SUPPLEMENTARY INFORMATION

Select geographical disclosures

The following divisions operate across the geographic locations illustrated below:

Institutional division – Asia, Europe & America, Pacific and New Zealand
Asia Retail & Pacific division – Asia and Pacific
New Zealand division – New Zealand

Asia Pacific, Europe & America geography

		Europe &
	Asia	America	Pacific	APEA Total
	$M	$M	$M	$M
March 2017 Half Year
Statutory profit	(8)	151	95	238
Cash profit	(10)	107	95	192
Net loans and advances	49,568	7,695	3,412	60,675
Customer deposits	60,656	52,521	5,374	118,551
Risk weighted assets	55,062	19,852	7,555	82,469
March 2016 Half Year
Statutory profit	84	64	94	242
Cash profit	83	86	94	263
Net loans and advances	57,532	7,882	3,726	69,140
Customer deposits	64,413	49,888	5,403	119,704
Risk weighted assets	64,115	24,212	7,546	95,873
September 2016 Half Year
Statutory profit	206	119	67	392
Cash profit	208	120	67	395
Net loans and advances	54,303	8,441	3,636	66,380
Customer deposits	60,635	48,138	5,491	114,264
Risk weighted assets	59,132	21,698	7,725	88,555

New Zealand geography (in NZD)

New Zealand geography (in NZD)
Net interest income Other operating income	Half Year Mar 17 NZD M Sep 16 NZD M Mar 16 NZD M 1,534 1,536 1,493 514 393 402	Movement
		Mar 17 v. Sep 16 Mar 17 v. Mar 16 0% 3% 31% 28%
Operating income Operating expenses	2,048 1,929 1,895 (718) (765) (815)	6% 8% -6% -12%
Profit before credit impairment and income tax Credit impairment (charge)/release	1,330 1,164 1,080 (40) (99) (50)	14% 23% -60% -20%
Profit before income tax Income tax expense and non-controlling interests	1,290 1,065 1,030 (362) (287) (279)	21% 25% 26% 30%
Cash profit Adjustments between statutory profit and cash profit	928 778 751 (59) 1 12	19% 24% large large
Statutory profit	869 779 763	12% 14%
Individual credit impairment charge/(release) - cash Collective credit impairment charge/(release) - cash Net loans and advances Customer deposits Risk weighted assets Total full time equivalent staff (FTE)	69 88 50 (29) 11 - 122,954 120,651 117,470 96,259 91,360 90,148 74,511 76,005 74,537 7,761 7,869 8,063	-22% 38% large n/a 2% 5% 5% 7% -2% 0% -1% -4%

115

SUPPLEMENTARY INFORMATION

Exchange rates

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

Chinese Yuan Euro Pound Sterling Indian Rupee Indonesian Rupiah Japanese Yen Malaysian Ringgit New Taiwan Dollar New Zealand Dollar Papua New Guinea Kina United States Dollar	Balance Sheet As at Mar 17 Sep 16 Mar 16 5.2716 5.0809 4.9471 0.7160 0.6789 0.6760 0.6122 0.5874 0.5335 49.557 50.764 50.741 10,184 9,900 10,164 85.565 76.844 85.951 3.3834 3.1576 3.0015 23.216 23.895 24.640 1.0939 1.0487 1.1093 2.4304 2.4143 2.3724 0.7644 0.7617 0.7651	Profit & Loss Average
		Half Year
		Mar 17 Sep 16 Mar 16 5.1672 4.9507 4.6622 0.7025 0.6694 0.6558 0.6071 0.5432 0.4886 50.639 50.258 48.101 10,018 9,939 9,835 83.904 78.750 85.328 3.3021 3.0295 3.0565 23.681 24.100 23.708 1.0593 1.0640 1.0834 2.3906 2.3648 2.1565 0.7533 0.7510 0.7212

Derivative financial instruments

Derivative financial instruments are contracts whose value is derived from one or more underlying variables or indices defined in the contract, require little or no initial net investment and are settled at a future date. Derivatives include contracts traded on registered exchanges and contracts agreed between counterparties. The use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading and sales activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in foreign exchange and interest rates as part of its asset and liability management activities.

The following table provides an overview of the Group’s foreign exchange, interest rate, commodity and credit derivatives. They include all trading and balance sheet risk management contracts. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market rates relative to the terms of the derivative.

Fair Values Foreign exchange contracts Spot and forward contracts Swap agreements Options purchased Options sold	Assets Liabilities As at Mar 17 $M Mar 17 $M 12,703 (11,830) 11,439 (13,247) 565 - - (587)	Assets Liabilities As at Sep 16 $M Sep 16 $M 10,960 (10,794) 10,680 (14,309) 887 - - (802)	Assets Liabilities
			As at
			Mar 16 $M Mar 16 $M 17,145 (16,911) 18,000 (23,473) 1,388 - - (1,087)
	24,707 (25,664)	22,527 (25,905)	36,533 (41,471)
Commodity contracts Derivative contracts	2,340 (1,461)	2,294 (1,395)	2,424 (1,950)
Interest rate contracts Forward rate agreements Swap agreements Futures contracts Options purchased Options sold	2 (2) 35,939 (36,011) 40 (316) 649 - - (1,388)	12 (17) 61,355 (59,011) 33 (119) 1,098 - - (2,076)	35 (46) 48,490 (46,127) 31 (213) 907 - - (1,557)
	36,630 (37,717)	62,498 (61,223)	49,463 (47,943)
Credit default swaps Structured credit derivatives purchased Other credit derivatives purchased	56 - 14 (129)	40 - 117 (125)	49 - 256 (268)
Total credit derivatives purchased	70 (129)	157 (125)	305 (268)
Structured credit derivatives sold Other credit derivatives sold	- (64) 135 (15)	- (50) 20 (27)	- (62) 22 (12)
Total credit derivatives sold	135 (79)	20 (77)	22 (74)

Total fair value	63,882 (65,050)	87,496 (88,725)	88,747 (91,706)

116

DEFINITIONS

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

ADI – Authorised Deposit-taking Institution.

APRA – Australian Prudential Regulation Authority.

APS – ADI Prudential Standard.

BCBS – Basel Committee on Banking Supervision.

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

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

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

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

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

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

Covered bonds are bonds issued by an ADI to external investors secured against a pool of the ADI’s assets (the cover pool) assigned to a bankruptcy remote special purpose entity. The primary assets forming the cover pool are mortgage loans. The mortgages remain on the issuer’s balance sheet. The covered bond holders have dual recourse to the issuer and the cover pool assets. The mortgages included in the cover pool cannot be otherwise pledged or disposed of but may be repurchased and substituted in order to maintain the credit quality of the pool. The Group issues covered bonds as part of its funding activities.

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

Credit risk weighted assets represent assets which are weighted for credit risk according to a set formula as prescribed in APS 112/113.

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

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

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

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

IFRS – International Financial Reporting Standards.

Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or where concessional terms have been provided because of the financial difficulties of the customer. Financial assets are impaired if there is objective evidence of impairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on the expected future cash flows of the individual asset or portfolio of assets.

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

Individual provision is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments.

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

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

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

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

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

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DEFINITIONS

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

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

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

Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

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

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

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

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

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

118

DEFINITIONS

Description of divisions

Other than those described above, there have been no other significant structural change in March 2017 half. However, certain prior period comparatives have been restated to align with current period presentation. The divisions reported below are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.

Australia

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

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

Institutional

The Institutional division services global institutional and business customers across three product sets: Transaction Banking, Loans & Specialised Finance and Markets.

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

New Zealand

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

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

Wealth Australia

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

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

Asia Retail & Pacific

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

Asia Retail provides general banking and wealth management services to affluent and emerging affluent retail customers across nine Asian countries via relationship managers, branches, contact centres and a variety of self-service digital channels (internet and mobile banking, phone and ATMs). Core products offered include deposits, credit cards, loans, investments and insurance. Subject to regulatory approval, ANZ expects the sale of its Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to be completed during 2017 and early 2018.
Pacific provides products and services to retail customers, small to medium-sized enterprises, institutional customers and Governments located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticated financial solutions provided to business customers through dedicated managers.

Technology, Services & Operations and Group Centre

TSO and Group Centre provide support to the operating divisions, including technology, group operations, shared services, property, risk management, financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes Group Treasury, Shareholder Functions and minority investments in Asia.

119

ASX APPENDIX 4D – CROSS REFERENCE INDEX

Page Details of the reporting period (4D Item 1) ...................................................................................................................................................... After front cover Results for Announcement to the Market (4D Item 2) ..................................................................................................................................... After front cover Net Tangible Assets per security (4D Item 3) ....................................................................................................................................................................... 10 Details of entities over which control has been gained or lost (4D Item 4) ......................................................................................................................... 100 Dividends and dividend dates (4D Item 5) ...................................................................................................................................................... After front cover Dividend Reinvestment Plan (4D Item 6) ........................................................................................................................................................ After front cover Details of associates and joint venture entities (4D Item 7) ................................................................................................................................................ 100

120

ALPHABETICAL INDEX

PAGE Appendix 4D Cross Reference Index ................................................................................................................................................................................. 120 Appendix 4D Statement ......................................................................................................................................................................................................... 2 Auditor’s Review Report and Independence Declaration ................................................................................................................................................... 103 Average Balance Sheet and Related Interest .................................................................................................................................................................... 110 Basis of Preparation ............................................................................................................................................................................................................. 80 Capital Management .......................................................................................................................................................................................................... 106 Changes in Composition of the Group ............................................................................................................................................................................... 100 Condensed Consolidated Balance Sheet ............................................................................................................................................................................. 77 Condensed Consolidated Cash Flow Statement .................................................................................................................................................................. 78 Condensed Consolidated Income Statement ....................................................................................................................................................................... 75 Condensed Consolidated Statement of Changes in Equity .................................................................................................................................................. 79 Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 76 Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 100 Credit Risk ............................................................................................................................................................................................................................ 93 Definitions .......................................................................................................................................................................................................................... 117 Deposits and Other Borrowings ........................................................................................................................................................................................... 90 Derivative Financial Instruments ........................................................................................................................................................................................ 116 Directors’ Declaration ......................................................................................................................................................................................................... 102 Directors’ Report .................................................................................................................................................................................................................. 74 Dividends ............................................................................................................................................................................................................................. 85 Divisional Results ................................................................................................................................................................................................................. 43 Earnings Per Share .............................................................................................................................................................................................................. 86 Exchange Rates ................................................................................................................................................................................................................. 116 Fair Value Measurement ...................................................................................................................................................................................................... 95 Full Time Equivalent Staff .................................................................................................................................................................................................... 16 Funds Management and Insurance Income Analysis (Group) ........................................................................................................................................... 113 Group Results ...................................................................................................................................................................................................................... 17 Income ................................................................................................................................................................................................................................. 82 Income Tax Expense ........................................................................................................................................................................................................... 84 Investments In Associates.................................................................................................................................................................................................. 100 Net Loans and Advances ..................................................................................................................................................................................................... 88 Operating Expenses ............................................................................................................................................................................................................. 83 Profit Reconciliation ............................................................................................................................................................................................................. 67 Provision for Credit Impairment ............................................................................................................................................................................................ 89 Related Party Disclosures .................................................................................................................................................................................................. 100 Segment Analysis ................................................................................................................................................................................................................ 87 Select Geographical Disclosures ....................................................................................................................................................................................... 115 Share Capital ....................................................................................................................................................................................................................... 99 Shareholders’ Equity ............................................................................................................................................................................................................ 99 Subordinated Debt ............................................................................................................................................................................................................... 92 Subsequent Events Since Balance Date ............................................................................................................................................................................ 101 Summary ................................................................................................................................................................................................................................ 7

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AI assistant

Australia and New Zealand Banking Group Ltd. — Interim / Quarterly Report 2017

10425_rns_2017-05-01_7168b7f4-ce62-435e-b2d8-174999f131f9.pdf

Australia and New Zealand Banking Group Limited

Dividend Reinvestment Plan and Bonus Option Plan

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D

SUMMARY OF 2017 HALF YEAR RESULTS AND ASSOCIATED DISCLOSURE MATERIALS

CONTENTS

Summary

Statutory Profit Results

SUMMARY

Cash Profit Results[1]

SUMMARY

Key Balance Sheet Metrics[1]

SUMMARY

Cash Profit Results – FX Adjusted

Cash Profit - March 2017 Half Year vs March 2016 Half Year

Cash Profit - March 2017 Half Year vs September 2016 Half Year

SUMMARY

Cash Profit Results – Adjusted Pro-forma

Pro-forma

Valuation adjustments

 Software capitalisation changes

 Restructuring

SUMMARY

 Esanda Dealer Finance divestment and pro-forma

 Derivative CVA methodology change

Cash Profit Results - Adjusted Pro-forma

Cash Profit Results - Adjusted Pro-forma

Full time equivalent staff

Other Non-financial Information

CONTENTS

Group Results

Non-IFRS information

Cash profit

GROUP RESULTS

Net interest income

Net interest margin (-7 bps)

Average interest earning assets (+$12.5 billion or +2%)

Average deposits and other borrowings (+$10.1 billion or +2%)

Net interest margin (-6 bps)

Average interest earning assets (+$13.6 billion or +2%)

Average deposits and other borrowings (+$11.7 billion or +2%)

Other operating income

GROUP RESULTS

Net fee and commission income (-$59 million or -5%)

Net funds management and insurance income (-$103 million or -13%)

Cash Markets income (+$403 million or +42%)

Other (-$81 million or -87%)

Net fee and commission income (-$24 million or -2%)

Net funds management and insurance income (-$79 million or -11%)

Cash Markets income (+$527 million or +63%)

Share of associates’ profit (-$70 million or -29%)

Other (-$211 million)

Operating Expenses

 March 2017 v March 2016

Technology infrastructure spend

GROUP RESULTS

Software capitalisation

GROUP RESULTS

Credit risk

Individual credit impairment charge

 March 2017 v March 2016

 March 2017 v September 2016

GROUP RESULTS

Collective credit impairment charge

 March 2017 v March 2016

 March 2017 v September 2016

Provision for credit impairment

Gross Impaired Assets

 March 2017 v March 2016

 March 2017 v September 2016

New Impaired Assets

 March 2017 v March 2016

 March 2017 v September 2016

Ageing analysis of net loans and advances that are past due but not impaired

 March 2017 v March 2016

 March 2017 v September 2016

Income tax expense

 March 2017 v March 2016

Australia and New Zealand Banking Group Ltd. Interim / Quarterly Report 2017